As the year comes to a close, Connecticut residents often look for smart financial moves that align with their estate planning goals. One of the most effective strategies is year-end gifting.
Gifting allows you to transfer wealth to loved ones during your lifetime, while also potentially reducing the taxable value of your estate. With both federal and Connecticut-specific tax rules to consider, understanding how gifting works can help you make the most of your exemption limits and avoid unnecessary taxes.
The 2025 Federal Gift Tax Exclusion
For 2025, the annual federal gift tax exclusion is $19,000 per recipient, according to the IRS. This means you can give up to $19,000 to as many individuals as you wish without triggering a gift tax or reducing your lifetime exemption.
Married couples can “split” gifts and together give $38,000 per recipient in 2025. Anything above the annual exclusion counts against your lifetime federal gift and estate tax exemption, which is $13.99 million per individual in 2025 (source).
While these limits are generous now, they may change after 2025 if federal exemption levels are reduced. That makes year-end gifting an especially valuable tool before any potential adjustments.
Connecticut’s Gift and Estate Tax Rules
Connecticut is the only state in the nation that currently imposes its own gift tax in addition to an estate tax. Both are unified under a single exemption, which is also $13.99 million per person in 2025 (Connecticut Department of Revenue Services).
Gifts above the annual federal exclusion count toward that state exemption. Connecticut applies a flat 12 percent tax on the value of taxable gifts or estates that exceed the exemption amount. Importantly, Connecticut does not offer portability between spouses, so each spouse must use their own exemption individually (Fuchs Financial, 2025).
If you make taxable gifts during your lifetime, you may still be required to file a Connecticut gift tax return (Form CT-706/709) even if no tax is ultimately due.
How Strategic Gifting Reduces Future Taxes
By making gifts during your lifetime, you not only share your wealth but also remove future appreciation of those assets from your taxable estate. This approach can significantly reduce estate tax exposure later.
Some effective strategies include:
• Making annual gifts to children or grandchildren before December 31 to maximize this year’s exclusion.
• Using gift-splitting as a couple to double your impact.
• Gifting appreciated assets (such as stock) rather than cash to move potential growth out of your estate.
• Funding an irrevocable trust for future generations to preserve control while reducing taxable value.
Thoughtful planning with your attorney ensures these gifts align with both federal and Connecticut requirements.
Practical Considerations Before Making a Gift
Before finalizing any large gift, consider the following:
- Document everything. Record each gift’s value, date, and recipient for accurate reporting to both the IRS and Connecticut DRS.
• Coordinate with your estate plan. Ensure your gifts complement your will or trust structure.
• Consult professionals. A Connecticut estate planning attorney and a tax advisor can help you evaluate long-term effects on your estate and beneficiaries.
• Act early. Gifts count for the calendar year only if completed before December 31.
Why Legal Guidance Matters
Gifting can be one of the most powerful tools in your estate plan—but without professional guidance, it can also create unintended tax consequences. Understanding both the federal and Connecticut rules ensures you give wisely and preserve your legacy effectively.
At the Law Offices of Charles L. Kurmay, we help clients across Connecticut design estate plans that maximize tax benefits, protect family wealth, and honor long-term goals.
Take the Next Step
If you’re considering year-end gifts or want to review how gifting fits into your broader estate plan, we can help.
Call the Law Offices of Charles L. Kurmay at (203) 380-1743 to schedule a confidential consultation and start planning strategically for the year ahead.
