Purposes of a Simple Trust

Most people in Connecticut do not have to worry about estate taxes when they die because the exemptions are $13.61 million, both for federal the state of Connecticut. Those laws can change, but for the average Connecticut resident, inheritance taxes are not a reason to do a simple trust. But there are two big reasons why a simple revocable trust may be a wise thing to do for any married couple.

First, the trust will avoid having to go through the probate process. That can save time and expense, although in Connecticut it will not avoid a probate fee, because that fee is based on the amount shown on the inheritance tax return, even though no inheritance tax is due below $13.61 million. So the good news is that probate is not needed for your assets held in a revocable trust. The bad news is there will still be a fee owed to the probate court in Connecticut.

A significant reason to have a revocable trust that passes on your assets to your family, is to protect your children from controlling those assets because of young age, inexperience, or marital issues. Even if those children are financially savvy and careful, a married child cannot control what might happen from an unexpected divorce. But if you have their inheritance held in a revocable trust which becomes irrevocable after you die, the person you choose to invest and use those assets for them go a long way to protect those assets from a divorce, con men, or simple mistakes of someone who does not have the years of experience that you do.

Another reason to have a revocable trust is to name someone to handle your assets if you become incapable. This can also be accomplished with a durable power of attorney, and the critical part is choosing a reliable and experienced person to handle those assets. That could be your spouse, your CPA, your attorney, or anyone you choose to act wisely for your children’s benefit until they become older and wiser and experienced in life. In most cases where families have less than $13.61 million, you and your spouse can be the trustee during your lifetime. If one of you dies, and the other becomes incapable, then that trust can continue by putting a child in charge, or someone else if that child is too young or inexperienced, or is married to someone that you have concerns may waste that money.

In short, there is no one size fits all, as family situations differ. But it is common sense not to have a significant part of your assets go directly to your children if because of age, inexperience, or potential marriage problems those hard earned assets could be wasted. A simple, revocable trust can be a good answer in how to protect your children’s inheritance until they become older and wiser.

Attorney Stephen O. Allaire is Of Counsel and Attorney Halley C. Allaire is principal in the law firm of Allaire Elder Law, members of the National Academy of Elder Law Attorneys, Inc., with offices at 271 Farmington Avenue, Bristol, (860) 259-1500, or on the web at www.allaireelderlaw.com. If you have a question, send a written note to either attorney at Allaire Elder Law, LLC, 271 Farmington Avenue, Bristol, CT 06010, and they may use your question in a future column.