Federal Changes

Lifetime Estate and Gift Tax Exemption. The federal estate and gift tax exemption will increase to $15,480,000 per person in 2027, up from $15,000,000 in 2026. The federal estate and gift tax exemption is the total amount a person may transfer to beneficiaries during life or at death without incurring federal estate or gift tax. The federal estate and gift tax exemption increased to $15,000,000 per person in 2026 under the One Big Beautiful Bill Act (“OBBBA”) and will continue to be adjusted annually for inflation.

Tax Rate. The federal estate tax rate for assets that exceed the federal exemption amount remains at 40%, which is unchanged from prior years.

Annual Gift Tax Exclusion. In 2027, the annual exclusion for gifts will also increase to $20,000 per recipient, up from $19,000 in 2026. This means that an individual may gift up to $20,000 to an unlimited number of recipients in 2027 without the requirement to file a federal gift tax return, and without reducing lifetime federal estate and gift tax exemption or owing federal gift tax. However, donors should be aware not all gifts (such as certain gifts to trusts) qualify automatically for the annual gift tax exclusion.

No Change at Washington State Level

No Inflation Adjustment. The Washington state estate tax exemption was reduced from $3,076,000 per person to $3,000,000 per person on July 1, 2026, and will now remain at $3,000,000 per person indefinitely. There is no inflation adjustment for 2027. Although Washington law technically provides for annual inflation adjustments to the state estate tax exemption beginning in 2027, such inflation updates are effectively frozen due to a technicality (the consumer price index identified in the statute as the basis for inflation updates is no longer available).

No Washington State-Level Gift Tax. The Washington state estate tax exemption is the total amount a person may transfer to beneficiaries at death without incurring Washington state estate tax. Washington state does not have a gift tax, so unlike at the federal level, the Washington state exemption is not applied to lifetime property transfers in addition to those occurring at death. The lack of a Washington state gift tax also means there is no annual exclusion at the Washington state level.

Tax Rates. Like the Washington state exemption amount, the Washington state estate tax rates also decreased in 2026 and will remain the same for 2027 (and indefinitely thereafter). As of July 1, 2026, the Washington state estate tax rates range from 10% (on the first $1,000,000 of assets exceeding the $3,000,000 exemption) to 20% (on assets that exceed the $3,000,000 exemption by $9,000,000 or more). This is a reduction from the prior maximum rate of 35%.

Impact on Estate Planning

The 2027 increase to the federal estate and gift tax exemption provides additional opportunities for individuals and married couples with substantial estates to transfer wealth without incurring federal estate or gift tax. However, the significant difference between the federal exemption ($15,480,000 per person) and the Washington state exemption ($3,000,000 per person) means that Washington residents may still face state estate tax exposure even with estates well below the federal exemption amount.

The specific circumstances of each individual or married couple determine whether federal and/or Washington state estate tax planning is appropriate. If you have any questions about the federal estate and gift tax exemption, the annual exclusion from the federal gift tax, or the Washington state estate tax exemption and how these amounts may impact your estate planning, please contact an attorney in our estate planning practice group.