2009 Developments in Connecticut Estate and Probate Law

• Publication year: 2021
• Pages: 73

Connecticut Bar Journal Volume 84.

84 CBJ 73. 2009 DEVELOPMENTS IN CONNECTICUT ESTATE AND PROBATE LAW

Connecticut Bar Journal
Volume 84, No. 1, Pg. 73
June 2010

2009 DEVELOPMENTS IN CONNECTICUT ESTATE AND PROBATE LAW

By John R. Ivimey(fn*) and Jeffrey A. Cooper(fn**)

In this article, we provide a summary of recent developments impacting Connecticut estate planning and probate practice. In Part I, we discuss 2009 legislative developments. In Part II, we provide a survey of selected 2009 case law relevant to the field.

I. Legislation

In this part, we summarize a number of 2009 legislative developments of relevance to those practicing in the areas of estate planning and probate.

A. Pet trusts

Effective October 1, 2009, Connecticut law allows a person to create a testamentary or lifetime trust for the benefit of pets.(fn1) The trust can benefit one or more animals alive during the lifetime of the person.(fn2) The trust must terminate when the last surviving animal dies.(fn3)

Although the Act establishing pet trusts articulates a general rule that statutory provisions governing trust creation and administration also apply to pet trusts,(fn4) the legislature added several unique provisions to the Act in an effort to protect the intended nonhuman trust beneficiaries (who otherwise lack capacity and standing). Specifically, the Act requires the trust to designate both a trustee to manage the property for the benefit of the animal and a trust protector to act on the animal's behalf.(fn5) The trustee is required to annually submit an account to the trust protector.(fn6) The protector has the power to file a petition in the Superior Court, or the probate court with jurisdiction over the trust, to seek court action to enforce the terms of the trust, to remove or replace the trustee or to require the trustee to file an account.(fn7) In addition, if the trust protector suspects the trustee has engaged in self-dealing or fraud, he or she can ask the Attorney General to intervene.(fn8)

In addition, addressing public policy concerns that trusts for animals should not be funded with excessive amounts or facilitate lavish lifestyles for animals, the Act provides that upon application of the trustee or the trust protector, the Superior Court or the probate court has the power to order the distribution of any part of the trust it determines exceeds the amount required for its intended use.(fn9) The Act specifies the following order for the distribution of any such excess property: (1) to other beneficiaries pursuant to the terms of the trust; (2) to the remainder beneficiaries; (3) to the settlor, if living; (4) to the residuary beneficiaries under the settlor's will; or (5) the settlor's heirs at law.(fn10)

Finally, it is worth noting that the Act does not exempt pet trusts from Connecticut's rule against perpetuities.(fn11) The practical impact of this potential omission is that many pet trusts must terminate within 90 years of creation. While dog and cat owners will find this issue of little consequence, owners of pet tortoises will need to carefully consider the implications for their estate planning.(fn12)

B. Gift and Estate tax Changes

In 2009, the General Assembly amended General Statutes Section 12-391 to make significant changes in the Connecticut estate tax, and General Statutes Section 12-642 to make significant changes to the gift tax.(fn13) In most cases, the changes took effect January 1, 2010.(fn14) Table 1 illustrates the current estate and gift tax rate tables effective as of January 1. Following the table is a more detailed discussion of the applicable legislation as contained in Public Act 09-3 (June Special Session).

Table 1: Old and New Estate and Gift Taxes(fn15)

VALUE OF TAXABLE ESTATE OR GIFT	OLD TAX RATE Deaths on or before December 31, 2009 (Add cols. C and D)	NEW TAX RATE Deaths on or after January 1, 2010 (Add cols. E and F)
Col. A: Col. B:	Col. C: Col. D:	Col. E: Col. F:
Over But not over	Tax on Col. A Tax rate on excess Over Col. A	Tax on Col. A Tax rate on excess Over Col. A
0 $2,000,000	NO TAX	NO TAX
$2,000,000 2,100,000	5. 085% of the total over 0
2,100,000 2,600,000	$106,800 8. 0%
2,600,000 3,100,000	146,800 8. 8%
3,100,000 3,500,000	190,800 9. 6%
3,500,000 3,600,000	229,200 9. 6%	0 7. 2%
3,600,000 4,100,000	238,800 10. 4%	$7,200 7. 8%
4,100,000 5,100,000	290,800 11. 2%	46,200 8. 4%
5,100,000 6,100,000	402,800 12. 0%	130,200 9. 0%
6,100,000 7,100,000	522,800 12. 8%	220,200 9. 6%
7,100,000 8,100,000	650,800 13. 6%	316,200 10. 2%
8,100,000 9,100,000	786,800 14. 4%	418,200 10. 8%
9,100,000 10,100,000	930,800 15. 2%	526,200 11. 4%
Over $10,100,000	1,082,800 16. 0%	640,200 12. 0%

As illustrated by Table 1, Public Act 09-3 made several significant changes to Connecticut's estate and gift tax regime. The first major change is an increase in the state estate and gift tax exemption from $2 million per taxpayer to $ 3.5 million per taxpayer.(fn16) Accordingly, the state estate and gift tax regime should no longer impact taxpayers below this level of wealth. Taxpayers at or above this wealth level will still need to plan for Connecticut estate and gift taxes. The Act was intended to simplify the planning for these individuals insofar as the new $3.5 million state estate tax exemption equaled the $3.5 million federal estate tax exemption in effect for calendar year 2009.(fn17) Unfortunately, however, Congress did not take the legislative action required to keep the federal exemption at this $3.5 million level.(fn18)

Second, for decedents dying after December 31, 2009, the Act eliminated the much-maligned "cliff" which appeared in the prior rate tables.(fn19) Under prior law, a taxable estate of $2 million or less incurred no tax, while a taxable estate over $2 million incurred a tax on all of its assets, including the first $2 million. This structure produced a so-called "cliff" in which a $1 increase in the value of a taxable estate from $2,000,000 to $2,000,001 increased tax liability from $0 to $101,700. For decedents dying in 2010 and thereafter, the 2009 legislation eliminated the cliff by providing that estate tax applies solely to the portion of an estate's taxable value which exceeds the $3.5 million taxable threshold, rather than to the entire taxable estate.

Third, the Act reduced marginal tax rates on estates by 25% from previous levels.(fn20)

Finally, for deaths on or after July 1, 2009, the Act reduces the time an executor has to file an estate tax return from nine months after the date of death to six months after the date of death.(fn21) This change provides a one-year budgetary benefit for the state by accelerating an additional three months of estate tax revenue into the current fiscal year. However, we consider this legislative change a short-sighted one. The change unduly accelerates settlement of Connecticut estates by requiring all estates to appraise and value assets three months sooner than required under prior Connecticut law (and federal law). In addition, this change is particularly problematic for those estates considering making an election to valuate estate assets as of the "alternate valuation" date of six months after date of death.(fn22) Since the state estate tax return is now due on the alternate valuation date, it is impossible for estates to report those alternate values accurately on a timely return. The result will be a significant increase in the number of extension requests, estimated tax payments,and amended returns.(fn23) The state's one year revenue boon thus comes at the expense of creating a permanent administrative burden for decedents' estates and those who represent them. We do not consider this a wise trade-off.

C. Probate Court Reforms and Redistricting

In 2009, the General Assembly enacted Public Act 09-114, which made significant changes to the probate court system.(fn24) This brief summary focuses on those provisions likely to be of greatest immediate relevance to most practicing attorneys.

First, the Act established a probate redistricting...