A bill has been introduced in the Washington state legislature that would double estate taxes for residents.
Currently, there is a $2 million exemption in that state, with a 10% tax that climbs to 19% at $9 million and above. Under the proposed law, the range would jump to a 20% estate tax for more than $2 million, up to 38% at the $9 million mark.
If the latest proposal is enacted, 2011 could be a costly year for some Washington residents. Assuming that the federal estate tax, which lapsed at the end of last year, comes back as scheduled next year with a $1 million exemption at 55%, Washington residents could be paying in excess of 75% in estate taxes, experts said.
“This is shocking and disturbing, and has very significant ramifications for the majority of our clients,” said Tom Gores, a partner in Perkins Coie LLP, a law firm with offices in Seattle and Bellevue, Wash. “We are contacting our state representatives to make sure they understand this.”
Already, a number of wealthy clients are discussing leaving the state due to the high estate taxes, and this number will only increase, said Dean Butler, an attorney at Carney Badley Spellman PS in Seattle.
The bill, HB 3184, was proposed Feb. 13 and hasn't yet been scheduled for a hearing, said Rick Person, a coordinator for the House Finance Services Committee. The legislative session ends March 11.
Small businesses already are planning to lobby against the bill.
“Our greatest concern is that this bill is another threat to small businesses at a time when so many of them are still just holding on,” said Jocelyn McCabe, a spokeswoman for the Association of Washington Business, which represents 6,900 state businesses.
Experts predict that given the number of states with deficits, Washington won't be alone in considering such legislation this year.
For financial advisers, this means that it is more important than ever to pay attention to what is going on locally, said Gail Cohen, head of global wealth management at Fiduciary Trust Company International. “Don't assume that just because there is no federal estate tax, there won't be any estate tax at all,” she said.
E-mail Jessica Toonkel Marquez at [email protected].
