Effective July 1, 2007, the Virginia estate tax was repealed. This means that the estates of Virginia domicilaries dying after June 30, 2007 will not be subject to Virginia estate tax. However, the decedent’s estate may be subject to Federal estate tax, depending upon the size of the estate. In 2008, only estates that exceed $2,000,000 in value are subject to Federal estate tax. In 2009, this taxable “threshold” will increase to $3,500,000.
Because of the way the law repealing the Virginia estate tax was written, the state estate tax will return in 2011 if Congress does not act before then to change the Federal estate tax laws. As a result, the Virginia legislation does not create a permanent repeal of the state estate tax.
Because of the repeal of the Virginia estate tax, Virginia may become a desirable place of domicile for many individuals whose estates might otherwise be subject to state estate tax (including, for example, Maryland and the District of Columbia). However, becoming a Virginia domiciliary takes specific planning.