Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

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celentano
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Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by celentano » Wed Jun 13, 2018 7:12 pm

I have a very specific gift/estate tax question. I called the CT department of revenue services numerous times each time I got a different answer. I am hoping someone is familiar with rules in CT so that I can ask the question. Their website is useless. Thanks.

fabdog
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by fabdog » Wed Jun 13, 2018 7:42 pm

As opposed to one of us giving it our best shot, if it is a complex state specific gift/estate tax question, maybe spend a few $ and ask a local CPA and/or lawyer who specializes in this area. Depending on how much money is at stake, could be well worth the effort

I would not expect the folks answering the phone at my states dept of revenue to spit out an answer to a complex question. You'd have to try and reach a specialist in that area for the revenue department, who depending on the complexity might be hesitant to give you an answer

Mike

bsteiner
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by bsteiner » Wed Jun 13, 2018 8:43 pm

If you can get to the right people at the Connecticut Department of Revenue Services, they'e pretty good.

You could post your question here and perhaps someone will be able to help, or at least point you in the right direction.

celentano
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by celentano » Thu Jun 14, 2018 2:43 pm

Great suggestion. Here is the situation:

There is a good chance that I may not make it more than a year...
I am planning on gifting my son $2 Million (a stock portfolio for which he is the sole beneficiary) this year.
After the gift, I will have about $5 Million left over to pass to my wife.

I just needed to know how much (if any) of these figures the state of CT would get as tax after I am gone or before I am gone. I thought this was an easy question to ask to the 'tax experts' at the CT department of revenue. I was wrong! I got answers from 'no taxes' to 'enormous' tax amounts depending upon who I talked to. Their website is useless,because there are many dead end webpages. And, I decided try my luck on this great forum.

fabdog
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by fabdog » Thu Jun 14, 2018 2:55 pm

Some info below on the Connecticut exclusions. There is a nice chart showing the changes upcoming but had trouble getting it pasted in

So I assume you are trying to nudge your CT taxable estate down before you pass. I am sorry you find yourself in that spot.

In gifting the shares to your son, you will owe gift tax on the amounts above $15K, and he'll lose the step up in basis. It appears in wither case there will be CT tax due, but not likely federal

Mike
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The new Connecticut state budget, signed by Governor Malloy on October 31, 2017, increased the individual exemption for Connecticut estate and gift taxes over the next three years. In 2017, the exemption in Connecticut was $2,000,000. Under the new law, the exemption increased to $2,600,000 in 2018 and then to $3,600,000 in 2019. In 2020 and beyond, the Connecticut exemption will match the federal estate and gift tax exemption. From 2018 to 2025, the federal estate and gift tax exemption is $11,200,000. The exemption is indexed for inflation each year. A married couple with proper planning will be able to shield up to $22.4 million from federal estate tax.

Additionally, the new Connecticut law lowers the cap on the maximum estate and gift tax payable, from $20 million to $15 million, starting in 2019. The law also modifies the marginal rate schedule for Connecticut estates and gifts over $5.1 million, by raising the initial rate to 10%, with graduated increases of 10.4%, 10.8%, 11.2% and 11.6% for each million dollar increase, until reaching the top rate of 12% for a taxable estate or gift over $10,100,000 (see the tax rate schedule at the end of this article).

In addition to the increasing estate tax exemption, the annual exclusion amount for gifts is $15,000 in 2018, after remaining at $14,000 since 2013. As a result, starting in 2018 gifts of $15,000 or less to any number of recipients (or $30,000 or less, if made by a married couple who elect to split the gift on a properly filed gift tax return) in a calendar year will have no gift tax consequences.

http://www.trustsestateselderlawct.com/ ... x-2017.png

http://www.trustsestateselderlawct.com/ ... -exemption

celentano
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by celentano » Thu Jun 14, 2018 4:03 pm

Thanks for this info Mike.
Do you know what they are talking about here?

"The new Connecticut state budget, signed by Governor Malloy on October 31, 2017, increased the individual exemption for Connecticut estate and gift taxes over the next three years. In 2017, the exemption in Connecticut was $2,000,000. Under the new law, the exemption increased to $2,600,000 in 2018."

fabdog
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by fabdog » Thu Jun 14, 2018 4:21 pm

they are talking about the exemption amount that can be passed on without taxes. So it was $2 million in 2017, then it goes to $2.6 million this year, $3.6 million next year, and then in 2020 matches the federal exemption at $11.2 million

So in your case with an estate of $7 million, in 2018, $2.6 million of that can pass tax free, and the remaining $4.4 million would be taxed at rates from 7.2% to 8.4% (see the table in the previous post)

In 2019, $3.6 million will pass tax free, and the remaining $3.4 million would be taxed at rates from 7.8% to 10.4%

in 2020, the entire amount would pass free of CT estate tax

If you gifted your son the $2 million, you would owe CT gift tax on the amount above $15K. I don't have that tax table handy

Mike

bsteiner
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by bsteiner » Thu Jun 14, 2018 4:40 pm

As others have noted, the Connecticut exempt amount is $2.6 million in 2018 and will be $3.6 million in 2019. Connecticut allows a state-only QTIP election if you don't otherwise make a Federal QTIP election.

Someone with a large estate would shelter the Federal exclusion amount at the first spouse's death, at the cost of paying Connecticut estate tax on the difference between the Connecticut exempt amount and the Federal exclusion amount.

Someone with a medium size estate would focus on the Connecticut estate tax, and would leave the Connecticut exempt amount in a way so that it would be out of your wife's estate for both Federal and Connecticut estate tax purposes.

If you want to earmark $2 million for your son, you could leave $2 million to (or preferably in trust for) your son, and the balance of the $2.6 million or $3.6 million Connecticut estate tax exempt amount in a credit shelter trust for your wife and issue.

If you didn't want to earmark $2 million for your son, you could leave the entire $2.6 million or $3.6 million Connecticut estate tax exempt amount in a credit shelter trust for your wife and issue.

In either case, the $2.6 million or $3.6 million Connecticut exempt amount, and the income and growth thereon, during your wife's lifetime, won't be included in your wife's estate for Federal or Connecticut estate tax purposes.

You could then leave the rest of your estate ($4.4 million in 2018, or $3.4 million in 2019) to your wife either outright or in a marital trust. In either case, if she lives until 2020, she won't pay any Federal or Connecticut estate tax (unless she has sufficient other assets of her own).

Given your health issues, it would be better to provide for your son at your death than now, to obtain a basis step-up for the assets at your death.

With a $7 million estate, and your health issues, you should see a competent trusts and estates lawyer to get this done soon.
Last edited by bsteiner on Fri Jun 15, 2018 10:28 am, edited 1 time in total.

celentano
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by celentano » Fri Jun 15, 2018 9:27 am

Bsteiner, This was extremely helpful due to numerical nature of your explanation, thanks. Here is the plan:

I will gift $2.6 Million to my son now. I don't want him to deal with this stuff when I am gone. He will not be in a good state of mind. Yes, he will pay taxes on the stock gains eventually, but that won't be a big problem because he will not sell any stocks for a while until long term capital gain rates kicks in (I was going to pay tax on the gains eventually anyway).

The remaining $4.4 Million ($7 Million minus $2.6 Million) will go to my wife in 2019 (when my time expires) for her to live comfortably rest of her life. She will also have my social security and 1/2 of my pension.

There will NOT be any State or Federal taxes (gift or estate) on all this. Did I get all this right?

pshonore
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by pshonore » Fri Jun 15, 2018 9:52 am

celentano wrote:
Fri Jun 15, 2018 9:27 am
Bsteiner, This was extremely helpful due to numerical nature of your explanation, thanks. Here is the plan:

I will gift $2.6 Million to my son now. I don't want him to deal with this stuff when I am gone. He will not be in a good state of mind. Yes, he will pay taxes on the stock gains eventually, but that won't be a big problem because he will not sell any stocks for a while until long term capital gain rates kicks in (I was going to pay tax on the gains eventually anyway).

The remaining $4.4 Million ($7 Million minus $2.6 Million) will go to my wife in 2019 (when my time expires) for her to live comfortably rest of her life. She will also have my social security and 1/2 of my pension.

There will NOT be any State or Federal taxes (gift or estate) on all this. Did I get all this right?
Note there will probate fees assessed by the Probate Court on all estates whether the assets pass via probate, RLT, POD, etc). The fee for $4.4 mill passing to a spouse is about $6600. Not a large amount, but more than pocket change. $7 Mill would be about double that, and more if passing to a non-spouse. And of course any attorney fees be would an additional cost.

mw1739
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by mw1739 » Fri Jun 15, 2018 10:06 am

celentano wrote:
Fri Jun 15, 2018 9:27 am
Bsteiner, This was extremely helpful due to numerical nature of your explanation, thanks. Here is the plan:

I will gift $2.6 Million to my son now. I don't want him to deal with this stuff when I am gone. He will not be in a good state of mind. Yes, he will pay taxes on the stock gains eventually, but that won't be a big problem because he will not sell any stocks for a while until long term capital gain rates kicks in (I was going to pay tax on the gains eventually anyway).

The remaining $4.4 Million ($7 Million minus $2.6 Million) will go to my wife in 2019 (when my time expires) for her to live comfortably rest of her life. She will also have my social security and 1/2 of my pension.

There will NOT be any State or Federal taxes (gift or estate) on all this. Did I get all this right?
You will need to file IRS form 709 to report the gift above the annual exclusion amount, but no federal tax will be due on this gift. Additionally, since you are below the federal estate tax threshold, you will not owe federal estate taxes upon death.

I'm not an expert on Connecticut tax law, but it appears from the link provided that you would owe approximately 8% tax on the $800,000 exceeding the 2019 exemption amount of $3.6 million, for a CT estate tax bill of $64,000.

As bsteiner points out - go see an attorney - the fees could potentially save you tens of thousands in estate taxes.

ras4250
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by ras4250 » Fri Jun 15, 2018 12:14 pm

Go see an attorney. For the few thousand (if that) that it will cost you, it will save you many $$$$.

I'm not a tax lawyer, but what about a move to a state with no estate tax? Is that feasible? New Hampshire or down south?

celentano
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by celentano » Thu Jun 21, 2018 7:55 pm

UPDATE on my $7 Million deal:

First, I want to thank everyone who tried to help.
$3 Million will go to my son after my passing in 2019 (hopefully not 2018) state and federal tax free with basis step-up, because I made him the sole beneficiary of these funds.
Remaining $4 Million will go to my wife state and federal tax free, because I made her joint owner of these funds. This is great! Thanks again.

bsteiner
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Re: Is anyone familiar with Connecticut Gift and Estate Tax rules? my son) tax rules?

Post by bsteiner » Thu Jun 21, 2018 10:19 pm

celentano wrote:
Thu Jun 21, 2018 7:55 pm
UPDATE on my $7 Million deal:

First, I want to thank everyone who tried to help.
$3 Million will go to my son after my passing in 2019 (hopefully not 2018) state and federal tax free with basis step-up, because I made him the sole beneficiary of these funds.
Remaining $4 Million will go to my wife state and federal tax free, because I made her joint owner of these funds. This is great! Thanks again.
It may not be so great.

What if your death occurs in 2018 when the Connecticut exclusion amount is $2.6 million?

Are you familiar with the inclusion (and hence basis) rules for assets held by spouses jointly?

$3 million is a large amount to leave to a child outright. What if he does well and has a taxable estate? What if he gets divorced? Do you know what's in the pot for equitable distribution in Connecticut? What if he outlives his spouse and remarries? What if he has other creditors? What if he goes into a nursing home and wants Medicaid?

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