Creating a living trust in Connecticut allows you to protect your assets during and after your lifetime by transferring some assets into a trust where they continue to be available for your own use during your life. After your death, they pass to your beneficiaries. A revocable living trust is an important part of estate planning.
Living Trusts in Connecticut
A Connecticut living trust is created by a grantor, a person who wishes to have a trust. The grantor first chooses a trustee who will manage all of the trust assets. You can name yourself as trustee, but you need a successor trustee who can take over after you die. The trustee manages the assets for the benefit of the grantor during his lifetime. When you create a trust you continue to use your assets just as before, living in your home, using your car, and spending your savings. After your death, the trust distributes your remaining assets to the beneficiaries you have selected.
Most Connecticut living trusts are revocable, which means you can alter or undo them while you are alive. Once you die, the terms become permanent. An irrevocable living trust is one that cannot be changed from the moment it is signed.
One of the primary benefits of a living trust in Connecticut is that the assets in the trust pass to your beneficiaries without going through probate, the court process through which a will is proven. Connecticut does not use the Uniform Probate Code, so its procedure is not simplified. Avoiding probate can save much time and money since the process takes many months and incurs fees for the executor and attorney. Additionally, living trusts are much more difficult to contest than wills, providing extra insurance that your wishes will be carried out.
If you have neither a will nor a living trust, your assets are distributed according to Connecticut’s intestacy statutes, parceling out your assets among relatives according to a formula with no input from you.
Do I Need a Living Trust in Connecticut?
A living trust in Connecticut is an attractive choice for many because it gives total control over assets both during your life and after your death. While you are alive, you handle your assets as you normally would, making all decisions if you have chosen to be the trustee. Unlike when you pass your assets through a will though, a trust also allows you control over them after your death. In the trust you can control exactly when and how much each person receives. Some people choose to distribute assets gradually, giving children or grandchildren amounts as they reach certain birthdays. If you use a will everything is distributed at once.
When you create a living trust in Connecticut, you not only plan for your death, but for your life as well. Assets placed in a living trust provide protection for you should you become mentally incapacitated. Your assets are already in place, being managed by the trust, so no guardianship proceedings are necessary.
One of the most important reasons some people choose to create a living trust is for the privacy protections it offers. When you write a will it must be probated in court, becoming part of the public record. Trusts are managed without any court intervention and are never made public. The terms of your trust, the amounts and types of your assets, and the name of your beneficiaries are never released.
Living Trusts and Estate Taxes in Connecticut
A living trust won’t protect you from estate taxes, unless you create a specific trust called a QTIP, marital, or AB trust. Connecticut is phasing out its state estate tax but currently provides exemptions for only $2 million while federal estate tax exempts $5.4 million. A specialized living trust will transfer assets from spouse to a surviving spouse, avoiding estate tax on the transfer. Living trusts do not protect your assets from Medicaid costs.
How to Create a Living Trust in Connecticut
To create your trust, you need to first prepare the trust document with the names of your trustee and beneficiaries and details about how the assets are to be distributed. You then sign the document in front of a notary. The trust is not complete until you fund it by transferring ownership of assets. It’s up to you to select the assets you want to place in the trust, but IRAs, 401(k)s or Keogh plans cannot be transferred to a trust. Once that step is complete, the trust is functional.
A living trust is an important option to consider as part of your estate planning in Connecticut. A living trust offers benefits not available through a will and is a popular asset management tool.
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