Many homeowners wish to pass their properties down to their children and future generations. Properties can be worth significant money, and for many families, the value of the home has increased significantly since the home was purchased. But the financial incentives are not the only reason many families want to know how to keep the family home in the family. Our homes also have significant sentimental value due to the memories of cherished times with loved ones that we have experienced there.
Properly accounting for the family home in an estate plan can help ensure it stays in the family after the owner has passed away. For Washington homeowners, there are a few options available for including the family home in an estate plan. The best option for each homeowner will vary based on their needs and preferences. You can learn more about how to keep a property in the family by contacting Baxter Legal Services’ Washington estate planning lawyers at 425-686-0574.
Can the Family Home Be Left to Someone in a Will?
While each estate plan varies, there are certain foundational legal documents that are likely to be included in every estate plan, including a Last Will and Testament (will) Many families will designate who should receive the family home as part of their will. The individuals designated in the will are known as beneficiaries, and the estate owner has the right to name as many as they wish. Family members can name more than one person to inherit the family home in a will. Naming multiple heirs has the potential to cause complications, as they may not agree on whether the house should be kept in the family or sold.
Additionally, a house left in a will must go through the probate process before it can be passed down to beneficiaries. This process can be lengthy and time-consuming. Other estate planning options, such as trusts, avoid the probate process and also may allow homeowners to more effectively reduce their estate taxes.
Washington State Estate Tax
In the United States, there are IRS federal estate taxes that apply to residents of all 50 states. The current federal estate tax applies to estates that are valued at over $11.7 million worth of total assets. Additionally, Washington and 16 other states have a statewide estate tax.
Washington residents who leave behind an estate valued at over $2,193,000 are subject to the state’s estate tax. This is significantly lower than the federal rate, so it is relatively common for Washington homeowners to owe state estate taxes even when they do not meet the threshold for the federal tax. The gross estate value is the sum of all assets, including real estate, bank accounts, investments, vehicles, businesses, and other property. The taxable amount is determined after subtracting all deductions from the gross estate.
Washington Estate Tax Rates
According to the Washington Department of Revenue, the state applies its estate tax on a sliding scale based on the taxable amount of the estate:
- $0-1,000,000 - Tax is owed on 10% of the taxable amount
- $1,000,000-$2,000,000 - $100,000 plus 14% of the amount exceeding $1,000,000
- $2,000,000-$3,000,000 - $240,000 plus 15% of the amount exceeding $2,000,000
- $3,000,000-$4,000,000 - $390,000 plus 16% of the amount exceeding $3,000,000
- $4,000,000-$6,000,000 - $550,000 plus 18% of the amount exceeding $4,000,000
- $6,000,000-$7,000,000 - $910,000 plus 19% of the amount exceeding $6,000,000
- $7,000,000-$9,000,000 - $1,100,000 plus 19.5% of the amount exceeding $7,000,000
- Over $9,000,000 - $1,490,000 plus 20% of the amount exceeding $9,000,000
Washington state’s estate tax policies can leave many high-net-worth. Washington residents with heavy tax bills. This is why homeowners in this state often seek guidance from estate planning lawyers regarding ways to minimize their estate taxes. You can learn more about reducing estate taxes and other estate planning matters by contacting the experienced Washington estate planning lawyers at Baxter Legal Services.
Putting a House Into a Trust
Many estate plans designate some or all of the estate’s major assets, including the family home, as part of a living trust or revocable trust. In some cases, a trust may be an effective answer to how to keep the family home in the family. These two different types of trusts each have pros and cons, and the better option will depend on the needs of the estate.
Living Trust
A living trust is also often referred to as a revocable trust, as the estate owner has the right to revoke or change the conditions of the trust at any time. They have the right to add or remove beneficiaries, change how assets in the trust will be distributed, and make other modifications. Homeowners who place their properties into a living trust will maintain control of their properties until their death.
Maintaining control can also have some negatives. Since the owner still controls the assets, they are not protected from creditors or lawsuits. In a lawsuit, the judge could rule that trust assets must be liquidated in order to pay any court judgments. State and federal taxes will also be owed once the revocable trust owner dies.
Irrevocable Trust
An irrevocable trust offers certain advantages over a revocable one. Once an irrevocable trust is signed, its terms are essentially set in stone. The terms of an irrevocable trust may only be changed in extreme circumstances. A reduced tax burden is the main advantage of choosing an irrevocable trust. The trust will become the owner of the assets, removing them from the taxable estate of the owner and legally avoiding the estate tax.
Learn More About Including the Family Home in an Estate Plan from an Experienced Washington Estate Planning Lawyer
Individuals who are wondering how to keep the family home in the family are often overwhelmed with the complexities of estate planning. It is not always easy to draft an estate plan that meets the estate owner’s needs, distributes their assets as they wish, and reduces tax burdens. If you are seeking guidance regarding how to include the family home in an estate plan or other estate planning concerns, Baxter Legal Services wants to help. Contact our experienced Washington estate planning lawyers today at 425-686-0574.