Most of what adult children need to know about Vermont estate and incapacity planning is concentrated in a small number of documents and a handful of state-specific rules. Vermont’s most distinctive feature compared to most US states is the state estate tax, which kicks in at roughly $5 million per individual and applies regardless of whether the federal estate tax does. For families with land, business interests, or accumulated savings, that’s a meaningful planning consideration.
The four documents to have in place this year
1. Durable Power of Attorney (14 V.S.A. §3501 et seq.)
A Vermont durable POA names a person (the agent or attorney-in-fact) to handle your parent’s financial affairs if they become unable to. Vermont law allows POAs to be durable (surviving incapacity) when explicitly drafted as such.1
Important practical notes for Vermont:
- The document should be durable, in writing, signed by your parent, and acknowledged before a notary. Vermont generally requires notarization for POAs intended for use in real-estate transactions.
- Vermont banks, brokerages, and town clerks (for property records) are often cautious about accepting older, generic, or out-of-state POAs. A Vermont-format DPOA from a Vermont attorney is meaningfully easier to use in practice.
- Certain extraordinary powers — gifting authority, authority to amend a trust, authority to change beneficiary designations — should be explicitly granted in the document. Default boilerplate often omits these.
2. Advance Directive for Health Care (18 V.S.A. §9700 et seq.)
Vermont’s Advance Directive Act provides a combined statutory form that names a health-care agent and records the principal’s wishes about life-sustaining treatment and end-of-life care.2Vermont’s framework allows for relatively flexible drafting and is well- integrated with the state’s COLST (Clinician Orders for Life-Sustaining Treatment) form for end-of-life medical orders.
The form should be signed by your parent and witnessed according to statutory requirements (specific restrictions apply to who may serve as a witness).
3. Last Will and Testament
The will controls distribution of your parent’s probate assets — the assets that don’t pass by trust, beneficiary designation, or right of survivorship. Vermont requires the testator’s signature and two witnesses (14 V.S.A. §5). Self-proving affidavits avoid the need to locate witnesses later for probate.
4. Revocable Living Trust (14A V.S.A.)
A revocable living trust is the workhorse of Vermont estate planning for families that want to avoid probate. Your parent transfers assets into the trust during life, retains full control as trustee, and names a successor trustee to manage and distribute assets at death without probate. Vermont’s Trust Code provides a modern framework for trust administration.3
Vermont’s state estate tax
Vermont is one of the smaller number of US states that imposes its own estate tax. Key features:
- Exemption. Approximately $5 million per individual. This is separate from the federal exemption (~$13.99M per individual in 2025).
- Rate. Vermont applies graduated rates to the taxable estate above the exemption.
- Filing. Vermont Estate Tax Return (typically VT-Form EST-191) is due 9 months after death, with extension rules available.4
- Coordination with federal. Vermont uses its own exemption and rate structure; the state tax is separate from the federal estate tax. For estates above both, Vermont tax paid is generally deductible from the federal taxable estate.
For Vermont families with estates approaching the threshold, the planning levers are familiar: lifetime gifting (within federal annual-exclusion limits, currently $19,000/year per recipient), credit-shelter trusts at the first spouse’s death, irrevocable life-insurance trusts (ILITs), and careful use of the marital deduction.
No state inheritance tax
Vermont does not impose a separate inheritance tax. The Vermont estate tax is calculated on the estate as a whole; beneficiaries don’t pay a separate tax based on what they receive (unlike Pennsylvania or New Jersey’s former structure).
Probate in Vermont
Vermont probate is governed by Title 14 of the Vermont Statutes Annotated. Most estates go through one of three paths:
- Formal probate.The standard probate process. Personal representative is appointed, creditors are notified, claims are addressed, and assets are distributed under court supervision. Vermont’s probate courts operate at the county level.
- Small estate procedure. Vermont allows a streamlined process for estates under a small-estate threshold using a sworn affidavit.
- Settlement by affidavit for certain transfers. Some specific asset types (e.g., certain motor vehicles) can be transferred outside formal probate.
A properly funded revocable living trust avoids probate entirely for the assets it holds. For Vermont families with real estate, business interests, or out-of-state property, trust planning often pays for itself in avoided probate costs and complexity.
Elective share for surviving spouses
Vermont provides a statutory elective share for surviving spouses (14 V.S.A. §319 and related provisions). The share is calculated as a portion of the decedent’s estate, allowing the surviving spouse to elect a statutory minimum rather than what the will specifies.5
This rule matters most in second-marriage estate planning. The fix is a properly drafted prenuptial or postnuptial agreement, or planning structures that anticipate the elective share proactively.
Vermont’s homestead exemption
Vermont’s homestead exemption (27 V.S.A. §101 et seq.) protects equity in the primary residence from forced sale by general creditors during life. The protected amount is in the range of $125,000. This is important for general creditor protection but doesn’t change Medicaid’s separate ~$752,000 home-equity ceiling for LTC eligibility.
Vermont property-tax relief for older homeowners
Vermont offers a Property Tax Credit (income-tested) for primary-residence homeowners, applied for annually through the Vermont Department of Taxes alongside the state income-tax return. The credit can meaningfully reduce property-tax exposure for moderate-income retirees.
What to do this quarter
- Locate (or create) your parent’s four documents: DPOA, Advance Directive, Will, and (if appropriate) Revocable Living Trust.
- If documents exist but are more than five years old, have them reviewed.
- If your parent’s estate is approaching $5M, consult a Vermont attorney about estate-tax planning levers.
- Confirm whether your parent is signed up for the Property Tax Credit through the Vermont Department of Taxes.
- For Medicaid planning specifically — the LTC eligibility rules that interact with gifting and trust structures — see the Vermont Medicaid guide.