The clock is ticking. At the end of 2025, the historically high federal estate tax exemption is scheduled to sunset. Unless Congress steps in, the exemption will be cut roughly in half starting in 2026. For Washington families who have worked hard to build wealth in real estate, retirement accounts, or small businesses, this change could be a turning point.
At Terry Law Firm, P.S., we’ve been talking with clients across the state about what these cuts mean and how to prepare before the window closes.
What’s changing in 2026
Right now, the federal exemption allows individuals to transfer a significant amount of wealth without triggering estate tax. But beginning January 1, 2026, the exemption will drop back to pre-2018 levels—adjusted for inflation. That means families who thought they were comfortably below the threshold could suddenly find themselves subject to estate taxes.
For example, property values in Pierce, King, and Thurston counties have risen steadily over the past decade. A home, a retirement account, and a modest business can quickly push an estate above the new limit.
Why it matters for Washington residents
Washington also has its own estate tax, which starts at a much lower level than the federal one. That double layer makes planning even more critical. Without adjustments, your estate could face state and federal taxes, reducing what ultimately passes to your loved ones.
Planning opportunities before the cut
The next year and a half offers a rare planning window:
- Lifetime gifting. You can take advantage of today’s higher limits by making gifts now. This may involve direct gifts to children and grandchildren or transfers into trusts.
- Spousal planning. Couples may want to explore ways to maximize both exemptions through coordinated planning.
- Trust structures. Irrevocable trusts and other strategies can help preserve wealth while maintaining flexibility.
- Business succession. For family businesses, 2025 may be the time to think about transferring ownership or setting up clear succession plans.
At Terry Law Firm, P.S., we walk families through these choices, tailoring strategies to their unique mix of assets and goals.
Avoiding the “wait and see” trap
It’s tempting to hold off, hoping Congress will extend or modify the exemption. But waiting can backfire. If nothing changes, families who delayed action may find the door slammed shut at the end of 2025. Acting now doesn’t mean locking into a rigid plan—it means preserving flexibility and options.
More than taxes
While the looming exemption cut is important, estate planning isn’t just about taxes. Updating wills, powers of attorney, and health care directives is just as critical. Family changes—like marriages, divorces, or new children—should also be reflected in your plan. Taxes may drive the urgency, but the goal is peace of mind.
How Terry Law Firm, P.S. can help
Every family’s situation is different. Maybe your primary concern is passing on a small business. Maybe it’s making sure your kids can keep the family cabin. Or maybe you just want to make sure the savings you’ve built over a lifetime don’t vanish into unnecessary taxes.
At Terry Law Firm, P.S., we help Washington families navigate these turning points with practical, personal planning. The 2026 exemption cut is coming, but with the right steps now, you can protect your legacy.
If you’re ready to review your plan or explore your options, visit www.terrylawfirm.com.
- Preparing for Federal Estate Tax Exemption Cuts in 2026 - January 31, 2026
- Critical Estate Planning Issues to Address in 2025 - January 17, 2026
- Mid-Year Estate Planning Checklist: Don’t Overlook These Key Updates - January 3, 2026
