Estate tax spousal personal residence exclusion

For people who pass away on or after January 1, 2025, the personal residence of married or registered domestic partnership couples (spouses) may be excluded from the calculation when determining if the gross estate of the decedent meets the filing requirements.

The personal residence exclusion is only used to determine if a filing is required. The personal residence value is not excluded from the gross estate if the remainder of the decedent’s assets meets or exceeds the filing threshold.

What is a personal residence?

The term “personal residence” includes any of the following:

House and the spousal owned land the house sits on.
Mobile home or park model, if it is fixed to a foundation on the spousal owned land it sits on (no longer considered a mobile unit).
A single-unit dwelling (such as a condo).
Houseboat or floating home.
Leasehold property (such as a cabin on government property).
DST (Delaware Statutory Trust co-op owned percentage) residence.

Requirements to exclude the spousal personal residence

The following requirements must be met for the personal residence to be excluded from the calculation of the gross estate when determining if the estate meets the filing threshold:

No other elections are required of the estate’s filing.
- If the estate wishes to elect the treatment of a trust or portion of a trust as a qualified terminable interest property (QTIP) trust, they must file even if below the filing threshold.
There must be a surviving spouse.
- If the spouses die in simultaneous deaths, the personal residence exclusion would not apply. See Chapter 11.05A RCW for explanation of simultaneous deaths.
The personal residence must pass to the surviving spouse.
- If the personal residence passes outright, then no filing is needed when rest of requirements are met.
- If the personal residence passes into an irrevocable trust (credit shelter, bypass, B, exemption, exclusion, etc.), for the benefit of the surviving spouse, and no QTIP election is made for any part of the trust, then no filing is needed when the rest of the requirements are met.
- If the personal residence passes into a QTIP-elected trust for IRS purposes and the estate wishes to make a different election for Washington state, then a filing must be filed to make election regardless of filing threshold.
Both spouses must have occupied the personal residence for at least six months of the year prior to death.
- If one or both spouses were in long-term care (hospital, nursing home, assisted living facility, etc.) during the year prior to death, the personal residence still qualifies, as long as neither of them resided for more than six months during that year in another personal residence.
  - The personal residence may be rented to another person if both spouses are in long-term care.
The decedent’s gross estate value, after removing the decedent’s share of the personal residence, is below the current filing threshold.
- For estate tax filing threshold amounts, see the Filing thresholds and exclusion amounts table.

QTIP Elected Trust Considerations

QTIP elected assets made on an IRS estate tax return for a predeceased spouse are brought back into the surviving spouse’s estate. This is also true for a Washington estate tax return unless a Washington estate tax return is filed for the predeceased spouse claiming a different QTIP elected amount. A Washington QTIP election can be zero. For an election to be made, an estate tax return must be filed (this is true for the IRS or Washington state).

To explain this, consider a community property estate with $4 million assets (each spouse owns $2 million). Scenario one is if the estate only files with the IRS and not Washington. Scenario two is when the estate files both with the IRS and Washington.

For scenario one, when the predeceased spouse’s estate tax filing is only filed with the IRS claiming a $2 million QTIP elected trust, then the surviving spouse’s estate would be (assuming no changes in value) $4 million for both the IRS and Washington (depending on the then current filing thresholds for each, a return may be required to be filed or not). Since a separate QTIP election was not filed, the entire federally elected QTIP is brought back into the second spouse to die’s estate for Washington purposes.

However, for scenario two, when both an IRS and a Washington estate return was filed for the predeceased spouse, then different QTIP elections can be made.

For IRS purposes it may be beneficial to elect QTIP on the entire $2 million estate’s assets to preserve portability of the full federal exclusion amount to the surviving spouse’s estate.

For Washington purposes it may be beneficial to elect a zero QTIP election for the entire $2 million estate’s assets. Those $2 million in assets would stay in an irrevocable trust and be sheltered from coming back into the surviving spouse’s estate. The surviving spouse’s estate would be $2 million (assuming no changes in value). Depending on the current filing thresholds, the surviving spouse’s estate may or may not have to file an estate tax return.

Examples of personal residence exclusion calculation

Example – No filing required

All community property.
Entire community property value is $6,000,000.
Decedent’s one-half community property gross estate is $3,000,000.
Everything goes outright to the surviving spouse.
The personal residence they lived in, for the entire last year, is worth $1,800,000.
The decedent’s share of the personal residence is $900,000.
$3,000,000 Decedent’s gross estate
($900,000) Less decedent’s share of personal residence
---------------
$2,100,000 Gross estate calculation for the personal residence filing threshold

Because the decedent’s gross estate, less the decedent’s personal residence’s value share, is less than the current filing threshold (the applicable filing threshold for 2025 is $2,193,000), no filing is required of the estate.

Example – Filing required

All community property.
Entire community property value is $6,500,000.
Decedent’s one-half community property gross estate is $3,250,000.
Everything goes outright to the surviving spouse.
The personal residence they lived in, for the entire last year, is worth $1,800,000.
The decedent’s share of the personal residence is $900,000.
$3,250,000 Decedent’s gross estate
($900,000) Less decedent’s share of personal residence
---------------
$2,350,000 Gross estate calculation for the personal residence filing threshold

Because the decedent’s gross estate, less the decedent’s personal residence’s value share, is more than the current filing threshold (the applicable filing threshold for 2025 is $2,193,000), a filing is required of the estate, even if no taxes would be due.

Example – While below filing requirement, should file

All community property.
Entire community property value is $6,000,000.
Decedent’s one-half community property gross estate is $3,000,000.
Everything goes into an irrevocable trust for the benefit of the surviving spouse.
- The estate wishes to preserve the IRS exclusion amount for the surviving spouse’s estate, so they file a return with the IRS for portability.
The personal residence they lived in, for the entire last year, is worth $1,800,000.
The decedent’s share of the personal residence is $900,000.
$3,000,000 Decedent’s gross estate
($900,000) Less decedent’s share of personal residence
---------------
$2,100,000 Gross estate calculation for the personal residence filing threshold

However, since the estate decided to file with the IRS for portability and elect QTIP treatment of the $3,000,000 valued trust, the estate must file with Washington to elect a different QTIP amount. The estate should file a $807,000 QTIP election for Washington ($3,000,000 less $2,193,000). If no QTIP election is made with Washington, then the entire federally elected QTIP trust would be brought back in on the second spouse’s filing if their estate is above the filing threshold.

For additional information, see RCW 83.100.050 or WAC 458-57-135.