There is a saying that the only two certainties in life are death and taxes. However, there is a lot of uncertainty about where those two issues overlap. People often hear and believe inaccurate information about so-called death taxes that apply to their property after they die.
Misinformation and urban legends about estate taxes have led to many people not understanding what tax liabilities they have when they die, which means they don’t have an estate plan that addresses those tax risks.
As someone planning or thinking about revisiting their estate, learning more about estate taxes can help ensure that your legacy doesn’t wind up in the public coffers instead of in the hands of the people you love.
Is there an estate tax in Virginia?
As a Virginia resident, you are subject to federal and state taxes. Those potential tax obligations continue even after you die. Thankfully, the state of Virginia does not levy an estate tax anymore.
Regardless of how much property you leave behind for those you love, you will not need to worry about the state of Virginia assessing a tax based on the value of your estate. However, if you own a business or other major assets, you may need to worry about federal estate taxes. Currently, estates worth more than $11.8 million may have to pay an estate tax.
You will have other tax obligations after your death
The year after you die, your executor will have to file your last income tax return. They will have to settle any outstanding income tax that you owe to the Internal Revenue Service or the state of Virginia before they distribute your property to your loved ones.
Making sure you have enough set aside to cover those tax obligations is important. You may also need to think about taxes when you plan how to transfer your assets to people. For example, instructing your executor to sell off property might mean that the estate itself generates income and will have to pay income tax on the sale of those assets in the future.
Thinking carefully about what you own and who you want to receive those assets can help you create an estate plan that minimizes your tax liability after death.
