USA – CONNECTICUT Law and Practice Contributed by: William Kambas, Lawton Leung and Samantha Kopf, Withers
gifts made during life and to transfers at death. The lifetime exemption is tied to the federal exemption – for 2026, that is USD15 million per individual. Con- necticut gift tax on lifetime transfers is not due unless an individual’s cumulative taxable gifts exceed the lifetime exemption. Once the lifetime exemption is exceeded, Connecticut imposes a flat 12% tax on the portion of the lifetime gifts that exceed the exemption. Even if no tax is due, Connecticut generally requires a state gift tax return (Form CT-706/709) to be filed if an individual makes a taxable gift during the year that is above the annual federal exclusion amount (in 2026, USD19,000 per donor per donee). Gifts that qualify for the federal exclusion (tuition, medical expenses, annual exclusion gifts, spousal gifts) are also excluded from Connecticut gift tax. Gifts to a non-US citizen spouse do not qualify for the mari- tal deduction; however, the first USD190,000 of gifts made to a spouse who is not a US citizen is excluded from the Connecticut total amount of gifts. 5.2 Testamentary Dispositions Connecticut does not have an inheritance tax, mean- ing that Connecticut does not impose a tax on the beneficiary based on what they receive after some- one’s death. Connecticut’s estate tax applies to a Connecticut tax- able estate that exceeds the state estate tax exemp- tion amount. Currently, the Connecticut estate tax exemption amount is the same as the federal estate tax exemption amount, which is USD15 million. A resident estate (if the decedent was domiciled in Connecticut) is taxed on all property, worldwide. A non-resident estate is taxed only on real property and tangible personal property located in Connecticut. If the taxable estate exceeds the federal basic exclu- sion amount, the estate must file a Form CT-706/709 and pay tax at a flat rate of 12% of the excess over the federal basic exclusion amount. While Connecticut does not impose a separate inher- itance tax, basis in inherited property is determined under the federal income tax rules. Accordingly, when
property is acquired from a decedent at death, the recipient’s tax basis in the property is generally the fair market value of the property at the decedent’s date of death. Notable Local Variations Connecticut does not recognise estate tax portabil- ity, meaning that a married individual cannot trans- fer unused Connecticut exemption from a deceased spouse. Accordingly, in Connecticut, a married couple may use lifetime gifts or bypass trusts to capture both spouses’ exemptions prior to the death of the second spouse, In Connecticut, given the state gift tax, annual exclu- sion gifting is a basic and foundational strategy. Every individual may make a gift of up to USD19,000 to any other individual. Gifts within the annual exclusion do not trigger Connecticut gift tax and do not reduce the Connecticut lifetime exemption amount. No state gift tax return is required. Individuals who own what will become probate prop- erty (property that is owned by an individual and that does not name a beneficiary) at death regularly fund revocable trusts during lifetime. Assets without benefi- ciary designations that are owned in a revocable trust, as opposed to by an individual, are still subject to a statutory probate fee, but will pass outside of probate. Assets that pass outside of probate are not subject to ongoing court supervision. A revocable trust also provides privacy, as a will becomes public when filed with the probate court, but a revocable trust does not. Another way to avoid probate is to name beneficiaries where permissible, such as with respect to life insur- ance policies, retirement accounts and transfer-on- death or payable-on-death accounts. Under Section 14-16 of the Connecticut General Statutes, a vehicle owner may designate a beneficiary to assume owner- ship of the vehicle upon the death of the initial owner, by writing on the vehicle registration. Unlike certain 6. Lifetime Succession Planning Mechanisms 6.1 Common Planning Techniques
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