Washington Estate Estate Tax Planning
Last updated: 07 Nov 2025 • Author: Alexander Foelsche CPA (US), WP (DE), RE (CH)
Washington Estate Tax — Planning Guide
Washington imposes a stand-alone Estate & Transfer Tax (RCW 83.100). Effective planning centers on capturing the state exclusion, using state QTIP when appropriate, validating QFOBI eligibility, managing situs and apportionment for nonresidents, and coordinating valuation, liquidity, and timing with probate. Plan with a WA specialist
1) Married couples — capture the state exclusion
Credit Shelter / Bypass trust (state-sized)
- On first death, fund a credit shelter trust up to the Washington exclusion to lock in the decedent’s state exemption (no WA portability).
- Coordinate with federal: even when no federal estate tax is due, use pro-forma 706 schedules for basis and documentation.
- In community-property contexts, model basis results and survivor cash flow.
State-only QTIP (deferral)
- Elect a Washington QTIP to defer WA tax on the marital portion until the surviving spouse’s death (income interest, trust terms, election consistency required).
- Keep election statements and trust provisions with the WA filing; track “state-QTIP” basis and remainder identification for the second death.
Choose between bypass (capture) vs. QTIP (deferral) based on net worth trajectory, survivor needs, and expected appreciation.
2) Qualified Family-Owned Business Interests (QFOBI)
When it helps
QFOBI can reduce the WA base up to the statutory cap applicable to the date of death (e.g., $3,000,000 for 7/1/2025–12/31/2025), if ownership, size, nexus, and post-death continuity tests are satisfied.
- Start eligibility mapping early (ownership periods, active conduct, employee/payroll metrics).
- Preserve minutes, tax returns, org docs, and financials to support the claim.
Design implications
- Be cautious with recapitalizations and transfers that could break continuity.
- Combine with state QTIP or bypass trust to shape survivor control versus deduction magnitude.
- Coordinate with valuation discounts (if any) and appraiser instructions tailored to WA requirements.
3) Nonresidents — situs & apportionment strategy
Limit the WA numerator
- For nonresidents, WA taxes WA real property and tangibles; most intangibles stay out of the numerator absent a WA business situs.
- Use Addendum #4 to apply the fraction: WA-situs gross estate ÷ worldwide gross estate.
- Consider entity holding structures and asset location practices (e.g., where artwork/boats/equipment are kept).
Documentation
- Collect deeds, titles, storage/berth records, insurance, photos, and use logs to substantiate situs.
- Where items transit WA, retain travel/service records to support non-situs treatment.
4) Charitable planning
Outright gifts & testamentary split-interest
- Outright bequests to qualified charities reduce the WA base dollar-for-dollar.
- Consider CRTs/CLTs to combine WA reduction with family income or remainder interests.
Asset selection
- Direct IRD assets (e.g., pre-tax retirement) to charity where possible; leave step-up assets to family.
- Validate charity qualification and keep contemporaneous acknowledgement letters.
5) Lifetime gifting & basis trade-offs
No Washington gift tax
- Washington has no separate gift tax; completed lifetime gifts can reduce the eventual WA estate (no general “add-back” rule).
- Balance WA savings against loss of step-up and federal transfer/income tax effects.
- Use irrevocable trusts to shift future appreciation while maintaining governance features.
Community property & titling
- Review titling to optimize basis adjustments at the first death and to feed the state-sized bypass trust.
- Coordinate beneficiary designations (TOD/POD/retirement) with overall WA plan.
6) Deductions, valuation & timing
Substantiation
- Executor/administrator commissions & fees, attorney/accountant fees, and debts require invoices, court approvals (if applicable), and proof of payment.
- Appraisals: use local WA appraisers for real property and significant tangibles.
Liquidity & extensions
- Return due in 9 months. If extending to file (via My DOR), plan a tentative payment by month 9 to limit interest.
- Sequence sales/loans and distributions to avoid fire-sale discounts and to match cash needs.
Advisor checklist
During life
- Model couple’s plan with state-sized bypass vs. state QTIP; no WA portability.
- Screen for QFOBI eligibility and preserve documentation.
- Use lifetime gifts judiciously (no WA gift tax) while minding basis and federal issues.
- Align titles/beneficiary designations with WA exclusion capture and liquidity aims.
At death
- Confirm correct exclusion for the date of death; assemble federal schedules (even if pro-forma).
- For nonresidents, document situs and compute apportionment on Addendum #4.
- Calendar month-9 payment; request filing extension in My DOR if needed.
- Attach election statements (QTIP), appraisals, and deduction support to minimize DOR queries.
References
- RCW 83.100 — Washington Estate & Transfer Tax (scope, exclusion, deductions, special deductions).
- WAC 458-57 — Rules (apportionment mechanics, examples, definitions, valuation).
- Washington Department of Revenue — Estate Tax Return & Filing Instructions; My DOR extension/payment; Addendum #4 (apportionment).
- IRS Form 706 & Instructions — federal valuation & marital/QTIP coordination (for documentation where no federal filing is required).