Estate Planning | Making a Difference One Family at a Time

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estate taxes, estate tax exclusionEstate taxes can be a factor when your legacy is being transferred to your heirs. However, most people don’t have to be concerned because of the robust exclusions. Plus, even if you are a high-net-worth individual, there is a provision for spousal transfers. Let’s look at the facts.

Federal Estate Tax Basics

The federal estate tax applies to the value of your estate at the time of your death. However, it only affects estates with values that exceed the federal exemption.

In 2025, the federal estate tax exclusion is $13.99 million per person. If the total value of everything you own is below that amount, no federal estate tax will be due.

For married couples, each spouse has an exclusion. If your estate is larger than the exemption, the portion above the threshold can be taxed at rates up to 40 percent. Even so, the law provides special treatment for property that passes to a surviving spouse.

The Unlimited Marital Deduction

One of the most important provisions in estate tax law is the unlimited marital deduction. This rule allows you to transfer any amount of assets to a spouse who is a U.S. citizen without paying federal estate tax.

The deduction applies whether you leave everything outright to your spouse or use certain types of trusts designed to qualify for the deduction.

Portability

Since 2012, the federal estate tax exclusion has been portable between spouses. This means that a surviving spouse could use the exclusion that was earmarked for their deceased spouse. Using the 2025 figure, a surviving spouse would have a total exclusion of $27.98 million.

Transfers to Non-Citizen Spouses

The unlimited marital deduction is only available if your spouse is a U.S. citizen. If your spouse is not a citizen, transfers over the exemption amount can trigger immediate estate tax liability.

This rule exists because Congress wanted to prevent large gifts that could leave the tax system entirely if the surviving spouse moves assets abroad.

To address this, the law allows you to set up a Qualified Domestic Trust (QDOT). When you transfer assets into a QDOT, you defer estate tax until the trust makes distributions of principal or until the surviving spouse dies.

The trust must meet strict requirements, including having at least one U.S. trustee and providing the IRS the ability to collect tax when required. A QDOT can be an effective way to avoid immediate taxation while still providing for a non-citizen spouse.

Connecticut Estate Tax Rules

In addition to the federal estate tax, Connecticut imposes its own state estate tax. For 2025, Connecticut’s exemption amount matches the federal exemption of $13.99 million.

Estates above that threshold are taxed at rates that start around 11.6 percent and increase based on the size of the estate.

Connecticut also allows a marital deduction for transfers to a surviving spouse who is a U.S. citizen. This means that, like the federal system, you can leave any amount to your spouse without incurring state estate tax right away.

However, Connecticut does not permit portability. This means if you do not use your exemption when the first spouse dies, it cannot be transferred to the surviving spouse. Careful planning is necessary to avoid wasting the first spouse’s exemption and increasing the taxable estate later.

Planning for the Second Spouse’s Estate

While transfers to your spouse can postpone the estate tax, they do not eliminate it entirely.

All property left to a surviving spouse will eventually be included in that person’s estate. If the combined estate exceeds the available exemption when the second spouse dies, your family could face a significant tax bill.

That’s the bad news, but here’s the good news: estate tax efficiency strategies can be implemented, and we can make the proper recommendations based on the circumstances.

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Diana O'Rourke, Estate Planning Attorney
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