In the event of your untimely passing, would you owe estate tax to the state? Feldman & Lee, a wills and trusts law firm in Lynnwood, says that it would depend on the laws in effect when you pass away. For example, if you pass away in 2017 and your estate’s gross value is $2,000,000 (the least taxable amount) or higher, your executor should pay estate taxes. In Washington, a non-resident’s executor should pay estate taxes on their behalf if they owned valuable property in the state.
Who Should Pay Estate Taxes?
Majority of estates that should file do not really end up owing estate taxes. The threshold for filing returns pegged at $2,000,000, is lower than the threshold for paying estate taxes ($2,129,000). Likewise, property left to spouses or charities that are tax-exempt don’t get taxed, plus some expenses lower the taxable estate’s overall size.
If your estate qualifies to be taxable, it would be your executor’s job to do the paperwork. But what if your estate avoids probate? It would be the responsibility of your trustee or inheritors. To determine if your executor or trustee should file, they must estimate the total value of your assets. These include bank accounts, real estate, vehicles, investment accounts (e.g., mutual funds, bonds, and stocks, as well as retirement account funds). This also includes interests incurred in business, life insurance proceeds, and all assets held in your trust if applicable.
Your estate would also include half of the community assets you jointly own as well as separate property if you were married. Washington, unlike the IRS, doesn’t require that you include the value of all taxable gifts you made when you were alive in your estate. Additionally, if the value of more than half of your estate is from real estate (which includes equipment you used for farming), your estate could deduct the farming property’s value.
Other Vital Things to Consider
Let’s say your executor or trustee doesn’t have experience in dealing with estate tax returns. It would then be best they seek help from an experienced attorney. The whole process is complex and lengthy. Moreover, tax laws in Washington are tricky, and an experienced professional could help in navigating current tax procedures and rules.