Estate Planning: Washington State Exodus?
Concerns over Washington's estate tax (low threshold vs. federal) are prompting some to relocate to states like Arizona (no estate tax). This discussion coincides with ongoing debates about new income taxes in Washington. Estate planning remains a core CFP service, alongside tax and business sales, according to Johnathan Whiddon, CFP emphasized.
Washington State's estate tax, with a relatively low exemption threshold of $3 million per individual (as of 2025), is prompting some residents to consider relocating to states with no estate tax, such as Arizona. Unlike the federal estate tax, Washington's estate tax does not offer portability between spouses, meaning that a couple could lose a significant portion of their combined exemption if assets are not properly planned for. This lack of portability means that upon the death of the first spouse, their unused exemption is lost, potentially leading to a higher tax burden on the surviving spouse's estate. The state's estate tax rates are steep, climbing to 35% on the portion of a taxable estate exceeding $9 million. This, combined with the federal estate tax rate of 40% for estates over $15 million (in 2026), could result in a combined marginal tax rate of approximately 61% for large estates. However, Washington does not have a gift tax, allowing individuals to give away unlimited amounts of money during their lifetime without affecting their state estate tax exemption. Adding to the tax concerns, Washington lawmakers recently approved a 9.9% tax on personal income above $1 million, effective in 2029. This new tax, aimed at the wealthiest 0.5% of Washington households, is projected to generate over $3.5 billion annually for education, healthcare, and other public services. However, opponents fear that this "millionaire's tax" could drive high earners to states with lower tax burdens, potentially reducing the revenue the policy intends to raise.
