Washington State Estate Tax Rollback: What High-Net-Worth Families Need to Know

April 1, 2026

Washington State is officially rolling back the estate tax rate increases passed in 2025. Legislation signed by Governor Ferguson restores the prior estate tax structure for individuals who pass away on or after July 1, 2026, while also modifying the exemption framework by halting its effective inflation growth. 

This marks a significant shift in estate planning considerations for Washington residents with taxable estates.

Quick Answer: What Does the Washington Estate Tax Rollback Mean?

Beginning July 1, 2026, Washington State will reverse the 2025 estate tax rate increases, lowering the top marginal estate tax rate from 35% back to 20%. At the same time the estate tax exemption will reset to $3.0 million and be effectively frozen (no meaningful inflation adjustments going forward under current law). This rate change will significantly reduce estate tax liabilities for larger estates, particularly those above $4 million.

What Changed in 2025?

The 2025 law raised estate tax rates across most brackets, with the most dramatic increases impacting higher-value estates:

  • Taxable estates above $4 million saw meaningful rate hikes
  • The top marginal rate increased from 20% to 35%
  • Lower brackets experienced smaller, incremental increases
  • The lowest bracket (under $1M taxable estate) remained at 10%

What the Rollback Will Do (Starting July 1, 2026)

Now that the rollback is law, here’s what will happen:

  • Restore the pre-2025 rate schedule (10%–20%)
  • Reduce the top rate from 35% back to 20%
  • Leave the $1M taxable estate base bracket unchanged at 10%
  • Reset the exemption to $3.0 million and effectively freeze it (eliminating practical inflation adjustments)

Why This Matters for Estate Planning

Estate taxes are applied marginally, meaning each additional dollar is taxed at progressively higher rates. Timing can materially impact tax liability.

Key implications:

  • Timing matters: The difference between passing before vs. after July 1, 2026, could materially impact estate taxes
  • Liquidity planning: Higher rates in 2025–mid-2026 may still require careful planning to avoid forced asset sales
  • Strategic opportunities:
    • Lifetime gifting strategies
    • Trust structuring
    • Charitable planning
    • Domicile considerations

This is particularly relevant for:

  • Business owners
  • Real estate-heavy portfolios
  • Families with illiquid wealth

What Happens to the Exemption?

While tax rates are decreasing in 2026, the exemption is not continuing to grow with inflation under the new law:

  • The Washington estate tax exemption is not changing
  • It increased from ~$2.19M to ~$3M in 2025 and ~$3.076M in 2026
  • Beginning July 1, 2026, it reverts to $3.0M and is effectively frozen

For estates near this threshold, the exemption may still be the most important planning variable.

FAQs

When does the Washington estate tax rollback take effect?

The rollback takes effect for individuals who pass away on or after July 1, 2026.

What is the Washington estate tax exemption in 2026?

The exemption is approximately $3.076 million (adjusted for inflation), and reverts $3.0 million (effectively frozen) for deaths on or after July 1, 2026

What is the top Washington estate tax rate now vs. after the rollback?

  • Through June 30, 2026: up to 35%
  • Starting July 1, 2026: top rate reduced to 20%

Should I revisit my estate plan?

Yes. The change in law creates a planning window where timing, liquidity, and gifting strategies could materially impact outcomes.

Final Thoughts

The Washington estate tax rollback represents a meaningful shift for high-net-worth families, particularly those with estates above $4 million. While the reduction in top rates from 35% back to 20% creates a more favorable planning environment, the $3 million exemption freeze may expand the number of taxable estates over time.

Conceptually, this creates a window where thoughtful planning around timing, liquidity, and wealth transfer strategies can have an outsized impact on outcomes.

If your estate may be subject to Washington estate tax, now is an opportune time to revisit your plan.

Connect with a Freestone Client Advisor to evaluate how these changes may affect your long-term strategy and ensure your plan remains aligned with your goals.

Important Disclosures: This article is not intended to provide, and you should not rely upon it for accounting, legal, tax or investment advice or recommendations. We are not making any specific recommendations regarding any financial planning, investment or tax strategy, and you should not make any financial planning, investment or tax decisions based on the information in this article. This article is intended to be educational in nature and to discuss a few limited aspects of very complex legislation or other complex subject matters. This article is not a comprehensive or complete summary of considerations regarding its subject matter. We recognize that every individual has different needs and the opinions expressed in this article may not be appropriate for everyone. Please consult with a Freestone client advisor, accountant, or lawyer regarding options specific to your needs.  Please note that Freestone does not approve or endorse any third-party content hyperlinked to in this article.