Divorce Estate Planning Steps

Important Post Divorce Planning Steps

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Ending a marriage, whether though divorce or dissolution, isn’t a simple process. It’s not like flipping a switch, one day you’re married, another day you’re not. Whether a couple was together for a relatively short period of time or set down roots together for decades, spouses separating financially, physically, and emotionally is a labor-intensive journey. With all the paperwork and meeting with attorneys throughout the divorce, the last thing people want to do is sit down with an Ohio estate planning attorney and go over estate planning documents. Unfortunately, reviewing and updating estate planning documents is a non-negotiable part of martial separation. Regardless of whether you do anything or not, your estate planning documents will have a profound effect on you during some of the most critical, and vulnerable, moments of your life and in the lives of your family.

Apart from drafting a new last will and testament, powers of attorney, updating beneficiary designations, and considering trust use, what else should be updated post-separation? The following is a list of additional advice every experienced Cleveland domestic attorney would give their divorced or separated clients regarding their estate documents:

Review Your New Tax Reality

A big part of estate planning is minimizing taxes. Namely, estate, generation-skipping, and gift taxes. Since probate administration can easily eat up 5% to 8% of the value of a decedent’s estate, everyone is looking to save money. The good news, however, there are exemption limits. This is where the unified tax credit comes in. The unified tax credit is a certain amount of money and assets that can be given free of estate, generation-skipping, and gift taxes. Individuals get a set exemptible limit, but married couples can effectively utilize twice the amount than that of single individuals. Obviously, an estate plan formed on tax assumptions centered around accessible martial exemptions and deductions needs to be rethought post-divorce. The last thing you want is your surviving friends and family to deal with an out-of-date tax plan for your estate. The unified tax credit, however, is only the tip of the tax iceberg. Numerous federal, state, and local taxes work differently for married couples than they do for single individuals, make sure the middle of April isn’t full of nasty surprises because you assumed you’d still be taxed at a married rate.

Review Current Property Ownership

Often spouses are joint owners of property obtained during the lifetime of the marriage. Vehicles, boats, martial homes, and vacation residences all must be reviewed post-divorce to confirm who the listed owner or owners are.  What is said on paper matters in the legal world and a house owned jointly with a right of survivorship goes to the surviving owner, regardless of whether the divorce is finalized. Often in the whirlwind of divorce negotiations and arguments, simple things like updating a deed goes unnoticed. If there is a dispute, however, one of the first places a court and attorneys will look to determine who gets what is legal documentation. As such, make sure the ownership documents for your most significant assets reflect your life going forward.

Review and Update Guardianships 

If a spouse is nominated as a guardian for a minor or someone with special needs, divorce and martial separation does not revoke that appointment. If the time ever came when a guardianship is necessary, the existence of a pending or finalized divorce would be a factor a court would consider during an appointment hearing but it wouldn’t be determinative. Again, leaving it up to a court official to decide who cares for a child or someone with special needs is never preferable. That is why experienced Ohio divorce and estate planning attorneys will make sure you take a hard look at who will care for those who depend on you when you are no longer able. A simple designation in a basic estate planning document can make a whole lot of difference to your children and wards.

Review and Amend Existing Trusts

Given the utility of trusts, from tax savings, avoiding probate, ensuring eligibility for government programs, and plain old peace of mind, they are becoming more and more prevalent within families. Trusts, however, are only one piece of a comprehensive estate plan and when used within the context of a married family, are highly tailored to the issues, concerns, finances, and benefits of marriage. Thus, when divorce rears its ugly head any effected trust must be reevaluated for effectiveness and potential martial asset division. Often a pre-martial trust does not survive a divorce, too much regarding a trust was created on the assumption of marriage. As such, sit down and read your trust with your Ohio estate planning attorney and ask yourself if your trust is actually accomplishing what you want it to.

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.

Helping You and Your Loved Ones Plan for the Future

Security Deposit Blog

Security Deposits: A Practical Primer

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People often have questions about things that are relevant to their jobs or lives. For landlords, a usual topic of conversation is security deposits. Previously, legal standards and procedures regarding landlords keeping security deposits was covered, but what do these rules mean in ordinary terms? The following are a few good tips for every landlord, a little bit of good advice in the right place often makes all the difference. But if you really want to get on the ball, save the most money, and protect yourself and your business, call an experienced attorney at Baron Law.

Be Upfront with the Tenant, Give them a Move-Out Letter

All good things must come to an end, lease agreement and tenancies are no different. So, in order to save time, stress, and avoid disputes over security deposits, using move-out letters is a good move. Move-out letters are tangible notice to tenants that they are ending the tenancy, good proof of breach for later on, and makes sure all parties are on the same page.

At minimum, your move-out letters should tell the tenant how the property/unit should be left, whether it should be cleaned, etc., explain the procedures and timing for final inspection of the premises, include the itemized deductions from the security deposit, if any, tell the tenant to return keys, provide a forwarding address for the security deposit, and explain the details of how any monies will be returned.

Move-out letters should be standard operating procedure for every landlord. If you are having trouble drafting your own letter or want to ensure every important point is covered, hire an experienced Cleveland attorney to do your drafting.

Itemizing a Security Deposit Withholding/Deduction

A recognized rule in Ohio is that any security deposit withholding or deduction must be itemized. The logic of this requirement is to make landlords give specific reasons to tenants why the security deposit is being withheld so tenants have the necessary information to decide whether or not to chase after the deposit via legal means. (It’s only fair, and the law is all about fairness.)

So, you know to itemize, but how is it done and what does it look like? Again, common sense is a good rule of thumb. If any ordinary person saw your itemized calculation, could they make sense of it? At minimum, take the total amount of the deposit, and in a basic list, give the identity, value, and reason for each deduction. For example, the following was found insufficient by a court:

 

2-Times Mowing Yard                 $    40.00

Wal-Mart                                        $    112.59

Rug Shampooer                            $     29.66

Cleaning Lady                               $      75.00

$   257.25”

Schaedler v. Shinkle, No. CA99-09-025, 2000 WL 1283775 (Ohio App., 12th 2000). A court found this notice and itemization insufficient because it did not explain what the landlord had bought or why it was necessary. Though you must provide half-way decent information, the standards are not rigorous. A landlord may rely on estimates for local adverts if they are used honestly and in good faith.

When all else fails, Small Claims Court

Small claims court is the ever-present threat that makes tenants pay their rent on time. Landlords always have the option to pursue redress via the courts. Often theft, property damages, or amount of back rent, dwarfs the value of a withheld security deposit. Though a method is available, it doesn’t mean it is the best option. Good attorneys always counsel clients to pursue solutions without legal intervention. Expediency and cheapness is good for landlords and a small claims action is anything but.

In a nutshell, a small claims action flows in the following order:

1) legally actionable event,

2) collecting evidence,

3) filing a complaint,

4) serving a complaint,

5) waiting for trial date,

6) conducting a trial,

7) waiting for judgment, and

8) collections

All through out this process there are attorney conversations, communications between tenant and landlord, collection of evidence, and waiting, the ever-present waiting for someone to respond.

There’s a lot of stuff going on and all of it costs time and money. This is where good legal counsel comes in. Best case scenario a stern phone call and demand letter from an attorney scares the other party into paying. If that works, awesome, problem solves. If it doesn’t, a good attorney will tell you the pro’s and con’s of going the lawsuit route. Sometimes, though a landlord feels slighted and hates a breaching tenant, the payoff just isn’t worth the going through the courts. At minimum, a lawsuit will take months, will probably require a landlord’s in court testimony, and to pay an attorney to appear in court and prosecute a case will eat a significant amount of money. Often the sign of a trustworthy attorney is one who tell you not to retain their services.

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.

Helping You and Your Loved Ones Plan for the Future

Ohio Homestead Exemption

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Homes, for most people, are the most significant and expensive asset they possess. Being a homeowner is expensive, property taxes, homeowner’s insurance, utilities, repairs and upkeep, just to name a few.  As such, homeowners are concerned with exploiting every available opportunity or tactic to save money regarding their houses. One such opportunity is the Ohio homestead exemption, which, if exploited properly, can save thousands of dollars for homeowners over the years. If you want to take advantage of this credit, or don’t know how to apply for it, contract a local Cleveland area estate planning attorney and start saving.  

  • What is the Ohio Homestead Exemption?  

Per the Ohio Department of Taxation, the homestead exemption allows low-income senior citizens and permanently and the totally disabled, to reduce their property tax bills by shielding some of the value of their homes from taxation. The exemption works by giving qualified recipients a credit on property tax. This credit allows homeowners to exempt $25,000 in home value from all local property taxes. For example, if a home is worth $90,000 and qualifies for the exemption, it will be taxed as only being worth $65,000.    

Like all legal and tax questions, the precise amount of available savings is highly dependent on personal circumstance and state and local tax code. Further, under Ohio law, and as the name suggests, this exemption is limited to the “homestead,” which is defined as an owner’s dwelling and up to one acre of land. As such, if you have more property, different tax saving strategies, such as trusts, must be pursued. Again, per the Ohio Department of Taxation, overall, across Ohio, qualified homeowners saved an average of about $495 per taxpayer during the 2015 tax year. Note, however, the value of the exemption may not exceed the value of the homestead.  

  • How do you qualify for the Homestead Exemption? 

Per the Ohio Department of Taxation, the homestead exemption is available to any Ohio resident homeowner who:  

  • Owns and occupies their own home as their primary residence and 
  • Qualifies under the means-test and 
  • Is at least 65 years old or turns 65 in the year for which they apply; or 
  • Is totally and permanently disabled as of January 1 of the year for which they apply, as certified by a licensed physician or psychologist, or a state or federal agency; or  
  • Is the surviving spouse of a person who was receiving the previous homestead exemption at the time of death, and where the surviving spouse was at least 59 years old on the date of death. 

What is the mean-test for the Ohio homestead exemption? The means-test is an income threshold, which an applicant must be under to claim the exemption ($32,200 in 2018).  Further, since applications for real property are filed in the year for which homestead is sought, the homeowner must be 65 by December 31 of the year the application is filed. Additionally, in the event a person owns more than one home, the principal place of residence is the home where the person is registered to vote, and the person’s place of residence for income tax purposes. 

  • Homestead Exemption and Trusts 

As trusts have become more and more popular in estate planning, a common question is, will I lose my homestead exemption if I place it in trust? Again, like most legal questions, the answer is it depends. Here, it depends in the exact terms of your trust and the nature of the ownership interest conveyed to the trust and retained by the grantor/homeowner. 

As stated above, a critical aspect of qualifying for the homestead exemption is that it is only available for your personal residence and you are occupying. Herein lies the rub and is where your Cleveland estate planning attorney earns his keep. First, the legal definition of “owner” is broad enough to include a vendee in possession under a purchase agreement or a land contract, a mortgagor, a life tenant, and a settlor of a revocable or irrevocable inter vivos trust holding the title to a homestead occupied by the settlor as of right under the trust.  So, it doesn’t necessarily have to be the record title holder that qualifies for the exemption. Second, whether something is both a personal residence and in a state of occupation are fact specific questions. Largely you prove both via paperwork. The address you put down for your driver’s license, tax returns, receive mail, register to vote, etc.  Third, through precise and smart drafting of trust language, on paper your home can receive the peace of mind and protections of being in trust, while in reality, and to qualify for the exemption, you still physically reside at the home.  

The use of either a revocable or irrevocable trust is not an automatic foreclosure of homestead exemption eligibility. If a homeowner is willing to play ball and, if circumstances require, make some estate planning concessions to take tactical advantage of certain options, the world is your oyster. Municipal, state, and federal tax codes are full of potential avenues for estate tax savings, one only needs the courage and knowledge to take advantage of them. Lucky for you, smart homeowner, you have experienced Ohio estate planning attorneys that are only a quick phone call away.    

Disclaimer: 

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.  

GST: Generation Skipping Transfer Tax

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Staying abreast of current tax changes is critical to getting the most “bang for your buck” when it comes to estate planning. 2018 had significant, albeit likely temporary, increases in the federal estate, gift, and generation-skipping transfer tax exemptions. For example, individuals who previously used their previous lifetime gift tax exemption amounts can now effectively double the amount of assets and money that can be transferred without incurring any federal gift tax consequences. As such, it is a good idea to reevaluate your current estate planning to determine if your estate planning goals are being met and if there are now unexploited taxation opportunities with the recent changes in law. For example, many people, in light of the increased lifetime gift tax exemption amount and generation-skipping transfer tax exemption amount, are making gifts to children, grandchildren, or close family friends with either outright distributions or through new or existing trusts. The first step, however, in manipulating recent changes in federal law to your personal benefit is understanding the underlying tax structures. One significant theory of taxation is the generation-skipping transfer tax. This tax, however, is only one of many which may affect your estate, as such, contact an experienced Ohio estate planning attorney to make sure the most goes to your friends and family.     
 

  • What is the GST Tax? 

First question is the most common, what is the generation-skipping transfer tax? The generation-skipping transfer tax or, “GST”, is a flat, 40% tax on transfers to specific persons, sometimes called “skip persons,” such as grandchildren, other family members more than one generation from you, nonfamily members more than 37.5 years younger than you, and also certain trusts. Whether or not transfers to a particular trust are subject to GST taxation is primarily focused on who are named as beneficiaries and their generational status to the grantor(s). Avoiding GST taxation and preserving the most amount of your money and assets is one of the primary goals for you and your estate planner.     

  • How is it triggered? 

GST taxation can be triggered either intentionally or unintentionally via transfers of assets or money. Intentional transfers, such as purposefully leaving bequests, trust distributions, or inheritance to “skip persons.” Unintentional transfers, such as children predeceasing grandchildren and an estate plan failing to take this possibility into account when calculating future distribution structures.   

When a particular transfer is deemed to trigger the GST tax, the next step is to calculate whether it falls into any exemption categories and if there is any money left in any of those categories to shield the transfer from GST taxation. The two major exemptions are the annual gift tax exclusion, currently $14,000 per recipient; $28,000 for married couples, and the Unified Tax Credit, approximately $11.8 million lifetime exemption and approximately double that amount for married couples.   

  • How do I use exemptions to avoid GST?  

Utilizing tax exemptions to avoid GST essentially boils down to properly documenting and earmarking transfers that may trigger GST taxation and filing any appropriate paperwork with the IRS. Again, regardless of whether these transfers are made during the grantor’s lifetime or at their death, as long as transfers either skip a generation or are made in trust for multiple generations, GST taxation must be considered and addressed.  

Estate planners take the transfers you want to make, then plot different tactics for transfer dependent on your overall goals and realities for your particular estate. Many, few, or no options may be available to avoid GST in your circumstances. Sometimes certain gifts are not applied toward the exemption, such as “annual exclusion” gifts and direct payments for medical or education purposes, thus these can be made completely tax-free. Other times decisions have to be made to temporary hold off on a transfer or to shift a transfer to another spouse to use their tax exemption amounts. Furthermore, the estate planner must decide whether to file a gift tax return or plan the transfer so it appears as an incomplete gift. Just because a transfer looks like it falls within the bounds of a taxation exemption doesn’t mean the transfer magically is ignored by the IRS, your estate planning still has a lot of paperwork and legal leg work to do.    

  • How to Avoid GST with trusts 

Trusts provide a multitude of estate planning benefits, one of the most popular uses for them is minimizing or avoiding estate taxation, in this context, GST taxation. A-B trusts, bypass trusts, and dynasty trusts are all examples of trust vehicles that can mitigate or completely avoid any concerns you might have with generation-skipping transfers. Trust use here primarily concerns manipulating trust funding and available exemption amounts in conjunction with the practical needs of you and your family. Each trust type, however, has their own benefits and disadvantages. As such, it is important to talk with an Ohio estate planning attorney to find out the pro’s and con’s of using a trust in your circumstances.  

Regardless of whether a trust is right for your estate planning goals, now is the time to review your current estate planning documents to ensure they remain in accordance with your intent and the recent changes in law. Often many estates are planned around and use trusts that are funded according to formulas tied to now changed federal estate exemption amounts. As such, with the recent increased estate tax exemptions, such trusts may be funded with significantly larger amounts than you anticipated when you originally met with your estate planner. Further, a comprehensive review of your trust and estate planning documents will allow you to assess their effectiveness in light of the changes to the law, changes in your personal life, and changes to your estate planning goals.    

Disclaimer: 

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.  

How to Lower Your Property Tax – Fighting Overvalued County Appraisals

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What: Property Value Appraisal

Ohio operates on a system in which county auditors reappraise every piece of land and every building located in their county every six years. These base appraised values are then multiplied by local tax rates. This value is what is shown on local county auditor’s website and is often used as a base line when determining potential real estate taxes.

This reappraisal occurs in different counties at different times. Naturally, it is just too much for every local government to reappraise everything all at once. So, Ohio uses staggered reappraisal with different groups of counties undergoing reappraisal or updating during different tax years.

The following counties recently have either finished reappraisals or recently undergone updates:

Update Counties

 

Allen Coshocton
Guernsey Sandusky
Vinton  

 

Reappraisal Counties

 

Belmont Brown Crawford Cuyahoga Erie
Fayette Highland Huron Jefferson Lake
Lorain Lucas Morgan Muskingum Ottawa
Portage Stark Warren Williams  

 

Why: Property Reappraisal and Updating can result in a Bigger Tax Hit

Most importantly with reappraisal and updating, is that they can result in increased property values and consequently increased tax liability. Property owners in particular counties subject to reappraisal or update will see new property values reflected in their property tax bills that arrive in the mail either December or January.  This is an often-overlooked tax consequence that many people fail to plan for and can eat up an otherwise expected, and critical, tax refund. As such, many people desire to keep their property values low, at least in regards to taxation, and want to challenge their county auditor’s assessment of their property value. This is where experienced Cleveland legal attorneys come in.

How: Filing a Complaint to Challenge Property Valuation

The period for filing formal challenges to a county auditor appraisal generally begins January 1 and ends March 31 so contact an attorney sooner rather than later if you want to challenge a recent change in your property value. Generally, property owners can only challenge an assessment one time every three years.

How you challenge an improper auditor valuation is with a complaint filed with your local county board of revision where the property under dispute is located. This complaint is sometimes referred to as a “complaint against valuation” and asks 14 boilerplate questions. Questions such as has the property been sold within the last 3 years, have you made any improvements to the property, and your justifications for requesting a change in value.

This form is found on every county auditor’s website as well as the Ohio Department of Taxation’s website. A lot of individuals challenge land valuation so the process, at least in some ways, is streamlined. Note, however, if the property owner challenging valuation is a business, an attorney must almost always sign the complaint.

The most common reasons property values are challenged include declining market values in a depressed area, functionally and/or economically obsolete properties, declining rents in tandem with vacancies, and damage caused by non-human agency, such as fire, flood, earthquakes, or mold. Further, those who recently purchased a property in an arms-length transaction for less than the county auditor’s value, often have a strong case. Note, however, recent Ohio Supreme Court rulings adjusted the evidentiary rules for property owners looking to use a recent arms-length transaction as a basis to challenge the value of real property. The important takeaway from recent legal rulings is that appraisal evidence must be carefully considered before presentment to the board of revision. As such, experienced legal counsel should be retained before filing any tax appeal.

Once the complaint is filed and received by the board of revision, the board sets an evidentiary hearing. The hearing usually lasts between 15 to 30 minutes and takes place in front of a panel of decisions makers, usually the county auditor, county treasurer, and the president of the Board of County Commissioners. At this hearing, an attorney appears on your behalf and presents arguments, evidence, and witness testimony to prove the actual property value. Depending on the value or discrepancy of the value under dispute, other interested parties, such as local school districts, will appear via their own counsel and argue in favor of the higher value.

After the hearing, the board of revision makes its decision of the value of the real property. If you took the proper steps, gathered the right documents, and hired the right attorney, your property value should be changed to reflect the real value and you can avoid any significant tax hit in the near future.

When: When should I challenge?

As with every legal question asked of every attorney, the answer is always going to be, it depends. But as rule of thumb, if it seems like no rational buyer would purchase your property for what the auditor appraised it, calling your local Cleveland business attorney is probably a good move.

Another critical factor in assessing when to challenge is the sufficiency of evidence currently in your possession. This is where good legal counsel comes in. Attorneys are well-versed in hiring qualified appraisers to determine the initial overvaluing of the property, generating presentable reports for the evidentiary hearing, and identifying the relevant purchase transaction documents. If you are asking for a significant change in value, it is highly likely opposing attorneys will come out of the woodwork to counter your appeal. As such, experienced local counsel is often the difference between a waste of time and money and significant tax saving.

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.

Helping You and Your Loved Ones Plan for the Future