Washington Estate Tax FAQ: Plain-English Answers To Your Most Common Questions

If you have recently lost a loved one in Whatcom County, and are serving as Personal Representative to the estate, the rules around Washington’s estate tax can feel confusing at the exact moment you want simple, straight answers. This guide – curated directly from the WA Department of Revenue website – collects the most common questions about estate tax and answers them in clear, practical terms. It is not legal or tax advice, just a helpful roadmap so you can learn more and move forward with greater confidence.

Q: Does Washington have an inheritance tax or an estate tax?

A: Washington does not have an inheritance tax. Washington does have an estate tax. In 1981, voters repealed the inheritance tax and enacted an estate tax, effective January 1, 1982. In an inheritance tax system, the tax falls on each beneficiary. In an estate tax system, the tax is paid by the decedent’s estate. If you live in Washington and inherit money or property, you do not owe Washington tax on what you receive.

Q: What is the estate tax?

A: It is a tax on the right to transfer property at death. A Washington resident may owe Washington estate tax depending on the value of their estate. A nonresident may also owe Washington estate tax if they owned Washington-sited property at death, again depending on the size of the estate.

Q: When do I have to file a Washington estate tax return?

A: You must file if the decedent’s gross estate value, wherever located, is over the filing threshold and either of the following is true:

• The decedent was a Washington resident, or
• The decedent was a nonresident who owned Washington real estate or tangible personal property on the date of death.

A filing is required even if no tax is ultimately due. If the estate is under the filing threshold, no return is required and no tax is due. If a married couple owns a personal residence, the decedent’s portion of that residence may be excluded from the gross estate solely for determining whether the filing threshold is met, if it qualifies under the spousal personal residence exclusion.

Q: What counts as “property“ in the gross estate?

A: Property is broad. It includes real estate, stocks, bonds, interests in business entities, cash, notes, life insurance policies, assets owned jointly with a spouse or others, vehicles and RVs, royalties, pension plans, refunds, assets held in trust, annuities, and more. List everything owned or controlled on the date of death.

Q: Who is responsible for filing?

A: The executor or personal representative must file the Washington estate tax return if the decedent owned property in Washington and the gross estate exceeds the filing threshold. If the gross estate is over the filing threshold, a return is required even if the final tax calculates to zero.

Q: What is the due date, and can I get more time?

A: The return is due nine months after the date of death. A timely filed extension application automatically grants an additional six months to file the return.

Important: any tax due must still be paid within nine months of death, or interest will accrue.

Q: How do I figure out a Washington taxable estate?

A: Start with the gross estate and subtract allowable expenses and deductions. These can include funeral expenses, administration costs, debts and mortgages, qualifying marital transfers, qualifying charitable gifts, the farm deduction (if eligible), the qualified family-owned business interests deduction (if eligible), and the applicable exclusion amount.

Q: Which assets are included for married couple, and how does community property work?

A: All assets owned by the decedent on the date of death are included, including assets held in a revocable trust and assets located outside Washington. For a married decedent, report all community property and the decedent’s separate property. On the gross estate schedules, list the full value of each community asset and then take the “Less ½ community property” reduction to reflect the decedent’s half. In Washington, assets are presumed to be community property unless they were kept as separate property under a valid agreement or were inherited and kept separate without commingling. A return is required when the decedent’s half of community property plus the decedent’s separate property meets the filing threshold, even if everything passes to the surviving spouse and no tax is due. The decedent’s portion of the primary personal residence may be excluded from the gross estate for filing-threshold purposes if it qualifies under the spousal personal residence exclusion.

Q: Do I have to include out-of-state property? How does apportionment work?

A: Yes. Report all property owned by the decedent, wherever located. Washington calculates the tax on the entire estate as if all property were in Washington, then apportions the tax between Washington property and out-of-state property. Domicile controls the in-state vs. out-of-state determination. For a Washington domiciliary, real property and tangible personal property outside Washington are treated as out-of-state. For a nonresident decedent, intangible property, and any property outside Washington, are treated as out-of-state for apportionment.

Q: How are assets valued?

A: Use actual value or fair market value on the valuation date.

• Actual value is cash value or unpaid principal plus interest accrued to the valuation date.

• Fair market value is the price a willing buyer and willing seller would agree to, with no compulsion to buy or sell and both having reasonable knowledge of the facts. Business entity value includes goodwill. For most publicly traded stocks and bonds, use the mean between the high and low on the valuation date.

• The valuation date is the date of death, unless the estate properly elects the alternate valuation date six months later.

Include documentation supporting values, such as real estate appraisals, date-of-death brokerage statements, and business appraisals.

Q; What is the best way to value real estate?

A: An actual arm’s-length sale within a reasonable time after death is the best evidence of value. If there is no sale, obtain a certified appraisal to establish fair market value. (A Comparative Market Analysis performed by a qualified real estate broker is also typically acceptable. I have done many of these for PR’s.)

Q: Do Transfer on Death (TOD) assets still go on the estate tax return, and who pays the tax?

A: Yes. Even if an asset transfers directly to a beneficiary after death, it was owned by the decedent on the date of death and must be included on the return. Liability for estate tax on TOD property is determined by RCW 83.110A.

Q: What expenses and deduction are commonly allowed?

A: Washington follows defined schedules on the return . Highlights:

• Schedule J, Part A (Funeral expenses; one-half deductible in a community estate): casket or urn, funeral home, transportation, burial plot or columbarium, marker, obituary.
• Schedule J, Part B (Administrative expenses subject to claims; may be deducted on the estate return or the income tax return, but not both): executor commissions, attorney and accountant fees, appraisals, court costs, storage or maintenance when immediate distribution is not possible, HOA fees, certain insurance expenses.
• Schedule K1 (Debts of the decedent existing before death): credit cards, utilities, medical bills, prorated property taxes to date of death, income taxes.
• Schedule K2 (Mortgages and liens): mortgages, notes, lines of credit, including interest to the date of death.
• Schedule L1 (Net losses during administration): theft, fire, storm, shipwreck losses above insurance reimbursement.
• Schedule L2 (Administrative expenses not subject to claims): similar to Schedule J, Part B but tied to the decedent’s trusts.
• Schedule M (Marital deduction): outright transfers to a U.S. citizen spouse, or QTIP/QDOT elected trusts with the required addenda.
• Schedule O (Charitable deduction): written, documented gifts to qualifying governmental, charitable, religious, scientific, literary, educational, fraternal, lodge, or veterans organizations.
• Farm deduction and Qualified Family-Owned Business Interests: available if the estate meets specific eligibility and documentation requirements.
• Statutory exclusion amount: 2,193,000 dollars for dates of death January 1, 2018 through June 30, 2025, and 3,000,000 dollars for dates of death July 1, 2025 through December 31, 2025. For 2026 and later, see the state’s table of filing thresholds and exclusion amounts.

Closing Notes

Every estate is different. Two estates with the same gross value can have very different tax results based on deductions, apportionment, and the composition of assets. When in doubt, document everything, keep valuation support together, and follow the schedules on the return so deductions are taken in the right place.

For more detail straight from the source, visit this page:

https://dor.wa.gov/taxes-rates/other-taxes/estate-tax/estate-tax-faq

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