New Federal and Washington State Estate Tax Exemptions: Why Smart Estate Planning Still Matters

Jennifer Georgianne
Jul 6, 2025
3 min read

In 2025, significant changes are unfolding in the world of estate planning. The recently passed federal legislation—dubbed the "Big Beautiful Bill" by lawmakers—has reshaped how much wealth can be transferred free of federal estate tax. However, Washington State’s separate estate tax remains unchanged and continues to pose a significant liability for high-net-worth families.

At East County Estate Planning, PC, we believe staying ahead of these changes through proactive trust-based planning is essential. In this article, we’ll explain the new federal exemptions, Washington’s unique estate tax rules, and how a properly drafted trust can help protect your legacy from unnecessary taxation.

What Is the "Big Beautiful Bill"?

The "Big Beautiful Bill," passed by Congress in 2025, significantly increased the federal estate and gift tax exemption. Under this legislation:

The individual exemption is now $15 million, up from $13.61 million in 2024.
For married couples, this means up to $30 million can be passed tax-free with proper planning.
The federal estate tax rate above this exemption remains progressive, topping out at 40%.

These changes provide expanded flexibility for wealth transfer, business succession, and gifting strategies—but they don’t eliminate the need for estate planning.

Washington State’s Estate Tax: A Hidden Pitfall

Unlike most states, Washington imposes its own estate tax, and it kicks in far sooner than the federal version:

The exemption threshold is only $3 million (as of 2025), with no portability between spouses.
Estate tax rates range from 10% to 35%, depending on the estate’s size and subject to the following tables.:
Steeper Tax Brackets for Larger Estates
Marginal rates across the board have increased—with the top bracket nearly doubling from prior to 2025:

Taxable Estate Above Exemption	Prior Rate	New Rate (from 7/1/2025)
$0 – $1 M	10%	10%
$1 M – $2 M	14%	15%
$2 M – $3 M	15%	17%
$3 M – $4 M	16%	19%
$4 M – $6 M	18%	23%
$6 M – $7 M	19%	26%
$7 M – $9 M	19.5%	30%
Over $9 M	20%	35%

The top rate of 35% on estates above $9M is now among the highest in the country

There is no gift tax in Washington, but lifetime gifts don’t reduce the taxable estate.

This means that even if you’re far below the new federal exemption, your estate may still owe hundreds of thousands in Washington State estate tax unless you plan properly.

Trust-Based Planning: The Key to Minimizing Taxes

Many families assume that simply having a will is enough. However, for those with estates over the Washington exemption, a revocable living trust with the right tax planning provisions can provide substantial benefits.

Here’s how trusts help:

1. Credit Shelter Trusts (Bypass Trusts)

Married couples can use a Credit Shelter Trust to preserve both spouses’ Washington State exemptions. Without this planning, the exemption of the first spouse to die is lost, often doubling the tax owed.

2. Portability Is Not Automatic in Washington

Portability (transferring a spouse’s unused exemption) exists at the federal level—but not in Washington. Only a properly drafted trust can preserve both spouses’ $3 million exemptions, allowing a couple to shield up to $6 million from Washington estate tax.

3. Gifting and Lifetime Transfers

Using irrevocable trusts for lifetime gifts can also help reduce the size of your taxable estate—taking advantage of both federal and state strategies without triggering unintended tax consequences.

4. Privacy and Probate Avoidance

Trusts help avoid probate court, which is public, time-consuming, and expensive. In addition to tax savings, trusts preserve privacy and streamline the transfer of assets to your loved ones.

Who Should Be Concerned?

If your net worth exceeds $3 million, including your home, retirement accounts, and life insurance proceeds, you should seriously consider tax-focused estate planning. If your estate is above the federal exemption, the stakes—and potential tax savings—are even higher.

Next Steps: Get a Customized Estate Plan

Every family’s situation is unique. At East County Estate Planning, PC, we specialize in creating trust-based estate plans that protect your assets and minimize both federal and Washington State estate taxes.

We’ll help you:

Calculate your projected estate tax liability.
Design a plan using trusts to maximize exemptions.
Review your beneficiary designations and asset titling.
Coordinate with your financial and tax advisors to ensure alignment.

Let us give you peace of mind and protect your family’s future.

Contact Us Today

East County Estate Planning, PC Serving San Diego County, California and King County, Washington and surrounding communities

Office Locations

📞 Call us today at (619) 566-8084 or visit www.ecestateplanning.com to schedule your free consultation.

Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute legal advice. Reading this blog or contacting our firm through this website does not create an attorney–client relationship. You should not act or refrain from acting based on any content included in this blog without seeking appropriate legal or other professional advice specific to your situation.