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<p class="MsoNormal">Great email, Liberty -- thank you! <o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Obnoxious but well-meaning nit: The 2.9% capital gains surcharge is retroactive to 1/1/<b><u>25</u></b>, which is noted in your bullets at top of your email. Just in case anyone is reading the text further below, I changed 2026 to 2025
under the header “<b><span style="font-family:"Times New Roman",serif">Washington Capital Gains Tax</span></b>” – intending only to help anyone wishing to forward or print this.
<span style="font-family:"Segoe UI Emoji",sans-serif">😉</span><o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Best, Josh<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
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<div style="border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in">
<p class="MsoNormal"><b><span style="font-size:11.0pt;font-family:"Calibri",sans-serif;mso-ligatures:none">From:</span></b><span style="font-size:11.0pt;font-family:"Calibri",sans-serif;mso-ligatures:none"> wsbapt-bounces@lists.wsbarppt.com <wsbapt-bounces@lists.wsbarppt.com>
<b>On Behalf Of </b>Liberty Upton<br>
<b>Sent:</b> Tuesday, May 20, 2025 3:52 PM<br>
<b>To:</b> wsbapt@lists.wsbarppt.com; WSBA Real Property (wsbarp@LISTS.WSBARPPT.COM) <wsbarp@LISTS.WSBARPPT.COM><br>
<b>Subject:</b> [WSBAPT] New Washington Estate Tax Exemption and Rates + Changes to Capital Gains Tax<o:p></o:p></span></p>
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</div>
<p class="MsoNormal"><o:p> </o:p></p>
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<span style="font-size:9.0pt;font-family:"Segoe UI",sans-serif;color:#212121;mso-ligatures:none">You don't often get email from
<a href="mailto:lupton@khbblaw.com">lupton@khbblaw.com</a>. <a href="https://aka.ms/LearnAboutSenderIdentification">
Learn why this is important</a> <o:p></o:p></span></p>
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<p class="MsoNormal"><b><span style="font-family:"Times New Roman",serif">Engrossed Substitute Senate Bill 5813
<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-family:"Times New Roman",serif">Changes to Washington Estate Tax Exemption and Rates; Washington Capital Gains; and Addition of Qualified Non-Familial Heir for QFOBI
<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></b></p>
<p class="MsoNormal"><b><u><span style="font-family:"Times New Roman",serif">WHAT YOU NEED TO KNOW</span></u></b><b><span style="font-family:"Times New Roman",serif">:<u><o:p></o:p></u></span></b></p>
<ul style="margin-top:0in" type="disc">
<li class="MsoNormal" style="mso-list:l4 level1 lfo3"><span style="font-family:"Times New Roman",serif">New law goes into effect on July 1, 2025, for WA Exemption and tax rates<o:p></o:p></span></li></ul>
<ul style="margin-top:0in" type="disc">
<ul style="margin-top:0in" type="circle">
<li class="MsoNormal" style="mso-list:l4 level2 lfo3"><span style="font-family:"Times New Roman",serif">WA Exemption will increase from $2,193,000 to $3,000,000<o:p></o:p></span></li><li class="MsoNormal" style="mso-list:l4 level2 lfo3"><span style="font-family:"Times New Roman",serif">Annual inflation adjustments to the WA Exemption will begin on January 1, 2026<o:p></o:p></span></li><li class="MsoNormal" style="mso-list:l4 level2 lfo3"><span style="font-family:"Times New Roman",serif">Estate tax rates will increase from a top rate of 20% to a top rate of 35%<o:p></o:p></span></li></ul>
</ul>
<ul style="margin-top:0in" type="disc">
<li class="MsoNormal" style="mso-list:l4 level1 lfo3"><span style="font-family:"Times New Roman",serif">Starting January 1, 2025, an additional 2.9% on long-term capital gains over $1,000,000<o:p></o:p></span></li><li class="MsoNormal" style="mso-list:l4 level1 lfo3"><span style="font-family:"Times New Roman",serif">Definitions of “qualified non-familial heir” and “employee of a farm” added for QFOBI<o:p></o:p></span></li></ul>
<p class="MsoNormal"><b><u><span style="font-family:"Times New Roman",serif"><o:p><span style="text-decoration:none"> </span></o:p></span></u></b></p>
<p class="MsoNormal"><b><u><span style="font-family:"Times New Roman",serif">ADDITIONAL INFORMATION</span></u></b><b><span style="font-family:"Times New Roman",serif">:<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-family:"Times New Roman",serif">Washington Estate Tax Exemption and Rates<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif">To raise revenue to balance the budget, the Washington State Legislature recently made significant changes to Washington estate tax laws that both increase the Washington estate tax exemption
(“WA Exemption”) and increase the tax rates for estates that exceed the WA Exemption amount. On April 26, 2025, the Washington State Legislature passed the Engrossed Substitute Senate Bill 5813. The Governor had several options: sign the bill into law, veto
it, or allow it to become law without his signature. The Governor signed the bill on May 20, 2025.
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Times New Roman",serif">Washington Exemption and Tax Rates before July 1, 2025</span></u><span style="font-family:"Times New Roman",serif">: The WA Exemption is currently $2,193,000 per person and has been frozen
at this amount since 2018. While Washington law indexed the WA Exemption for inflation, the inflation index referenced in the law changed in 2018. Currently, RCW 83.100.020(1)(b) references the consumer price index (“CPI”) for the Seattle-Tacoma-<i>Bremerton</i>
area as calculated by the US Bureau of Labor and Statistics (“USBLS”). As of January 1, 2018, the USBLS no longer calculated the CPI for the Seattle-Tacoma-<i>Bremerton</i> area. Instead, the USBLS began calculating the Seattle-Tacoma-<i>Bellevue</i> area.
After the USBLS 2018 CPI change, the Washington Department of Revenue took the position that the WA Exemption could not be increased for inflation because the CPI referenced in the law (for Seattle-Tacoma-<i>Bremerton</i>) no longer existed. Since 2018, there
have been several attempts to try to fix the referenced CPI. The $2,193,000 WA Exemption remains in effect until July 1, 2025.
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif">Currently, Washington estate tax rates range from 10% to 20% on estates that exceed $2,193,000:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif;mso-ligatures:none"><img border="0" width="433" height="206" style="width:4.5119in;height:2.1428in" id="Picture_x0020_4" src="cid:image001.png@01DBC9A3.D5DACC60"></span><span style="font-family:"Times New Roman",serif"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Times New Roman",serif">WA Exemption and Tax Rates on or after July 1, 2025</span></u><span style="font-family:"Times New Roman",serif">: Under Senate Bill 5813, the Washington State Legislature revised the
CPI referenced in Washington law and made a one-time adjustment to make up for seven years of inflation adjustments that did not occur between 2018 and 2025. Starting on July 1, 2025, the new WA Exemption will be $3,000,000. The WA Exemption will be adjusted
annually for inflation, starting on January 1, 2026. Additionally, if the USBLS changes the CPI for the Seattle area in the future, the CPI for purposes of Washington law will automatically update to whatever index includes Seattle and the surrounding area
(without further action needed by the Washington State Legislature). <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif">The Washington State Legislature also increased the estate tax rates. Starting on July 1, 2025, Washington estate tax rates will range from 10% to 35% on estates that exceed the WA Exemption:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif;mso-ligatures:none"><img border="0" width="432" height="197" style="width:4.5in;height:2.0535in" id="Picture_x0020_3" src="cid:image002.png@01DBC9A3.D5DACC60"></span><span style="font-family:"Times New Roman",serif"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><b><span style="font-family:"Times New Roman",serif">Washington Capital Gains Tax<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif">A 7% excised tax is imposed in Washington on long-term capital gains that exceed a $270,000 standard deduction. Starting January 1, 2025, for long-term capital gains that exceed $1,000,000
an additional 2.9% excise tax is imposed. No changes were made to existing exemptions from the long-term capital gains excise tax.
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><b><span style="font-family:"Times New Roman",serif">Farm Employee – Qualified Non-Familial Heir
<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif">Additional definitions of “Employee of a farm” and “Qualified nonfamilial heir” were added. This means that individuals who are not family members, but who are deemed “qualified,” can benefit
from the QFOBI deduction when inheriting a family-owned business interest.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif">Engrossed Substitute Senate Bill 5813 as passed by the Washington State Legislature:
<a href="https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/Senate%20Passed%20Legislature/5813-S.PL.pdf?q=20250520154348">
https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/Senate%20Passed%20Legislature/5813-S.PL.pdf?q=20250520154348</a>
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><b><u><span style="font-family:"Times New Roman",serif">ADDITIONAL BILLS THAT IMPACT PROBATE AND TRUST SECTION</span></u></b><b><span style="font-family:"Times New Roman",serif">:<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></b></p>
<ul style="margin-top:0in" type="disc">
<li class="MsoNormal" style="mso-list:l2 level1 lfo6"><span style="font-family:"Times New Roman",serif">HB 1215/SB 5096: Removing references to pregnancy from the model directive form under the natural death act.
<a href="https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/House%20Passed%20Legislature/1215.PL.pdf?q=20250517140321">
https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/House%20Passed%20Legislature/1215.PL.pdf?q=20250517140321</a>
<b><u><o:p></o:p></u></b></span></li></ul>
<p class="MsoNormal"><b><u><span style="font-family:"Times New Roman",serif"><o:p><span style="text-decoration:none"> </span></o:p></span></u></b></p>
<ul style="margin-top:0in" type="disc">
<li class="MsoNormal" style="mso-list:l2 level1 lfo6"><span style="font-family:"Times New Roman",serif">SB 5037: Enacting the Uniform Custodial Trust Act.
<a href="https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/Session%20Laws/Senate/5037.SL.pdf?q=20250517140218">
https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/Session%20Laws/Senate/5037.SL.pdf?q=20250517140218</a>
<b><u><o:p></o:p></u></b></span></li></ul>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Times New Roman",serif"><o:p> </o:p></span></p>
<p class="MsoNormal">Liberty Upton<span style="font-size:11.0pt;mso-ligatures:none"><o:p></o:p></span></p>
<p class="MsoNormal">Attorney<o:p></o:p></p>
<p class="MsoNormal"><span style="mso-ligatures:none"><img border="0" width="87" height="63" style="width:.9047in;height:.6547in" id="Picture_x0020_1" src="cid:image003.png@01DBC9A3.D5DACC60"></span><o:p></o:p></p>
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:0in">
<span style="font-family:"Times New Roman",serif">Tel (206) 382-4414 (ex. 232) / Fax (206) 382-4412 /<span style="color:#2F5496">
<u><a href="mailto:lupton@khbblaw.com"><span style="color:#0563C1">lupton@khbblaw.com</span></a></u></span><o:p></o:p></span></p>
<p class="MsoNormal" style="mso-margin-top-alt:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:0in">
<span style="font-family:"Times New Roman",serif">705 Second Avenue / Suite 800 / Seattle, WA 98104 /<span style="color:#2F5496">
<u><a href="http://www.khbblaw.com/"><span style="color:#2F5496">www.khbblaw.com</span></a><o:p></o:p></u></span></span></p>
<p class="MsoNormal"><o:p> </o:p></p>
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