2017 Estate Tax UpdatesJanuary 5, 2017
Currently, both Washington state and the federal government have an estate tax due at an individual’s death, depending on the value of the assets the decedent owned. Both Washington and the federal government specify an amount of assets and money exempt from estate tax at death. Washington taxes assets transferred at death with no tax on lifetime gifting, while the federal government has a combined estate and gift tax and taxes non-spouse gifts over an annual exclusion amount as well as the value of assets over the specified exclusion amount at your death.
Washington’s estate tax exclusion amount rose to $2,129,000 as of January 1, 2017. This means that for a person dying in 2017, no tax is due until the decedent’s assets total more than $2,129,000. This amount increased from $2,079,000 in 2016, based on scheduled annual increases accounting for inflation. The tax due on amounts over the exclusion amount ranges from 10-20% depending on the size of your estate. More information on calculating Washington’s estate tax can be found here: washington-estate-tax-table.
The federal government continues to have an estate and gift tax exclusion amount in 2017. The exclusion amount for 2017 is $5,490,000 (and can be doubled between spouses if the surviving spouse takes advantage of the portability of a deceased spouse’s unused exclusion amount). The exclusion amount available at death is reduced by prior taxable gifts made to anyone other than your spouse. The federal government taxes estates with asset values above the exclusion amount at rates between 18-40%. This tax is in addition to the Washington state tax estate paid at death. For more information on calculating federal tax, see here for the tax table and rates: federal-estate-tax-table.
Current federal law retains the estate tax exclusion with annual increases for inflation, but both the president-elect and the republican legislature have indicated a plan to eliminate the federal estate tax in its entirety. Additionally, the president-elect’s proposed plan could eliminate the step-up in asset basis at death for beneficiaries. Such a step could lead to either taxation of capital gain assets at death or a carry-over basis to the beneficiaries. The coming presidential term could bring interesting changes to the federal estate tax for all families. Regardless of potential changes in the law, estate planning remains an essential element in protecting your assets and planning for your family’s future.