Trusts – Page 2 – Estate Planning & Probate

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.

Living Trusts for the Benefit of Children

I recently had a discussion with a married couple with two children, ages 4 and 2. 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 reasons why managing assets for the benefit of an adult may be important. 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.

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

COPYRIGHT 2016 DOMENICK N. CALABRESE. ALL RIGHTS RESERVED. THE USE, REPRODUCTION OR DISSEMINATION OF THIS ARTICLE OR ANY PORTION OF IT IS STRICTLY PROHIBITED WITHOUT THE EXPRESS WRITTEN CONSENT OF THE AUTHOR.

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.