Estate Tax Reduction Strategies for Washingtonians

‍Washington state is one of several states that imposes an estate tax. This requires considerate planning for individuals and couples who plan to die in the state with wealth. As of 2026, an individual with an estate below $3 million is exempt from owing any Washington state estate tax. Similarly, a married couple with an estate below $6 million (that has Bypass Trust provisions) is exempt.

Individuals and couples who exceed these exemption amounts (or plan to exceed these limits in the future) may consider a few simple strategies to help reduce their taxable estate.

Strategy #1 - Establish ‘Bypass Trust’ Provisions In Estate Plan (Married Couples Only)

Unlike at the federal level, Washington state does not recognize automatic portability of the first-to-die spouse’s unused exemption amount. If no proper planning is done to enable portability, this effectively reduces a married couple’s exemption potential from $6 million down to $3 million. This portability can be established as a provision within a married couple’s estate plan through the use of a Bypass Trust,  which may be an important component of an estate plan for some married couples, depending on their financial, tax, and estate planning goals.

Strategy #2 - Annual Exclusion Gifting: The $19,000 Per Person, Per Year Strategy

Every year the federal government allows individuals and couples to give up to a certain amount of dollars to anyone of their choosing without triggering gift tax or eating into their lifetime gift exemption. In 2026, this is $19,000 per person. This means you can give up to $19,000 to a best friend and there will be no gift taxes owed whatsoever. A married couple can ‘gift split’ their gift to any recipient so the recipient receives $38,000 in a year without triggering gift tax.

Lifetime gifts are one of the most efficient ways to remove assets from your Washington taxable estate. Every dollar gifted during life is a dollar that won't be subject to Washington's estate tax rates at death. Consider a couple with three adult children and six grandchildren — nine potential recipients in total. With gift-splitting, they can transfer up to $342,000 per year ($38,000 × 9) completely free of gift tax. Over ten years, that's $3.42 million removed from the taxable estate, before accounting for any growth on those gifted assets.

Strategy #3 - Qualified Charitable Distributions: Tax-Smart Giving from Your IRA

If you are age 70½ or older and charitably inclined, Qualified Charitable Distributions (QCDs) from a traditional Individual Retirement Account (IRA) can be a valuable tax planning strategy for eligible individuals. In addition to supporting charitable giving, QCDs may also complement your broader estate planning goals, depending on your individual circumstances.

How QCDs Work

A QCD allows you to direct up to $111,000 per year (2026 limit, indexed for inflation) from your traditional IRA directly to a qualified charity. The distribution counts toward your Required Minimum Distribution (RMD) but is excluded from your taxable income entirely, never appearing on your taxable income!

The Estate Planning Benefit

From a Washington estate tax perspective, the benefit of QCDs is twofold:

#1. Reduces IRA balances: IRAs are fully includable in your taxable estate, and they're also among the most income-tax-inefficient assets to leave to heirs, who must typically draw them down over 10 years and pay income tax on each distribution. By using QCDs to spend down IRA assets during life, you reduce the value of a tax-heavy asset in your estate. This helps to satisfy your charitable goals without spending after-tax dollars.

#2. Preserves other assets: Because QCDs satisfy charitable giving without reducing your spendable, non-IRA wealth, your other assets  may receive a step-up in basis at death and pass more tax-efficiently to heirs.

Strategy #4 - 529 Plan Superfunding: Front-Loading Education Gifts

If there are important people in your life with future education plans (such as grandchildren) then gifts toward their 529 college savings plans can be massively beneficial from an estate reduction perspective. While an individual or couple can stick to the traditional gifting limit standards from Strategy #2, they can also utilize ‘Superfunding’ which is a special rule allotted for 529 plans:

How Superfunding Works

Federal tax law includes a special "five-year election" for 529 plan contributions. You can contribute up to five years' worth of annual exclusion gifts to a 529 plan in a single year and treat the contribution as if it were made ratably over five years. For example, if you were a grandparent in 2026, that means:

• $95,000 per beneficiary (5 × $19,000) from one grandparent, or

• $190,000 per beneficiary (5 × $38,000) from a married couple using gift-splitting

Contributions to a 529 plan may be removed from your taxable estate, subject to applicable tax rules. Earnings grow tax-deferred, and withdrawals are generally federal income tax-free when used for qualified education expenses. State tax treatment may vary.

Example

A couple with four grandchildren superfunds a 529 for each in 2026, contributing $190,000 per child. That's $760,000 removed from their taxable estate in a single year, with the potential for decades of tax-free growth funding future tuition, room and board, and other education costs.

Strategy #5 - Appreciated Stock Contributions to a Donor Advised Fund

For couples who hold appreciated securities (like stocks, mutual funds, or ETFs with significant embedded capital gains), contributing those assets to a Donor Advised Fund (DAF) offers a combination of estate tax reduction, capital gains avoidance, and flexible charitable giving.

What Is a Donor Advised Fund?

A Donor Advised Fund is a charitable giving account sponsored by a public charity (such as Fidelity Charitable, Schwab Charitable, or a community foundation). You make an irrevocable contribution to the DAF, receive an immediate charitable deduction, and then recommend grants to qualified charities over time. All this can be done on your own schedule.

Why Appreciated Stock?

When you contribute appreciated stock directly to a DAF:

• You avoid capital gains tax entirely. The DAF is a tax-exempt entity and can sell the stock without triggering a taxable event.

• You receive a charitable deduction for the full fair market value of the stock (subject to AGI limits which is generally 30% of AGI for appreciated property, with five-year carryforward).

• The full value leaves your estate immediately, reducing your Washington taxable estate.

Depending on your individual circumstances, using a Donor-Advised Fund (DAF) may help reduce certain tax liabilities, allowing a greater portion of appreciated assets to be directed toward charitable giving rather than taxes.

Strategy Integration

The combination of any of these strategies can be massively helpful for reducing your estate below the non-taxable thresholds. Curious to learn more about implementation of several of these strategies but don’t know how to execute? Feel free to book a call with a team member from Consilio Wealth Advisors.

DISCLAIMER:

Consilio Wealth Advisors does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action. Before investing, consider investment objectives, risks, fees, and expenses. Investments in securities involve the risk of loss, including loss of principal. Past performance is no guarantee of future returns. The views and opinions reflected in the content are subject to change at any time without notice. The content speaks only as of the date indicated. Some information was obtained from external sources. The information is believed to be accurate, but there is no guarantee that it is.