Federal and State Estate Tax
The federal government and most states levy a tax on a person’s accumulated net worth at death. Because some states and the federal government provide a partial exemption from these taxes if your net worth is below a certain threshold, most people are exempt from these taxes.
Federal Estate Tax Exemption
In recent years and in light of inflation, the amount of the federal estate tax exemption has been adjusted each year. For example, it was $11.7 million in 2021, but as of 2022 has increased to $12.06 million. However, that mechanism itself is temporary since current legislation is set to expire in 2026. When that occurs, unless Congress otherwise changes it before then, the federal exemption amount will fall all the way back down to $5.49 million.
State Estate Tax Exemption
In Connecticut, the state estate tax exemption for 2022 decedents is $9.1 million. But unlike the current federal scheme, the amount is not directly tied to inflation. Rather, starting in 2023, Connecticut's amount will officially be set to match the federal amount.
This relatively low taxability threshold has caused many Connecticut residents to consider relocating to more "tax friendly" states, such as Florida. However, in order to establish Florida domicile, and avoid paying Connecticut estate tax, there are a number of steps which need to be taken in order to show an intent to permanently remain in Florida.
Some taxes can be avoided or reduced with proper estate planning. Contact us today as we would be happy to discuss this with you as part of your estate plan.
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