Estate planning is not something that can be completed in one sitting if you are responsible enough to put an estate plan in place long before you would expect to pass away.
Over the years, things will invariably change in your life, and these changes will affect the relevancy of your estate plan. As a result, you should view estate planning as an ongoing process, and you should be prepared to make adjustments along the way.
With the above in mind, one major factor to take into consideration is the matter of taxation. Since you pay so many taxes throughout your life, you may assume that your death will not be a taxable event, but the tax man adopts a different perspective.
There is a federal estate tax that everyone in all 50 states must contend with, and there are a number of states in the union that impose state-level estate taxes. Our practice is located in the state of Connecticut. As luck would have it, there is a state-level estate tax in our state.
On both levels, you can transfer unlimited assets to your spouse tax-free, as long as your spouse is an American citizen. Transfers to anyone else, even your children, are potentially subject to taxation.
During the current calendar year, the federal estate tax exclusion is $5.43 million. This is the amount that can be transferred before the estate tax would be applied by the IRS. The maximum rate of the federal estate tax is 40 percent.
We clarified the exclusion based on the calendar year because there are annual adjustments to account for inflation. Next year, an inflation adjustment may be added that would increase the amount of the exclusion by a relatively small percentage.
The Connecticut state estate tax exclusion is much lower, so you are not necessarily out of the woods if your estate does not exceed $5.43 million in value. In Connecticut, the state-level estate tax exclusion is $2 million.
Estate Plan Revisions
Now that we have explained the estate tax parameters, we can get back to the need for estate plan updates. If you put your plan in place when you were a relatively young adult, you may not have been exposed to death taxes. However, as your financial status improves, the situation may change.
Plus, there can be legislative changes to the estate tax parameters that can enter the picture.
There are estate tax efficiency strategies that can be implemented if you are exposed, and this is one of the reasons why you should view estate planning as a process that is unfolding on an ongoing basis.
If you keep your head stuck in the stand, a significant percentage of your wealth could be consumed by estate taxes after you are gone.
Schedule a Free Consultation
We can help if you would like to learn more about taxation and the tax efficiency strategies that exist. Our firm offers free consultations, and you can contact us through this page to set up an appointment: Hartford CT Estate Planning Attorneys.
