Those engaged in the estate planning process in Washington may have learned that there are a number of strategies one can employ to avoid liabilities against their estates (thus preserving more assets to pass on to their beneficiaries). Yet many may believe that there is no way to avoid estate taxes.
That may not necessarily be true. There are measures to place to limit (or potentially even avoid) one estate tax liability that one can easily incorporate into their estate plans.
Federal estate tax portability
The federal government sets an estate tax exemption threshold annually. According to information shared by Forbes Magazine, the threshold for 2020 is $11.58 million per person.
An additional benefit is also available known as estate tax portability. The unlimited marital deduction allows spouses to pass money between each other without it being subject to tax. Thus, one can leave their assets to their spouse upon their deaths and preserve their entire estate tax exemption amount. Portability then allows their surviving spouse to claim that unused exemption in combination with their own exemption. Per the Internal Revenue Service, a surviving spouse can take advantage of this benefit by filing an estate tax return claiming portability within nine months of their spouse’s death.
Washington’s estate tax guidelines
The state of Washington also imposes a local estate tax on its residents. It also has an estate tax exemption, which is $2.193 million. This means that if the total taxable value of one’s estate comes in below that amount, it will not be subject to Washington’s estate tax. Unfortunately, Washington state does not extend the benefit of portability to local residents. However, some estate planning tools can be used to take advantage of both spouses’ $2.139 million exemption.