Estate tax planning in Connecticut has a unique element: The taxable estate includes gifts made within a particular timeframe. This is unusual when compared to other states, but Connecticut does this to prevent grantors from transferring large chunks of their estates to heirs simply to evade a larger estate tax bill.
The aspect of this that strikes us at The Unger Company as curious and interesting is that the gift tax aspect remains despite an increase in the estate tax exemption to the federal level of $12.92 million. The state’s estate tax exemption changed this year (2023) to bring it into line with the federal exemption.
The tax used to be progressive, but also new for 2023 is the application of a flat tax of 12 percent whether applied as an estate tax or a gift tax. Prior to this year, the tax was progressive and the exemption was on a different state scale.
Connecticut is the only state that applies a gift tax. It has a lifetime exemption that is equal to the estate tax exemption (currently $12.92 million), and there is an annual exemption of $15,000 per person. This isn’t dissimilar to the federal gift tax, which has a $17,000 annual exemption per person in 2023, and a 2023 lifetime exemption of $12.92 million.
The gross taxable estate for Connecticut is tabulated by taking the entire value of the estate, adding any taxable gifts that were made since January 1st, 2005, with allowable deductions mirroring federal deductions plus gift taxes paid during the last three years of the grantor’s life.
There is one more interesting thing in Connecticut: a ceiling on the total estate and gift tax an estate must pay. Since 2019, that amount is $15 million. When considering that Connecticut now uses a flat tax of 12 percent, estate proceeds and gifts tallying in excess of about $130 million after exemptions would stop accruing taxes. It’s not a freebee, but it’s a nice little benefit.
In Connecticut, the estate tax is due within six months of the grantor dying, so the estate and heirs need money at the ready. This is where working with an estate tax strategist like The Unger Company can be so important. Rather than having to liquidate assets at fire sale prices to satisfy a tax bill, The Unger Company helps by creating offsets that help a family to retain assets of intrinsic or sentimental value.
The Unger Company, Ltd. has distinguished itself as one of the foremost firms in building elegant and effective estate tax plans for the high-net-worth classes. The firm was founded by Harold Unger in 1974, and brings uncommon experience and know-how to this highly specialized topic. Contact us through our website or call us at 212-755-4777 to learn more about how we can help you.
Harold Unger LinkedIn: https://www.linkedin.com/in/harold-m-unger-9453aa73/
The Unger Company Ltd. LinkedIn: https://www.linkedin.com/company/93617123/
The Unger Company, Ltd. does not seek to practice law for clients and these published items are intended only to be informational in nature.