Lisa
Nachmias Davis
Davis
O'Sullivan & Priest
LLC
davis@sharinglaw.net
www.sharinglaw.net
READ THE DISCLAIMER!!
(last
updated June 27, 2022)
Somebody dies. After the
important things are taken care of
(grieving -- or at least beginning to grieve; burial or cremation;
funeral or memorial; making sure any person or animal
dependent on the deceased person is being cared for), at some point it
is necessary to deal with financial matters. This
essay is a short guide to some of the pesky PAPERWORK required, that
is, filings in
probate court, especially for those who don't own a lot, or didn't
expect to be dealing with the probate court at all. Click on the
links to get to the forms or sites to which I refer. This is not
a
comprehensive list! There are particular complexities that relate
to
IRA or retirement plan distributions and these must be dealt with in a
timely fashion-- don't procrastinate but don't rush.
OK. You are now ready to tackle
the financial matters - the paperwork.
The first thought may be:
Dad had
a will, we must go to probate court. An alternative thought may
be: everything was joint (or in the living trust), so there is
nothing to do, we don't have to go to probate court. In each
case, it isn't so simple.
True, CT
law
requires that anyone with custody of a person's original last will and
testament take that will to the probate court for the town where the
person resided (check this link for the
correct court location). If you think probate may not be
required, or
if you aren't sure, you can file the will with a simple form, "PC-211" (download
PDF), and a death certificate with the Social Security number blacked
out. The court wants the original will, not a copy (if an exception
applies, you need an attorney). Keep a copy, of course.
Just because there is a will, is
"probate" required? Depends what you mean by "probate."
In Connecticut, technically "probate" is a legal procedure that
takes at least five months, might involves court hearings, means that
the
COURT (not a document) appoints an executor (if named in the will) or
administrator (if not), and requires filing several forms with copies
to many parties. Full "probate" is ONLY required by law if the
person
who dies, with or
without a will, (1) owned real estate (not just a life use) that does
not
pass by the deed to the "surviving" joint owner, OR (2) owned $40,000
or
more of other assets that also don't pass by beneficiary or joint
ownership to another person. (This could include life insurance,
if there was no beneficiary or the beneficiary was deceased.) You
can read
more about this (PDF again) on the Probate Court website,
too. And you will probably need a lawyer or at a minimum a
consultation. (We are not a helpline if you need full probate.)
So whether or not full "probate" is really required depends on what was
owned, and how it was owned.
What if the person died owning
something, but not real estate and not worth as much as
$40,000? (Not counting the things that passed by
beneficiary
designation, joint ownership, etc.)
If the person did NOT own real
estate, and what the person owned is worth LESS than $40,000 (not
counting what passed by
beneficiary, etc.), there is still some
paperwork to be done at the Probate Court in order to get those assets
out of
the dead person's name and into someone else's. That is --
it depends. If the person's "assets" consisted of old furniture,
dishes, and a few books, nobody is probably going to ask for paperwork
if the children, or the family friend -- whoever is in charge -- takes
the stuff home or to Goodwill. The assumption is that the cost of
removal wipes out the value of the items. (If the person's
"assets" consist of collection of Hummel figurines and the family is
about to come to blows over who gets which one, that could be
different!) Ordinary "stuff" doesn't require the Probate Court
unless there is an argument about what happens to it.
Assume for the
moment that Dad owned bank or brokerage accounts jointly with Joe and
Suzy, and these
accounts passed to Joe and Suzy upon death. However, his $5,000 life
insurance policy named Mom, who died five years ago. The insurance
company won't pay the $5,000 to Joe and Suzy but want to make the check
to "Estate of Dad."
WAIT!! If Dad was on
Title 19 (Medicaid) (in a nursing home or getting long-term care at
home), OR received care in a state institution or from DMHAS or DDS, OR
was in prison in the last two years, OR owed child support that was
paid by the state -- Joe and Suzy may not be getting that $5,000 at
all. Under a terrible law called 4a-16,
even if Joe and Suzy do all the
paperwork and even if they pay a lawyer to prepare it, once the State
finds out that there is $5,000 lying around, it can file a certificate
to become administrator of the estate, seize the money, and it doesn't
even have to reimburse Joe and Suzy for the funeral if it's already
been paid. Outrageous but true. Tell your legislator to repeal
4a-16! On the bright side, there ARE some exceptions --depending
on which category of debt Dad owed, having a surviving spouse, disabled
child, child under 21, or spouse/child/parent who was dependent on Dad
for support, might save the day -- talk to a lawyer; for that you can
email me, too. And at least
(eff 7/1/22) the State is no longer demanding payback for "welfare"
liens such as
AFDC.
OK. SO what if Dad never received
any of
these benefits (as they like to call them) from the State. There
is still that $5,000 check to be cashed. What to do?
If it is really that simple, Joe
or Suzy can
file Form PC-212
with
the probate court. This form lists the funeral and other expenses
plus any debts Dad owned when he died. It also asks for a list of
what Dad owned that needs probate (in this case, only the
$5,000). If the expenses are more than $5,000, whoever files the
PC-212 can ask that the $5,000 be paid over to whoever paid the
expenses. If the expenses (let's say, the funeral expenses) have not
been paid, the form can ask that the $5,000 be paid over to whoever is
owed (let's say, the funeral home). I keep mentioning the funeral home
because the court may ask not only for the death certificate but for a
copy of the funeral bill saying "paid." In either case, once the
tax return is filed (SEE BELOW) and probate fee paid (SAME), the Court
will issue a decree saying that the $5,000 goes to
whoever paid the expenses. But suppose the expenses were $10,000
and the life insurance that has no beneficiary has $30,000 of proceeds.
THEN the
extra $20,000 has to go to the
beneficiaries in the will, or if there is no will, to the
"heirs." This requires Form PC-212A,
request for an order of distribution, copy sent to all the same people
required if there were probate -- heirs and beneficiaries. If Dad had
10 kids, then even if
the will left everything to John and Suzy, the form will have to
include a list of the other 8 children and their addresses, and they
must all get copies of the form. This is because without a will,
all 8 would be heirs. (Who are heirs? people who "take" if there
is no will - start at 45a-437
and read on.) This can be a real pain! Almost as
bad as "real probate." In our office we refer to this whole
PC-212/PC-212A process as "mini
probate." It's a little like probate, just faster, if and only if you
have all the information for the form and the tax return! Keep in
mind
that if Dad had a $1 million living trust to avoid probate, but left
his car in his sole name with no beneficiary -- no help for it, this
mini probate is
required. And as you can see, it might be complicated enough that
you opt for "full probate" even though this mini probate is available.
DON'T RUSH THIS. It's annoying enough without having to do it twice. The car title is one big issue, of course (nowadays the owner CAN list a beneficiary on the registration form and sign with a witness and this should avoid having to deal with the car if the beneficiary goes to DMV within 60 days.). Another item often overlooked is the deceased person's INCOME TAX REFUND. If he/she died after paying estimated taxes or having taxes withheld, there may be a refund. If the deceased person was married, everything can probably go on the joint tax return and the refund can just be issued to the spouse, but if not married, then the refund that was already received may have to be listed on PC-212 discussed above, or go through probate if big enough. (In any case, an income tax return will have to be filed by April 15th of the year following death.) If the return is filed later and the refund being received later, there is an IRS Form 1310 that may let you deal with the refund without the court order -- ask the accountant. Other refunds to look out for: refunds from assisted living facilities; security deposits; insurance payments. Check CTbiglist.com for unclaimed checks. If Dad owned MetLife or other mutual insurance, check for stock he didn't know he had. Also -- if there are a lot of heirs, make sure you wait for all the doctor copays, monument charges, etc. If expenses are more than assets, he or she who pays them gets the assets, which is simpler paperwork. Don't rush. You might even decide to file for probate after all so that someone can be appointed Executor and can at least deal with the assets even if they are worth less than $40,000. Let's say there are 3 old rustbuckets on the property worth $3,000, but the funeral was prepaid and there are 12 children. How will it help to get a court decree turning over these wrecks to the children? It may be easier to get someone appointed administrator or executor just so the executor can "sell" them to the junk dealer and get rid of them. That means full probate.
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What if the person died owning
NOTHING AT ALL that requires even "mini" probate? AND had no
will? Suppose Dad paid someone $5,000 or more to do a fancy
living
trust document and carefully titled every last little thing in the
trust?
Bad news. There is still
paperwork to file with the probate court. This is the infamous CT
estate tax return -- either CT 706 or CT 706 NT. This is
due whether you are doing probate, mini probate, or no probate.
If the person owned $9.1
(in
2022+) million or
more of whatever, in any form (even in a living trust, even with
beneficiaries, even life insurance) then an actual estate tax return,
CT 706, is required and
probably tax will be owed, starting at 7% on amounts over $9.1
million. CALL A
LAWYER. This you don't do yourself. For years prior to
this year, click here for
older forms.
But even if the person died
homeless on the New Haven Green and owned only a tent, the law seems to
require a tax return -- in this case a CT 706 NT, the CT estate tax
return for so-called "non-taxable" (under $9.1 million in 2022+)
estates. Click here
and SCROLL DOWN to "non-taxable" (!) at the bottom of the page.
For years prior to this year, click here for
older forms. This is due 6 months after the person's death
but you can get a 6 month extension IF you ask for it before the 6
months is up. There's a form
for that, too..
For our friend in the tent, the fee for the CT 706
NT would be $25, the minimum fee, not zero, but probably nobody would
feel any need to file
the CT 706 NT and the court is not going to hunt someone down to pay
that $25. For that matter, if Dad owned no real estate, but only
a $10,000 bank account titled jointly with John and Suzy, probably if
they "forget" to file the return, nobody is going to hunt them down
either, although the the law is the law and as a lawyer I can't tell
anyone not to obey the law.
When real estate is involved,
however, or probate or
"mini probate," you can't get away from it. You can't see it, but there
is a lien on the real estate.
Suppose
Mom and Dad owned a house jointly when Mom died five years ago. Nobody
did anything when Mom died.
Now Dad wants to sell and move to assisted
living. Filing the return due when Mom died would be required
now in order to clear title to the home, that is, in order to make the
buyer's and mortgage company's title insurer satisfied and let the sale
go through. They want a "release of lien" for this tax even if it
is screamingly obvious that Mom did not have millions of dollars
(in 2017, it was not $9.1 million, but $2 million.)
Problem is, when the CT
706 NT form is
filed,
by return mail
you will get a BILL from the Probate Court -- even though there
is no
probate at all, and even though no tax is due either! Despite the
fact that
Mom's estate owed "no estate tax," a so-called "fee" must be paid to
Treasurer, State of Connecticut c/o the Probate Court, assessed on the
value of Mom's interests when she died. This includes not only
her half of the house, but (if she died a CT resident) her half of any
joint bank accounts, etc.
and even the value of any survivor benefits on her pension that pass to
Dad after she dies. If you report it.... Anyway, if this
adds up to $100,000,
and Dad outlived
her, the fee will be $377.50 (perhaps more if a will has to be filed or
there are attachments to the form). When Dad dies, and he
isn't married at that time and still owns $100,000, a new CT 706 NT
will be required. This time, the fee will be $465. The fee
starts
at $25 and tops out at $12,500 on estates of $4,754,000. You can
compute it with my spreadsheet by clicking this link.
The probate court site also has a calculator. The
title insurer or buyer's attorney is going to want a release of the
lien for this
too! To get both certificates you file Form PC-205B if the
court doesn't issue the release automatically. Every court has
its own system.
Why not just
wait until the house
is being sold to file this thing, pay the fee, get the liens
released? One reason may be
interest (for those
dying after 1/1/11). The CT 706 NT is due six months after death,
although extensions are available - there is a form
(PDF) for that too. But if the CT 706 NT is not filed when due
(with extensions), interest is assessed. The only exceptions are (A)
where
the assets reported on this return are $40,000 or less OR (B) any
portion
of the assets passes to
the surviving spouse "and the basis for costs" (that is, the person's
assets listed on the return reduced by 50% of what passes to
the surviving spouse) "does not exceed $500,000." So where
Mom/Dad
have a little house and a savings account, all owned jointly, no more
than
$2 million combined, no interest due if Dad dies first and no return is
filed until late. (His basis would be $1 M - $500,000 =
$500,000.) Another reason to file timely,
however: record-keeping. If you wait for years to file the darn
thing, how are you going to figure out what the house, bank account,
etc. was worth at time of death? Then again -- who
will know if you get it wrong?
Since my office
doesn't make any real
money doing the mini-probate
and CT 706 NT for you, but would still
charge more than you might be thrilled to pay, you could try doing it
yourself. It will depend on whether you are a worrier or not! If
you worry a lot about getting things done "right," making mistakes, you
are probably going to need help, since you seem to hire me anyway! But
if you don't sweat the details and don't like lawyers then here you go:
Tips on Form CT 706 NT:
ALSO:
If you need help, (please) DO NOT CALL
WITH A RANDOM QUESTION. I spend a fair amount of time on these
little articles already. If you really do need to hire our firm
to help with this, (1) we CAN do one-shot consultations with no
commitments and give you info / help then; or (2) you can hire us do as
much as you want -- we charge by the hour: as of this writing
(2022), that means $375/hour for lawyer time, $150-$200/hour for
paralegal/assistant time, although we may try to keep this at paralegal
rates for very small estates or hardship situations. With
inflation, the rates may go up in the next year or so; lots of my
colleagues are charging $400+ per hour already. (At some firms
that is the paralegal rate!!!!) We don't
charge a percentage and we count our time by 5 minute increments -- not
half an hour. We did not
invent the miserable rules that impose a tax return, and a fee, on
everyone who resides in, or owns real estate, in Connecticut who
dies. Remember the Beatles' song,
"Tax Man"?
If not -- if you want to D.I.Y. -- GOOD
LUCK!
P.S. To repeat. My grateful
public has been
calling with "just a quick question" after reading this article.
I truly appreciate your thanks, and hope this helps you, but to
be perfectly honest, I don't want to create MORE unpaid work for
myself as the price of trying to be helpful! So try not to call
me with questions; save them up and schedule a (paying) consultation
with me or another attorney. Of if you must, send an email.
Attorneys like this stuff because even if the deceased had a million
debts, provided the deceased owned something, the attorney usually gets
paid. We did not invent that rule, but some attorney probably
did! I am usually happy to sit with you for an hour to
answer your questions, although it might take a while to get an
appointment. But we are not a free helpline. An email is free if
you want to try but no guarantees I will answer.
P.P.S. -- even though this is against
my interest as an attorney -- tell your legislator to get rid of the
lien on real estate for the probate fee-- and get rid of the
requirement of a CT 706 NT for people who don't have to pay estate
tax! Sign
the "change.org" petition here! and start your own petition to get
rid of 4a-16!
DISCLAIMER: THIS
INFORMATION IS NOT PROVIDED AS LEGAL ADVICE