Living Trust (or Revocable Trust)

Establishing a living trust is probably the best strategy to avoid the probate process and protect your privacy. A living trust is a contract in which you transfer ownership of your assets to the trustee of your trust. The trustee is responsible for managing the trust assets for your benefit in accordance with the directions contained in the trust agreement. Your trust can hold all types of assets, such as investment portfolios, rental property, collectibles, and stocks in a closely held business. Most people choose to serve as their own trustee. You can also appoint someone else or a corporate trustee as your trustee.

Upon your death, assets in your living trust do not pass through the probate process. Thus, they can be distributed more quickly and with less administrative cost. Unlike a will, a living trust is not a matter of public record.

If you own real estate outside of Connecticut, you should strongly consider creating a trust. An individual who owns property in both Connecticut and a second state will trigger two separate probate proceedings upon death: one for the Connecticut property and another for the out-of-state property. The probate for the out-of-state property will take place in the state where it is located. This double probate situation will add significant time, delay, expense and complexity to the probate process. However, if the out-of-state property is in a trust, it will avoid probate.

It is important to realize that only those assets titled in the trust’s name will avoid probate. Too often people create trusts without bothering to “fund” them. Upon the creation of the trust, you must re-title your assets to the name of your trust. Assets held outside the trust will pass through probate, which is why you still must have a will in addition to the living trust. This is called a “pour over” will.

“Pour Over” Will

The pour over will directs that any solely owned assets not held in your living trust shall “pour over” into the trust at your death. The probate assets are then managed along with the other trust assets.
Ideally, all of your assets should be in your trust at the time of your death. Nonetheless, if you forgot to place certain assets into your trust, a pour over will is critical.

Joint Ownership

Jointly owned property will pass to the surviving co-owner upon your death. Using joint ownership for real property, bank accounts, or investment portfolios is a simple way to help meet the needs of your survivors while your estate is being settled. However, you should be aware of the potential pitfalls of joint ownership. Since each joint owner has full access to the jointly owned asset, the entire asset may be at risk if your co-owner has problems with creditors or experiences a divorce. Under Connecticut law, joint bank accounts are owned 100% by each co-owner. Joint ownership may preclude the use of other estate planning techniques that may help you reduce estate taxes.

Beneficiary Designations

Assets can pass outside of probate through a “beneficiary designation.” Life insurance policies, qualified retirement plans, annuity contracts, and individual retirement accounts (IRAs) direct the payment of these assets to a specific person or entity immediately upon your death. These assets will not pass through probate because they are not treated as solely owned. The Connecticut Uniform Transfer on Death Security Registration Act (C.G.S. §45a-468) allows you to designate a “payable on death” beneficiary for securities and brokerage accounts.

Please check to make sure that the designation of your beneficiaries and contingent beneficiaries is current. You should review it every few years, in case a beneficiary dies or becomes incapacitated.

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