WA Estate Tax Rates Roll Back July 1, 2026 — But the Exemption Just Got Frozen
Washington's top estate tax rate drops from 35% to 20% on July 1, 2026, but ESB 6347 also freezes the $3M exemption. Here's what family business owners should check.
Washington’s estate tax just changed for the second time in under a year. Governor Ferguson signed ESB 6347 on March 24, 2026, rolling back last year’s rate increase — but the bill also permanently freezes the exemption amount, a tradeoff that matters most for owners of family-held businesses.
For estates of people who die on or after July 1, 2026, Washington’s top marginal estate tax rate drops back to 20%, reversing the 35% top rate that applied to deaths between July 1, 2025 and June 30, 2026. The bottom rate stays at 10% on the first $1 million of a taxable estate.
At the same time, the exemption amount — which had been indexed to inflation and sat at $3,076,000 for deaths between January 1 and June 30, 2026 — resets to a flat $3,000,000 for deaths on or after July 1, and stops adjusting for inflation going forward, according to Stokes Lawrence. The law reverts to referencing an inflation index (the old Seattle-Tacoma-Bremerton CPI) that no longer exists, effectively locking the exemption in place.
That means 2026 is a split year: whether an estate faces the higher 2025-26 rates and slightly larger exemption, or the lower post-July rates and frozen exemption, depends entirely on the date of death.
Why it matters
For a large estate, the rate rollback alone can mean a real dollar swing — Mercer Advisors estimates the difference between dying in June versus July 2026 can equal roughly $200,000 in tax on a $10 million taxable estate. But the frozen exemption cuts the other way over time: as asset values grow with ordinary inflation, more estates will cross the $3 million threshold each year simply because the exemption no longer moves with them.
What this means for small business owners
Check where you sit relative to $3 million. Business equity, real estate, and retirement accounts all count toward the taxable estate. A frozen exemption means owners who are comfortably under the threshold today may not be in five years.
Revisit liquidity planning. Advisors flag buy-sell agreements and insurance coverage as the practical tools that keep heirs from having to sell business assets fast just to cover a tax bill — sometimes at a discount, under time pressure.
Don’t assume last year’s plan still fits. Because Washington has changed this rate structure twice in twelve months, an estate plan built around the 2025 rules may no longer reflect current law.
The bottom line
The headline rate went down, but the frozen exemption means Washington’s estate tax is quietly getting more small business owners into its scope over time, not fewer. If your business is your biggest asset, it’s worth a conversation with an estate planning attorney about where you actually stand under the post-July 1 rules — not the ones you last checked a year ago.
