Connecticut estate and gift tax in 2026: what families should review this year
By Eleanor Whitmore, Managing Partner
Connecticut's estate and gift tax catches families by surprise more often than any other part of estate planning. Because the state exemption now tracks the federal basic exclusion amount, many residents assume the tax no longer affects them. For most households that is true. For business owners, families with appreciated real estate, and anyone considering large lifetime gifts, the rules still reward careful planning.
How the Connecticut tax works
Connecticut taxes the combined value of taxable gifts made during life and the estate at death above the state exemption. The top rate is 12 percent, and the total Connecticut estate and gift tax is capped at a maximum amount set by statute. Unlike most states, Connecticut also requires a gift tax return for taxable gifts made during life.
Every Connecticut estate, even one well below the exemption, files a return with the probate court. The probate court fee itself is calculated on the estate's value, which surprises many executors.
Why federal changes matter locally
Because Connecticut's exemption follows the federal figure, any change in federal law flows through to the state. Families whose plans were drafted around older, lower exemptions may have formula clauses in their wills or trusts that now allocate assets in ways they never intended, such as funding a credit shelter trust with nearly the entire estate and leaving little outright to a surviving spouse.
Old formula clauses are the most common problem we find in plans drafted before 2018.
Who should review their plan this year
We recommend a review if any of the following apply to you:
- Your will or trust was signed before 2018 and uses formula funding language.
- You own a closely held business or a stake in a family LLC.
- You hold real estate in another state, which may create a second probate or estate tax filing.
- You have made, or plan to make, gifts above the annual exclusion amount.
- You have moved to or from Connecticut in the past five years.
Lifetime gifts and the Connecticut gift tax
Annual exclusion gifts remain free of federal and Connecticut gift tax and do not require a return. Larger gifts use part of your lifetime exemption, and Connecticut requires its own return. Gifts of business interests can often be valued with discounts for lack of control and marketability, which means more value moves out of the estate for the same use of exemption.
Timing matters. Gifting appreciated assets gives up the step-up in basis that heirs would receive at death, so we coordinate every significant gift with your CPA.
Domicile for snowbirds
Many Connecticut retirees spend winters in Florida, which has no estate tax. Changing domicile takes more than a driver's license. Connecticut looks at where you vote, where your doctors and advisors are, where you keep valuables and where you spend holidays. If you intend to change domicile, document it thoroughly and update your estate plan under the new state's law.
Next steps
Gather your current documents, a list of assets with approximate values, and beneficiary designations for retirement accounts and life insurance. A 45-minute review is usually enough to tell whether your plan still fits, and many plans need only a short amendment rather than a complete rewrite.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. Laws change; talk to a lawyer about your specific situation. Learn more about our estate planning practice.