Legacy Planning for Virginia Homeowners: Passing Down Assets Without the Tax Surprise

The Good News: Virginia Has No State Estate Tax

One of the most important facts for Virginia homeowners is that the Commonwealth does not impose a state-level estate tax or inheritance tax. Virginia repealed its estate tax back in 2007, and no state death taxes exist today. This means your heirs will not face a Virginia tax bill simply because they inherit your home or other assets. This tax-friendly approach is one of the reasons Virginia is consistently ranked as a favorable state for retirees and for multigenerational wealth transfer.

The Federal Estate Tax: A $15 Million Threshold

The only estate tax that may apply is at the federal level. The One Big Beautiful Bill Act, signed into law in July 2025, permanently set the federal estate and gift tax exemption at $15 million per individual, with an inflation adjustment going forward. For married couples using portability, the combined exemption is $30 million. The top federal estate tax rate is 40%, but the threshold is so high that the vast majority of Virginia estates will owe nothing. For context, if your total estate, including your home, retirement accounts, investments, and personal property, is worth less than $15 million, your heirs will not owe federal estate tax. Most Virginia homeowners fall well below this threshold.

The Stepped-Up Basis: A Hidden Benefit for Heirs

One of the most valuable tax benefits for heirs is the stepped-up basis rule. When you pass away, the cost basis of your home and other assets is "stepped up" to their fair market value at the date of death. This means if your children inherit a home you bought for $100,000 that is now worth $500,000, their cost basis becomes $500,000. If they sell the home soon after inheriting it, they owe little or no capital gains tax. This is a powerful estate planning tool that can save your heirs tens of thousands of dollars in taxes. It is also one reason why simply adding a child's name to your deed during your lifetime is often not the best strategy, as they would inherit your original lower basis instead.

Virginia Probate: What Has Changed in 2026

Virginia has made several recent updates to its probate laws that affect how assets pass to heirs. The small estate threshold was raised from $50,000 to $75,000, meaning more estates can use simplified probate procedures without the full court process. New laws effective July 1, 2026 also extended the window for surviving spouses to claim their statutory allowances, giving families one year from the date of probate qualification rather than one year from death. Surviving spouses in Virginia can also claim a family allowance of up to $30,000, exempt personal property up to $25,000, and a homestead allowance of $25,000, for a combined potential of up to $80,000 in priority claims ahead of most creditors.

Wills vs. Trusts: What Makes Sense for Your Situation

A will is the simplest estate planning document, but it requires going through probate court, which can be time-consuming and public. A revocable living trust allows your heirs to avoid probate entirely, saving time and preserving privacy. For Virginia homeowners, a revocable trust is worth considering if you own real estate, want to control how and when your heirs receive their inheritance, or want to avoid the delays of probate. Virginia also has a unique provision (Va. Code § 55.1-136) that allows married couples to move tenancy-by-the-entirety property into a revocable living trust while retaining creditor protection, a benefit that is not available in most states.

Virginia's Domestic Asset Protection Trust

Since 2012, Virginia has had a Domestic Asset Protection Trust (DAPT) statute, which allows you to create an irrevocable trust that protects assets from future creditors while you remain a beneficiary. For homeowners with significant assets or those in professions with higher liability risk, a DAPT can be a valuable layer of protection. Additionally, as of July 2024, Virginia permits 1,000-year dynasty trusts for personal property, enabling multigenerational wealth transfer while reducing exposure to estate and generation-skipping transfer taxes.

The Annual Gift Exclusion: A Simple Way to Transfer Wealth

For 2026, the annual gift tax exclusion is $19,000 per recipient. This means you can give up to $19,000 to as many individuals as you wish each year without filing a gift tax return or reducing your lifetime estate tax exemption. For married couples, the combined exclusion is $38,000 per recipient. Over several years, gifting assets to children or grandchildren can meaningfully reduce the size of your taxable estate while providing financial help when your family may need it most.

Beneficiary Designations: One of the Most Overlooked Steps

Many homeowners go to the trouble of creating a will or trust but forget to update the beneficiary designations on their retirement accounts, life insurance policies, and bank accounts. Beneficiary designations override what your will says, so if they are outdated, your assets could pass to an ex-spouse or a person you no longer intend to include. Review your beneficiaries every few years and especially after any major life change like a marriage, divorce, or the death of a family member.

Putting It All Together: Your Legacy Planning Checklist

• Document your wishes. Create or update your will and consider whether a revocable living trust makes sense for your situation.
• Update beneficiary designations. Review all retirement accounts, life insurance policies, and bank accounts to ensure they reflect your current wishes.
• Title your home carefully. Understand the implications of joint ownership, tenancy by the entirety, and adding children to your deed.
• Organize your documents. Keep wills, trusts, deeds, insurance policies, and financial account information in one accessible location. Let a trusted family member know where they are.
• Talk with your family. Have an open conversation about your plans. Surprises after a loss compound grief with confusion and conflict.
• Consult a Virginia elder law attorney or CPA. Tax and estate laws vary significantly by state, and Virginia-specific expertise is invaluable for proper planning.