Publications
Increases in Federal Estate and Gift Tax Exempt Amount
The Taxpayer Relief Act of 1997 (“TRA ’97”) mandated that the amount that individuals can pass to their heirs free of the federal estate and gift tax be increased over a nine year period. At the time TRA ’97 passed, the applicable exemption amount (which is a cumulative total of all taxable transfers made during life or at death) was $600,000. As shown in the chart below, by 2006, the applicable exemption amount will rise to $1,000,000.
| Years | Applicable Exemption Amount |
| 2000 – 2001 | $ 675,000 |
| 2002 – 2003 | $ 700,000 |
| 2004 | $ 850,000 |
| 2005 | $ 950,000 |
| 2006 | $1,000,000 |
Connecticut’s new Principal and Income Act took effect on January 1, 2000, and applies to all trusts and estates in existence as of that date. In general, this new Act allows a trustee to adjust returns between income and principal if necessary to impartially balance the interests of current income beneficiaries and ultimate remainder interest holders. The power to adjust returns is particularly important in light of modern portfolio theory with its emphasis on diversification of investments and the recent market trends favoring long-term growth in principal at the expense of current dividends and interest. If you would like more information about how this Act may affect you, please contact Leonard Leader at 203-363-7602.