Hartford Business Journal

16 HARTFORDBUSINESS.COM | MARCH 10, 2025 FOCUS | Tax Planning & Business Succession James Zahansky, principal, managing partner and chief strategist for WHZ Strategic Wealth Advisors, says the Trump tax cuts were the biggest change to the federal tax code since the 1970s. CONTRIBUTED PHOTO Sunset Watch With Trump tax cuts set to expire, tax pros tell businesses not to wait to develop a succession plan 2025 unless it's extended." Vincent A. Liberti Jr., a partner with the Connecti- cut-based law firm Halloran Sage LLP, said that if the TCJA is not extended, the "exemption is expected to be around $7 million per person." When a business owner dies, Liberti said, the exemption is applied to the gross taxable estate — "with adjustments for taxable gifts during his or her life." Zahansky said the tax is based on the valuations of privately held compa- nies, whether small, medium or large. "The transfer of that wealth to the next generation is usually the largest part of anyone's estate," he said. "So, if they've set up a succession that is family-based, there's only so much you can pass along based on federal and state limits." State taxes In addition to the federal tax, Connecticut has an estate tax as well, set at a flat 12% rate. According to the Tax Foundation, Connecticut is one of just 12 states with an estate tax, and the only one that has linked its exemption threshold to the federal threshold. "If the federal exemption rolls back, the Connecticut exemption will roll back too," Zeger said. Among states with an estate tax, Connecticut's exemption threshold is the highest, but its tax rate is not. Vermont, for example, has a $5 By David Krechevsky davidk@hartfordbusiness.com T here are many reasons for a business owner to develop a succession plan. It can ensure continuity and minimize disruptions, especially in the face of an unexpected death. It also can help prepare employees for future leadership roles. But attorney Sahri Zeger, a prin- cipal and leader of the trusts and estates group with accounting and advi- sory firm CohnReznick, which has offices in Hartford and Stam- ford, tells her clients to think of it in a very personal way. "I tell people a basic estate plan is effectively a 'love letter' to your family, because you're sparing them a lot of trouble," Zeger says. "It's more sophisticated in terms of tax planning, succession, charitable, philanthropy, that kind of stuff," she continued. "But the basic estate plan, if you don't want to do anything else, at least do that for the people you love." A succession plan may be even more critical in 2025, though, given the uncertainty surrounding potential changes at the federal and state levels that could drastically alter estate tax exemption thresholds. Trump tax cuts At the federal level, business planners and tax professionals are keeping a close eye on whether tax cuts approved during the first Trump administration will be extended before they expire at the end of the year. The Tax Cut and Jobs Act (TCJA) was approved by Congress in 2017, and signed into law by President Donald Trump in January 2018, during his first term. "It was the biggest change to the tax code since the '70s," said James Zahansky, principal, managing partner and chief strategist for WHZ Strategic Wealth Advisors, which has offices in Pomfret and Tolland. The TCJA nearly doubled the federal lifetime estate and gift tax exemption. For 2025, the exemption is $13.99 million per person and $27.98 million for a married couple. Any assets above the exemption are taxed at the federal rate of 40%. Back in 2000, Zeger said, the life- time estate and gift tax exemption for a single person was $675,000. "It really had not increased for decades," she said. "The (George W.) Bush administration came in and started slowly stepping it up. We had another tax law change that increased the exemption to $5 million per person, and that was indexed for inflation." Then came the TCJA, which not only doubled the exemption, but continues to increase it annually based on inflation, Zeger said. "In 2025 we now have just under $14 million per person in lifetime exemption," she said. "So, you can give away almost $14 million before you incur a single dollar of federal estate tax. That increased exemption is scheduled to sunset at the end of Sahri Zeger Vincent A. Liberti

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