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August 2016

A power of attorney gives someone you trust the power to sign financial documents for you. If you lose the ability to make financial decisions or you are away on vacation or business, your agent can act for you. 

We find many of our clients have powers of attorney but they are old. Now, more than ever before, it is time to update your power of attorney.  Here are 5 reasons to do so.

Connecticut Changed its Power of Attorney Law

Effective October 1, 2016, Connecticut has a new power of attorney law. See Connecticut Public Acts 15-240 and 16-40.  Most current Connecticut powers of attorney are based on a statute passed in the 1960s. That is before retirement plans existed, before home computers existed and even before electronic banking! The new law clearly defines all of the powers necessary to undertake modern financial transactions. 

Your Agent May No Longer Be Appropriate

Lives do not stay the same. Whether from a divorce, a move to another state or country, death, change in availability, or decline in friendship, your relationship with your agent may not be the same as it was when you named him or her as your agent in your power of attorney. You may now have other people who are closer to you and have good sense who would make better agents for helping you with financial transactions.

A Financial Institution May Not Accept Your Power of Attorney

Some banks do not accept old powers of attorney. They become stale. Any power of attorney more than 3 years old is subject to rejection. With the new Connecticut law, financial institutions have a duty to accept powers of attorney unless the financial institution suspects fraud.  However, it is unclear whether financial institutions will require the use of the new form of Connecticut power of attorney to accept the power of attorney.

Notice to Your Agent of Their Duties

The old Connecticut law gave no guidance to agents. The new law clearly outlines the agent’s duties. Those duties include keeping good records, avoiding conflicts of interest, working with your health care agent, following your estate plan, and following your wishes to the extent known.

Clarify Whether You Want the Agent to Be Able to Make Gifts or Change Beneficiary Designations

The new Connecticut power of attorney law requires the signor to affirmatively elect by initialing whether the agent can make gifts, change beneficiary designations, or amend a trust.  These “hot powers” will create an opportunity for you to define what you want your agent to be able to do. The ability to make gifts could prove useful for saving estate taxes or qualifying for Title 19 Medicaid. Giving the agent the power to change beneficiaries could help reduce income taxes on retirement assets. The agent could abuse these powers, though, so they are not for every family situation. 

With the passage of the new law, there has never been a more important time for Connecticut residents to review and revise their powers of attorney.  Give us a call to talk to our knowledgeable estate planning attorneys about updating your power of attorney. 

Our estate planning law firm recently had an elderly client who was selling her home in Connecticut and moving to another state.  She bought her home with her husband in 2000 and both of them were listed on the deed as joint tenants with rights of survivorship.  Then – in 2003 – the husband died.  Now, many years after the house was purchased and several years after the death of her husband, our client was ready to move.

She signed a contract for the sale of her home and her buyer’s lawyer did a title search of the property.  The title search revealed that there was no release of the inchoate lien for Connecticut succession (or estate) taxes.  The term “inchoate” means “secret.”  The State of Connecticut does not record this inchoate lien on the land records of any town.  Rather, when someone dies in Connecticut owning an interest in real property, the State of Connecticut has an unrecorded – inchoate – lien (for the taxes) on the decedent’s real estate.  This secret lien must be released before you can give clear title to your buyer.

In order to obtain a written release of this lien, our firm first had to provide a succession tax return to the probate court where her home was located.  On the return, we reported the husband owned real estate jointly with rights of survivorship.  We then determined the value of the house on the husband’s date of death by obtaining a copy of the tax assessor’s card for 2003.  We reported one-half of the appraised value on the return.  In addition, we provided the court with a certified copy of the husband’s death certificate and a copy of the deed to the two of them.  

Once the probate court received these documents, it was able to determine that there were no succession taxes due.  The court issued a document entitled Certificate of No Succession Tax and a second document entitled Certificate Releasing the Connecticut Estate Tax Lien.  The Release was then recorded on the land records to officially clear title to the home and enable her to give good title to her buyer.  If any succession taxes had been due, she would have had to pay the taxes to obtain the Release.

Releasing the State’s inchoate estate tax lien is one of many issues that may need resolution during the home selling or estate administration process.  If you have any questions related to what you’ve learned in this blog, please don’t hesitate to call the estate planning attorneys at Cipparone & Zaccaro, PC.