As you approach the estate planning process, you have many tools at your disposal. One such tool is a living trust. By creating a living trust, you can protect your assets and property and save your family from having to go through probate following your death. The considerations surrounding the creation of a living trust depend in part on your state’s laws. In this article, we’ll explore how to create a living trust in Connecticut.
Like any legal document, living trusts can be complex, so it might be helpful to work with an estate planning lawyer. A financial advisor can work with your lawyer to ensure a living trust fits in with your overall financial plans.
How to Create a Living Trust in Connecticut
Connecticut residents need to complete six distinct steps to get their living trust off the ground:
A living, or “inter vivos,” trust is a legal arrangement that holds your property and assets in a single, sheltered entity. Regardless of whether you or someone else acts as trustee, this person is responsible for the care of your living trust. Don’t forget to name a successor trustee that will oversee the distribution of your trust’s contents to the appropriate heirs.
Items in a living trust may include:
Living trusts come in two variations: revocable and irrevocable. A revocable living trust allows you, the trust grantor, to add or remove contents as often as you’d like. An irrevocable trust abides by much stricter rules, as you cannot make changes to the trust without the express consent of everyone named within it.
Because the grantor technically retains control of the property and assets in a revocable trust, they are personally on the hook for any associated taxes. An irrevocable trust, on the other hand, is an independent entity, so it’s taxed on its own.How Much Does It Cost to Create a Living Trust in Connecticut?
The costs associated with a living trust vary on a case-by-case basis. The main factors that go into this calculation are the complexity of your estate planning needs and the method by which you choose to create your living trust.
Lawyers are notoriously expensive, and estate planning attorneys are no exception. In fact, if you go this route, you can expect to pay somewhere around $1,000 when all is said and done.
Online living trust services are much less pricey (around $200), but there are inherent dangers with taking estate planning into your own hands. It’s recommended you work with an estate planning lawyer.Why Get a Living Trust in Connecticut?
The primary benefit of getting a living trust is that, when you’re gone, your family can count on skipping probate. Probate is the time-consuming process by which a court confirms and finalizes the contents of a will. In addition to taking a while to complete, the probate process may result in private information becoming part of public record, which many families would like to avoid.
Some states have adopted the Uniform Probate Code, a set of laws designed to simplify the probate process. Unfortunately, Connecticut is not one of them. That makes getting a living trust a particularly smart idea in Connecticut.
Another advantage of a living trust is it lets you offer an inheritance to a minor without needing to hand it over to them right away. This is done through the naming of a trustee that will supervise the property or assets in your name until the minor reaches a specific age.Who Should Get a Living Trust in Connecticut?
The absence of Uniform Probate Code in Connecticut law makes living trusts a worthwhile investment for many residents. Although they’re often pinned as tools solely for the wealthy, many people, regardless of their financial state, can make use of them.
While it hasn’t adopted the Uniform Probate Code, Connecticut has instituted a simplified probate process for estates worth less than $40,000. So if you fall into this category, think twice about starting a living trust for you and your family.
There are a few downsides to living trusts. For starters, they are much more expensive to put together than other common estate planning tools, such as wills. Take into consideration that they also have a long window for potential legal challenges, which could still end up making things difficult for your family.Living Trusts vs. Wills
Wills and living trusts provide similar benefits, but don’t be afraid to utilize both. A will dictates what happens to property not placed in your living trust, making them a great pairing. Other features of a will include the ability to:
Take a look below for a breakdown of the differences between living trusts and will:Living Trusts vs. Wills Situation Living Trusts Wills Names a property beneficiary Yes Yes Allows revisions to be made Depends on type Yes Avoids probate court Yes No Requires a notary Yes No Names guardians for children No Yes Names an executor No Yes Requires witnesses No Yes Living Trusts and Taxes in Connecticut
In nearly every case, living trusts have basically no effect on your tax situation. There is an estate tax in Connecticut, though, so make sure to take this into account. The state does not levy an inheritance tax of any kind, clearing the way for your heirs.
No matter what state you live in, you may have to pay the federal estate tax. However, this IRS charge only applies to estates that are worth $11.4 million or more. That means most estates won’t encounter this tax.Bottom Line
The lack of Uniform Probate Code in Connecticut makes living trusts a truly effective estate planning tool in the state. They should be on the table for essentially every Connecticut resident with an estate that’s worth at least $40,000. You can go for the DIY approach if you feel confident you can handle the research, but an estate planning attorney could be a major help.Tips for Planning Your Estate
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