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August 2015

In Connecticut, we have many estates in which the decedent has a million dollars or more but there is nothing for the court to administer. How can that happen?  First you need to know that the Probate Court only administers property passed from the decedent to the beneficiary by a Will or by the laws of intestacy.  “Intestacy” is the legal term for when someone dies without a Will.  There are 4 situations where assets do not need to go through the probate process. These are when:

  1. The decedent’s entire estate consists of property held in a trust
  2. Property is owned jointly with another person or entity
  3. Investments are in a brokerage account or retirement plan with a designated beneficiary
  4. There is a life insurance policy with named beneficiaries

In these situations, the executor of the estate needs to file a “tax purposes only estate” which is different from the typical probate process. Let me explain.

When someone dies with property worth more than $40,000, the Executor usually has to open a formal probate.  Formal probate requires filing 4 reports that have different time requirements for submission:

  1. An Inventory of the estate needs to be filed within 2 months of appointment of the executor
  2. A Return & List of Claims needs to be filed within 5 months of appointment
  3. A Connecticut estate tax return needs to be filed within 6 months of decedent’s death and
  4. A Financial Report within needs to be filed 1 year of the decedent’s death.

In Connecticut, every estate no matter how small or whether passing by trust or joint ownership of beneficiary designation, must file an estate tax return.  A Probate Court must then find that no estate tax is due in order to remove the inchoate (“silent”) lien that the State of Connecticut has on all property of a decedent.  However, with a tax purposes only estate, the Executor does not have to file 3 of the 4 reports:  Inventory, the Return & List of Claims, and the Financial Report.

Section 30.22(c) of the 2015 Probate Court Rules of Procedure clarifies that the Executor may petition the court to excuse the requirement of an inventory and final financial report or account by submitting a statement signed under penalty of false statement that the estate has no assets and, if not previously filed, a return of claims. The Executor must send a copy of the statement, at the time of filing, to each party, creditor and attorney of record and certify to the court that the copy has been sent.  This election is now made on Probate Court Form PC-211 when the Will is submitted to the court.

This new Rule recognizes that people can avoid complicated estate probate proceedings by putting all of their property in a trust, holding property jointly with another, and/or a brokerage account, retirement plan or a life insurance policy with a designated beneficiary. Wouldn’t your heirs prefer to avoid most of estate administration by using one of these non-probate methods? If you think that they would, come see us and we can help you create a “tax purposes only” estate.

New Fee schedule effective person’s dying on or after January 1, 2015

The Governor’s budget that passed in the general assembly in June provided zero funding for the Probate Court system creating an approximate $32 million shortfall for the next two fiscal years.  In order to keep the Probate courts afloat, the general assembly included increases in the probate court fees as part of the budget implementer bill.  What does this mean for Connecticut residents?  Connecticut now funds its probate court system entirely from user fees.  According to Probate Court Administrator, Paul Knierim, in a recent Hartford Courant editorial, Connecticut now has the most expensive probate courts in the United States and will be sending out six- and seven-figure invoices for probate fees.

Under prior law, the highest probate fee payable was capped at $12,500.  This fee maxed out for estates of $4,754,000 and over.  Under the new law effective for estates in which a person dies on or after January 1, 2015, the fees for estates under $4,754,000 remain the same.  However, there is no longer a cap on the probate fee for estates over $4,754,000.  Estates totaling $2,000,000 and over will now pay $5,615 plus .5% of all in excess of $2,000,000.  For example, a $10 million estate will now incur a fee of $45,615 under this new schedule.  The new fee schedule is listed below.    

Who is subject to probate court fees? 

The probate court fees are essentially a tax that applies to a person’s estate regardless of whether the probate court has any involvement in the transfer of the person’s assets at death.  Unlike most states, Connecticut is one of the few states in the country that includes property passing outside of probate in calculating fees on a decedent’s estate.  For example, a person may plan to avoid probate by having all of his or her assets held in a lifetime revocable trust, or pass to beneficiaries via survivorship designations (such as jointly owned real estate or bank accounts), or pass via beneficiary designations (such as retirement plans or life insurance proceeds).  This is a common planning tool in other states.  Nonetheless, the Connecticut probate court fee still applies to these types of assets because they are part of the deceased person’s gross taxable estate.

How can one avoid Connecticut probate court fees?

For many people with average wealth, the new probate court fees will have little effect on their estates.  For those who might be impacted by the fee increase, there are a few options. 

One way to minimize or avoid the probate fee is to change your domicile to another state, such as Florida, and move the majority of your property to that state.  The Connecticut probate court fee applies to a deceased person who is domiciled in Connecticut on the date of his or her death, and applies only to that person’s real property or tangible personal property located in Connecticut.  Property of the deceased person situated outside of this state is excluded.  For a person who was not domiciled in Connecticut on the date of his or her death but who owned real property or tangible personal property in this state, such real property or tangible personal property situated in this state is included in the basis for Connecticut probate fees.

Another option is to plan for the probate fee and purchase sufficient life insurance to cover the expected fee.  Yet another option is to utilize lifetime gifting strategies to move wealth to your family in order to reduce your taxable estate.

If you are concerned over the impact the new probate court fees may have on your estate, contact us today to review your situation and discuss planning options suitable for you and your goals.

CT probate Court Fees

[If the basis for fees is less than ten thousand dollars and a full estate is opened, the minimum fee shall be one hundred fifty dollars.]