Estate planning allows you to prepare for the future and help ensure the carrying out of your affairs to your wishes. Part of that is planning for your loved ones to receive assets that may enable them to do certain things like go to college or ease the way for them to own a house after you are no longer here to do so yourself.
Taxes are a natural and important part of any functioning society. It is important to factor them in during planning so you know their potential impact on what you plan to leave behind for your loved ones.
1. There is no estate tax
Virginia is one of the states that does not levy an estate tax of any form. The state does not have an inheritance tax or a gift tax.
2. There is a probate tax
This is separate from estate, inheritance and gift taxes. It applies only to those estates with a value greater than $15,000 and excludes certain forms of property within an estate, including an insurance payout to a specific beneficiary (and not the estate). The amount of the tax depends on the overall estate value.
3. There is a federal tax
While Virginia is a tax-friendly state, federal taxes still apply, though these largely apply to high-income estates. As long as your estate is below the exemption limit, $12.06 million for individuals in 2022 (though this number is subject to change from year to year), you do not have to worry about the federal estate tax. If your estate exceeds this limit, you do have options for trying to avoid estate taxes.
Estate taxes may not impact all Virginia residents, but they are a possibility. By accounting for them, you help make your estate plan more solid.