Connecticut Estate Planning Report : Connecticut Estate Planning Lawyer & Attorney : John O'Brien : CT Trust Counsel Law Firm : Wills, Trusts & Probate Litigation

A further update to Connecticut's attempt to enact a Pet Trust Statute.  The Bill that was voted favorably out of the Judiciary Committee, Committee Bill No. 650 and the Bill that is now to be presented to the Senate for action, File No. 707.

In large measure, the two Bills are similar.  There is one significant difference from the perspective of a client that wants to establish such a trust -- any trust must be approved by the Probate Court.  Apparently the Legislature sees this as an opportunity to generate revenue for the Probate Court because the Probate Courts will charge a fee of between $50-$750 to review the trust.  This change creates all kinds of logistical problems for the implementation of these type of trusts, albeit ones that can be overcome, but certainly ones that are better avoided.  I am actively involved with seeing this proposed Legislation through this Session and presently involved with trying to see if there can be any movement at the very least on the language that includes the necessity for Probate Court review.  Help!!  The Bill is not yet on the Senate Agenda, so there is still time. 

I think the opportunity is now for Connecticut to adopt this Legislation and if it means we must accept the language, then so be it but the push is on.  Over the past two years, I've had to disappoint four clients because Connecticut did not have a Pet Trust Statute.  The time is now, let's get it done.

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Clients frequently have amassed a wonderful and valuable art and antique collection during their lifetime.  During the planning process, these assets must be carefully looked at and not simply considered regular personal property to be devised by Will or otherwise at the time the client passes on.  Art and antiques are appreciating assets, and as with any appreciating asset, the goal of a well created estate plan is to remove the appreciating asset from the estate.  The earlier the Hassam painting, the Queen Anne high chest of drawers and the Chippendale chest of drawers are removed from the estate the better.  It helps with the potential estate tax and allows the beneficiaries to enjoy the future appreciation without concern to tax implications.  And while one must always look at gift tax implications, as the Low Art Prices Mean High Time to Make Gifts article from the Wall Street Journal points out, there is no better time than now to pass on your treasure because of present market conditions.

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Connecticut does not impose an estate tax on estates valued under $2,000,000.  Thus, there is a zero tax due on estates valued at $2,000,000 or less.  However, one dollar over the exemption triggers a significant tax.  This is the infamous Connecticut Estate Tax Cliff.  An estate worth $2,000,001 will trigger a tax of $101,700.  Yes, that's $0 to $101,700 in the flash of one dollar.

Certain members of The Connecticut Legislature have attempted to eliminate this problem and have, to date, unfortunately failed.  And frankly, in the present economic climate, it is unlikely that such a measure could be passed. So counting on the Legislature does not make for good present planning.  Don't count on the Legislature, rather look to employ some of the following strategies.

(1)  Make gifts during your lifetime to reduce your estate at or below the $2,000,000;

(2)  Incorporating charitable bequests in planning during life in effect having anything over $2,000,000 paid to a charity or charities; and

(3)  Post-Death Planning can include reducing the taxable estate by legitimately increasing deductions.

These are just a few of the ways the problem is addressed.  Although, it must be addressed in your estate plan.

Those of us thinking that we already have a good plan in place really should have a check-up this year.  Until this year, the Federal exemption and the Connecticut exemption were the same -- they were coupled.  That's not the case now with the Federal exemption at $3,500,000 and the Connecticut exemption presently, and for the foreseeable future, at $2,000,000.  Many plans, with marital planning, are premised on this coupling and should be changed to properly and effectively account for the new difference.

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I recently had a conversation with a colleague who has established what he calls a Gift HSA.  His website is found at http://www.theoriginalgifthsa.com. The use of a Health Savings Account ("HSA") has increased over the years. 

Just as a brief overview, a HSA is established and presently can be funded up to $3,000 in 2009 for individuals and up to $5,950 for families.  Additionally, a high deductible health plan is purchased.  The owner of the HSA gets a tax saving on the contribution and tax-free distribution when funds are used for qualified medical expenses.  The money grows tax-free in the account and to the extent it is unused, the money can be left to a beneficiary by designation.  Sounds and works much like the ever popular IRA.  

The whole concept behind the Gift HSA is that you set up the Health Savings Account for a loved one, fund it annually and pay the annual premium on the high deductible health plan, using your annual exclusion gifting (currently $13,000 for individuals and $26,000 for married couples). 

What a great gift to the graduating loved one soon to be off your health insurance.  You give them the comfort of having health insurance while also potentially providing tax-free growth.  It's a great ongoing gift for your upcoming college graduate.

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