I was recently part of a panel at the Senior Center and asked to present on the most important topics related to aging. My focus was “end of life planning.” Here’s what I said:
End of Life Planning
There are 2 major categories to end of life planning;
- How do you get your stuff — the good stuff at least — to the people you want to get it when you die?
- What end of life planning can I do that benefits me while I’m still alive?
Distribution of Assets
The 4 ways to get your assets to the people you want to have them when you die.
Option 1: Do absolutely nothing
This is called intestacy. If you die with assets in your name and no Will directing who gets them, Connecticut has a default set of rules it will apply. Generally speaking, those rules prioritize spouses, then children, then parents of the deceased. Be warned, though, that they may not prioritize them the way you would, or even define “children” the same way you would. For example, most married couples with children execute “I love you wills” where each leave their assets to the other first, and if they are the second to die, it all goes to their children. Connecticut intestacy laws in that same situation don’t do the same thing. The spouse gets the first $100,000, but only half of all the remaining assets. For couples who have jointly shared all of their assets throughout their married life, this can be quite a financial shock. The state may also not define children the same way you do, nor handle the share for your adult child who tragically predeceased you but left a widow, your daughter-in-law, and children and/or your grandchildren the way you would.
Option 2: Assets owned jointly
Have only assets that aren’t just in your name, or that have their own beneficiary named. The most common is to own jointly with another. You can jointly own a checking account, house, a car or even an investment account. When you die, the survivor becomes the sole owner. Other assets have beneficiary requirements, i.e. retirement accounts and insurance policies are examples. Today there are many other classes of assets, even investment and brokerage accounts, that also offer a beneficiary option.
The risk here is that the results can be haphazard. You cannot know what the values of those assets will be at your death, and there’s no one place you can look to make sure you have all the right beneficiaries named on each asset.
Option 3: Have a Will
The most common way to pass on assets in just your name and not governed by a beneficiary process, is to have a will. In Connecticut a will is effective if in writing signed by the testator and witnessed by two people. Those two witnesses should be independent and have to affirm under oath that they witnessed your sign and believed you competent when you did. In Connecticut if your total assets exceed $40,000 you go through the probate process (if under it, you probate the estate with a single form filed.) Our probate courts are small regional informal courts where an elected judge objectively overseas your estate to make sure your executor/trix pays all the bills, gets the tax returns filed, and distributes your assets in accordance with the will. For many, the probate process is a valuable oversight mechanism to ensure fairness. The downside is it can take a year or more, and there are some fees and costs involved, but there are options to make the assets available to support your spouse or beneficiaries who need it during the process.
Option 4: Using a Trust
The topic of trusts is too broad to cover here. Trusts come in all shapes and sizes. Most are revocable (you can change or cancel them completely) and used mainly to avoid the long probate process, often called Living Trusts. The next most common reason are to exert control over the assets and how they are distributed after you’re gone: to support your spouse during their lifetime, but also guarantee assets then go to your children (and not to a subsequent spouse); to support a child with special needs; or make sure they are not wasted by your adult child the way you fear if given a lump sum. To be valid in Connecticut a trust needs a Grantor (you), a trustee, a beneficiary and the trust document must be signed in front of a notary.