Death Now Less Taxing in Washington

The Washington Supreme Court eliminates state's estate tax

The Supreme Court eliminated the differences between State and Federal rules regarding taxable estates in Washington. You probably remember that the Congress passed legislation in 2001 that raises the threshhold for a taxable estate over the next several years, and eliminates estate taxes in 2010. Washington had never increased their threshhold accordingly, so individuals were having to deal with two different sets of rules for estate taxes. Even though an estate was exempted from federal tax, it could have a Washington liability.

This difference complicated financial planning and prevented Washington residents from enjoying the estate tax relief contemplated by Congress. The Supreme Court decided that Washington was only ever entitled to a portion of the federal tax. If there were no federal tax, Washington had no right to collect the state's portion.

As a result, estates that paid Washington will receive at least a partial refund of their estate taxes. If an estate was completely exempt from Federal tax, it looks like they will receive a full refund from Washington.

This is the type of change that makes a huge difference here in the financial and estate planning community. Differing sets of standards complicate the planning substantially, and simplification will help individuals better understand the rules.