Secure Your Legacy and Save on Taxes: A Guide to Connecticut Estate Planning
5 Steps to Creating a Solid Estate Plan in Connecticut
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Estate planning is crucial for ensuring your assets are distributed according to your wishes after you pass away. While the core principles remain similar across states, Connecticut has its own set of rules and considerations that can impact your plan. Here's a breakdown of key nuances to be aware of when crafting your estate plan in the Constitution State:
1. Connecticut Estate Tax:
Unlike many other states, Connecticut has a relatively low estate tax threshold. In 2024, estates valued at less than $7.1 million are exempt from state estate tax. However, if your estate exceeds this amount, your beneficiaries may face a tax on the portion exceeding the threshold. This tax can range from 7% to 12%, depending on the estate's value.
2. Spousal Elective Share:
Connecticut law grants surviving spouses the right to claim a statutory share of the deceased spouse's estate. This share is typically one-third of the deceased spouse's probate estate, which includes assets titled solely in the deceased spouse's name. This can have significant implications for your estate plan, especially if you wish to leave a larger portion of your assets to children or other beneficiaries.
There are ways to minimise the impact of the spousal elective share. A prenuptial agreement can waive the right to the elective share, though this should be carefully considered with legal counsel. Additionally, some assets, such as retirement accounts with designated beneficiaries or jointly owned property with rights of survivorship, may not be subject to the elective share.
3. Probate Avoidance Strategies:
Probate is the court process of administering a deceased person's estate. It can be time-consuming and expensive. Connecticut offers several strategies to avoid probate, such as:
Joint Tenancy with Rights of Survivorship: Owning property jointly with another person with rights of survivorship automatically transfers ownership to the surviving owner upon death, bypassing probate.
Payable-on-Death (POD) Accounts: These accounts, like bank accounts or investment accounts, allow you to designate a beneficiary who will inherit the funds upon your death, avoiding probate.
Transfer-on-Death (TOD) Registrations: Similar to POD accounts, TOD registrations allow you to designate a beneficiary for assets like vehicles, bypassing probate.
Living Trusts: A living trust allows you to transfer ownership of assets to a trust while you're still alive. You can then designate a successor trustee to manage the assets upon your incapacity or death, avoiding probate.
4. Medicaid Planning:
If you anticipate needing long-term care in the future, planning for Medicaid eligibility is crucial. Connecticut has a "look-back" period of five years for Medicaid planning purposes. This means that if you gift assets within five years of applying for Medicaid, the value of those assets may be counted when determining your eligibility. An experienced estate planning attorney can advise you on strategies to protect your assets while qualifying for Medicaid.
5. Charitable Giving:
Connecticut offers various tax benefits for charitable giving. You may be able to deduct charitable contributions from your state income tax return, making charitable giving an attractive option for estate planning.
Conclusion
Estate planning in Connecticut requires careful consideration of state-specific laws and tax implications. Consulting with an estate planning attorney familiar with Connecticut law is essential to ensure your plan effectively distributes your assets according to your wishes, minimises taxes, and protects your loved ones.
Remember, this article provides general information and shouldn't be considered legal advice. Always consult with a qualified professional for personalised guidance on your estate planning needs in Connecticut.
Information published to or by The Industry Leader will never constitute legal, financial or business advice of any kind, nor should it ever be misconstrued or relied on as such. For individualized support for yourself or your business, we strongly encourage you to seek appropriate counsel.
