Posted on September 17, 2009 by Beverley Rogers

"Cliff Notes" on Connecticut's Estate Tax Changes

Connecticut has eliminated the “cliff” from its estate tax. The Danbury News-Times, along with other media and legal blogs, reports that this change to Connecticut’s estate tax law, along with other significant changes, will go into effect for decedents who die on January 1, 2010 or later.

The aforementioned “cliff” refers to the fact that under prior tax law, an estate of $2,000,000 was exempt from taxation. However, add one more dollar to that, and the entire $2,000,001 was taxed, resulting in a tax liability of $101,700. With the new law, estates of $3,500,000 or less will not be taxed. This is similar to the federal estate tax threshold (or at least this year it is).

Under current law, the federal estate tax will be abolished next year, only to come back in 2011 with a threshold of only $1,000,000. The expectation is that the federal estate tax will be modified. On the other hand, that expectation has existed for some 8-10 years.  A clear explanation of the status of the federal estate tax is provided by this recent Wall Street Journal article.

In New York, the state estate tax threshold is a mere $1,000,000. But, in either Connecticut or New York, the federal tax takes a far bigger bite, with a marginal rate up to 45%. That’s right, 45%.

Here’s some good more news for Connecticut: estate tax rates are now being reduced by 25 percent, with a new maximum rate of 12%. But the estate tax and a return will be due six months after date of death instead of the current nine months.

In all three jurisdictions, (federal, Connecticut and New York), your “estate” for tax purposes includes almost everything you own: property, IRA’s, 401(k)’s, pension plans, the proceeds of life insurance and “In Trust For” accounts.

And one more point of potential confusion, specifically with respect to life insurance: the fact that beneficiaries do not pay income tax on the proceeds does not mean that the estate won’t pay estate tax.  A substantial life insurance policy can be enough to "tip: an estate into a taxable bracket.

A final piece of advice: take care of yourself and your loved ones.

 

 

 

 

 

 

 

 

 


 

 
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Posted on July 30, 2009 by Beverley Rogers

Connecticut Probate Court Consolidation

We’ve mentioned before that the Probate Court system in Connecticut faces severe financial problems. To avoid facing the possibility of a $5 million deficit in 2011, the state has passed a law reducing the number of probate courts in Connecticut from 117 to 50 or fewer.

According to the Ridgefield Press, Ridgefield’s probate court will likely be joined with those of Redding, Bethel and Newtown, serving about 78,000 people.

What does this mean for local residents and attorneys? A lot more driving. Since we also practice in New York, we’re accustomed to this. We currently have active cases in New York (downtown Manhattan), Queens (Jamaica), Rockland (New Town) and Westchester (White Plains) Counties, not to mention the Towns of Ridgefield, Madison, and Westbrook in CT.

However, we recognize that many Probate cases are small, and that individuals may be handling them without attorneys. It makes sense to locate regional courts so that getting to them does not become a burden.  The Ridgefield Press reports that Ridgefield Probate Judge Joseph Egan and Ridgefield First Selectman Rudy Marconi are concerned that Newtown is pushing to host the court offices for the four towns.  Yet Danbury and Bethel are possible contenders for the site, too. 

In his Connecticut Law Blog, Ryan McKeen brings up some interesting questions, including the issue of whether or not new facilities will have to be built.

We'll buckle our seatbelts and prepare for a bumpy ride.

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