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Connecticut Estate and Gift Tax Thresholds: When a Business Valuation Is Required
Connecticut estate tax business valuation becomes a filing requirement the moment a closely held business interest sits inside an estate or lifetime gift near the state's exemption. This guide walks through Connecticut's unified estate and gift tax rules, the current exemption and rate, and exactly when a formal appraisal is needed.
Connecticut is one of a small handful of states that still taxes estates, and it's the only one that pairs that estate tax with its own standalone gift tax under a single unified exemption. For anyone holding an interest in a closely held business, that combination changes the math on when a professional valuation stops being optional and starts being a filing necessity. This guide walks through Connecticut's current exemption, rate, and filing thresholds, and explains exactly when a business interest needs to be appraised rather than estimated.
Our team prepares business valuation reports for Connecticut estates, trusts, and lifetime gifts specifically because the state's rules put business interests under scrutiny that most other states never apply.
Why Connecticut Is Different From Most States on Estate Tax
Most states have no estate tax at all, and almost none impose a separate gift tax on lifetime transfers. Connecticut does both, and it unifies them under one lifetime exemption and one rate schedule, according to the Connecticut Department of Revenue Services estate and gift tax guidance. That means a large gift made during life and a taxable estate at death draw from the same bucket of exempt value, not two separate ones.
This matters for business owners specifically because business interests are often the single largest, least liquid asset in an estate. A gift of a minority LLC interest to a child this year and a taxable estate five years from now aren't treated as isolated events under Connecticut law. They share one exemption, and both require the business interest to be valued.
Connecticut's Current Estate and Gift Tax Exemption and Rate
Connecticut's estate and gift tax exemption is scheduled to match the federal basic exclusion amount each year, which brought the threshold to $13.61 million in 2024 and $13.99 million in 2025. For 2026, Connecticut's exemption rises to $15 million per person, aligning with the federal exclusion amount, according to a year-end private client advisory from Wiggin and Dana.
Connecticut applies a flat 12% rate to the value of an estate or lifetime taxable gifts above that exemption, and it caps the maximum combined estate and gift tax at $15 million per individual, per a 2024 Connecticut Office of Legislative Research report. That flat rate replaced Connecticut's older bracketed structure and applies uniformly regardless of how large the taxable estate grows beyond the threshold.
How the Exemption Has Moved Since 2024
The table below shows how closely Connecticut's threshold has tracked the federal exemption over the past three years.
| Year | Federal Exemption | Connecticut Exemption | Connecticut Top Rate |
|---|---|---|---|
| 2024 | $13.61 million | $13.61 million | 12% flat |
| 2025 | $13.99 million | $13.99 million | 12% flat |
| 2026 | $15 million | $15 million | 12% flat |
Connecticut has kept its exemption identical to the federal amount in every recent year, but that alignment is a policy choice, not a permanent feature of the statute. The federal exemption is also scheduled for a significant reduction after 2025 under prior legislation, and Connecticut lawmakers could choose not to follow it down. Anyone with a business interest near the threshold should treat the current parity as temporary rather than assume it continues indefinitely.
When a Closely Held Business Triggers a Connecticut Filing
A Connecticut filing is triggered whenever a decedent's taxable estate, or a donor's lifetime taxable gifts, approach or exceed the exemption in effect for that year. Connecticut includes business interests in the taxable estate at date-of-death fair market value, and there's no statutory carve-out for closely held or illiquid interests. If the business is a meaningful share of the estate's total value, its appraised value can be the deciding factor in whether the estate crosses the $15 million line at all.
The same logic applies to lifetime gifts. A gift of a family business interest, whether outright or through an LLC or family limited partnership, consumes part of the same unified exemption that will apply again at death. Because the exemption is shared, an inaccurate or unsupported valuation on a gift tax return today can distort the exemption calculation years later on an estate tax return.
Watch out: Connecticut still requires a state estate or gift tax return to be filed in many cases even when no tax ends up being owed, simply because the exemption alignment with the federal amount means the filing threshold and the taxable threshold are the same number. A business interest inside that estate or gift still has to be valued to complete the return correctly, tax due or not.
What the IRS Expects to Substantiate a Business Interest's Value
For a federal gift tax return (Form 709), the standard way to substantiate the fair market value of a closely held business interest is a qualified appraisal prepared by a qualified appraiser, meaning someone independent of the transaction with relevant credentials and no fee tied to the outcome, as described in IRS Publication 561. Adequate disclosure of the valuation on the gift tax return also matters for a separate reason: if the disclosure isn't sufficient, the statute of limitations on that gift never starts running, leaving the IRS free to challenge the valuation indefinitely.
For a federal estate tax return (Form 706), the IRS expects the same level of rigor. A credible, professionally prepared valuation applying one or more of the three standard approaches (income, market, and asset-based) is the baseline for defending a closely held business interest's reported value. Connecticut's own statutes and DRS forms don't spell out a separate valuation methodology; in practice, the state relies on the same fair market value standard and expects the same caliber of support.
Key takeaway: Minority ownership stakes and interests with transfer restrictions typically warrant discounts for lack of control and lack of marketability, but those discounts only hold up under audit when they're backed by a formal valuation analysis, not a rough estimate from the owner or accountant.
Why the Filing Requirement Doesn't Depend on Tax Being Owed
Connecticut requires either Form CT-706/709 or the shorter CT-706 NT depending on the estate's size, and the trigger for filing is often independent of whether any tax will actually be due. Because the Connecticut exemption now mirrors the federal one, an estate or gift that falls just under the threshold still needs documentation showing exactly where it falls relative to that line. A business interest with no clear appraised value makes that determination impossible to support.
This is where a lot of families get caught off guard. They assume that if the estate is unlikely to owe tax, a rough guess at the business's value is good enough for the filing. In an audit, a DRS or IRS examiner has every incentive to challenge an unsupported number, particularly when a business interest represents a large enough slice of the estate that a modest valuation swing could push the filing over the threshold.
What a Connecticut Business Valuation for Estate or Gift Purposes Involves
A Connecticut estate or gift tax business valuation follows the same three approaches recognized across the profession: income-based methods like discounted cash flow, market-based methods using comparable transactions or guideline public companies, and asset-based methods for holding companies or asset-heavy entities. The appraiser also documents any minority or marketability discounts with the empirical support an examiner would expect to see.
Fees for this kind of engagement are quoted as a fixed fee after we scope the assignment, based on the complexity of the entity, the completeness of the financial records, and whether the report needs to meet IRS-qualified appraisal standards for a Form 709 or Form 706 filing. You can see how business valuation costs are generally scoped before committing to an engagement. Engagements are never billed hourly; the fee is fixed and agreed before the work begins.
Getting Ahead of a Connecticut Filing Deadline
Connecticut's unified estate and gift tax exemption means a business interest gifted today and an estate settled years from now can both hinge on the same appraised number. Waiting until a filing deadline is close leaves little room to correct course if a valuation turns out to be thin or unsupported.
Our appraisers prepare USPAP-compliant business valuations for Connecticut estate and gift tax filings, structured to hold up whether the return is reviewed by DRS, the IRS, or both. If you're weighing a lifetime gift of a business interest or settling an estate that includes one, request an appraisal to get the valuation scoped before a filing deadline forces the issue.
This article is provided for general informational purposes only and does not constitute legal, tax, or financial advice. Readers should consult a qualified attorney or CPA regarding their specific circumstances.