Don't Fall Off The Cliff!!
Connecticut does not impose an estate tax on estates valued under $2,000,000. Thus, there is a zero tax due on estates valued at $2,000,000 or less. However, one dollar over the exemption triggers a significant tax. This is the infamous Connecticut Estate Tax Cliff. An estate worth $2,000,001 will trigger a tax of $101,700. Yes, that's $0 to $101,700 in the flash of one dollar.
Certain members of The Connecticut Legislature have attempted to eliminate this problem and have, to date, unfortunately failed. And frankly, in the present economic climate, it is unlikely that such a measure could be passed. So counting on the Legislature does not make for good present planning. Don't count on the Legislature, rather look to employ some of the following strategies.
(1) Make gifts during your lifetime to reduce your estate at or below the $2,000,000;
(2) Incorporating charitable bequests in planning during life in effect having anything over $2,000,000 paid to a charity or charities; and
(3) Post-Death Planning can include reducing the taxable estate by legitimately increasing deductions.
These are just a few of the ways the problem is addressed. Although, it must be addressed in your estate plan.
Those of us thinking that we already have a good plan in place really should have a check-up this year. Until this year, the Federal exemption and the Connecticut exemption were the same -- they were coupled. That's not the case now with the Federal exemption at $3,500,000 and the Connecticut exemption presently, and for the foreseeable future, at $2,000,000. Many plans, with marital planning, are premised on this coupling and should be changed to properly and effectively account for the new difference.
