Overview of ESSB 5813
On May 20, 2025, Governor Ferguson signed Engrosed Substitute Senate Bill 5813 (“ESSB 5813”) into law. ESBB 5813 increases the applicable Washington state estate tax exemption for the estates of decedents dying on or after July 1, 2025 and also dramatically increases the rate structure for such estates.[1] ESBB 5813 also increases rates applicable to the Washington state capital gains tax. This blog post focuses on the changes to the Washington state estate tax exemption and rate structure. The changes applicable to the Wahington state capital gains tax are discussed in a recent blog post by Allison Int-Hout.
Exemption Increased to $3 Million and Re-tied to Inflation
Under Washington law, every decedent’s estate is allowed to deduct a fixed amount from the value of the gross estate (the “exemption”) in order to calculate the “Washington taxable estate,” which is the amount that is subject to Washington state estate tax. In other words, a decedent’s estate will only be subject to Washington state estate tax to the extent that the estate’s value exceeds the exemption. Prior to the enactment of SB 5813, this exemption was $2,193,000 for all decedents dying in 2018 or later. However, under the new law, the exemption for estates of decedent’s dying on or after July 1, 2025, but before January 1, 2026 will increase to $3,000,000. For decedents dying in 2026 or later, the exemption will be adjusted annually for inflation.[2]
To provide a simple example of the effect of the change to the exemption, imagine a Washington resident dies in August 2025 with an estate valued at $2,693,000. Under prior law, $500,000 of the decedent’s estate would be subject to Washington state estate tax ($2,693,000 minus the $2,193,000 applicable exemption under prior law). However, under the new law, the decedent’s estate is fully covered by the $3,000,000 exemption. Thus, under the new law the decedent’s estate will owe no Washington state estate tax and will not be required to file a Washington state estate tax return.
Significant Increases to Estate Tax Rates
In addition to increasing the exemption and re-tying it to inflation, ESSB 5813 also significantly increases the tax rates for the estate of any decedent dying July 1, 2025 or later. Under prior law, the rate started at 10% for the first $1,000,000 of the decedent’s Washington taxable estate, then increased incrementally to a maximum of 20% for amounts over $9,000,000. The new law also begins at 10% for the first $1,000,000, but increases incrementally to 35% for amounts over $9,000,000. A chart comparing the rate under prior and new law is shown below:
| Washington Taxable Estate | Prior Rate | New Rate |
|---|---|---|
| $0 to $1,000,000 | 10% | 10% |
| $1,000,000 to $2,000,000 | 14% | 15% |
| $2,000,000 to $3,000,000 | 15% | 17% |
| $3,000,000 to $4,000,000 | 16% | 19% |
| $4,000,000 to $6,000,000 | 18% | 23% |
| $6,000,000 to $7,000,000 | 19% | 26% |
| $7,000,000 to $9,000,000 | 19.5% | 30% |
| $9,000,000 and up | 20% | 35% |
As shown in the chart above, the new rates are significantly higher than the prior rates, and the changes to the rates are more pronounced and progressive as the size of the Washington taxable estate increases.
Takeaways
Under the new law, fewer estates will be subject to Washington state estate tax. However, for those estates that continue to be subject to Washington state estate tax, the total estate tax liability may be significantly greater under the new law, especially for high-net-worth individuals. Individuals with estates above or approaching the new $3,000,000 exemption should consult with their advisors to consider the impact of the new law on their current estate plans and consider, among other issues, estate liquidity issues related to an increased estate tax burden, as well as lifetime gifting and other estate tax reduction strategies.
If you have any questions regarding how the new law affects your current estate plan, please reach out to one of the estate planning attorneys at Montgomery Purdue.
[1] ESSB 5813 also increases the deduction for qualifying family-owned business interests to $3,000,000 and allows the farm deduction to be taken in certain instances where the farm passes to a “qualified nonfamilial heir”. These changes are outside of the scope of this blog post.
[2] As discussed in a blog post I wrote earlier this year, from 2013 through 2018 the exemption was tied to inflation. Then, beginning in 2018 it was “frozen” at $2,193,000 as a result of a change in the methodology the United States Bureau of Labor Statistics used to calculated the Seattle area consumer price index. My prior blog post discussed three bills (HB 1375, SB 5405, and HB 2019) which were proposed earlier this year to fix this issue. While none of those bills made it out of their respective legislative committees, ESSB 5813 effectively “unfreezes” the exemption.