Taxpayers Win a Huge Victory against the Department of Revenue
On October 18, 2012, the Washington Supreme Court provided taxpayers with a favorable ruling on the taxability of pre-2005 Marital Deduction Trusts (otherwise known as QTIP Trusts).
In 2005, Washington adopted a state estate tax and levied such tax on the estates of all Washington decedents. In addition to imposing this tax on all tangible property located in Washington as well as all intangible property regardless of location, the state imposed this tax on assets that had been left to deceased taxpayers in a QTIP Trust. The state failed to distinguish between trusts that had been established prior to the creation of the state estate tax and trusts that had been established after the creation of the tax.
Taxpayers asserted that the State had no authority to tax assets held in a trust that had been created prior to the effective date of the tax and, in a long awaited ruling, the Washington Supreme Court agreed.