PDF ALL YOU NEED TO KNOW ABOUT LIVING TRUSTS AND PROBATE By ...
ALL YOU NEED TO KNOW ABOUT LIVING TRUSTS AND PROBATE By Attorney Paul T. Czepiga, JD, CPA A.Whatisalivingtrust? Alivingtrustisawrittendocumentthatyoucreatewithyourlawyerduringyour lifetime.Youmaychoosetofunditduringyourlifetime,orleaveitunfundeduntil yourdeath.By"fundit,"Imeanthatyouactuallymakeitthelegalownerofyour assets,someorallofthem;itisuptoyoutodecide.Forexample,youmightchoose toretitleyourbankaccounts,brokerageaccounts,orevenyourhouseintothename ofyourtrust.Ifyoudoso,youwillnolongerbetheownerofthoseassets--the Trusteeofyourtrustwillbetheowner. Yourtrustwillcontainprovisionsformanagementofthetransferredassetsduring yourlifetimeandwillinclude,aswell,whathappenstothoseassetsuponyour death.Inthelatterregard,itfunctionsasaWillsubstitute.Thetrusteewill administerthetrustinaccordancewithitsterms.Mostoftenyou,thecreatorofthe trust,willbethetrustee,althoughsometimesthecreatorwillnameaspouse,child, friendorbankasaCo-Trustee.IfyouaretheonlyTrustee,thenyouwillnamea spouse,child,friendorbankasyoursuccessortrusteetoserveuponyourdeathor disability. B.Isalivingtrustrevocable? Yes,alivingtrustisrevocable,meaningthatyoucanenditatanytime.You,asthe creatorofthetrust(the"Grantor"),reservetherighttoamendit,revokeit,change thetrustee,andgenerallyalterthetrusthoweveryouplease.Becauseyouretain suchrights,youaretreatedbytheInternalRevenueServiceasifyoustillownedthe propertyinthetrust.Therefore,youwillreportonyourpersonalIncomeTax Return,Form1040,anyincomegeneratedbythetransferredassets.And,solongas youareaTrusteeorCo-Trusteeofyourtrust,thetrustwillnothavetofilea separateincometaxreturn.IfyouarenottheTrusteeorco-Trustee,thetrustwill havetofileaninformationreturn,butyoustillreporttheincomeonyourForm 1040.Therevocabilityofalivingtrustbyyou,itscreator,meansthatalivingtrust, intermsofyourcontrolovertheassets,isnodifferentthanifyouownedthem outright.Alivingtrustis,inessence,yourpersonalcheckbook--youcandowiththe assetswhateveryouwish.Althoughthetrustisthelegalowner,theIRStreatsyou astheownerbecauseyoureallyhavenotpartedwithcontrol--youcantakethe assetsoutofthetrustforyourpersonaluseatanytimeandforanyreason.You suffernolossofcontrolorofincome. C.CanIreducemyestatetaxliabilitywithalivingtrust? Alivingtrustisrevocableandbecauseyoucanobtainaccesstoalloftheassetsat anytimeforanyreason,then,uponyourdeath,anyassetsinthetrustwillalsobe includedinyourgrossestatefordeathtaxpurposes.Thisisanimportantpoint--a
livingtrustdoesnotofitselfsaveanydeathtaxes.Whateverdeathtaxsavingscan beachievedinaWillcanalsobeachievedinalivingtrust.Onedoesnothaveadeath taxadvantageovertheother.Forthisreasonaswell,thereisnominimumnet worthorwealththatisnecessarytoconsideralivingtrust. D.Whatarethebenefitsofalivingtrust? 1.Avoidingprobate First,thoseassetsthatyouhavetransferredtothetrustpriortoyourdeathwill avoidprobate.AprimarypurposeofaProbateCourtwhensomeonediesisto facilitatethetransferoftitlefromthepersonwhodiedtothebeneficiaries.The ProbateCourthasjurisdictiononlyoveranestatetotheextentthatapersonowned assetsinhisorhersolenameatthetimeofdeath.Inthecaseofafundedliving trust,thetrust,whichisthelegalowneroftheassets,didnotdieandtheProbate Courtdoesnotgetinvolved.Uponthegrantor'sdeath,thetrusteeofthetrustwilldo withtheassetswhateverthetrustsays.Thetrustmaysay,forexample,thatuponits grantor'sdeath,thattheTrustwillendandtheassetswillbedistributedbythe Trusteetothebeneficiaries,ortheTrustmaysaythattheTrusteewillcontinueto holdtheassets--italldependsuponwhattheGrantorstatedinthedocument.The bottomline--UpontheGrantor'sdeath,thetrustservesasaWilltotheextentthatit hasassetsinit. AvoidingProbatemeansthattheassetscanbetransferredimmediatelyafterdeath totheintendedbeneficiarieswithoutdelay.Itdoesnotmean,however,thatthe assetsavoiddeathtaxes,asdiscussedearlier,orthatyouavoidProbateCourtfees. ProbateCourtschargefeesbasedonthesizeofthetaxableestate,notonthesizeof theprobateestate(Seepage____).ProbatefeesareoneofthewaysthattheProbate Courtsarefundedtopaystaffandoperatingcosts. 2.Privacy UnlikeaWill,whichisapublicdocumentthatmustbefiledwiththeProbateCourt atdeath,alivingWillisprivateandisnotavailableforinspectionbythepublicat yourdeath.Ihavefoundthatthisprivacyelementisseldomamotivatingfactorfor usingalivingtrust. 3.Aplanningtoolforincapacity Alivingtrustwillensurethatyourassetsaremanagedforyourbenefitintheevent thatyoubecomeincapacitated.Shouldyoubecomeeitherphysicallyormentally disabled,then,ifyourassetsareinalivingtrust,yoursuccessortrusteewill continuetomanagethetrustanditsassetsinaccordancewiththetermsthatyou established.ThereisnoneedtoseekaconservatorintheProbateCourtanda ProbateCourt,intheexerciseofitsdiscretion,cannowrefusetoappointa Conservatorifitfeelsotherarrangementsareinplace,suchaslivingtrust,forthe
incapacitatedperson. 4.Out-of-staterealestate Foroutofstaterealproperty,alivingtrustownssuchproperty,andassuch,itwill notbenecessarytogothroughthatstate'sprobateproceduresortopayalawyer fromthatstatetohandletheprobate,usuallyatconsiderablecost,forjusttheone asset. 5.Familyfriction Ifthereisasecondmarriage,orifyouhavechildrenwhodonotgetalong,thena livingtrustmaybebest(ifyourTrusteeisfaithfultoyourwishes)becauseitwillbe harderforoneoftheotherpotentialbeneficiariestocausetroublefortrouble'ssake iftheydonotknowwhatthetrustcontainsorsays--rememberthatitisaprivate document. E.HowtoreapthebenefitsofaLivingTrust Youwillrealizetheabovebenefitsonlyifyouactuallyfundyourlivingtrust.Some peoplewillhaveaterrificlivingtrustandnotfundit,eitherintentionallyorby accident.Ifitisintentional,thepersonlikelyhasa"pourover"Willsothatinthe eventthepersonownsanyassetsintheirnameatthetimeoftheirdeath,their "pour-over"Will,whichwaspreparedasapartoftheirestateplan,providesthat thoseassetsaretobeaddedtotheassetsofthepreviouslycreated,butunfunded, livingtrust,sothattheywillbedistributedaccordingtothetermsofthetrust. However,allsuchassetswillbesubjecttoprobateatdeathbeforetheyareaddedto thetrust. Becauseanyassetswhichyoumayowninyourownnameatthetimeofyourdeath willbesubjecttoprobateatyourdeath,eventhoughtheywillultimatelybeadded totheassetsheldintheLivingTrust,youshouldcarefullyandcontinuallyreview thoseassetsheldinyourownname(whethernowownedoracquiredlater)tobe surethatsuchownershipisappropriateinlightofyourdesiretoavoidprobateat death. Apersonwhohascreatedalivingtrustmaychoosenottofunditinitially.Theymay decidetowaituntilsuchtimeastheyareunabletomanagetheiraffairsandeither funditatthatpointorhavesomeoneholdingtheirPowerofAttorneyfundit.The decisiontodelayfundingcouldalsobeanoutgrowthofwantingtoavoidtheone timeadministrativestepsthathavetobetakeninordertofundit(dealingwithall thebanksthatholdyourCDs,yourbrokerageaccountorindividualstock certificates,doingnewdeedstoyourrealestateetc.). Insummary,alivingtrusthasverypracticalapplications,butthisdoesnotmean thateveryoneneedsone.Itisaveryflexibleplanningtoolandhaslifetimeandpost
deathapplications.Thedecisiontousealivingtrustcannot,however,bemadeina vacuum--itmustbeviewedinlightofyourassets,wealth,andfamilyrelationships. F.Whataboutprobateisitsoterrible? Oneofthebenefitsofaproperlydraftedandfundedlivingtrustisthatitenablesa persontoavoidprobateupontheirdeath.Whetherprobateavoidanceisa"good"or a"bad"thingishighlysubjective.Toanswerthequestion,weneedtofirstdefine exactlywhatprobateisandthentooverlaytheprocessonyourfinancialandfamily situationtodeterminewhetherprobateavoidanceisinyourbestinterests. Ingeneral,whenapersondiesthefunctionoftheprobatecourtisthefollowing:to ensurethat,iftherewasaWill,itisthedecedent'struelastWill,andnotaforgedor revokedversion;toensurethatthedecedent'sassetsaresafeguardedandprotected fromwaste,theft,orneglect;toensurethatvalidbillsanddebtsarepaid,including deathtaxes,ifany;andtomakesurethatwhatremainsispaidtotheintended beneficiariesinaccordancewiththedecedent'svalidLastWillandTestament.In summary,thepurposeistooverseethetransferoftitleofthedecedent'sassetsfrom thedecedent'snametothedecedent'sbeneficiaries,makingsurealongthewaythat alloftheassetsareaccountedforandthatallofthebillsarepaid.Themore importantstepsintheprobateprocessaredescribedchronologicallybelow: 1.ApplicationforAdministrationorProbateofWill ThisisthefirstformfiledwiththeProbateCourt,anditgivesthecourtallpertinent informationaboutbeneficiariesandfamilymembers.TheoriginalWill,ifthereis one,accompaniesthisform.Afterthecourtreceivesthisform,itwillsetahearingto accepttheWillandalsotoappointanExecutoroftheestate.TheProbateCourtwill issuecertificatestotheExecutor.ThesecertificateswillevidencetheExecutor's authoritytoactonbehalfoftheestate.Inmanysituations,theWillcanbeaccepted andtheExecutorappointedwithouttheneedforahearingorforanyonetogotothe probatecourtatall. 2.CertificateforLandRecords Ifthedecedentownedrealestate,theprobatecourtwillgivetheexecutorthisform toberecordedonthelandrecordsshowingthedecedentdiedandthat,ifthe propertywasownedjointly,thattheremainingjointownersnowowntheproperty. 3.FilingtheInventory AbouttwomonthsaftertheExecutorisappointed,theExecutormustfilean Inventoryoftheestate'sassetswiththeprobatecourt.ThisInventorywillcontain alloftheassetsheldbythedecedentinhisorhernamesolely.Thepurposeofthe InventoryistoshowwhatassetsaresubjecttotheCourt'sjurisdiction--thecourt onlydealswithassetsinthedecedent'sownname.Assetsthatarepayableby
beneficiarydesignation(lifeinsuranceandIRAs,forexample)orthatareheld jointly(suchasabankaccounttitled"husbandorwife"or"parentorchild)pass outsideoftheprobateprocessbecausethecourt'sinterventionisnotneededto transfertitle.Inthecaseofjointlytitledassets,titlepassesautomaticallyatdeathto thesurvivingnamedaccountholdersandforlifeinsurance,forexample,titlepasses whentheinsurancecompanysignsanddeliverstheproceedschecktonamed beneficiary. 4.Liabilities Next,theExecutormustdeterminewhatbillswereowedatthedecedent'sdeath. Thiswillincludeanymedicalbills,taxbills,alimony,mortgages,etc.Thesebillswill besetforthonaReturnandListofClaims,whichtheExecutorfileswiththeProbate Court.Thisformmustbefiledbytheendofthefifthmonthfollowingthe appointmentofexecutor. 5.ConnecticutSuccessionTaxReturn TheExecutorwillneedtofileaConnecticutSuccessionTaxReturnsixmonthsfrom thedateofdeath,andanytaxduemustbepaidatthistime.Thistaxreturnwill indicateallproperty,whethersolelyownedorjointlyownedbythedecedent,any pensionsortrusts,anygiftsthatmighthavebeengivenduringthelastthreeyears, funeralexpenses,burialexpenses,andanyotherbills.Althoughthistaxreturnisnot partoftheprobateprocess,itisfiledwiththeProbateCourtandtheCourtforwards ittotheStateDepartmentofRevenueServices.AProbateCourtfeeandasuccession taxwillbeassessedagainstthetaxableestatereflectedonthereturn. 6.FederalEstateTaxReturn Ninemonthsafterthedateofdeath,theExecutormayneedtofileafederalestate taxreturn,dependingonthesizeoftheestate,andanypayanyfederaltax.Thistax returnwillshow,liketheSuccessionTaxReturn,everythingintheestate,anditwill includelifeinsurance(whichisnottaxablebytheStateofConnecticut).Thisformis sentdirectlytotheIRSwhowillthenassessitsowntaxonthenettaxableestate. 7.TheFinalAccount AftertheStateandFederaltaxingauthoritieshavereviewedtheirrespectivetax returns,andconcludedthatallinheritancetaxeshavebeenpaid,theywillsendthe Executorastatementthatwillshowthatalltaxeshavebeenpaid.Uponreceiptof thestatement,theExecutorcanstarttoprepareaFinalAccountingandProposed DistributionoftheestateforProbateCourtpurposes.Thefinalaccountshowsallof theactivitythatoccurredintheProbateestate,usingasthestartingpoint,thetotal assetsshownontheInventorythatwasfiledwiththeProbateCourtatthe beginningoftheprocess.Afterfilingtheaccountingandproposeddistribution,the Courtwillholdahearingandwillaccepttheaccountingandproposeddistribution
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related download
- pdf so you want to be a lawyer pennsylvania bar association
- pdf responses to information requests rirs justice
- pdf why study law at university if i want to become a lawyer
- pdf why study law should people who weren t
- pdf all you need to know about living trusts and probate by
- pdf mediator licensing and certification in california
- pdf you and your lawyer pleis nb
- pdf guardianship or power of attorney which one do you need
- pdf how to be the personal representative for a small estate
- pdf real estate broker associate broker application
Related searches
- what you need to buy a house
- what you need to become a lawyer
- things to know about investing in stocks
- what you need to start a business
- what to know about annuities
- why you need to travel
- what you need to become a teacher
- why do you need to learn english
- what you need to buy a car
- what you need to travel
- everything you need to know about stocks
- need to know business terms