Planning for incapacity – Connecticut Estate Planning & Probate

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

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

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

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

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.

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.