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Most people have an
attorney create a will, or a revocable living trust, or another estate planning
document such as a power of attorney, a living will, etc. for non-tax
reasons. That being said, taxes affect us all in one way or another and
for some clients estate taxes are a big concern when they are creating
their estate plan. Recently, there were some pretty big Federal tax law
changes. For your reference, I have summarized some of the important aspects
of the new Federal Law affecting the Federal Estate Tax below (note -
these numbers have been updated in a January 2013 post - see below for link):
Federal Estate Tax in 2012 (UPDATED TO REFLECT 2012 ADJUSTMENT IN EXEMPTION
- EDIT: For 2013 Estate Tax Changes
$5,120,000 exemption - If you die in 2012 with less than a $5,120,000 estate after adding the
amount of your total lifetime taxable gifts to your taxable estate you
will not be subject to Federal estate tax.
35% tax rate on amounts over the exemption.
Portability - Your unused exemption may be transferred to your spouse upon your death
(subject to limitations which should be discussed with an estate planning
Estate/Gift/Generation-Skipping Tax exemptions are currently EQUAL.
Based on these changes, many people who fall within the $5,120,000 exemption
will assume that the inheritance they leave behind will not be subject
to an estate tax (at least so long as they die between now and 2013).
Unfortunately, it may not be that easy. Currently, Connecticut also imposes
an estate tax that is separate and in addition to the Federal Tax.
Connecticut Estate Tax (UPDATED TO REFLECT 2011 CHANGE IN EXEMPTION)
$2,000,000 exemption - The Connecticut estate tax applies only if the amount of your Connecticut
taxable estate exceeds $2,000,000 when you die. Your Connecticut taxable
estate is your gross estate less deductions
plus the total amount of taxable gifts made on or after January 1, 2005.
Rate increase depending on size of estate - The amount of estate tax begins at 7.2% of the excess over $2,000,000
and increases from there.
No portability - Portability only applies to the Federal exemption.
CT estate tax return required regardless of estate size - If your Connecticut taxable estate is more than $2,000,000 then you
file a return with the Connecticut Department of Revenue Services, and
if it is equal to or less than $2,000,000 you file a return with the probate court.
Resident and non-resident estates - If you are domiciled in Connecticut or if you own real or tangible property
in Connecticut you may owe Connecticut Estate taxes if the size of your
estate is greater than $2,000,000.
As you can see, many people who fall under the $5,120,000 Federal exemption
will not be subject to Federal estate taxes, but will be subject to Connecticut
estate taxes. Of course there are also many others who are still not subject
to any estate taxes given the current law in Connecticut and at the Federal
I will continue to check in with you all as this Connecticut Estate Tax
situation develops, but in the meantime, if you think you would like to
have a discussion regarding the non-tax or taxable issues that affect
your Estate Planning, please feel free to contact a Connecticut Estate
Planning attorney by