WA estate tax allows spouses to exclude their personal residence from being taxed.

If you call Seattle home, then you're probably well aware of the Washington Estate Tax and its potential impact on your loved ones after you pass away. But if you happen to be out of the loop, you can read more about it in our comprehensive discussion on the subject.

So, here's a quick recap: Washington state requires an estate tax return if the total value of your assets at the time of your death exceeds $2,193,000. With the current real estate market in Washington, it's safe to assume that your primary residence is a significant contributor to that number.

However, there's some good news on the horizon. A proposed amendment aims to fix a legislative glitch that has prevented the exclusion amount from keeping up with inflation. And on top of that, a recent change to the state's estate tax law could allow you to exclude the value of your home if it passes on to your spouse after you're gone.

But let's take a closer look at what has and hasn't changed when it comes to whether or not your estate will need to file a Washington estate tax return.

The not-so-great news is that the applicable exclusion amount remains at $2,193,000. Originally set at $2,000,000, the law was supposed to adjust this amount annually to account for inflation, with the Bureau of Labor Statistics (BLS) index being used as a reference. However, the BLS has since revised its methods and now publishes the relevant Consumer Price Index (CPI) data under a different name.

As a result, the Department of Revenue (DOR) has no choice but to require returns for estates worth more than $2,193,000, as the specific index mentioned in the law no longer exists. The legislature has recognized this issue and introduced House Bill 1484 in early 2023, which proposes to update the exclusion amount to $2,659,000 for estates of those who pass away on or after August 1, 2023.

The bill also aims to remove any reference to a specific index and instead adopts a more general approach to inflation adjustment by referencing the statistic for "the geographic area sample that includes Seattle and surrounding areas." This should prevent the glitch from happening again in the future.

However, despite multiple attempts, House Bill 1484 did not make it through the Washington House of Representatives in 2023, and no further action was taken during the 2024 regular session. But there's still hope, as the House's 2025 session begins on January 13, 2025.

So, the bottom line is this: if the total value of your estate exceeds $2,193,000 at the time of your death, you'll still be required to file a Washington estate tax return. But don't lose hope just yet, because there's some good news to come.

If your primary residence is the main factor pushing your estate over the threshold, there's a high chance that you can exclude its value, as long as you're married and your estate meets a few other criteria.

While House Bill 1484 was stuck in the House, another proposal, House Bill 1867, sailed through both legislative bodies and was signed into law by the Governor in March 2024. This new law amends the estate tax statute and states that no return is required if three conditions are met.

Firstly, your estate must not have any other requirements to file, such as making a specific election. For example, if your estate plan includes a Qualified Terminable Interest Property (QTIP) election, your executor will still need to file a return, even if excluding your primary residence would bring your estate under the threshold.

Secondly, your surviving spouse must inherit your primary residence upon your passing. If the home goes to someone else or funds a bypass trust, then its value will need to be included in your estate. It's worth noting that Washington state recognizes registered domestic partnership couples as spouses.

Lastly, the value of your estate, after excluding your primary residence, must fall below the applicable exclusion amount. If your other assets push your estate over the threshold, then a return will be required, and the value of your primary residence will need to be included in the gross estate.

For more information and helpful examples, the DOR has provided additional resources here.

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