It is never pleasant to think about end-of-life issues, but a little planning can go a long way to preserving a person’s estate for their family, friends or beneficiaries. Connecticut residents may want to consider their liability for federal and state taxes on their property and assets upon death.
Under state law, estates valued below $2 million are tax free. Rates for larger estates range from 7.2 percent to 12 percent payable to the Nutmeg State if an estate soars above $10.1 million in value. These taxes are due to the government within six months of a deceased person’s passing.
The taxable value of an estate begins at $2 million. More specifically, it is the amount of an estate over that level that is taxable, not the entire value. This is an update on the “cliff” tax structure that was abandoned in 2011.
Federal taxes apply to estates valued in excess of $5 million. Individuals with estates above this level will pay taxes to both the IRS and Connecticut. For example, an estate of $6 million would be taxed approximately $360,000 in Connecticut, because that is 9 percent of the amount that exceeds $2 million.
Assets that are transferred or co-owned by spouses are generally not taxed. The usual method is a by-pass trust or credit shelter trust that passes the first spouse’s exemption amount into a trust for the life benefit of the surviving spouse.
These and other estate taxes may be best understood with the assistance of an attorney, who can gauge a person’s liability and find ways of preserving the value of his or her estate.
Source: Stamford Advocate, “Connecticut estate taxes explained,” Julie Jason, accessed Dec. 15, 2017