CT Passes Important Estate Tax Changes September 2009
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Wealthy Connecticut residents will no longer have to flee to Florida to avoid the Connecticut estate tax because of a new law enacted September 8, 2009 (House Bill 6802).
Neither will people have to deal with the dreaded Connecticut “cliff.”
Beginning with deaths occurring on or after January 1, 2010, estates (and gifts) of up to $3.5 million will be exempt from Connecticut estate (and gift) tax -- up from the current $2 million level.
Importantly, the new law also lifts the Connecticut “cliff” where a single US dollar bill counts as $101,700 Connecticut dollars. Currently, an estate of $2 million pays no Connecticut estate taxes. But, an estate of $2,000,001 – just a dollar more – pays Connecticut $101,700. The cliff will die its death with the new year (2010).
These are two very important estate tax changes. And, there is one more. The new legislation also reduces rates by 25 percent beginning in 2010.
Under current law (2009), an estate (or gift) of $3.5 million pays a Connecticut estate tax of $190,800, according to the Connecticut Office of Fiscal Analysis.
Under the new law, for deaths occurring after the end of 2009, the tax will be zero and there will be no cliff – that is, the tax for estates above $3.5 million will be taxed only on the amounts above $3.5 million. The tax rate is 7.2 percent for estates of $3.5 million to $3.6 million, down from 9.6 percent.
Here are a few more comparisons.
An estate of $5.1 million currently (2009) pays $402,800 to Connecticut; the new tax (starting in 2010) will be $130,200 for deaths occurring in after the end of the year (2009). A $10.1 million estate pays a little over $1.08 million in 2009; beginning in 2010, the tax will be $640,200, taxed at the highest marginal rate of 12 percent, down from 16 percent.
What does this mean to you?
If your estate is $3.5 million or less and you’ve been planning to establish your residence in another state to avoid Connecticut estate taxes, there will be no need after January 1, 2010. Likewise, if you have an estate of around $2 million and have been planning to gift assets to avoid the cliff, you won’t need to bother after the end of the year.
We still don’t know whether changes in the federal estate tax are looming. As of right now (2009), the federal threshold for a taxable estate is $3.5 million, meaning estates under $3.5 million pay no federal estate tax. Next year for one year only, the federal estate tax is zero for all estates of any size.
In any event, you’ll want to revisit your estate plan with your attorney sometime soon.
Before we leave the subject, there is one more major change in the Connecticut law.
According to the Connecticut Office of Fiscal Analysis, for deaths occurring on or after July 1, 2009, executors have to file Connecticut estate tax returns (and pay taxes due) within six months of the decedent’s death. That’s three months less time than was allowed under the old law in effect for deaths before July 1, 2009.
For more information on the new law, you can click here for the fiscal note for the House Bill, as amended by House “A” and House C,” which is the bill that became law on September 8, 2009.
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