Ask whether Virginia has an estate tax and the answer is short. It does not. The Commonwealth repealed its estate tax effective July 1, 2007, and it has no inheritance tax either. For a family whose assets sit entirely inside Virginia, that is the end of the state-level analysis.

It is also the reason this gets missed.

The Washington region does not organize itself around state lines. An Arlington family holds a rental on Capitol Hill. A McLean business owner keeps a place at the beach in Maryland. A couple sells in Falls Church and retires into a condo in the District. In each case the estate tax question stopped being a Virginia question, and nobody sent a notice when it did.

Two things make this the right autumn to work through it. The federal exemption changed in a way that removed the deadline everyone had been planning around, which has quietly left a lot of families with no plan at all. And one lever — the only one in this entire area with a hard date — expires on December 31 and does not carry forward.

What Changed in 2026, and What Stopped Changing

For most of the last two years, estate planning conversations were organized around a cliff. The federal estate and gift tax exemption was scheduled to fall by roughly half at the end of 2025, and a great deal of gifting was done specifically to use the higher amount before it disappeared.

It did not disappear. The One Big Beautiful Bill Act set the federal estate, gift and generation-skipping transfer tax exemption at $15 million per individual for 2026 — $30 million for a married couple — and made that amount permanent and indexed for inflation, rather than letting it revert.

"Permanent" in this context means only that no sunset date is written into the statute. A future Congress can change it. But the planning posture is genuinely different: the pressure to act before an expiration has been removed, and for the large majority of families the federal estate tax is now a non-issue.

That is good news, and it is also where the complacency starts. The federal number went up. The numbers on the other side of the Potomac and the other side of the Beltway did not.

The $19,000 Clock

The annual gift tax exclusion for 2026 is $19,000 per recipient. A married couple electing to split gifts can transfer $38,000 to the same person. These gifts do not consume any part of the $15 million lifetime exemption, and no gift tax return is required for a straightforward cash gift at or below the limit.

The exclusion is use-it-or-lose-it. It does not accumulate, it does not roll into next year, and it resets on January 1 whether or not you used it. Every December 31 that passes without a gift is an exclusion that no longer exists.

Two mechanical points cause problems every year.

The gift has to be complete. Writing a check in late December does not finish the transfer. For a gift by check to a non-charitable recipient, the general rule is that the gift is complete when the check is paid, certified or unconditionally accepted by the bank — not when it is signed or mailed. A check delivered on December 29 that clears on January 3 is a 2027 gift. Wire transfers, custodial account contributions and transfers of securities each carry their own timing mechanics, and the week between Christmas and New Year's is the worst possible time to discover that.

The exclusion is per recipient, not per year. A client with three children and six grandchildren has nine separate $19,000 exclusions, or $38,000 each if married and splitting. That is $342,000 of transfers in a single year that never touches the lifetime exemption. Spread over a decade, it is the most durable wealth transfer tool most families will ever use, and it works precisely because it is boring and repetitive.

A related election is worth knowing about if there are young children in the picture. A contribution to a 529 plan can be elected to be treated as made ratably over five years, allowing a front-loaded contribution of five times the annual exclusion per beneficiary without using lifetime exemption. The election is made on a gift tax return, and the five-year clock starts with the year of the contribution.

The River Problem

Here is the part that catches Virginia residents.

Both the District and Maryland tax the estates of non-residents on real property and tangible personal property located within their borders. You do not have to live there. You do not have to have ever lived there. If the property sits in their jurisdiction on the date of death, it is within reach.

The District of Columbia. D.C. imposes an estate tax with an exclusion indexed annually. The exclusion for decedents dying in 2025 was $4,873,200. The exclusion for decedents dying in 2025 was $4,873,200; for decedents dying in 2026, it is $4,988,400. The return is Form D-76 or D-76EZ, filed and paid within ten months of the date of death, with a six-month extension available for filing. Filing is electronic through MyTax.DC.gov.

Maryland. Maryland's estate tax threshold is $5 million, and that number has been frozen since 2019. It is not indexed for inflation, which means it tightens in real terms every single year while asset values rise around it. Maryland is also the only state in the country that imposes both an estate tax and a separate inheritance tax.

Maryland's inheritance tax is a flat 10 percent, but it turns on relationship rather than size. A surviving spouse, children and other lineal descendants, parents, grandparents, siblings and step-relatives are exempt. The tax reaches property passing to nieces, nephews, cousins, friends and unrelated beneficiaries. Most people who inherit in Maryland pay nothing — but a client planning to leave the beach house to a favorite niece should know the number before the will is signed, not after.

What is and is not caught. For non-residents, both jurisdictions generally reach real property and tangible personal property with situs there. Intangibles — marketable securities, brokerage accounts, bank accounts — are generally not treated as situs property of a non-resident. The distinction is the whole game. A Virginia resident with a $3 million brokerage account and no out-of-state real estate has no D.C. or Maryland exposure. The same resident with a $900,000 rental on Capitol Hill has a D.C. filing question the moment the gross estate approaches the D.C. threshold.

Set the three numbers next to each other and the shape of the problem is obvious. The federal threshold is $15 million. The District sits near $4.9 million. Maryland sits at $5 million and is not moving. A Northern Virginia couple with a primary residence, retirement accounts, life insurance they own outright and one piece of property across a border can clear a state threshold without ever being close to the federal one — and without ever thinking of themselves as having an estate tax problem.

One more wrinkle for this region specifically: domicile is not where you pay property taxes, and it can change faster than people expect. A Virginia couple who sells in Arlington and buys in the District has not simply moved. They have moved their entire estate into a jurisdiction with a threshold roughly a third of the federal one. That decision is usually made for reasons that have nothing to do with tax, which is exactly why it should be run past counsel before closing rather than after.

If You Own a Business, Your Real Deadline Already Passed

For owners of closely held businesses, the year-end conversation is different, and the timing is much less forgiving than the December 31 date suggests.

Transferring an interest in a closely held company is one of the most efficient uses of both the annual exclusion and the lifetime exemption, because what moves is not only today's value but all of the future appreciation. Minority interests in closely held entities are also commonly valued at a discount to their proportionate share of enterprise value, reflecting lack of control and lack of marketability — discounts frequently falling in the range of 25 to 35 percent, though the figure is entirely dependent on the facts and the quality of the appraisal.

That last clause is the point. A discount is only as good as the valuation supporting it, and a defensible appraisal is a professional engagement that takes weeks. It requires financial statements, an understanding of the operating agreement, and an appraiser who will stand behind the number. You cannot commission one in the third week of December and expect to transfer by the 31st.

Three things to check before anything moves:

The operating agreement may not let you. Transfer restrictions, rights of first refusal and consent requirements are standard in LLC and shareholder agreements, and they bind family transfers as readily as third-party sales. A gift made in violation of a transfer restriction can be void, ineffective, or a breach — and it will still have been reported.

The annual exclusion requires a present interest. This is where gifts of entity interests most often fail. The annual exclusion is available only for gifts of a present interest, and courts have agreed with the IRS that an entity interest may be a future interest when the operating agreement’s transfer and distribution restrictions leave the done without a substantial present economic benefit. Hackl v. Commissioner, 118 T.C. 279, 293–94 (2002), aff’d, 335 F.3d 664 (7th Cir. 2003); Price v. Commissioner, T.C. Memo. 2010-2. The gift still counts against the lifetime exemption; the exclusion is simply lost.

Succession planning and tax planning are the same conversation. The question of who should eventually own the business and the question of how to move value out of your estate have the same answer surprisingly often. Treating them separately tends to produce a transfer that is efficient on paper and unworkable in the family.

If a business interest is part of the year-end plan for this year, the valuation engagement should already be underway. If it is not, the realistic target is the first quarter of next year — which is a better outcome than a rushed transfer supported by a number nobody will defend.

The Charitable Math Changed This Year

One more item specific to 2026, because a great deal of the advice still circulating is now out of date.

The One Big Beautiful Bill Act made three changes to the charitable deduction that take effect this year:

A 0.5 percent of AGI floor now applies to itemized charitable contributions. Giving is deductible only to the extent it exceeds that floor. On $400,000 of AGI, the first $2,000 of charitable giving produces no deduction.

The value of itemized deductions is capped at 35 percent for taxpayers in the top bracket. A dollar of deductible giving now saves at most 35 cents in federal tax rather than 37.

A new above-the-line deduction of $1,000 for individuals and $2,000 for married couples filing jointly is available to taxpayers who do not itemize.

Through 2025, the standard advice was to accelerate charitable giving into 2025 to get ahead of the floor. That advice has expired along with the year. The live question now is how the floor changes bunching strategy going forward — whether it makes more sense to concentrate several years of giving into a single year to clear the floor once, and whether a donor-advised fund is the right vehicle for doing it. Those answers are specific to a taxpayer's income, deduction profile and giving history, and they are worth running before December rather than after.

Frequently Asked Questions

Does Virginia have an estate tax? No. Virginia repealed its estate tax effective July 1, 2007. There is no Virginia estate tax on the estate of a Virginia decedent.

Does Virginia have an inheritance tax? No. Virginia has neither an estate tax nor an inheritance tax. Beneficiaries do not pay Virginia tax on what they receive.

I live in Virginia but own a condo in the District. Does D.C. tax my estate? Possibly. The District imposes estate tax on non-residents with respect to real property and tangible personal property located in D.C. Whether a return is required depends on the value of the D.C.-situs property measured against the District's threshold and filing rules. This is the most common cross-border question in this region and it is worth a specific answer rather than a general one.

Do I need to file a gift tax return if I give my child $19,000? Generally no. A straightforward cash gift at or below the annual exclusion to a single recipient does not require a return. A return is required if you exceed the exclusion for any one recipient, if you and your spouse elect to split gifts, if you make the five-year 529 election, or if you make certain gifts of future interests or hard-to-value property. When in doubt, filing is inexpensive and starts the statute of limitations running.

If the federal exemption is $15 million, why would I gift at all? Because the exemption is not the only reason to transfer. Annual exclusion gifts move both current value and future appreciation out of the estate at no exemption cost. State thresholds in D.C. and Maryland are a fraction of the federal amount. And for business owners, gifting is frequently the mechanism by which succession actually happens.

Final Thoughts

Virginia's clean slate is real. It is also narrow. It covers Virginia, and it covers the kinds of assets most people think of when they think about an estate, and it stops at the property line of anything you own across a border.

The federal change this year removed a deadline and, with it, a forcing function. What remains is less urgent but more specific: an annual exclusion that expires on December 31 and does not come back, two neighboring jurisdictions with thresholds a third the size of the federal one and no interest in where you live, and — for business owners — a valuation timeline that makes December a month for executing decisions rather than making them.

November is the right time to work through this. December is not.

If you have questions about year-end gifting, estate tax exposure across Virginia, Maryland and the District of Columbia, or transferring business interests before year end, please contact Chris Young at 703.284.7252 or cyoung@beankinney.com, Jordan Reed at 703.284.7248 or jreed@beankinney.com, or your current Bean Kinney attorney.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.