Many people form LLCs to protect real estate or other investments, but if you’re a Washington resident, using an LLC can have unexpected consequences for your estate plan. Understanding these implications can help you avoid costly mistakes and plan more effectively.

Why LLCs Matter in Estate Planning

LLCs are a popular tool for liability protection, privacy, and business organization. However, when it comes to estate planning, they can change how your assets are categorized for tax purposes. This is especially important for Washington residents who own property in other states.

How Out-of-State Property is Affected

Consider this scenario:

• You own real estate in Texas.

• You transfer that Texas property into an LLC.

• You are a Washington State resident.

In this situation, Washington may treat that Texas property as Washington property for estate tax purposes.

If you didn’t use an LLC and owned the Texas property directly, it generally would not be included in your Washington estate tax calculation. Placing the property in an LLC changes that, potentially increasing your estate tax liability.

What You Should Do

Before moving property into an LLC, it’s crucial to:

• Consult an estate planning attorney familiar with Washington laws.

• Understand how the LLC affects your estate tax exposure.

• Ensure that your estate plan aligns with your financial goals while still protecting your assets.

LLCs can be useful, but without proper planning, they can unintentionally increase your estate taxes.

Bottom Line

If you’re a Washington resident with out-of-state real estate, transferring it into an LLC may seem like a simple protective measure—but it could have significant tax consequences. Always review your estate plan and consult a professional before making changes that affect ownership structures.

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