Update on federal estate laws and impact on Connecticut estates
Fiscal cliff negotiations result in new estate tax rules. These rules, along with Connecticut state rules, should be kept in mind when constructing an estate plan in Connecticut.
April 09, 2013
Update on federal estate laws and impact on Connecticut estatesArticle provided by Riefberg, Smart, Donohue & NeJame, P.C.
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The new federal estate tax rules for 2013 were passed during the fiscal cliff negotiations. This portion of the negotiations included an exclusion of up to $5.25 million in assets per person. This means each person can pass just over $5 million in assets to loved ones without paying taxes and each couple can exclude $10.5 million.
This new amount is much larger than originally anticipated. Without the change that came with the fiscal cliff negotiations, the exclusion would likely have capped at only one million dollars. In addition to increasing the exclusion amount for estate taxes, the gifting rules also increased from $13,000 in 2012 to $14,000 in 2013. This means individuals can gift up to $14,000 a year without tax penalties.
These new, much more generous amounts allow most individuals throughout the United States the opportunity to pass their assets to loved ones through their estate planswithout paying excessive tax fees.
The importance of proper planning
Even with this exemption, it is important to plan how assets within an estate are passed. This includes everything within one's estate, such as property, bank accounts, stocks, life insurance plans as well as personal property like jewelry or automobiles. Without an estate plan assets are passed in accordance with state law.
An estate plan can be composed of many different tools, including wills and trusts. Wills are legally binding documents that outline how a person's property is distributed and who should receive it.
A trust can be used in place of or to supplement a will. This tool manages how assets are distributed by putting different people in charge. There are many types of trusts that can offer various benefits. Often, trusts provide the creator with tax benefits and privacy.
Estate laws in Connecticut
In addition to determining the best structure for an estate plan based on federal rules, state rules must also be taken into consideration. In Connecticut, state gift and estate taxes apply in addition to federal taxes.
The gift tax applies to any gift of Connecticut real property, tangible personal property located within the state and intangible property managed by Connecticut residents. Tax is due once the gift exceeds $2 million. Estate taxes are calculated based on the amount of Connecticut taxable estate and are also required on estates exceeding $2 million.
Determining the tools to use within an estate plan based on federal and state laws can be difficult, particularly since estate laws often change. If you or a loved one is considering putting together an estate plan or would like an estate plan reviewed, contact an experienced Connecticut estate planning lawyer to discuss your situation and better ensure your wishes are met.