[WSBAPT] Nonresident estate taxes

[Mimi Wagner]

Hello, Listmates, 

 

A few weeks ago someone raised a question about WAC 458-57-125 and I did not
notice any answer.  If the nonresident decedent's only asset in WA was a
house in her own name valued at well less than the WA exclusion, I am
surprised to see that the entire non-WA estate of the nonresident decedent
is pulled into WA for calculations, with the result that WA estate tax would
nonetheless be due (in the hypothetical below).  Can anyone comment on this?


 

"(b) Example - Nonresident decedent. A widow dies during 2013 leaving a
gross estate of $6 million. The decedent was a Colorado resident at death
and all of the decedent's property is located in that state, except for a
vacation home located in Washington valued at $650,000. The estate had
$100,000 in expenses deductible for federal estate tax purposes. The
applicable exclusion amount for 2013 is $2,000,000.

Under the facts of this example, the estate owes Washington estate tax on a
Washington taxable estate of $3,900,000, computed as shown below:


Gross estate:

$6,000,000


Less allowable deductions:

($100,000)


Less applicable exclusion amount:

($2,000,000)


Washington taxable estate:

$3,900,000

The preapportionment Washington estate tax for this estate, using the table
provided in WAC 458-57-115
<http://app.leg.wa.gov/WAC/default.aspx?cite=458-57-115>  (3)(a), equals
$534,000, computed as follows: $390,000 + ($900,000 x 16%) = $534,000.

Because the decedent owned property located outside Washington, the tax due
to Washington is calculated by multiplying the amount of preapportionment
tax computed above by the fraction described in this subsection (2). Also,
because the decedent was not a Washington resident at death, the numerator
of the fraction does not include the value of decedent's intangible personal
property. The denominator of the fraction is the value of the decedent's
gross estate. Using the facts in this example, the tax owed to Washington
equals $57,850, computed as follows: ($650,000/$6,000,000) x $534,000 =
$57,850." 

 

A related query is: 

 

Nonresidents want to put WA real estate in LLCs to convert them to
intangible, non-WA situs property under the newer DOR guidance.
Understandable.  But the guidance is scarce.  

Is anyone aware of any concerns about making the nonresident's Trust a
Member of the LLC (instead of a natural person)?  I don't know why this
would be a problem, but there isn't much guidance and the stakes are high.  

 

Thank you,

 

Mimi M. Wagner 

Wagner Law Offices P.C.

385 Court Street, Suite 4 

P.O. Box 3019

Friday Harbor, WA  98250
 <mailto:mimi at sanjuanlaw.com> mimi at sanjuanlaw.com
Phone (360) 378-6234
Fax (360) 378-6244
 <http://www.sanjuanlaw.com/> www.sanjuanlaw.com

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