The Washington “Millionaires’ Tax” and the Future of Your Legacy

For decades, Washington residents relied on the absence of a state income tax as a cornerstone of wealth planning. That assumption may now be ending. With the Senate’s recent 27-22 passage of Senate Bill 6346 (known as the 'Washington Millionaires Tax'), Washington has signaled a historic shift toward a 9.9% personal income tax on households earning over $1 million a year. For families who have built their success in the Pacific Northwest, the message is clear: the era of tax simplicity is evolving into a landscape of strategic complexity and diversification.

As an estate planning and asset protection firm, we view this not merely as a political debate, but as a timely prompt for our community to audit their long-term financial architecture. Legislative shifts like this are exactly why modern estate plans must be designed for change and flexibility rather than static stability. Whether this specific bill survives the House, the Governor’s desk, or the inevitable court challenges, the underlying intent of the legislature is a permanent shift in how high-net-worth (HNW) assets are viewed and valued.

The “Tax Layering” Trend: Why Income and Estates are Converging

During the three-and-a-half-hour Senate floor debate, Senator Chris Gildon accurately described the current legislative trajectory as “tax layering.” This isn’t just about one new 9.9% levy; it’s about how that levy interacts with existing capital gains taxes, property taxes, and the volatile state estate tax.

For the roughly 21,000 filers expected to be affected by the proposed income tax, this creates a compounding effect. When income is taxed at the front end and the remaining assets are taxed again at the time of transfer, the “velocity of wealth” across generations, in theory, slows down significantly.

Let’s run the math on an example. Let's say you have a successful e-commerce business with your partner and you make $5 million in income annually.

• Current Tax: $0

• SB 6346 Tax (9.9% on $4M excess): $396,000 per year.

• 10-Year Cost of Inaction: ~ $4 Million.

  
  

Proactive estate planning is the only mechanism available to decouple your hard-earned assets from these overlapping tax layers. By utilizing specialized trust structures, we can often redefine how and when income is recognized, potentially keeping families below the “millionaire” threshold while maintaining their standard of living and quality of life.

Navigating Political Volatility: The Case for “Agile” Planning

One of the most striking elements of the current session is the back-and-forth on the Washington State Estate Tax. While the Senate moved to create an income tax, it simultaneously voted 38-11 to undo estate tax hikes passed just last year. This legislative “flip-flopping” creates a dangerous environment for those using static, “set-it-and-forget-it” estate plans.

A plan drafted in 2023 might already be obsolete by 2026. Our firm encourages the community to focus on Agile Estate Planning—building flexibility into your documents through:

• Trust Protectors: Third parties (who can technically be yourself, family, friends, or professionals) who can amend trust terms as tax laws change.

• Jurisdictional Flexibility: The ability to move the “situs”, or home, of a trust to a more tax-favorable state if Washington’s “historic” shifts become too burdensome.

• Decanting Provisions: The power to pour assets from an old, tax-exposed trust into a new one designed for the current legal environment.

  
  

Asset Protection is More Than Just Tax Savings

While the headlines focus on the 9.9% rate, the broader conversation is about Asset Protection. Supporters of the bill cite the biblical adage “to whom much is given, much is required.”

From a legal perspective, we believe that to whom much is given, much must be defended.

If SB 6346 is enacted, it is slated to take effect January 1, 2028. This may feel like a narrow window, but proper asset protection requires detailed analysis of your current landscape and can take 6-12 months to establish. Asset protection isn’t just about avoiding a tax bill; it’s about shielding your life’s work from litigation, economic shifts, and the “false hope of reform” that often accompanies new tax layering.

The Proposed Cost of Inaction

The Senate Minority Leader warned of an exodus of Washington’s wealthy residents. However, leaving the state isn’t the only, the best, or most likely option. For most, the solution lies in sophisticated legal engineering within the state. Jerry Cornfield (2026) explains that while some taxpayers may absorb the cost, the resulting $2.5 billion in state revenue has a specific roadmap for distribution:

“[It would] bolster public defense services in local courts around the state, expand the Working Families Tax Credit program, and increase tax breaks for businesses grossing less than $600,000 a year.”

Whether the “Millionaires’ Tax” is the ultimate solution for the budget or an “economic consequence” for the affluent resident, your family’s financial security should not be solely reliant on the outcome of a Senate vote. By integrating income tax mitigation with robust estate planning, you ensure that your legacy is defined by your choices, not the state’s budget needs.

Is Your Current Plan Ready for 2028?

The legislative landscape is moving fast, and your protections need to move faster. Audit your 2028 exposure before the window closes and ensure your assets, values, and family are protected exactly how you intend for them to be — for this generation, and the next.