Estate planning is a very important part of managing and protecting your wealth. Effectively managing estate taxes require careful consideration to ensure you make the best choices. A wealth manager in Great Falls can help you ensure that your plan is complete and works to accomplish your goals.
Estate Taxes in Virginia
A wealth manager will review, or help you create your estate plan with estate taxes in mind. Currently, Virginia does not have an independent estate tax that is lower than the federal exemption. While other local jurisdictions have an exemption that is lower, Virginia does not.
However, not all individuals need to be concerned with estate taxes. While there may not be a Commonwealth of Virginia estate tax liability, there may still be a federal tax liability. A wealth manager can help you understand and plan for these tax implications.
[Related: Protecting Inheritances]
Mitigating Impacts of Estate Tax
If a person who owns real estate or is a resident of Virginia, is exposed to the federal estate tax, there are several options available. Areas of focus include maximizing each spouse’s exemption or providing for portability for the surviving spouse.
Other techniques focus on “freezing” assets at a lower cost basis so that the assets that are “frozen” are included in the decedent’s estate at a much lower level than the appreciated value.
Another opportunity may be focused on permanently giving away assets or gifting during the decedent’s lifetime prior to death. Lastly, there are several opportunities that focus on charitable giving that could provide mitigation to exposure to the estate tax.
Included Assets
When reviewing your estate plan to decern whether an estate tax return is due, your wealth manager will include any assets that are in the decedent’s control on the date of death. This includes:
- Real estate holdings
- Account bonds
- Personal property
- Bank accounts
- Investments
- Jewelry
- Life insurance policies
- Certificates of deposit accounts
- Artwork collections
- Tax deferred and non-deferred retirement assets
- Any other assets in the decedent’s control on the date of death.
Often, people believe that life insurance is not included for estate tax purposes, but that is incorrect. Assets that are beneficiary-driven or owned jointly with another person or several persons can still be included in the calculation of the gross taxable estate.
Another common misunderstanding is the difference between assets that are included in the taxable estate and those that are in the probate estate. While assets in the probate estate may not include jointly owned or beneficiary-driven assets, a taxable estate does include these assets.
More to Consider
Typically, there are three taxing systems to consider when someone passes.
First, is the inheritance tax. Virginia does not have an inheritance tax system, but some other jurisdictions do. For instance, if a Virginia resident owned real estate in Maryland and was leaving their estate to a nephew or friend, there may be some inheritance tax consequences as a result.
Next, there are income taxes to consider. There may be federal and state income tax exposure. However, some planning can be done to utilize or maximize the opportunity for an increase or a step up in class to reduce capital gains, or to at least provide some income tax consideration with regard to estate planning.
Finally, you must consider the estate tax. The current federal estate tax has a maximum tax rate of 40% and is due nine months after the decedent’s date of death.
A wealth manager can help you consider all these taxing systems and plan for the optimal outcome.
[Related: Wealth Transfer Strategies]
Estate Tax Return
An estate tax is a tax on the right to leave assets. Normally, Virginia does not require an estate tax return unless there is a federal estate tax return due.
The calculation of what is to be included in an estate tax return is made in accordance with the fair market value of the assets as of the date of death. If that value exceeds the current filing threshold for estate taxes, then an estate tax return would be due.
While Virginia does not have an estate tax that differs from the federal estate tax filing threshold, other jurisdictions such as Maryland and the District of Columbia do. These estate tax consequences are different from the federal filing threshold and do not protect estates up to the federal limit.
Wealth Manager Great Falls
The best way to protect your wealth and ensure that your estate planning is solid, is to have a wealth manager help you create your estate plan and review it often. A professional and experienced wealth manager can help you consider all options and create a plan that helps you reach your goals and protect your family’s wealth. Contact the professionals at Argent Bridge Advisors today to get started!
