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To Trust or To Put It in a Trust: That Is the Question

Joan Reed Wilson

Today, when more than fifty percent of marriages end in divorce, it is not surprising that many of my clients are couples in their second marriage. And most of these husbands and wives have children from their first marriage. They are not unlike Joseph and Anna Menard, about whom a recent Connecticut court case was written. (Menard v. Gaskell, 92 Conn. App. 551 (2005)).

Joseph and Anna Menard married in 1954. They were each married previously and each had a child from the previous marriage. During the marriage, Joseph and Anna kept in close contact with their children. After 32 years of marriage, Joseph and Anna went to a lawyer to prepare wills. Like most couples who prepare wills, they wanted the survivor of them to get everything. Since they did not know who would be the survivor, they created “mirror” wills so that upon the survivor’s death (whichever one that would be) their assets would be split equally between their two children. Their lawyer explained to them that the survivor would be able to change his or her will at any time, so the provision that their children would split the inheritance equally is not carved in stone. The Menards understood their lawyer and presumably felt that after so many years together they wanted to trust that the other would not disinherit their child.

Understandably, this conversation is sticky for all involved. As a partner in a happy marriage, you do not want to take a stand that may make your spouse feel distrusted. As the lawyer, I do not want to instill a feeling of distrust in an otherwise happy family; but I must also feel confident that my clients fully understand their decision. Sometimes it is hard to know whether people really understand the realities of the “mirror” wills, which is why I thought it important to highlight this case.

Now back to our story…Mr. Menard passed away in 1989, leaving everything that he owned to his wife, Anna. According to the case, after Joseph’s passing, Anna saw Joseph’s son, George, all but once. As you have probably already suspected, after several years of no contact with him, Anna changed her Will. By 2000, when Anna passed away, Anna’s Will expressly omitted George because she had not heard from him since his father’s passing. George sued Anna’s daughter for over $300,000—one-half of Anna’s estate. After nearly five years of litigation through the Probate Court, the Superior Court and the Appellate Court, George lost his lawsuit and the estate likely lost thousands of dollars in litigation costs. In the end, no one won.

What is the solution, you ask? It’s simple. To ensure that your beneficiaries are not written out of the inheritance that you intend for them, put it in a Trust. Your spouse can use the Trust during his or her lifetime, so he or she will not be left penniless; however, the Trust (as opposed to your spouse’s Will) is irrevocable and unamendable by your surviving spouse. So after your spouse passes away, the beneficiaries whom you named are still the beneficiaries. By the way, the Menard’s situation can also easily happen with first marriages. So the question for every married person is, should you trust or put it in a Trust?

Kristie and Mark Rohlfs became clients 2-1/2 years ago when they followed through with their New Year’s Resolution to make a Will. At the time, they had two minor daughters, Nadia and Deming, so we made sure to name responsible guardians. A little over one year after executing their Wills, they adopted Harrison. Kristie and Mark called to make sure that Harrison was covered under the Will. Fortunately, because of Connecticut probate law and the fact that we drafted the Wills to take such possibilities into account, Harrison is included in the Will, and Kristie and Mark do not have to execute additional documentation. Their initiative was very impressive to me, however, because it is extremely important to review your estate planning documents periodically and especially following a major life event.

Kristie and Mark are impressive in other ways too. They are both successful business owners, with Kristie’s business being right in Killingworth. Kristie co-owns (with Colette Schultz and Helena Erskine) Jazzercise of Killingworth, located in the Back Stage Dance Center in The Courtyard on Route 81. Classes are held every morning Monday – Saturday and three evenings per week. I took the very first class two years ago and have been going ever since. It’s the one form of exercise that I haven’t tired of in a few weeks. The classes are fun, energizing and a great way to keep up with the latest music (you’ll be the hippest parent on the block!) For more information, call (860) 663-3929.

During the process of establishing her business, Kristie contacted us to develop a contract to allow her to sublease her space. She also contacted us to review and explain her franchise owner regulations so she would be in compliance. Their next resolution as a couple is to complete the Inventory Review Sheet we sent them so they can keep up-to-date the documentation of their assets. “Joan makes it very easy to keep our important matters organized with the Estate Planning Binder, Inventory Review Sheet and periodic reminders. We are happy to have found such an organized, approachable and affordable attorney.”

The Jack Foundation, Inc. is a nonprofit corporation set-up by my clients, Beth and Joe LiPuma, to raise funds for programs for children with disabilities. The corporation’s namesake, Jack, is Beth and Joe’s son, who is intellectually disabled. The LiPumas came up with the idea when they received notice that the funding for one of the programs that Jack had benefited from had been depleted. The program, called Hippo Therapy, is a type of horseback-riding and was offered to the students on a weekly basis at High Hopes Therapeutic Horseback Riding Facility in Old Lyme. Beth and Joe saw the direct benefits of this program. “The confidence that the children get as they groom their own horse, mount it and proceed to direct the horse around the ring is amazing to watch.” They decided to organize a Golf Tournament to raise funds so programs like Hippo Therapy and others can continue to be offered to children with disabilities.

1st Annual Jack Foundation Golf Open
Sunday, October 8th, 2006
Laurel View Country Club, Hamden

For more information on sponsoring or
participating in the event, please see the
enclosed inserts or contact Beth or Joe LiPuma
at (860) 663-0803 or bethlipuma@comcast.net

Do you have equity in your primary residence, second home, or investment property? Whether the property is here in Connecticut, or in another state, a home equity loan can help you tap into that equity to improve your overall financial picture.

Home equity loans come in two forms: (1) Fixed Rate Seconds and (2) Home Equity Lines of Credit (“HELOC”). A Fixed Rate Second allows you to borrow a set amount of money, at a set interest rate, with set payments. A HELOC allows you to have a renewable source of funds that you can borrow against and pay back. HELOCs are similar to a credit card but at a low, interest only payment based on the prime rate.

So why use your property’s equity instead of another small loan or credit card? First, the interest rates on home equity loans are typically lower than other types of small consumer loans and credit cards. Second, the amount that you can borrow in a home equity loan is often higher than what you could borrow on your credit cards or with consumer loans. In some cases you can borrow up to 100% of the appraised property value. Third, the interest can be a tax deduction. Consult your accountant for more specifics on the tax advantages of equity loans. Finally, there are no restrictions on how you can use the money, so you get to decide what is most important to you—home renovations, landscaping, college tuitions, debt consolidation, automobile purchases, investments, vacations, investment properties or a down payment for a second home.

The opportunities are endless. Dawn Parker is a Loan Expert with First Horizon Home Loans. Contact Dawn or her partner, Tracey Smolen, for a free consultation just by mentioning this article. Dawn Parker, 860-575-9293,dmparker@ firsthorizon.com or Tracey Smolen, 860-287-3444, tasmolen@firsthorizon.com