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.

Copyright © 2017 Domenick N. Calabrese. All rights reserved. No part of this article may be disseminated, reproduced or used without the express written consent of the author.

For more articles and presentations by Dom Calabrese, visit his 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.

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.

Copyright © 2017 Domenick N. Calabrese. All rights reserved. No part of this article may be disseminated, reproduced or used without the express written consent of the author.

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

Advantages of Living Trusts Part 1

Recently a friend asked me about living trusts. A family member of his placed their assets in a living trust. When they passed away, my friend was impressed at how quickly that family member’s assets were transferred after death without involving the probate court. My friend asked whether a living trust would be right for him, and the differences between a living trust and a will.

There is a great deal of confusion about trusts. This is partly due to the claims some purveyors of living trusts make in order to sell more of their “one size fits all” living trust packages.

Like anything else, living trusts have advantages and disadvantages. It is only after these advantages and disadvantages are understood that an informed decision can be made as to whether a living trust makes sense for a particular person. Too often people believe that because a friend or relative had a living trust that it would be appropriate for them to have one as well. Everyone’s situation is different, and each person has different priorities. These differences are why it’s essential that an attorney takes the time to understand his or her client’s situation and objectives before discussing options, including living trusts, for estate planning. I attended a living trust seminar where the presenter stated that anyone owning assets that exceeded a certain value should have a living trust. Just because someone’s assets exceed a certain value is not, all by itself, a sufficient basis for deciding whether or not a living trust is appropriate.

A trust is simply a means of owning assets, such as accounts in financial institutions, stocks, bonds, real estate, motor vehicles, and other assets. A trust may be the named beneficiary of a life insurance policy.

A will is a document that outlines how a person wants their solely-owned assets distributed after they pass away. A will has no utility during someone’s lifetime; it only has legal effect after the person passes away and the will is admitted to the probate court. Without these two events, a will is simply a piece of paper and does not determine what happens to someone’s assets during their lifetime.

To review all the different kinds of trusts would take many pages. In this series of articles, I’m going to briefly discuss just a few features of trusts. A living trust is created and usually funded by someone while they are alive. Testamentary trusts, on the other hand, do not come into existence until someone passes away and their will, which contains a trust, is admitted to the probate court, and an acceptance of trust is filed with the court.

In my next article, I’ll begin to review some of the advantages of living trusts.

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.

Copyright © 2015 Domenick N. Calabrese. All rights reserved. No part of this article may be disseminated, reproduced or used without the express written consent of the author.

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.

COPYRIGHT 2016 DOMENICK N. CALABRESE. ALL RIGHTS RESERVED. COPYING, DISSEMINATION AND DISTRIBUTION WITHOUT THE EXPRESS WRITTEN PERMISSION OF THE AUTHOR IS STRICTLY PROHIBITED.

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.

COPYRIGHT 2016 DOMENICK N. CALABRESE.  ALL RIGHTS RESERVED.  THE USE, COPYING OR DISSEMINATION OF THIS ARTICLE WITHOUT THE EXPRESS WRITTEN PERMISSION OF THE AUTHOR IS STRICTLY PROHIBITED,

 

 

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.