Washington vs. Illinois Estate Tax in 2025–2026: New Washington Rates, Illinois $4M Cliff, and Planning Moves

For high-net-worth families in the Midwest or with dual residency, the choice between Washington and Illinois domicile has became a critical arithmetic problem. 2026 brings new rates to Washington and maintains legal "cliffs" in Illinois.

This article compares the two regimes to find the optimal tax position.

Key Concepts

State estate taxes function differently than federal taxes.

• Cliff Effect (IL) — The punitive mechanism where exceeding the exemption by $1 taxes the entire estate, not just the overage.
• Rate Graduation (WA) — Washington's rates climb steeply to 20%, often exceeding the cost of Illinois tax for ultra-large estates.
• Domicile Stickiness — The legal difficulty of successfully changing residency to avoid tax.

Illinois: The $4 Million Cliff

Illinois has a $4M threshold. If you have $4,000,001, you are taxed on the whole amount (retroactively starting from zero), resulting in a massive marginal tax rate on that first dollar of overage.

Planning Strategy: Gifting to stay under $4M is extremely high-leverage in Illinois. "Don't fall off the cliff."

Washington: The Progressive Clamp

Washington has a comparatively generous exemption (~$2.1M indexed), but high rates (up to 20%) on the excess. Unlike Illinois, it is a true deduction (meaning only the overage is taxed).

For moderate estates ($5M-$10M), Washington is often friendlier. For massive estates ($50M+), the 20% flat bite can be more painful than Illinois' calculation.

Conclusion

There is no default "better breakdown." It depends on the specific asset value.

Attorneys must run the numbers for both jurisdictions projected out 10 years. We often advise clients to "pick a lane" early— structuring assets to maximize the specific advantages of their chosen domicile.

Frequently Asked Questions

Can I just buy a condo in Florida?

No. Domicile is about intent and center of gravity. Auditors look at where your dog is, where you vote, and where your doctors are.

Do these taxes apply to spouses?

Both states currently offer a QTIP election to defer tax until the second death, but the exemptions are not portable.

Sources & Further Reading

• WA Dept of Revenue Estate Tax
• Illinois Attorney General Estate Tax