Planning an estate in Connecticut may require careful consideration and diligence to the State's laws because doing otherwise could end up costing more money and time than necessary when the estate transfers ownership. This article will discuss the planning of Connecticut estates in terms of 1) estate deductions, 2) estate relevant taxes, and 3) additional Connecticut estate planning information. It will also provides links throughout as reference, and sources of additional information regarding a particular aspect of estate planning in Connecticut.
Connecticut estate deductions
Familiarizing with estate deductions is important in reducing the value of an estate for tax purposes. For example, if an estate is taxable when it reaches a value of $2 million dollars, lowering its value via deductions to below $2 million dollars would eliminate that particular tax. In Connecticut, estates are valued after the same deductions allowed by the U.S. Internal Revenue Service. These and other deductions are viewable at the following links:
Connecticut estate deductions
Familiarizing with estate deductions is important in reducing the value of an estate for tax purposes. For example, if an estate is taxable when it reaches a value of $2 million dollars, lowering its value via deductions to below $2 million dollars would eliminate that particular tax. In Connecticut, estates are valued after the same deductions allowed by the U.S. Internal Revenue Service. These and other deductions are viewable at the following links:
Federal estate deductions:
State estate deductions:
As evident in the above link, some examples of these deductions include estate administrative expenses, and property transferred to a spouse after the estate holder's and/or primary trustee's death. However, take note of the sentence stating in some cases property transferred to a spouse may not qualify for deduction.
To avoid complication in deductions such as transfer of property and debt, documents and financial instruments proving ownership of property and debt are of importance. For example, the IRS may require documentation that payable on death bank accounts are legitimate from the financial institution. This assists the tax agency in certifying the type of account, its applicability to an estate or lack thereof, and validation of account owners and/or beneficiaries.
Estate relevant taxes in Connecticut
Connecticut implements a sliding scale on estate taxes meaning the higher the taxable amount of the estate, the greater the tax. This estate tax currently ranges between 8-16% and does not include other taxes. Also included in the Connecticut estate's valuation are real and personal property. Moreover, the State of Connecticut does impose a generation skipping tax. The aforementioned information and other Connecticut estate law can be found at the following link.
Connecticut Estate tax law:
Other taxes such as income tax, inheritance tax, and gift tax may apply in the State of Connecticut if the estate's income sources, and assets are not tax protected via financial vehicles and instruments allowing such. For example, income from business within the estate is likely to be taxable either as a corporation or individually depending on the structure of the business.
i) Connecticut inheritance tax:
ii) Connecticut gift tax:
However, if that business is registered overseas and owned by a foreign trust with assets within the company remaining abroad, the possibility of that business qualifying for taxation in the United States is reduced dependant on the legal separation of that business and/or its income from the estate's beneficiaries.
Additional Connecticut estate planning information
When an estate transfer takes place, the State of Connecticut requires tax documents be filed with the State's probate court regardless of value according to bankrate.com. These and other forms can be found at the Connecticut Department of Revenue website below and includes estate and gift tax forms, domicile declaration, estate tax returns and insurance statements.
Also important to note is that certain financial instruments may not be considered as within the jurisdiction of a trust according to Michael J. Keenan, Esq of Keenan Law, LLc, Specifically, in his estate planning blog, Keenen refers to 401K's, POD accounts, life insurance death distributions and IRA;s are distributed according to listed beneficiaries and not a Will.
Other estate documentation pertaining to estate planning include living wills, last will and testament, trust(s) and power of attorney should comply with Connecticut's estate law in order to be legally valid for estates within that State. These documents can be found and prepared at a number of locations and may required the assistance of an estate planner skilled, certified and/or licensed in the State of Connecticut.
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