The US state of Washington on its webpage on Estate Tax on 9 November 2024 announced the state will allow married couples and registered domestic partners to exclude the value of their personal residence when determining if their estate meets estate tax filing requirements. The new calculation will apply to individuals who pass away on or after 1 January 2025.

The personal residence exclusion is only used to determine if a filing is required. The personal residence value is not excluded from the gross estate if the remainder of the decedent’s assets meets or exceeds the filing threshold.

What is personal residence? 

On its Estate Tax webpage, the Washington Department of Revenue clarified The term “personal residence” and includes any of the following:

• House and the spousal owned land the house sits on;
• Mobile home or park model, if it is fixed to a foundation on the spousal owned land it sits on (no longer considered a mobile unit);
• A single-unit dwelling (such as a condo);
• Houseboat or floating home;
• Leasehold property (such as a cabin on government property).
• DST (Delaware Statutory Trust co-op owned percentage) residence.

Requirements to exclude the spousal personal residence

The Washington Department of Revenue has clarified that, following House Bill 1867, a spouse’s personal residence will be excluded from the gross estate calculation when assessing if the estate meets the filing threshold which is as follows:

• No other elections are required of the estate’s filing.
  • If the estate wishes to elect the treatment of a trust or portion of a trust as a qualified terminable interest property (QTIP) trust, they must file even if below the filing threshold.
• There must be a surviving spouse.
  • If the spouses die in simultaneous deaths, the personal residence exclusion would not apply. See Chapter 11.05A RCW for explanation of simultaneous deaths.
• The personal residence must pass to the surviving spouse.
  • If the personal residence passes outright, then no filing is needed when rest of requirements are met.
  • If the personal residence passes into an irrevocable trust (credit shelter, bypass, B, exemption, exclusion, etc.), for the benefit of the surviving spouse, and no QTIP election is made for any part of the trust, then no filing is needed when the rest of the requirements are met.
  • If the personal residence passes into a QTIP-elected trust for IRS purposes and the estate wishes to make a different election for Washington state, then a filing must be filed to make election regardless of filing threshold.
• Both spouses must have occupied the personal residence for at least six months of the year prior to death.
  • If one or both spouses were in long-term care (hospital, nursing home, assisted living facility, etc.) during the year prior to death, the personal residence still qualifies, as long as neither of them resided for more than six months during that year in another personal residence.
  • The personal residence may be rented to another person if both spouses are in long-term care.
• The decedent’s gross estate value, after removing the decedent’s share of the personal residence, is below the current filing threshold.