An estate that contains out of state property must first calculate estate tax due on the entire estate as if all property is Washington property. Then, an apportionment calculation is done to determine estate tax payable.
To determine the amount of estate tax payable if the estate contains out of state property, the tax computed on the entire estate is multiplied by a fraction. Generally, the numerator of the fraction is all Washington property and the denominator is the gross estate. See WAC 458-57-125 for examples.
Out of state property defined
In general terms, out of state property means property that is physically located outside of the state of Washington. Intangible personal property is allocated to the state of domicile of the decedent. Trust assets included in the gross estate of the decedent are identified as in state or out of state property based on the physical location for tangible personal property and real property or the decedent’s domicile for intangible personal property.
Out of state property owned by a decedent domiciled in Washington is any tangible personal property and any real property located outside of Washington. Out of state property owned by a decedent domiciled outside of Washington is all intangible personal property, any tangible personal property and any real property located outside of Washington.
Examples of Property
Tangible personal property includes, but is not limited to:
Real property includes, but is not limited to:
- Bare land
- Mineral interests
Intangible personal property includes, but is not limited to:
- Bank accounts
- Business interests
- Interests in partnerships
- Life insurance
- Retirement plans
The decedent’s domicile at time of death is the permanent legal home that the decedent intended to use for an indefinite or unlimited period, and to which, when absent, the decedent intended to return. The question of domicile is mainly a matter of intention as indicated by the decedent’s actions. The estate must be able to show that the decedent intended a given place or state to be his or her permanent home. Several factors are considered when determining domicile and include:
- Decedent’s address reported on the federal income tax return,
- Where the decedent is registered to vote,
- Location of property owned by the decedent,
- Decedent’s citizenship,
- Length of residency of the decedent, and
- Decedent’s business or social ties to the community.
The amount of time spent in one place does not always explain the difference between home and domicile. A temporary home or residence may continue for months or years while a domicile may be established the first moment the property is occupied. The intent is the determining factor in providing where a decedent is domiciled. If there is a question as to what the domicile for the decedent is, complete the Affidavit Substantiating Decedent’s State of Domicile at Death form. The Department will review the completed form to determine the decedent’s domicile.
If apportioning for out of state property, complete the Washington State Estate Tax Addendum # 4 – Apportionment for Out of State Property and attach to the Washington estate tax return.