[WSBAPT] Washington inheritance tax question

Wed Mar 23 16:44:08 PDT 2022

I vote with Heather.  Washington changed their policy a few years ago, and they now treat LLC interests as intangible property.  You probably want to get the non-Washington parcels out of the LLC, depending on the estate tax laws of the state(s) where the property is located.
Phil Jones

Philip N. Jones
Duffy Kekel LLP
Portland, OR
pjones at duffykekel.com
(503) 853-1482 cell

On Mar 23, 2022, at 8:57 AM, Heather de Vrieze <heatherd at westseattlelaw.com> wrote:

Mike,

I’m not seeing anyone having already responded, so I’ll give you my understanding.

First, Washington’s has an estate tax, not an inheritance tax, and real property outside the state of Washington will result in a pro-rata reduction of the tax due, but, being converted to an intangible asset by being in the LLC will eliminate that reduction.

I also wonder why multiple properties in and out of Washington are held in one LLC. That would seem to defeat the purpose of the LLC. Generally, it will not eliminate liability, but limit liability of an LLC to the assets of within that particular LLC.

Heather

Heather S. de Vrieze
Attorney-at-Law
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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Mike Zeno
Sent: Tuesday, March 22, 2022 11:35 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Washington inheritance tax question

I am wondering if I am analyzing this correctly:

Client and spouse are Washington residents and sole members of an LLC.  The only assets of the LLC are real properties, some in Washington and some out of state.  Question is whether the value of the out-of-state properties would be subject to Washington inheritance tax.

Different heirs will receive difference properties.  I would expect the properties to be distributed in kind rather than sold.

The first question is whether the entire membership interest in the LLC would be considered intangible property, and so the value of all the properties in the LLC (both in state and out of state properties) would be subject to Washington tax.

The second question is whether the answer to the first question is unimportant if the LLC is dissolved and the properties distributed to the appropriate heirs, because Washington’s inheritance tax is figure on the value of what is inherited and not on the value of the estate.  I think the answer to the second question is yes, but I am interested in what others think.

Mike Zeno

The Law Office of G. Michael Zeno, Jr., P.S.
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