Article | by Geffen Mesher

Article by Mariana Danailova

Washington Senate Bill 5813 (SB 5813) was signed into law on May 20, 2025. SB 5813 aims to enhance funding for public education, childcare, early learning, and higher education in Washington State through a revised capital gains tax and estate tax structure. All new revenue from these taxes is deposited into the Education Legacy Trust Account.

SB 5813 represents a progressive shift in Washington’s tax system.

Key takeaways of SB 5813:

1. Capital Gains Tax

SB 5813 introduces a new 2.90% new excise tax on long-term capital gains exceeding $1,000,000 (after exemption). The new excise tax is retroactive to January 1, 2025, while retaining the existing 7% tax on capital gains over $270,000 per year, adjusted annually.

2. Estate Tax Exemption

SB 5813 also increases the Washington estate tax exemption from $2,193,000 to $3,000,000 for estates of decedents dying on or after July 1, 2025. The exemption amount will be adjusted annually for inflation. The bill aims to create a fairer tax system by reducing the tax burden on residents with taxable estates below the new threshold.

3. Estate Tax Rates

In addition, SB 5813 increases Washington’s estate tax rates for decedents dying on or after July 1, 2025, setting a new top marginal rate of 35% for estates with net assets exceeding $9MM. This represents the highest state-level estate tax rate in the nation. The changes significantly affect tax liability for estates with taxable assets over $1MM, as demonstrated in the table below:

To illustrate the impact of these changes, consider the difference in Washington estate tax owed on a $15MM estate for a decedent dying on June 30 versus July 1:

Why do these legislative changes matter for Washington residents?

· For high-income and invested individuals who realize $1,270,001 in taxable capital gains annually, the marginal state tax rate increases to 9.9%. Additionally, estates exceeding $3MM will face higher estate tax rates, with those over $9MM taxed at a top rate of 35%.

· For moderate- and middle-income families, the impact is minimal. Capital gains below $1 million continue to be taxed at 7%, and estates valued under $3 million remain unaffected.

· For estate planning and trusts, advisors and families with high-net-worth estates will likely need to reevaluate inheritance plans and trust strategies because of the higher tax rates—especially for assets exceeding the $3MM exemption.

As a next step, consider reviewing the timing of any planned asset sales, especially if nearing the $1 million threshold and exploring opportunities to defer gains, where appropriate. We also recommend updating any estate plans, including wills, trusts, gifting strategies, and retirement accounts, to ensure they reflect the new tax brackets and remain tax efficient.

Geffen Mesher’s Estate and Trust Team is available to assist you with any questions related to these changes. Please contact our professionals for more information.