As you may know, several tax law changes resulted from the legislation signed into law by Governor Malloy on May 4, 2011, as part of the budget compromise. The following summarizes a few of the key changes.
CONNECTICUT ESTATE AND GIFT TAX LAWS
Estate and gift tax exemption reduced to $2,000,000.
The Connecticut estate tax exemption amount has decreased from $3,500,000 to $2,000,000. The estates of decedents dying on or after January 1, 2011, that are over $2,000,000 are now subject to Connecticut estate tax.
There is a parallel change to the Connecticut gift tax exemption, which was also reduced to $2,000,000, effective January 1, 2011. Connecticut residents are now limited to making lifetime gifts of up to $2,000,000 without incurring Connecticut gift tax. (However, the federal gift tax exemption remains at $5,000,000 for 2011 and 2012.) For Connecticut gift tax purposes, the aggregate amount of all gifts made on or after January 1, 2005, (the year when Connecticut originally adopted its "unified" estate and gift tax structure) "count" against the Connecticut gift tax exemption.
The estate and gift tax rates are unchanged, with a maximum tax rate of 12 percent. The rate schedule is summarized below.
Amount of Total Connecticut Taxable Transfers
(add Col. C and Col. D)
But not over
Tax rate on excess over Col. A
What does this mean to you?
If your documents have been updated to take into account the potential difference between state and federal estate tax exemptions (which is relevant now with the $5,000,000 federal estate tax exemption), no further changes should be needed to your documents. However, without appropriate planning, married couples may be subject to tax that could otherwise be avoided. Properly drafted estate plans and proper ownership of assets by married couples are necessary for maximum use of the available exemptions. Please contact us if you would like to discuss how these changes may affect you. If you have not updated your documents in the last few years, this may be an appropriate time for a more comprehensive review of your estate plan to ensure that it still meets your estate planning needs and objectives.
In addition, if you made Connecticut taxable gifts earlier this year in an effort to capture some of the current $5,000,000 federal gift tax exemption, you should be aware that those gifts, even if made prior to the enactment of the new Connecticut tax exemption, will be subject to the lower exemption and therefore could result in higher Connecticut gift tax than you might have expected. For example, a $5,000,000 Connecticut taxable gift in 2011 for an individual with her full Connecticut gift tax exemption will cause $229,800 in Connecticut gift tax under present law, as compared to $121,800 in tax under the law previously in effect.
INCREASE IN INDIVIDUAL INCOME TAX RATES
The legislation increased the marginal income tax rates for those with taxable incomes over $100,000 for joint filers, $50,000 for single filers and married filing separately, and $80,000 for heads of household. The number of tax brackets has been increased from three to six. In addition, the highest marginal income tax rate was increased to 6.7% for those with taxable incomes over $500,000 for joint filers, $250,000 for single filers and $400,000 for heads of household.
SALES TAX CHANGES
The general sales and use tax rate has been increased to 6.35%. A higher "luxury" tax rate of 7% now applies to the full sales price of motor vehicles (costing more than $50,000), boats (costing more than $100,000), jewelry (costing more than $5,000), and clothing (costing more than $1,000). The sales tax was extended to certain new services, including motor vehicle storage and salon services.
These are some general points about the new Connecticut tax laws.
On December 7, Amy Lonergan was on the faculty for the Massachusetts Continuing Legal Education (MCLE) Program on Planning For and Administrating Estates With Unique Assets.The 3 hour program included discussion on legal issues that arise when dealing with unusual assets in estate administration, and how to best plan for them in advance.
On November 16, Alexis Gettier will be participating in a GenSpring Family Office panel called, "Avoid Art Ache: Planning & Communication, Considerations For Collections."
Carl Merino co-authored an article, "Tax Planning for Foreign Couples Buying U.S. Homes: Ownership Through Foreign and Domestic Trusts," for Bloomberg BNA’s Daily Tax Report.
On November 9, Darren Wallace will be speaking on a panel at Private Asset Management's Breakfast Briefing at the Lambs Club in New York City.
Carl Merino co-authored an article, "Tax Planning for Foreign Couples Buying U.S. Homes: Ownership Through Foreign Corporations and Partnerships," for Bloomberg BNA’s Daily Tax Report.
Stephen Ziobrowski was quoted in an article, "How Bermudians can be exposed to US taxes," in The Royal Gazette. The article is a recap of an International Tax and Planning Seminar at an AFL Investment sponsored event held in May 2016, in which Ziobrowski participated.
Darren Wallace and Ed Krzanowski were quoted in an article, "Valuation discounts: what could the IRS’ new proposal mean for families?" in Private Asset Management Magazine. In the article, Wallace and Krzanowski discuss the recently issued proposed regulations under Internal Revenue Code Section 2704 that, if finalized, would curtail or eliminate valuation discounts for gift and estate tax purposes
Ed Krzanowski was quoted in an article, "IRS Estate-Transfer Proposal Meets Rare Repeal Bill," in Law360.
Angela Titus McEwan was mentioned in an article, "Executive Moves: Who hired whom this week," in NJBIZ. Titus McEwan recently joined Day Pitney as a partner in the trusts and estates practice in the Parsippany office.
Leiha Macauley was quoted in an article, "As Women Gain Earning Power, A New Focus on Finances," in Banker & Tradesman. The article is about how saving for retirement is a salient issue for women because they tend to outlive their spouses, make less money over the course of their lives, are more likely to act as caregivers for elderly parents and are also likely to inherit more money.