(Part two of three installments)

Part one of this article discussed the importance of wills, powers of attorney, and healthcare proxies as part of any effective estate plan. In this section, we will discuss the value of trusts as an additional estate planning component.

Revocable Trusts

There are many types of trusts, but the two main categories are revocable and irrevocable trusts. A revocable trust is one that you (the grantor) set up during your lifetime, and it stays under your control for as long as you live. You are allowed to amend or revoke a revocable trust at any time. You may place assets in a revocable trust and those assets will be held in the trust’s name. The trust will also establish how you would like the assets to be distributed upon your death.

A key benefit of a revocable trust is that assets held therein are not subject to probate (i.e., not distributed according to a will), thus making it easier and less expensive to pass them to your heirs. Assets in a trust are also confidential and not subject to public filings.

The trade-off for the flexibility of a revocable trust is that it does not transfer wealth outside of your estate for estate tax or statutory probate fee purposes. A revocable trust is usually set up under the grantor’s social security number. The grantor pays taxes on any income generated by the assets during his or her lifetime. When the grantor dies, the trust receives its own tax ID number and the assets become subject to state and federal estate taxes at the trust rate unless they are distributed to the beneficiaries according to the trust’s terms.

Irrevocable and Other Trusts

As the name implies, an irrevocable trust is the opposite of a revocable trust. Its main purpose is as a wealth transfer vehicle since once it is set up, the grantor no longer owns or controls the assets. Someone else must be appointed as the trustee and a separate tax ID number is established. An irrevocable trust can be set up so either the grantor or the trust pays the taxes on income generated within the trust. The assets are not included in the grantor’s taxable estate and so are not subject to estate taxes. Irrevocable trusts can also be used to protect assets from creditors and to set up guidelines for the terms of inheritance for beneficiaries. 

There are other types of less commonly used trusts that still have value for estate planning. Two of interest are charitable remainder trusts and irrevocable life insurance trusts.

Charitable Remainder Trusts

A charitable remainder trust involves giving a gift to a charity of an asset that has appreciated greatly – for instance, a painting, a house, or stock. The charity then sells that asset at current market value without owing any capital gains on the appreciation. Using the proceeds, the charity pays the grantor an annuity payment over a pre-determined term of years, with whatever is left over at the end (a mandatory minimum of 10% of the original gift) being kept by the charity. The grantor receives a current income tax deduction on the value of the remainder distribution to the charitable beneficiary.

Irrevocable Life Insurance Trusts

An irrevocable life insurance trust is established specifically to own a life insurance policy. Often individuals hold policies in significant dollar amounts to protect their young families or to provide an inheritance later in life. These policies’ death benefits, however, can often exceed federal or state estate exclusion amounts and will be taxed accordingly. But if the insurance policy is owned in a trust, the asset is outside of the estate and therefore not subject to taxation. Existing life insurance policies can be transferred into a life insurance trust but will be subject to a three-year look back by the IRS before the transfer can be recognized for tax purposes. If a policy is originally purchased by a trust, the benefits are available immediately.

Part three of this article will cover important estate planning aspects of gifting, accounting titling, and beneficiary designations.

For more information about estate planning, please contact Michele D. Gartland or Marianne C. Cirillo.

Residents of New Canaan, Connecticut, like many towns, value youth sports. Securing regular funding to build and maintain top-notch athletic facilities for its teams is becoming increasingly difficult. Education budgets are stretched, and, although residents support the myriad of school- and town-offered activities, no one wants to pay for them with tax increases.

Faced with that reality, a group of local residents founded the New Canaan Athletic Foundation (“NCAF”) as a volunteer fundraising organization in mid 2016. At its inception, NCAF’s most pressing job was to establish an endowment for future required turf replacement at Dunning Field, the high school football stadium. Once that project was finished, the group wanted to continue, with a stated goal of supporting the experience of all student athletes with a broad-based community commitment towards facilities and a healthy lifestyle. That encompasses improving fields and practice areas for most of the town’s youth sports (including football, track, tennis, baseball/softball, soccer, and lacrosse), and identifying current and future needs across all athletic facilities.

The organization soon found out that setting up a non-profit 501c (3) operation is more complicated than it first appears. After some troubles arose, the Foundation hired Rucci Law Group (“RLG”) to steer them through the incorporation period.

“NCAF faced a problem that is all too common for non-profit start-ups,” said Kate Diehm, Attorney at RLG. “They relied initially on online forms set up on the State of Connecticut website. What they didn’t realize is that the state paperwork requirements are not the same as those of the IRS, which has different regulations regarding dissolution issues, among other things.” Attorney Diehm continued, “It’s not so easy to do this yourself—it’s easy to be confused by the different rules surrounding for-profit and not-for-profit organizations.”

Over the past year, RLG has helped NCAF rework its formation documents, bylaws, certificate of incorporation, and conflict of interest documents to meet IRS standards. RLG also helped NCAF develop budgets and projections and formalize a description of the work they seek to accomplish. Despite some delays caused by the federal government shutdown earlier this year, the documents were all approved and the organization’s designation as a non-profit corporation is now complete. With the paperwork done, NCAF has the legal authority to spend money and can now seek to carry out its mission.

Since its early days, NCAF has sought not only to raise project funds but to change the entire athletic funding process. Part of Rucci’s work has involved helping the organization negotiate a novel public/private partnership with the town. This involves the Foundation taking over collection of the  “fields usage fee” collected for each player every season, the proceeds of which are used for maintenance. NCAF also expects to create a master plan to schedule anticipated field repairs and replacements. The group will seek to rent out the facilities during the off-season, thus offsetting expenses with an income stream. The town reserves the right to prioritize projects and designate how funds are spent.

“This is not a partnership in legal terms, in that the groups have no liability for each other and they cannot act on each other’s behalf,” explained Attorney Diehm. “But it is very much a partnership in every other sense of the word, and it is an exciting experiment that may well become an important way for towns to work with outside organizations for the benefit of all involved,” she added.

The town/NCAF partnership was approved earlier this summer and the NCAF is already planning its first fundraiser—a townwide picnic to be held at Waveny Park on Saturday, September 7^th. The newly hired NCAF executive director Bobby Rushton is actively working with the town to develop the business plan for a newly created Athletic Enterprise Zone that will manage and optimize field use.

RLG’s initial work is done, but the firm will have an ongoing role in reviewing annual maintenance procedures, preparing annual report documents and facilitating required annual meetings. “The nature of such organizations is that parents’ involvement will change over time as children move through the school system, so we at RLG are the constant—the institutional memory of the organization,” noted Attorney Diehm.

For more information about non-profit organization formation and planning, please contact Kate Diehm.

(Part one of three installments)

Do you have a written plan for what happens to your assets when you die? Does your family know your wishes in case you need care or become infirm? You may have a will, but have you given serious thought to the many other important aspects of estate planning, such as the ease of the probate process, maintaining the privacy of your estate, tax planning, and designating who can act on your behalf for healthcare or financial matters if you are not able to act for yourself? These may not be easy conversations, but they are important ones.

Estate planning is a term often not well understood: many people assume they aren’t wealthy enough, they aren’t old enough, or they don’t have enough assets to make estate planning worthwhile. But, in fact, estate planning is a useful and vital tool that people of any age, income and wealth bracket should use to make sure their wishes are carried out upon a change in circumstances during their lifetime and upon their death.

Estate planning encompasses several legal areas, including wills, trusts, tax issues, and healthcare decisions. It affects financial and personal matters and has a direct impact on the people you love. Estate planning encourages you to make carefully considered choices – and review them periodically – and to designate someone else to be your executor and to act on your behalf in case you become unable to do so yourself.

Here follows a description of the documents that should be part of every estate plan.

Wills

A will establishes who will handle your estate upon your death and outlines how you would like your assets distributed. For families with minor children, wills serve the critical role of providing clear instructions for the children’s guardianship in the event of a tragedy. Not only does a will ensure that one’s wishes are being carried out, it avoids the lengthy and costly process of probate. If you die without a will (known as being intestate), the probate court will appoint an executor (who may or may not be the person you would designate), and divide your assets according to the Connecticut intestate laws, regardless of your wishes. The court will also appoint someone to take care of your minor children (again, who may or may not be the person you would choose). A normal probate process, already lengthy at six to twelve months, can increase significantly in cases where no will is available.

Wills can be relatively simple documents, but be cautious when using “do it yourself” services like Legal Zoom and others. While perfectly legal, such services may carry incomplete instructions. It’s important to make sure the document you are working with is appropriate to your state, is updated to reflect recent statutes, and contains detailed instructions on how to execute the document properly – including witness and notary requirements. Wills that are not properly executed may be invalidated by the probate court and the decedent will be considered to have died intestate.

A will comes into play after your death, but for many people, of equal or more importance is being protected personally and financially when health issues threaten your ability to make decisions while you are still living. For that, a power of attorney and a healthcare proxy are vital estate planning documents.

Power of Attorney and Healthcare Proxy

A power of attorney allows you to appoint someone to act on your behalf for financial matters while you are still living. This can give a loved one the critical ability to pay your bills if you are in the hospital or manage your financial affairs. There are two types of powers of attorney: a springing power of attorney, that springs into action upon a given event or situation, and a durable power of attorney, which is in place immediately and lasts until you specifically rescind it. Either allows someone to act in your stead in case of an unforeseen event.

In addition to preparing a power of attorney for financial matters, it is very important to appoint a healthcare representative to make medical decisions on your behalf in the event you are not able to make them for yourself. Setting up a living will and a healthcare proxy document gives a loved one and the medical community a clear indication of your wishes.

For both financial and healthcare matters, it is important to name a successor representative as well as a primary one. Family members may die in a common accident or a surviving spouse can prove unable to handle the role. It is also important to update these documents regularly—every 3-5 years is recommended. Hospitals and financial institutions often insist on recent documents and may refuse to honor documents they consider too old. As memory loss affects more older adults, having the proper documents in place at an earlier age may spare the family from dealing with a difficult situation later.

It is not a time-consuming or expensive process to prepare a power of attorney or healthcare representative document. But without those, in the event of a need, a relative or loved one must ask the probate court to initiate a procedure to be appointed a Conservator of the Estate or Conservator of the Person. This can be time consuming and expensive —and can be completely avoided if the proper documents are in place.

Beyond planning for your wishes after death or when ill, estate planning can also help you manage your assets during your life. We’ll discuss some valuable tools in part two of this article.

For more information about estate planning, please contact Michele D. Gartland or Marianne C. Cirillo.

The Rucci team supported several charities this spring. RLG was a sponsor of the Waveny Care Network Spring Luncheon on May 14th, the The Darien House Tour, which raised funds for the Liberation Programs and other local charities on June 6th, and the 88th Annual Charity Horse Show at Ox Ridge, which ran June 11-16th.

On June 4th, Marianne Cirillo and Michele Gartland led a comprehensive presentation of Estate Planning at Maplewood in Darien. You can read about some of the areas discussed in this quarter’s newsletter. Also in June, Amy Zabetakis moderated a presentation on changes in local zoning regulations at the Fairfield County Bar Association.

On July 4th, RLG once again sponsored the annual Push-n-Pull Parade to benefit the Darien VFW. Amy Zabetakis and Sarah Mead enjoyed volunteering their time at this town-wide event.

As spring fundraising season move into full swing, Rucci Law Group is proud to be a sponsor of several local non-profit organizations’ events. Here is a listing:

April 30
The New Canaan Community Foundation is hosting a luncheon on at the Country Club of Darien. The event will raise awareness of behavioral health issues.

May 14
Waveny Care Network is hosting a Spring Luncheon and Panel Discussion

June 6
The Darien House Tour Funds raised will help support Liberation Programs and other local charities.

June 11-16
88th Annual Charity Horse Show at Ox Ridge This is the first one to be held at the completely renovated new club. Come see what it’s all about.

Julie Jaramillo co-chaired a Latin Bingo Night, a fundraising event for New Lebanon School on March 16^th with her fiancé, Christian A. Roca. As a parent of the school, Julie believes it is important to give back to the community. The funds raised support enrichment programs for the school.