You may have noticed a recent article by James Drew in The News Tribune, a Tacoma newspaper, entitled “We in Washington pay highest estate tax in the nation. There’s a reason, officials say.” The article states, “Washington has the nation’s top graduated rate in its estate tax — at 20 percent — and is the only state without an income tax that levies a death tax, according to the Tax Foundation, a conservative think tank in Washington, D.C.” The article continues, “Washington’s death tax, which kicks in for those with estates of $2.2 million and above, has generated from $134 million to $203 million a year in recent budgets. The rates range from 10 percent to 20 percent, depending on the estate’s size. The funds are spent on K-12 education.”
Usually, when I see the term “death tax,” I tend the view the information with a bit of skepticism – assuming that the intent is to politicize the issue rather than to provide accurate information. Estate planning attorneys use the term “estate tax” – which is the correct terminology. I found my skepticism to be well placed as I continued reading the article, and found the following quote attributed to Jason Mercier, the director of the Center of Government Reform with the Washington Policy Center: “Mercier said those are who most impacted by the death tax are the estates of individuals and small businesses that are slightly above the $2.2 million threshold and can’t afford the legal expertise that would help cut their tax bills. ‘Who you are hitting are those who can’t do the estate planning,’ he said.”
Really? Let’s take a look at that claim. A small business does not have an estate tax obligation – period. Perhaps a small business owner has an estate tax liability, but the business itself does not. Second, according to MarketWatch, “[t]he medium net worth of the average U.S. household is $97,300.” Individuals who pass away with an asset level high enough to incur Washington estate tax liability have, at a minimum, over 22 times the assets of the median household. Yet, somehow, according to Mr. Mercier, these poor impoverished souls cannot afford to pay legal fees associated with their estate planning.
Of course, Mr. Mercier’s assertion is patently absurd. In a prior blog post, I outline some basic strategies for minimizing or avoiding the Washington estate tax including annual gifts, charitable donations, and testamentary trusts. The first two strategies require no “legal expertise” – they are quite self-evident. The third strategy does require the advice and counsel of an estate planning attorney. That legal advice does not need to be exorbitantly expensive, and a household possessing assets of that nature can, in all likelihood, afford the attorneys’ fees for this type of work. In addition, Mr. Mercier’s statement implies that someone with over $2 million in assets doesn’t need estate planning work outside tax planning considerations, and couldn’t afford to pay an attorney to prepare a Will. That’s simply not true.
If you have concerns about potential Washington estate tax liability, please do not pay attention to this type of misinformation. Our firm, among others, will be happy to answer your questions and provide assistance.