sharinglaw.net

the website of
Lisa Nachmias Davis
Davis O'Sullivan & Priest LLC
Elder Law, Estate Planning & Probate,  Nonprofit Organizations


Davis O'Sullivan &
Priest LLC
129 Church Street
Suite 503
New Haven, CT
06510
203-776-4400
Fax: 203-774-1060


LIVING TRUSTS

"What about living trusts?  I want to avoid probate!"  Despite what the "experts" on the bestseller list say, establishing a "living trust" may or may not be right for you. 

What is a living trust?  A "revocable" trust that you "fund" during life by transferring most or all of your assets into the name of a trustee. At your death, the assets pass as the trust provides.  You may have such a document included in your estate plan as a "pour-over," named as beneficiary of your will, but which you did not actually intend to "fund," put assets into, during life. This can usually be funded if you decide a "living trust" is right for you, but may need modification.

Advantages of living trusts during lifetime:

Help with managing your property 

Avoiding conservator ship or other probate court procedures if you are unable to handle your financial affairs 

Maintaining control over your property (you can change your mind) 

Advantages of living trusts at death:

"Avoid probate" (that is, avoid administrative expenses, including attorneys' fees, that necessarily arise from required court filings and hearings; avoid need to give notice of probate to "heirs," that is, those who inherit without a will; avoid delay between death and appointment of someone to handle the "estate"; avoid the process for paying creditors -- so that potentially, unsecured creditors' claims can probably be avoided) 

No delay in disposing of assets pending payment of creditors, getting accounts approved by court

No out-of-state probate proceedings if your out-of-state real estate is held in a trust

Minimizes challenges (a Will must be "proven" to be admissible to probate, and all heirs, who might contest, are given notice of probate; a trustee can act according to the trust provisions unless the trust is challenged in court)

Privacy (a probated Will is a public document, an inter vivos trust is not)

When trust will continue after death, no accountings required as could be required for trusts under a will 

In some states (like CT), protection from statutory claims against your "estate" that may be made by a spouse, or on behalf of a spouse by third parties (such as the State, if the spouse is receiving Medicaid benefits) 

But:

You "avoid probate" ONLY if nothing is forgotten.  If you set up the trust but fail to transfer property to the trustee, the trust provides few of these benefits.  If you transfer property to the trust, but acquire new property that is not transferred, you do not avoid probate of that property. 

In some states such as Connecticut, your estate will pay so-called probate fees (up to 0.5% of your total estate) whether or not your estate passes through probate; if your estate is substantial enough to require a federal estate tax return, and to need to file income tax returns or trust income tax returns, additional probate costs may be relatively insignificant. 

A living trust does not save death taxes or ensure Title 19 (Medicaid) eligibility.  In Connecticut, payments from a living trust that disinherit a spouse applying for Title 19 may have disastrous consequences.

It is sometimes important to have an "executor" appointed to make claims against insurance companies, deal with difficult out-of-state banks, or bring lawsuits, and this is not  possible without probate. 

In some states a spouse's statutory rights against estates apply even if there is no estate and all property is held in a living trust. 

Probate oversight may be appropriate to ensure that your wishes are carried out unless you have complete confidence in the trustee you select. 

If you are the trustee and become incompetent, it will be important to make provision in the trust document and/or your power of attorney for a mechanism to force resignation and get the successor in place -- your power of attorney may not be able to access trust funds otherwise.

Attention:  Under Connecticut law, when a probate court is asked to appoint a conservator for a person who is claimed to be "incapable" of managing his/her affairs, it must take into account arrangements already made by the person claimed incapable - such as a power of attorney, and presumably, a trust.  The pros and cons of a funded living trust notwithstanding, this law makes having a living trust document in place, combined with a durable power of attorney, an important and useful "emergency" tool to maintain control over your affairs even when you are no longer capable of directing them yourself. 

 For further information on living trusts and estate planning, send email to me at davis@sharinglaw.net, or write to me at the address shown. I can only provide general information, and will not provide advice about a particular case without a formal engagement. Writing to me does not create an attorney-client relationship.


DISCLAIMER:
THIS INFORMATION IS NOT PROVIDED AS  LEGAL ADVICE AND CREATES NO ATTORNEY-CLIENT RELATIONSHIP.  NO ENDORSEMENT IS INTENDED BY ANY REFERENCES HEREIN.  PLEASE CONSULT YOUR OWN LEGAL AND FINANCIAL ADVISORS BEFORE TAKING ANY ACTION.  In compliance with regulations issued by the Internal Revenue Service, please be advised that nothing on this webpage was written to be used or may be used by any person to avoid any penalties under the Internal Revenue Code.
 

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Lisa Nachmias Davis
Davis O'Sullivan & Priest LLC

129 Church Street, Suite 503
New Haven, CT 06510
Phone: 203-776-4400
Fax: 203-774-1060
Email: davis@sharinglaw.net