(Note to our Blog readers: we first posted this article about a month ago. We are re-posting it this week as part of our focus on estate taxes.) 

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“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” 

So wrote Benjamin Franklin in a letter in 1789. While Franklin wasn’t the one who originated the phrase “death and taxes,” his use has become the most famous, and the most frequently-cited, even by those who have no idea Franklin said it. Moreover, when the two ideas are joined together – as they are with the estate tax – it’s bound to get people’s attention.  

Estate taxes tend to be controversial. Perhaps the best-known estate tax is the one levied by Uncle Sam at the federal level. However, residents of at least a dozen states (plus the District of Columbia) must also contend with estate taxes at the state level. Most of these are northern-tier states, stretching from the Pacific Northwest to New England, and each has its own set of rules and exemptions that are guaranteed to keep tax attorneys and estate planners busy. 

For residents of Washington State, home to AgingOptions and Life Point Law, a new, updated set of estate tax regulations took effect on July 1, 2025. Today we’re examining those new rules, because knowing your tax liability and planning wisely can save your estate significant dollars. Let’s take a closer look.  

(For those who want to read the State Senate Bill Report on the new law, you’ll find the text here.) 

Understanding Estate Tax vs. Inheritance Tax 

Before we look into the impact of the new law, we want to clarify one bit of terminology that sometimes triggers confusion. It’s the important distinction between estate tax and inheritance tax. 

Basically, estate tax, as multiple sources we reviewed have explained, is charged by the state or federal government against the unprotected assets you own when you die – in other words, your estate. The estate tax is paid by your estate itself. 

By contrast, inheritance tax is paid by your beneficiaries – the ones who receive something from you when you pass away. The beneficiary pays the inheritance tax based on the value of the assets they received. 

As noted above, while twelve states (plus DC) levy an estate tax, only five currently charge an inheritance tax. At present, our sources say, there are no states which levy both an estate tax and an inheritance tax. 

First, the Good News: A Higher Exemption Amount 

Here in Washington State, the new estate tax rules now in effect offer some important good news for many Washington taxpayers, according to multiple sources we explored for this article on the Blog. The biggest positive change is in the amount of your estate that will be exempt from estate taxes entirely. 

As Bellevue’s Davies Law Office told its clients, “Currently, estates in Washington owe estate tax if they exceed approximately $2.2 million. Starting July 1, 2025, that threshold will jump to $3 million. This is great news for many Washingtonians — it means more of your assets can be passed to your heirs without being subject to estate tax.” 

Under the new law, this exemption level is scheduled to rise with inflation over time. This means, as estates increase in value over time, more of that growth will be tax-exempt, at least here in the Evergreen State. 

The Bad News: New Tax Brackets Peak at Nation’s Highest Level 

While it’s nice for the state to have bragging rights, we’re not sure that saying “We’re number one in estate tax rates!” is a strong selling point. But under the new rules, it’s still true. 

The Evergreen Small Business newsletter published by Nelson CPA in Redmond wrote about this in a recent post. “Washington State levies an estate tax of up to 35 percent on estates of decedents dying on or after July 1, 2025,” says the post. “That new rate is by far the highest estate tax rate in the country.” 

The top estate tax rate under the now-expired guidelines: 20 percent. 

State officials argue that the new rates are “more progressive,” in that higher-value estates will pay higher tax rates while smaller estates may pay the same or less. Let’s summarize the new estate tax brackets: 

Washington State Estate Tax Exemption Rates 

There are several sources (including the Senate report cited earlier) showing tables of the new rates. Unfortunately, the format of our Blog makes it difficult to include tables and charts. 

But we can summarize the basics. Estate amounts over the $3 million exempted will pay the following rates: 

*Up to $1 million, 10 percent 

*Between $1 million and $2 million, 15 percent 

*Between $2 million and $3 million, 17 percent 

*Between $3 million and $4 million, 19 percent 

*Between $4 million and $6 million, 23 percent 

*Between $6 million and $7 million, 26 percent 

*Between $7 million and $9 million, 30 percent 

*Over $9 million, 35 percent 

This is a graduated tax. That means the rates shown apply to each segment as the value of the estate increases. As an over-simplified example: a $6 million estate would owe taxes on $3 million of that amount after the exemption. The first one-third would generate $100,000 in taxes, the second $150,000, and third $170,000. The total tax liability would be $420,000. 

The Bottom Line: Plan Now to Avoid a Bigger Bite in the Future 

The new law, while exempting more value for modest-sized estates, will have a profound impact on those with larger asset values. (We should note that this also applies to small business owners. The new law increases the deduction for qualified family-owned businesses to $3 million, up from $2.5 million.) 

Experts advise that now is the time to revisit your will or trust strategy. Those with businesses or other significant assets should anticipate that increased tax rates will almost certainly affect their heirs. The best way to avoid a painful surprise down the line is to engage in strategic, proactive planning now, in order to minimize taxes and preserve your legacy. 

Rajiv Nagaich – Your Retirement Planning Coach and Guide 

The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public. Retirement: Dream or Disaster joins Rajiv’s ground-breaking DVD series and workbook, Master Your Future, as a powerful planning tool in your retirement toolbox. As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.  

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read. 

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more. 

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.  

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important message. And remember, Age On, everyone! 

(original article)