Estate tax is a tax on what you own when you die. Most families will never pay federal estate tax, but Washington and Oregon have their own estate taxes that start at much lower amounts. This article explains how these taxes work and how planning can reduce them.
Why this matters
If your estate may owe state estate tax, how your plan is written can make a significant difference to what your family receives. A married couple can often save hundreds of thousands of dollars with planning that uses both spouses’ exclusions, as the examples below show.
Key terms
- Taxable estate: Everything you own or control at death, including cash, real estate, investments, retirement accounts, life insurance, and business interests, minus your debts.
- Exclusion: The amount each person can leave free of estate tax. The federal government, Washington, and Oregon each set their own.
- Portability: A federal rule that lets a surviving spouse use the unused part of the federal exclusion of the spouse who died first.
- Marital deduction: The rule that lets you leave any amount to your spouse without estate tax at your death. The tax is put off until your spouse dies.
- Credit Shelter Trust: A trust that holds property up to the exclusion amount at the first death, so it is not taxed again when the surviving spouse dies.
Your taxable estate
Your taxable estate is the fair market value of everything you own or control at death, minus your debts. That includes property that passes outside your Will or Revocable Trust, such as retirement accounts and life insurance. If the total is more than the exclusions and deductions available, estate tax may be owed.
Married couples usually plan with their combined estate in mind. In Washington, only the deceased spouse’s half of the community property counts in their estate. For more, see this article.
Federal estate tax
In 2026, the federal exclusion is $15,000,000 per person, or $30,000,000 for a married couple. It is adjusted for inflation each year beginning in 2027. Large gifts made during your lifetime use up part of this exclusion. Amounts above the exclusion are taxed at 40%.
Separately, you can give up to $19,000 to each person in 2026 without using any of your exclusion or filing a gift tax return. This is called the annual exclusion.
Portability lets a surviving spouse add the first spouse’s unused federal exclusion to their own. It requires filing an estate tax return at the first death. If the surviving spouse remarries and the new spouse also dies first, the unused exclusion from the first spouse can be lost.
State estate tax
Washington and Oregon each have their own estate tax, separate from the federal tax. Their exclusions are far lower than the federal exclusion, so many families who will never owe federal tax may owe state tax.
Three points apply in both states:
- Neither state allows portability, so without planning, the first spouse’s state exclusion can be lost.
- Neither state has a gift tax, although large gifts still count for federal purposes.
- People who live elsewhere can owe estate tax on real estate or other physical property in Washington or Oregon, such as a coastal vacation home.
Because federal and state exclusions differ and change over time, a good plan stays flexible enough to work under both.
The marital deduction
Under federal and state law, you can leave any amount to your spouse without estate tax and without using any of your exclusion. This is the unlimited marital deduction. It does not apply to unmarried partners.
Property can qualify in two ways. It can be left to your spouse outright, or it can be left to a Marital Trust, also called a QTIP Trust. A Marital Trust must distribute all of its income to your surviving spouse at least once a year. What is left after your spouse dies passes as your plan directs.
Everything your spouse owns at death, including what they inherited from you, is part of their taxable estate. The marital deduction therefore delays estate tax, but it does not necessarily eliminate it.
For more on trusts for a spouse, see this article.
Planning examples: Washington and Oregon
The examples below show how the same $6 million estate is taxed in Washington and in Oregon, with and without tax planning. Each assumes a married couple with $6 million of assets, $3 million controlled by each spouse. It also assumes the first death is on or after July 1, 2026, and that values do not change. They are simplified illustrations.
Federal estate tax: At $6 million, the couple’s estate is well below the $15 million federal exclusion, so no federal estate tax is owed in these examples.
Washington estate tax
In Washington, the exclusion is $3,000,000 per person for deaths on or after July 1, 2026. With planning, a married couple may be able to exclude up to $6,000,000. The Washington exclusion is not reduced by lifetime gifts, and beginning in 2027 it is adjusted each year for inflation. The amount above the exclusion is taxed at rates from 10% to 20%.
- Husband and Wife have assets totaling $6 million. Each spouse controls $3 million.
- Husband dies first and leaves his $3 million outright to Wife.
- The transfer is not subject to estate tax because it qualifies for the unlimited marital deduction.
- Wife now owns $6 million. When she dies, she leaves everything to their children.
Washington estate tax result:
Husband’s $3 million exclusion goes unused, and Washington does not allow portability. Wife’s taxable estate is $6 million. After subtracting her $3 million exclusion, $3 million is subject to Washington estate tax.
Estimated Washington estate tax due:
$390,000.
- Husband and Wife have assets totaling $6 million. Each spouse controls $3 million.
- Husband dies first. His estate plan uses a tax formula that sends his $3 million, the Washington exclusion amount, to a Credit Shelter Trust for Wife.
- Husband’s own exclusion covers the $3 million, so no estate tax is owed at his death.
- Wife can benefit from the Credit Shelter Trust during her lifetime, but it is not part of her taxable estate.
- Wife keeps her own $3 million. When she dies, she leaves everything to their children, and the Credit Shelter Trust passes to the children under its terms.
Washington estate tax result:
Wife’s taxable estate is $3 million, which is fully covered by her $3 million exclusion.
Estimated Washington estate tax due:
$0, a savings of $390,000 compared with Example 1.
Oregon estate tax
In Oregon, estate tax applies to estates of $1,000,000 or more, at rates from 10% to 16% on the amount above $1,000,000. The $1,000,000 threshold does not adjust for inflation. An Oregon estate tax return must be filed for any estate of $1,000,000 or more, even when planning means no tax is owed.
- Husband and Wife have assets totaling $6 million. Each spouse controls $3 million.
- Husband dies first and leaves his $3 million outright to Wife.
- The transfer is not subject to estate tax because it qualifies for the unlimited marital deduction.
- Wife now owns $6 million. When she dies, she leaves everything to their children.
Oregon estate tax result:
Wife’s Oregon taxable estate is $6 million. The tax on an estate between $5.5 million and $6.5 million is $482,500 plus 12% of the amount above $5.5 million.
Estimated Oregon estate tax due:
$542,500.
- Husband and Wife have assets totaling $6 million. Each spouse controls $3 million.
- Husband dies first. His estate plan uses a tax formula that sends $1 million, the Oregon exemption amount, to a Credit Shelter Trust for Wife. The remaining $2 million goes outright to Wife.
- No Oregon estate tax is owed at Husband’s death. The $1 million in the Credit Shelter Trust is within the exemption, and the $2 million to Wife qualifies for the unlimited marital deduction.
- Wife can benefit from the Credit Shelter Trust during her lifetime, but it is not part of her taxable estate.
- Wife now owns $5 million: her own $3 million plus the $2 million she inherited. When she dies, she leaves everything to their children.
Oregon estate tax result:
Wife’s Oregon taxable estate is $5 million. The tax on an estate between $4.5 million and $5.5 million is $367,500 plus 11.5% of the amount above $4.5 million.
Estimated Oregon estate tax due:
$425,000, a savings of $117,500 compared with Example 3.
Why the results differ
The difference is the size of each state’s exclusion. Washington’s $3 million exclusion lets a Credit Shelter Trust shelter the first spouse’s entire share, so planning removes the Washington tax altogether. Oregon’s $1 million exemption shelters less, so the same planning reduces the Oregon tax but does not eliminate it.
Want to read more?
These articles are optional.
- Trusts for a surviving spouse: Credit Shelter, Disclaimer, and Marital Trusts. See this article.
- Community property: How it affects your estate and the tax benefit at the first death. See this article.
- Questionnaire help: If you are filling in the questionnaire, see the help for the Asset Details page for Washington or for Oregon.
- Glossary: Common estate planning terms. See this article.
- Beneficiary designations: How retirement accounts, life insurance and other property outside your Will fit with your plan. See this article.