DRS: TSSN-32, Connecticut Inheritance Tax

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

25 Sigourney Street
Hartford CT 06106-5032
 
 
 
 
 
 

 
 

Important: Succession Tax was eliminated effective for estates of decedents dying on or after January 1, 2005.  For Decedents dying or gifts made on or after January 1, 2005, visit the Estate and Gift Tax webpage

TSSN-32

Connecticut's Inheritance Tax
 

 
This pamphlet is intended only as an introduction to the most basic concepts of the State's inheritance tax.

Q. What is the inheritance tax?

A. It is a levy imposed on the transfer of a deceased person's property. The most common method of transfer is by a will. When someone dies without a will, i.e., intestate, state law determines how property is distributed.

Q. Am I liable for inheritance tax if I transfer my property prior to death?

A. Possibly. Transfers made within three years prior to death are presumed to be in contemplation of death, and taxable. The transfer will not be taxed if it can be shown that the transfer was not made in contemplation of death.

Also taxable are transfers prior to death with some form of beneficial interest retained by the transferor. An example would be the transfer of the title to one's home to a child, with the transferor continuing to live in the home.

Q. Is there a tax on jointly owned properties?

A. Yes. The tax is based on the number of co-owners. If there are two owners, then 50 percent of the property is taxable. One third of the property is taxable if there are three owners. The entire property is taxable if the transferor retains a beneficial interest in the entire property until his or her death.

Q. Are transfers by trust taxable?

A. Yes, if the transferor can revoke the trust or if the transferor retains a beneficial interest in an irrevocable trust. Irrevocable trusts are also taxable if the transferor based the termination of the trust on his or her life.

Q. What kinds of property are taxable?

A. State law recognizes three types of property for purposes of this tax: Real property, such as a house; tangible personal property, such as an automobile, and intangible personal property, such as stocks, bonds and bank accounts.

Liability for tax on the various types of property depends on whether one is a state resident.

Q. Does that mean the inheritance tax also applies to non-Connecticut residents?

A. Yes. The real property and tangible personal property of non-residents are taxable if the property is situated in Connecticut. All three classes of property are taxable if the deceased was a Connecticut resident except real property and tangible personal property located outside Connecticut.

Q. I'm retired and I spend only part of the year in Connecticut. Am I a state resident?

A. One's residence for tax purposes is at his or her principal place of abode. If someone resides for substantial periods each year in homes maintained in two or more states, the contesting states will usually work out a compromise so that the estate is subject to only one tax.

Q. Are transfers to religious organizations exempt?

A. Yes. So are transfers to charitable, educational, literary, scientific and historical institutions. Farmland transferred to certain relatives who plan to use it in farming may be subject to a lower rate of taxation.

Q. What about benefits from a federally approved pension plan?
(The overwhelming majority of pension plans are federally approved.)

A. The benefits are taxable in proportion to the decedent's contribution of the pension plan. A non-contributory approved plan is not taxable.

Q. Are there any deductions that will reduce the amount of tax due?

A. Yes, for such things as debts, claims against an estate, unpaid taxes and expenses of administering the estate.

Q. Is insurance taxable?

A. There is no tax on life, accident or war risk insurance. An annuity is subject to this tax.

Q. What is the tax rate?

A. It varies depending upon to whom property is transferred and on the size of the estate.

Q. What would be the tax on my estate if my wife is the sole beneficiary?

A. If your death was on or after July 1, 1988, there is no state tax on transfers to your spouse regardless of the size of the estate.

Q. Suppose my estate is $15,000 and I name my two sisters as beneficiaries. What tax is due?

A. The $6,000 exemption as shown in Class B of the tax rate chart applies to the entire class of beneficiaries, not to each beneficiary. As a result, only $6,000 of your estate is exempt from taxation. The balance is taxable.

In this case, the tax would be computed in the following manner:

Base amount: $ 0
5.72 percent of $9,000 514.80
Tax due 514.80

Q. Must a return be filed if there is no tax due?

A. Yes. If the value of the estate does not exceed the exemption for the relevant class of beneficiaries, use Form S-2, a one-sheet form. Otherwise, use Form S-1. File the return in duplicate in the probate court having jurisdiction.

Q. When is payment of the tax due?

A. Technically, the day the deceased died. However, interest, at a rate of 15 percent per year, is not charged until six months after death.

Q. Do I pay the tax due to the probate court?

A. No. The tax should be mailed or brought to the Department of Revenue Services at 25 Sigourney Street, Hartford, CT 06106.

Q. Must I pay both the state and federal inheritance tax?

A. Not necessarily. Only very large estates are subject to the federal tax. Federal law grants a $600,000 exemption to all estates and there is no federal tax for a transfer to a spouse. The federal rates are substantial once the taxable area is reached.

You can also write for information to: Taxpayer Service Division, Department of Revenue Services, 25 Sigourney Street, Hartford, CT 06106

 

PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.

FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.

Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Web home page at http://www.ct.gov/drs. Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.


TSSN-32 (Rev. 10/90)