When it comes to estate tax planning, the idea of making “deathbed gifts” — gifts made shortly before you pass away — can sound extreme. But in Washington state, it can actually be a viable strategy to reduce your taxable estate.

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How Deathbed Gifts Work in Washington State

Washington state estate tax law allows you to give away as much as you want at any time, including right up until the moment of death. Any assets you give away before you pass are removed from your taxable estate for Washington state estate tax purposes.

That means if you’re concerned about your estate exceeding Washington’s relatively low exemption threshold (currently much lower than the federal exemption), gifting can be an effective last-minute way to lower your estate tax bill.

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Why This Doesn’t Work for Federal Estate Taxes

If you’re dealing with federal estate taxes, the rules are different. The IRS includes certain lifetime gifts in your federal taxable estate, so deathbed gifting generally won’t help there. This makes it important to know which level of taxation you’re planning for — state, federal, or both.

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The Capital Gains Tax Trade-Off

While deathbed gifting can reduce Washington state estate taxes, there’s a major drawback: no step-up in basis for the gifted assets.

• Step-up in basis means that when you pass away, the cost basis of your assets resets to their fair market value at the date of death.
• Without it, your heirs could owe significant capital gains taxes if they later sell those assets.

For example, if you give away highly appreciated stock or real estate before death, the recipient inherits your original purchase price as the cost basis. This could result in a large tax bill when they sell.

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When to Use This Strategy

Deathbed gifting may make sense if:

• You have assets that have not appreciated much and won’t trigger large capital gains.
• You’re over the Washington state estate tax threshold and want to quickly reduce your taxable estate.
• You’re confident the recipient can manage the gift immediately without needing to sell it right away.

If your assets have significant built-in gains, you’ll likely want a different approach to preserve the step-up in basis and avoid unnecessary capital gains taxes for your heirs.

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The Bottom Line

In Washington state, a well-timed gift — even right before death — can legally reduce your estate tax liability. However, it’s not without risks, especially when dealing with appreciated assets. Always weigh the potential estate tax savings against the possible capital gains tax cost to your heirs.

Pro tip: Work with an experienced estate planning attorney and tax advisor to determine if this strategy makes sense for your specific situation.

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