Legal Incapacity – Connecticut Estate Planning & Probate

Beware! POAs, Trusts and Liability

Having just completed my sixteenth year as a Connecticut probate judge, I’ve noticed an increase in litigation against fiduciaries; several of these have resulted in criminal prosecution of the guilty parties.

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.

Get an Estates and Trusts 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 has been a Connecticut Probate Judge since 2003, and since 1995 has practiced law in Connecticut with offices currently in Watertown and Stamford. He practices in the areas of estate planning, probate, asset protection and business counsel.

How Often Should You Review 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 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. Here in Connecticut, major changes to the Connecticut estate and gift tax will become effective on January 1, 2018. In 2016 and 2017, Connecticut law governing powers of attorney have seen the most dramatic changes in many years. 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 3-5 years.

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 by Dom Calabrese, visit his website at https://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

Advantages of Living Trusts Part 3: Providing for Children

I recently had a discussion with a married couple with two small children. They were interested in providing for their children if something were to happen to both parents.

One way to accomplish this would be with a living trust. The parents could create a living trust, place assets into the trust, and name a trustee in addition to or in place of the parents. If both parents were to pass away while their children were still young, the trust could provide money to pay for the children’s education, medical care, housing, clothing, or anything else for the children’s benefit.

Once the children attained a certain age – it could be any age – 18, 25, 30, or some other age – anything left in the trust would then be turned over to children in their adulthood.

The trustee – the person responsible for managing the trust – would use the trust money to pay for whatever of the children’s expenses the trust was designed to cover. The trustee would be bound by the terms of the trust to be sure the trust assets were properly invested, and the trustee would be liable if he or she wasted trust assets.

Providing for the management of assets for minor children is important – if it’s not done with a trust or custodial account, a guardianship estate might need to be established in the probate court. In addition to “youth” – those under the age of 18 – there are other reasons why managing assets for the benefit of an adult may be needed. For example, it can be very challenging for a young adult to responsibly manage a significant asset. Likewise, adults in their 30s or older may lack the sophistication or maturity to responsibly manage a significant asset. Perhaps providing support for someone with serious creditor issues, or someone who is easily taken advantage of by the unscrupulous is a goal. A parent or grandparent with adult children or grandchildren in difficult marriages may want to ensure that a potential “ex” spouse doesn’t end up with some or all of assets intended for their own child or grandchild. In all of these cases, a living trust could provide for the management of assets and support of loved ones without giving them the asset outright.

Trusts can be funded with any of a variety of assets – real estate, financial accounts, life insurance proceeds, and bequests in a will are just a few potential sources of trust assets.

In my next article, I’ll review how living trusts can be used to reduce Connecticut estate tax liability.

Living trusts are not appropriate for everyone. Only after consulting a qualified, ethical attorney who will take the time to understand your situation and objectives, and explain your options, is it possible to make an informed decision as to whether a living trust is appropriate for you.

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

Advantages of Living Trusts Part 2: Legal Incapacity

Living trusts offer many advantages. One of them is providing for the management of assets when the person who created the trust is incapacitated. However, this is only true for assets that are moved into the trust first. Simply creating a trust without moving assets into the trust will not provide this benefit.

Let’s look at how this might work. Mary Jones creates a living trust, naming herself and her son William as co-trustees of the trust. William’s reliability must be beyond question; unreliable co-trustees could easily mismanage or even steal from the trust.

Mary then moves some or all of her assets, including her financial accounts, into the trust – a very important step. She also arranges for her regular income to be automatically deposited into the trust accounts.

A few months later, Mary suffers a stroke and becomes incapacitated. She can’t write or communicate, and has a very limited understanding of what’s going on. Because she moved her financial accounts into the trust, William (as co-trustee) is able to manage Mary’s finances through the trust. He may use the money in trust accounts to pay Mary’s bills. If Mary’s income automatically gets deposited into trust accounts, William will also be able to manage that income.

If Mary hadn’t established the trust and moved her financial accounts into it, institutions where Mary’s accounts are located might not work with William or other family members. Even if Mary appointed an attorney in fact through a durable power of attorney, it’s possible that the financial institutions might choose to ignore the power of attorney.

This could create a number of problems. No one would know the value of Mary’s assets; it would be difficult or impossible to manage Mary’s affairs. There would be no access to Mary’s assets to pay her bills. Mary’s bills, such as insurance, mortgage, taxes and utilities might not get paid, resulting in foreclosure, interest and penalties for unpaid taxes, termination of insurance coverage, utilities being shut off, or collection action against Mary. Family members would not know what Mary could and could not afford.

Without the trust in these circumstances, a family member might need to make an application to the probate court to appoint a conservator of the estate for Mary so that her bills could be paid and her assets managed. Involuntary conservatorship proceedings in the probate court can be time consuming and expensive. This adds to the stress that Mary’s family must deal with in addition to the significant challenges posed by Mary’s stroke and resulting legal incapacity.

Living trusts are not appropriate for everyone. Attending “free seminars” promoting “one size fits all” living trust packages is NOT a good reason to pay for a living trust. Only after consulting a qualified, ethical attorney who will first carefully examine, understand and explain your options, can you make an informed decision whether a living trust is appropriate for you.

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

The Importance of Having a Healthcare Representative

Some time ago, Joan Rivers, a well-known television personality, had to be placed on life support after it was reported that she experienced complications during a surgical procedure. When I originally wrote this column, a newscaster mentioned that decisions regarding continuing that life support might need to be made. It’s easy to understand that these kinds of situations are extraordinarily stressful. The situation is even more difficult if the family doesn’t know the patient’s wishes.

Ms. Rivers’ unfortunate situation highlights concerns that many of us have about our own health care: what happens if we can’t communicate with our health care providers and are unaware of what’s going on? Medical and surgical treatment always requires decisions to be made. Sometimes our health care provider recommends a particular treatment, or provides options for different treatments. The health care provider acts on the patient’s direction, which may include authorization for a particular treatment, or the decision to not have a treatment. Examples of these types of decisions include the use of life-saving interventions such a cardiopulmonary resuscitation (CPR), and intubation if the patient cannot breath on their own. Life-sustaining treatments might include feeding the patient through a tube or intravenously.

If a patient can’t communicate decisions to their health care provider, what options are available? One tool that adults in Connecticut can use in such a situation is the appointment of a health care representative. A health care representative may make medical decisions on behalf of the patient when the patient is unable to do so. There is no inherent limit on those decisions – they are not limited to life-saving or life-sustaining interventions, but may include any and all health care decisions for a person who is incapacitated to the point where they can’t actively take part in decision-making and cannot direct their health care provider regarding their medical care.

The ability to make health care decisions when the patient is incapacitated is one important way health care representatives are different from health care agents. The authority of health care agents is limited to conveying the patient’s wishes to medical providers; they have no authority to make decisions. Effective October 1, 2006, Connecticut law was changed to permit the appointment of health care representatives. The difference between health care agents and health care representatives is especially important for those who executed an appointment of health care agent several years ago. The change in the law gives adults in Connecticut a potentially more effective tool in planning for incapacity. A health care representative retains authority to make health care decisions even if the person who appointed them is under an involuntary conservatorship, unless a court order says otherwise.

The next column will examine advance medical directives. Advance medical directives, also known as “living wills,” are commonly used in conjunction with the appointment of a health care representative as part of a legal strategy to plan for potential incapacity.

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

The New Connecticut Uniform Power of Attorney Act: Part 3 – Authorities of the Agent

One of the many new features of the Connecticut Uniform Power of Attorney Act is the new authorities that the person creating the power of attorney (called the “principal”) may grant to someone else (called the “agent”). Technically, even before Connecticut’s new law was enacted, a power of attorney could be drafted to include many powers not in the statutory short or long form template. Most of these “new” powers are related to estate planning and asset management.

Under the new law, the agent may be given power to create, revoke or terminate a living trust. This provision can be useful to help in management of assets such as real property and bank accounts, as well as in estate planning.

In the realm of estate planning, the agent might also be granted the authority to disclaim property. With a disclaimer, someone who is entitled to receive property from an inheritance or as a named beneficiary in a life insurance policy, to name just two examples, could refuse to take that property. When that happens, the next person in line to receive the disclaimed property would be entitled to it. Disclaimers are often, but not exclusively used when a relative passes away leaving assets (such as a bank account or real estate) to their husband, wife, son, daughter, grandchildren, or someone else.

Another power that the agent might be granted is the authority to make gifts from the assets of the principal. For example, the principal may have a tradition of giving gifts to relatives at birthdays or holidays, or gifts for a specific purpose, such as college tuition. Authority to make gifts could allow the agent to continue these types of traditions, especially if the principal becomes incapacitated.

Changing rights of survivorship is another area that an agent might be granted authority. It’s common for real property, particularly residential real estate, to be owned in survivorship. One advantage of survivorship property is that upon the death of one of the owners, the remaining owner or owners would automatically receive the deceased owner’s share of the property without probate proceedings. However, probate applications would still be necessary in such a situation to obtain release of Connecticut estate or succession tax liens and release of lien for Connecticut probate fees.

Related to changing rights of survivorship is the authority to change beneficiary designations. Beneficiary designations operate in a similar way to survivorship, except that a beneficiary essentially has no right to the asset until the owner passes away. Life insurance policies and accounts in financial institutions are two examples of property that commonly has a beneficiary designation.

The new law provides for other powers that may be granted under a power of attorney.

For information and advice as to your particular situation, consult a qualified attorney who has experience with estate planning and powers of attorney.

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.

The New Connecticut Uniform Power of Attorney Act Part 2: Advantages of Powers of Attorney

Preserving powers of attorney as an inexpensive means of incapacity planning that is flexible and private is one of the objectives of the new Connecticut Uniform Power of Attorney Act. But just how are powers of attorney “inexpensive,” “flexible,” and “private”?

The best way to deal with legal incapacity is to plan for it before it occurs. Nearly all the tools to plan for future legal incapacity – powers of attorney, trusts, health care representatives, changing ownership of assets, and advance directives – require the person creating them to have legal capacity to put them into place. Unfortunately, most people fail to plan for legal incapacity, and when it strikes, these options are not available.

One of the few options to manage the affairs of an incapacitated adult who has not planned for incapacity is through the appointment of an involuntary conservator in the probate court. The person for whom the conservatorship is being sought must have legal representation, which they must pay for unless they are indigent. The person making the application should also retain legal counsel to represent them before the probate court; this is particularly important where there is conflict between family members. This adds up to significant preparation and cost, in addition to the stress and emotional toll of adversarial court proceedings. Conservatorship proceedings and most documents are accessible to the public. An effective power of attorney may preclude the need for a conservator.

Trusts can be a very effective way to plan for management of assets during incapacity. However, creating a trust and transferring assets into it (a necessary but often overlooked step) is costly.

Powers of attorney are far less expensive and time consuming than these other options. The new Connecticut Uniform Power of Attorney Act preserves key elements of powers of attorney that make them inexpensive, flexible and fairly expeditious to create. How does the new law accomplish this?

It provides a suggested form for a power of attorney, making it efficient to draft compared with a trust. This greatly reduces an attorney’s billable time, translating to lower costs for clients.

The power of attorney can grant a number of authorities to the agent, or very narrow authority to an agent – for example, authority over a single financial account. The power of attorney may be drafted so it expires on a particular date, or it may have no expiration date. This feature makes a power of attorney very flexible.

Powers of attorney are private documents not subject to public inspection, since they don’t need to be filed in the probate court or on the public land records.

A power of attorney is just one part of a comprehensive estate plan. It’s not necessarily a substitute for a trust or other documents. When lay people attempt to draft their own estate planning documents, the results can be disastrous. Planning for incapacity should only be accomplished through a qualified attorney.

THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE, AND SHOULD NOT BE RELIED UPON AS LEGAL ADVICE. CONSULT A QUALIFIED ATTORNEY FOR ADVICE REGARDING YOUR SPECIFIC SITUATION.

The New Connecticut Uniform Power of Attorney Act Part 1

A power of attorney is a legal document that allows an adult to designate a trusted friend or family member with legal authority to manage their affairs. Depending on the circumstances, a valid durable power of attorney can provide a means to manage the estate of someone who later becomes legally incapacitated. It may prevent the need for appointment of an involuntary conservator. In Connecticut probate courts, proceedings to appoint an involuntary conservator can be time consuming and expensive, especially when compared with the ease and relative economy of a durable power of attorney. However, once legal incapacity strikes, it’s often too late for a durable power of attorney to be executed. This is because an adult must have legal capacity to sign a durable power of attorney; if the power of attorney is signed by someone who lacks capacity, that power of attorney may not be valid.

Beginning October 1, 2016, significant changes to Connecticut law governing powers of attorney became effective. This article highlights some changes that the new law creates. In future articles, each of these changes will be examined in more detail.

The changes in Connecticut law are designed to achieve six general objectives. One objective is to preserve powers of attorney as an inexpensive means of incapacity planning that is flexible and private.

A second objective the new law addresses is the inclusion of safeguards to protect the person who creates the power of attorney (called the “principal”), the person who acts under the power of attorney (called the “agent”), and third parties that perform an action based on the power of attorney (for example, a bank that allows the agent access to a financial account owned by the principal).

A third objective is to modernize powers of attorney so that retirement plans and certain estate planning documents could be managed under a power of attorney.

A fourth area – a particularly important one – is to encourage the acceptance of valid powers of attorney by third parties. Certain financial institutions, in particular, have long had a reputation of refusing to recognize valid powers of attorney. Some of these institutions would only recognize a power of attorney created on their own forms. Frequently these forms amounted to little more than a document that exonerated the institution should any problems arise as a result of the use of the power of attorney.

A fifth area addresses situations where the agent acts properly but may also have a conflict of interest. An example of this would be where assets are transferred to family members under the power of attorney.

Finally, the new law provides ways to customize the power of attorney document. This is not entirely new – it was also allowed under the previous version of Connecticut law.

In the next few articles, I’ll look more closely at each of these areas and highlight how the new law works.