03/20/98

Wills and Trusts can be Taxing

In response to Death Without a Will (3/13/98)

Several readers asked questions about wills and trusts which, as a non-attorney, I could not answer. The state of Connecticut is divided into 132 probate districts, each of which is presided over by a Judge of Probate. Most Probate Courts provide informative pamphlets to the general public, a good starting point for answers to your questions. Clerks at the probate court offices can steer you to people who are knowledgeable about estate law.

Also, there is an organization called Statewide Legal Services of Connecticut that answers legal questions from the general public. Call Monday through Friday from 9:00 am to 3:00 pm. The numbers are: 203.344.0380 and 800.453.3320.

Readers offered the following comments and information about wills and trusts:

• May I recommend a revocable living trust? This eliminates probate and allows you to designate who will be first trustee when you die. In the meantime, all your assets are yours to do with as you wish. If you change your mind about the disposition of anything in particular, you can amend the trust. In my case my oldest daughter is first successor trustee. Should she predecease me, then my son is successor, then my next son and so on. Not only does your estate not get tied up in probate, but neither is any of the financial information "published." -- Establish Succession in Advance
• I wonder about the legality of the wills that are produced by the software packages on the market today for home computers. I assume these pre-packaged wills are designed to eliminate the need of consulting expensive attorneys, just to produce a simple will. --- Reduce Attorney Costs

Author's Note: After creating a computer software will, I suggest consultation with an attorney anyway, just to be sure the will conforms to the laws of the state in which you reside.

• You didn't mention taxes in the article. Without proper planning, taxes become a big factor. In this country the rates are as high as 70% of the estate. Although the unified credit begins to shelter property up to $600,000, here in Fairfield County many people have that much equity in their homes or value in their businesses. Terms of a will can have a significant impact on taxation. -- Avoid Excessive Taxation

Author's Note: There is a type of trust called QTIP (Qualified Terminable Interest Property), which is designed to provide married taxpayers with tax benefits arising from the transfer of property to spouses and heirs. QTIP can minimize the potential for conflict by giving the surviving spouse a qualifying life interest while leaving the principal to children of the marriage. Consult the following Internet site for more information and examples of benefits of QTIP:

• QTIP, another reader says, allows the first spouse who dies to leave an amount equal to the credit shelter amount ($625,000 this year) to a trust. Income from the trust, plus a 5% power to invade trust principal, goes to the surviving spouse. The residual is then left to the children or grandchildren tax-free. Effectively the parents have left $1,300,000 (instead of $625,000) to their children tax-free. This can only be done with a will that allows this election by the executor (along with other technical requirements). The QTIP can also have a dramatic effect on state estate taxes. Careful estate planning, through the use of a will, can save thousands of dollars in estate taxes. -- The Cost of a Will is Worth Every Penny!
• Visit the Essex Probate Court homepage for further information. -- Probate Court Judge

Please send questions or comments to bbruno@snet.net.