We have an estate planning office in Westport, Connecticut, where the median home value is over $2 million according to Zillow. Our other office is in Glastonbury, and though it is not as affluent, there are many seven-figure homes in that area as well.
This is a good thing on the one hand, but you have to be aware of the potential impact of taxation if you own a high-end home. Fortunately, there is an estate tax efficiency solution, but before we explain it, let’s look at the estate tax parameters so you know where you stand.
How the Federal Estate Tax Works
The federal government imposes an estate tax on the portion of your estate that exceeds a certain exemption amount. In 2025, that exemption is $13.99 million per individual. If your total estate is below that threshold, you will not owe any federal estate tax.
However, if your estate exceeds that figure, the excess can be taxed at a rate of up to 40 percent. That tax applies to everything you own, including your home, investment accounts, retirement savings, business interests, and even life insurance proceeds in some cases.
While most estates fall below the federal limit, the inclusion of a valuable home can quickly increase your taxable estate’s value.
Connecticut’s Matching Estate Tax Threshold
Connecticut is one of the 12 states that also impose a state-level estate tax. The good news is that the exemption amount matches the federal exclusion, which means that you are only taxed if your estate exceeds $13.99 million.
That said, the value of your home still counts toward that total. If your property is worth several million dollars, and you have other substantial holdings, your estate may be exposed to both federal and Connecticut estate taxes.
Using a Qualified Personal Residence Trust
One estate tax efficiency tool worth considering is the qualified personal residence trust, or QPRT. This specialized type of irrevocable trust allows you to transfer ownership of your home while still retaining the right to live in it for a set number of years.
Here’s how it works. You move your home into the trust, and you specify a term during which you can continue living in the house rent-free.
This is called the retained interest period. When that period ends, full ownership of the home transfers to your chosen beneficiaries, usually your children.
The key advantage lies in how the IRS values the transfer. Because you retain the right to live in the home for a certain period, the value of the gift is discounted. This allows you to shift a high-value asset out of your taxable estate at a much lower gift tax cost.
If you outlive the trust term, the home is no longer part of your taxable estate. That means the appreciation in the property’s value is also removed from your estate, resulting in significant potential tax savings.
A Broader Tax Efficiency Strategy
A QPRT can be a powerful tool, but it is not a one-size-fits-all solution. You may benefit from incorporating it into a larger strategy that involves one or more additional trusts.
For example, you might also consider an irrevocable life insurance trust (ILIT) to keep life insurance proceeds out of your estate. Or, if you own appreciable assets, a grantor-retained annuity trust (GRAT) may help transfer future appreciation with minimal gift tax impact.
Every trust serves a specific purpose, and the right combination depends on your personal goals, family dynamics, and the structure of your estate. By layering these tools strategically, you can reduce your taxable estate and help preserve more of your wealth for the next generation.
Attend a Complimentary Learning Event!
We make an effort to provide learning opportunities to members of the communities we serve through our seminars. These events are held in and around Glastonbury and Westport, as well as the entire state of Connecticut, and you will learn a lot if you join us.
You can visit this page to see the dates and get all the details: Nirenstein, Horowitz & Associates P.C. Estate Planning Events.
Reach Out Today
If you’re ready to get started now, call us at (860) 548-1000 to schedule a consultation at our Glastonbury or Westport offices. You can also reach out to us online through our contact form.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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