Czepiga Law Group LLC
Paul T. Czepiga, JD, CELA*, MBA, CPA48 Christian Lane
PrincipalNewington, CT 06111
Brendan F. Daly, JDTel : (860) 594-7995
Fax : (860) 594-7998
email:
website: czepigalaw.com
July 6, 2005
Legislature Repeals Gift Tax BUT Imposes Estate TAX
As elder law attorneys, we are dedicated to helping our clients preserve their wealth for future generations and this oftentimes advising our clients to give away a portion of their assets. Unfortunately, until recently, Connecticut imposed a gift tax on the maker of the gift. Although the gift tax rate was low (2% - 6%), the tax was incurred at relatively low thresholds—taxable gifts of $25,000 or more per year. This gift tax meant that Connecticut residents of modest means could be subject to the gift tax if they made taxable gifts of more than $25,000, a relatively modest amount.
There is finally a reprieve for the middle class, as the Connecticut Legislature voted to impose a $2 million lifetime gifting exemption effective January 1, 2005. The Governor signed this bill into law July 6, 2005. This repeal means that there is no gift tax imposed as long as the aggregate of all lifetime transfers does not exceed $2 million. Obviously, for persons of modest means who have estates of less than $ 2 million, they will never be subject to Connecticut’s gift tax. The new gift tax rates range from 5.085% to 16%. This means that Connecticut residents with modest net worths can make gifts and not worry about any gift tax issues.
In addition to the repeal of the gift tax, this new law also eliminates Connecticut’s succession tax and amends Connecticut’s estate tax. The succession tax is an inheritance tax imposed on assets a Connecticut resident owns at their death. This tax was gradually going to be phased out in full by 2008, but the Connecticut legislature accelerated its phase out so that it no longer applies for anyone dying in 2005 or later. The estate tax was a second inheritance tax imposed on large estates (over $1 million) that was linked to the federal estate tax. Due to changes in the federal estate tax, Connecticut has amended its estate tax so that it applies to Connecticut residents with taxable estates exceeding $2 million. The rate table is identical to the gift tax: rates ranging from 5.085% to 16%.
Both of the above taxes (the revised gift tax and the revised estate tax) also apply to nonresidents in certain situations.
If you would like more information on any of the above matters or on an estate planning or elder law matter generally, please feel free to contact Paul or Brendan.
Czepiga Law Group LLC
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