Christopher S. Mulvaney,

Attorney and Counselor-at-Law

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THIS WEBSITE INCLUDES GENERAL INFORMATION & THE OPINIONS OF CHRISTOPHER S. MULVANEY. IT IS INTENDED TO STIMULATE A BASIS FOR QUESTIONS RELATED TO YOUR PARTICULAR FACTUAL CIRCUMSTANCES — BEFORE YOU ACT.  THIS WEBSITE DOES NOT CONSTITUTE LEGAL ADVICE. IF YOU WANT LEGAL ADVICE, PLEASE MAKE A ZOOM APPOINTMENT TO SPEAK WITH ME.

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Gonzaga University School of Law – Spokane, Washington – Class of 2002 – Cum Laude The Latin phrase “Deo patriae, scientiis, artibus” translates to “For God and country through sciences and arts”.  The initials A.M.D.G. on the seal of Gonzaga Law School stand for Ad Majorem Dei Gloriam, which is Latin for “For the Greater Glory of God” the Motto of the Society of Jesus (Jesuits): a Catholic religious order founded by St. Ignatius of Loyola.

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“I don’t see why a man shouldn’t pay an inheritance tax. If a Country is good enough to pay taxes to while you are living, it’s good enough to pay in after you die. By the time you die you should be so used to paying taxes that it would just be almost second nature to you.”
– Will Rogers, “They’ve Got a New Dictionary at Ellis Island,” 28 Feb. 1926, in Will Rogers’ Weekly Articles 2:157, 158 (James M. Smallwood ed. 1980)

Avoiding or minimizing Washington State estate tax under the new laws effective July 1, 2025, requires proactive estate planning. Here’s a breakdown of strategies to consider: 

1. Utilize the Increased Exemption Amount:

• Higher Exemption: The new law increases the Washington estate tax exemption from $2.193 million to $3 million per individual, starting July 1, 2025.

Portion of Taxable Estate Exceeding Applicable Exclusion Amount  Rate on Whole Estate	Rate as of July 1, 2025 This means that no tax is due on the first $3M.
$0 – $1,000,000 2.5%	10% – $4M pays $100,000.
$1,000,001 – $2,000,000 5.0%	15% – $5M pays $100,000 + $150,000 = $250,000
$2,000,001 – $3,000,000 7.0%	17% – $6M pays $250,000 + $170,000 = $420,000
$3,000,001 – $4,000,000 8.71%	19% – $7M pays $420,000 + $190,000 = $610,000
$4,000,001 – $6,000,000 10.5% 11.88%	23% – $8M pays $610,000 + $230,000 = $840,000 $9M pay $840,000 + $230,000 = $1,070,000
$6,000,001 – $7,000,000 13.3%	26% – $10M pays $1,070,000 + $260,000 = $1,330,000
$7,000,001 – $9,000,000 14.81% 16.08%	30% – $11M pays $1,330,000 + $300,000 = $1,630,000 $12M pays $1,630,000 + $300,000 = $1,930,000
More than $9,000,000 17.53%	35% – $13M pays $1,930,000 + $350,000 = $2,280,000

Inflation Adjustment: This new exemption will be adjusted annually for inflation beginning in 2026, which can help reduce estate tax exposure for more households over time.

• Review Your Estate Plan: If your estate value is close to or exceeds the $3 million exemption, it’s crucial to review and update your estate plan to potentially take advantage of this increased threshold. 

2. Consider Gifting Strategies:

• Reduce Estate Size: Making lifetime gifts can reduce the overall value of your estate, potentially bringing it below the taxable threshold.
• Annual Gift Tax Exclusion: You can give up to $19,000 per person per year in 2025 without triggering federal gift tax reporting requirement.
• Federal Lifetime Exemption: You can use your federal lifetime exemption, which is $13.99 million per individual for 2025, to make very large tax-free gifts.
• Consult a Tax Professional: It’s crucial to consult with a tax professional and investment advisor before making significant gifts to understand the tax implications, especially if you anticipate your gifts potentially exceeding the federal lifetime exemption. 

3. Explore Irrevocable Trusts:

• Irrevocable Trusts: Creating an irrevocable trust and transferring assets into it can remove those assets from your taxable estate.
• Estate Tax Benefits: Assets held in an irrevocable trust are generally not subject to estate tax.
• Types of Trusts: Various types of trusts exist, such as Washington Exempt Trusts or bypass trusts, and you should consult with Christopher S. Mulvaney to determine the best option for your situation. 

4. Leverage the Marital Deduction:

• Unlimited Marital Deduction: If you’re married and your spouse is a U.S. citizen or Green Card holder, you can leave an unlimited amount of assets to them without incurring estate taxes.
• Washington Exemption Trust: Since Washington doesn’t have estate tax portability, married couples should consider using a Washington Exemption Trust to preserve the first spouse’s exemption and potentially double the amount that can pass to heirs tax-free. 

5. Strategic Life Insurance Planning:

• Beneficiary Designation: Naming beneficiaries for your life insurance policy can ensure that the death benefit is paid directly to them, outside of your taxable estate.
• Transfer Ownership: To avoid having the death benefit included in your estate, you can transfer ownership of the policy to someone else, such as an irrevocable life insurance trust. 

6. Consider Relocation (for high-net-worth individuals):

• State of Residence: Washington State taxes the estates of residents or non-residents who own real property within the state.
• Potential Benefits: For individuals with very large estates (e.g., over $30 million), relocating to a state with no estate tax could significantly reduce or eliminate estate tax liability.

Twelve States and the District of Columbia Levy State Estate Tax (Top Marginal Rates in 2025-Exemption):

Washington (35%-$3M);, Hawaii (20%-$5.49M); Illinois (16%-$4M);

Massachusetts (16%-$2M); Minnesota (16%-$3M); New York (16%-$7.16M); 

Oregon (16%-$1M); Rhode Island (16%-$1.8M); Vermont (16%-$5M); D.C. (16%$4.87M;

Maine (12%-$6.8M); Connecticut (12%-$13.99M).

The only State with a State Level Gift Tax is Connecticut with a Top Marginal Tax Rate of Twelve Percent (12%).

Nine states do not have a State Income Tax: 

Alaska; Florida; Nevada; New Hampshire; South Dakota; Tennessee; Texas; Washington; Wyoming. 

Eight states have no state income tax and no state estate tax:

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming.

• Consult with Advisors: This is a complex decision that requires careful consideration and consultation with estate planning attorneys, tax advisors, and investment advisors. 

7. Charitable Donations:

• Reduce Taxable Estate: Gifting to qualified charities during your lifetime or through your estate can reduce your taxable estate.
• Tax Benefits: You may also receive income tax deductions for charitable contributions. 

A way to combine these benefits with lifetime income and assets protection is a Charitable Remainder Trust.

I had a client with $4 million, who created two Charitable Remainder Trusts, one for each of his daughters with $1 million each. This avoided WA Estate Tax, generated 5% income for life for his daughters, and provided asset protection for him and his daughters. 5% of $1 million is $50,000. His daughters received that amount paid out weekly. When each daughter passes away decades in the future, the charity gets all of the principal in the account. The amount will be much higher than $1 million because the average stock market return is about 10%. So, about $100,000 per year will be added to the account, and $50,000 removed, meaning that the next year each daughter will receive about $52,500, and so on throughout their lives.

The father cannot lose the $2 million in principal and neither can the daughters because neither owns it. So, devastating medical expenses, bankruptcy, divorce, alcohol, drug or gambling addiction cannot reduce the principal. This provided a $2 million charitable gift tax deduction, estate tax reduction, annually increasing lifetime income, and asset protection. This strategy checked all of the boxes for this client’s goals.

Important Considerations:

• Consult with Professionals: Estate planning is a complex process, and it’s essential to work with qualified estate planning attorneys and tax advisors who can provide personalized guidance based on your specific financial situation and goals.
• Federal Estate Tax: Keep in mind that Washington estate tax is in addition to the federal estate tax, which has its own exemptions and rates.
• Ongoing Review: Regularly review your estate plan to ensure it reflects your current financial situation, family dynamics, and legal requirements. 

By implementing these strategies and working closely with Christopher S. Mulvaney, you can potentially reduce or eliminate Washington State estate tax and ensure that your assets are distributed according to your wishes.

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Washington State residents can meet with me in Zoom/DocuSign from anywhere in the world, and I can notarize their electronic signatures because I am a remote online notary.  Just email me an image of your photo ID.

 

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