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Differences between inheritance tax and estate tax

On Behalf of | Apr 21, 2022 | Estate Planning & Wills

Are you getting ready to plan your estate in Virginia? There are a whole host of details that you need to absorb. You want to make sure that you leave a viable estate for your family members to inherit. To do so, you need to know about issues such as taxation. This prior knowledge will help you plan for the future.

Understanding inheritance tax vs. estate tax

There are two main types of taxation that you may encounter during the process of estate planning and wills. The first is inheritance tax. This is the amount of money that the beneficiary must pay when they receive what you have left them. At the moment, this type of tax is not applicable in the state of Virginia.

Estate tax is a different matter altogether. This type of tax is definitely on the books in Virginia. This will be the amount that is taken out of your estate upon your passing. It will already have been deducted from your estate before the rest is distributed to your heirs. You can calculate this amount in advance.

Can your estate be taxed twice?

One of the biggest fears that a person planning their estate may have is being taxed twice. As noted above, you don’t need to fear this since inheritance tax doesn’t exist in Virginia. However, you should be aware that there is a federal estate tax. This is a tax that applies to estates valued at over $11.7 million.

It’s a good idea to speak to a financial as well as legal advisor in order to plan your estate. You can plan for the future with this knowledge of taxation in mind. The sooner you create an asset plan, the sooner you can focus on preserving your estate for your heirs.

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