Estate Tax Planning Strategies for Families in Virginia: 9 Powerful Ways to Protect Your Legacy

Estate tax planning is one of those things most Virginia families know they should think about, but it keeps getting pushed to next year. Part of the reason is confusion. You hear that Virginia has no estate tax, so it feels like there is nothing to plan for. Then you hear about federal exemptions, trusts, probate fees, and gift limits, and it starts to feel like a maze.

Here is the honest picture. Virginia repealed its own estate tax back in 2007, and the federal estate tax exemption is now $15 million per person in 2026. That means most families will never write a check to the IRS for estate tax. But that does not mean estate tax planning is a waste of time. The rules can change with the next Congress. Your home, retirement accounts, business, and land can grow faster than you expect. And Virginia still charges a probate tax, still runs estates through the circuit courts, and still has rules about spouses and real estate that can trip up a family that never planned.

Good estate tax planning strategies do more than cut taxes. They keep assets out of court, avoid fights between siblings, protect a surviving spouse, and pass wealth on the way you actually want. In this guide, we walk through how the tax rules work for Virginians right now, nine practical strategies families use, Virginia-specific issues to watch, and the mistakes that cost families the most.

Does Virginia Have an Estate Tax? What Estate Tax Planning Looks Like at the State Level

No. Virginia does not have a state estate tax or a state inheritance tax today. The Virginia Department of Taxation confirms the estate tax was effectively repealed for deaths on or after July 1, 2007. Before that date, Virginia’s tax was tied to a federal credit for state death taxes. When Congress phased out that credit, Virginia chose not to replace it with a standalone tax.

This puts Virginia in a good spot compared with its neighbors. Maryland has both an estate tax and an inheritance tax. Washington, D.C. has its own estate tax with a much lower threshold than the federal one. If your family has ties across the Potomac, that difference matters a lot for Virginia estate tax planning.

Why Virginia families still need estate tax planning

A lack of a state tax does not mean there is no cost when someone dies. Here is what still applies to most Virginia estates:

• Federal estate tax on very large estates, at a top rate of 40%.
• Virginia probate tax, a fee charged when a will is probated or an administrator qualifies in circuit court.
• Income tax on inherited retirement accounts, which heirs pay as they withdraw money.
• Capital gains tax on assets your heirs later sell, which depends on how and when they received them.
• Legal and administrative costs of running an estate through probate, which can take six months to a year or longer.

Out-of-state property changes the picture

Many Virginians own a beach house in North Carolina, a cabin in West Virginia, or a condo in Maryland. Real estate is taxed and probated where it sits. A Virginia resident who owns land in a state with an estate tax can owe that state money even though Virginia charges nothing. That is a common blind spot, and it is one reason estate tax planning is still worth doing for families who are nowhere near the federal limit.

Federal Estate Tax Rules Every Virginia Family Should Know in 2026

Since Virginia charges no estate tax, the federal rules drive most estate tax planning decisions. The One Big Beautiful Bill Act, signed in July 2025, set the federal estate and gift tax exemption at $15 million per person for 2026, or $30 million for a married couple. It is indexed for inflation and has no built-in sunset. Without that law, the exemption would have dropped to roughly half that amount this year. You can read the official rules on the IRS estate tax page.

The lifetime exemption is shared between gifts and your estate

The federal system is unified. Every dollar you give away above the annual gift tax exclusion during your life reduces what you can pass tax-free at death. Giving $19,000 a year to each child or grandchild uses none of your $15 million. Giving one child $500,000 for a house uses up $481,000 of it, though no tax is due until your total lifetime gifts and estate pass the limit.

Portability helps married couples

When the first spouse dies, any unused exemption can move to the surviving spouse. This is called portability. The catch is that the executor has to file a federal estate tax return (Form 706) to claim it, even if no tax is owed. Many Virginia families skip that filing because the estate seems small. That can be a costly miss if the survivor’s assets grow or the law changes later.

Step-up in basis is a quiet tax saver

Assets that pass at death usually get a step-up in basis to their value on the date of death. If your parents bought a Fairfax house for $150,000 and it is worth $900,000 when they die, your basis becomes $900,000. Sell it soon after and you owe little or no capital gains tax. Gifts made during life do not get this benefit. This is why smart estate tax planning strategies weigh income tax as well as estate tax.

9 Estate Tax Planning Strategies for Families in Virginia

The right mix depends on your net worth, your family, and what you own. A retired couple in Richmond with a paid-off house and two IRAs needs a very different plan than a Loudoun County business owner with $20 million in assets. Below are the estate tax planning strategies that come up most often, starting with the ones nearly every family should consider.

1. Set up a revocable living trust

A revocable living trust is the backbone of many Virginia estate plans. You move your assets into the trust while you are alive, you stay in full control as trustee, and you can change it any time. When you die, your chosen successor trustee hands out the assets without going through circuit court.

A revocable trust does not lower federal estate tax on its own, because you still own the assets for tax purposes. What it does is:

• Avoid probate and the Virginia probate tax on trust assets.
• Keep your affairs private, since a will becomes a public court record.
• Make it easy to manage your money if you become incapacitated.
• Hold the tax-saving trusts described below, which kick in at death.

For most families, this is the first step in estate tax planning, not the last.

2. Use the annual gift tax exclusion every year

In 2026, you can give up to $19,000 to as many people as you like without filing a gift tax return. A married couple can give $38,000 per person. Over time, that adds up fast.

Say you and your spouse have three children and six grandchildren. Giving each of them $38,000 a year moves $342,000 out of your estate annually. Over ten years, that is more than $3.4 million, plus all the growth on that money, that will never be counted in your taxable estate.

There are also two unlimited gifts that do not count against the annual limit at all:

1. Tuition paid directly to a school or college.
2. Medical expenses paid directly to a doctor, hospital, or insurer.

Virginia families can also fund a Virginia529 college savings account and front-load five years of annual exclusion gifts at once. That is a popular way for grandparents to help with college while shrinking their estate.

3. Build a credit shelter trust into your plan

Portability is helpful, but it has limits. The unused exemption that moves to a surviving spouse does not grow with inflation, and it does not carry over to the grandchildren’s generation-skipping exemption. A credit shelter trust, sometimes called a bypass trust or family trust, solves both problems.

At the first death, assets up to the exemption amount go into a trust for the surviving spouse. The survivor can get income and, in many cases, principal for health and support. But whatever is in the trust, including all its growth, is not taxed again when the second spouse dies. For couples whose combined wealth may top $30 million someday, this is a core part of estate tax planning.

4. Move life insurance into an ILIT

Many people are surprised to learn that life insurance proceeds count toward their taxable estate if they own the policy. A $5 million policy can push an otherwise safe estate over the line.

An irrevocable life insurance trust (ILIT) owns the policy instead of you. When you die, the payout goes to the trust free of estate tax, and the trustee can use it to support your family or give the estate cash to pay any taxes due. A few points to keep in mind:

• Transferring an existing policy into an ILIT starts a three-year lookback. If you die within three years, it still counts in your estate.
• Having the trust buy a new policy avoids that lookback.
• Premiums are usually paid through annual gifts to the trust, which use your annual exclusion when set up correctly.

5. Use irrevocable trusts to lock in today’s exemption

Wealthy families often worry the $15 million exemption will be cut by a future Congress. One way to protect against that is to use it now by giving assets to an irrevocable trust. Two common types:

• Spousal lifetime access trust (SLAT). One spouse gifts assets into a trust for the other spouse and the children. The assets leave the taxable estate, but the family still has indirect access through the beneficiary spouse. Couples must be careful not to create mirror-image trusts for each other.
• Grantor retained annuity trust (GRAT). You put fast-growing assets, like company stock, into a trust and take back an annuity for a few years. Any growth beyond an IRS-set interest rate passes to your heirs with little or no gift tax.

These tools give up some control, so they fit best when you have more than you will need to live on.

6. Hold family businesses and land in an LLC or family limited partnership

Virginia has many family farms, timber tracts, rental properties, and closely held companies. Putting these into a family limited partnership or LLC can help in a few ways. Parents keep control as managers while giving non-voting shares to children over time. Because those shares cannot be sold easily and carry no control, they are often valued at a discount, which stretches the value of each gift.

This strategy also makes succession easier. Instead of splitting a 200-acre farm in Fauquier County into pieces, the family owns shares in one entity with clear rules. The IRS looks closely at these structures, so they need real business purposes, proper paperwork, and a qualified appraisal.

7. Give to charity in tax-smart ways

If charitable giving is part of your values, it can also be part of your estate tax planning. Gifts to qualified charities are fully deductible for estate tax purposes. Some options:

• Charitable remainder trust (CRT). You get an income stream for life or a set term, and the charity gets what is left. You get an income tax deduction now and remove the asset from your estate.
• Donor-advised fund. A simple way to give a large amount in one year and grant it out over time.
• Qualified charitable distributions (QCDs). If you are 70½ or older, you can send IRA money straight to charity, which counts toward required minimum distributions without adding to your taxable income.
• Leaving retirement accounts to charity. IRAs are taxed as income to most heirs but not to a charity, so they are often the best asset to give at death.

8. Coordinate beneficiary designations and transfer on death tools

Retirement accounts, life insurance, and many bank and brokerage accounts pass by beneficiary designation, not by your will. If those forms are old or blank, your plan can fall apart no matter how well your will is written.

Virginia also allows a transfer on death deed for real estate under the Uniform Real Property Transfer on Death Act. You record the deed during your life, keep full ownership, and the property goes straight to your named beneficiary at death without probate. Pair that with payable-on-death (POD) and transfer-on-death (TOD) designations on financial accounts and a large part of your estate can skip the court process.

Check every designation after a marriage, divorce, birth, or death in the family. This is one of the cheapest and most effective steps in any estate tax planning review.

9. Plan for grandchildren with a dynasty trust

The federal generation-skipping transfer tax adds a second 40% tax when wealth skips a generation, such as a gift straight to grandchildren. Each person has a separate GST exemption that matches the estate exemption.

A dynasty trust uses that exemption to hold assets for children, grandchildren, and later generations. Assets in a well-built dynasty trust are not hit by estate tax at each generation, and they can be protected from beneficiaries’ creditors and divorces. For families focused on long-term wealth transfer, this is one of the most powerful tools available.

Virginia-Specific Rules That Shape Your Estate Tax Planning

National articles tend to skip the local details. These are the Virginia rules that come up again and again when families sit down with an estate planning attorney in the Commonwealth.

The Virginia probate tax

Virginia charges a probate tax when a will is admitted to probate or an administrator is appointed. The state rate is 10 cents per $100 of estate value on estates over $15,000, and cities and counties can add a local tax of up to one third of the state amount. On a $1 million probate estate, that works out to roughly $1,000 to $1,333.

The tax is measured only on assets that pass through probate. Property held in a revocable trust, jointly owned with survivorship rights, or passing by beneficiary designation is not counted. Life insurance paid to a named person is excluded too. So the more you move outside probate, the smaller this bill becomes.

Tenancy by the entirety for married couples

Virginia allows married couples to own property as tenants by the entirety. When one spouse dies, the other owns the property outright without probate. Just as important, property held this way is generally protected from creditors of only one spouse. Couples who move assets into a revocable trust can keep that protection if the trust is drafted to meet Virginia’s rules for entireties property. Ask your attorney about this before retitling your home.

The elective share protects surviving spouses

In Virginia, you cannot fully disinherit a spouse. A surviving spouse can claim an elective share of the augmented estate, which pulls in many non-probate assets as well as the probate estate. The share is generally one half if there are no children or other descendants, and one third if there are. This matters most in second marriages and blended families, where a prenuptial or postnuptial agreement may be needed to make the plan work as intended.

Small estates and the affidavit process

If a person’s probate assets are under $50,000, Virginia allows heirs to collect them with a small estate affidavit instead of full probate. Good estate tax planning often aims to leave so little in the probate estate that this simple process is all the family needs.

Conservation easements and farmland

Virginia has one of the strongest land preservation programs in the country. Donating a conservation easement on farmland or forest can earn a state land preservation tax credit, a federal income tax deduction, and a lower estate value, since the land’s development rights are gone. Federal law can also exclude part of the remaining land value from the estate. For families who want to keep the farm in the family, this can be a game changer.

Powers of attorney and advance medical directives

Estate planning is not only about death. A durable power of attorney lets someone you trust manage your money and carry out gifting or trust funding if you become unable to. An advance medical directive names who makes health care decisions for you. Without these documents, your family may need to go to circuit court for a guardianship or conservatorship, which is slow, public, and expensive.

Common Estate Tax Planning Mistakes Virginia Families Make

Most estate problems are not caused by bad strategy. They come from small gaps that nobody noticed until it was too late. Here are the ones Virginia families run into most often:

• Creating a trust and never funding it. A revocable trust only controls assets titled in its name. If the house deed and brokerage accounts were never moved, they still go through probate.
• Ignoring beneficiary forms. An ex-spouse still listed on a 401(k) or a deceased parent named on a life insurance policy can override a carefully written will.
• Skipping the portability election. Not filing Form 706 after the first spouse dies can waste millions in exemption.
• Giving away low-basis assets during life. Gifting a stock you bought decades ago passes your old basis to your child. Holding it until death would have wiped out the gain.
• Forgetting out-of-state real estate. Property in another state may need its own probate and could face that state’s estate tax.
• Naming the wrong people. An executor or trustee who lives far away, does not get along with siblings, or has no head for money can turn a simple estate into a long ordeal.
• Never updating the plan. A will signed in 2005 was written under a very different federal exemption. Old formula clauses can send far more or far less to a spouse than intended.

How to Build Your Estate Tax Planning Strategy Step by Step

You do not need to do everything at once. Here is a simple order that works for most families.

1. Take inventory. List every asset, how it is titled, its rough value, and who is named as beneficiary. Include real estate, retirement accounts, business interests, and life insurance.
2. Estimate your future estate. Project what your assets might be worth in 15 or 20 years, not just today. A growing business or a rising real estate market can change the math quickly.
3. Define your goals. Decide who should inherit, when, and with what protections. Think about a surviving spouse, children from prior marriages, a child with special needs, or a family business.
4. Sign the core documents. A will, a revocable living trust, a durable power of attorney, and an advance medical directive form the foundation.
5. Fund the trust and update titles. Retitle real estate and accounts, record any transfer on death deeds, and fix every beneficiary designation.
6. Add advanced strategies if needed. If your estate may approach the federal limit, talk through gifting programs, an ILIT, a SLAT, a GRAT, or a family LLC.
7. Review every three to five years. Also review after a marriage, divorce, birth, death, move, sale of a business, or change in tax law.

A team approach usually works best. An estate planning attorney drafts the documents, a CPA looks at the income tax side, and a financial advisor helps with funding and investments. When they talk to each other, your estate tax planning holds together.

Frequently Asked Questions About Estate Tax Planning in Virginia

Do I need estate tax planning if my estate is under $15 million?

Yes, in most cases. You may not owe federal estate tax, but planning still helps you avoid probate, cut the Virginia probate tax, protect a spouse, lower income tax for heirs through a step-up in basis, and prepare for a future change in the exemption. For most families, estate tax planning is really about control and peace of mind.

Will my children pay inheritance tax in Virginia?

No. Virginia has no inheritance tax, so your children will not owe the state anything simply for receiving an inheritance. They may owe income tax on money withdrawn from an inherited traditional IRA or 401(k), and capital gains tax if they later sell an asset for more than its stepped-up value.

Is a will enough, or do I need a trust?

A will works for some families, especially those with modest assets and simple wishes. But a will must go through probate, which is public and can take months. A revocable living trust avoids that and is usually the better choice if you own real estate, have minor children, own property in more than one state, or want to control how and when heirs receive money.

What happens if I die without a will in Virginia?

Virginia’s intestacy laws decide who inherits. Your spouse usually receives everything if all your children are also your spouse’s children. If you have children from another relationship, your spouse receives one third and your children share the rest. The court also picks the administrator and, if needed, a guardian for minor children.

How often should I update my Virginia estate plan?

Review it every three to five years and after any major life event. Changes in federal tax law, like the 2025 update that set the $15 million exemption, are also a good reason to sit down with your attorney.

Conclusion

Virginia families are in a better position than many: the state has no estate or inheritance tax, and the federal exemption sits at $15 million per person in 2026. But estate tax planning is still worth your time, because probate, the Virginia probate tax, out-of-state property, spousal rights, income tax on inherited accounts, and future changes in federal law can all cost your family money and peace of mind. The strategies covered here, from a funded revocable living trust and yearly gifting to credit shelter trusts, ILITs, SLATs, family LLCs, charitable planning, transfer on death deeds, and dynasty trusts, give you a toolkit you can scale to your situation. Start with an inventory and the core documents, keep your beneficiary forms current, add advanced tools only when your numbers call for them, and review the plan every few years with a qualified Virginia estate planning attorney so your wealth goes where you want it to go.