Probate – Page 2 – Connecticut Estate Planning & Probate

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.

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.

2016 Connecticut Estate Taxes & Probate Fees

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Three Probate Myths, Misconceptions & Mistakes

This article examines 3 common probate mistakes, misconceptions and myths.

Myth: Probate can be totally avoided by placing assets in survivorship or a living trust.

This myth is often promoted by purveyors of “one size fits all” living trust packages. When a Connecticut resident dies, even if all their assets are in survivorship or a revocable living trust, probate proceedings are still necessary for Connecticut estate tax and probate fee clearance. If probate proceedings don’t take place, there will be a problem when the real estate in which the deceased person had an interest is sold. Property in a living trust or survivorship allows for transfer of ownership independent of the probate court; the probate court has no role determining the legal owner of that property (one element of “avoiding probate”.) However, the Connecticut Department of Revenue Services treats property in a trust or survivorship as includible for calculating Connecticut estate taxes liability and probate fees. Property is clear of Connecticut estate tax and probate fee liens only after the probate court issues a release of lien upon payment of the probate fee and any outstanding Connecticut estate tax.

Misconception: Probate fees and taxes can cost 33% or more of an estate’s value.

Three fees and taxes that may be assessed on a deceased person’s assets are federal estate tax, Connecticut estate tax, and Connecticut probate fees. For anyone dying with less than $2 million in assets in 2016, there will be no federal or Connecticut estate tax liability. Connecticut probate fees are progressive and based on the value of the deceased person’s estate: the greater the value of the estate, the higher the probate fee. In Connecticut, probate fees are established by law, not by probate judges and courts. The courts must strictly adhere to the established fee schedules. Probate fees range from one third of one percent to one half of one percent. For example, if a Connecticut resident dies owning assets valued at $600,000, the Connecticut probate fee will be approximately $2,100. A change in the way probate fees were calculated in 2015 removed the $12,500 “cap” on probate fees and increased the marginal rate for estates valued in excess of $2 million to one half of one percent – a significant increase in probate fees for high value (multi million dollar) estates. It’s likely that more changes to Connecticut probate fees are on the horizon and will be the subject of a future article. However, Connecticut probate fees are far lower than the 33% or more that some people believe.

Mistake: Relying on the advice of a well-meaning bank teller, friend, nurse, social worker or contractor for probate and estate planning advice.

Even after fourteen years as a probate judge, I am still amazed by how many people believe they can dispense advice on probate matters! I’ve seen people proceed in probate relying on the advice of well-meaning relatives, friends, neighbors, bank tellers, nurses, social worker and others. Probate is a highly specialized area of the law, and even very few attorneys are well versed in probate law. Attorneys with substantial probate experience are most qualified to give reliable advice. Probate court clerks cannot give legal advice, but are able to answer many questions and provide probate forms to the public. Unlike other courts, many – but not all – matters in Connecticut probate courts do not require an 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.

Wills: Myths, Misconceptions & Mistakes

Most people realize having a will is a good idea. It provides for the transfer of your assets after you pass away to the people and institutions of your choice. As an attorney and probate judge, I’ve seen and heard myths, misconceptions and mistakes in this area.

Some people believe it’s effective to simply write a note directing who will receive their assets after they die. This won’t work in Connecticut. Connecticut has strict requirements for how a will needs to be executed. If these requirements are not carefully followed, the note won’t be recognized as a valid will.

The same principle applies if someone wants to make changes to an existing will. Crossing out and writing in provisions to an existing will generally won’t be valid. If someone wants to change their will they either need to execute a new will or execute a codicil to the current will. The laws of will execution also apply to how a codicil must be executed in order to be valid.

Another misconception is that if someone dies without a will, all their assets will go to their surviving spouse. This is only true if the person who passed away had no children or surviving parents. Otherwise, the children or surviving parent will receive some portion of the decedent’s probate assets. If someone passes away survived by a spouse and children, the surviving spouse receives the first $100,000 and half of everything over $100,000. The children receive one half of everything over $100,000. However, if one or more of the children are not also children of the surviving spouse, the surviving spouse receives 50% of all the decedent’s assets and the other 50% are divided equally among the children. Stepchildren of the decedent are not recognized as heirs at law unless there are no surviving blood relatives of the decedent.

Photocopies of a will are not legally valid – only the original signed copy of the will may be admitted to probate. If the original cannot be located, additional proceedings in the probate court are necessary to allow admission of the photocopy.

All wills name an executor – someone or an institution (such as a bank or trust company) responsible to administer the estate. However, the executor named in the will does not actually become the executor unless they are willing and able to serve as executor and they are appointed by the probate court. Often people state they are the executor of a living relative’s estate, but that is not the case until their relative dies and they are appointed by the probate court.

Wills have no legal authority until admitted to the probate court. If someone becomes legally incapacitated, their will has no effect on the management of their assets while they are alive. Trusts, advance healthcare directives, powers of attorney, appointment of healthcare representatives and advance designation of conservators are legal tools used to plan for incapacity.