Estates and Trusts

What is a Pre-Need Funeral Services Contract?

Pre-need Funeral Services Contract

A pre-need funeral services contract allows an individual to set aside funds, before his or her death, to be used specifically to pay for funeral expenses. Under the terms of such a contract, a “purchaser” signs the contract and advances funds, which are held in an escrow account for the purpose of paying for future funeral services for the “beneficiary” upon his or her demise. See C.G.S. §42-202. A pre-need funeral services contract may only be sold by a funeral director licensed by the public health commissioner. See C.G.S. §42-201.

Requirements

There are strict requirements for such contracts under Connecticut law. For example, funeral services contracts must be in writing, and must contain the following:

(1) The name, address, telephone number and Social Security number of the beneficiary and the purchaser;

(2) The name, address, telephone number and license number of the funeral director for the funeral service establishment providing the goods or services;

(3) A list of the selected goods or services, if any;

(4) The amount of funds paid or to be paid by the purchaser for such contract, the method of payment and a description of how such funds will be invested and how such investments are limited to those authorized pursuant to subsection (c) of section 42-202;

(5) A description of any price guarantees by the funeral service establishment or, if there are no such guarantees, a specific statement that the contract contains no guarantees on the price of the goods or services contained in the contract;

(6) The name and address of the escrow agent designated to hold the prepaid funeral services funds;

(7) A written representation, in clear and conspicuous type, that the purchaser should receive a notice from the escrow agent acknowledging receipt of the initial deposit not later than twenty-five days after receipt of such deposit by a licensed funeral director;

(8) A description of any fees to be paid from the escrow account to the escrow agent or any third party provider;

(9) A description of the ability of the purchaser or the beneficiary to cancel a revocable funeral service contract and the effect of cancelling such contract;

(10) For irrevocable contracts, a description of the ability of the beneficiary to transfer such contract to another funeral home; and

(11) The signature of the purchaser or authorized representative and the licensed funeral director of the funeral service establishment.

C.G.S. §42-200 + C.G.S. §42-202

See C.G.S. §42-200(b). A funeral services contract must also contain a statement that if the particular merchandise provided for in the contract is not available at the time of death, the funeral service establishment will furnish merchandise similar in style and at least equal in quality of material and workmanship to the merchandise provided for in the contract.  See C.G.S. §42-202(g). Funeral services contracts should not be confused with burial insurance policies, which are separately codified in the Connecticut General Statutes, under Section 38a-464.

For further information on pre-need funeral services contracts in Connecticut, see Chapter 743C of the Connecticut General Statutes. The General Statutes can be found online at: http://www.cga.ct.gov/. Additional information is available in the State of Connecticut’s Office of Legal Research Report on pre-need funeral services contracts online at: http://www.cga.ct.gov/2007/rpt/2007-R-0578.htm.

Should you have questions regarding pre-need funeral services contracts, contact managing partner Joseph C. Maya at 203-221-3100 or at JMaya@Mayalaw.com for a free consultation. You may also contact the well-practiced attorneys of Maya Murphy P.C. for any other inquiries regarding estates and trusts.

Connecticut Appellate Court finds that Incorrect Standard was applied for Testamentary Capacity to make a Will

Deroy v. Estate of Baron, 136 Conn. App. 123, 43 A.2d 759 (2012)   

In a case involving testamentary capacity, Defendant Jeanne Baron appealed from the judgments of the Superior Court denying the admission of a will executed by her mother, Edith Baron, because of lack of capacity.  The Probate Court originally received two documents purporting to be the decedent’s will, one executed on February 12, 2002 and the other on July 3, 2002.   The will executed on July 3, 2002 was admitted by the Probate Court.  On appeal, the Superior Court concluded that Edith Baron was “incompetent” when she executed the will on July 3, 2002.

In reviewing the Superior Court decision, the Appellate Court found that the incorrect standard was applied for testamentary capacity.  The standard does not require the testator to be able to understand “complex” financial transactions.  Rather, the mental capacity necessary to make a will under Connecticut law is a lower standard.  An individual may have the capacity to make a will even if they are generally incapable of business transactions.

“To make a valid will, the testatrix must have had mind and memory sound enough to know and understand the business upon which she was engaged, that of the execution of a will, at the very time she executed it.” (Internal quotation marks omitted)  Sanzo’s Appeal from Probate, 133 Conn. App. 42, 50, 35 A. 3d 203 (2012); see also Atchison v. Lewis, 131 Conn. 218, 219-20, 38 A.2d 673 (1944).  The Appellate Court reversed the judgment of the Superior Court and the case was remanded for further proceedings.

Should you have any questions relating to wills, trusts, estates or probate issues generally, please feel free to contact Attorney Joseph C. Maya, managing partner in the firm’s Westport, Connecticut office in Fairfield County by telephone at (203) 221-3100 or by e-mail at jmaya@mayalaw.com.

Larceny Convictions Reversed Where State Provided Insufficient Evidence of Property’s Value

Appellate Court of Connecticut

In a criminal law matter, the Appellate Court of Connecticut reversed a defendant’s larceny-related convictions, agreeing that the State did not provide sufficient evidence to convict.

This case first arose from an incident that occurred on January 26, 2004. Police responded to a Cumberland Farms store that was broken into. They located a hole cut into the roof, as well as the store safe partially broken into: $446 was taken from the bottom drawer, but the top drawer was undisturbed. In addition, an ATM with $7,500 showed signs of an unsuccessful break-in. Police found burglar’s tools, a piece of paper with the defendant’s shoe print on it, as well as knit caps and a bandana.

Case Details

On February 29, 2004, police in a neighboring town responded to an alarm at a liquor store. When they arrived, they spotted a Nissan Altima speeding away. However, an officer permitted the vehicle to leave because his partner did not confirm whether or not a crime had been committed.

An investigation revealed a tampered alarm box as well as a hole cut through the roof, burglar’s tools, and a red knit cap. The suspected burglary was immediately reported, and officers pursued the Nissan Altima, which crossed into Massachusetts. Nonetheless, the vehicle was stopped and four men, including the defendant, were brought to state police barracks. There, a Connecticut state trooper seized the men’s clothing, including the sneakers the defendant was wearing.

The defendant was subsequently arrested and faced numerous charges, including attempt to commit larceny in the first degree and conspiracy to commit larceny in the first degree. At trial, the State presented evidence showing the amounts of money within the ATM and bottom drawer of the safe, totaling $7,946. In addition, a Cumberland Farms employee testified that the top draw had “a fair amount” of money within. However, the State did not present evidence that this “fair amount” exceeded $2,054, or that any other potential source of money was accessible to the defendant.

Nonetheless, the defendant was convicted following a jury trial and he appealed. He argued that the State presented insufficient evidence of the larceny charges because they did not prove that he “attempted to take, or conspired to take, property in excess of $10,000.” Therefore, he sought acquittal on these charges. The State countered that the proper course of action is conviction for second-degree larceny, which they argued was a lesser included offense.

Connecticut General Statute (CGS) § 53a-119

Under Connecticut General Statute (CGS) § 53a-119, larceny is defined in the following manner: “A person commits larceny when, with the intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains, or withholds such property from an owner.”

First-degree larceny is committed when the value of the property exceeds $10,000, while second-degree has a lower threshold value of $5,000. Conspiracy to commit larceny requires a showing of intent to deprive another’s property, plus wrongful conspired or attempted taking of such property. The Appellate Court of Connecticut has authority to simultaneously reverse convictions order entries of judgment for lesser-included offenses.

Court Decision 

In this case, the Appellate Court was persuaded by the defendant’s sufficiency of the evidence claim. It disagreed with the State that the jury reasonably inferred that a “fair amount” of money located in the top drawer exceeded $2,054, thus bringing the total value to $10,000 as required for first-degree larceny.

The Court further held that acquittal was the proper remedy. It explained, “Although it is true that there was evidence from which the jury might have concluded that the value of the property exceeded $5000, we do not know what evidence the jury accepted and what it rejected or how it reached the conclusion it did reach.” The Court would not speculate, and therefore reversed conviction on these counts with the direction to the lower court to enter findings of not guilty.

Written by Lindsay E. Raber, Esq.

When faced with a charge of larceny or conspiracy to commit larceny, an individual is best served by consulting with an experienced criminal law practitioner. Should you have any questions regarding criminal defense, please do not hesitate to contact Attorney Joseph C. Maya in the firm’s Westport office in Fairfield County at 203-221-3100 or at JMaya@Mayalaw.com.

What is the gift tax and how does it work?

The Gift Tax

The federal gift tax applies to gifts of property or money while the donor is living. The federal estate tax, on the other hand, applies to property conveyed to others (with the exception of a spouse) after a person’s death.

The gift tax applies only to the donor. The recipient is under no obligation to pay the gift tax, although other taxes, such as income tax, may apply. The federal estate tax affects the estate of the deceased and can reduce the amount available to heirs.

Exceptions

In theory, any gift is taxable, but there are several notable exceptions. For example, gifts of tuition or medical expenses that you pay directly to a medical or educational institution for someone else are not considered taxable. Gifts to a spouse who is a U.S. citizen, gifts to a qualified charitable organization, and gifts to a political organization are also not subject to the gift tax.

You are not required to file a gift tax return unless any single gift exceeds the annual gift tax exclusion for that calendar year. The exclusion amount ($14,000 in 2013) is indexed annually for inflation. A separate exclusion is applied for each recipient. In addition, gifts from spouses are treated separately; so together, each spouse can gift an amount up to the annual exclusion amount to the same person.

Determining the Gift Tax

Gift taxes are determined by calculating the tax on all gifts made during the tax year that exceed the annual exclusion amount, and then adding that amount to all the gift taxes from gifts above the exclusion limit from previous years. This number is then applied toward an individual’s lifetime applicable exclusion amount. If the cumulative sum exceeds the lifetime exclusion, you may owe gift taxes.

Tax Relief Act

The 2010 Tax Relief Act reunified the estate and gift tax exclusions at $5 million (indexed for inflation), and the American Taxpayer Relief Act of 2012 made the higher exemption amount permanent while increasing the estate and gift tax rate to 40% (up from 35% in 2012). Because of inflation, the estate and gift tax exemption is $5.25 million in 2013. This enables individuals to make lifetime gifts up to $5.25 million in 2013 before the gift tax is imposed.


Contact Managing Partner Joseph Maya and the other experienced estate law attorneys at Maya Murphy, P.C. today at (203) 221-3100 or by email at JMaya@Mayalaw.com, to schedule a free initial consultation.

Connecticut Supreme Court upholds Order for Specific Performance of Contract to purchase Estate Property

Bender v. Bender, 292 Conn. 896; 975 A.2d 636 (2009)

The plaintiffs filed a complaint in Superior Court for specific performance and damages for breach of contract against the defendants, the executors of the Estate of Edward Stebner (the “Estate”).  The complaint arose out of a contract entered into by the plaintiffs and the defendants for the plaintiffs’ purchase of real property from the Estate.  The plaintiffs tendered a deposit in accordance with the contract but the defendants subsequently indicated that they were unwilling to complete the transaction.  The Superior Court dismissed the plaintiffs’ claim for damages but entered judgment in favor of the plaintiffs on their claim for specific performance of the contract.

The defendants appealed claiming that res judicata barred the plaintiffs from pursuing the breach of contract claim and bringing an action for specific performance in Superior Court because the Probate Court had denied the petition brought by the plaintiffs for specific performance of the contract.  Also, the defendants argued that the action should not have proceeded without the residuary beneficiaries of the decedent as named in the will, that the contract was invalid and that the contract could be avoided under several defenses.

The Supreme Court concluded that res judicata did not bar the action because the Probate Court lacked jurisdiction under Conn. Gen. Stat. § 45a-98(a)(3) over the claims brought in the Superior Court.  In addition, the Superior Court correctly ordered specific performance because the defendants had authority to sell the property as executors of the Estate pursuant to a valid contract that could not be avoided.  Finally, the Supreme Court ruled that the action could proceed without the residuary beneficiaries.  Therefore, the judgment of the Superior Court was affirmed.

Should you have any questions relating to wills, trusts, estates or probate issues generally, please feel free to contact Attorney Joseph C. Maya, managing partner in the firm’s Westport, Connecticut office in Fairfield County by telephone at (203) 221-3100 or by e-mail at jmaya@mayalaw.com.

In Dissolution of Marriage Action, Court Orders Both an Allocated and Unallocated Alimony Award

In a dissolution of marriage action, the Court ordered a husband to pay to his wife unallocated alimony and child support for a period of two and one-half years, followed by allocated alimony and child support for a period of six years.  The parties originally met in 1998 and were married for 13 years.  They were the parents of two children, both of whom were minors at the time of trial.

The parties blamed each other for the breakdown of the marriage, with the wife accusing the husband of engaging in verbally and physically abusive behavior, and the husband accusing the wife of being unfaithful.  Despite the parties’ accusations, the Court ultimately found that neither was at greater fault for the marital breakdown.

At the time of trial, the wife was forty-one years of age.  She had suffered from asthma for approximately three years and also had heart spasms, though neither condition prevented her from working.  During the marriage, she earned between $30,000 and $40,000 per year until the birth of the parties’ second child.  According to the wife, at that point, the husband asked her to cut back so she could care for the children.  Based on her earnings history, the Court found the wife had an earning capacity of $40,000 per year.

The husband was fifty-two years of age and generally in good health.  At one point during the marriage he earned approximately $100,000 per year as a car salesman.  However, at the time of trial he was working as a general manager at a local dealership earning $211,120 gross annually, or $4,060 gross per week.

The Court’s Decision

Based on its findings, the Court awarded the wife unallocated alimony and child support in the amount of $1,000 per week for a period of two and one-half years, followed by periodic alimony in the amount of $250 per week for a period of six years, and child support in the amount of $500 per week until the parties’ children graduate from high school, or attain the age of 19, whichever occurs first.  The Court designated both the unallocated award and the allocated periodic alimony as non-modifiable as to duration, and also allowed the wife a safe harbor, permitting her to earn up to $40,000 per year before the husband could seek a downward modification to his alimony obligation.

By: Joseph Maya, Esq.

If you have any questions or would like to speak to a divorce law attorney about a divorce or familial matter, please don’t hesitate to call our office at (203) 221-3100. We offer free divorce consultation as well as free consultation on all other familial matters. Divorce in CT and divorce in NYC is difficult, but education is power. Call our family law office in CT today.

Our family law firm in Westport Connecticut serves clients with divorce, matrimonial, and family law issues from all over the state including the towns of: Bethel, Bridgeport, Brookfield, Danbury, Darien, Easton, Fairfield, Greenwich, Monroe, New Canaan, New Fairfield, Newton, Norwalk, Redding, Ridgefield, Shelton, Sherman, Stamford, Stratford, Trumbull, Weston, Westport, and Wilton. We have the best divorce attorneys and family attorneys in CT on staff that can help with your Connecticut divorce or New York divorce today.

Accepting Funds from a Charitable Trust may Create a Contract that Cannot be Unilaterally Modified

Blumenthal v. Getraer, CV106007120S, 2011 WL 4953727 (Conn. Super. Ct. Oct. 4, 2011)

In a case before the Superior Court of Connecticut, the Attorney General of the State of Connecticut brought a declaratory judgment action to represent the public interest in protecting gifts intended for charitable purposes, pursuant to Connecticut General Statute § 3-125.   The action posed four specific questions to the court regarding a charitable trust that was intended to honor a respected synagogue member and provide funds for capital improvements to the synagogue to which he belonged.

Case Background

In 2002, a respected member of the synagogue passed away, and was survived by his wife and son.  The following year, a charitable foundation in New York City gave the synagogue he attended a gift of $40,000 which was contingent upon the synagogue’s agreement to name its sanctuary after the deceased.  The gift and additional donations of over $100,000 were placed in a memorial fund, which was controlled by the widow and her son.

After receiving the gift, the synagogue erected a plaque over the entrance to the sanctuary declaring that it was named in honor of the deceased.  At the synagogue’s next board of directors meeting, the widow offered, on behalf of the memorial fund, to give the money in the fund to the synagogue with the restriction that it be used only for capital improvements and not ordinary expenses.  The widow and the son would act as the trustees of the fund and disburse monies for capital improvements at their absolute discretion.  The board of directors approved the arrangement.

The Dispute

A dispute later arose between the widow and her son, and the board of directors.  The widow and her son were dissatisfied because the memorial plaque was covered on several occasions so that it was not visible to people in the synagogue.  For example, during the 110th anniversary celebration of the synagogue, a sign announcing the name of the synagogue was placed over the memorial plaque.  During one Chanukah celebration, decorations were placed over the plaque and left there until July of the following year.

The board of directors was dissatisfied because the widow and her son stopped paying for capital improvements.  The board of directors that approved the arrangement with the widow and her son was dismissed and replaced with a new board.  This new board of directors voted to request the widow and her son to turn control of the fund over to the synagogue.

Determining the Rights of the Parties

In an action seeking declaratory judgment, the sole function of the trial court is to ascertain the rights of the parties under existing law.  Ginsberg v. Post, 177 Conn. 610, 616 (1979).  Four specific questions were posed to the court to determine the rights of the trustees and the rights of the synagogue.  Prior to addressing these questions, the court found that a contract had been formed between the fund and the synagogue based on the synagogue’s acceptance of monies from the fund and other actions taken by the synagogue board of directors.  Therefore, the court found that the vote by the new board of directors had no legal significance because they could not unilaterally change the terms of the previous contract with the widow and her son.

The Court’s Findings

Based on finding the existence of a contract, the court determined that the widow and her son were entitled to continue to control the fund and act as its trustees.  However, the court also found that equity required them, in their capacity as trustees, to reimburse the synagogue for the capital expenditures made in reasonable reliance on the agreement that the fund would pay for capital improvements.  The trustees had discretion to determine what constituted a capital improvement.  The fund was also required to continue to pay for capital improvements, on the condition that the memorial plaque was visible to all who would be able to see it.

The court ordered that the memorial plaque not be covered and, if it was, that would constitute a breach of contract on the part of the synagogue.  In that event, the widow and son would be free to terminate the trust and the fund, and either return the money to the donors or use it for other charitable purposes at their discretion.  Finally, the court suggested that the fund cease soliciting further donations and allow the remaining monies to be depleted to that the relationship between the parties could be terminated.

Should you have any questions relating to charitable trusts or other personal asset protection issues, please do not hesitate to contact Attorney Susan Maya, at SMaya@Mayalaw.com or 203-221-3100, and Attorney Russell Sweeting, at RSweeting@Mayalaw.com or 203-221-3100, in the Maya Murphy office in Westport, Fairfield County, Connecticut.

$211,000 in Fiduciary and Attorney’s Fees O.K. After Sibling Probate Quarrel

In an Appellate Court decision, the court upheld an award of $211,000 in fiduciary and attorney’s fees after probate of a highly disputed estate. The award was challenged by one of the three beneficiaries of the estate who claimed the award was excessive and inconsistent with the widely relied on Hayward factors set out by the Connecticut Supreme Court. Plaintiff also urged the court to adopt a new rule limiting the fiduciary and attorney’s fees that can be collected from an estate to an amount proportionate to the size of the estate. The court disagreed with the contention and declined to adopt such a rule.

Case Details

The plaintiff and challenger of said fees was the daughter of the decedent. The other two beneficiaries in this probate were the two sons of the decedent. None of these siblings had a good relationship with the other and there was constant disputes among them about how to best administer the estate. Ultimately, the court determined it was their constant bickering that resulted in the huge amount of attorney fees that in light of the situation could have been much more.

This probate case “involved more contentiousness, disputes, arguments, correspondence, pleadings, memoranda of law and judicial hearings than any other decedent’s estate” in the judge’s 30 years on the bench. The defendants’ expert witness, who reviewed the materials that detailed the requests the siblings made of Gallant(the defendant), testified that “the contentiousness [between the beneficiaries is] at a level I have only seen once in some forty-four years of this work.”

The plaintiff’s expert witness conceded that the extensive quarreling among the siblings made settling the estate “a very difficult matter,” and that one of the strategies defendant used to try to quell the siblings’ animosity was to directly and unequivocally tell them the truth: their constant quarreling was resulting in fees that were diminishing the estate.

Despite this forewarning by the defendant lawyer, the plaintiff still sought to challenge the awarded fee. It was her firm belief that an attorney could not collect such a large amount of an estate. In actuality, the estate was worth over 1.2 million dollars and his fee constituted just 1/6th of the estate. This left more than 1 million to be dispersed between the three children.

Determining Reasonable Compensation

In analyzing the issues claimed by the Plaintiff the Appellate Court reviewed the Hayward factor analysis made by the trial court who awarded the fee. First, the court stated it is well understood that “under [Connecticut] law an executor, administrator, trustee or guardian is entitled to a reasonable compensation for his services, depending upon the circumstances of the case.” Hayward v. Plant, 98 Conn. at 384, 119 A. 341.

Further, in Hayward, our Supreme Court set forth nine factors for the trial court to consider when determining the reasonableness of such compensation: (1) the size of the estate; (2) the responsibilities involved; (3) the character of the work required; (4) the special problems and difficulties met in doing the work; (5) the results achieved; (6) the knowledge, skill and judgment required of and used by the executors; (7) the manner and promptitude with which the estate has been settled; (8) the time and service required; and (9) any other circumstances which may appear in the case and are relevant and material to this determination. Id., at 384–85, 119 A. 341.

The Decided Compensation

After the determination of those factors, the trial court decided the figure of $211,000 was reasonable. In reviewing that decision “[t]he test is, has the court exercised a reasonable discretion, or, in other words, is its exercise so unreasonable as to constitute an abuse of discretion.” Hayward v. Plant, supra, 98 Conn. at 382, 119 A. 341.

“This standard applies to the amount of fees awarded … and also to the trial court’s determination of the factual predicate justifying the award…. Under the abuse of discretion standard of review, [w]e will make every reasonable presumption in favor of upholding the trial court’s ruling, and only upset it for a manifest abuse of discretion…. [Thus, our] review of such rulings is limited to the questions of whether the trial court correctly applied the law and reasonably could have reached the conclusion that it did.”

Factual Backing of the Award

There was much factual information that supported the trial court’s decision. At trial, the plaintiff conceded that the billing records submitted by the defendants to the Probate Court accurately reflected the work that the defendants performed, but she advanced an argument that much of that work was unnecessary and could have been avoided had Gallant been more decisive in his actions with regard to the estate. Her primary argument was that Gallant’s inability to sell the Bahamian property(which amount to about half of the estate) in a timely fashion and the erosion that occurred on the property during the time the property was for sale support a reduction of fiduciary and attorney’s fees under Hayward’s results and promptitude factors.

The court, however, was presented with evidence of the siblings’ contentiousness and litigious nature, and determined that “an extensive amount of time was spent by Gallant in dealing with issues raised by the beneficiaries.” Among the myriad issues created by the beneficiaries included bickering about the listing price of the Bahamian property. Therefore, the award did have factual backing and could have been anticipated by plaintiff due to the siblings constant issues with how to best settle the estate.

The Court’s Decision

So, with regard to the question of whether the court used the proper legal standard, the Appellate Court concluded that the trial court made an independent determination after a two day trial. It produced a written memorandum of decision, which provided in part: “When applying the standards set forth in Hayward v. Plant, the court finds that the fees charged by the defendants are reasonable under the unusual circumstances presented here.” Therefore, there was no error in the legal standard applied by the court.

Next, the Appellate Court addressed the plaintiff’s contention that a new rule should be adopted that limited attorney and fiduciary fees to a reasonable proportion of the estate. In declining to adopt such a rule the court stated that “size of the estate is one of the factors our Supreme Court set forth in Hayward, and as such, it should be considered by a court in determining whether fiduciary and attorney’s fees are reasonable. It is, however, one of nine factors. Elevating it to the dispositive level suggested by the plaintiff would run afoul of the sound holistic approach to reasonableness our Supreme Court set forth nearly a century ago.”

Our estate planning firm in Westport Connecticut serves clients with will, trust, and estate law issues from all over the state including the towns of: Bethel, Bridgeport, Brookfield, Danbury, Darien, Easton, Fairfield, Greenwich, Monroe, New Canaan, New Fairfield, Newton, Norwalk, Redding, Ridgefield, Shelton, Sherman, Stamford, Stratford, Trumbull, Weston, Westport, and Wilton. We have the best probate attorneys in CT on staff that can help with your Connecticut or New York estate today.

If you have any questions or would like to speak to a probate law attorney about a will, trust, or estate matter, please don’t hesitate to call our office at (203) 221-3100. We offer free consultation on all matters. Call today.

Trustee Interpretation of Ambiguous Trust Provisions will not be Changed by a Court Without Evidence of a Clear Abuse of Trustee Discretion

Heath v. Heath, CV094044709S, 2012 WL 2477953 (Conn. Super. Ct. June 5, 2012)

In a case before the Superior Court, four trust beneficiaries filed a three-part complaint against the trustees of a trust created by their mother.  The complaint alleged breach of fiduciary duty, unjust enrichment, and other charges. The trial court ruled that the trustees had properly distributed the trust interests and entered judgment in their favor.

Case Background

In 1953, a trust indenture known as the Hembdt Trust was drafted with assets consisting of royalty interests in oil, gas and mineral rights.  During her lifetime, the settlor and beneficiary of this trust (“the decedent”) married and had ten children.  Upon her death, the terms of the trust provided that the royalty interests would pass to “his or her legal representatives, heirs at law or next of kin in accordance with the provisions of law applicable to the domicile of the deceased beneficiary.”

In 1967, the decedent died. Pursuant to her will, several testamentary trusts were created, including a testamentary trust for the benefit of her husband (“marital trust”) and a trust for her children (“children’s trust”).  The trustees and executors of the decedent’s will determined that the provision in the Hembdt Trust required the trust’s royalty interests to pass into her estate which, in accordance with her will, resulted in these interests being distributed in a 54/46 ratio between the marital trust and the children’s trust.

Legal Representatives of a Trust

The beneficiaries of the children’s trust argued that the entirety of the royalty interest should have been distributed to them as the decedent’s heirs at law because the term “legal representatives” in the Hembdt Trust provision, used under the circumstances provided, could only be interpreted to mean the children of the decedent.  The decedent’s husband, in his capacity as a fiduciary of the trusts, argued that the beneficiaries’ interpretation was inconsistent with the language of the trust instrument and the law.

He argued that the term “legal representatives” was used in conjunction with “heirs at law” and “next of kin;” therefore, the clear intent of the Hembdt Trust provision was that upon the death of the individual beneficiary, his or her interest would pass to: (1) the beneficiary’s legal representatives, which would be the beneficiary’s executors, if the person died testate, to be administered according to the beneficiary’s will, or the beneficiary’s administrators, if the person died intestate and a probate estate was opened; (2) the beneficiary’ heirs at law if the person died intestate and no probate estate was opened; and (3) the beneficiary’s next of kin if there were no heirs at law.

The decedent’s husband further argued that if all three conditions existed, then the distributions would have to be in accordance with Connecticut law, which requires that, when a decedent leaves both a spouse and children, they both inherit.  Finally, the decedent’s husband argued that Connecticut law requires that if a decedent leaves a will, a distribution is made according to the will.   Conn. Gen. Stat. § 45a-431.  The remaining trustees adopted the arguments of the decedent’s husband.

The Language of a Trust Instrument

According to Connecticut case law, a court’s role in the construction of a trust instrument is to determine the meaning of what the grantor stated in the trust instrument and not to speculate upon what the grantor intended to state in the instrument. Connecticut Bank & Trust Co. v. Lyman, 148 Conn. 273, 278-79, 170 A.2d 130 (1961).  Language in the trust instrument is to be accorded its common, natural and ordinary meaning and usage.  WE 470 Murdock, LLC v. Cosmos Real Estate, LLC, 109 Conn.App. 605, 609, 952 A.2d 106, cert. denied, 289 Conn. 938, 958 A.2d 1248 (2008) (internal quotation marks omitted).

Furthermore, no language will be construed as to remove a trustee from equitable control; courts may intervene only to protect and preserve the trust in circumstances where the trustees have abused their discretion.  Gimbel v. Bernard F. & Alva B. Gimbel Foundation, Inc., 166 Conn. 21, 34, 347 A.2d 81 (1974)

The Court’s Decision

Connecticut case law has established that the phrase “legal representatives” in a testamentary instrument is an ambiguous or equivocal term. Smith v. Groton, 147 Conn. 272, 274–75, 160 A.2d 262 (1960).   In interpreting the trust provisions, the court determined that the language did not permit the decedent’s beneficial interest to pass to each of the three categories (“legal representatives, heirs at law and next of kin”) or to pass to different recipients depending on an exercise of discretion (“legal representatives, or heirs at law, or next of kin”).

For that reason, the court found that the terms “legal representatives,” “heirs at law,” and “next of kin” did not conflict and that the provision required that the decedent’s beneficial interest pass to the recipients in the order clearly listed the trust instrument.  Therefore, the trustees did not abuse their discretion in determining that the royalty interests passed to the executors, as the decedent’s legal representatives, to be distributed to the marital trust and children’s trust in accordance with the decedent’s will.

Because the trial court did not find that the trustees of the decedent’s trusts abused their discretion, the court refused to upset their determination of how the decedent’s interests should be distributed.

Should you have any questions relating to wills, trusts, estates and other personal asset protection issues, please do not hesitate to contact Attorney Susan Maya, at SMaya@Mayalaw.com or 203-221-3100, and Attorney Russell Sweeting, at RSweeting@Mayalaw.com or 203-221-3100, in the Maya Murphy office in Westport, Fairfield County, Connecticut.

Assets Protected From Creditors in Connecticut

In today’s economy more and more people find themselves having a hard time paying the bills and avoiding late payments.  Still others have a problem with creditors chasing them for unpaid debts.  Now more than ever it is important for you to know what assets are protected from creditors and what are not.

Connecticut law provides some protection from creditors in a situation where your income or assets are subject to a court judgment or lien.  You can protect yourself in a variety of ways by planning ahead and consulting with a professional financial planner and an attorney.   Taking out liability insurance or setting up a corporate entity or trust for your property are examples of how you can shield your assets from future creditors.  However, there are some individual assets that are automatically protected from creditors.  Here is brief summary of the law in Connecticut:

A.            Wages

Once a creditor obtains a judgment against you, it can apply for an execution against your wages.  See Connecticut General Statutes, Section 52-361a.  Connecticut law does provide for some protection in this situation.   No more than twenty-five percent of an individual’s weekly disposable earnings may be subject to a wage execution.  The portion of disposable earnings subject to the wage execution is withheld and applied to the amount of the judgment.    In some cases, the maximum amount that can be withheld may be less depending upon the ratio between the individual’s disposable earnings and the hourly minimum wage in effect at the time of the execution.

B.             Retirement Plans

Generally, retirement plans are exempt from claims by creditors.  Both IRAs and 401ks are protected assets pursuant to Connecticut General Statues, Section 52-321a.

C.             Personal Property

Connecticut law provides a list of exempt personal property that creditors cannot claim an interest in pursuant to Connecticut General Statutes, Section 52-352b.  The list of property includes basics necessities such as apparel, bedding, foodstuffs, household furniture and appliances.  Items necessary for a person’s occupation or profession such as tools, books, instruments, farm animals and livestock feed are also considered exempt property.  Wedding and engagement rings are not subject to creditor claims as well.

D.             Insurance and Government Assistance Payments

Some insurance and government assistance payments are exempt from creditors under Connecticut General Statutes, Section 52-352b.   Health and disability insurance payments are exempt as are Workers’ compensation, Social Security, veterans and unemployment benefits.  In addition, under Connecticut General Statutes, Section 38a-453, creditors of an insured cannot seek payment from a life insurance policy beneficiary under most circumstances.

E.             Child Support and Alimony Payments

Any court approved child support payments received by a debtor are exempt and protected from creditors.  Alimony payments, to the extent that wages are exempt from creditor claims, are also protected.  See Connecticut General Statutes, Sections 52-352b & 52-361a.

F.             Real Estate

Your homestead or personal residence is exempt from creditor claims up to the value of seventy-five thousand dollars.  If a creditor has a money judgment arising out of hospital services, then the value of the exemption increases to one hundred twenty-five thousand dollars.  The exemption is calculated based upon the fair market value of the equity in the property taking into account any statutory or consensual liens on the property.  See Connecticut General Statutes, Section 52-352b.

There is no such exemption in place for commercial real estate or rental properties.

G.             Motor Vehicles

Only one motor vehicle is exempt from creditor claims up to the value of one thousand five hundred dollars.  The exemption is calculated by estimating the fair market value of the motor vehicle and taking into account any relevant liens or security interests.  See Connecticut General Statutes, Section 52-352b.

H.              Bank Accounts

         A creditor can enforce a judgment by way of a bank execution.  However, the same exemptions apply to bank accounts as they do to government assistance, insurance, alimony and child support payments as outlined above.  Therefore, you have the opportunity to challenge a bank execution based on these exemptions and prevent a creditor from taking money out of your account.   In addition, you can claim a general exemption not to exceed one thousand dollars.

In conclusion, Connecticut law prevents creditors from seizing all of your income, property, possessions and savings pursuant to a judgment or lien.  However, the law does not prevent a debt collector from jeopardizing your livelihood and financial wellbeing.  You best bet is to limit individual liability and plan ahead to avoid a creditor claim in the first place.  Consulting with a professional financial planner and an attorney is recommended.