Washington’s Estate Tax "Undo"

Posted March 23, 2026, By Cole Ferrier

In software development, when a new feature causes more system instability than the value it provides, the development team issues a "reversion." They roll the code back to the last known stable state.

In a rare move of legislative moderation, the Washington State Legislature has essentially done the same. On March 13, 2026, lawmakers delivered Senate Bill 6347 to the Governor. As the Governor still has not signed it, it has not become law. Its primary mission: to "undo" the aggressive estate tax rate hikes that were signed into law just one year ago.

If you’ve been holding your breath (or considering a move to Florida) due to the 35% "Death Tax" headlines, it’s time for a system reboot. The rules of the game have shifted again, and for many high-net-worth Washingtonians, the "Fall" off the estate tax cliff just got a lot shorter.

The "Bug" in the 2025 Update

To understand why the legislature hit "CTRL+Z," we have to look at the "breaking change" introduced by ESSB 5813 in 2025.

As I analyzed in my previous deep dive, Washington’s 2025 Estate Tax Overhaul, that bill was intended to increase funding for the Education Legacy Trust Account. While it successfully raised the exemption to $3 million (a welcome fix for inflation), it coupled that relief with a highly progressive rate structure. Specifically, it spiked the top marginal rate from 20% to a nation-leading 35% for estates over $9 million.

The result? Washington became a massive outlier. Our state-level "operating system" became incompatible with the goals of many long-term residents. This created a "migration bug"—anecdotal reports suggested high-income residents were preparing to "log off" from Washington residency entirely to protect their family's legacy.

The 2026 Patch: SB 6347

Senate Bill 6347 is the corrective patch. It recognizes that being a national outlier in "Death Taxes" was a threat to the state's long-term tax base.

The Rate Changes:

• Rate Reversion: For decedents dying on or after July 1, 2026, the estate tax rates will revert to their pre-2025 levels. The top marginal rate will drop from 35% back to 20%.

• The "One-Year Glitch": Because the reversion only applies to deaths after July 1, 2026, estates of those who pass away between July 1, 2025, and June 30, 2026, remain subject to the higher 35% rates. In engineering terms, this was a one-year "unstable build" of the tax code.

The Exemption "Step-Down": A 2026 Logic Error?

There is a bit of "weirdness" in how the exemption threshold is being handled during this transition.

For the first half of 2026 (January 1 to June 30), the Department of Revenue's inflation adjustment set the exemption at $3,076,000. However, the new law (SB 6347) resets the base to exactly $3,000,000 for deaths occurring on or after July 1, 2026.

This creates a temporary "downward step" in the exclusion amount mid-year. The good news? The bill finally provides a permanent fix for the "frozen index" glitch. Starting in 2027, the $3,000,000 base will once again be adjusted annually using the Seattle-Tacoma-Bremerton CPI. We’ve traded a few months of a slightly higher exemption for a lifetime of a functional, growing "safe harbor."

The Updated Playbook: Bridging the Logic Gaps

While the lower rates reduce the "voltage" of the estate tax, the underlying "circuitry" of Washington law—specifically the lack of portability—remains a major point of failure for the unprepared.

As I detailed in A Tale of Two Estate Tax Rules, Washington does not allow a surviving spouse to "inherit" the unused exemption of the first-to-die. This "Portability Gap" means that even with a 20% top rate and a $3,000,000 exemption, a simple "I love you" Will can result in an optional tax bill that could have been avoided with a properly coded trust.

Furthermore, the federal landscape has shifted permanently. With the passage of the One Big Beautiful Bill Act (OBBBA), the federal exemption is now locked in at $15 million per person ($30 million for couples). This creates a massive "latency" between state and federal planning. You likely have $0 in federal exposure, but your Washington "hardware" is still tripping the state-level circuit breakers at just $3 million.

Gifting: Still Your Superpower

The reversion of rates doesn't change the fact that Washington still has no gift tax.

A systematic gifting strategy remains the most efficient way to "shrink the volume" of your estate. By exploiting the delta between the new $15 million federal limit and our $3 million state limit, you can move assets off your personal balance sheet today to avoid the 20% "toll" later.

The Bottom Line: Stable Code vs. Sacred Text

Your Financial Plan is a Living Document, Not a Sacred Text. This legislative whiplash is the perfect example of Public Policy Risk in action. A plan built in 2024 was broken by 2025 and is now being "refactored" in 2026.

Connect With Us: Debug Your Legacy

Navigating the "reversion" of 2026 requires more than just reading headlines; it requires modeling the math for your specific family structure.

If you want to ensure your estate plan isn't running on an obsolete "OS," reach out to us. We specialize in helping Washington families bridge the gap between complex law and simple, effective legacy strategies.

Resources:

• Senate Bill 6347 (2026): Bill Report & Status

• WA Department of Revenue: Estate Tax Overview