Washington State 2025 Tax Legislation Updates: Estate and Gift Tax Changes

The 2025 legislative session in Washington introduced major changes to the state's estate and gift tax laws, including rate increases, narrowed exemptions, stricter definitions, and expanded reporting requirements. These updates—passed under ESSB 5813 and related legislation—make estate planning more complex and urgent for families, business owners, and high-net-worth individuals.

At the Law Office of Theresa Nguyen, PLLC, we break down what’s changed and how to protect your legacy.

⚖️ Key Estate Tax Law Changes in 2025

💵 Increased Estate Tax Rates

Effective May 20, 2025

• Washington has introduced tiered increases to its existing estate tax brackets.

• Top marginal estate tax rate now exceeds 20% for estates above $15 million.

• Lower brackets have also been adjusted upward.

⚠️ Estate planning that worked in 2024 may now result in significantly higher taxes.

📉 Reduced Exclusion Threshold

• The exclusion amount for estate tax purposes has been reduced from $2.193 million to $1.5 million.

• This means more estates will now be subject to tax.

• No inflationary adjustment has been announced for 2026.

📊 Many middle-class estates—particularly those with real property or retirement accounts—may now be taxable.

🧾 Capital Gains Tax Planning for Estate Purposes

• The new law removes the ability to avoid capital gains tax using certain trust structures and pass-through business entities.

• Incomplete Non-Grantor Trusts (INGs) and Nevada Incomplete Gift Trusts (NINGs) no longer bypass state capital gains tax.

• Anti-avoidance provisions target artificial gifting or manipulation of trust residency.

🚫 Trusts designed to avoid WA capital gains tax must be reviewed immediately.

🔍 Stricter Definitions and Reporting Rules

🧬 Clarified Definitions of Capital Gains and Non-Probate Assets

• The definition of capital gains now excludes fewer asset categories.

• Non-probate assets are more narrowly defined, which affects how assets outside of wills are treated for estate tax purposes.

📋 New Reporting Requirements

• Lifetime gifts and distributions from trusts must now be reported more comprehensively.

• Required for estate and gift tax valuation and for audit purposes.

🕵️ Families using gifting strategies or trust income distributions should prepare enhanced documentation.

🧱 Real Property Valuation for Estate Tax

• Washington now clarifies how real property should be valued at death.

• Values must coordinate with federal estate and gift tax rules.

• Appraisals must follow uniform valuation standards, even if no federal return is required.

🏠 Homeowners and landowners should secure updated appraisals when preparing for estate planning or probate.

✅ What Families Should Do Now

📌 Next Steps:

• Review your estate plan and trust documents.

• Assess your gifting and trust distribution history.

• Work with your CPA or attorney to recalculate exposure under the new exclusion and rate schedules.

• Get updated valuations for your real estate and business assets.

👩‍⚖️ How the Law Office of Theresa Nguyen, PLLC Can Help

We assist individuals and families across Washington State with:

• Estate tax minimization strategies

• Revising trust structures for compliance

• Lifetime gifting and wealth transfer planning

• Coordinating federal and state reporting

📍 Based in Renton, WA
📞 Schedule a confidential consultation today to update your estate plan under Washington’s new 2025 tax laws.

Other Articles About the Washington State 2025 Tax Legislation

Washington State 2025 Tax Legislation Updates: General Taxes (Sales, Use, and Excise)

Washington State 2025 Tax Legislation Updates: What Individuals Need to Know

Washington State 2025 Tax Legislation Updates: What Business Owners Should Know