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Last time we focused on the question: “What happens if I die with a Will?” We discussed the fact that a Last Will and Testament is a “Ticket to probate.” Some people see going to probate like going to jail in the game Monopoly. That’s right: Go Directly to probate and DO NOT “Pass Go and collect $200.”
I see lots of clients who want to “avoid probate.” My first question is usually “Why do you want to avoid probate?” There is quite a range of answers- some people don’t know why but know they don’t want to g
There are many reasons a person would want to avoid the probate process. Probate is time consuming. It takes from nine months to one year to fully probate an estate, sometimes it takes longer if your heirs are not getting along. This means that it takes a long time to get your assets into the hands of your heirs. We all know that “time is money” and when the process takes upwards of one year you can imagine how expensive it is to probate an estate. Typically, the cost of probating an estate in Connecticut can range from 1-4% of the decedent’s gross estate. This means for a probate estate valued at one million dollars the fees can reach (and perhaps exceed) $40,000.
In addition to being time consuming and consequently expensive, the probate process lacks privacy. Probate is a very public process. Once your Will is admitted to the Court it becomes a public document. Any person can take a look at your Will and see what you had and where it is going. Many people want to avoid such attention.
As you can see there are some very good reasons why a person would want to avoid probate. There are ways to avoid probate. One way would be to not own anything at your death- spend the last dollar on the last day. This is not as easy to accomplish as it sounds. There are more sophisticated ways to bypass the process. Next week we will discuss how Revocable Living Trusts can help to keep your assets out of probate and put them into the hands of your heirs in a timely matter.
Tuesday is always an interesting day in “Guertin Land.” Tuesday is my work at home day. One day a week I play lawyer and daddy from home. My wife is off to her weekly meeting and its just me, my son, the dogs and client files. Now I try to make this as legit a work day as possible- this means attempting to get up, awake and working long before my 20 month old wants to start his day ( which sometimes happens at 5 a.m)- just last week at around 5:12 AM Jeremy was belting out at an extreme volume “Allllllll Aboard!” He hasn’t been the same since he took a ride on the Essex Steam Train. So I parent and work my way through the day. This morning I was working on a trust and I wrote this paragraph, that when I re-read I could not help think that if I get hit by a bus tomorrow and die- nobody,I mean NOBODY will know what the heck I was trying to say. So, try to get into my mind- read what I wrote and post a comment with what you think I meant- the person closest will get a copy of my book and something random from my office.
The term “Equally” when used in this agreement means that if one of the grantor’s issue receives any property because of the grantor’s death (including property not passing through the grantor’s estate such as real property, life insurance, joint bank accounts, investment accounts and all other non-probate assets), which when added to the property passing by way of this trust equate to a greater total fair market value (at the time of the second death of me and my spouse) than the grantor’s other issue would receive. The Grantor’s issue receiving the greater total amount, considering all of the above, shall be required to pay to the issue receiving the lesser amount, an amount necessary to equalize the total amounts necessary to effectuate a 50/50 total distribution to both of the grantor’s issue, per stirpes. If either or both of the grantor’s issue has made a contribution to any property increasing the fair market value (exceeding $1,000), that amount will be subtracted from the fair market value before the above calculation.
Last time we focused on the question: “What happens if I die without a Will?” We discussed that when you die without a will- you die intestate. When a person dies “intestate” their property and assets are subjected to the one size fits all Connecticut Intestacy Statutes. This week we will explore what happens if you die with a Will.
If you die with a Will your estate will go through the probate process. Probate is the process of admitting your Will as a valid legal document, and then disposing of the property of the estate according to the guidelines set forth in the Will. In a larger sense, probate is the process of gathering up your assets, paying your debts, expenses and taxes, and distributing property to designated beneficiaries.
The process begins when a decedent’s Will and an application for probate is filed with the Probate Court in the town where the decedent lived. A hearing will be held, and absent objections, the Executor nominated in the Last Will and Testament will be appointed.
Once appointed, the Executor should secure the property of the estate. This involves transferring bank accounts and brokerage accounts into an estate account. Changing the names on stock certificates to the estate is also necessary. If the decedent owned any real estate, the Executor must also file a Certificate of Notice on the land records in each town where the decedent owned real estate.
After the Executor takes possession of the assets of the estate they should inventory it. Only property that is in the decedent’s name should find its way into the inventory. You do not need to itemize household goods unless they are valuable. After the inventory is complete it will need to be filed with the Probate Court.
The Executor is also responsible for notifying creditors to file claims. The Executor should convert the property to cash as needed to pay claims against the estate, legitimate debts of the estate, taxes and administrative expenses associated with probating the estate. The Executor must file state and, in some cases, federal estate tax returns, and pay any taxes due.
After all claims, debts, taxes and expenses have been paid the Executor must file a final accounting with the Probate Court. It should detail the property received and expenses during the settlement of the estate. The remaining balance is available to be distributed to the beneficiaries. After the beneficiaries have been paid, the Executor may then file a closing statement with the Court ending the probate procedure.
In most cases the process takes up to a year. Sometimes it can feel like a full-time job, although much of the time is spent waiting. There are certain timetables built into the process that stretch it out. These timetables are necessary to ensure creditors are given adequate notice to file their claims and for various other reasons. The probate process can be expensive and cumbersome; however, there are ways to avoid probating your estate through the use of trusts.
We’re going to hit up the “way back machine” this week. I’m going to take you back…way back. Way back to a post I wrote in February of 2009 (okay- maybe we’re not going that far back). Why you ask- well because I am currently writing a post on what happens if you die with a Will, and I thought that this would be a nice primer- showing what happens if you die without one. So here goes..get ready to flashback… are you feeling tingly?
If a person dies without making a Will he/she dies intestate. Without a Will, a decedent’s property will pass according to the State of Connecticut Intestate Succession Laws. If you are thinking that “intestacy” sounds like some sort of sickness, you may not be too far off the mark. When you see how the state distributes the funds of those who die intestate… you may feel a little sick.
In Connecticut, State statutes provide that if a person dies intestate, and there are children that are the children of the decedent and the spouse, the surviving spouse will receive the first $100,000 plus one half of the balance of the intestate estate. The children will receive the remainder. For example, assume a $500,000 estate: The spouse will receive $300,000 ($100,000 plus half of the remaining $400,000) and the children will receive the remaining $200,000 in equal proportions ($100,000 each). Now let us suppose that there is only one child who is 18 years-old. Even a very mature 18 year-old may have difficulty handling a check for $200,000.
Typically, when most people plan out their estate, they want all of their assets to go to the surviving spouse and not to their children. The thought is that the surviving spouse is in the best position to use the assets wisely for the benefit of the children. In many scenarios it does not make sense to hand a large sum of cash over to a child or young adult. Imagine trying to convince an 18 year-old into investing his/her money in a college education — good luck.
The rules are different if the decedent had children that were not children of the surviving spouse. In this case, the surviving spouse would receive one-half of the intestate estate, and the children would receive the balance. This solution seems to be based in logic. The state wants to make sure that the step-children of the surviving spouse are not taken advantage of by a person who is not related to them by blood. While this plan works in preventing the aforementioned problem, it still puts money into the hands of people who may not be ready to handle it. With a Will based plan you can direct where your assets go, as well as direct appropriate measures to protect your children from the problems that come with receiving a large sum of money outright.
If there are no children of the decedent, but the decedent is survived by a parent or parents, the spouse does not receive the entire intestate estate. In this scenario the surviving spouse will receive the first $100,000 plus three-quarters of the balance, and the parents would receive the balance of the estate. Furthermore, if there are no heirs to the estate, the decedent’s money, property, etc., will escheat to the state and the state will become the owner. It’s probably not a coincidence that you cannot spell escheat without “c-h-e-a-t.”
As you can see from the above sampling from the Connecticut Intestate Succession Statutes, by not planning for the disposition of your property the state has a plan for you. It should be no surprise that control freaks hate the laws of intestacy. It takes control (albeit control that was never exercised) of a person’s hand and vests that control with the State, who then applies cookie cutter solutions for unique situations. The only way to avoid intestacy is to make sure that you have a validly executed Will. Any other plan will fall short.
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