You work hard throughout your adult life to accumulate assets for the benefit of your heirs in Virginia. One of the main purposes of the estate planning process is to identify areas where you can minimize expenses against your estate to preserve as many of those assets as possible. Yet many come to us here at the Law Office of Deborah N. Arthur thinking that one expense that you cannot avoid is estate taxes.
Yet is that true? Virginia does not impose an estate or inheritance tax on local residents, leaving the only potential tax liability facing your estate coming from the federal level. You may even be able to limit that liability, as well.
Understanding the federal estate tax exemption
The federal government sets an estate tax exemption that may allow your estate to escape a tax liability. Provided that the total taxable value of your estate comes in under the estate tax exemption threshold, it will not be subject to tax. According to the Internal Revenue Service, the exemption threshold for 2021 is $11.7 million. You and your spouse (if you have one) may even be able to effectively double that amount through the process of portability.
Taking advantage of estate tax portability
Married couples can work together to optimize their estate tax exemption. Your spouse can claim the unused portion of your exemption and combine it with their own. To double the exemption threshold to $23.4 million together, you need to plan to leave the entirety of your estate to your spouse upon your death (preserving your entire exemption by instead taking advantage of the unlimited marital deduction). Your spouse then needs to file an estate tax return following your death electing portability.
You can find more details on optimizing your estate planning by continuing to explore our site.