Recently enacted changes to the federal tax code this year could also impact estate plans and how property is transferred to beneficiaries in the event of death. According to attorneys at the law firm of Hickman Menashe, P.S., “These changes require taking a closer look at existing wills or trusts and updating these documents, while also keeping in mind Washington State taxes that may apply.”
A February 2018 NBC News report indicates that roughly six out of every ten higher bracket taypayers have modified their current financial planning as a result of changes in the federal tax code. Many of these involve updates and amendments to estate planning documents, due to increased gift and estate tax exemptions.
Under the new guidelines, these exemptions are now set at just over $11 million, which is more than twice the previous amount. This is what you can transfer to your beneficiaries while avoiding the federal estate tax. While this may seem to only impact wealthy individuals, it includes all of the property and assets that someone possesses, such as a home, retirement accounts, business profits, and investments.
Keep In Mind Washington Tax Limits
While the federal changes do prompt taking a closer look at how property and assets are distributed through wills or trusts, it also important to keep in mind Washington State limits. The Washington Department of Revenue (DOR) advises that while a person may not owe any federal tax, that person may owe state taxes if the person is a resident of the state or own property in the area.
The current exemption is estimated at roughly $2.2 million. While this falls well beneath the federal exemption level, anything over would be subject to estate taxes on the state level. The tax rate itself depends on the amount of property owned, regardless of whether or not it is located within Washington. Once the amount is calculated, it will be apportioned to avoid taxing property in other areas.
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