Federal Estate and Gift Taxes
The federal estate and gift tax exemption represents the amount that an individual may gift or transfer at death without the payment of any federal transfer tax. The federal estate and gift tax exemption for 2022, indexed for inflation, is $12.06 million, up from $11.7 million in 2021. The generation-skipping transfer (GST) tax exemption for 2022 is also $12.06 million. The estate, gift, and GST tax rates remain a flat 40 percent.
The annual gift tax exclusion has increased from $15,000 to $16,000. As a result, an individual may gift up to $16,000 and married couples can gift up to $32,000 per year per recipient without using any estate or gift tax exemption. Annual gifting program continues to be a tax efficient way to make tax free gifts. Direct payments of tuition and medical expenses also remain an excellent way to reduce your potential transfer tax liabilities.
Connecticut Estate and Gift Taxes
The Connecticut estate and gift tax exclusion for 2022 increased to $9.1 million, up from $7.1 million in 2021. In 2023, the Connecticut exemption amount is scheduled to match the federal estate and gift tax exemption and thereafter will be adjusted annually for inflation. If the federal exemption is halved in 2026, the Connecticut exemption would follow suit. The Connecticut estate and gift tax rates on transfers above the exemption range from 10.8 to 12 percent.
Connecticut remains the only state with a gift tax. Therefore, any Connecticut resident, or any non-resident making a gift of Connecticut property, must consider the potential Connecticut gift tax.
Estate Planning Periodic Review
Regardless of tax laws, you should review your estate plan annually to ensure that your choices are still appropriate. For example, you may have previously appointed a spouse or sibling as an Executor or Health Care Representative, however, you may now wish to consider naming a child(ren) or a younger relative. Similarly, your estate plan should be reviewed in light of marriage, divorce, births, deaths or major life events.
It is equally important to review your designated beneficiary forms for your IRAs, 401(k)s, and other retirement plans as well as your life insurance policies and the manner in which your assets are held to make sure that they are consistent with your estate plan.
I can help you with your estate planning needs. Please contact me at 203-544-9945, or beth@eedwardslaw.com.
