About Washington State estate tax return with 529 college fund

[april4mar]

Hi,

How are you?  Thanks for your help

Washington state has $2.193M estate tax exemption in 2024.  Let's make it easy for me to explain my question.  Say Washington state estate tax exemption is $2M rather than $2.193M.   

Hypothetically, say I contribute $600,000 to my 3 grandkids 529 college fund.  I also have real estate $700,000 and financial investment & retirement $1.4M.   Add it up, I leave behind $2.7M if I die suddenly.

In that scenario, do I pay estate tax based on the $700,000 which exceeds $2M or I just need to pay estate tax based on the $100,000?   

In other words, can 529 college fund be excluded from my net worth since it is contribution or gift?  If not, would it be better off I give them tax-free annual gift ($18K) to reduce my net worth over time.   

Please shed light for me.  Thank you for your knowledge.  

[tagteam]

You should consider consulting with a local estate planning attorney.

See https://www.avvo.com

Having said that, Washington does not impose a gift tax on lifetime gifts. Current gifts do not reduce the amount of the Washington state estate tax exemption available at death. The Washington estate tax (if any is due) is based on the value of your estate when you pass away in Washington.

[april4mar]

Thank you for your reply, Champ. 

So you think the 529 college fund portion is considered part of the value of my estate?  I hope not.  That's my question.  Thanks.

[tagteam · Accepted solution]

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@april4mar wrote:

So you think the 529 college fund portion is considered part of the value of my estate?  

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I do not. I believe it was an inter vivos gift (which removes the gift from your estate in terms of Washington's estate tax computation).

[april4mar]

And thanks for the link too.  Your answers and the link all are helpful.

[april4mar]

Thank you.  That helped.