Vermont Estate Tax

Vermont applies to the estates of Vermont residents. This tax is separate from and in addition to the federal estate tax.

Unlike many other states, Vermont estate tax is not proggressive, but rather a flat rate of 16%. The state exemption is currently $5 million. A surviving spouse can use their deceased spouse’s unused exemption amount. This is known as portability. However, non-probate assets such as those held in revocable living trusts and beneficiary-designated assets are still included in the gross estate for estate tax purposes.

In addition, unlike some other states, Vermont does not allow for a partial QTI election to avoid imposing estate taxes on the excess of the federal exemption over the state exemption. This can significantly complicate the drafting of an estate plan to minimize both federal and Vermont transfer taxes.

It is critical to seek professional advice to understand how these new laws affect your estate planning and to determine the best strategies to reduce both your federal and state transfer tax liabilities.

Vermont offers a simplified probate process for smaller estates. To qualify, the estate must be survived by a spouse, child, or parent and the value of personal property cannot exceed $45,000. The executor must file a petition with the probate court to use this process. You can find more information about probate and how to file a petition on the Finding Legal Help web page. The court may also require a probate bond.

Vermont Estate Tax Exemptions
Vermont Estate Tax 1

Vermont Estate Tax Exemptions

Even though Vermont does not impose an estate tax, this doesn’t mean that a married couple’s combined assets are completely safe from exposure to both state and federal estate taxes. For example, if the standard bypass trust in an estate plan is not fully QTIPed for federal purposes (to maximize the benefits of the federal exemption portability feature), then the couple may end up paying both federal and Vermont estate taxes.

Given the recent increase in the Vermont estate tax exemption amount, it’s important to review any existing trusts and estate planning documents that rely on the value of the then-applicable federal exemption. In some cases, the increased Vermont exemption may result in an estate distribution that’s no longer consistent with your intent.

When to Pay Vermont Estate Tax?

All payments must be received by 4:30PM on the due date to avoid delinquency fees. Payments may be mailed or dropped in the secure payment box located by the front entrance of Town Hall. Credit card payments are accepted for an additional 3% convenience fee. If you have questions, please contact the Vermont Department of Revenue or a local Probate Court.

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