The Washington legislature has been busy. You have probably heard about Washington's new same-sex marriage act, but you should also take note of the new Washington trust act, especially if you created a trust, are serving as trustee or who have a beneficial interest in a trust sited in Washington. In addition, you should be aware of the federal and state gift and estate tax exclusion and the potential advantage of making taxable gifts before year end.
New Washington Trust Act
The Washington legislature enacted some sweeping changes to the administration of trusts in this state. Included are
- Notice requirements when a trust is created;
- Requirements for periodic reports to beneficiaries;
- Safe harbor rules for trustee liability;
- Clarified procedure for reforming wills and trusts to conform to the maker's intent;
- Statutory trust certification form (handy when opening trust accounts or buying or selling trust property);
- New rules regarding when trusts are sited in Washington or governed by Washington law;
- Additional options for distributing trusts to minors or persons who are incompetent; and
- Clarification regarding how revocable living trusts created by spouses or partners are revoked.
Trustees and beneficiaries should review their trusts to make sure they are in compliance with the new laws.
Same-Sex Marriage in Washington
On February 13, 2012, Governor Gregoire signed into law a bill that expanded the definition of marriage to include same-sex couples. The new law is scheduled to take effect June 30, 2012, but the effective date may be postponed if it is challenged by initiative or referendum.
For purposes of estate and gift tax planning, heterosexual married couples who are U.S. citizens can take advantage of the unlimited federal and state marital deductions, allowing transfers between them to be made free of gift or estate tax. Same-sex couples registered as domestic partners in Washington or married under Washington's new law may take advantage of the Washington marital deduction, but are barred from claiming the federal marital deduction under the Defense of Marriage Act ("DOMA"), which prevents same-sex spouses from taking advantage of any of the benefits afforded to other spouses under federal law.
Estate and Gift Tax Exemptions
Federal. For 2012, the basic exclusion amount for federal gift, estate and generation-skipping transfer taxes increased to $5,120,000. Unless Congress acts by the end of the year, that amount will decrease to $1,000,000 in 2013. If you have been thinking of making a taxable gift, now may be the time. The annual gift tax exclusion remains at $13,000.
Washington. For 2012, the basic exclusion amount for Washington estate tax remains at $2,000,000. Washington has no gift or generation-skipping transfer tax.