You have to be aware of estate taxes when you are planning your estate as a financially successful individual. These taxes can significantly impact the future of your family if you are exposed.
As a resident of the state of Connecticut, you have two different estate taxes that you may be forced to address. There is a federal estate tax that people all around the country must contend with, and in Connecticut, there is also a state-level estate tax.
A certain amount can be transferred before estate taxes would kick in. This is called the credit or exclusion. For the rest of 2015, the federal estate tax exclusion is $5.43 million. Each year there are inflation adjustments, so you will see a slightly larger figure year-by-year if the current laws remain intact.
The Connecticut state estate tax exclusion stands at $2 million at the present time. Because the state-level exclusion is considerably lower than the federal exclusion, you could potentially be exposed to the Connecticut tax even if you are exempt from the federal estate tax.
We should point out the fact that there is an unlimited marital deduction, and it applies to the federal tax and the state estate tax. You can transfer unlimited assets to your spouse free of these estate taxes.
You may assume that you are divesting yourself of direct personal possession of property that you convey into any type of trust. This can lead you to the belief that assets that have been conveyed into a revocable living trust would no longer be part of your estate for estate tax purposes. In fact, this is not the case.
When you have a revocable living trust, you can act as the trustee and the beneficiary while you are alive and of sound mind. You also have the right of revocation; you can dissolve the trust at any time, and you would once again become the direct owner of the property that was in the trust.
Since you are retaining incidents of ownership with this type of trust, the assets would be part of your taxable estate.
You retain incidents of ownership when you have a revocable trust, but things are different with irrevocable trusts. Since you cannot revoke this type of trust, you are surrendering incidents of ownership. As a result, certain types of irrevocable trusts are used by people who are looking for estate tax efficiency solutions.
Take Direct Action
If you would like to explore the estate tax efficiency strategies that are available to you, our firm can help. We offer free consultations, and we would be glad to answer your questions and make recommendations.
To set up an appointment, send us a message through our contact page: Hartford CT Estate Planning Attorneys.
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