Tax Implications in Virginia Estate Planning 

Tax implications in Virginia estate planning are important to understand. Unlike Maryland and DC, there is no estate tax in Virginia. However, based on the value of the person’s estate, there could be federal estate tax implications. Currently, there is a 40 percent tax imposed on an estate over $5,490,000 for decedent’s dying in 2017. When an estate that is worth less than $5,490,000, no estate tax is imposed and an estate tax return is not required to be filed. Any estate above $5,490,000 is considered to be a taxable estate and will be taxed. It can be confusing, so talk to a qualified estate planning lawyer in Virginia if you have any questions.

Estate Tax Return

An estate tax is a tax on a person’s right to transfer property upon their death. An estate tax return is a required to be filed when an estate is worth more than $5,490,000. Virginia has no estate tax, so an estate is only required to file a federal estate tax return when the estate meets the filing thresholds. Assets included in the estate tax returns include probate assets and non-probate assets. Any assets a person owns at their death regardless of how the asset is titled and regardless of whether there is a beneficiary designation are included on the federal estate tax return. Examples of assets include real estate, cars, jewelry, artwork, bank accounts, investment accounts, retirement accounts, and life insurance policies. For the purpose of an estate tax return, assets are valued as of the date of the person’s death. For assets like real estate and personal property, a professional appraisal is often required to determine the value. When a federal estate tax return is required to be filed, it must be filed within nine months of the date of death.

Documents Submitted

In addition to the federal estate return, the death certificate must be filed along with a copy of the person’s last will and testament, their trust if there is one, and copies of evaluations of assets. For example, appraisals of real estate and tangible personal property should be attached to the returns as well as documentation of the funeral expenses.

Other Tax Returns

The personal representative must ensure that all income tax returns are filed including the decedent’s final income tax return. The decedent’s personal income tax return is different from the estate tax return, although in many cases, an estate tax return is not required to be filed. A personal income tax return is almost always required. When a person dies at the beginning of the year, the personal representative must make sure to file that current year’s tax returns. Similarly, when a person dies in the middle or end of the year, the personal representative must make sure to file by April 15th of the following year on the decedent’s behalf.

Mitigating Impact of Fairfax Estate Taxes

Virginia does not have a separate tax. Therefore, Virginia residents only have to be cognizant of the federal estate tax system. An estate planning lawyer can help someone plan to mitigate the consequences of possible federal estate taxes. If a person is planning on moving to a neighboring jurisdiction such as Maryland or DC, they should consult with an attorney to discuss the estate tax implications in those jurisdictions in regards to estate planning.

Submission Deadline

When a federal estate tax return is required to be filed, the return is due nine months from the date of death. For income tax returns, the income is required to be reported on a decedent’s final income tax return which is due on April 15th of the following year. There is an opportunity to request an extension of six months, so it is possible to have a total of 15 months from the date of death to file the decedent’s estate tax return. The extension, however, does not defer the deadline to pay the tax, and estimated taxes are still due nine months from the date of death. Consult with an attorney to learn more about tax implications in Virginia estate planning.