JACK REARDON, J.D., LL.M.

Do you have a life plan?  Are you prepared for the affect your passing will have on your family, your business, your loved ones? 

Wills, Trusts, and Estate Planning Attorneys

Serving the Connecticut Shoreline from New London to New Haven

(860) 442-0150

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How would your children make it through their adolescent years without you?  Who would care for your minor children and manage their finances in your absence?  Could your family get by without your earnings?  Who will get your property?  Who will take care of your pets?  Will your assets be depleted by estate taxes or generation skipping transfer taxes? 

What if you become physically or mentally incapacitated.  Will your family be able to manage?  Who will take care of you and your finances?  Who will make your medical or life support decisions if you are unable to communicate with your doctors?  

We don't like to consider our mortality, but the answers to these questions are too important to leave for another day.  Sometimes the unexpected occurs and the chance for planning on your own terms becomes unnecessarily complicated or even lost.  Ask yourself: Will a judge make the same decisions I would for my family?

Why do I need a Will?  There are several benefits to having a Will.  The following are some of the most common reasons: 

• For people with minor children, one of the most important reasons to execute a Will is to nominate who will become guardian of the children.  Absent a nomination in your Will, the choice of guardian will be made by a judge who may know little about the people seeking to become guardian.
• To control who gets your property.  If you die without a Will, your property will be distributed pursuant to state laws of intestacy, which might be surprisingly different than what you desire (see our webpage on Estate Administration and Probate Law for an overview of Connecticut intestate law).  For various reasons, you may want to change the proportion of your estate passing to a spouse or child, or to disinherit a child.  You may want to leave a bequest to charity or a friend.  You need a Will to accomplish these goals.    
• To establish or fund a trust.  A Will can be used to create a trust or to pour over assets to fund an existing trust.  A trust may be necessary or desirable to manage the inheritance of minor or disabled children or an incompetent or disabled spouse, or to provide for a second spouse while preserving an inheritance for children from a prior marriage.
• To take advantage of significant tax savings for high net worth individuals.  Specific language in a Will and trust can be used to fully maximize savings from exemptions for federal and state estate tax and generation skipping transfer tax for individuals with a taxable estate.  Proper planning can often save hundreds of thousands or even millions of dollars depending upon the size of the estate.

Why hire a lawyer when I can just purchase an inexpensive form Will and complete it myself? 

When you hire a lawyer to prepare your Will, you are really paying for a service not a product.  Keep in mind, a lawyer is required to graduate from law school and pass rigorous exams before the lawyer qualifies for a license to practice law.  Moreover, a lawyer also has an ongoing ethical duty to stay current with the laws effecting his practice area. 

A lawyer does more than take your information and plug it into a form.  A lawyer provides legal advice based upon his knowledge of local and federal law and legal terms, and often years of experience in drafting and executing Wills for clients with similar goals and circumstances.  A good lawyer will take the time to meet with you, to review your family situation and goals, to review your assets, to discuss alternatives, to discuss possible complications and to discuss potential tax consequences of a plan.  The lawyer should then make a written recommendation of the best technique to accomplish your wishes and present you with draft documents so you can take the time in the privacy of your home to carefully review the drafts before execution.  If you have any questions about your Will, a lawyer is available to assist you and explain the legal terms of your Will prior to your signing.  A lawyer should then meet with you again to oversee proper execution of your Will so that it will be accepted for probate when the time comes.  A lawyer should also advise you how to finish the details of your estate planning, such as arranging safekeeping of your documents, notifying your fiduciaries of their potential duties, recording details on how to locate and access your documents, making proper beneficiary designations for retirement accounts and insurance policies, and implementing proper funding of any trusts.  Finally, most lawyers remain in contact with clients and will advise you when a law changes that may effect your planning, so you may update your Will accordingly.     

Yes, one could fill in the blanks on an online form to prepare his own Will.  Similarly, one could buy wood and nails and build his own home, or buy new brakes and install it in his car.  How long would it take a novice to educate himself and become proficient with these tasks?  Would the house be safe?  Would the brakes fail?  Would the probate court accept the Will and interpret it as intended? 

Purchasing one of these products and preparing a Will yourself is risky.  The law prescribes very strict standards for executing a Will.  One error in executing a Will makes the entire Will (every single term) completely invalid - and, if the validity of your will is at issue, that means you are no longer around to fix it.  Moreover, language in a Will may be interpreted differently than you intended.  Specific language in a Will can have significant legal meaning beyond common usage, in addition to severe tax consequences of which you might not be aware.  Additionally, laws vary from state to state and are constantly changing.  Accordingly, form Wills might not reflect current law in your home state. 

Aren't trusts only for very wealthy people? It is true that many wealthy people use trusts effectively to reduce taxes, to control who benefits from their wealth, to shelter assets from creditors, and to fulfill philanthropic goals.  However, trusts have many other uses that benefit moderate net worth people.  Trusts are also used for such things as:

• to manage an inheritance or lifetime gifts for children until they are mature enough to manage their own assets, 
• to provide for a disabled or special needs person without disqualifying the person from government benefits,
• to shelter assets from the beneficiary's creditors,
• to hold life insurance in a tax advantageous manner,
• to maximize the benefit of estate, gift and generation skipping transfer tax exemptions,
• to avoid passing assets through probate,
• to manage assets for a spouse who is not good at handling his or her financial affairs,
• to allow uninterrupted management of one's assets in the event the person becomes mentally incapacitated or dies,
• to provide for a surviving spouse for life while preventing the spouse from disinheriting children from a prior marriage,
• to disinherit a spouse during a pending divorce or any other time,
• to provide for family pets.

Do I still need estate tax planning with the new law increasing federal estate tax exemptions to five million dollars?  In December of 2010, the federal government enacted a new tax law that, among other things, increased the federal estate, gift and generation skipping tax exemption equivalents to five million dollars per person.  The law also provides, if appropriate elections are timely made, that a surviving spouse gets the benefit of any unused portion of a deceased spouse's exemption without using what is commonly referred to as a credit shelter trust** (this new election is referred to as "portability").  This means that a married couple, with proper elections, can combine exemptions to shelter up to ten million dollars from estate tax.

While the new law appears very beneficial to tax payers, it falls short of eliminating the need for estate planning for many moderately wealthy persons. 

First, the law is temporary and will expire on January 1, 2013.  Unless the government extends the 2010 law or makes it permanent, than in 2013 the law will revert back to the one million exemption amounts in force in 2001 (indexed for inflation), and any election to preserve the deceased spouse's unused exemption will be lost.  This means that unless both spouses die during the years 2011 or 2012, then there is no guarantee of having a five million dollar exemption or portability of the unused exemption of the first spouse to die.  Therefore, a couple with a net worth exceeding the 2001 exemption amount should still utilize credit shelter trust** planning until the uncertainty is removed from the 2010 law or they will risk paying unnecessary federal estate taxes.

Also, the 2010 law applies only to federal taxes.  Many states, like Connecticut and Massachusetts, have state estate taxes with much lower exemption amounts (2 million in CT for 2011; 1 million in MA for 2011).  Consequently, married couples with net worths exceeding the state estate tax exemption  still benefit from credit shelter trusts** to minimize estate taxes at the state level.

Center on Budget and Policy Priorities recommends new estate tax rules should expire after 2012.



What is the current Connecticut Estate and Gift Tax Exemption level?  On May 4, 2011, the Connecticut Senate and House of Representatives passed Public Act No. 11-6, which the Governor signed into law.  Pursuant to Public Act No. 11-6, section 84, for estates of all decedents dying after January 1, 2011, an estate tax will be due on all Connecticut taxable estates exceeding $2 million.  Pursuant to section 87, for taxable gifts made after January 1, 2011, a gift tax will be due on all Connecticut Taxable gifts exceeding $2 million in aggregate.  This is a reduction of the $3.5 million dollar exemption in force during 2010.

What effect do gift taxes have on my estate tax exemption?  Use of any portion of one's lifetime gift tax exclusion causes a corresponding reduction in the amount of estate tax exclusion available for that person's estate.  In general, under both Connecticut and Federal law, a gift tax is imposed upon the person making the gift(s) (the "grantor") when the value of the gift(s) from the grantor to any one individual during the year exceeds $13,000 (excluding gifts to one's own spouse or a charity).  A person can make gifts up to this $13,000 "annual exclusion amount" per recipient annually to an unlimited number of people without making a "taxable gift".  Once a grantor exceeds the $13,000 annual exclusion amount, a gift tax is imposed on that portion of the gift(s) exceeding $13,000 for the year (i.e. a $15,000 gift to a person will cause a $2,000 "taxable gift": $15,000 gift - $13,000 annual exclusion = $2,000 taxable gift).  Although a gift tax is imposed, a tax may not actually be payable.  Each individual has a lifetime gift exclusion available (currently $2 million in Connecticut and $5 million federal).  Accordingly, once a grantor exceeds the annual exclusion amount of $13,000, the amount of the grantor's taxable gift(s) is subtracted from the grantor's remaining lifetime gift exclusion (i.e. the $2,000 taxable gift noted above would reduce the grantor's lifetime gift exclusion by $2,000, leaving the individual with $1,998,000 remaining Connecticut exclusion and $4,998,000 remaining federal exclusion for use toward future taxable gifts).  Gift taxes must be paid once the lifetime gift exclusion is exhausted by taxable gifts.  Unfortunately, as stated above, each time a grantor uses up a portion of the grantor's lifetime gift exclusion, this essentially reduces the grantor's estate tax exclusion available at death.

**Note - Credit shelter trusts are a common tool utilized to preserve the estate tax exemption of the first spouse to die, however, other planning methods are also effective.