Estate planning is one of the most important steps you can take to ensure your property and health care wishes are honored. A complete estate plan can resolve most legal questions that tend to crop up after death.
Creating a will
If you don’t have a will, that is called dying intestate. Your estate will be taxed at the maximum, and someone else will make the important decisions. A will clarifies who shall inherit your property and who shall be the guardian for the children should you and the other parent die. In Connecticut if you don’t have surviving relatives, the state receives the estate.
A will should specify:
- Your desired property distribution, including gifts to family, trusts and charitable donations
- Provisions for your children and even pets
- Your chosen executor or executrix (who will manage your affairs)
Tips for avoiding probate
Probate is a court-supervised process after death. Its purpose is to authenticate the will, appoint an executor, inventory property, settle debts, locate heirs and distribute the property according to the will or, if there is no will, according to state law.
Formal probate consumes time and money and is best avoided when possible. Most states now offer simplified probate procedures for low value estates. It is unlikely that you can avoid probate entirely, but many assets can be transferred outside of probate. Examples include:
- Living trusts provide tax benefits to the trust beneficiaries, avoiding taxation on the estate of a beneficiary. Trusts don’t go into probate and creditors cannot access it.
- Property transfers to the surviving owner of real estate, bank accounts, vehicle, brokerage account, and individual stocks and bonds, will avoid probate through joint ownership.
- Payable upon death beneficiary bank accounts and CDs are simple ways to avoid probate. Transfer upon death registrations and deeds like cars and real estate are similar probate avoiders.
- Limit the tax burden by transferring assets while alive, through an inter vivos gift. If you do not own it, it cannot be taxed.
In some states, very small estates can be distributed without probate. Under Connecticut statute Sec. 45a-273, where an estate is valued at no more than $40,000, you may skip probate and file an affidavit of small estate with the probate court.
Financial power of attorney
Setting up a financial power of attorney is a good idea. You choose the person you wish to handle financial decisions for you if you become incapacitated and avoid the court making the choice in a legal proceeding.
Specifying that the document is effective immediately provides you with coverage instantly. Adding “durable” to the power allows the legality to continue into the future. You can also specify for a “springing” durable power of attorney, which will activate later upon incapacitation.
Health care and end-of-life choices
You have the right to make health care and end-of-life decisions in Connecticut. These choices are enforced through an advance directive that applies for any incapacitating illness and end of life decisions, which can be:
- A living will document that contains your wishes regarding health care instructions including if you wish to receive life support systems
- Power of attorney that specifies the appointment of a health care representative that will make health care choices on your behalf
Connecticut offers many do-it-yourself forms. These forms are basic. If you wish for a customized document you may wish to consult an attorney.
Many people also wish to include funeral provisions in the estate plan to avoid burden and expense to the family. Options are:
- Prearrange and prepay—This is chancy, as inflation may not keep up with what you set aside. If you move, you may not receive a refund or the company may go out of business, rendering your contract useless.
- Documentation—Document your final arrangements via a witnessed will, power of attorney, living will or final letter of instruction. It is funded via insurance policy made payable to an irrevocable trust or special bank account.
Additional planning considerations
Most people should have at least basic plans for above items, but others depend largely on your circumstances. Consider:
- Estate taxes may need to be set aside if your estate is $5.25 million for the year 2013.
- If your spouse would be unduly burdened or other family member, you may benefit from a life insurance policy.
- Have a buy-sell agreement or trust for succession or sale of your business. You may also set up limited partnership under IRS "estate freeze" to reduce tax liability. Without a plan, heirs may owe estate taxes as high as 55 percent.
- Pets are considered property and must be addressed in estate planning to ensure the animal’s continued care. You may ensure their well-being with a pet trust or pent guardian.
Estate law is covered by federal and state laws that change regularly. The best way to be sure your loved ones will be properly cared for and your estate is handled the way you wish, is to confer with an estate planning attorney in Connecticut.