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Do you need a plan to minimize your estate taxes?

On Behalf of | Dec 4, 2021 | Estate Planning |

When you die, you want your property to go to certain people in your family. You may want your children to inherit your real estate or your best friend to inherit the car you rebuilt together. Many people working on their estate plans become so focused on distributing their property that they don’t think about their liabilities. 

Your liabilities when you die include your debts and your outstanding tax obligations. Even unsecured debt, like credit card balances, can impact what you leave behind for the people you love when you die, and so can taxes. 

Is your Virginia estate potentially vulnerable to estate taxation? 

There are no state estate taxes, but you may have to plan for federal ones

An estate tax is a tax that applies to the total value of your estate and which the representative of your estate will typically have to pay before giving assets to your loved ones. An inheritance tax applies to the value of what people inherit, meaning that beneficiaries have to pay that tax. Thankfully, Virginia does not assess either an estate tax or an inheritance tax. 

However, estates worth more than $12 million may be subject to federal estate taxation. The more the estate is worth, the higher the tax rate may be. The top tax rate could consume 40% of the assets that you leave behind when you die. Your executor may also need to pay taxes when filing a final tax return or if your estate generates income through the sale of assets. 

Thinking about taxes can help you protect your loved ones’ inheritance in your estate plan.

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