Many people form LLCs to protect real estate and other investments, but if you’re a Washington resident, using an LLC can have unexpected consequences for your estate plan. Here’s what you need to know to avoid costly mistakes.

Why LLCs Can Affect Your Estate Plan

LLCs are often used to separate assets from personal ownership for liability protection, privacy, or business purposes. That’s all well and good—but when it comes to estate planning, the implications aren’t always obvious.

For example, if you own real estate in another state, like Texas, and place that property into an LLC, Washington State may treat it differently when calculating your estate tax.

How State Residency Matters

• Without an LLC: If you directly own out-of-state real estate, Washington generally does not include it as part of your taxable estate.

• With an LLC: When you transfer your Texas property into an LLC and you are a Washington resident, the property is considered part of your Washington estate for tax purposes. This could increase your Washington estate tax liability, even though the property is physically located in another state.

What This Means for You

Before transferring any out-of-state real estate into an LLC, it’s crucial to consult an estate planning attorney. They can help you:

• Understand how the transfer affects your Washington estate taxes.

• Determine whether an LLC is the right tool for your property.

• Plan strategies to minimize tax consequences while still protecting your assets.

Bottom Line

LLCs can be powerful tools, but if you’re a Washington resident, moving property into an LLC can unintentionally increase your estate tax exposure. Always review your estate plan before making changes that affect ownership structures.

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