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In
the Wake of Hemphill:
Washington Legislature Enacts New Estate Tax
By James
A. Flaggert and Peter
J. Johnson
[May 2005]
In response
to the Washington Supreme Court’s February 2005 effective
repeal of the Washington estate tax in Estate of Hemphill v.
Washington State Department of Revenue, 153 Wn.2d 544, 105
P.3d 391 (2005), the Washington State Legislature enacted a new
Washington estate tax effective May 17, 2005. Under this stand-alone
tax, personal representatives must file Washington Estate Tax Returns
for estates of Washington resident decedents who owned property
with a value in excess of $1.5 million (for decedents who die between
May 17 and Dec. 31, 2005), or with a value in excess of $2 million
(for decedents who die in 2006 and thereafter). If a decedent’s
estate is worth more than the applicable exemption and includes
property located outside Washington, the Washington estate tax is
reduced proportionately. The Washington estate tax exemptions are
currently identical to the federal estate tax exemptions until 2009,
pending any changes Congress may make to the federal estate tax
exemptions.
Washington
estate tax is imposed at rates that begin at 10 percent on estate
property in excess of the exemption amount, and reach a maximum
rate of 19 percent for estate property worth more than $9 million
over the exemption amount. The effect of these rates is somewhat
dampened because Washington estate tax will be deductible on a federal
estate tax return. This new tax law exempts farmland and some timberland
from the estate tax under certain circumstances, repeals the Washington
generation-skipping transfer tax, and recognizes a deduction for
assets passing to a surviving spouse or in a trust for a surviving
spouse in certain forms. Notably, this new tax remains in effect
whether or not Congress repeals the federal estate tax.
The new Washington
tax may increase the overall tax payable by large estates. Accordingly,
it may be desirable to make gifts up to the amount of the federal
gift tax exemption (currently $1 million) during life and, in particular,
in certain "deathbed" situations. Please contact us if
you have any questions about the new Washington estate tax or its
application to an estate planning situation.
For
more information, please contact:
Other
DWT contacts:
Steven
W. Andreasen, Seattle, (206) 628-7613, SteveAndreasen@dwt.com
Richard
A. Klobucher, Bellevue, (425) 646-6131, RickKlobucher@dwt.com
Douglas
S. Lloyd, Seattle, (206) 628-7748, DougLloyd@dwt.com
Malcolm
A. Moore, Seattle, (206) 628-7728, MalcolmMoore@dwt.com
Kimbrough
Street, Seattle, (206) 628-7717, KimStreet@dwt.com
This
Advisory is a publication of the Trusts and Estates Group of Davis
Wright Tremaine LLP. Our purpose in publishing this Advisory is
to inform our clients and friends of recent developments in the
industry. It is not intended, nor should it be used, as a substitute
for specific legal advice as legal counsel may be given only in
response to inquiries regarding particular situations.
Copyright
© 2005, Davis Wright Tremaine LLP.
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