For a decedent whose “gross estate” exceeds two million dollars, a Washington State estate tax return must be filed with the Department of Revenue (RCW 83.100.50).
The term “gross estate” is essentially the value of the decedent’s property wherever situated, before any deductions, defined under IRC Section 2031.
While filing a return at the two million dollar threshold is required, there may be no tax imposed:
First, each Washington State resident decedent is entitled to an annually adjusted applicable exclusion amount. The Washington State estate tax will only be assessed on the value of assets in excess of the exclusion amount. The 2016 applicable exclusion amount is $2,079,000. Thus, for a decedent dying in 2016, the assets in excess of $2,079,000 will be taxed at a graduated rate of between 10% to 20% (RCW 83.100.040). If the estate value falls between $2,000,000 and $2,079,000, a tax return must be filed, but no tax is imposed.
Second, an unlimited marital deduction allows a decedent to transfer assets of unlimited value to a surviving spouse, completely free of estate tax (RCW 11.108.020 and IRC 2056). If the estate value exceeds $2,000,000, but the assets are transferred to the surviving spouse, a tax return must be filed, but no tax is imposed.
Third, transfers at death to entities with qualified public, charitable and/or religious purposes allow a decedent to pass assets of unlimited value free of estate tax (IRC 2055). Thus, if the estate value exceeds $2,000,000, but the assets are transferred to an entity with a qualified public, charitable and/or religious purpose, a tax return must be filed, but no tax is imposed (WAC 458-57-015(3)(b)).
When an individual passes away in Washington State, it is important to consult with your attorney to determine if a Washington State estate tax return must be filed, if any tax will be due, and perhaps most importantly, to determine what steps are possible to reduce the estate tax at the death of a surviving spouse.