By Rob Longsworth
Connecticut’s government continues to struggle with the economic, political, and social ramifications of the state’s growing fiscal deficit, and it is increasingly hard-pressed to plug the yawning revenue-expense chasm. In July, the budget deficit for the 2015-2016 fiscal year ending June 30 was estimated at $279 million. This pales in comparison to the current estimates for the 2016-2017 fiscal budget deficit, which are now pushing $1 billion—an eye-watering number by any measure. More worrisome than the number of these estimates’ commas is the incredibly steep year-over-year trend they represent.
One immediate consequence of this gap is the state legislature’s little publicized moves to impose materially higher probate filing fees on Connecticut decedents. These filing fees cover the administrative work involved in filing a state estate tax form, a process not affected by the size or complexity of an estate. The first change dates to July 2015, when the state legislature voted to alter the $12,500 probate filing cap to a formula calculated on the taxable size of an estate. Over night, the upper limit soared to $20 million—not a typo—and for several estates in the midst of probate this $12,500 fee metamorphosed into hundreds of thousands of dollars.
Those who were affected protested vociferously. In spite of the immediate and constant backlash from trust and estate attorneys and their clients, it took until July of this year for the legislature to reduce the probate fee cap to $40,000. While this new cap is magnitudes less than last year’s changes, it is a 220 percent increase over $12,500.
Perhaps of greater concern is what this behind-the-scenes meddling says about the state legislature’s persistent guiding philosophy for attempting to close the widening revenue-expense gulf. As more and more of Connecticut’s wealthiest residents flee for states with no or reduced income taxes, it is difficult to understand how a viable salve to the state’s fiscal woes exists in providing to Connecticut’s wealthiest residents yet another reason to not walk, but run for the door.
The über-wealthy’s hundreds of millions of dollars in state taxes represent a substantial portion of the state’s revenue. The millions of citizens not earning generational wealth benefit from the infrastructure and services these monies fund. For this reason, even those not earning gargantuan sums ought to remain aware of the budgeting and legislative gymnastics ongoing in Hartford. When wealthy individuals choose to leave Connecticut and the state’s budget is drastically affected, everyone loses something, regardless of how immediate or direct that loss is. Missing revenue, especially of the sudden kind, causes legislatures to look elsewhere—which always engenders new schemes to generate revenue from those farther down the income ladder. These are the “trickle down” effects we all wish to avoid.
If you have a solution to this thorny issue, I promise not to use it and pass if off as my own, but would love to hear more. Or if you want to discuss another wealth management topic altogether, please do not hesitate to contact me.
Rob Longsworth is a Wealth Advisor at Greenwich Wealth Management LLC, 45 East Putnam Ave., Suite 128, Greenwich, CT 06830. Email Rob with questions at Rob@greenwichwealth.com or write to him c/o the Greenwich Sentinel, 28 Bruce Park Ave., Greenwich, CT 06830 (203) 883-1430. Advisory services offered through Greenwich Wealth Management, LLC, an SEC Registered Investment Advisor. Securities offered through Private Client Services, Member FINRA, SIPC. Greenwich Wealth Management and PCS are unaffiliated entities.