Taxation is an important consideration when you are planning your estate, and the Connecticut estate tax is looming. Fortunately, there is a sizable exclusion, and we will provide all the important details in this post.
Taxable Threshold
The exclusion or credit is a dollar amount that can be transferred tax-free. Any portion of the estate that exceeds this amount is potentially subject to the Connecticut estate tax.
In 2024, the exclusion in our state is $13.61 million. Due to legislative mandate, the state-level exclusion is now equal to the federal exclusion. Previously, the state level estate tax exclusion was lower than the federal credit.
Tax Rate
The rate of the tax changed for the 2024 calendar year as well. In the past, it was a graduated rate that started at 10.8 percent and maxed out at 12 percent. Now, there is a 12 percent flat rate, regardless of the amount that exceeds the exclusion.
Connecticut Gift Tax
A logical response to the estate tax would be lifetime gift giving. Unfortunately, this window was closed because there is a gift tax in Connecticut. There are 11 other states with estate taxes, and our state is the only one with a gift tax as well.
Marital Considerations
There is an unlimited marital estate tax deduction. If you are legally married to an American citizen, you can leave or gift any amount of property to your spouse in a tax-free manner.
Of course, they would then be in possession of a taxable estate, but you would avoid one round of taxation. The entirety of the estate would continue to grow throughout the life of the surviving spouse if there are appreciable assets.
In an estate administration context, the term “portability” is used to describe the ability of a surviving spouse to use their deceased spouse’s exclusion. The Connecticut estate tax exclusion is not portable, but the federal estate tax exclusion is portable.
Out of State Property
As a resident of Connecticut, you could potentially face estate tax exposure in another state. For example, let’s say you have a vacation home on Martha’s Vineyard in Massachusetts that is worth $4.5 million.
There is a state-level estate tax in Massachusetts, and the exclusion is just $2 million. Even though you’re not a full-time resident of Massachusetts, that tax will apply to your estate. Under our example, the tax will be imposed on the $2.5 million that is in excess of the exclusion.
Estate Tax Efficiency Strategies
There are trusts that can be used to gain estate tax efficiency if the value of your estate will exceed the exclusion. When you work with our firm, we can help you make the right choices if taxation will be a source of concern.
Attend a Learning Event!
We place an emphasis on education, and you will find a treasure trove of information right here on this website. This blog is updated all the time, and there are other written materials that you can access free of charge, such as our Estate Planning Checkup or our Estate Planning Worksheet.
In addition, we conduct learning events on an ongoing basis that cover all of the most important topics. There is no charge to attend these sessions, so this is an ideal way to build on your knowledge as you make a connection with our firm.
To see the dates and obtain more information, visit our Special Events Page and follow the instructions if you decide to register.
Need Help Now?
Learning is great, but at some point, it’s time to take action. If that time is now, you can call us at 860-548-1000 to schedule a consultation at our Glastonbury or Westport, CT estate planning offices. There is also a contact form on this site you can use to send us a message.
