Ways and Means hears estate tax briefing; excess receipts routed to higher-education endowment

The Ways and Means Committee on Thursday, Jan. 29 received a detailed briefing on Vermont’s estate tax and how recent receipts interact with FY27 budget planning.

Speaker 4 summarized how the estate tax works and contrasted federal and state rules. “Estate taxes essentially is the value of all your assets when you die and they're being passed on,” Speaker 4 said, and noted federal rules exempt the first $15,000,000 for an individual (with higher marginal rates above that) while Vermont’s statute applies only to amounts above a $5,000,000 threshold taxed at 16%.

The briefing emphasized volatility in estate-tax revenue and a statutory mechanism that directs excess funds to higher education. “So any anytime when the estate tax goes above 125% of what was forecasted, there's an automatic mechanism that sends those funds to the Vermont Higher Education Endowment Trust Fund,” Speaker 4 said. Speaker 4 cited last year as an unusually large year, saying receipts were about $26,400,000 above the 125% forecast and that total estate-tax receipts in that year were $55,200,000.

Committee members asked technical questions about joint ownership, trusts, and residency. Members and the presenter agreed to seek CPA input and additional testimony on valuation methods and trust planning; Speaker 1 said the committee will hear CPAs and tax-department testimony in subsequent sessions.

The briefing described how the trust is administered and how distributions may be used. Speaker 4 said the treasurer’s office administers the Vermont Higher Education Endowment Trust Fund and that statute permits distributing up to 5% of a rolling 12‑quarter average to UVM, Vermont State University and VSAC for nonloan student financial aid; an additional up-to-2% endowment matching allocation may also be approved for UVM and Vermont State University. “It can't be made from the principal,” Speaker 4 added, explaining that distributions come from earnings to preserve the trust’s principal.

Speaker 6, speaking as a state-college trustee, told the committee trustees follow the fund closely and expressed interest in how efficiently scholarship dollars reach students. The treasurer’s reports cited in the briefing show 675 scholarships at an average award of about $1,400 in 2024, with roughly 73% going to first-generation students; a fiscal-year gain in the portfolio in 2025 (11.4% on the cited slide) supported a 7% distribution in that period that totaled about $2,600,000.

Presenter comments stressed that estate-tax revenue is unpredictable: “the revenue is extremely random,” Speaker 4 said, noting receipts depend on timing and the assets tied to individual estates. The presenter also pointed to demographic data (citing a Joyce Manchester household-wealth report) showing wealth concentrates among older households and suggested Vermont’s aging population could influence filings and receipts, though members cautioned correlation is not causation.

No formal motions or votes occurred on the topic. Committee members asked staff to compile additional distribution-history figures and to coordinate with other committees reviewing proposed uses of trust assets; Speaker 3 noted a governor’s budget item elsewhere that would access trust assets for specific UVM projects, and members agreed to watch testimony in those related committees.

The committee recessed for a short break and scheduled further testimony on valuation, compliance, and tax-department issues in upcoming meetings.