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Q:  Can you give me examples of how the estate tax applies?

A: 

1. John dies in 2006 with an estate valued at $3 million. John left one million dollars to his spouse Jane using the unlimited marital deduction. There is no Washington estate tax due on John's estate.

Gross estate

$3,000,000

Less unlimited marital deduction

-$1,000,000

Less $2,000,000 statutory exemption

-$2,000,000

Washington Taxable Estate

$0

 

Although no Washington estate tax is due, the estate is required to file a Washington estate tax return

 

2. A widow dies in 2006 leaving a gross estate of $3,100,000. The estate had $100,000 in expenses deductible for federal estate tax purposes. Examples of allowable expenses include funeral expenses, indebtedness, property taxes, and charitable transfers. The decedent also owned a home in Arizona valued at $300,000.

Gross estate

$3,100,000

Less administrative expenses deduction

$100,000

Less $2,000,000 statutory exemption

$2,000,000

Washington Taxable Estate

$1,000,000

 

Based on the tax table, the estate tax equals $100,000 ($1,000,000 x 10% Washington estate tax rate). Because the decedent owned an out-of-state asset the tax due to Washington is prorated by multiplying the amount of tax owed by a fraction. The numerator of the fraction is the value of the property located in Washington divided by the denominator that equals the value of the decedent's gross estate.

 

 Washington Assets 
Gross Estate

   $2,800,000 ($3,100,000 - $300,000)    
$3,100,000

X $100,000 = $90,323

 

The estate does not have to pay estate tax to the state of Arizona in order to reduce the tax owed to Washington. The estate tax due to Washington is $90,323.

 

3. John dies in 2006 leaving a gross estate valued at $4 million. The estate assets include John's one - half community property interest in timberlands. John's one-half interest in the timberlands is valued at $2 million dollars. John's spouse Jane owns the other one-half community property interest in the timberland. The timberlands qualify for the Washington estate tax deduction for farm property. John leaves his interest in the timberlands to his son, a qualified heir.

Gross estate

$4,000,000

Less $2,000,000 farm deduction

-$2,000,000

Less $2,000,000 statutory exemption

-$2,000,000

Washington Taxable Estate

$0

 

Although no Washington estate tax is due, the estate is required to file a Washington estate tax return.

 

4. A widow dies in 2006 leaving a gross estate valued at $3.5 million. A majority of the value of the gross estate was comprised of a small construction business. The business assets (real property and heavy equipment) were heavily mortgaged. The estate had $1,500,000 in mortgage debt and other allowable expenses deductible for federal estate tax purposes.

Gross estate

$3,500,000

Less debt and allowable expenses deduction

-$1,500,000

Less $2,000,000 statutory exemption

-$2,000,000

Washington Taxable Estate

$0

 

Although no Washington estate tax is due, the estate is required to file a Washington estate tax return.

 

5. A widow dies in 2005 leaving a gross estate valued at $3 million. The estate had expenses deductible for federal estate tax purposes equaling $100,000. The estate assets include a farm and farm equipment valued at $2 million that qualify for the Washington estate tax farm deduction. The widow leaves the farm to her daughter, a qualified heir.

Gross estate

$3,000,000

Less debt and administrative expenses deduction

-$1,000,000

Less $1,500,000 statutory exemption

-$1,500,000

Less $2,000,000 statutory exemption

-$2,000,000

Washington Taxable Estate

$0

Although no Washington estate tax is due, the estate is required to file a Washington estate tax return.

More information
Washington Estate and Transfer Tax Return for deaths on or after May 17, 2005 (pdf)
More information about estate tax for deaths on or after May 17, 2005
Related questions & answers
Who must file a Washington estate tax return?
How do I pay the estate tax?
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