In Connecticut, we have many estates in which the decedent has a million dollars or more but there is nothing for the court to administer. How can that happen? First you need to know that the Probate Court only administers property passed from the decedent to the beneficiary by a Will or by the laws of intestacy. “Intestacy” is the legal term for when someone dies without a Will. There are 4 situations where assets do not need to go through the probate process. These are when:
- The decedent’s entire estate consists of property held in a trust
- Property is owned jointly with another person or entity
- Investments are in a brokerage account or retirement plan with a designated beneficiary
- There is a life insurance policy with named beneficiaries
In these situations, the executor of the estate needs to file a “tax purposes only estate” which is different from the typical probate process. Let me explain.
When someone dies with property worth more than $40,000, the Executor usually has to open a formal probate. Formal probate requires filing 4 reports that have different time requirements for submission:
- An Inventory of the estate needs to be filed within 2 months of appointment of the executor
- A Return & List of Claims needs to be filed within 5 months of appointment
- A Connecticut estate tax return needs to be filed within 6 months of decedent’s death and
- A Financial Report within needs to be filed 1 year of the decedent’s death.
In Connecticut, every estate no matter how small or whether passing by trust or joint ownership of beneficiary designation, must file an estate tax return. A Probate Court must then find that no estate tax is due in order to remove the inchoate (“silent”) lien that the State of Connecticut has on all property of a decedent. However, with a tax purposes only estate, the Executor does not have to file 3 of the 4 reports: Inventory, the Return & List of Claims, and the Financial Report.
Section 30.22(c) of the 2015 Probate Court Rules of Procedure clarifies that the Executor may petition the court to excuse the requirement of an inventory and final financial report or account by submitting a statement signed under penalty of false statement that the estate has no assets and, if not previously filed, a return of claims. The Executor must send a copy of the statement, at the time of filing, to each party, creditor and attorney of record and certify to the court that the copy has been sent. This election is now made on Probate Court Form PC-211 when the Will is submitted to the court.
This new Rule recognizes that people can avoid complicated estate probate proceedings by putting all of their property in a trust, holding property jointly with another, and/or a brokerage account, retirement plan or a life insurance policy with a designated beneficiary. Wouldn’t your heirs prefer to avoid most of estate administration by using one of these non-probate methods? If you think that they would, come see us and we can help you create a “tax purposes only” estate.
