With Connecticut’s changes for 2023, it may be wise for high-net-worth and ultra-high-net-worth families to revisit their estate tax strategy. Contact The Unger Company to learn more about how we can help.
Connecticut has moved its estate tax exemption into alignment with the federal exemption of $12.92 million for 2023. This is new, as the state’s estate tax exemption was lower in previous years.
Knowing that the exemption has been raised for 2023 isn’t enough, though. As estate tax planning and strategy experts, The Unger Company reads a little more deeply into the law, and we’ve learned some interesting things about Connecticut.
Connecticut has the highest mean net worth of any state in the nation at $730,000, according to data from First Republic Bank drawn from the Federal Reserve Survey of Consumer Finances. That’s a pretty high mean; second place goes to Hawaii, which isn’t all that close.
In Connecticut, it isn’t enough to just ask about estate taxes. Although Connecticut doesn’t currently have an inheritance tax, the state has a broad heading under which it sometimes discusses its death taxes – meaning estate, inheritance, and gift taxes. If you’re looking up information on estate taxes in Connecticut and are overlooking the gift tax, you may want to re-examine your search criteria.
In developing a tax basis for applying its estate tax, Connecticut uses an aggregate measure in calculating the tax exemption that includes gifts thereby preventing wealthy individuals from simply gifting their estates to heirs during their lifetime. In the words of the state, “Gift taxes apply to property transferred during a property owner’s lifetime, thus preventing individuals from avoiding paying estate and inheritance taxes by transferring their assets while alive. The donor is generally responsible for paying the tax.”
Connecticut begins with the same gross estate as the federal calculation for a decedent, and subtracts the same federally allowable deductions other than the state estate tax. The fair market value of real assets is tabulated, deductions for a surviving spouse are applied, as are charitable deductions. Then, the state adds the total value of all Connecticut taxable gifts made by a decedent after January 1st, 2005, and the amount of the state’s gift tax paid during the three years preceding the decedent’s death.
For Connecticut, it doesn’t matter if the personal property gifted is located inside or outside of the Nutmeg State – it gets added up as part of the gift tax. The tax, depending on the year and the amount, will be somewhere between 10-and-12 percent. As of 2023, Connecticut’s estate tax also has a 12-percent flat tax that will be applied to assets over the federal threshold and after allowable deductions.
Connecticut has one more interesting wrinkle, and it’s a benefit for people in the high-net-worth classes. The state has a maximum amount of gift or estate tax a decedent’s estate must pay. Since 2019, that amount for gifts and wealth transferred from an estate is $15 million. That’s may seem like a high bar, but once you get into the nine-digit estate range, that 12-percent can approach or surpass that max quickly.
As our founder Harold Unger is fond of saying, “You’re not going to get a thank you note from the governor for taxes paid,” so if you are a high-net-worth family, talking to The Unger Company can mean the difference between liquidating or retaining a prized family asset.
The Unger Company, Ltd. brings five decades of expertise in planning and strategizing solutions for estate taxes for high-net-worth (HNW) and ultra-high-net-worth (UHNW) estates. We have proven methods for asset protection and wealth transfer. The Unger Company works in tandem with a client’s legal and financial advisors, using insurance and legal entities to legally avoid estate and similar taxes at the federal and state levels. Contact us through our website or call us at 212-755-4777 to learn what we can do for you.
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The Unger Company, Ltd. does not seek to practice law for clients and these published items are intended only to be informational in nature.
