Changes to estate tax laws can significantly affect how families protect assets for loved ones with disabilities. With upcoming 2025 changes, understanding the potential impact on Special Needs Trusts (SNTs) is important for Connecticut residents.
What are Special Needs Trusts?
A Special Needs Trust allows individuals to set aside funds for a loved one with disabilities without jeopardizing eligibility for government assistance programs like Medicaid or Supplemental Security Income (SSI). These trusts ensure beneficiaries can access essential resources for their care while retaining access to public benefits.
2025 estate tax updates explained
In 2025, the federal estate tax exemption is set to decrease from its current level of $12.92 million to approximately $5 million (adjusted for inflation). This change could expose more estates to taxation, making it essential for families to reassess their estate plans. Connecticut, which imposes its own estate tax with an exemption limit of $9.1 million in 2025, will also be affected by the federal adjustments.
How SNTs could be impacted
Special Needs Trusts protect assets for beneficiaries with disabilities, but the reduced estate tax exemption could mean that families may owe more in taxes if their estates exceed the new limits. This could make it harder for grantors to fully fund SNTs without incurring additional costs.
Planning strategies to consider
Families should review their estate plans with a focus on minimizing tax burdens while ensuring adequate funding for SNTs. Options may include revising existing trusts, utilizing lifetime gift exemptions, or creating irrevocable trusts to shield assets from estate taxes. These approaches can provide greater financial security for beneficiaries.
Proactive adjustments today can help preserve essential resources for loved ones with disabilities. Families should explore their options to protect their legacies while complying with the upcoming changes.