Connecticut Estate Taxes
Probate and You
Domenick N. Calabrese, Judge
Connecticut Probate District 22
Benjamin Franklin said “In this world nothing can be said to be certain, except death and taxes.”
Taxes come in all forms – real estate, income, sales, and more. There are also a number of taxes that may become payable when someone passes away. Sometimes referred to as “death taxes,” they are usually levied by the state and federal governments.
In Connecticut, one of the “death taxes” that may be due is the Connecticut estate tax. Beginning January 1, 2005, the Connecticut Estate Tax schedule was established and is based on assets the deceased person owned when they passed away. Included in new legislation that was passed recently is Public Act No. 09-3, “An Act concerning Expenditures and Revenue for the Biennium Ending June 30, 2011.”
This new law creates major changes to the Connecticut estate tax. The changes will result in fewer Connecticut estates incurring this tax and reduces the tax rates on taxable estates by 25%. The new law also eliminates the estate tax “cliff”, which will result in even larger reductions in the tax for some estates.
Currently, there is a $2 million exemption for the Connecticut estate tax. So, if a Connecticut resident (or a non resident owning real property in Connecticut) dies owning property with a total value of $2 million or less, no Connecticut estate tax is due. But if the value of the deceased person’s assets is even a single dollar over $2 million, Connecticut estate tax is due and is calculated on the entire value of their estate – not just the amount over $2 million. Some refer to this as the Connecticut estate tax “cliff” because an increase of as little as a single dollar in the value of someone’s estate triggers over $100,000 of Connecticut estate tax. Effective January 1, 2010, the new law increases the exemption to $3.5 million, and also eliminates the “cliff”.
Let’s look at examples of how some of the changes in the Connecticut estate tax might work. Rob Cratchit, a resident of Connecticut, passed away in 2008. The value of everything Mr. Cratchit owned when he passed away was $2,000,001. His Connecticut estate tax bill was $108,000. Edmund Scrooge, also a Connecticut resident, passed away the same year as Mr. Cratchit. When he died, the total value of Mr. Scrooge’s estate was $2,000,000. Mr. Scrooge’s estate paid no Connecticut estate taxes, even though the value of his estate was only a single dollar less than that of Mr. Cratchit.
Now let’s see how some of the revisions to the Connecticut estate tax will change how estates will be taxed. In 2010, Connecticut resident Jason Marley passes away. The value of everything Jason owned when he passed away was $3,500,000. Under the new law, Mr. Marley’s estate has no Connecticut estate tax liability because the exemption has been raised to $3.5 million. Had he died in 2009, his Connecticut estate liability would have been $190,800. Chester Dickens, who lives in Connecticut, passes away in 2010 with an estate valued at $3,500,001. Connecticut estate tax on Mr. Dickens’ estate is $0.072, or 7.2%. With the elimination of the estate tax “cliff,” Mr.Dickens’ estate will pay Connecticut estate taxes on only the portion of his estate over the $3.5 million exemption; in this case, $1.
While the old adage about death and taxes still applies, in the case of the Connecticut estate tax, the inevitability of this tax has been eliminated for more Connecticut residents beginning next month.
This article is for informational purposes only. It is not intended to be, nor should it be relied upon, for legal advice. Readers should retain the services of competent legal counsel for advice as to your particular situation.
Copyright ©2010 Domenick N. Calabrese. All rights reserved.