Hartford Business Journal

HARTFORDBUSINESS.COM | JUNE 10, 2024 25 FOCUS | WEALTH MANAGEMENT At NBT Bank, our goal is to help you reach yours. Our relationship managers provide the expert guidance and custom solutions it takes to help grow your business. Our local commitment builds strong, long-lasting partnerships that maximize your potential for success. Fraud Protection & Secure Banking Solutions Local Perspective & Decision Making Capital and Treasury Management Solutions Let our experienced Connecticut commercial banking team create real opportunity for your business. Dante Fazzina, Maureen Kennedy, Steven Brandfield, Deb Oakliff, Steven Angeletti, Andreas Kapetanopoulos, Kate VanValkenburg, Heather Piteo, Dale Stewart, Steven Essex Member FDIC nbtbank.com/ct More urgent planning In early May, New Haven-based law firm Wiggin and Dana announced that it was absorbing Ellis Law Group, a boutique trusts and estates firm with four attorneys based in Boca Raton, Florida. Ellis Law Group specialized in setting up trusts and planning estates, as well as asset and wealth protection, business succession plan- ning and general business counsel. Wiggin and Dana said its invest- ment in Florida was driven by the upcoming sunset of the $13.61 million per-person federal estate tax exemption. On Jan. 1, 2026, the exemption is set to drop to $5.6 million per-person. Connecticut's estate tax exemption is tied to the federal level, so as of Jan. 1, 2026, Connecticut's estate tax exemption will drop to $5.6 million as well. At the current level, an heir of a decedent may receive up to $13.61 million without paying the federal or state estate tax in Connecticut. However, as of Jan. 1, 2026, that will change. Typically, after credits are applied, the federal estate tax rate is about 40%, and Connecticut's estate tax rate is an additional 10%, said Heather Rhoades, chair of Stam- ford law firm Cummings & Lock- wood's private clients group. Notwithstanding potential congres- sional action to extend the $13.61 million federal exclusion, more Connecticut estates soon will be subject to both the federal and state estate taxes, which can devour roughly 50% of their value. Connecticut's estate and gift tax generated $218.35 million in revenue in 2022-23, according to a report from the Department of Revenue Services. That same year, there were 54 tax returns filed for estates worth $10 million to $15 million; 28 returns for estates worth $15 million to $25 million; and 28 returns for estates over $25 million, according to DRS. There are questions about whether Connecticut could decouple its estate tax exemp- tion from the federal level to help prevent wealthy families from potentially leaving. Gov. Ned Lamont's office didn't respond to a request for comment on whether there has been any consid- eration of the issue. But law firms are preparing for an influx of clients trying to minimize the potential tax impact. "Our high-net-worth clients are thinking more urgently about their estate planning ahead of the (Dec. 31,) 2025, tax sunset," said Seth Ellis, who founded Ellis Law Group in 1999 and is now a Wiggin and Dana partner in its Boca Raton office. The federal exemption nearly doubled to a historical high under the Tax Cuts and Jobs Act of 2017 — just two months after Connecticut tied its exemption to the federal threshold. The Tax Cuts and Jobs Act took effect in 2018. Prior to 2018, Connecticut's exemption stood at $2 million for nearly 15 years. Some experts have speculated that if a new presidential administration takes over in January 2025, it could extend the higher exemption level. Florida is among 33 states that do not have an estate tax, putting states like Connecticut, in the minority. Families with multiple homes must establish their primary residence in a state without an estate tax to avoid being subject to the Connecticut tax, Rhoades said. Generally, a household's "primary residence" is where they spend the majority of their time. For some, that could mean living in one home for six months and one day per year, and spending the rest of their time in one or more other homes. "The New England states have been pretty aggressive in auditing that type of change over time," Rhoades said. "So, clients do have to be careful that they actually intend to call Florida home when they change their domicile." Early mover Cummings & Lockwood was among the first law firms to notice Nutmeggers' predilection for Florida. Founded in Stamford in 1909, the firm opened its first Florida location in Naples in 1978. It now has three offices in Florida — two on the west coast and one on the east coast — with a total of 23 attorneys. Cummings & Lockwood has more than 200 attorneys overall and is considered one of the largest trusts and estates practices in the United States. It has six offices evenly spread between Connecticut and Florida. While the firm has clients across the U.S. and in 20 countries, one of its main focuses is migration from Connecticut to Florida. "The income tax, the estate tax, everything feels more burdensome for clients over time," Rhoades said. "And we see this increasing trend over time where clients are looking for other states. Florida is the primary one. There are other tax-friendly states as well, but I would say Florida is definitely the majority." Heather Rhoades Seth Ellis

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