People in most areas of the country have just one estate tax to concern themselves with. The federal estate tax is applicable everywhere, but the good news is that there is a relatively large estate tax exclusion. The credit or exclusion is the amount that you can transfer tax-free. You would have no federal estate tax exposure if the value of your estate does not exceed $5.43 million.
You may be relieved after you hear this if your estate is valued at less than the exclusion. However, we practice law in the state of Connecticut. In our state, there is a state-level estate tax. Most states in the union do not have their own state-level estate taxes, but unfortunately, Connecticut is among the minority in this regard.
It would be possible to be exposed to the Connecticut state estate tax even if you are exempt from the federal estate tax, because there is a lower exclusion on the state level. At the present time, the Connecticut state estate tax exclusion is just $2 million.
When you consider the fact that your home and any other real estate that you own is part of your estate for tax purposes, you could be exposed to the Connecticut state estate tax even if you do not consider yourself to be an extraordinarily wealthy person.
There is an unlimited marital deduction on the federal level and the state level. You can bequeath any amount of money and/or property to your spouse free of taxation, as long as your spouse is a citizen of the United States. These taxes would potentially be applicable on asset transfers to anyone else, even your children.
Estate Tax Efficiency Strategies
If you are facing estate tax exposure on either level, there are estate tax efficiency strategies that can be implemented. In many cases, irrevocable trusts will be utilized. Trusts that provide estate tax relief would include generation-skipping trusts, qualified personal residence trusts, grantor retained annuity trusts, and charitable remainder trusts.
The optimal way to proceed will depend upon your unique set of circumstances, and trusts are not the only way to transfer assets in a tax efficient manner.
These taxes can significantly reduce the wealth that you are trying to keep in the family. If you would like to discuss your unique personal situation with a licensed professional, our firm would be glad to help.
We have a thorough understanding of the current tax laws, and we have been providing tax efficiency solutions for a very long time. Our firm offers free consultations, and we can learn about your situation and recommend the appropriate strategies.
To set up an appointment, send us a message through this page and we will be back in touch promptly: Hartford CT Estate Planning Attorneys.
Jeffrey A. Nirenstein, Vice PresidentJeffrey A. Nirenstein is vice president and a founding member of the law firm of Nirenstein, Horowitz & Associates, P.C. He received his bachelor of arts degree in government from Clark University and his law degree from New York Law School.
Mr. Nirenstein provides to his clients, trust and estate planning, trust and probate administration and elder and disability care planning services. Formerly an adjunct professor of business law at Central Connecticut State University and Teikyo Post University, he continues to educate members of the public as a contributing author to A Will is Not Enough in Connecticut.
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