We love meeting with clients to execute their estate plans. Clients have a well-deserved sense of accomplishment that they’ve asked the hard questions, made the right decisions, and now have a plan in place. They have peace of mind that their family will be provided for and their wishes will be carried out. However, there is one last piece that needs to fall into place for every estate plan to be well organized. It is a paper or digital file that you keep in a safe, accessible place known to your executor and/or family. It is a letter of instructions which will serve as a valuable roadmap to enable your executor to identify and assemble assets, successfully settle your estate and carry out your wishes. Your letter of instructions should include:

• A complete list of all assets;
• The location of any tangible assets that are not readily accessible;
• Information about all liquid assets, including bank, brokerage, retirement, and investment accounts, including passwords and PINs;
• Names and contact information of any bankers, brokers, attorneys, or other professionals who handle your assets;
• Preferred charities for donations, if any are to be made;
• The location of legal and financial documents such as bank and social security statements, tax returns, birth and marriage certificates, divorce and citizenship papers, Social Security card, titles and/or deeds for any real estate properties, wills, and trusts;
• A list of all financial account designated beneficiaries or other estate beneficiaries and their contact information;
• The location of all safe deposit boxes and their keys;
• The contact information of any debtors, such as mortgages, credit cards, and car loans;
• Any digital account and computer passwords and PINs, if required to access important information or assets;
• Instructions for social media accounts, if applicable;
• A list of memberships that have value, such as frequent flier accounts;
• Funeral and burial instructions and evidence of any prepaid plans or title to pre-purchased burial plots;
• Information regarding the disposition of specific assets, such as who would get a sentimental possession or heirloom, if your Will states that these articles are to be distributed according to a letter. I strongly recommend this letter be kept with the Will and dated, so everyone is clear that it is the most current.  I also recommend it be sent to me to keep with the original Will.  It is important to note that if your Will does not provide for this type of letter, it will not be recognized, especially if it contradicts your Will.  The terms of your Will govern all dispositions.
• Details about and contact information for any and all insurance coverage, especially life insurance;
• Instructions for the care and placement of any pets; and
• Any personal messages you’d like to leave to loved ones.

The above list is a guide and not meant to be exhaustive. The general rule for what to include will be based on (i) what information someone needs to know to step into your shoes and settle your estate and (ii) what information you would like someone to know in order to manage your affairs according to your wishes after you are gone.

The hardest part will be compiling the information the first time. Start with the easy items so you have a sense of accomplishment, and then continue on through the list. Once it is done, updating the instruction letter should not be time consuming. A review of the letter should be done annually to keep it up-to-date as things inevitably change over time.

It is easy to see how critical it would be for your executor to have the letter and how much more difficult his or her task would be without it. This is a final act of kindness for those you leave behind and a critical component of a well-organized estate plan.

If you have any questions about this or any aspect of your plan, we would be happy to assist you. Please contact Michele Gartland or Marianne Cirillo directly with any questions or email us at [email protected].

New Canaan Office Opening

Rucci Law Group will be opening a New Canaan office March 1st. We are excited to announce that we are expanding! To better serve our New Canaan clients, we are opening an office at 59 Grove Street as of March 1, 2020. Office hours in New Canaan will be by appointment only so please continue to contact us at our main number –203-202-9686.

George Reilly

George Reilly has been elected to the Darien Planning and Zoning Commission. George will participate in the review of commercial real estate projects with a view toward maintaining the character of Darien, ensuring safety of pedestrian and vehicle traffic and encouraging sustainability of resources.

Michele Gartland

Michele Gartland was inducted as a new member into the Darien Rotary Club this past October. She looks forward to volunteering her time and lending her professional skills to the community organizations the club supports.

By George A. Reilly

Daniel and Kaitlyn were excited about their upcoming wedding. At the same time, Kaitlyn believed she needed to protect assets she had accumulated. She could not imagine that her marriage to Daniel would end badly, but she has seen it happen to others.

Kaitlyn has received significant gifts from her grandmother, and knows she may become a beneficiary of a trust. She also thinks she may receive a significant inheritance from her parents someday. Kaitlyn’s parents love Daniel, but they want any inheritance protected for Kaitlyn and, hopefully, grandchildren.

Finally, with three months to go before the wedding, Kaitlyn broached the subject of a prenuptial agreement with Daniel. The conversation went well, as Daniel had some concerns of his own.

They need to consider carefully the merits of a Connecticut prenuptial agreement and how their assets and income would be shared in the event of termination of their marriage by divorce or legal separation. It may also address their rights upon the death of a party as well.

Judges have discretion

In Connecticut, any property owned by Kaitlyn and Daniel can be divided between them in the event of a divorce regardless of whether the property was given to, invested in, earned or inherited by one spouse, and regardless of how they hold title.

That is not to say that a Connecticut court will always divide property in the name of one party between the spouses, but it can. In fact, Connecticut law mandates that the court consider the source of the property, but there is no assurance about how a judge would distribute such property.

Assurances can be achieved through a properly prepared prenuptial agreement. The parties need an attorney for each of them and they need to disclose all of their present and anticipated financial circumstances. A Connecticut court will enforce the prenuptial agreement unless a court finds it to be “unconscionable”. Finding an agreement unconscionable in Connecticut is rare.

Typical issues

Kaitlyn and Daniel have a number of typical issues to consider. They must consider how to distribute property they own at the time of their marriage and any appreciation of that property. They can address how to provide financial support from their respective incomes during and after the marriage. It is even possible to consider the cause of the breakdown of the marriage in determining the distribution of property. For example, the parties can agree that if one party engages in an extramarital affair, that party will transfer 20% more of his or her property than otherwise provided in their agreement.

Kaitlyn also wants to think about Daniel’s claims against her estate upon her death. Connecticut law assures each spouse of a certain minimum from the estate of the deceased spouse. In a prenuptial agreement, the parties may give up even that minimum so their Wills will determine the surviving spouse’s share. In this way, each spouse can carve out property they own individually from such distribution. Kaitlyn wants to take advantage of this opportunity, even though now, before any children, she plans to leave all her property to Daniel.

Resolved and relieved

Daniel and Kaitlyn made a simple agreement to keep for himself and herself the property each owned at the time of their marriage. They agreed that if they acquire property jointly, their interest in that property will be determined by the amount of each party’s investment in it. They also agreed to leave unresolved any obligation for support from income (alimony) to be determined if their marriage ends by divorce based on their circumstances at such time.

Having made their agreement, Daniel, Kaitlyn and their parents enjoyed the wedding with peace of mind.

George A. Reilly has practiced family law and related areas of law for over 36 years in and around Darien and New Canaan.

For more information, please contact George Reilly at 203-202-9686.

By Michele Gartland and Marianne Cirillo
(Final installment)

Estate Taxes and Gifts

In part one and part two of this article, we covered wills, powers of attorney, healthcare proxies, and trusts. Now let’s discuss estate planning techniques that occur outside of these documents.

Let’s start with some background information. When a person dies, his or her estate is subject to federal estate tax, and, in Connecticut, there is also a state estate tax (CT is one of 12 states that applies an estate tax). Current federal law exempts the first $11,400,000 per person from estate taxes (a married couple’s exemption amount is $22,800,000), but anything beyond that value is taxed at a 40% rate.¹ The current Connecticut exemption amount is $3,600,00 per person, which cannot be doubled for a married couple.² It should be noted that these are lifetime exemption amounts, meaning that if you give away sizeable portions of your estate during your lifetime, the value of those gifts will be deducted from the exemption limit, thus reducing the tax-free amount of your final estate.

One aspect of estate planning is to minimize estate taxes to the extent the law allows. An efficient way of minimizing those taxes is to reduce the size of your estate over your lifetime so the final estate is subject to little or no tax. This can be done through the process known as “gifting.” Gifting is often an easy, straightforward way to manage the size of one’s estate, but it is important to realize that, if the size of the gift exceeds the exemption amount, the donor pays the tax, not the recipient. However, you can still make annual gifts without it counting toward the exemption amount as described below.

You may give gifts worth up to $15,000 (this year’s annual exclusion amount) to any one person without having it count toward your lifetime estate exemption amount and without having to file a gift tax return. This annual exclusion amount typically increases a little each year to adjust for inflation. You can give an unlimited number of those exclusion amount gifts as long as they are not to the same person, and this can be repeated year after year. If you give someone a gift worth more than $15,000 in a given year, you won’t have to pay federal taxes on it until you hit the lifetime exemption amount, but you will have to file a gift tax return with the IRS so the agency can keep track. In Connecticut the current $3.6MM exemption is a combination of lifetime gifts plus the size of your estate, so gifting can add up over time and should be carefully planned. As the size of Connecticut’s exemption amount grows to be more closely aligned with the federal amount over the next few years, if you are considering making a large gift it may be worth doing so before the federal exemption amount is set to return to its previous levels at the end of 2025.

Some exceptions to the exclusion amount limits: donations to charity are always tax deductible if you itemize, and they do not count as gifts. In addition, a gift can exceed $15,000 and still be considered a permitted exclusion if the gift is made directly to an educational institution or a medical institution to be used directly for the beneficiary’s education (tuition) or medical expenses.

Accounts Titling and Beneficiary Designations

What happens when a person who dies shares an account with someone else? Many people own houses or bank accounts jointly with a spouse, for example.

If a house is solely owned by an individual, it is his or her property at time of death and is considered a probate asset. But if it is titled as jointly owned with right of survivorship with either a spouse or a child, 50% of that asset transfers automatically to the surviving account holder and it is not reported as a probate asset. This is also true for a bank account or other property that is owned jointly with right of survivorship.

Similarly, 401(k)s, IRAs and life insurance policies have designated beneficiaries. If these parties are named, the funds are transferred to the named parties relatively quickly and do not pass through probate. Beneficiaries of retirement plans also get the added benefit of converting the IRA into an inherited IRA, and that asset can continue to grow tax free. If no designated beneficiary is named, then the asset will be considered an asset of the estate and will not be distributed until the estate is settled.

Both account titling and beneficiary designations are important aspects of estate planning that should be carefully considered and reviewed regularly to make sure they reflect your current wishes. 

Conclusion

Estate planning helps people plan for and navigate critical decisions at different times in their lives. Families in particular can benefit from proper estate planning as it gives them the ability to look out for and protect parents, children, siblings and others. Having a plan establishes a clear indication of your wishes and creates peace of mind for you and your loved ones.

The lawyers at Rucci Law Group have strong experience in estate planning. For more information, please contact Michele Gartland or Marianne Cirillo at 203-202-9686.

¹ This number will go up by an inflation-adjusted amount until the end of 2025, when the law is set to expire and decrease to $5,490,000 per person and $11, 980,000 per couple.

² Assuming no future changes in the law, this number is set to increase to $5.1MM in 2020, $7.1MM in 2021, $9.1MM in 2022, and to the federal exclusion amount thereafter.