USA – CONNECTICUT Trends and Developments Contributed by: William Kambas, Lawton Leung and Samantha Kopf, Withers
Withers 157 Church Street
New Haven Connecticut 06510 USA
Tel: +1 203 302 4100; Fax: +1 203 869 0558;
Email: inquiries.gw@withers.us.com Web: www.withersworldwide.com
Connecticut’s Evolving Landscape for Estate and Trust Planning For private client estate and tax planning, Connecticut has become a more trust-friendly jurisdiction. Once viewed primarily as a high-tax state with limited plan- ning flexibility, Connecticut has enacted a series of statutory reforms that now allow grantors to create long-term trusts with significant structural flexibility. Under current Connecticut law, grantors can design trusts that can last many generations and that per- mit the involvement of various fiduciaries beyond a single, traditional trustee. These developments place Connecticut firmly within the group of states offering modern trust-planning tools suitable for complex fam- ily, investment and governance objectives. These favourable trust-law developments, howev- er, must be understood within the broader context of Connecticut’s tax regime. Connecticut remains one of the few states that imposes a separate state estate tax and is the only state with a standalone gift tax. Estates exceeding the applicable exemption are subject to a flat 12% tax, with the total estate and gift tax liability capped at USD15 million. In addition, Connecticut courts and the Department of Revenue Services continue to apply rigorous scrutiny to resi- dency and domicile determinations, emphasising substance over form. This enforcement posture was most recently illustrated by Leslie B. Daniels, Execu- tor of the Estate of Jack Andersen v Commissioner of Revenue Services (2024), where the court reaf- firmed that administrative steps alone are insufficient to establish a change of domicile in the absence of
clear evidence of where a decedent actually lived and centred their life. As a result, effective planning in Con- necticut requires careful co-ordination of favourable trust statutes with ongoing estate, gift, income tax and residency considerations. The Connecticut Uniform Trust Code and Uniform Directed Trust Act A major inflection point in Connecticut trust law occurred with the adoption of the Connecticut Uniform Trust Code, which has been in effect since 1 January 2020. For the first time, Connecticut implemented a comprehensive statutory framework governing testa- mentary trusts, revocable trusts, irrevocable trusts, charitable trusts and private trusts. Prior to this enact- ment, Connecticut trust law was governed largely by a combination of common law principles and piecemeal statutes. The Uniform Trust Code introduced clarity, consistency and predictability by providing default rules governing trust administration, fiduciary duties and beneficiary rights. Although the Uniform Trust Code permits significant flexibility through trust drafting, Section 45a-499e of the Connecticut General Statutes establishes that, unless modified by the terms of a trust instrument, the Code governs “the duties and powers of a trustee, relations among trustees and the rights and interests of a beneficiary.” This statutory framework has enhanced Connecticut’s appeal by providing a modern baseline that trustees, beneficiaries and courts can rely upon, while still preserving the grantor’s ability to tailor the trust’s terms to specific family or business objectives.
243 CHAMBERS.COM
Powered by FlippingBook