Trusts and Estates

Stamford, Dairy Anne, Westport and Norwalk

Mamaroneck, Harrison & New Rochelle Trusts & Estates Lawyer

Both federal and state laws protect the rights of each individual to self determine what happens to his or her person and property. However, these rights are waived when a person fails to make a written plan that will survive incompetency and death. As described below, without written documents (the minimal of which arehealth care directives, durable power of attorney, and last will and testament), your state's default law of Guardianship controls the treatment of the person and the disposition of the person's property during life and your state's laws of intestacy control the disposition of property upon death. The state's planning often ends up being much more costly, in legal and accounting fees, than the cost of establishing an individual's estate plan with contingencies in the event of catastrophic illness. Finally, the "wrong people" often inherit under the state's intestacy laws.    

Basic Estate Documents

Last Will and Testament

1. Avoids property distributed pursuant to your state's intestacy laws.
2. Appoints a guardian of your minor children's person and property.
3. Provides for children of a first marriage.
4. Provides for disabled beneficiaries without making them financially ineligible to received SSI, Medicaid, and other government benefits.
5. Reduces the cost of administration of your estate.
6. Reduces or eliminates state tax.
7. Reduces or eliminates contested probate litigation.
8. Gives peace of mind that you have provided for your loved ones.  

Durable Power of Attorney

This document appoints an agent called an "attorney in fact" who can be given broad powers to manage the individual's affairs. These powers include taking legal action and managing the individual's finances The agent cannot revoke the individual's living will or health care designation.  Upon mental incapacity or catastrophic illness of the individual who does not have a power of attorney, the only alternative to manage a mentally incapacitated person's finances and legal affairs is the appointment of a guardian.

Living Will

Pursuant to the federal Patient Self Determination Act of 1991individuals have the right to accept or refuse medical treatment. A Living Will permits the individual to state in writing what type of treatment he wants or refuses should he be in a comatose state with no expectation of consciousness or expected to die shortly with no expectation of recovery. The individual's treating physician will follow the instructions in the living will when the patient can no longer communicate his treatment wishes to his physician.

Appointment of Health Care Agent

Any person over eighteen who is not the individual's treating physician or medical provider can be appointed by an individual to serve as her health care agent. The agent by law must make decisions according to the individual's known wishes.

Estate Planning for Minor Children

Appointment of a Guardian of the Minor Child    Parents should appoint a guardian of their minor children in their wills in the event that both parents die in a common disaster. This is one of the most important reasons to have a will.  

Minor's Trust- This trust manages property left to a minor. The trustee can be directed by the trust to hold assets until the minor reaches a certain age which can be well over the age of 18. Most often the Guardian of the minor children also serves as the guardian of the Minor's Trust.  

Estate Planning for Disabled Beneficiaries

Third Party Special Needs Trust for a Disabled Person Receiving Public Benefits. Disabled relatives who reach the federal financial eligibility levels to receive public assistance can be financially  provided for by relatives or friends who have no legal duty of support of the disabled beneficiary by establishing a specially drafted trust which provides for the needs of the disabled not covered by Medicaid, Medicare, Supplemental Security Income or other public benefits. Upon death of the disabled beneficiary the trust funds are distributed to other beneficiaries named in the trust.  

Estate Tax Planning

Disclaimer Trust- This trust is useful if a married couple is uncertain whether or not the first spouse's death will create a taxable estate upon the second spouse's death. The surviving spouse can disclaim his/her inheritance from his/her spouse within nine months of his/her death if he/she wants to avoid estate tax exposure upon death. The disclaimed property is placed in an irrevocable credit shelter trust.  

Credit Shelter Trust- In the year 2009 each individual can pass $3,500,000.00 free of federal estate tax. If a married couple has a $5,000,000.00 estate and it all passes to the surviving spouse only 3,500,000.00 will pass tax free upon the second spouse's death. However, if the first $3,500,000.00 is placed in a credit shelter or "By-Pass" trust for the benefit of the decedent's spouse and family, $3,500,000.00 will pass tax free. When the second spouse dies, only $1,500,000.00 (plus any growth if the spouse does not make annual gifts) will be in the spouse's estate.

Marital Trust- For large estates, after the By Pass/Credit Shelter Trust is funded with federal estate tax exempt amount, the balance of the decedent spouse's estate can be placed in a Marital Trust for the benefit of the surviving spouse. The Marital Trust property is not taxable until the second spouse dies due to the marital election rules. Further, the surviving spouse's credit shelter amount of $3,500,000.00 can be applied to the Marital Trust property at the spouse's death.  

Life Insurance Trust- Life insurance placed into a correctly drafted irrevocable trust removes the life insurance proceeds from the decedent's taxable estate, thus reducing estate tax liability. Upon the death of the insured, the proceeds are paid out to the beneficiaries tax free. The insurance policy value and death proceeds are protected for Medicaid eligibility purposes and Medicaid recovery.  

Charitable Remainder Trust- The grantor receives income for his (or his and his spouse's) life, the remainder is given to a charity of the grantor's choice. If the trust is funded with highly appreciated assets, there are no capital gains when the trust sells the assets. The assets are removed from the grantor's taxable estate and the grantor receives an income tax deduction in the year funded.

Estate Planning for Post Divorce

Post Divorce- It is important to update you estate documents, including retirement account and insurance beneficiary designations, to prevent your former spouse from possibly inheriting your assets. Both New York and Connecticut have laws which void some, but not all, testamentary bequests to ex-spouses. It is important to have your estate plan reviewed by an estates and trust attorney at the time of your divorce and updated to reflect your current wishes..  

Estate Planning to prevent Ancillary Probate of Out of State Property

Revocable Living Trust- This trust is useful when the individual owns property out of state, because holding the property in trusts avoids probate in the both the home state and ancillary probate in the foreign state where the property is located. It is also useful to manage large or complicated estates, because the trustee has an affirmative duty to prudently invest, manage, and protect the trust assets. The revocable trust does not protect assets for Medicaid eligibility purposes. A"pour over" will is still necessary as it is unlikely to have all one's property in a trust. The trust must be properly funded in order to be beneficial as described above.