Client Update September 2019

As we begin to enter the brisk days of fall, we wanted to provide you with a summary of recent estate and gift tax developments.  While many are aware of the Tax Cuts and Jobs Act (the “TCJA”) that was signed into law in December 2017, there have also been other significant developments that we want to highlight for you.



Temporary Increase in Personal Gift and Estate Tax Exemption

The TCJA temporarily doubled the personal gift and estate tax exemption amount from 2017 levels, beginning in 2018.  This increased exemption will be adjusted annually to account for inflation until January 1, 2026, when it is scheduled to sunset and return to 2017 levels as adjusted for inflation.  For 2019, the exemption amount is $11.4 million. 


As a result, fewer estates will be subject to the federal estate tax during this time period.  In addition, the TCJA continues to allow a surviving spouse to save a deceased spouse’s unused federal estate and gift tax exemption for use at the survivor’s later death, meaning that the personal exemption can be as much as $22.8 million for a surviving spouse. 


No “Clawback” on Gifts Made During Increased Exemption Period

One of the big questions arising after passage of the TCJA was how it would impact individuals who make gifts during the increased exemption period, if and when the exemption goes back down in 2026.  The IRS recently issued proposed regulations stating that there will be no “clawback” of gifts made during the increased exemption period after it expires.  As a result, gifts that were exempt from gift tax because of the increased exemption in the TCJA will not be taxed at a later date when the increased exemption sunsets.  This addresses the concerns of people who would like to make gifts now, but fear that it would subject their future estate to increased estate taxes if they die after 2025.  Although these regulations must still be finalized, they should provide relief to individuals who would like to take advantage of the increased exemption by making gifts now. 


Annual Gift Tax Exclusion Remains the Same in 2019

The annual gift tax exclusion, which is periodically adjusted for inflation, is $15,000 in 2019.  An individual may gift up to $15,000 per person (or $30,000 if married) this year without triggering a gift tax or using up a portion of his or her personal exemption.  Note that married couples who make joint gifts may still need to file a Gift Tax Return, even if no tax is due.



Increase in Connecticut Estate and Gift Tax Exemption for 2019

Connecticut also made changes to its estate and gift tax exemptions, introducing graduated increases beginning in 2018.  In 2019, the Connecticut estate and gift tax exemption is $3.6 million.  The change to Connecticut’s exemptions pre-dated the TCJA and there was uncertainty as to whether Connecticut would match the Federal exemption in effect in 2017 or the current increased Federal exemption.  That question has now been clarified in a favorable way and the Connecticut exemption is slated to match the Federal exemption in 2023, with gradual increases each year as follows:



Exemption Amount


$3.6 million


$5.1 million


$7.1 million


$9.1 million


Not over the Federal exclusion amount


Increase in Marginal Estate Tax Rates

In addition to increasing the exemption, Connecticut also adjusted the marginal tax rate.  Estate tax rates stay the same in 2019 for taxable estates over the exemption amount up to $5.1 million.  For estates over $5.1 million, the tax rate increased from 9% to 10%, incrementally increasing up to 12% for taxable estates over $10.1 million. 


New “Mansion Tax” To Take Effect in 2020

The new budget recently signed by Governor Ned Lamont includes an increase in the state conveyance tax on sales of houses in excess of $2.5 million beginning July 1, 2020.  Currently, the state conveyance tax is .75% on the first $800,000 of the sale price and 1.25% on any portion over $800,000.  The new “mansion tax” imposes an additional 1% tax on the portion over $2.5 million beginning July 1, 2020.  Sellers who remain Connecticut residents would be eligible for a credit on the increased conveyance tax, which can be taken on state income tax returns over a period of three years, beginning with the third year after the year of the sale.  A seller would need to remain in Connecticut for six years in order to fully recoup the “mansion tax.”


Estate Planning Changes

Connecticut made significant changes to its trust laws, which will go into effect on January 1, 2020.  This is in addition to the changes Connecticut made to other estate planning documents in recent years.  If we have not reviewed your estate plan with you in the past few years, please reach out to us to see if any changes are appropriate.



Increase in New York Estate Tax Exemption for 2019, but “Cliff” Remains

The New York estate tax exemption amount increased to $5.74 million for decedents dying in 2019.  However, estates exceeding the New York exemption by 5% or more ($6,027,000 in 2019) may still be subject to the New York estate tax “cliff” whereby the exemption is lost and the entire estate is subject to estate tax.  In addition, the requirement to add back to an estate gifts made during the three-year period preceding the decedent’s death was recently extended for decedents dying after January 15, 2019 and before January 1, 2026. 


Supplemental “Mansion Tax” For New York City Properties

New York has a statewide 1% “mansion tax” on sales of homes of $1 million or more.  However, effective July 1, 2019, sales of properties in New York City will also be subject to a supplemental mansion tax.  Beginning with sales of properties between $2 million and $3 million, there will be an additional .25% tax, resulting in a total mansion tax of 1.25%.  The tax gradually increases up to a total mansion tax of 3.9% for sales of properties of $25 million or more.


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It is important to note that the tax landscape is always shifting, so there is the possibility that changes to the TCJA could occur before 2026.  It is a good idea to periodically review your estate planning documents, but especially so in light of these recent changes to make sure that your documents maximize the available

The above material is not intended to promote, market or recommend any matter or transaction addressed above. It is provided for informational purposes only and does not constitute legal advice. This communication may be deemed advertising under applicable state laws.

Estate and Gift Tax Update January 2020


Happy New Year! Please let us share some recent estate planning developments to help you gain 2020 vision.



Increases to the Basic Exclusion Amount for 2020

The IRS recently announced the 2020 inflation adjustments for various tax items, including increases in the federal estate and gift tax exclusion. For 2020, the estate and gift tax basic exclusion amount is $11.58 million. This means that an individual can transfer up to $11.58 million during life or at death, free of federal estate and/or gift taxes. 


In addition, Connecticut and New York have also increased their basic exclusion amounts. For Connecticut, the estate and gift tax exclusion increases in 2020 from $3.6 million to $5.1 million, as part of recent legislation gradually increasing the Connecticut exemption to match federal levels. In New York, the basic exclusion amount increases in 2020 to $5.85 million


Annual Gift Tax Exclusion Remains the Same

The annual gift tax exclusion, which is periodically adjusted for inflation, will remain at $15,000 in 2020. An individual may gift up to $15,000 per person (or $30,000 if married) this year without using up any basic exclusion amount. Note that married couples who make joint gifts may still need to file a Gift Tax Return, even if no tax is due.


New Distribution Rules for Retirement Accounts

As part of the budget bill signed into law last month, the Setting Every Community Up for Retirement Enhancement Act (the “SECURE Act”), which took effect on January 1, 2020, made significant changes to the minimum distribution rules for IRAs and 401(k) accounts.


Elimination of Stretch IRAs

Perhaps the most significant impact on estate planning is the SECURE Act’s elimination of so-called “stretch” IRAs. The stretch IRA permitted children, grandchildren and other non-spouse beneficiaries to take minimum distributions from inherited retirement accounts over their lifetimes, based on their age and life expectancy. This typically allowed the beneficiaries to enjoy the tax-deferred treatment of the retirement accounts over a long period of time. 


The SECURE Act unfortunately eliminates this strategy for account owners dying after December 31, 2019. While the new law no longer imposes an annual required minimum distribution for beneficiaries of inherited retirement accounts, the entire account balance must be distributed to a non-spouse beneficiary within ten (10) years following the account owner’s death. For some, particularly younger beneficiaries, this could have a significant tax consequence. This 10-year rule applies to traditional IRAs and 401(k) accounts, as well as to Roth IRAs. 


There is an exception to the 10-year rule carved out for certain “eligible” designated beneficiaries. A surviving spouse can continue to take distributions over his or her life expectancy. In addition, minor children of the account owner, disabled and chronically ill beneficiaries, and beneficiaries less than ten (10) years younger than the account owner are not subject to the 10-year rule. However, in the case of minor children, the 10-year rule kicks in once the child reaches the age of majority. For other beneficiaries exempt from the 10-year rule, once they die, subsequent beneficiaries will still be subject to the rule.


Increase in the Age for Beginning Required Minimum Distributions

One welcome piece of news is the increase in the age at which a person needs to begin taking required minimum distributions from his or her retirement account. Previously, participants in a traditional retirement plan were required to begin withdrawing from their accounts when they reached 70 ½ years of age. Under the SECURE Act, the required minimum distribution age has been increased to 72 for those who were born after June 30, 1949. This increase in age is prospective and does not apply to anyone who was 70 ½ or older in 2019. If you were required to take a minimum distribution in 2019, then you must still take annual distributions under the old rules.


Elimination of Age Cap on Contributions to Traditional IRAs

Under the old rules, individuals with earned income were barred from contributing to traditional IRAs upon reaching age 70 ½. The SECURE Act eliminates the age cap and allows individuals to continue contributing to IRAs even after they turn 70 ½. If you haven’t been contributing to your IRA because you hit the age cap and are still earning income, you may want to restart contributions to it now.


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As this update shows, the tax landscape frequently changes, so it is important to periodically review your estate planning documents to make sure they continue to meet your goals. If you have any questions or would like to review your estate plan, please contact Mark Chioffi at (203) 973-5280 and This email address is being protected from spambots. You need JavaScript enabled to view it. or Aoife Cox Rinaldi at (203) 973-5288 and This email address is being protected from spambots. You need JavaScript enabled to view it.


We look forward to hearing from you.