USA – CONNECTICUT Trends and Developments Contributed by: William Kambas, Lawton Leung and Samantha Kopf, Withers
Trust “decanting” The most recent major statutory addition to Con- necticut trust law is the adoption of the Uniform Trust Decanting Act, which has been in effect since 1 Janu- ary 2025. The Decanting Act permits a trustee of a trust that is not created under a will to transfer trust assets from an existing trust into a new trust without court approval or beneficiary consent, provided statu- tory requirements are satisfied and the perpetuities period of the original trust is respected. Decanting offers trustees and advisers a powerful mechanism to modernise older trusts, respond to changes in tax law, refine administrative provisions, or address evolv- ing family circumstances without the delay, expense, or uncertainty associated with judicial modification proceedings. Electronic signatures Connecticut does not permit electronic signing of wills or other core estate‑planning documents. A valid Connecticut will must be in writing and signed in the physical presence of two witnesses, meaning electronic signatures and remote witnessing are not legally recognised. Although Connecticut has adopted the Uniform Electronic Transactions Act (UETA) under Connecticut General Statutes Section 1-266 et seq, which generally gives electronic signatures the same effect as handwritten ones, Connecticut explicitly exempts wills and testamentary trusts from electronic execution. Connecticut has legalised remote online notarisation (RON) for many documents, but the stat- ute specifically prohibits remote notarisation for wills, trusts, powers of attorney, and other key estate‑plan- ning instruments. This means documents requiring notarisation as part of an estate plan must still be executed with traditional, in‑person notarisation. While a Connecticut revocable or irrevocable trust is not required to be in writing to be valid (unless it con- tains real property, the statute of frauds requires a written, executed and notarised trust), an irrevocable trust should be in writing to expressly provide that the trust is irrevocable. A revocable or irrevocable trust does not need to be witnessed or notarised (unless it contains real property). However, it is common to have trust agreements signed by at least two disin- terested witnesses and to have the settlor’s and trus- tee’s signatures be notarised. If necessary, witnesses
can testify to the settlor’s capacity (and regarding any undue influence or fraud) and a notarised trust gives a presumption of validity. Cross-state considerations Beyond trust and estate law, Connecticut has also made notable changes affecting closely held busi- nesses and individuals earning income across state lines. Connecticut fundamentally restructured its Pass-Through Entity Tax (PTET) beginning in 2024. Once mandatory, the PTET is now elective on an annual, irrevocable basis. Partnerships and S corpo- rations must affirmatively choose each year whether to elect into the PTET regime, with outcomes varying depending on owner residency, income sourcing, and federal State and Local Tax deduction considerations. For many closely held businesses, this change has transformed PTET analysis from a one-time compli- ance exercise into an ongoing strategic decision that must be revisited annually. Connecticut has also responded to the growing prevalence of remote work and multi-state employ- ment arrangements. Connecticut enacted a targeted income tax credit for Connecticut residents who suc- cessfully obtain refunds from other states that taxed income earned while the taxpayer was physically working in Connecticut. Although the credit is narrow in scope, it reflects Connecticut’s increasing engage- ment with cross-border wage taxation and questions arising from “convenience of the employer” rules imposed by other jurisdictions. *** Taken together, these developments reflect a Con- necticut legal environment that has become signifi- cantly more sophisticated and flexible from a trust-law perspective, while remaining assertive with respect to tax enforcement. Connecticut offers the structural tools traditionally associated with leading trust juris- dictions, including directed trusts, decanting, extend- ed perpetuities and asset protection planning. At the same time, its estate tax, gift tax, residency rules and income tax regime require planning and ongoing attention to detail and contemporaneous documenta- tion supporting a bona fide rationale for planning with economic substance.
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