USA – CONNECTICUT Law and Practice Contributed by: William Kambas, Lawton Leung and Samantha Kopf, Withers
(Conn. Gen. Stat. §§ 31‑70 to 31‑76k), may influence incentive structures, retention plans and transitional management arrangements. 9. Trusts, Foundations and Related Entities 9.1 Choice of Planning Vehicle Connecticut law allows for a wide range of trusts and planning vehicles for both residents and non-resi- dents, supported by the recently adopted Connecti- cut Uniform Trust Code (CUTC), which was codified in Chapter 802c of the Connecticut General Statutes and came into effect on 1 January 2020. The CUTC governs the creation, administration and enforcement of revocable and irrevocable trusts. Lifetime trusts and testamentary trusts may be created. Testamen- tary trusts can be created through a will but would be subject to probate court jurisdiction for ongoing supervision. Connecticut levies both a state estate tax and the country’s only state-level gift tax, which function in tandem with the federal transfer tax regime. The state’s estate and gift tax exemptions mirror the fed- eral exemption, set at USD15 million per individual in 2026. Revocable living trusts are widely used by Connecti- cut residents for probate avoidance, incapacity plan- ning and administrative efficiency. Because a settlor may amend or revoke the trust during life, the trust remains a flexible estate planning tool, and is particu- larly useful for individuals with multi-state assets and a need for estate tax planning. Irrevocable trusts – including qualified personal resi- dence trusts, grantor annuity trusts, life insurance trusts and other gifting trusts – are employed by resi- dents and non-residents for tax planning, asset pro- tection and long-term wealth transfer. For charitable and estate planning, residents and non-residents may create charitable trusts (intending to qualify as a non- profit organisation, perhaps), charitable lead trusts or charitable remainder trusts.
Connecticut law enforces spendthrift clauses that can shield trust assets from creditor claims. Connecti- cut also has an 800-year perpetuity period, which is attractive and helpful for dynastic and generational planning. Beyond trusts, residents and non-residents can also incorporate a Connecticut non-stock corporation to qualify it as a public charity or private foundation under Section 501 (c)(3) of the Internal Revenue Code. This allows for ongoing charitable, income tax and estate tax planning. 9.2 Recent Developments Affecting Planning Vehicles Connecticut expressly authorises directed trusts under the Connecticut Uniform Directed Trust Act (Conn. Gen. Stat. § 45a-500b). This structure is desir- able since it enhances flexibility and control, allow- ing a settlor to divide fiduciary responsibilities among investment advisers, distribution committees and administrative trustees. It may be ideal for holding unique or illiquid assets. Connecticut enacted the Connecticut Qualified Dis- positions in Trust Act, codified in Conn. Gen. Stat. §§ 45a-487j through 45a-487r, which authorises certain types of irrevocable self-settled trusts, often referred to as “qualified disposition trusts”. Such trusts must have a qualified Connecticut trustee, include a spend- thrift clause, and choose Connecticut law and allow a grantor to transfer assets, retain beneficiary status and shield assets from creditor claims. In effect since 1 January 2025, the Connecticut Uni- form Trust Decanting Act, codified in Conn. Gen. Stat. §§ 54a-545b through 45a-545cc, allows trustees of most irrevocable trusts to distribute assets into a new trust with modified terms without court approval. It requires the trustee to have discretionary distribution power and act in accordance with the trustee’s fiduci- ary duties. The statutory ability to “decant” provides flexibility to improve trust terms, change administra- tive provisions or alter beneficiary interests, except for charitable beneficiaries.
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