Connecticut Estate Planning – Estate Planning & Probate

Probate Mistakes, Misconceptions and Myths Part 2

This article examines 5 common probate mistakes, misconceptions and myths.

Myth: If all of someone’s assets are in trust, survivorship, POD/TOD or have a beneficiary designation, there’s no need to go to the probate court when they pass away.

This is not a myth for Florida and New York residents. However, when someone dies owning any interest in Connecticut real property (even if they are a resident of another state), probate proceedings are still necessary in order to get clearance of Connecticut estate tax and probate fee liens on the real property.This is somewhat unique to Connecticut; neither New York nor Florida have such proceedings, which, in my opinion, has turned Connecticut Probate Courts into tax collectors. This is true even if none of the deceased person’s assets are probate assets. Probate assets are assets that were solely in the deceased person’s name at the time of death with no beneficiary, survivorship, TOD/POD designation, or trust.

This is a common source of confusion, and can sometimes result in problems when the real property in which the deceased person had an ownership interest needs to be sold and there is no release of lien from the probate court.

Myth: A living trust is a substitute for a will.

Living trusts are a will substitute only for assets that were transferred into the trust during the trust creator’s lifetime. In that regard, a trust is a will substitute. However, many – indeed, most – people with living trusts fail to transfer assets into their living trusts during their lifetime. In those cases, where an asset was solely in the decedent’s name, probate proceedings will be required to determine the legal owner of the asset.

In my years on the bench and practicing law, I’ve frequently seen family members come to the court with their deceased loved one’s living trust, only to find that the person who died never transferred anything into the living trust.

Mistake: Writing your own will.

Connecticut, Florida, and New York do not recognize handwritten wills that fail to satisfy the legal requirements of what the law recognizes as a potentially valid will.

I strongly recommend having an experienced estate planning attorney work with anyone who would like to have a will. Mistakes in “do it yourself” legal documents – including wills – can have disastrous consequences. I’ve seen more than my share of them as a probate judge.

When it comes to something as important as your wishes for your family and your assets, cutting corners by doing it yourself or using an online form or vendor is foolhardy. It will likely end up costing your family orders of magnitude more than might have been “saved” instead of using an experienced estate planning attorney.

Misconception: Without a will, all that I own will go to my spouse when I die.

This is usually not the case, particularly if you have children and/or surviving parents. Surviving spouses will only receive all of the deceased spouse’s assets if there are no children, grandchildren and parents of the deceased spouse.

Misconception: You need to include funeral and burial arrangements in your will.

A will is only effective after it has been admitted to the probate court. Even a will that is submitted to the probate court immediately after someone passes away will take several weeks to be admitted. It’s only after the will is admitted that it has any legal authority.

A better approach is to either make your final arrangements while you are still alive, or discuss your preferences with loved ones (spouse and children) so at least they will know what you want.

THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO BE, NOR SHOULD IT BE RELIED UPON AS LEGAL ADVICE. CONSULT A QUALIFIED ATTORNEY FOR ADVICE REGARDING YOUR SITUATION.

Beware! POAs, Trusts and Liability

Fiduciary Defined

Most everyone has heard the word “fiduciary” but I suspect most don’t understand what a fiduciary is and the serious personal liability inherent in serving as one.

A fiduciary is a person or organization (such as a financial institution) required to place the interests of another person above theirs. It’s a very high legal standard.

In probate, examples of fiduciaries include lawyers, executors, administrators, guardians, conservators, trustees, health care representatives and agents under a power of attorney.

Common Mistakes

A significant mistake – one that frequently leads to litigation – is the failure of the fiduciary to understand their powers and responsibilities.

Sources of Fiduciary Powers and Responsibilities

Fiduciary powers and responsibilities come from 3 sources: court orders, the law, and a document, such as a trust, will, or power of attorney. Under the new Connecticut Uniform Power of Attorney Act, complex powers of attorney have become more common. While this complexity is designed to increase the flexibility of powers of attorney, it can make the agent’s authority and limitations difficult to understand and carry out without the services of an experienced trusts and estates attorney.

Don’t Get Caught in This Trap

Wills and trusts can be complex. It’s not unusual for a trust to be 60 pages or more in length. Serving as an administrator, executor or trustee should not be done without hiring an experienced trusts and estates lawyer; it’s virtually impossible for the average layperson to understand a trust, and even difficult for a general practice attorney with minimal trust experience to do so.

Maintain Complete Records…or Else

All fiduciaries engaging in financial transactions – paying claims and expenses, managing income and assets – must keep complete and accurate records. A fiduciary must be prepared to submit accountings to the court, even if the legal document establishing their authority excuses accountings. If the fiduciary’s dealings are called into question, it is the fiduciary’s responsibility to establish by clear and convincing evidence that their actions were proper and within the law. Failure to do so will likely result in a finding of breach of fiduciary duty.

A fiduciary who has breached their duty can be ordered to pay the estate they were responsible for (under a trust, will, power of attorney, conservatorship or guardianship) from their own personal funds. Criminal prosecution of fiduciaries who breached their duty happens frequently, and long prison sentences have been ordered in some cases.

Who is Benefiting: Conflicts of Interest

Another area rife for litigation is conflicts of interest. An example is when a widower gave his girlfriend authority over his finances under a power of attorney. If the girlfriend used the widower’s assets to pay her own expenses, or to pay the expenses of another (for example, the girlfriend’s children), a court could find that she breached her fiduciary duty. The consequences could include restitution, and even criminal charges.

There’s Much More

There are many more areas of importance for fiduciaries to be aware of that cannot be covered here.

Retain a Trusts and Estates Lawyer!

Because of the complexity and potentially serious consequences, I strongly recommend anyone serving as a fiduciary retain an experienced trusts and estates lawyer to advise and protect them. While some fiduciaries may exercise their duties without a lawyer, the stakes are too high to risk something going wrong.

DISCLAIMER: This article is for informational purposes only. It is not intended to be, and should not be relied upon as legal advice. For advice as to your specific situation, please contact a qualified attorney.

Dom Calabrese was a Connecticut Probate Judge for 22 years, and since 1995 has practiced law in Connecticut, Florida, and New York with offices currently in Palm Beach Gardens, Florida, and Watertown and Stamford Connecticut. He practices in the areas of estate planning, probate, asset protection and business counsel.

How Often Should You Update Your Estate Plan?

Estate plans are created at a specific point in time. Having an estate plan is important for many reasons. Some of these reasons include ensuring your wishes are followed for who will receive your assets after you pass away; providing for loved ones; minimizing estate taxes and maximizing family wealth for future generations; maintaining your independence should you become incapacitated; avoiding guardianships or conservatorships; avoiding court intervention; minimizing family conflict; asset protection; and ensuring that your wishes for end of life health care are honored in the event you are unable to communicate with your healthcare professionals.

It’s been said that the only constant in life is change. This truth has significant implications for estate planning. Changes in your circumstances – death of a spouse, marriage, divorce (yours or your children’s), birth of a child or grandchild, significant changes in your health or financial circumstances, or moving to another state – may require an update to your estate plan.

The law is in a constant state of change. In Florida, Connecticut, and New York changes to the law governing estate planning and probate occur more and more frequently. Since 2019, well over 25 substantive changes to probate and estate laws in those 3 states have been implemented. These changes may affect your estate plan – the only way to know for sure is to have a qualified attorney review your estate plan.

It’s also important to review your estate plan every 3 years. If you experience significant changes – get married, divorced, the death of a spouse, the birth of a child or grandchild, have major changes to your finances or health, or move to a new state, you should prioritize an estate plan update even if your current estate plan is less than 3 years old.

If you have no estate plan, it’s important to make an appointment with an estate planning attorney to discuss creating an estate plan.

It’s easy to forget about estate planning. Most people put off estate planning entirely. After all, there are no consequences to not having an estate plan until a dramatic life event – such as incapacity or death occurs. Unfortunately, once those events take place, there are very few options available compared to those at the disposal of those who plan well in advance of such events.

There is a common – and erroneous – perception that estate planning is only for the very wealthy. That is an unfortunate fact. In my 15 years on the bench as a Connecticut probate judge, I see people from all walks of life who would have been much better off had they put an estate plan in place.

THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO BE AND SHOULD NOT BE RELIED UPON AS LEGAL ADVICE. FOR ADVICE AS TO YOUR SPECIFIC SITUATION PLEASE CONSULT WITH A QUALIFIED ATTORNEY.

For more articles and presentations on probate, estate planning and asset protection, visit our website at https://DCalLaw.com

Fiduciaries Part 3: Removal

In my previous article in this series on fiduciaries, I examined situations where a fiduciary (trustee, executor, administrator, guardian of the estate or conservator of the estate) may be removed. This article continues the discussion on removal of fiduciaries.

Connecticut law includes one more situation that may result in the removal of a fiduciary: where all the beneficiaries request that the fiduciary be removed, the court agrees it’s in the best interest of the beneficiaries to remove the fiduciary, and there is a suitable successor fiduciary available.

It’s also important in that situation to determine that removal of the fiduciary isn’t contrary to an important term of the will or trust. Sometimes, the person who creates a trust chooses a specific trustee or group of trustees for their expertise, maturity, or reliability. Perhaps the trust beneficiaries lack financial sophistication, have creditor issues or lack maturity. The purpose of the trust for those beneficiaries might be to provide a reliable income stream for a set period of time, usually many years.

However, the beneficiaries may “want their money now” and are unwilling to wait for the trustee to make distributions in accordance with the trust. A television commercial from a few years ago comes to mind; in it, people are yelling from their windows and front porches “It’s my money and I want it now!” In that case, there could well be conflict between the beneficiaries, who may want the trustee to make distributions to them, and the trustee, who is unwilling to make distributions in excess of what the trust allows.

Another example of a situation where this might happen is when the fiduciary doesn’t communicate with the beneficiaries, file documents with the court in a timely way, or make required distributions to the beneficiaries.

In addition to state law, a trust document usually includes provisions for when a trustee may be removed. Trusts and wills can be very complex; a fiduciary only has the authority to perform the tasks and responsibilities that are in the trust or will.

Likewise, how a trust may be managed is usually in the trust document. Whenever there is a question about a trust, the trust document should be the first place to look for guidance.

It’s common for the trust to create a mechanism for removal of a trustee. Such provisions are usually highly customized, depending on the purpose of the trust, the preferences of the trust’s creator, and requirements of federal and state law.

Anyone who is a fiduciary should consult with a knowledgeable estate planning attorney for guidance. As a probate judge for 15 years, I’ve seen fiduciaries create problems because they didn’t understand their responsibilities and acted contrary to the provisions of the trust, will or law. Nearly all of them chose not to retain an attorney to guide them.

Being a fiduciary is a serious responsibility, and it’s all too easy for well-meaning people to create problems because they failed to retain competent legal counsel. Breach of fiduciary duty can have serious financial consequences: fiduciaries have personal liability. In some cases, there can be criminal liability for breach of fiduciary duty.

For more articles and presentations by Dom Calabrese, visit his website at https://DCalLaw.com

Fiduciaries Part 3: Removal

Likewise, how a trust may be managed is usually in the trust document. Whenever there is a question about a trust, the trust document should be the first place to look for guidance.

For more articles and presentations by Dom Calabrese, visit his website at https://DCalLaw.com

Fiduciaries Part 2: Removal of Fiduciaries

In my first article on fiduciaries, I explained the role of executors and administrators in decedent’s estates. This next article in the Fiduciaries series examines situations that may require a court to remove a fiduciary under Connecticut law.

One such situation is where the fiduciary (trustee, executor, administrator, guardian, conservator or agent under a power of attorney) is no longer capable of performing their job, or simply stops doing what is required. There can be a number of reasons for this. Perhaps the fiduciary has a serious illness that prevents them from performing their fiduciary duties. Maybe the circumstances of the fiduciary have changed (caring for an ill family member, a change in jobs, moving to a distant state or even another country) that have made it difficult or impossible for the fiduciary to do their job. I’ve also seen situations where the fiduciary simply becomes unresponsive for unknown reasons and doesn’t communicate with the parties or the court. All of these may require the fiduciary to be removed and replaced.

Some trusts – notably but not exclusively irrevocable living trusts – commonly give one trustee the authority to replace the independent trustee.

Another reason why a fiduciary may be removed is if they waste the estate. Almost all fiduciaries are responsible for assets. There are many scenarios where a fiduciary could illegally waste the estate. For example, if they use some or all of the estate for their own enrichment, make poor investment decisions, fail to follow the requirements of the will or trust that governs the estate, or fail to properly safeguard the assets in their charge (perhaps they’ve failed to properly insure real property that subsequently is damaged or destroyed).

Failure to furnish a court-ordered bond is another reason for a fiduciary to be removed. A bond is similar to an insurance policy that protects heirs, beneficiaries and creditors of an estate. If the fiduciary wastes an estate for which there’s a bond, the parties may be made whole by the surety (usually the insurance company that issues the bond) for losses due to the fiduciary’s mismanagement.

Another situation where a fiduciary may be removed is where there are 2 or more fiduciaries, and they are not cooperating with each other. If the lack of cooperation “substantially impairs the administration of the estate” a court may remove one or more of the fiduciaries. Generally in such a situation, the conflict among the fiduciaries causes even the simplest fiduciary functions to take an unreasonably long time to the detriment of the parties and the estate.

In 15 years on the bench, I’ve seen a lot of conflict among parties who appear before me. It’s important that parties put their differences aside to get the work at hand done. This can be particularly challenging when the parties in conflict are fiduciaries. For that reason, Connecticut law recognizes the gravity of those situations and gives courts the ability to remove fiduciaries.

For more articles and presentations by Dom Calabrese, visit his website at https://www.DCalLaw.com

Fiduciaries Part 1: Executors

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Fiduciary is a term used to describe someone who serves in a role where they must put the interests of another person or persons above their own. Examples of fiduciaries include executors, administrators, conservators, guardians, trustees, health care representatives, and agents under a power of attorney. Certain financial advisors may also be fiduciaries.

An executor is someone who is appointed by a court as a result of being named in a will. An executor is responsible for protecting the assets of the estate of the person who passed away. Executors are also responsible for administering the estate of the deceased person through the probate process.

Some people say that they are the executor of a living person’s estate. Such statements are incorrect. No one may be an executor until three things occur: first, they must be named in a valid will to be an executor; second, the person whose will names the executor must have died; and third, the will must be admitted to the probate court and the person named executor must be appointed by the court. Unless and until all those occur, there is no executor. Someone named as executor may decline to serve. In that case, another person must be appointed by the probate court to serve as executor (if the will names an alternate executor), or administrator (if not named in the will).

An administrator is someone who is appointed by a probate court when the person who died had no will, or when the person who died had a will, but the named executors in the will decline or are unbale to serve. An administrator only has authority that the probate court gives them. In contrast, an executor has the authority that the will gives him or her.

How do fiduciary duties apply to administrators and executors?

A fiduciary must perform their job. A fiduciary’s job always includes protecting the assets that are entrusted to their care. If the fiduciary wastes or mismanages the assets entrusted to them, they are subject to removal as well as surcharge (a court order to personally reimburse the estate for the loss).

The authority of a fiduciary is limited by a number of factors.

An executor’s authority is limited by the terms of the will under which they are appointed. If the executor needs to conduct an activity for which the will does not provide, then the executor must get permission from the court before they may carry out that activity. An example of this is where the decedent was the sole member of a limited liability company, and the business of the company needs to be wound up. While a will may provide authority for the executor to continue to conduct a business that the decedent owned, not all wills do so. An operating agreement of the company may also provide this authority, but, unfortunately, many limited liability companies don’t have operating agreements.

For more articles and presentations by Dom Calabrese, visit his website at DCalLaw.com

Living Wills

In a recent post, I discussed health care representatives as a tool that adults may use to plan for incapacity. Another tool that may be used along with an appointment of health care representative is the advance health care directive, commonly known as a Living Will.

Of course, as long as someone is able to understand their medical condition and can communicate with their health care providers, there is no need for a health care representative or Living Will. It’s when someone can’t actively take part in health care decision-making that a Living Will and health care representative may be useful.

Effective October 1, 2006, Connecticut law allows Living Wills to include direction on any aspect of a person’s own health care. Previously, Living Wills were limited to direction regarding life support only.

A Living Will is a written document. It directs a physician or other health care professional to provide or to not provide medical, surgical or other measures should a terminally ill patient become incapacitated.

A Living Will must be prepared and signed well before incapacity strikes. Once someone becomes incapacitated, it’s not possible for him or her to effectively execute a Living Will. Certain formalities must be observed or the Living Will won’t be valid. A “do it yourself” approach is not recommended. I’ve seen situations as a Probate Judge where a well-meaning friend or relative “drafted” a Living Will, which was then signed. Because the Living Will document was not correctly understood, the patient’s “wishes” were the exact opposite of what the Living Will indicated.

In Connecticut, physicians and licensed medical facilities are granted immunity from criminal and civil liability should they remove or withhold life saving or life-sustaining measures for incapacitated patients who are permanently unconscious. In order for this liability protection to apply, however, a number of requirements must be in place. One of them is that the physician or medical facility considers the patient’s wishes. A Living Will is one way to document and communicate your wishes to others.

In addition to a Living Will, there are other ways you can communicate what measures you would and would not want should you become unconscious. Discuss your wishes with your healthcare provider, and have him or her make a note of it in your medical record. Discuss your wishes with family members before there is a crisis. This can go a long way toward ensuring your wishes are both known and followed, in addition to providing family members with some measure of peace of mind should they need to make such decisions. The best approach to making it more likely your wishes will be followed is to use all of these measures so everyone – your family and health care providers – are well aware of your wishes, and they are documented.

For more articles and presentations by Dom Calabrese, visit his website at http://www.domcalabreselaw.com

How To Choose the Right Attorney

One of the strengths of Connecticut Probate Courts is their informality and approachability. For most matters, parties may not need to retain an attorney to represent them. However, in certain cases, parties are at a disadvantage if they don’t have an attorney representing them.

When there is an application to appoint an administrator or executor for a decedent’s estate and the applicant does not have an attorney, I always have a hearing so I can discuss the case with the applicant. During those hearings, I recommend (but don’t require) that the applicant retain competent legal counsel. Frequently the applicant asks me to recommend an attorney.

As a Probate Judge, I don’t believe it’s ethical for me to “steer” parties to specific attorneys, so I never recommend a specific attorney. However, I also understand that choosing an attorney is something most people have little experience with, along with a great deal of trepidation.

In those situations, I suggest how to go about evaluating and choosing an attorney. My hope is that this empowers people to make informed decisions, minimizing the uncertainty and stress choosing an attorney sometimes causes.

This article outlines important factors in the process of evaluating attorneys, helping you make the best choice.

First and foremost, the attorney or attorneys you consider should be qualified. Qualification means two things: for matters in Connecticut Probate Courts, the attorney must be admitted to practice in Connecticut – a member of the Connecticut Bar in good standing.

In addition, an attorney should have significant experience in probate matters. Probate is a highly specialized area of the law; an attorney with little or no probate experience will not be as effective as a highly experienced probate attorney. I have occasionally dealt with attorneys who have no probate experience representing parties before me. Unless these inexperienced attorneys familiarize themselves with probate procedure, they are at a disadvantage in providing effective counsel for their clients.

Another important aspect to choosing an attorney is interpersonal chemistry. Before hiring an attorney, meet with them. Do you feel comfortable with the attorney? Are they able to explain things to you in a way that you understand? Are they approachable? If you retain them, who will perform most of the work on your case – the attorney you meet with? Another attorney? An inexperienced attorney right out of law school? A paralegal? A secretary? What is the firm’s policy for returning inquiries from clients? One of the most common reasons why clients file grievances against attorneys is failure of the attorney to return calls and communicate in a timely manner.

Clients have a right to know what’s going on and to be a part of the decision making process when it comes to substantive matters in their case. A prospective client should also know the attorney’s fees, rates and billing practices before committing to hiring the attorney.

Only with this information can you make the right choice.

For more articles and presentations by Dom Calabrese, visit his website at http://www.domcalabreselaw.com

Connecticut Estate Taxes Part 1

For Connecticut residents who die on or after January 1, 2005, Connecticut imposes a state estate tax. This is in addition to the federal estate tax. Connecticut residents who died before that date were subject to a different scheme of state “death taxes” that are not covered in this article.

Estate tax is complex; rates and deductions vary depending on the date of death. For that reason, readers are cautioned that the scope of this article is limited to general information. You should draw no conclusions about your specific situation without consulting a qualified estate planning or tax attorney, or accountant.

The Connecticut estate tax is calculated based on the value of all the assets in which the person who passed away had an ownership interest. For example, if the person who passed away owned Connecticut real estate in survivorship with another person, one-half the fair market value of that real estate would be used to calculate the gross taxable estate.

Certain allowable deductions may be subtracted against the gross estate to arrive at the amount of the deceased person’s estate that is taxable. For Connecticut residents who die between January 2011 and the present, there is a $2 million exemption. This means that the first $2 million of each Connecticut resident who dies during that period is not subject to Connecticut estate tax.

To illustrate how the date of death affects the Connecticut estate tax, for those who passed away between January 1, 2005 and December 31, 2009, the $2 million exemption only applied to estates with a taxable value of $2 million or less. If an estate had a taxable value of $2,000,001, the exemption would not apply at all and the entire value of the estate would be subject to Connecticut estate tax. So, an estate with a taxable value of $2,000,001 has a Connecticut estate tax liability of approximately $100,000. This bizarre outcome was eliminated for Connecticut residents passing away on or after January 1, 2010 following a change in the law.

All transfers between spouses are not subject to the estate tax, even if they are in excess of the current personal exemption, which is $2 million. Charitable bequests, real estate located outside of Connecticut, and tangible personal property located outside Connecticut (for example, motor vehicles located and registered in another state) are just a few of the allowed deductions.

The Connecticut estate tax is progressive, similar to the federal income tax: the rate of the tax increases as the value of the taxable estate increases. These rates are different for different years, based on the year of death. For example, for those who passed away between January 1, 2005 and December 31, 2009, the lowest marginal rate is just over 5%, with the top marginal rate being 13.6%. For those who passed away beginning January 1, 2011 the lowest marginal rate is 7.2%, with the top marginal rate being 12%.

For more articles and presentations by Dom Calabrese, visit his website at http://www.domcalabreselaw.com