Living trusts have been gaining in popularity recently, but they may not always be necessary or advisable.  There are alternatives, such as testamentary trusts (trusts within the will), durable general or springing powers of attorney, and other more complex approaches.  What is best is dependent on your individual, economic and tax situation, and it is in your interest if you are considering estate planning to call your lawyer and discuss your particular situation, both with regard to what is the best plan for your beneficiaries, and what will effectuate your true wishes.

Connecticut is currently grappling with extremely high costs for probating an estate.  While a living trust can provide benefits regarding privacy, ease of administration with reduced probate oversight, and extensive direction as to care and education for beneficiaries, it will not necessarily provide reduced costs in Probate fees which relate to the amount of the assets in the name of the decedent on date of death.  In fact, it can sometimes increase total costs due to its ongoing administration.  Sometimes the benefit of Probate Court oversight over future Trust administration is sought and can be achieved with a Testamentary Trust.  The real issue is what is best for you and your beneficiaries, and it should be your focus.

A living trust is in effect a hybrid contract which takes legal effect upon signing.  In practice, the living trust only takes effect when assets such as a house or car, are actually managed by the trust or placed in the trust.  The person creating the trust often forgets to place certain assets in the trust.  You, the person who creates the trust must decide what the rules are.  Your instructions are critical.  Your rules describe who the trustee will be, how the assets are invested and managed, who are the beneficiaries, the circumstances under which the beneficiaries receive some or all of the assets, and many other details.  Health needs, education and general support are the more common reasons for distribution of trust assets. The trustee or trustees are responsible for ensuring that the instructions which are set forth in the trust are followed.  A decision will have to be made whether individual (relative or friend) trustees would be more appropriate than a corporate trustee.  A corporate trustee such as a bank has requirements with respect to the minimum size of the trust assets to be managed and published fees based on the size of the trust.

The funding of the trust is up to the settlor’s discretion during his or her lifetime so long as his or her legal and actual capacity is maintained.  Thereafter the trust can become fixed or irrevocable, especially after death.  Funding generally relates to the economic circumstances of the settlor at the time.

For a person with fairly limited assets, a trust may not be helpful.  In many situations, a will coupled with a power of attorney is frequently sufficient.  The durable general power of attorney survives the incapacity of the principal under Connecticut law and it can be structured so as to be “springing”, i.e. to not be effective until the actual incapacity of the principal.  By setting up such a power of attorney, the principal can hopefully avoid the need for a conservatorship which can be a significant burden for family, especially with probate court fees and filing requirements for the administration of a conservatorship.  In addition to the will and durable general power of attorney, the appointment of a health care agent should be considered.  The naming of a health care agent using the proper document is highly recommended, especially to cope with requirements in today’s hospital setting.  Special circumstances further suggest its need if a traditional legal relationship between the principal and the recipient of the power has not been established, such as a marriage.  A living will, which is not a will in a testamentary sense, can accompany a health care power of attorney to set forth more extensive requirements with respect to what can and cannot be done in life saving or life prolonging situations requiring consultation with physicians.  Finally, an advance directive for appointment of conservator can be executed in the event it should become necessary.

Additional matters to consider are whether one owns real estate outside of the state of Connecticut.  In that event, a limited liability company ownership of the real estate can be of great assistance to the beneficiaries, because it can help to avoid the need for an ancillary administration or probate transfer of title and administration of the real estate in a foreign jurisdiction.

To determine whether you have need for any of these approaches to the disposition and transfer of your assets before or after death, contact a family attorney at BoneeWeintraub today to get started.