Posts tagged with "trust and estate law westport"

Connecticut Appellate Court Finds That Incorrect Standard was Applied for Testamentary Capacity to Make a Will

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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.

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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 at Maya Murphy, P.C. in Westport, Connecticut, by telephone at (203) 221-3100 or by e-mail at JMaya@Mayalaw.com.

What is the Gift Tax and How Does it Work?

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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.

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

Connecticut Supreme Court Upholds Order for Specific Performance of Contract to Purchase Estate Property

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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.

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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 at Maya Murphy, P.C. in Westport, Connecticut, by telephone at (203) 221-3100 or by e-mail at JMaya@Mayalaw.com.

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

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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.”

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If you have any questions or would like to speak to an attorney about a will, trust, or estate matter, please don’t hesitate to contact Joseph Maya and the other experienced attorneys at Maya Murphy, P.C. at (203) 221-3100 or JMaya@Mayalaw.com to schedule a consultation today.

Connecticut Estate Taxes: What You Need to Know

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If you live in Connecticut, all the property that you own at your death will be valued to determine if your estate owes money to the IRS or Connecticut — or both — or neither. Your estate includes your house, car, furniture, bank account, brokerage account, IRA, 401(k), business interests and everything else you call your own. But assets passing to a spouse are not counted as part of your taxable estate.

Connecticut estates over $2 million are taxed at different rates. The rates range from 7.2 percent for estates over $2 million to the top of 12 percent for estates over $10.1 million. The first $2 million is tax free. For example, the Connecticut estate tax for a $2 million estate is zero. A $3 million estate is taxed $72,000 (7.2 percent of $1 million). An estate of $5 million would pay a Connecticut estate tax of $252,000 (8.4 percent of $3 million). A $10 million estate would pay $912,000 (11.4 percent of $8 million). The Connecticut tax is due six months after death.

You may recall that pre-2010, we had a “cliff” tax structure. An estate of $2 million paid no Connecticut estate taxes. But an estate of $2,000,001 — just a dollar more — paid Connecticut $101,700. A Connecticut law enacted in 2011 did away with the cliff. Now, a $2,000,001 estate would be taxed only pennies. Again, there is no Connecticut estate tax on estates below $2 million.

What about Federal taxes?

Until a few weeks ago, it was not clear whether a $1 million estate would be subject to a federal estate tax. Now that’s resolved. Only estates over $5 million (inflation adjusted estimated to be $5.25 million for deaths in 2013) are subject to federal estate taxes, thanks to the American Taxpayer Relief Act signed into law on Jan. 3. That means that estates of individuals dying in 2013 are not taxable on the federal level if they are valued at $5.25 million or less.

Because of “portability,”(see our previous article on portability and tax law permanency) spouses can pass $10.5 million to heirs free of federal estate tax. Portability preserves the $5.25 million exemption on the federal level, but not in Connecticut for the first spouse to die.

How Connecticut and Federal Taxes Work Alongside Each Other

To see the effect of the two tax schemes, we need to consider the size of the estate, individuals with estates below $2 million will pay nothing to Connecticut and nothing to the IRS while individuals with estates above $5.25 million will pay taxes to both the IRS and Connecticut. For example, an estate of $6 million will be taxed $360,000 in Connecticut (9 percent of $4 million, with the first $2 million tax-free).

Because the Connecticut tax can be deducted on the federal tax return, the $360,000 paid to Connecticut reduces the federally taxable estate from $6 million to $5.64 million. The federal estate tax is $156,000, figured as follows: $5.64 million less than $5.25 million is $390,000; 40 percent of $390,000 is $156,000.

A $6 million estate would pay a grand total $516,000, counting both Connecticut and federal estate taxes. Estates valued between $2 million and $5.25 million will owe Connecticut taxes but no federal estate taxes. Since the Connecticut tax rate for estates between $2 million and $5.25 million ranges from 7.2 percent and 8.4 percent, each $100,000 of assets over $2 million will cost between $7,200 to $8,400 in Connecticut taxes.

The Importance of Planning

That amount can potentially be saved through planning — or be avoided altogether by making a move to a tax-free state, such as Florida. With proper planning, a married couple can pass $4 million free of federal and Connecticut estate tax. The usual method is a by-pass trust or credit shelter trust that passes the first spouse’s exemption amount into a trust for the life benefit of the survivor. Unlike the federal law, Connecticut does not have “portability” where unused exemptions on the first death pass automatically to the surviving spouse.

Remember, in Connecticut, the rule is “use it or lose it.” Couples need to do some planning to protect the Connecticut $2-million-per-person exemption, or it’s lost when the first spouse dies.

Here is an example: A married couple with $8 million has all of their assets in joint name with rights of survivorship. There will be no federal or Connecticut estate tax when the first spouse dies and no federal tax when the second spouse dies due to portability. In Connecticut, the $8 million will be reduced by $2 million (not $4 million), when it comes to paying Connecticut taxes. Planning before the first death can preserve another $2 million. This is why it is important to have an experienced estate planning lawyer on your side.

Article provided by Stamford Advocate writer Julie Jason.

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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 do not hesitate to contact Joseph Maya and the other experienced attorneys at Maya Murphy, P.C. at (203) 221-3100. We offer free consultations on all matters.