WA Estate Tax: Stay, Move, or Plan- An Honest Analysis
Washington’s estate tax hits where the federal exemption no longer does. Here’s what your options actually look like — and what each one really costs.
Washington is one of fewer than a dozen states with its own estate tax. That used to feel like a manageable footnote. But something changed in 2025: Congress made the TCJA’s expanded federal exemptions permanent, lifting the federal threshold to $15 million per person ($30 million for a married couple) — effectively removing estate tax from the federal conversation for most of our clients.
Which leaves Washington standing largely alone. With a $3 million exemption and no portability between spouses, the state now sits at a $12 million gap relative to the federal threshold. For a married couple in the Pacific Northwest with a $10 million estate, the federal government has zero claim on it. Washington may have a very significant one.
Three questions come up in nearly every conversation we have about this. Should I move? Should I stay and plan around it? Or is there a level at which moving is the rational economic answer? Here’s the honest analysis.
“Washington’s estate tax exemption sat at $2.193 million for years before a brief jump in 2025 — and is now frozen at $3 million. The federal exemption is five times that. That gap — and what it costs — is the estate planning question of the decade for Pacific Northwest families.”
What Changed in 2026 — and What Didn’t
Two things happened this year worth understanding.
At the federal level, Congress passed the One Big Beautiful Bill Act and signed it into law on July 4, 2025. That legislation permanently eliminated the TCJA’s sunset provision, which would have dropped the federal exemption from approximately $13 million back to around $7 million per person. Instead, the federal exemption rose to $15 million per individual ($30 million per couple) and is now indexed to inflation going forward. The cliff that estate planners had been warning about for years simply didn’t arrive.
At the state level, Governor Ferguson signed ESB 6347 in March 2026 — rolling back the 35% top rate that had been in place since July 2025 and restoring rates to the pre-2025 structure. That’s genuinely good news. The top rate is now 20%, and the exemption is frozen at $3 million.
What didn’t change: the $3 million exemption itself. It sat at $2.193 million for years, was briefly raised to just over $3 million in mid-2025, and is now frozen at exactly $3 million. No inflation indexing, no portability, and no sign of movement from Olympia. The gap between WA’s exemption and the federal one is the widest it’s ever been.
| Washington State | Federal (2026) | |
|---|---|---|
| Exemption per person | $3,000,000 | $15,000,000 |
| Exemption — married couple | $6,000,000 (with bypass trust) | $30,000,000 (with portability) |
| Portability between spouses | No — must use bypass trust | Yes — automatic |
| Top tax rate | 20% (on estates >$9M above exemption) | 40% |
| Inflation adjustment | Frozen at $3M (as of July 1, 2026) | Indexed annually |
| Real estate in-state (non-residents) | Taxable in WA regardless of domicile | N/A |
Source: ESB 6347 (signed March 24, 2026); One Big Beautiful Bill Act (July 4, 2025). Federal exemption indexed for inflation; WA exemption frozen.
What the Tax Actually Costs
Washington’s rates are graduated, starting at 10% on the first taxable million (above the $3M exemption) and rising to 20% at the top. For most of our clients, the effective rate falls somewhere between 12% and 16% of the taxable estate.
| Taxable Estate Above $3M | Marginal Rate | Approximate WA Tax |
|---|---|---|
| $3M – $4M (first $1M taxable) | 10% | ~$100,000 |
| $4M – $6M (next $2M taxable) | 14%–15% | ~$380,000 cumulative |
| $6M – $9M (next $3M taxable) | 15%–16% | ~$840,000 cumulative |
| $9M – $12M above exemption | 18%–19% | ~$1.4M+ cumulative |
| Over $12M above exemption | 20% | 20% on excess |
Rates are approximate. WA estate tax is computed on taxable estate (total estate minus $3M exemption and allowable deductions). Consult your estate planning attorney for a precise calculation.
A few things worth noting about these numbers. First, the marital deduction still defers the tax — assets passing outright to a surviving spouse generate no WA estate tax on the first death. The bill comes due on the second death, against one exemption, not two, if no planning was done. Second, Washington calculates estate tax on the full face value of assets — including ones that still carry an embedded income tax bill. Consider a traditional IRA: contributions went in pre-tax and have never been taxed. Your estate will owe WA estate tax based on the IRA’s full balance, and then your heirs will also pay ordinary income tax each time they take a withdrawal. The same issue applies to a privately-held business: if the business is eventually sold, the gain will be taxed as income — but the estate was already taxed on the full value today. This double-tax reality means the true economic cost of a WA estate is often higher than the rate schedule alone would suggest.
Option 1: Move
Let’s address this one directly, because it comes up often and deserves an honest answer rather than a reflexive dismissal.
Moving works. If you establish genuine domicile in a state with no estate tax — Nevada, Arizona, Texas, Florida, Wyoming, South Dakota, and a handful of others — Washington no longer has a claim on your estate. For someone with a $10–$15 million estate and genuine flexibility about where they live, the present value of avoided estate tax can reach seven figures. That’s a meaningful number, and we’re not going to pretend otherwise.
But “moving” in this context has a specific legal meaning that goes well beyond forwarding your mail.
What Genuine Domicile Change Actually Requires
Physical presence — you must actually live there, spending the majority of your nights in the new state. “Snowbird” arrangements where you maintain a primary home in WA typically don’t survive scrutiny.
Intent to remain — you must genuinely intend the new location as your permanent home. Courts look at where you vote, where you worship, where your doctors are, where your club memberships are, where your family is.
Sever Washington ties — driver’s license, vehicle registration, banking relationships, and social affiliations should migrate to the new state.
Real estate trap — even as a non-resident, Washington real estate you own at death remains subject to WA estate tax. Moving out of state does not eliminate tax on in-state property.
Document the change — a written domicile declaration, updated estate planning documents reflecting the new domicile, and contemporaneous records are essential.
Beyond the logistics, the harder question is whether it’s actually the right answer for the individual. Our clients on the Eastside have built their lives here — their families, their business relationships, their communities, their grandchildren’s schools. They’ve spent decades building something that is genuinely rooted in this place. The math on moving can look compelling in a spreadsheet, and still be the wrong decision when set against everything that would be traded away.
There’s also a second-order cost worth considering: the WA capital gains tax, at 7% on long-term gains above approximately $262,000 per year, does not follow you if you leave. For clients who are no longer realizing significant capital gains — typically in or near retirement — this consideration is less relevant. For clients who are still building and monetizing, the interaction between the capital gains tax and the estate tax is part of a fuller analysis.
Our view: moving makes sense when it aligns with where you genuinely want to live, not primarily as a tax maneuver. We’ve had clients for whom it was the right decision — they’d long wanted to spend time in Arizona or Nevada, had family reasons to be elsewhere, and the tax math accelerated a choice they were already making. We’ve had others for whom the analysis was clear on paper and obviously wrong in practice. The honest answer is that this is a life decision first, and a tax decision second.
Option 2: Stay and Plan
For most of our clients, the right answer is to stay and plan well. Washington’s estate tax is real, but it is also plannable. Strategies exist that can substantially reduce or eliminate the state estate tax exposure while you remain in the Pacific Northwest, keep your relationships intact, and continue building the life you’ve built here.
The most important strategies, in roughly the order we encounter them:
Bypass Trust — the single most important tool for married couples.
Washington does not allow portability. Under federal law, a surviving spouse can inherit the deceased spouse’s unused federal exemption — effectively doubling the couple’s protection. Washington provides no such mechanism. If the first spouse to die leaves everything outright to the surviving spouse (as most simple wills do), the deceased spouse’s $3 million exemption is wasted.
A bypass trust — sometimes called a credit shelter trust — funds up to the WA exemption amount ($3 million) into a trust on the first death. The surviving spouse can benefit from the trust, but those assets are not included in the surviving spouse’s taxable estate. Done correctly, a married couple captures $6 million in combined WA exemptions instead of $3 million. For a couple with a $6 million estate, this is the difference between a meaningful tax bill and no WA estate tax at all.
If your current documents don’t include WA-specific bypass trust provisions, this is the first thing to fix.
Lifetime Gifting.
The annual gift tax exclusion — $19,000 per recipient per year in 2026 — removes assets from your estate without triggering gift tax. A couple with three adult children and six grandchildren can transfer $342,000 per year out of their estate entirely. Over ten years, that’s $3.4 million removed from the WA taxable base. Combined with the appreciation those assets would have generated inside the estate, the effect compounds meaningfully.
Washington has no state gift tax, which creates a modest structural advantage: gifts made during lifetime remove assets from the WA estate regardless of the federal treatment. This makes gifting strategies particularly effective for WA residents.
Spousal Lifetime Access Trust (SLAT).
A SLAT is an irrevocable trust established by one spouse for the benefit of the other. The donor spouse transfers assets into the trust, removing them from their WA taxable estate permanently. The non-donor spouse retains access to the trust during their lifetime. On the non-donor spouse’s death, trust assets pass to children or other beneficiaries outside the estate.
SLATs are particularly useful when an estate is large enough that lifetime gifting alone won’t close the gap, and the couple doesn’t want to wait. Assets transferred today leave the estate at current values, and all future appreciation accumulates outside the taxable estate.
Charitable Strategies.
Charitable remainder trusts, charitable lead trusts, and donor-advised funds each offer paths to reduce the taxable estate while supporting causes that matter to the family. For clients who have philanthropic intent — and many of our clients do — integrating charitable giving into the estate plan can accomplish multiple goals simultaneously. A well-structured charitable lead trust, for example, can provide income to a charity for a term of years, then pass remaining assets to children at a reduced gift or estate tax value.
Life Insurance to Fund the Tax.
Sometimes the most practical answer isn’t eliminating the estate tax — it’s funding it efficiently. An irrevocable life insurance trust (ILIT) holds a life insurance policy outside the taxable estate. At death, the proceeds pay into the trust and are available to cover the WA estate tax bill without requiring heirs to liquidate assets at an inopportune time. For clients with estates tied up in real estate, a family business, or concentrated stock positions, this approach protects against a forced sale at the worst possible moment.
The Interaction with Concentrated Stock and Business Value
One aspect of WA estate tax planning that deserves explicit attention: the interaction with concentrated equity positions and closely-held businesses.
Many of our clients carry a substantial portion of their net worth in one or two positions — employer stock, a privately-held business, or a real estate portfolio. These assets present two intersecting challenges. First, they’re illiquid, meaning the estate tax bill must be paid from other assets or through liquidation. Second, they’re often subject to deferred taxes that the estate tax calculation doesn’t account for — the estate is taxed on the gross value of a pre-tax retirement account or a business with embedded gain, and the heirs will also eventually pay income tax on those same assets.
For clients in this situation, the estate planning conversation connects directly to the conversations we’re already having about diversification, the CEDAR model, and exit planning. The timing of a business sale or a stock liquidation program, and how those proceeds are structured, can have significant implications for the estate tax picture as well. These aren’t separate conversations.
So: Stay, Move, or Plan?
Here’s the honest answer: for the vast majority of our clients, the right choice is stay and plan well. The strategies available within Washington are genuinely effective, and the cost of leaving — measured in relationships, community, and quality of life — is real and often underestimated.
Moving becomes a reasonable analysis when the following conditions are true simultaneously: the estate is large enough that avoided tax is material in absolute terms (typically $10M+), the client has genuine lifestyle flexibility about where they want to live, the move would be authentic rather than primarily tax-driven, and the non-tax costs of leaving are manageable. When all four are true, the economics merit a serious conversation. When any one is missing, the math usually doesn’t justify uprooting a life.
The one thing that’s never the right answer: doing nothing. A simple will that leaves everything to the surviving spouse, with no bypass trust provisions, no gifting program, and no charitable intent, is a plan that wastes one spouse’s entire WA exemption. For a couple with an $8 million estate, that oversight can cost $300,000 to $500,000 at the second death — a tax bill that could have been substantially reduced or eliminated with straightforward planning.
Washington will continue to have this conversation with your heirs. Our job is to make sure you’ve had it first.
Want to know what WA estate tax your estate would owe — and what it would take to reduce it?
mike@privateasset.com • privateasset.com • Kirkland, WA
This post is for informational and educational purposes only and does not constitute legal or tax advice. Estate tax laws are subject to change. Washington estate tax rates and thresholds shown are approximations based on current law (ESB 6347, effective July 1, 2026). Individual situations vary. Consult a qualified estate planning attorney and tax advisor before making any planning decisions. PAM is a registered investment adviser and does not provide legal advice.