Where Does Washington Estate Tax Go?

Not every estate is subject to estate tax in Washington; the tax applies only to the value in an individual’s estate above $2.193 million in 2022. Estate planning clients who have the good fortune to be considering how to approach Washington estate tax liabilities often have different views about paying  it. Some support the tax, believing that it reduces wealth inequality. Others object to the tax and work with accountants and estate planning attorneys to take every possible measure to avoid paying it. Some take a hybrid approach, wanting to take some measures to reduce their tax liability but not fully eliminate it. But few ask, “If my estate ends up paying Washington estate tax, where does the money go?”

It may surprise many that the money doesn’t go into the general state coffers, to be spent as part of the general state budget. To the contrary, funds received through the payment of Washington estate taxes are designated specifically to The Education Legacy Trust Fund. According to the Washington Department of Revenue:

The Education Legacy Trust Fund provides funding for:

• The student achievement fund for reducing class sizes, professional development of teachers, extended learning such as before- and after-school programs, and pre-kindergarten learning.
• Learning assistance program to help kindergarten through 12th-grade students who are not up to standards.
• Higher education (which includes monies for financial aid, supporting additional enrollment of students, adult basic education programs in community colleges, work-study programs, etc).

The Education Legacy Trust Fund was created in 2005, and is authorized by RCW 83.100.230 which provides that the funds can only be expended through appropriation. The statute sets forth that “expenditures from the account may be used only for support of the common schools, and for expanding access to higher education through funding for new enrollments and financial aid, early learning and child care programs, and other educational improvement efforts.” Also note that The Education Legacy Trust Fund includes interest earned from the estate tax deposits as well as capital gains tax.

In working with estate planning attorneys and accountants to determine potential Washington estate tax liability, and the potential measures to be taken to reduce or eliminate this liability, some may wish to consider how the estate tax funds will be used as part of their decision-making process.

Do you have questions about the Washington estate tax? We’d be happy to help.