Wealth Management in Virginia

Wealth that grew up around Washington

Much of Virginia’s private wealth is a product of proximity to the federal government. Over several decades, contracting firms in Reston, Herndon, Tysons and Chantilly grew from small shops into companies worth tens or hundreds of millions of dollars. Their founders, early employees and executives now hold equity, deferred pay and real estate. More recently, data centers in Loudoun and Prince William counties and technology firms in Arlington and Richmond have added a second wave. Elsewhere, wealth comes from physicians and academics, from banking and utilities in Richmond, from shipbuilding and naval careers in Hampton Roads and from land that families have held for generations in the Piedmont and the Valley.

According to the U.S. Census Bureau, 2020 to 2024 American Community Survey, per capita income is about $50,666 and about 42.2 percent of adults hold a bachelor’s degree or higher, both well above national levels. Wealth management exists for households where several of these sources overlap, and where a choice in one area changes the rest.

Selling a contracting company

The Northern Virginia contracting market has an active merger scene, and many owners eventually receive an offer. The decision is complex because the company’s value rests on contracts, cleared employees and past performance, and a buyer will examine all three. Preparation helps. Three to five years before a sale, owners usually work to broaden the customer base so no single contract represents too large a share of revenue, document their capture and delivery processes, strengthen a second tier of managers and clean up financial statements. Buyers pay more for firms that can win work without the founder.

The structure of a deal affects the owner as much as the headline price. A sale of stock and a sale of assets are taxed differently. Part of the price may be deferred or tied to future performance. Owners may roll part of their equity into the buyer’s company. Employment and non-compete agreements, often negotiated at the same time, affect both income and flexibility. A wealth manager coordinates with the owner’s attorney and accountant to compare the after-tax value of competing offers, then helps invest the proceeds so the money lasts. Virginia taxes the gain at its graduated rates on top of federal tax, which is one more reason to model the details. Our tax planning guide explains how gains are taxed.

A clearance and a balance sheet

People with security clearances face a practical financial constraint that most states’ residents never think about. Investigators look at debt, spending habits, gambling, undisclosed foreign ties and the ability to meet obligations, because financial pressure can be a vulnerability. That does not mean a clearance holder must be debt-free. It means unpaid collections, tax delinquencies and sudden unexplained wealth draw questions. A wealth manager who understands the process helps clients keep records orderly, pay taxes on time, avoid risky leverage and document large transactions. Cleared professionals who hold crypto, own foreign accounts or have relatives abroad should discuss reporting requirements with their security officer and tax preparer before acting.

Technology and data-center equity

Equity pay from technology and data-center employers can build wealth quickly, and it can disappear just as fast. A household that holds a third or more of its net worth in a single employer faces a double risk, since the same company controls the paycheck. A wealth manager typically proceeds in four steps. First, inventory all grants, vesting dates, expiration dates and tax treatment. Second, project taxes for each year under different selling schedules. Third, set a rule such as selling a fixed share at each vest. Fourth, coordinate gifts of low-basis shares to charity or family. Employees should also learn their company’s trading windows and rules before they sell.

Holding a lot of employer stock?

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Federal and military households

Federal employees and military retirees often combine a fixed pension, a Thrift Savings Plan balance and Social Security, plus survivor benefits that need to be coordinated. Wealth planning for them focuses on the following questions. How does the pension, and a survivor annuity, change how much risk the rest of the portfolio can carry? Which Thrift Savings Plan funds make sense, and when should the account be rolled to an IRA, if ever? How do health insurance choices, such as the Federal Employees Health Benefits program or Tricare, affect costs in retirement? How does Virginia’s subtraction for military retirement pay interact with other income? For officers and senior civilians with large balances, the answers can affect hundreds of thousands of dollars over a retirement.

Land, waterfront and family property

Virginia families hold farms in the Piedmont, orchards and vineyards in the Valley, timber in the southwest and waterfront homes on the Chesapeake Bay, the Eastern Shore and the rivers. Property of this kind carries emotion and expectation. A written plan should say who may use the property, who pays tax and upkeep, how decisions are made and what happens if an owner wants to sell. Holding the land in a limited liability company or trust makes it easier to transfer shares to heirs over time. Virginia’s land use assessment program lowers property tax on qualifying farm, forest and open land in exchange for conditions, and a change of use can trigger repayment of back taxes. Waterfront owners add flood insurance and rising-water risk to the equation. An attorney drafts the documents, and a wealth manager models the costs of keeping the property for the next generation.

What wealth managers charge

Most firms bill quarterly at a yearly rate applied to the assets they manage, and the rate steps down as the balance grows. A rate near one percent on the first million is common. A retainer is the main alternative and can be fairer when your situation is complicated but your portfolio is modest. Fund expenses, trading costs and commissions on insurance or annuities come on top, so request one combined figure and the balances at which the percentage falls. Typical minimums are in the hundreds of thousands of dollars, though firms sometimes make exceptions for owners about to sell.

Virginia rules that shape the plan

Graduated income tax. Virginia taxes income, including gains, at rising rates that reach their top level at a low income. For most wealthy households the marginal rate is simply the top rate, and the timing of a sale matters less than the federal bracket, though losses still offset gains.

No estate or inheritance tax. Only the federal estate tax can apply, and it reaches a small share of estates. Trusts remain valuable for privacy, for controlling when heirs receive money and for protection from creditors or divorce.

Tenancy by the entirety. Virginia recognizes this form of joint ownership for married couples, which generally protects property from the creditors of one spouse alone. Retitling can end the protection.

Self-settled asset protection trusts. Virginia has a statute that allows a person to create a trust for their own benefit with creditor protections, subject to conditions. It is a specialized tool that requires an experienced attorney.

Oversight. The State Corporation Commission’s Division of Securities and Retail Franchising oversees smaller investment advisers, and its Bureau of Insurance licenses agents.

Choosing a firm

Write down what must be coordinated: a company sale, equity pay, a pension, land, a blended family. Verify the firm and each advisor on the SEC adviser database and BrokerCheck, and for small firms confirm state registration. Read Form ADV Part 2, the brochure that tells you what the firm sells and how it earns money. Ask who will run the portfolio, who will speak with your attorney and accountant and how often you will meet. Get one annual dollar figure for the full cost. Then describe your own situation and listen for specifics, because a firm that has worked with contractors, federal retirees or waterfront property will say so. Our investing basics guide explains how portfolios are built.

Protecting what you have built

As net worth rises, so does exposure to claims. A lawsuit after a car accident, an injury at your home or a dispute with a customer can produce a judgment far above ordinary insurance limits. An umbrella liability policy adds a million dollars or more of protection above your auto and homeowners coverage for a modest premium, and most wealth managers consider it a basic layer. Business owners should add professional liability, directors and officers coverage where relevant and a review of how the company is structured. Professionals such as physicians should look at malpractice limits and at how assets are titled. Virginia recognizes tenancy by the entirety for married couples, which protects jointly held property from the creditors of one spouse, but the protection is narrow and can be lost by retitling. An advisor can add up your policies, compare the limits with your net worth and point out gaps before a claim arrives.

Working with your accountant and attorney

A wealth manager does not replace your tax preparer or your lawyer. Good arrangements have all three sharing information with your permission. In the fall, the advisor can share projected gains, dividends and charitable gifts with the accountant so estimated payments are correct and year-end moves are made in time. The attorney needs account values and titling to draft trusts that actually hold assets. Ask a prospective firm how it works with outside professionals, whether it will join a call with them and who updates documents after a major change. A firm that welcomes your other advisors is usually confident in its own work.

Giving and legacy

Many Virginia families want their wealth to do more than fund their own spending. Donor-advised funds let you take a deduction in a high-income year and choose charities over time. After age 70 and a half, qualified charitable distributions move IRA money directly to a charity without counting as income. Gifts of appreciated shares avoid the gain. Retirement accounts are especially tax-smart assets to leave to charity, because heirs generally owe income tax on what they inherit from them. Our estate planning guide explains the documents involved, and our retirement planning guide explains how required withdrawals work. Finally, tell the family what the plan is and why, because heirs who understand a plan are less likely to contest it.

Frequently asked questions