Vermont Estate Planning (2026)

You’re not alone in this. As someone who went through the estate planning process with my own aging parents, I know the weight of these conversations — the awkwardness, the guilt, the fear that you’re not doing enough or doing it too late. Take a breath. You’ve found the right place, and Vermont has some genuinely powerful tools that can protect your family — if you know about them.

Here’s the headline most Vermont families don’t know: Vermont is one of only five states in America that recognizes Lady Bird deeds — officially called “enhanced life estate deeds” — and it’s also a probate-only Medicaid estate recovery state. That combination means your parents can sign a single document that keeps the family home out of probate court and shields it from Medicaid recovery after they pass. No trust required for the house. No complicated legal maneuvers. It’s one of the strongest home-protection strategies in the nation, and most Vermont families have never heard of it.

But Vermont also has a state estate tax — a flat 16% on estates above $5 million, with no portability between spouses. If your parents have a home in Burlington, a retirement account, a life insurance policy, and maybe a little farmland, that $5 million threshold can arrive faster than you’d think. And without a credit shelter trust, a married couple effectively gets one exemption instead of two.

Whether your family owns a farmhouse in the Northeast Kingdom, a condo in Burlington, or a vacation property on Lake Champlain — here’s everything you need to know about estate planning in the Green Mountain State. No legal jargon, just clear answers from a son who’s been through it.

Vermont’s Lady Bird Deed: The Tool Most Families Don’t Know About

A Lady Bird deed (officially an “enhanced life estate deed” in Vermont) lets your parents transfer their home to you or your siblings while keeping full control during their lifetime. They can sell it, mortgage it, rent it out, or revoke the deed entirely — all without your permission. You get nothing until they pass. At that point, the property transfers to you automatically, without probate.

Here’s why this matters so much in Vermont:

• Avoids probate — the property passes outside the probate estate entirely
• Shields from Medicaid recovery — because Vermont only recovers from the probate estate (33 V.S.A. § 1908a), and the property passed outside probate, it’s protected
• No gift tax consequences — the transfer isn’t complete until death, so no gift tax return is needed when the deed is signed
• Stepped-up tax basis — your parents’ heirs receive the property at its fair market value at death, potentially eliminating capital gains on decades of appreciation
• Fully revocable — your parents can change their mind anytime, without the grantee’s consent (27 V.S.A. § 656)
• Mortgage doesn’t revoke it — if your parents refinance, the Lady Bird deed stays in place

Lady Bird Deed vs. Other Options in Vermont

The Vermont reality: For many families, a Lady Bird deed for the house plus POD/TOD designations on financial accounts can accomplish the same probate avoidance as a trust — at a fraction of the cost. But if your parents have a taxable estate (over $5M), own property in multiple states, or need credit shelter trust planning, a comprehensive trust-based plan is still the right call. The Lady Bird deed is a powerful tool, not a complete plan.

Vermont’s Estate Tax: Flat 16% Above $5 Million

Vermont’s estate tax is simpler than most states: if your estate exceeds $5 million, you pay 16% on the excess. No graduated brackets, no cliff effect. An estate worth $5,000,001 owes $0.16 in Vermont estate tax. There’s no punitive jump at the threshold.

The problem is the combination of three things: the exemption isn’t indexed for inflation (so it’s worth less every year), there’s no portability between spouses, and Vermont’s 2-year gift clawback can add recent gifts back to the taxable estate.

What the Tax Actually Looks Like

Note: The federal estate tax exemption is $13.99 million (2026) and $15 million (2026). Estates between $5M and $15M owe Vermont estate tax with zero federal liability — a growing gap that makes Vermont-specific planning essential.

Why No Portability Is a Big Deal

Consider a married couple with a combined $9 million estate — a working farm with appreciated land, retirement accounts, and life insurance. Without planning:

• First spouse dies, everything passes to the surviving spouse via the unlimited marital deduction (no VT tax at first death)
• Second spouse dies with $9 million — Vermont estate tax is $640,000

With a credit shelter trust funded at the first death:

• First spouse dies, $5M goes into a bypass trust (sheltered by the first spouse’s exemption — $0 tax)
• Second spouse dies with $4M in their own name (below the exemption — $0 tax)
• Total Vermont estate tax: $0

That’s $640,000 saved by one planning decision. This is why every Vermont estate planning attorney will tell you that a credit shelter trust isn’t optional for married couples with combined assets anywhere near $10 million.

The 2-Year Gift Recapture Rule

Here’s a wrinkle that catches people off guard: under 32 V.S.A. § 7402(14), Vermont adds back “federal adjusted taxable gifts” made within two years of death to the Vermont taxable estate. This means deathbed gifting strategies don’t work in Vermont — if your parent gives away $500,000 and dies 18 months later, that gift gets added back to the estate for Vermont estate tax purposes.

The planning takeaway: lifetime gifting can still reduce the Vermont taxable estate, but gifts need to be made more than two years before death to be effective. Start early.

How Vermont Compares to New England Neighbors

Vermont sits in the middle of New England — better than Massachusetts and Rhode Island, worse than Connecticut, Maine, and New Hampshire. The 16% flat rate is the highest in the region alongside MA and RI (which use graduated rates up to 16%). And unlike RI and ME, Vermont’s exemption isn’t indexed for inflation — it stays at $5M until the legislature acts.

Filing Requirements

Form EST-191 must be filed if the deceased had Vermont property and either: (1) the federal gross estate plus adjusted taxable gifts within 2 years of death exceeds $5,000,000, or (2) a federal Form 706 is required. The filing deadline is 9 months from the date of death. A 6-month extension is available via Form EST-195, but does not extend the time to pay.

For nonresidents with Vermont property, the tax is prorated: Vermont-situs property (plus VT-situs gifts within 2 years) divided by the total federal gross estate (plus those gifts).

Two Trust Types in Vermont

Vermont adopted the Uniform Trust Code (Title 14A), providing a comprehensive statutory framework for trust creation and administration. A trust is presumed revocable unless the terms expressly state otherwise.

Vermont Rules at a Glance

No TOD Deeds — Why Lady Bird Deeds Fill the Gap

Vermont does not allow Transfer on Death (TOD) deeds for real property. In most states, a TOD deed is a simple, low-cost way to pass real estate outside of probate — you sign the deed, record it, and at death the property transfers automatically. Vermont families don’t have that option.

But Vermont has something most states don’t: Lady Bird deeds. And in some ways, they’re better than TOD deeds:

• Full control retained — unlike a TOD deed in some states, the grantor can sell, mortgage, or revoke without restriction
• Medicaid protection — in Vermont’s probate-only recovery system, the Lady Bird deed keeps the home out of Medicaid’s reach
• Stepped-up basis — same tax benefit as a TOD deed
• Statutory form available — 27 V.S.A. § 660 provides a standard form, reducing drafting risk

For non-real-estate assets (bank accounts, investments, vehicles), Vermont families should use POD (payable on death) and TOD (transfer on death) designations. Vermont allows TOD registration for securities and POD designations for bank accounts. Combined with a Lady Bird deed for real estate, many Vermont families can avoid probate entirely without a trust.

Medicaid Estate Recovery: Vermont’s Favorable Rules

Vermont limits Medicaid estate recovery to probate estate assets only (33 V.S.A. § 1908a). This is a critical distinction from states like Oregon, Montana, and Ohio that use expanded definitions reaching into joint accounts, TOD/POD assets, and even revocable trusts.

What this means practically:

• Lady Bird deed — home passes outside probate → protected from recovery
• Joint tenancy — survivor’s share passes outside probate → generally protected
• POD/TOD accounts — pass outside probate → generally protected
• Life insurance with named beneficiary — passes outside probate → protected
• Revocable trust assets — pass outside probate → generally protected from recovery
• Assets that go through probate — exposed to Medicaid recovery

Important limitations: The 5-year Medicaid lookback period still applies. Transfers to irrevocable trusts or outright gifts within 60 months of applying for Medicaid can trigger penalty periods. The Lady Bird deed itself is generally not treated as a “transfer” for lookback purposes because it remains fully revocable — but careful analysis with an elder law attorney is essential.

Recovery is deferred when there is a surviving spouse, a child under 21, or a blind or permanently disabled child. A hardship waiver may be available for heirs with incomes up to 300% of the federal poverty level, but only if the estate is valued at $250,000 or less.

Official Sources

VT Department of Taxes — Estate Tax · VT Department of Taxes — Fiduciary Tax · 27 V.S.A. Ch. 6 — Enhanced Life Estate Deed Act · 14A V.S.A. — Vermont Trust Code · 32 V.S.A. § 7442a — Estate Tax Rate · Vermont Judiciary — Probate Division · VT Judiciary — Estates and Wills · VT Department of Health — Advance Directives · VT Department of Taxes — Current Use Program

What Estate Planning Costs in Vermont

The cost perspective: A $500 Lady Bird deed can protect a $400,000 home from both probate and Medicaid estate recovery. A $4,000 estate plan with credit shelter trust provisions can save a married couple $640,000+ in Vermont estate tax on a $9M estate. These are among the highest returns on investment in personal finance. The Vermont Bar Association’s Lawyer Referral Service offers initial consultations of up to 30 minutes for no more than $25.

Vermont Probate: 14 County Courts

Vermont’s probate system operates through 14 probate divisions of the Superior Court — one per county. Each county has an elected probate judge serving a four-year term. Cases are filed in the county where the decedent was domiciled.

Probate Filing Fees (32 V.S.A. § 1434)

Vermont does not use a statutory percentage for attorney or executor fees — courts award “reasonable” compensation based on estate size, complexity, and time invested. For a straightforward $500,000 estate, expect total probate costs (filing fees + attorney fees) of $3,000-$8,000 and a timeline of 6-12 months.

The small estate procedure ($45,000 threshold, no real estate other than timeshares) is available under Vermont Rule of Probate Procedure 80.3 with just a $50 filing fee — but the real estate exclusion means most families with a home can’t use it.

With a Trust vs. Without (Probate) in Vermont

Estate Planning Readiness Checklist for Vermont

Common Estate Planning Mistakes in Vermont

Other Important Planning Tools in Vermont

Advance Directive (18 V.S.A. Chapter 231)

Vermont recognizes the fundamental right of adults to determine their own health care. An advance directive appoints an agent to make healthcare decisions and can include specific instructions about treatment preferences. Vermont does not require a specific form — individuals may use whatever form best meets their needs.

Execution requirements: Must be dated and signed by the principal, witnessed by two or more adults age 18 or older. Witnesses must attest that the principal appeared to understand the document and was free from duress. Neither witness may be an employee of the principal’s healthcare provider unless also a relative. The agent cannot be associated with the healthcare provider unless they are a relative.

Vermont uses COLST (Clinician Orders for Life-Sustaining Treatment) — Vermont’s version of POLST. COLST forms are actual medical orders completed with a clinician (MD, DO, PA, or APRN) based on shared decision-making, used for people with serious advanced illness. They’re portable and followed across healthcare settings.

Learn more about healthcare directives →

Patient Choice and Control at End of Life Act (18 V.S.A. Chapter 113)

Vermont was the first state to legalize medical aid in dying through the legislature (Act 39, signed May 20, 2013). Eligible patients must be 18+, have a terminal condition with 6 months or less to live, and make two oral requests at least 15 days apart plus one written request. A 2022 amendment (S.74) removed the in-person requirement for medication requests.

Durable Power of Attorney (14 V.S.A. Chapter 127 — UPOAA)

Vermont adopted the Uniform Power of Attorney Act in June 2023, modernizing its POA framework. Powers of attorney are durable by default — they remain effective after the principal becomes incapacitated unless the document expressly states otherwise (14 V.S.A. § 4004). A statutory form is provided at § 4051 with “hot powers” (gifts, trust changes, beneficiary designations) requiring separate initialing.

Learn more about powers of attorney →

Long-Term Care and Medicaid Planning

Vermont Medicaid (Green Mountain Care) covers long-term nursing home care and home and community-based services. Eligibility requires meeting strict asset limits. The look-back period is 60 months (5 years).

As noted above, Vermont’s probate-only estate recovery is a significant planning advantage. Combined with Lady Bird deeds, POD/TOD designations, and properly structured trusts, Vermont families have more protection from Medicaid recovery than most states offer.

Learn more about long-term care planning →

Vermont-Specific Planning Considerations

Current Use Program and the Land Use Change Tax

Vermont’s Current Use (Use Value Appraisal) program provides substantial property tax reductions for qualifying agricultural and forest land — but it comes with a catch that estate planners must understand. When enrolled land is “developed” (removed from the program), Vermont imposes a 10% Land Use Change Tax on the property’s full fair market value (32 V.S.A. Chapter 124).

On a 100-acre parcel worth $500,000, that’s a $50,000 tax if the heirs sell to a developer or change the use. A contingent lien is recorded against the property when it’s enrolled, and it follows the land through inheritance.

Planning strategies:

• Keep the land in agricultural or forestry use after inheritance to maintain the Current Use enrollment
• If selling, factor the 10% tax into the family’s financial plan
• Consider a conservation easement (which may reduce both the land use change tax exposure and the estate’s value for estate tax purposes)
• Use a family LLC or trust to manage succession while keeping the land enrolled

Farm and Agricultural Succession

Vermont’s agricultural heritage makes farm succession planning critical. Key considerations:

• IRC § 2032A special-use valuation — allows qualifying farm real estate to be valued at its agricultural use value rather than “highest and best use” fair market value, potentially reducing the federal taxable estate by up to $1,390,000 (2026)
• IRC § 6166 installment payments — allows estates where farm/business assets exceed 35% of the adjusted gross estate to pay federal estate tax in installments over 14 years
• Vermont Farm and Forest Viability Program — offers business and succession planning assistance for farm families
• Conservation easements — the Vermont Land Trust and other organizations can accept easements that reduce both property tax and estate value while keeping land in agricultural production

Act 250 and Property Transfers

Vermont’s landmark Act 250 environmental and land use law (10 V.S.A. Chapter 151) requires permits for certain developments. Act 250 permits run with the land, meaning they transfer with the property — but violations also transfer. Before inheriting or transferring Vermont real estate, verify that all Act 250 permits are in compliance. Agricultural use is generally exempt from Act 250, but changes in use (farm to residential development) can trigger permit requirements.

Second Homes and Out-of-State Owners

Vermont’s vacation property market — Lake Champlain, ski country, the Northeast Kingdom — means many out-of-state families own Vermont real estate. If you die owning Vermont property:

• Ancillary probate is required in Vermont for real property, even if your domicile is in another state
• Vermont estate tax applies to Vermont-situs property (prorated for nonresidents)
• Solution: Transfer the property into a revocable trust or use a Lady Bird deed — either avoids ancillary probate. An LLC can also hold Vermont real estate, converting it to personal property for the owner’s domiciliary state.

Cross-Border Considerations

• New Hampshire — No state estate tax, no state income tax. NH residents with Vermont property face ancillary probate and potential VT estate tax on the VT property. NH families looking for trust situs advantages (DAPTs, perpetual trusts, no trust income tax) should look at NH itself — which has become a premier trust jurisdiction.
• New York — Has its own estate tax with a “cliff” feature ($7.16M exemption). Families with property in both states face potential double-state estate tax exposure. Domicile planning is critical.
• Massachusetts — $2M estate tax exemption (much lower than Vermont’s $5M). Mass. residents with Vermont property face multi-state filing obligations and potentially owe estate tax in both states.

Vermont Trust Law: Modern Tools, Some Limitations

Vermont’s trust law (Title 14A) has been significantly modernized in recent years, but has some notable gaps compared to trust-haven states:

• Directed Trusts (14A V.S.A. §§ 1301-1318) — Vermont adopted the Uniform Directed Trust Act, allowing trust directors to hold specific powers separate from the trustee. This enables families to split investment, distribution, and administrative functions among different people or institutions.
• Trust Decanting (14A V.S.A. §§ 1401-1429) — Vermont adopted the Uniform Trust Decanting Act effective July 1, 2024. This allows an authorized fiduciary to distribute assets from one trust to another with different terms — a powerful tool for fixing outdated trusts or adapting to changed circumstances.
• Trust Protectors (14A V.S.A. §§ 1101-1105) — Vermont recognizes trust protectors as fiduciaries with broad powers in “sole and absolute discretion.” A trust protector is an “excluded fiduciary” with respect to powers given to others — meaning they aren’t liable for the trustee’s decisions on matters outside their scope.
• No DAPTs — Vermont does not allow self-settled asset protection trusts. Residents seeking DAPT protection should consider NH (which actively markets as a trust jurisdiction to New England families).
• No Dynasty Trusts — Vermont retains the Rule Against Perpetuities (wait-and-see approach, 27 V.S.A. § 501). Trusts are limited to lives in being plus 21 years. Families wanting perpetual trusts should consider NH, SD, or other jurisdictions that have abolished the RAP.

Find a Vermont Estate Planning Attorney

Vermont attorney directories:

• Vermont Bar Association
• VT Bar Lawyer Referral Service — 800-639-7036 (initial consultation up to 30 minutes for $25 or less)
• American College of Trust and Estate Counsel (ACTEC) — Find a Fellow
• National Academy of Elder Law Attorneys (NAELA)

Questions to Ask Before You Hire a Vermont Estate Planning Attorney

1. How many estate plans do you create per year, and what percentage of your practice is trust and estate work?
2. Should we use a Lady Bird deed for our home, or does our situation call for a trust-based approach?
3. Does our estate exceed the $5 million Vermont estate tax threshold, and what’s the best strategy to minimize exposure?
4. Should we set up a credit shelter trust, and how does it interact with our existing beneficiary designations?
5. How does Vermont’s probate-only Medicaid recovery affect our planning options?
6. What’s included in your flat fee (trust, pour-over will, POA, healthcare directive, Lady Bird deed)?
7. Are any of our assets enrolled in Current Use, and how does the land use change tax affect our succession plan?
8. We own property in New Hampshire/New York/Massachusetts — can you handle multi-state planning?

Recent Vermont Updates

• July 2024 — Uniform Trust Decanting Act: Vermont adopted the UTDA (14A V.S.A. §§ 1401-1429), giving trustees the power to distribute trust assets from one trust into a new trust with modified terms. This is a major new tool for families stuck with outdated trust provisions.
• June 2025 — UPOAA Amendment: 2025, No. 64, § 14 amended the Vermont Uniform Power of Attorney Act, refining the statutory form and third-party acceptance provisions. The updated law is effective June 12, 2025.
• FY2025 Estate Tax Revenue Record: Vermont collected $55.2 million in estate tax revenue in fiscal year 2025 — more than double the previous annual record, driven largely by a single large estate. Under current law, revenue exceeding 125% of consensus forecasts is deposited into the Higher Education Trust Fund.
• Federal — One Big Beautiful Bill Act (July 2025): Made the ~$15 million per-person federal estate tax exemption permanent. Vermont families still face the state estate tax at $5M — the federal change doesn’t help with the state-level exposure. The growing gap ($5M state vs. $15M federal) means more estates owe Vermont tax with zero federal liability.
• Estate Tax Exemption — $5,000,000: Unchanged since January 1, 2021. The exemption is not indexed for inflation. No pending legislation to change the exemption or rate has been identified as of February 2026.

Last reviewed: February 2026

Last updated: February 2026. I review Vermont’s estate planning rules quarterly and update this page whenever laws change. Bookmark it.

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