Wills and Trusts – FAQs
WILLS AND TRUSTS
1. IS A LAWYER NECESSARY TO DRAW A WILL OR TRUST?
There is no legal requirement that a will or trust be drafted by a lawyer. However, there is an abundance of misleading information and myths that surround this area. Attorneys have the training and experience to properly advise a person. The use of “do-it-yourself” forms is unwise. They are normally generic and only a qualified professional can draft documents that meet your needs and comply with state and federal law.
2. HOW ARE TRUSTS ESTABLISHED?
A trust is a written document that sets forth the terms of the trust. Typically, it names the parties to the trust (Trustee[s] and Beneficiary[ies]) and governs the use and disposition of the assets in the trust, both during the lifetime of the individual and after death.
3. WHAT IS A LIVING TRUST?
There are two types. A revocable living trust is a trust set up by an individual during his or her lifetime that can be completely changed or cancelled (revoked) at any time. An irrevocable living trust is the second type and is not subject to revision or revocation.
4. ARE LIVING WILLS THE SAME AS LIVING TRUSTS?
They are not related in any way. They each serve different purposes. A living will deals with healthcare directives and an individual’s desires regarding the use and continuance of artificial life support systems.
5. WHAT IS A TESTAMENTARY TRUST?
A testamentary trust is a trust set up in a will that takes effect only on death. It becomes irrevocable upon death and is used for a variety of reasons, including tax planning and preservation of assets for loved ones and financial care, support, and education of children and other individuals.
6. WHAT CAN A LIVING TRUST ACCOMPLISH?
A living trust can provide for management of assets both during one’s life and after death. It can provide for continuity of management of the trust assets and is more advantageous than powers of attorney or conservatorship. It can provide for distribution of the trust assets on death or retain the assets for management for a period of time after death. It may also be used to save estate taxes in a manner similar to a will. Also, a living trust may provide confidentiality and privacy from disclosure to the public. Parties who have a legitimate interest in the trust may be given access to its contents.
7. WILL A LIVING TRUST AVOID PROBATE?
Yes, but under current Connecticut law, not entirely. If assets are properly placed in trust before death, the living trust “bypasses” probate as no proceedings are now necessary to pass title on death. However, the Connecticut Estate Tax Return must be filed through the Probate Court. Thus, although the estate tax is currently being phased out, complete avoidance of the Probate Court is not currently possible. However, avoiding the jurisdiction of the Probate Court may not always be desirable and probate fees in Connecticut are very modest. Thus, the probate fee “to be avoided” should be balanced against the cost of creating and administering a living trust, which also has no similar oversight protection.
8. WHAT CAN’T A LIVING TRUST ACCOMPLISH?
A living trust does not necessarily save taxes. Reserved rights over the trust and its assets cause income and inheritance taxes to be incurred as if the trust did not exist. The trust can be drafted in a number of ways to save estate taxes, but such tax savings can also be achieved through the use of a will. Currently in Connecticut, a living trust also does not save Probate Court fees. These fees are the same whether or not a trust is used. Nor does a living trust generally protect trust assets from creditors.
9. IF I HAVE A LIVING TRUST, DO I STILL NEED A WILL?
Even if there is a living trust, it is always a good idea to have at least a simple will. Very often, by design, oversight, or lack of attention, every asset is not placed in the trust, thus necessitating probate for some assets. Also, the will may contain other important provisions such as a choice of guardians of minor children.
10. ARE TRUST ASSETS PROTECTED FROM THE COSTS OF LONG-TERM CARE?
Many elderly individuals are legitimately concerned with the costs of nursing homes. Under current State and Federal law, assets held in a revocable living trust are not protected.
11. WHAT ARE IRREVOCABLE LIVING TRUSTS USED FOR?
By design, these trusts transfer assets out of the control of the donor. Traditionally, they are often used in estate plans, sometimes coupled with life insurance, to pass assets to one’s chosen heirs. This lowers the size of the estate and potentially creates a fund to help defray estate taxes.
12. HOW DO I KNOW IF A LIVING TRUST IS RIGHT FOR ME?
Only an experienced professional can help you answer that question. Many people have been misled, sometimes purposely, in answering this question. A good rule of thumb is to be wary of people who are trying to “sell” you something. If you care to find out more about Living Trusts, please see Attorney Sousa’s article “Revocable Living Trusts: What are They and Do I Need One?” or call one of our attorneys at 203.885.1938.
13. WHAT IS TITLE XIX?
This is a cooperative Federal and State funded and administered program that pays for such things as nursing home care for those who cannot pay. Unfortunately, the costs of such care have risen to alarming levels in states such as Connecticut. Our elderly citizens are properly concerned for their spouses and family when viewing the potential depletion of their assets caused by extended stays in nursing homes. While there are no “cookie cutter” solutions, early proper planning can greatly help in this area.
14. IS IT TRUE THAT:
a. IF I DIE WITHOUT A WILL, THE STATE WILL TAKE MY ASSETS?
No. The State very rarely ends up with your assets. What will happen is that State law will tell you how your assets are distributed. So, if you have a brother to whom you do not want to leave any assets, then you’d better have a will.
b. IF I DIE WITHOUT A WILL, THE STATE WILL TAKE MY CHILDREN?
No. The Probate Court will generally find a relative who is acceptable to it to raise your children. The question is whether that relative is acceptable to you. A will allows you to designate your choice of guardians.
c. IF MY ESTATE GOES THROUGH PROBATE THE ASSETS WILL BE “TIED UP” FOR YEARS?
While it is true that the probate process can be long, especially for larger estates, the use of the assets is not unreasonably restricted. Things can be bought and sold, families supported, cars driven, and the like.
d. IF MY ESTATE GOES THROUGH PROBATE MY BENEFICIARIES WILL PAY HUGE PROBATE FEES?
While in some states this may be true it is certainly not the case in Connecticut. For example, the probate fee for a $300,000.00 estate is $1,165.00. This is the fee set by State statute and it cannot be exceeded.
e. THERE ARE NO BENEFITS FROM HAVING PROBATE COURT INVOLVEMENT?
The Probate Court, in Connecticut, acts as a watchdog to make sure the estate is handled properly and the fees charged are reasonable. There is no such supervision of a Living Trust. Also, disputes can be resolved in a very timely and cost-effective manner in the Probate Court as opposed to other courts where there are frequently lengthy delays before a hearing can be scheduled. This is not the same in every state so beware if you hear otherwise.