The easiest way to ensure optimal use of the high federal transfer tax exemptions while remaining available is to donate for life. Under current law, the increased exemption from inheritance and gift tax ($ 11.7 million per person, or double that amount for married couples) will revert to 2017 amounts ($ 5 million). dollars per person, or double for married couples, indexed to inflation) in January. 1, 2026. Regardless of tax laws passed in the meantime, asset donation now ensures full use of currently available exemptions and removes future appreciation of the donated asset from your taxable estate on death. Be aware, however, of the remote possibility of retroactive application of any reduction in exemptions.
Additionally, note that Connecticut is currently the only state in the country to impose a gift tax. The exemption is $ 7.1 million per person for gifts made in 2021. Connecticut residents should be aware of the exemption when giving gifts for life to avoid being taxed at the level of. state and should consider donating any out-of-state property, which is not the case. subject to the Connexion donation tax. Likewise, non-residents who own a property in Connecticut should consider donating that property now to avoid Connecticut estate tax on the property upon death.
Clients should also consider transferring valued assets now to escape the potential of future legislation that would impose a deemed recognition event on donations of valued assets, especially in the case of low base assets that would trigger offsets. significant taxable earnings. As long as the current law remains in force, the donee or beneficiary of a lifetime gift (whether an individual or an irrevocable trust, such as an SLAT or Dynasty trust will inherit the property. The donor’s tax base in the asset offered without deemed recognition of the capital gain.
Regardless of future changes in tax legislation, the donation of assets will now escape the triggering of any taxable gain on the transfer. Clients should consider creating an irrevocable trust as the beneficiary of a taxable gift (or donating assets to an existing irrevocable trust); this not only protects and manages the assets, but also ensures that the base is transferred to the trust and that no capital gain is realized at the time of the transfer.
© 1998-2021 Wiggin and Dana LLPRevue nationale de droit, volume XI, number 237