Seven Myths & Truths about Living Trusts

We posted this blog post many years ago, but, it is worth repeating.  We often get questions from clients and colleagues who are confused about what exactly a Living Trust is and the advantages and limitations of incorporating a Living Trust in an estate plan.

A “Living Trust”, also known as a “Revocable Trust,” often is advertised as a way to avoid probate and quickly transfer assets to family members upon death. However, there are many misconceptions about Living Trusts:

Myth 1: A Living Trust will avoid statutory Probate Court fees.

Truth 1: The assets in a Living Trust still are considered part of your gross taxable estate and therefore are subject to statutory Probate Court fees.

Myth 2: A Living Trust will reduce estate taxes.

Truth 2: The assets in a Living Trust still are considered part of your gross taxable estate; therefore, a Living Trust does not reduce your estate tax bill.

Myth 3: A Living Trust avoids the need to file a Connecticut Estate Tax Return.

Truth 3: Even with a Living Trust, a Connecticut Estate Tax Return must be filed with the Probate Court.

Myth 4: A Living Trust will protect assets from creditor claims and lawsuits.

Truth 4: Assets in your Living Trust are available to your creditors while you are alive.

Myth 5: A Living Trust protects your assets in the event long term care expenses are incurred.

Truth 5: A Living Trust provides absolutely no protection of assets if long term care is required; assets in your Living Trust still are considered owned by you.

Myth 6: The Probate Court can be completely avoided with a Living Trust.

Truth 6: Some involvement with the Probate Court cannot be completely avoided in Connecticut; at a minimum, a Connecticut Estate Tax Return must be filed with the Probate Court even if all of your assets are in the Living Trust.

Myth 7: Everyone’s estate plan should include a Living Trust.

Truth 7: A Living Trust is not necessarily for everyone. As with every estate plan, a Living Trust should be used only if it is the best tool to meet the specific needs of you and your family.

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It’s time to send the kids back-to-school! Do your college-age children have the proper legal documents in place?

  • Planning for adult children. Your children are now 18 and going off to college. It is an exciting time where they will have their first experience with independence. As you plan for your children to start school, move away, and begin this new chapter, have you even wondered what would happen if your child had a medical emergency? Now that they are over 18, you have no legal right to talk with their doctors or receive information about care they are receiving. This could quickly become a nightmare for most parents!
  • Health Care Instructions (AKA Living Will). Having your adult children sign Health Care Instructions appointing you as their Representative, will allow you the legal authority to be involved in medical decision making and speaking with doctors on your child’s behalf.
  • Power of Attorney Instrument. Independently managing finances for the first time can be a daunting task for young adults. Having your child appoint you as their Agent will ensure that you can easily assist with their finances, or step into their shoes if they were unable to manage finances for themselves.
  • Ensure you are not left in the dark. By taking the easy step of having your adult child execute these documents before going off to college, it will provide the family with peace of mind and the ability for you to be involved in health care and financial decision making, in the event that your child ever faces a medical emergency.
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What should my family do if I need help with decision making and don’t have a Power of Attorney Instrument or Health Care Instructions?

You may be surprised to learn that your family will need to initiate a conservatorship proceeding through the Probate Court.

  • Conservatorship, in general. If there comes a time that you need help making financial or health care decisions, and you have not previously signed a Power of Attorney Instrument or Health Care Instructions, your family will need to ask the Probate Court to appoint someone to make decisions for you. That person is called a conservator.
  • Conservator of estate. A conservator of your estate is authorized to make financial decisions for you. Examples include routine activities such as endorsing checks payable to you and paying your bills. But, with Probate Court approval, your conservator can engage in more extraordinary activities such as selling your home, making withdrawals from your retirement account, and making gifts of assets to family members.
  • Conservator of person. A conservator of your person is authorized to make personal decisions for you. Examples include consenting to surgery, authorizing the release of medical records, deciding on the best place for you to live, and accessing/making entries in your social media accounts. The conservator of your person can be (but does not have to be) the same person who is the conservator of your estate.
  • Voluntary conservatorship. Connecticut Statutes and Probate Court Rules allow you to file an Application for a Voluntary Conservatorship. The Application tells the Probate Court you need help with decision making and asks the Probate Court to appoint the person/people you name in the Application to help you. In most cases, the Probate Court will appoint the person/people you have chosen.
  • Involuntary conservatorship. If a third party thinks you need help with decision making, that third party will file an Application for an Involuntary Conservatorship. An Involuntary Conservatorship cannot be established without medical evidence that you need help with decision making. If there is disagreement about who should be appointed as your conservator, the Probate Court will hear evidence and make a decision based upon what appears to be in your best interests.

 

 

If you are interested in learning more about conservatorship proceedings, please visit our website and read our blog for recent posts.  For advice specific to you or your family, please contact the office.  We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.

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As Mother’s Day approaches, you may wonder, what does a legal column have in common with a Dr. Seuss book?

More than you may think! 

  • Do you remember the Dr. Seuss book “Horton Hatches the Egg”? Horton, an elephant, is asked by Mayzie, a bird, to sit on Mayzie’s egg while Mayzie does a few errands. Well, Mayzie ends up taking off on a permanent vacation to Florida, leaving Horton stranded on the egg. Horton, an elephant of his word, sticks it out through many trials and tribulations, until the egg is hatched. Out comes a creature that is part bird and part elephant. So, who is the mother?
  • Assisted reproductive technology. In 2018, there are many ways to become a mother. Examples include intrauterine insemination, egg and sperm donation, in-vitro fertilization, intracytoplasmic sperm injection, and gamete intrafallopian tube transfers.
  • Keeping track of the players. The genetic mother is the mother whose gamete has been fertilized. The carrying mother is the mother who carries the fertilized gamete (embryo) until delivery. The mother who ends up as the “parent” of the baby, however, might be a third mother who entered into a gestational agreement with the other “mothers.” So, is the mother Horton or Mayzie?
  • How does this relate to estate planning? Your Will and Living Trust (if applicable) should be clear about what you mean when you use terms such as “child,” “grandchild,” “heir,” “descendant,” or “lineal descendant.” You don’t want your family to be arguing about whether Horton or Mayzie is the mother. Clearly defined terms in your estate planning documents almost always will diffuse a disagreement about what was intended.

If you are interested in learning more about the intersection between assisted reproductive technology and estate planning, please visit our website and read our blog for recent posts.  For advice specific to you or your family, please contact the office.  We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.

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What do I need to report on a Connecticut Estate Tax Return that is filed with the Probate Court?

More than you may think!

  • Solely owned assets that don’t have designated beneficiaries. Examples are solely owned real property, solely owned financial institution accounts, solely owned United States Savings Bonds, and solely owned shares of stock.
  • Jointly owned assets. Even though the jointly owned asset passes to the surviving joint owner, by operation of law, the date of death value of the asset needs to be reported on the Connecticut Estate Tax Return. In most cases, only the decedent’s proportional part of the asset is part of the gross taxable estate.
  • Annuities, life insurance, and transfer on death accounts. If there is a designated beneficiary, these assets pass, by operation of law, to the designated beneficiary; however, the date of death value of the asset still needs to be reported on the Connecticut Estate Tax Return.
  • Do I need to be concerned about the Connecticut Estate tax? In most cases, the answer is “no.” There is an unlimited exemption for the value of assets passing to a citizen spouse. The 2018 exemption for the value of assets passing to a non-citizen spouse (as a class) is $2,600,000.00. The exemption increases to $3,600,000.00 in 2019, and is even higher in 2020.
  • What about probate Court fees? The Probate Court will bill you for statutory Probate Court fees based on the value of assets that constitute your gross taxable estate. As a rule of thumb, you can assume the amount of the fee will be about ½ of 1%. For assets passing to a spouse, the fee will be somewhat lower.

If you are interested in learning more about how probate and non-probate assets pass after death and are reported to the Probate Court, or, the Connecticut Estate Tax Return, please visit our website and read our blog for recent posts.  For advice on probate and non-probate assets that is specific to you or your family, please contact the office.  We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.

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New Year, New Numbers for 2018

Estate and Gift Tax:

  • The federal lifetime exemption for property passing to non-spouse beneficiaries has been increased to $11,200,000.00.
  • The Connecticut lifetime exemption for property passing to non-spouse beneficiaries has been increased to $2,600,000.00.
  • There is still an unlimited gift/estate deduction for property passing to a spouse; however, in order to qualify for the unlimited gift/estate tax deduction the spouse must be a U.S. citizen.
  • The amount that can be gifted to any one person without needing to file a gift tax return has been increased to $15,000.00 per recipient. Additional gifts can be made for qualified medical expenses and qualified education expenses without needing to file a gift tax return.

Long Term Care in a Nursing Facility:

  • If one spouse is living at home (“Community Spouse”) and the other spouse is living in a nursing home, the amount of non-excluded assets the Community Spouse can keep remains the same at $120,900.00 (as of the date of this publication).
  • If one spouse is living at home and the other spouse is living in a nursing home, the minimum amount of monthly income the Community Spouse can have has been increased to $2,030.00, and the amount it can be increased to, without an administrative hearing, has been increased to $3,022.50.
  • If one spouse is living at home and the other spouse is living in a nursing home, the amount of equity in the family home that can be excluded remains at $840,000.00 (as of the date of this publication).

Long Term Care Provided in Your Home:

  • The amount of monthly income you can have and still be eligible for the Connecticut Home Care Program for Elders (CHCPE) has been increased to $2,205.00.
  • The amount of monthly income that triggers a co-pay requirement has been increased to $2,010.00.
  • Use of a pooled trust for excess income to establish eligibility or to avoid co-pays remains a viable option.

If you are interested in learning more about how these 2018 numbers affect you and your family please visit our website and read our blog for recent posts.  For advice specific to you or your family, please contact the office.

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QMB Connecticut Legislative Changes Fact Sheet

What is QMB?

  1. QMB (Qualified Medicare Beneficiary), SLMB (Specified Low-Income Medicare Beneficiary) and ALMB (Additional Low-Income Medicare Beneficiary) are Medicare Savings Programs by which the State of Connecticut (through the Department of Social Services) helps low income Medicare beneficiaries with the cost of health care.

What did the legislature change?

  1. The 2017 session of the Connecticut legislature dramatically reduced the income a resident can have and still qualify for one of these Medicare Savings Programs. As a result, it is estimated that as many as 100,000 Connecticut residents may lose their eligibility for Medicare Savings Programs starting on January 1, 2018.
Program 2017 income limit

Single Person

2018 income limit

Single Person

2017 income limit

Couple

2018 income limit

Couple

QMB $2,120.00/month $1,025.00/month $2,854.00/month $1,374.00/month
SLMB $2,321.00/month $1,226.00/month $3,125.00/month $1,644.00/month
ALMB $2,472.00/month $1,377.00/month $3,328.00/month $1,847.00/month

 

How does a Medicare Savings Program help me?

  1. QMB. If you have QMB coverage, the State pays your Medicare A premium (if applicable), your Medicare B premium, and all Medicare co-insurance and deductible amounts.
    1. In 2017, the standard Medicare B premium is $134.00 per month.
    2. In 2017, the Hospital in-patient deductible is $1,316.00 per benefit period.
    3. In 2017, the Hospital in-patient co-insurance amount begins at $329.00 per day after 60 days in the Hospital.
    4. In 2017, the Medicare B deductible is $183.00.
    5. In 2017, the Medicare B co-insurance amount is 20% of the Medicare approved amount.
  2. SLMB. If you have SLMB coverage, the State pays your Medicare B premium.
  3. ALMB. If you have ALMB coverage, the State pays your Medicare B premium.
  4. Extra Help with prescriptions. If the State is paying your Medicare B premium, you automatically also qualify for Extra Help (also called a Low-Income Subsidy) with the cost of prescription medicine. In most cases this means you will pay no more than $3.35 for a 30-day supply of a generic drug, or $8.35 for a 30-day supply of a brand-name drug.

What can I do?

  1. If you were on QMB, you still may qualify for SLMB or ALMB. If you were on SLMB, you still may qualify for ALMB (check the income limits above). You may also qualify for “Extra Help/LIS.”
  2. If you have no Medigap insurance (covers Medicare co-insurance and deductibles) because you had been on QMB, speak to a knowledgeable health-care insurance agent about purchasing Medigap coverage.
  3. You can divert your “excess income” to what is called a “Pooled Trust” administered by a Connecticut non-profit corporation called Planned Lifetime Assistance Network of Connecticut, Inc. (“PLAN”). This will allow you to remain eligible for QMB, SLMB, or ALMB.

Example:

Assume a 70 year old widow whose only income is $1,850.00 per month from Social Security. For years, she has been eligible for QMB benefits. In 2018, she will have $825.00 per month of excess income ($1,850.00- $1,025.00). If she diverts the excess income to a PLAN Pooled Trust, this is how things will work:

  1. She will need to pay PLAN an Enrollment Fee of $1,050.00 to get started.
  2. Every month she will send PLAN a check for $825.00. This will make her eligible for continuing QMB coverage in 2018.
  3. She will direct PLAN to use the $825.00 to pay bills she previously paid from her checking account. Examples are utilities, taxes, insurance, automobile payments, etc.
  4. In addition to the Enrollment Fee, PLAN charges a monthly trust administration fee of $100.00 when PLAN actively pays bills and a one time closing fee of $300.00. Please note that there may be other fees assessed depending on how the trust is used.

Is it worth establishing a PLAN Pooled Trust?

  • As often is the case, the answer is “it depends.”
  • You need to weigh the cost involved in establishing and maintaining the Pooled Trust against the money you will save by not paying a Medicare B premium, possibly, not needing to have Medigap insurance, and having Extra Help with prescription costs.
  • You also need to weigh whether it annoys you to need to use an intermediary (PLAN) to pay some of the monthly bills you previously paid yourself.
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Connecticut General Assembly adopts new budget which includes an increased recording fee

The Connecticut General Assembly has adopted a new budget which includes an increased recording fee.  This increased recording fee will become effective December 1, 2017. The new fee will be seven dollars more per document to record documents on the land records.  At the time of publication, it is still unclear if the Governor will sign the bill.  however, even if he were to veto it, the affirmative votes cast in both the House and Senate appear to make the bill veto-proof.

 

 

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Allison and Nicole named to 2017 New England Super Lawyers (R) Rising Stars List

We’re excited to announce that Allison and Nicole have been named on the 2017 New England Super Lawyers Rising Stars list! This is an exclusive list, recognizing the top 2.5% of New England attorneys under 40 years of age and in practice for 10 years or less. This is Allison’s third consecutive year named to the Rising Stars list. Nicole has been named to the Rising Stars list after just two years of practicing law.  Both Allison and Nicole have been nominated to the list by their peers who have recognized Allison and Nicole for their work in estate planning.

Congratulations to Allison, Nicole, and all of the other attorneys recognized! To view the list click this link: Super Lawyers Digital Magazine.

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Living Well in Orange, Connecticut

Join us at Maplewood at Orange on Thursday November 2nd from 5 to 7pm to learn about all of the local resources available to support seniors as they age. A panel style discussion will include professionals from Floman DePaola regarding planning to pay for long term care. Maplewood will discuss the options that assisting living can offer. Orange Rehabilitation and Health Care Center will touch on the issues seniors face with regard to rehabilitation and skilled nursing care, and Orange VNA will cover in-home care options. Light supper and refreshments will be served. We look forward to seeing you there!

Please RSVP to 203-795-3117 by October 30th or to lcastiline@maplewoodsl.com

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