Connecticut inheritance taxes and federal estate taxes are different. In some cases, depending upon the value of your estate, taxes may be owed both to the federal government as well as to the state government. You need to know tax rules, whether your estate is subject to taxation, and how taxes will affect your ability to leave a legacy.
In many cases, it is possible to create an estate plan which incorporates tax minimization or tax avoidance strategies. By working with an experienced Connecticut estate planning lawyer, you could reduce the amount of taxes due after your death or could sometimes even eliminate taxes altogether.
This is important for anyone who is concerned that estate taxes will affect their legacy. Nirenstein, Horowitz & Associates understands the rules for Connecticut inheritance taxes and federal estate taxes, and can help you to explore legal ways to reduce or eliminate your tax burden. Give us a call to find out how we can help you.
Connecticut Inheritance Taxes
According to the Connecticut Department of Revenue Services, succession taxes in Connecticut were eliminated and no longer apply to estates of people who died after January 1, 2005. Today, the state of Connecticut does not charge an inheritance tax or succession tax. However, Connecticut does charge estate taxes. As of 2016, the estate tax exemption amount was $2 million. For estates with a value below $2 million, this would mean that no taxes would be owed to the state of Connecticut if the taxable assets which are part of the estate are below $2 million.
For estates above $2 million, the amount of tax assessed varies depending upon the specific value of the estate. The instruction book for Connecticut estate taxes indicates that the tax rate on estates between $2 million and $3.6 million is 7.2 percent of the amount over $2 million. For estates over $3.6 million but not over $4.1 million, the taxes due are $115,200 plus 7.8 percent of the amount exceeding $3.6 million. Different taxable amounts continue to go up from there, up to estates valued at over $10.1 million. For estates of this size, taxes due are set at $748,200 plus 12 percent of the amount exceeding $10.1 million.
Both residents of Connecticut AND non-residents of Connecticut could be held liable for estate taxes if their Connecticut taxable estate exceeds $2 million. This means that even if someone does not live in Connecticut at the time of his or her death but he owns real or tangible personal property in Connecticut, he could be required to pay Connecticut estate taxes if the value of his property in Connecticut was $2 million or greater. The Connecticut taxable estate includes a deceased person’s gross estate as valued for federal tax purposes, as well as taxable gifts which were made by the deceased person over the course of his lifetime.
Federal Estate Taxes
In addition to owing estate taxes in the state of Connecticut, it is possible that a death will also trigger a required payment of estate taxes to the federal government as well. The excludable amount for federal estate taxes is different from the excludable amount for Connecticut estate taxes. You can have up to $5.45 million in assets in the taxable estate before the federal government assesses an estate tax, as of 2016. In 2017 it was raised to $5.49 million.
Spouses can also transfer their excludable amount to each other. For example, a husband who dies first could leave his entire estate to his wife. Since there are no estate taxes paid on assets left to a spouse after a death, the husband has not used up any of his excludable amount. His wife now has her own $5.45 million exclusion and her husband’s. She can pass $10.9 million of assets tax free.
Getting Help from a Connecticut Estate Planning Lawyer
You do not want to jeopardize your family business, family farm, or any other legacy that you are leaving behind for the people you love. To keep more money in the hands of your beneficiaries, you should contact Nirenstein, Horowitz & Associates as soon as you can to make a comprehensive estate plan aimed at reducing Connecticut inheritance taxes and federal estate taxes.
To find out more about estate planning, you can download our free estate planning worksheet. You can also give us a call at 860-548-1000 or contact us online to speak with a member of our legal team and create a personalized plan specific to your needs. Call today to get started on protecting your nest egg from burdensome taxes.