While most people recognize that planning for the future is an important endeavor, the majority of Americans have not taken the time to put an estate plan in place. According to recent studies, only 24 percent of Americans report that they have a valid will—an alarming decrease from 33 percent in 2022. There are many reasons why people have not created an estate plan, ranging from the mistaken assumption that estate plans are only for high-net-worth or elderly individuals to simple procrastination. Even if you do not believe that an estate plan is necessary at this stage in your life, it’s essential to understand that an estate plan encompasses so much more than identifying your beneficiaries and allocating your assets accordingly. For instance, an estate plan can include an Advance Directive for Health Care that documents your wishes regarding medical care or interventions in the event that you are incapacitated and unable to articulate your decisions. Should you suffer an unexpected injury that renders you unable to communicate or make health care decisions, this document will ensure that your wishes are known and respected. It is never too soon to start putting an estate plan in place to protect you and your loved ones.
As you begin to think about the future, it can be helpful to enlist the guidance of a highly qualified and knowledgeable Washington estate planning attorney who can help you understand your options. Since Washington state has one of the highest estate tax rates in the country, exploring strategies to reduce these tax obligations can empower you to make informed decisions with greater certainty as you seek to preserve the integrity of your estate, both now and in the future. Let’s take a look at how Washington’s estate tax affects your approach to the estate planning process and some strategies you can use to reduce the impact and ensure your legacy.
Understanding Washington’s Estate Tax
Like Oregon (its neighbor to the south), Washington imposes one of the highest estate tax rates in the country. Moreover, Washington also recognizes a relatively low exemption threshold when compared to that at the federal level. As a result, individuals and families can be unpleasantly surprised to learn that an estate is subject to substantial estate tax obligations, which can complicate matters regarding succession planning and other estate planning considerations. Currently, Washington state levies an estate tax on all estates valued above $2.193 million, with tax rates ranging from ten to twenty percent (depending on the size of the estate). When compared to the federal estate tax threshold, which is currently set at $13.99 million per individual, Washington’s estate tax threshold is significantly lower (meaning that the estate of many more individuals and families will be subject to Washington’s estate taxes). If you have questions about your specific estate, a skilled and experienced Washington estate planning attorney can provide you with customized guidance at your convenience.
Who is Most Affected By Washington’s Estate Tax?
Many Washington state residents are surprised to learn that their state leads the nation in imposing the highest estate tax rate. According to several lawmakers, these taxes are valuable sources of funding for K-12 education. However, those who stand to be most affected by these significant estate taxes are the “estates of individuals and small businesses that are slightly above the $2.2 million threshold and can’t afford the legal expertise that would help cut their tax bills.” In other words, those who do not take the time to explore their Washington estate tax exemption options or other strategies for reducing their estate tax obligations risk facing steep tax liabilities when the time comes. Working with a knowledgeable Washington estate planning lawyer can help you and your family prepare for the future and address tax obligations in more purposeful and strategic ways.
Reducing Washington Estate Taxes
If you’re wondering how to reduce estate taxes in Washington, you are far from alone. Fortunately, there are several tools you can use to preserve your assets and minimize tax obligations, ensuring that more of your estate remains in the hands of you and your family, where it belongs. Below are just a few of the strategies that you can consider including in your estate plan.
Trust Strategies For Estate Taxes
Many Washington residents find that setting up a trust helps them support their estate planning vision. Irrevocable trusts can be highly effective tools for reducing estate taxes, as they remove assets from the taxable estate. In other words, the trusts assume ownership of these assets, allowing the value of your estate to fall below the estate tax threshold or reduce the overall tax rate. You can learn more about trusts and their potential benefits by discussing your goals with a trusted estate planning attorney.
Charitable Giving
If your estate planning vision includes supporting a cause you’re passionate about, you can set up a Charitable Remainder Trust to achieve this goal white reducing your taxable estate. Working with a trusted and caring Washington estate planning attorney can help you understand more about your options for incorporating a charitable trust into your estate plan.
Lifetime Gifts
You can reduce the taxable value of your estate over time by taking advantage of the federal annual gift tax exclusion. Currently, individuals are able to give $19,000 to individuals once a year without any tax liabilities or obligations. By incorporating this gift strategy into your estate planning approach, you can gradually transfer wealth to your beneficiaries while reducing your estate tax obligations.
Discuss Your Estate Planning Vision Today
Not only is an estate plan an effective way to protect your legacy, but taking this step can help to minimize estate tax obligations and avoid unpleasant surprises and challenges in the future. If you are interested in exploring your estate planning options, the dedicated and highly trusted estate planning team at Myatt & Bell, P.C., is here to help you articulate your goals and prepare for a bright and secure future. Please call our Vancouver, Washington office at (360) 360-0212 or our Portland, Oregon office at (503) 641-6262 to get started with a caring and experienced estate planning attorney.
The content on this blog is for general informational purposes only and does not constitute legal advice. The author of this blog is not an attorney, and the views expressed are solely those of the author. Always seek the advice of a qualified attorney for legal guidance regarding your unique situation.
