New Jersey residents who bemoan their tax burdens may wish to spare a thought for those who live in nearby Connecticut. The state has seen thousands of residents pack up and leave in recent years as taxes have risen to bridge yawning budget gaps, and changes to the state's probate fees introduced on July 1 have made Connecticut the costliest state in the nation to die in.
The new fee structure eliminates the old $12,500 cap and doubles the probate fee on estates valued at $2 million or above to .05 percent. The new fees also apply retroactively to the estates of any individuals who died as of the beginning of 2015. The retroactive nature of the new fee structure surprised estate planning attorneys and led observers to predict an even greater exodus of the state's wealthiest residents.
While calls for a comment to the governor's office went unanswered, a representative of Connecticut's probate courts accepted that the measure was adopted to make up for a shortfall caused by the loss of funding from the state. The state budget had provided the probate courts with approximately one-third of their budget before cutting off funds. The new rules will require an estate valued at $2 million to pay a probate fee of $50,000. The maximum fee due under the previous probate fee structure was $12,500.
While New Jersey has not chosen to follow the lead of Connecticut, the retroactive nature of these fee increases are a telling reminder of how important it is to take care of estate planning issues in a timely manner. While many New Jersey residents may feel that these matters only concern the wealthy, they should bear in mind that the proceeds of life insurance policies are factored into the calculation of Connecticut's probate fees. Attorneys with estate planning experience could show New Jersey residents how the prudent use of trusts can reduce tax exposure and avoid probate, and they may also help to craft a succession strategy that could reduce the possibility of a probate dispute.