Estate taxes in Washington state have the potential to significantly impact the wealth you pass on to your heirs. However, not everyone has to pay them, and whether you do depends on the value of your estate.
If you do wind up having to pay estate taxes, there are certain strategies you can employ to reduce your tax burden and help ensure that your assets undergo preservation for your loved ones.
Leverage the annual gift exclusion
The annual gift exclusion gives you a way to diminish your estate tax liability. In Washington, you can give a specific amount each year to your heirs or beneficiaries without incurring gift taxes. By making annual gifts, you can reduce the size of your taxable estate over time. Be mindful of the annual gift tax exclusion limit, though, as exceeding it may result in gift tax consequences.
Harness the spousal exemption
Married couples in Washington can take advantage of the spousal exemption, which allows for unlimited transfers of assets between spouses, both during their lifetimes and at death, without incurring estate taxes. By structuring your estate plan to optimize this exemption, you can protect your wealth for your surviving spouse and potentially reduce estate taxes.
Explore family limited partnerships
Family Limited Partnerships are a valuable tool for estate tax reduction. By transferring assets like real estate or investments into an FLP while maintaining control as the general partner, you can lower the taxable value of those assets. You may then gift the limited partnership interests to family members, further decreasing your taxable estate.
According to SmartAsset, estate tax rates in Washington vary but typically fall somewhere between about 10% and 20%. Taking proactive steps to reduce your estate taxes helps ensure that as much of your legacy as possible ends up in the hands of the people you care about.