On July 12, 2019, Governor Ned Lamont signed

House Bill 7104, An Act Concerning the Adoption of the Connecticut Uniform Trust Code.  It became Public Act 19-137 (CUTC). It will be effective January 1, 2020. 

Connecticut has never had a comprehensive statute covering trust law.  It relied solely on the Connecticut common law (i.e., judicial decisions) and a smattering of trust statutes to clarify the rules regarding the interpretation and enforcement of trusts.  The Estates & Probate Section of the Connecticut Bar Association tried for decades to pass the Uniform Trust Code in Connecticut.  Starting in 2020, Connecticut trust and estate lawyers will need to consult the new trust law before deciding what course of action to take.  We will attend many talks and seminars learning the new law. 

The Connecticut Uniform Trust Code covers trusts in a Will (i.e., testamentary trusts) and trusts effective during life (i.e., inter vivos trusts).  It covers Connecticut irrevocable trusts as well as revocable trusts.  It affects charitable trusts as well as private trusts.

CUTC allows the creation of directed trusts – trusts that allow the division of trust duties among a group of trustees.  For example, the person who signs the Trust (“the settlor”) can now have one Trustee manage investments and another Trustee with management experience run a business. 

CUTC made Connecticut the 19^th state to authorize domestic asset protection trusts (DAPT).  Starting January 1, 2020, you can put assets in an irrevocable trust with yourself as a beneficiary, and, certain creditors cannot attach or compel a distribution from the trust.  The Trustee must be in Connecticut.  Such a trust will not thwart child support or alimony claims.  The new DAPT cannot circumvent state or federal Medicaid laws.

The new law also allows dynasty trusts.  CUTC extends the rule against perpetuities from 90 years to 800 years.  Connecticut residents can now put their vacation home in a trust and not worry that the trust would terminate in the future.  If properly drafted, such trusts can continue for multiple generations without incurring gift, estate or generation-skipping transfer taxes.

CUTC also clarifies the rights of beneficiaries to notice of changes in a trust, trust accountings, trust administration, or any material facts necessary for the beneficiaries to protect their interests.  For instance, even if a charity is a remainder beneficiary, the Connecticut charitable beneficiary and the Connecticut Attorney General must receive notice.  As this notice provision does not apply to charitable bequests that are subject to powers of appointment, beginning in 2020, more trusts with charitable beneficiaries may include powers of appointment to allow the settlor to change the beneficiary.

 A Trustee has an affirmative duty to respond to a beneficiary’s request for information reasonably related to the administration of the trust.  For trusts created in 2020 and thereafter, Trustees must notify qualified beneficiaries of the trust’s existence, the settlor’s identity, the right to request a copy of the trust, and a

beneficiary’s right to request a trustee’s report. Trustees must report annually, and upon termination of the trust, to current beneficiaries regarding the trust properties, liabilities, receipts, disbursements and the trustee’s compensation.  Upon request of a remainder beneficiary,

Probate Courts Go Digital

 On June 12, 2019, the Probate Court

Administrator’s Office announced that the Probate Courts will start mandatory e-filing in the coming months. Attorneys will no longer file paper copies of petitions and motions in the court. Like Connecticut Superior Courts, attorneys will electronically file petitions and motions, serve them on parties and counsel, receive decrees and notices from the court, view case documents, and pay court fees.  The Probate Courts will use TurboCourt, a software system utilized in 19 other states. The new system is currently in the testing phase in several Probate Court districts. We understand that the statewide launch will not occur until 2020.  Self-represented parties will not have to   e-file, but many will want to do so given its benefits.

The Probate Court Administrator’s Office plans several webinar and live training sessions.  Attorneys will have to master the new Probate Court Rules of Procedure that e-filing will affect.  We are excited about the new e-filing system and the many benefits it will provide.

September, 2019, Issue #25

the Trust must also provide the report to the remainder beneficiary.  A beneficiary may waive the right to trustee reports or other required information.  CUTC also allows the settlor to designate a representative of a beneficiary to receive notice of the existence of a trust, the identity of the trustee, or the right to request a trustee’s report.

The new law may expand the use of inter vivos trusts.  As long as the trust has not become irrevocable, beneficiaries and Trustees of trusts created while the settlor is living can now enter into nonjudicial settlement agreements to avoid seeking probate court approval to (i) bless an accounting, (ii)  grant a trustee a necessary or desirable power, (iii) replace or appoint a trustee, (iv) determine a trustee’s compensation, (v) transfer a trust’s place of administration or (vi) waive trustee liability for certain actions.  Probate courts will retain jurisdiction of all testamentary trusts (i.e., trusts created under a Will and trusts created by the probate court). 

CUTC grants probate courts liberal powers to modify or terminate a trust.  If the Court finds that the settlor, the trustee and all of the beneficiaries consent to the modification or termination of a noncharitable irrevocable trust, the court may approve the modification or termination, even if the change is inconsistent with a material purpose of the trust.  Even if the settlor has died, if all of the beneficiaries consent to the termination or modification of the trust, the court can make the change if it is not inconsistent with the material purpose of the trust.  Courts, however, cannot modify or terminate Special Needs Trusts for disabled beneficiaries as easily as other noncharitable irrevocable trusts.  Courts can only modify Special Needs Trusts to ensure compliance with state or federal law or to change a remainder beneficiary after repayment of all state claims.  Courts, without the consent of all beneficiaries, may modify the administrative or dispositive terms of a trust if it will further the purposes of the trust.  Modifying a trust to conform to changing tax laws would clearly further the purposes of a trust.

For the first time, CUTC sets forth a procedure for making distributions upon termination of a trust.  Beneficiaries must have 30 days to object to the proposed final distribution.  The Trustee may keep a reasonable reserve for the payment of debts, expenses and taxes.  The Trustee may request a release from

liability from the beneficiary, but it will be invalid to the extent that the release was induced by improper conduct of the Trustee, or the beneficiary, at the time of the release, did not know of the beneficiary’s rights or of the material facts relating to the breach. 

The terms of a trust will usually prevail over a statute.  Yet, CUTC sets forth those provisions of CUTC that cannot be altered by trust language.  Those unalterable provisions include (i) the duty of a trustee to act in good faith and in accordance with the terms of the trust, (ii) the power of the court to modify or terminate a trust, adjust the compensation of the Trustee, or require or modify a

ESTATE PLANNING ADVISOR

 surety bond, (iii) the duty of the Trustee to notify each beneficiary who has attained the age of 25 or his representative of the existence of the trust, the identity of the trustee and the right to request a trustee’s report, (iv) the exculpation or personal liability of the Trustee, (v) the jurisdiction of the court, or (vi) the court supervision of testamentary trusts. When drafting trusts in 2020, we will include trust terms that cannot overrule CUTC provisions, but we will include trust terms that may contravene CUTC but streamline trust administration.

Consider updating your current trust if it has been a while since you reviewed it.  The new law may alter the effect of certain trust provisions.  New statutes can cloud the meaning of favorable trust provisions and clarify the meaning of unfavorable trust provisions.  You may want to explore modifying an irrevocable trust using the court’s expanded trust modification powers. 

If you have never had a trust, you have picked the right time to consider signing one.  You can tap the most current trust provisions to keep assets within your family, provide for charity, protect your assets from creditors and qualify for public benefits.  Given that the notice provisions do not apply to trusts signed before 2020, you may want to create your new trust before the end of this year.  

Finally, if you currently serve as a Trustee, you need to know the consequences of the new law.  Trustees do not want to expose themselves to greater liability by failure to follow the unalterable provisions of CUTC.  

The estate planning attorneys at Cipparone & Zaccaro, P.C. can help you understand how this new law affects you.

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Joe Cipparone wrote the articles in this edition.  No taxpayer can avoid tax penalties based on the advice given in this newsletter.  This information is for general purposes only and does not constitute legal advice.  For specific questions related to your situation, you should consult a qualified estate planning attorney.   

What to Do if You Only Have a Short Time to Get Your Financial Affairs in Order

The doctor said at your last visit, “I’m sorry. There is nothing more we can do.  You will not live long. I hope your affairs are in order.” Depression sets in as you realize that your life will end soon. A sense of urgency pervades your thoughts and those around you. If you’re like most people, you have a Will and Revocable Trust but they were probably  done 20 years ago when the kids were young. You know that you need to see an estate planning attorney because you don’t have much time left.

What steps can you take to assure proper and efficient administration of your estate?  Here is a 23-point checklist to help you get your affairs in order if you only have a short time to live. 

1.      Prepare a Durable Power of Attorney.

If your illness renders you unable to sign documents and make financial decisions, you will defeat the implementation of your final financial transactions. By signing a Durable Power of Attorney, you confer on another person the power to sign financial documents for you. 

2.      Prepare an Appointment of Health Care Representative and a Living Will. 

If your illness renders you unable to make health care decisions, you need someone with the power to make those decisions for you. An Appointment of Health Care Representative gives your agent the power to make health care decisions for you. This can include administration of pain medications, enrollment in a hospice program, or hiring home care providers. A Living Will gives the doctor permission to stop life support measures if those measures will not prolong your life. You can include end-of-life wishes in the appointment of health care representative and living will.

3.      Update and Fund your Revocable Trust. 

You have a Revocable Trust but things have changed in the years since you set it up. Your children have grown so they can serve as Trustee or Executor. If you are the Trustee of your Revocable Trust, now is the time to change the Trustee to someone you can trust who will survive you. More importantly, now is the time to put assets in the name of your Revocable Trust. For real estate, that means you must sign a deed conveying the property to the Trustee of the Revocable Trust. For brokerage investments, it means transferring your investments to a trust account or to a transfer on death (TOD) account that names the trust as beneficiary.   For a business, it means assigning a membership interest in a limited liability company (LLC) to the Trustee or transferring stock in a corporation to the Trustee. By funding the Revocable Trust, you will reduce the assets that pass through probate thus saving your estate money.

4.       Make Tax-Free Gifts.

You can move hundreds of thousands of dollars out of your estate by  making $15,000 gifts (the current gift tax annual exclusion) outright to donees or to irrevocable trusts with rights of withdrawal. For instance, if you have 10 grandchildren and 5 children, you can give away a total of $225,000 (15,000 x 15). You can prepay a grandchild’s tuition directly to a college without limit. You can pay a person’s medical care for treatment not covered by insurance. 

5.       Make gifts to grandchildren with your lifetime gift tax exemption. 

If you are married, your spouse receives your unused estate tax exemption (currently $11.4 million). The same is not true for your generation-skipping tax (GST) exemption. It’s use it or lose it. Consequently, if you want to give to grandchildren do so through either lifetime gifts to grandchildren or naming them in a trust for their benefit in your Will or trust.

6.      Make Charitable Gifts.

Now is the time to talk to a charity about the legacy you wish to leave. Find out about programs that could use funding or critical needs that the charity could address with your support.  Give an outright gift for simplicity before you die or name the charity as a beneficiary of your retirement plan.

7.       Get Married.

Many couples who were previously married to others live together without getting married. They fear the commitment and the legal consequences if they break up. If you only have a few weeks to live, though, those concerns disappear. As a spouse, your partner will have many more rights than if he or she survives you as a friend.  If you want your partner to receive your estate, why not tie the knot!

8.       Consolidate Accounts.

You may have multiple brokerage accounts and stocks held in street name or in a dividend reinvestment plan (DRIP). With little time left on the planet, diversification and saving brokerage fees are no longer a major concern.  Consolidating all of your investments into one brokerage account would greatly simplify your estate.  

9.       Exercise Powers of Appointment.

Are you the beneficiary of your parents’ trusts? If so, then speak to the attorney who prepared the estate plan and get a copy of those trusts. Have your attorney determine whether you have the power to appoint the trust principal to others including charitable organizations. If so, have your attorney prepare the documents to exercise your power of appointment.  Confirm the effectiveness of the exercise with your parents’ attorney.

10.     Confirm all beneficiary designations in writing.

Most people designate beneficiaries when they set up an account.  You may have set up the account 10 years ago and have no idea who you designated as beneficiary.  Now is the time to confirm who are the beneficiaries and change them if they do not conform to your current estate plan. 

11.     Create a joint account with sufficient funds to cover your final expenses.

Many expenses will arise upon your death. Who will pay for your medical bills, income taxes, cremation or casket, the funeral, the reception, and burial (or scattering of ashes)? Sometimes it can run in excess of $10,000. Estimate what those expenses might be for you and either prepay them or fund a joint account with your Executor (the person who will carry out your Will).  By creating a joint account, your Executor will have immediate access to the funds to pay for final expenses.  The joint owner will not even need to wait for the death certificate to cover these costs.

12.     Exercise Powers to Appoint Successor Trustees.

Sometimes trusts have powers to appoint Trustees.  If you are the Trustee of a trust, look for the power to choose a successor Trustee. If the trust contains such a power, appoint the right person to succeed you as Trustee of the trust.

13.     Revoke old trusts and obsolete premarital agreements.

Are there old trusts you never funded with provisions that no longer make any sense? Do you have an old premarital agreement that seems obsolete given how long you have been married?  Consider revoking them so no confusion occurs regarding the validity of those legal documents after you die.

14.     Convert Traditional IRAs or 401(k) plans to Roth IRAs or Roth 401(k)s. 

If you have traditional IRAs or regular 401(k) plans, consider converting them to Roth IRAs if you have large medical expenses in the final year of your life.  The medical expenses will offset the additional income tax owed upon converting traditional IRAs and regular 401(k)s to Roth IRAs and Roth 401(k)s. It will not only wisely use your medical expenses, it will free beneficiaries from paying income tax on withdrawals from your IRAs and 401(k)s.

15.     Provide Employee Benefit Information.

If you work for a large employer like General Dynamics, Pfizer or the State of Connecticut, you have valuable employee benefits that may be due upon your death.  Your employee records for a pension, 401(k) plan, deferred compensation, or profit sharing plan could help your loved ones. The information from your employer is not always accurate and sometime cannot be found by the employer. Certainly, information on who to contact in the Human Resources department and who are informed co-workers can prove most valuable.

16.     Organize all of your Insurance & Retirement Documents.

Executors spend a lot of time hunting for long-term care insurance policies, life insurance policies, and health insurance information. They often need to find annuity contracts and IRA beneficiary designation forms. Assembling all of those documents will make your Executor’s job much easier and save legal costs.

17.     Complete a Personal Affairs and Funeral Arrangements Checklist.

You need to write down important information such as: 

•what you own 

•who to contact after you pass away 

•what you want for your wake, funeral and burial, or cremation and memorial service 

•what should be in your obituary  

See our Personal Affairs & Funeral Arrangements Checklist. Write down this information and giving it to your Executor and lawyer will prove invaluable to your family and give them peace of mind that they knew what you want and tried their best to follow your wishes.

18.     Arrange a Care Plan for Your Pets. 

You owe it to your pets to have a plan for them as well.  Who will take them into their home? What do they eat and who is their veterinarian. What funds have you provide for their care? See our article Providing for Pets for more information.

19.     Find Important Government Documents. 

Assemble your social security card, birth certificate, marriage certificate, naturalization papers, green card, and DD-214 military discharge papers.  You may be the only one who knows where they are kept because they may have been issued 50 years ago.

20.     Complete a Digital Asset List.  

It is virtually impossible to gain access to your online life without usernames and passwords. Creating a Digital Asset List can give your executor access to your bank accounts online, the ability to pay bills and investing funds. It can also give your executor the ability to access your  social media accounts such as Facebook, Twitter and LinkedIn. Passwords to laptops, tablets, cell phones, and desktop computers must go to the person you trust – your Executor. See our Digital Assets Checklist to learn more.

21.     Inventory Your Safe Deposit Box.  

Go to the Bank with your Executor to assure that your Executor’s name is on the box and he or she has a key to the box. Inventory what is in the box so you know what will be found after you are gone. 

22.     Resign as Agent, Trustee or Executor.   

If you serve as a fiduciary under a Durable Power of Attorney, a trust or a Will, it is time to resign and turn everything over to a successor. Send notice of your resignation to beneficiaries, financial institutions, accountants, and lawyers. It will complete unfinished business and prevent any legal actions for breach of fiduciary duty. Consult your attorney to make sure all releases from liability are secured.

23.     Establish a Caregiver Plan for Your Dependents.

If you have minor children, provide care for a spouse or adult children, or are guardian for a child, you must create a detailed plan for their care. An experienced estate planning attorney can help you create a memo that clearly describes what your dependents need, the resources available to provide for those needs, and the people and organizations who can help meet those needs.

In Conclusion

Not all of these strategies may apply to you. In the short time you have left, you may not even be able to accomplish the strategies that do apply to you. You will certainly need the assistance of a spouse or a close friend (preferably your Executor) to accomplish these last minute tasks. Nevertheless, the more strategies you consider and act upon, the more efficiently your Executor will administer your estate, the better care your dependents will receive, and the sooner your gifts will make a difference for charity and your loved ones.

If you only have a short time to live and need help with financial estate planning, contact our office today at (860) 442-0150. 

Life is a constantly evolving journey.  Laws change.  People change.  Relationships change.  Finances change. Children come along, attend college, become adults, have their own children, and grow into their golden years.  Unfortunately, the language in a Will stays the same and may fail to accomplish your goals if not updated to parallel the evolutions of your life.  

So, once you have taken the sensible step of meeting with an experienced estate planning attorney and executing your Last Will and Testament (likely including a Trust Agreement, Durable Power of Attorney, and Appointment of a Healthcare Representative), how often should you update your Will and related estate planning  documents?  

Rule of Thumb is Every Three to Five Years

As a rule of thumb, you should review your Will and Trust documents with your estate planning lawyer at least once every three to five years to make sure that they still comply with your goals and any changes in the law.  Additionally, other situations may arise for which you should update your Estate Planning documents without delay.  The following are some of the common situations that necessitate you visiting your estate planning attorney to update your Last Will and Testament to accomplish your goals.

Marriage or Divorce

Whether a person is starting or ending a marriage, either event will have a significant legal impact on the person’s estate plan.  Additionally, marriage or divorce will most certainly change a person’s goals for the ultimate disposition of property.  State laws affect the terms of a Will by giving an omitted spouse some share of your estate, which share is unlikely to match your intentions.  In the event of a divorce, state laws will treat your spouse as if predeceased, but this might not apply to certain beneficiary designations on assets that pass outside of the probate process.  In either case, you should update your estate plan to make sure your property goes to your loved ones.  

Birth of a Child

The birth of a child is a wonderful event, but it also creates the need to protect your child  if something were to happen to you.  Who would serve as the guardian of your child or manage your child’s money during minority?  Who will pay for your child’s education?  If you have more than one child, does your will include your newborn in the disposition?  Should you update beneficiary designations now that you are a parent?  These are all typical concerns you should address in your estate planning.

Child No Longer a Minor

Children’s needs change as they grow older and become more responsible.  You may want to reevaluate who you have named as the executor under your Will or the agent in your other estate planning documents.  The person you have named may no longer be a good candidate for the administrative burden of being an executor because of age or infirmity.  Your child may now be a better choice to be your executor.  Moreover, now that your child is an adult, you may want to evaluate whether a trust for a minor is still necessary, or whether the child now needs a different trust for asset protection in the event of credit problems, divorce, or lawsuits.  

Empty Nest

Have you sold your home and relocated or downsized to suit your changing needs after your children have all moved out?  Does your Will specifically devise your former home to one individual?  Do you now own a vacation property in another state?  Are you considering adding your children to your deed?  You should review these issues with your estate planning attorney to make sure your Will, Trust and beneficiary designations accurately address these issues and your estate plan does not encounter any unforeseen obstacles.  Placing a child on a deed can affect real estate tax abatements, capital gains taxes, and government benefits.  Additionally, you want to simplify the process for your family and avoid the need and expense of an ancillary probate process if you own real estate in other states.  

A Change in Net Worth

Has your net worth significantly increased or decreased since you executed your Last Will and Testament?  If so, you should update your Will to add tax saving provisions or remove unnecessary tax provisions to simplify your Will.  The current estate tax exemption in Connecticut is two million dollars.  With proper planning a married couple with over two million combined net worth can protect up to four million dollars from estate taxes.  For a couple worth three million dollars, the savings could be over $70,000!

A Spouse, Child, or Executor Passes Away

You executed a Will to address the inevitability of your passing.  Although it is heartbreaking to consider, you may outlive a spouse, child or another loved one who is named in your Will as either a beneficiary or an executor.  You should update your will to make sure you control who will fill these vacancies in your Will.

Spouse or Child Applying for Medicaid

If you or your spouse or your child is in need of Medicaid assistance in the near future you should update your Will to make sure you don’t inadvertently disqualify them from getting assistance.  Meet with an experienced elder law attorney to review the allocation of your assets and make sure that you, your spouse and your children are protected to the maximum extent permitted and not left impoverished by the need for medical assistance.

Purchasing a Home with a Person Outside of Marriage

Cohabitating with a person outside of marriage can create problems for your estate plan.  If that person is not related to you by blood or marriage, then they have no right to inherit from you or serve as your healthcare proxy.  If you live with a person and buy personal property and real estate together you may need to separate that property at some point because of a change in the relationship or the passing of your partner.  How do you determine who owned what?  Do you want your partner to inherit from you?  You should consult a lawyer to document your wishes while your relationship is strong and cooperation is likely. 

There are many reasons to update your Will and estate plan. Don’t hesitate to contact the estate planning attorneys at Cipparone & Zaccaro, PC to keep your estate plan current. 

After a parent, relative or friend dies, you may be surprised to learn that you were chosen to be the Executor of his or her estate.  You might think of your appointment as an honor, a mark of trust and an indicator of how highly the decedent valued your relationship.  In truth, being chosen as an Executor can also feel like a burden, an obligation you might not want to tackle for any number of reasons. 

Do You Want to Serve as Executor? 

The first thing you should know is that you can decline the job and let it pass to someone else.  Every estate and family situation is unique.  Many factors will influence the amount of work an Executor will need to do:  the size of the estate, the type of assets owned by the decedent, the number of debts the decedent had, how well the beneficiaries get along, the quality of decedent’s Will and Trust(s), and your state's laws.

Here are some factors that can help you decide. 

Practical Considerations

1. Being the Executor of an estate is time-consuming.  It can be hard for you to be effective in this role if you work full time or have a family.
2. Because of the time commitment and possible stressors that come from dealing with family members, creditors, and professionals in the probate arena, being the Executor of an estate can wear you down if you have personal health problems.  This is equally true if you are caring for another family member and cannot spare the time or energy.
3. If you live outside the state where the decedent lived, that alone may cause you to decline being the Executor of the estate. Physical distance, time difference, and other factors make an already complex job even harder to manage. 

Emotional and Family Dynamic Reasons

Concerns regarding death can bring out the worst in people.  Even families that generally get along well can have fractures, arguments, and bad feelings during the loss of a parent or grandparent.  Many complex issues such as grief and jealousies over “who got what” come up and can alter relationships.  The Executor of the estate is often the brunt of beneficiaries' fear and anger.  And, if you are one of those family members grieving, this added burden can make an already difficult time significantly worse.

Issues of Temperament

Being a good Executor carries with it a requirement to be fair and even-tempered.  That can be hard under the best circumstances.  But, during a period of bereavement, it might seem Herculean. Some things to consider: 

• A good Executor must be careful, patient, thorough, organized and committed to doing a good job.  The amount of detail and minutiae is significant.
• An Executor must have excellent people skills. There is a large professional community involved in the process (bankers, accountants, realtors, appraisers and other agents) that you will need to tap to do your job well.  You will need to deal respectfully with troublesome family members and dependent beneficiaries.
• Stepping into a key decision-making role when you’re in the midst of grieving for a loved one can feel overwhelming.  The task list is huge and the risk of making a significant mistake (like improperly distributing the inheritance or paying creditors that have low priority) is very real.

If the prospect of acting as the Executor under a Will seems overwhelming, consider hiring experienced trust and estate counsel to guide you or handle the entire probate process.  Attorney fees are paid through the estate.  When you hire an estate settlement attorney to help you take a parent’s Will through probate, you are still involved in the overall proceedings and provide valuable family knowledge to assure the best outcome.  Hiring an experienced attorney honors your loved one’s wishes to get through probate in a timely and fair manner.  Knowledgeable assistance reduces your risk of making a critical mistake (for which you are literally liable!).

When a person dies, the State of Connecticut assesses a probate court fee based on the value of all property the decedent owned at death. Due to the budget crisis in Connecticut, the Connecticut General Assembly stopped funding the probate court system from general revenues. To help the probate courts become self-supporting, the legislature passed Public Act 15-5. This new law creates an inchoate lien to ensure payment of probate court fees.  A lien is an encumbrance on real estate that a seller must pay before the sale of the real estate. Some liens are inchoate which means that there is no record of them on the land records of the town where the real estate is located. Only state and federal governments can create inchoate liens. 

Effective July 1, 2015, the new lien applies to unpaid probate court fees including .5% per month interest on those fees from the date they are due (30 days after 6 months from death) to the date they are paid. This new inchoate lien is in addition to the lien for Connecticut estate taxes. To remove the probate court fee lien from a decedent’s real estate, the person in charge of probating the estate (i.e. – the Executor or Administrator) must file on the town land records a Certificate releasing the probate fee lien. The Probate Court handling the decedent’s estate issues the Certificate.

Let’s look at an example.  Say your father dies in Montville, Connecticut, and you are appointed Executor based on his Will. You timely file his Connecticut estate tax return within 6 months of his death. You list his life insurance, brokerage accounts, his Montville home, bank accounts and IRAs on the return. The Court issues a Certificate releasing the probate court fee lien on his home and you file it in the Montville land records. You file a Financial Report and an Affidavit of Closing.  You’re done. 

But let’s say that your father had bought a lot next door to his Montville home and you did not find the deed until one year after his estate was closed.  You list the lot for sale and you have a buyer.  The real estate attorney representing the buyer hires a title searcher who searches the Montville land records. The searcher finds that there is a Certificate releasing the probate court lien on your father’s home but not on the lot that you are now trying to sell. The buyer’s real estate attorney notifies your attorney that you do not have good title to the lot because the new inchoate lien for probate fees has not been released.  

How do you fix this problem? Unfortunately, it’s not a simple process. Your attorney tells you that you must reopen your father’s estate, amend the Connecticut estate tax return, pay more probate court fees based on the value of the lot, file a new Financial Report, and obtain the Certificate releasing the probate court fee lien. You ask how much it will cost in additional legal fees and probate court fees and the answer makes you wonder whether it is worth selling the lot. Probate fees range from 1% to .05% of the gross estate. For a lot that sells for $100,000, you would pay $465 in additional probate court fees. 

Your attorney estimates that it will take 30 days to complete all of those tasks in Probate Court. You complain that you will lose the buyer with that sort of delay.  But the attorney says that the Probate Court will issue a Certificate releasing the probate fee lien if payment is reasonably assured.  If the attorney sends a letter to the Probate Court that he will disburse the probate fees from the proceeds of the sale of real estate, payment is reasonably assured. Given the net proceeds you will receive from selling lot, you approve your attorney reopening the estate to obtain the Certificate releasing the lien for probate court fees on the lot.  

As you can see from this example, the new probate court fee lien can be a big “Gotcha!” in the sale of real estate. The new probate court fee lien may become an ugly surprise for families who do probate on their own without consulting a probate attorney. They may save a few thousand dollars in the short term only to waste time and money in the long run. Real estate closing attorneys must add the clearing of this lien to their closing checklists when the owner of the real estate has died.

For more on the calculation of probate court fees, see our blog New Fee Schedule Removes Cap on Probate Court Fees.

The recent changes in Connecticut probate laws that took effect on July 1, 2015, simplify some aspects and clarify other aspects of the probate process. In this blog post, I explain an important change in the probate notification process and what it means for Executors of estates.

When someone dies, many people have an interest in the probate proceedings. Beneficiaries under the will, intestate heirs (those people who would inherit if there was no will) and creditors of the decedent all care about what happens to the decedent’s property. Whenever a charity is a beneficiary, the Attorney General’s Office of the State of Connecticut also has an interest in the probate proceedings. Consequently, it is not uncommon to have up to 30 different parties with potential interest in the probate process.

The Connecticut Probate Rules of Procedure used to require notification by regular mail of every document filed in court to all parties.  A party is any person who has a legal or financial interest in the probate court proceeding. 

This universal notification requirement led to a lot of extra, unnecessary paperwork. For instance, the Executor had to send notifications to people who no longer had an interest in the estate. Let’s say the decedent left $10,000 to their church and the Executor disburses that money to the church prior to filing the Inventory. Under the old law, you still had to send the church a copy of the Inventory, the estate tax return, and the financial reports even after the charity has already been paid its bequest. You could also have a creditor who the Executor pays in full or a creditor whose claim the Executor barred pursuant to state statute.  Nevertheless, the Executor had to continue sending to those creditors a copy of the all the documents filed in the probate court. With all the extra paperwork and mailing costs, you can understand why people dread going through probate.

Now under the new Probate Rules of Procedure, the court may remove a person from the list of persons to whom the court will give notice of future proceedings.  A party removed from the notice list can request special notice; if granted, the party would return to the notice list.  This new provision allows Executors to remove a beneficiary or creditor who has been paid in full from the notice list.  Executors can also remove creditors with barred claims from the notification list.  

In another good change, after sending a copy of the decree admitting a will to probate and the notice, the court is not required to give notice of subsequent proceedings to the decedent’s heirs or beneficiaries under any purported will not admitted to probate.  Thus, intestate heirs do not have to receive notice once the Will is admitted to probate.  The Executor is also excused from the requirement of sending copies of the Inventory, Financial Report, or Affidavit of Closing to any beneficiary of a specific bequest who has acknowledged, in writing, receipt of the bequest. The Executor only has to file a copy of the acknowledgement with the court. These reductions in the paperwork burden save the Executor time and the estate money.  

As probate lawyers and probate judges continue to operate under the Rules of Procedure, they find more ways to simplify probate for Executors.  One of the best improvements this year are the new notification rules. 

Section 30 of the Connecticut Probate Court Rules of Procedure now requires a report called an Affidavit of Closing. While this may sound like extra paperwork, it’s actually a good thing for all involved because it ensures that what was supposed to be done actually got done.

In the Affidavit of Closing, the Executor of an estate must confirm what he or she did with the estate assets after the court approved the Financial Report which essentially says, “Here’s what the estate consists of and here’s what we’re going to do with it.” The Affidavit of Closing answers questions like “Did the beneficiaries receive the assets as proposed in the Financial Report?” and “Did the Executor set up the reserve to pay future legal fees and accounting fees needed to file the income tax returns or collect on a claim after the estate is closed?” As you can see, these are questions the beneficiaries, creditors and the probate court have an interest in making sure get answered satisfactorily. 

In the past, the Affidavit of Closing was not always submitted. Connecticut Probate Courts used to have discretion in determining whether to require an Affidavit of Closing. Some probate courts always asked for Affidavit of Closing and other probate courts didn’t ask. Executors never knew whether the probate court they were dealing with would ask for an Affidavit of Closing or not.  

Estate Executors do not need to wonder any more.  After July 1, 2015, all Executors must file an Affidavit of Closing after approval of the financial report or final account. While this sounds like extra work, it is a good thing because the Affidavit of Closing acts as a sort of protection for both the Executor and the beneficiaries of the estate. It makes sure that the Executor follows the Financial Report that the court approved. Following the court decree will relieve the Executor of liability for the estate. It also confirms to the court that the beneficiaries received the distribution approved by the court. The Probate Court can confirm whether the estate was closed as decreed at the beginning of the estate administration.  If not, the Probate Court will ask for an explanation of the delay in closing the estate.  

One of the benefits of the Rules of Procedure originally enacted in 2013 was that it imposed uniformity among Connecticut’s probate courts. This new rule regarding Affidavits of Closing further ensures that uniformity.

Contact our estate planning law firm today if you have questions about how an Affidavit of Closing or other recent probate rule changes affects your situation.

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:

1. The decedent’s entire estate consists of property held in a trust
2. Property is owned jointly with another person or entity
3. Investments are in a brokerage account or retirement plan with a designated beneficiary
4. 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:

1. An Inventory of the estate needs to be filed within 2 months of appointment of the executor
2. A Return & List of Claims needs to be filed within 5 months of appointment
3. A Connecticut estate tax return needs to be filed within 6 months of decedent’s death and
4. 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.

An Executor of a Will manages the administration of a deceased person's estate. One of the Executor's main jobs during probate is to pay people or institutions who are owed money by the deceased person. Those people or institutions are called “creditors.”

Probate can be overwhelming because the Executor must pay creditors in a specific order. The Executor may not be able to pay every creditor. An Executor is personally liable if debts are paid out of order. This is why it is important for the Executor to follow the right procedures to avoid unnecessary problems and personal liability.

The Executor of an estate in probate must begin by searching through the deceased persons papers looking for creditors. Connecticut law is very specific about the proper way to provide notice to potential creditors of an estate. The Probate Court will publish notice in the local newspaper warning creditors to present their claims to the Executor. The Executor may give known creditors actual notice by mailing a letter to them. In Connecticut, an Executor can bar claims of creditors who do not present their claims within 90 days of the date of letter. In the letter, the Executor can require a creditor to submit an affidavit in support of the creditor’s claim.

Creditors have 150 days to file a claim in a Connecticut estate going through probate unless the Executor sends the creditor the letter described above. A creditor can’t just ignore the Executor and march into any court other than the probate court and get a judgment for payment. A creditor must first file the claim with the Executor. Once a claim is filed, the Executor must accept, reject or pay the claim within 90 days. If the Executor fails to respond to the claim within 90 days, the creditor must give 30 days advance notice to the Executor that it will bring suit on the claim. If the Executor rejects the claim or refuses to accept or pay the claim, the creditor can sue the estate in Connecticut Superior Court.

Priority of Claims in the Probate Process

Every state sets the priority of claims in probate. Connecticut sets the priorities in the following order:

1. funeral expenses
2. estate administration expenses
3. claims due for the last sickness of the decedent;
4. all lawful taxes and all claims due the state of Connecticut and the United States
5. all claims due any laborer or mechanic for personal wages for labor performed within three months immediately before the decedent’s death
6. other preferred claims
7. all other claims (credit cards, personal loans, etc.) allowed in proportion to their respective amounts.

Executors must analyze the priority of each claim in the probate process. All creditors in a certain group must be paid before creditors in the next priority group can be paid. If there aren't enough funds to pay all the creditors in one group, then the payments are prorated among the creditors in that group. If the estate doesn't have enough money to pay all of its claims, the executor must declare the estate insolvent. The estate’s beneficiaries only receive a distribution once all the creditor claims have been satisfied.

Dealing with creditor claims during the probate process can be complicated and risky. If you make mistakes as Executor, you can be held personally liable. This is why it is important to have an attorney experienced in the probate process assisting you.

1. Failure to Plan for Incapacity. This mistake can cause your family great stress and acrimony, and leave your finances in disarray. You should have a financial Durable Power Of Attorney, an Appointment of Health Care Representative and a Living Will. You should not solely rely on joint bank accounts with children to manage incapacity.
2. Failure to Plan for Long-Term Care Expenses. If you can afford it, you should purchase and maintain a long-term care insurance policy. Long-term care costs pose a great threat to your financial future. If you are not financially able to pay for long-term care insurance, you should make sure you will qualify for Medicaid. Only those most fortunate with over $1,000,000 in liquid, non-retirement assets need not be concerned about long-term care expenses.
3. Outdated Wills, Trusts and Beneficiary Designations. You should review your wills, Trusts and beneficiary designations at least every five years and whenever there is a major change in your family circumstances (e.g., onset of dementia, death of a parent, marriage, divorce, birth of first child, moving to another state) or financial circumstances (e.g. – purchase or sale of a business or real estate, theft by family members).  Laws can change and people can change.
4. Poor Choice of Agent, Trustee or Personal Representative. Appointing a family member or the child who lives closest is not always best. It is important to pick a person respected by other family members who has the time, ability, and willingness to serve. Often, appointing co-fiduciaries makes sense. In cases where members of the family seldom agree with each other, are scattered geographically, or the assets are complex, appointing a professional trustee may be best.
5. Lack of Adequate Records. You should keep good records. If you don’t, it can lead to missed assets, unpaid bills, and extra work for your Executor or Trustee.  It can also mean that your probate attorney has to spend more time on your estate which leads to greater expenses for your family.
6. Overuse of Wills. Probate can be expensive. Your executor is required to file an Inventory of assets, and account for funds that came into, and went out of, the estate.  For a married couple of modest means, other devices such as life insurance beneficiary designations, joint ownership, and payable on death arrangements can often avoid probate at considerably less expense than using a Will for those purposes. A Revocable Trust can also avoid probate while saving taxes and keeping assets in the family.
7. Failing to Use Trusts to Keep Assets in the Family.  Most people who have children and grandchildren want to keep their inheritance in the family. Yet, they often just give their property outright to children and grandchildren.  It is simple and clean.  But it also means that your child can spend it unwisely, his or her spouse could take it all in a divorce or at your child’s death, or creditors could seize it.  Your child’s spouse could remarry and all of the inheritance you left to your child goes to the spouse’s new mate. With an outright distribution to your children, your grandchildren may never receive anything from your estate.  By using a trust, you can control who receives it and when.  You can protect it for your grandchildren.
8. Failure to Communicate. Although you may wish to keep your estate plan confidential, disclosure is often wise. Named executors and trustees are more likely to accept the office and family disputes can be avoided or minimized by discussing your estate plan with your children.
9. Inadequate Financial Planning. Estate planning involves more than the preparation of a will and trust. Cash flow is so important after someone dies.  How will your heirs pay for the funeral, administration expenses, and estate or income taxes? You may own residential real estate or a retirement plan with designated beneficiaries. But the real estate cannot pay bills and the retirement plan distributions are subject to income taxes upon distribution.  A small joint account with a trusted family member who knows the purpose of the account can help ease the early administration expenses of an estate. Life insurance can provide needed liquidity to pay larger administration expenses, court costs, and taxes.
10. Using Attorneys with Little Experience in Estate Planning or Elder Law.  Estate planning can be quite complex. It involves understanding estate and gift tax laws, income tax laws, probate procedure, financial planning, and long-term care planning. The strategies taken can lead to vastly different results.  Seeing experienced estate planning attorneys with substantial experience can make a difference.