Advanced Estate Planning Strategies: How High-Net-Worth Families Reduce Taxes and Protect Wealth

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Estate planning is a fundamental component of wealth management for all households—but for affluent families, it extends far beyond drafting a simple will. A comprehensive estate plan must address tax efficiency, asset protection, and long-term wealth transfer.

By utilizing advanced estate planning strategies, individuals can safeguard their assets, minimize tax exposure, and ensure their legacy is preserved according to their intentions.

Who Are These Estate Planning Strategies For?

Advanced strategies are commonly used by:

  • High-net-worth individuals and families
  • Business owners with appreciating assets
  • Physicians, executives, and professionals with liability exposure

When Should You Consider Advanced Estate Planning?

You may benefit from advanced estate planning strategies if:

  • Your estate is approaching estate tax exemption limits
  • You want to reduce estate or gift taxes
  • You want to transfer wealth to future generations efficiently
  • You own a business or rapidly appreciating investments
  • You are concerned about lawsuits or creditor exposure

Key Advanced Estate Strategies Explained

Irrevocable trusts play a pivotal role in this process, as assets transferred into such trusts are no longer considered part of the client’s estate. Consequently, these assets are exempt from estate tax calculations and are shielded from potential claims, thereby reinforcing the security of family wealth.

Various irrevocable trusts, including a Spousal Lifetime Access Trust (SLAT), Grantor Retained Annuity Trust (GRAT), Irrevocable Life Insurance Trust (ILIT) and Ohio Legacy Trusts, serve as essential instruments within these strategies, facilitating the protection and continuity of financial legacies. Let’s take a closer look at how each of these trusts works.

What Is a Spousal Lifetime Access Trust (SLAT)?

A Spousal Lifetime Access Trust is an irrevocable trust that enables one spouse to transfer assets into a trust for the benefit of the other spouse (and potentially other beneficiaries) while simultaneously removing those assets from the taxable estate.

Key Benefits:

  • Reduces estate tax liability
  • Protects from creditors
  • Allows continued financial access for the beneficiary spouse
  • Moves accrual of asset appreciation outside the taxable estate

The spouse can use funds from the trust to maintain their standard of living even though the trust assets have been removed from the estate. SLATs most often terminate at the death of the beneficiary spouse, at which point the trust assets pass to the other SLAT beneficiaries (typically a younger generation), either outright or in trust. Assets held in trust are then completely protected, and the beneficiaries can take distributions as needed.

SLATs are especially effective for married couples who want to preserve wealth while maintaining flexibility in financial access.

What Is a Grantor Retained Annuity Trust (GRAT)?

A Grantor Retained Annuity Trust enables the grantor to transfer appreciating assets to beneficiaries while minimizing exposure to gift and estate taxes.

Under this arrangement, the grantor transfers assets into the GRAT and retains the right to receive annuity payments for a predetermined period. Upon the expiration of the term, any residual assets in the trust pass to the designated beneficiaries without incurring additional estate taxes. For example, if you transfer $1 million to a GRAT, receive an annuity payment, and during the term, it grows to $1.5 million, the $500,000 in growth will pass to your beneficiaries free of estate and gift tax. This strategy is ideal for business owners or individuals with rapidly appreciating assets.

The effectiveness of a GRAT is contingent upon the appreciation of trust assets at a rate exceeding the IRS’s assumed rate of return, thereby allowing excess growth to be transferred tax-free.

Key Benefits:

  • Reduces gift tax exposure
  • Transfers asset appreciation with minimal tax impact
  • Ideal for high-growth investments or business interests

Potential Risk:

  • Mortality risk, wherein the premature death of the grantor results in the inclusion of trust assets in the estate
  • Insufficient asset appreciation, which may negate the intended tax advantages

What Is an Irrevocable Life Insurance Trust (ILIT)?

An Irrevocable Life Insurance Trust (ILIT) serves to exclude life insurance proceeds from the taxable estate, ensuring that beneficiaries receive the full policy value while simultaneously providing liquidity to cover estate expenses and shielding insurance proceeds from creditors.

Key Benefits:

  • Keeps life insurance proceeds outside the taxable estate
  • Provides tax-free liquidity for heirs
  • Protects proceeds from creditors

While ILITs were more commonly used when estate tax exemptions were lower, they remain valuable for certain high-net-worth planning scenarios.

What Is an Ohio Legacy Trust (Domestic Asset Protection Trust)?

An Ohio Legacy Trust – also known as a Domestic Asset Protection Trust (DAPT) – is designed for intergenerational wealth preservation, facilitates the transfer of assets across multiple generations without incurring estate taxes at each transfer, thereby preserving family wealth and affording protection from creditors and divorce settlements. An Ohio Legacy Trust, aka Domestic Asset Protection Trust (DAPT) is structured to insulate assets from creditors while allowing the grantor (creator) to remain a discretionary beneficiary under specific conditions.

Key Benefits:

  • Strong asset protection from lawsuits and creditors
  • Potential estate tax advantages
  • Allows continued access to assets in a limited capacity
  • Supports long-term wealth preservation

If the primary objective is the efficient transfer of wealth with minimal tax implications, a DAPT may be most suitable. A SLAT, by contrast, is particularly advantageous for individuals seeking to provide financial security for a spouse while simultaneously achieving estate tax savings.

DAPTs are often used by clients with a higher risk of lawsuits, such as doctors, business owners, or athletes. They are a great way to protect their wealth while also reducing potential estate tax concerns.

Be Cautious of Offshore Asset Protection Trusts

Offshore asset protection trusts are sometimes marked as a solution for asset protection, but they often introduce significant risks, including:

  • High administrative costs
  • Increased legal complexity
  • Potential IRS scrutiny
  • Political and economic instability in the foreign jurisdiction
  • Limited protection against certain U.S. claims

In many cases, domestic strategies – such as DAPTs – offer more practical and reliable solutions.

Which Estate Planning Strategy is Right for You?

The right strategy depends on your financial situation, family structure, and long-term goals.

  • An SLAT may be ideal for married couples seeking tax savings with flexibility
  • A GRAT works well for individuals with appreciating assets
  • An ILIT provides liquidity and estate tax efficiency
  • A DAPT offers strong asset protection for high-risk individuals

Even if estate taxes are not a concern, a revocable living trust remains a foundational tool to avoid probate and protect heirs.

Final Thoughts: Building a Strategic Estate Plan

Advanced estate planning strategies provide powerful tools for preserving wealth, minimizing taxes, and protecting assets across generations.

However, these strategies must be carefully structured and tailored to your unique circumstances. A well-designed plan ensures that your wealth is not only protected—but positioned to benefit your family for years to come.

To learn more or to schedule a free consultation, contact me at dan@baronlawcleveland.com or 216-573-3723.

parents and grandparents admiring their grandchildren

Estate Planning Considerations for 2026

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What is estate planning, and why does it matter in 2026?

Estate planning is the process of organizing your assets, legal documents, and financial decisions to ensure your wishes are carried out during life and after death. As we approach 2026, the estate planning landscape is poised for meaningful change. Economic uncertainty, evolving family dynamics, and recent changes to federal tax provisions underscore the importance of thoughtful, proactive planning.

Whether you are reviewing your existing documents or creating a plan for the first time, the new year presents a critical opportunity to ensure your affairs are aligned with your current goals, family structure, and financial situation. Without proactive planning, families may face probate delays, unnecessary taxes, confusion, and disputes at the worst possible time.

Below are key considerations every family should keep in mind as we transition into 2026.

Who This Estate Planning Guide Is For

This guide is designed for:

  • Individuals starting the estate planning process
  • Families updating outdated estate plans
  • Business owners with succession considerations
  • Individuals with retirement accounts or complex assets
  • Anyone experiencing life changes such as marriage, divorce, or new children

Estate Planning Checklist: What to Review Before 2026

Before the new year, review these key components of your estate plan:

✔ Wills and trusts
✔ Financial powers of attorney
✔ Health care directives and HIPAA authorizations
✔ Beneficiary designations (retirement accounts, life insurance)
✔ Asset ownership and titling
✔ Business interests and succession plans
✔ Digital assets and online accounts

When Should You Update Your Estate Plan?

You should review your estate plan every 2–3 years or after major life events such as:

  • Marriage or divorce
  • Birth or adoption of children
  • Death of a spouse or beneficiary
  • Business changes or asset growth
  • Changes in tax laws

Outdated estate planning documents can lead to probate delays and increased costs, unintended beneficiaries, tax inefficiencies, and family disputes or litigation.

Key Estate Planning Considerations as We Head Into 2026

 

1. Updating Foundational Estate Planning Documents

Many individuals assume estate planning is complete once documents are signed—but effective plans must evolve.

As the new year approaches, review and update:

  • Wills and Trusts: Check for outdated fiduciaries, changes in family circumstances, or assets no longer titled correctly. A plan prepared years ago may not reflect blended families, births, divorces, or shifts in financial priorities.
  • Financial Powers of Attorney: These documents often become ineffective because the named agent is no longer appropriate, or institutions demand more modern language. Banks often consider documents executed ten years or longer ago to be “stale” and will not honor them even if they have been properly executed.
  • Health Care Directives: Medical decision-making is one of the most overlooked areas of estate planning. Ensuring the correct individuals are authorized—and that they understand the client’s wishes—is essential. This includes maintaining a HIPAA release for all family members who you wish to have access to your medical records and information.
  • Beneficiary Designations: As more wealth resides in retirement accounts and life insurance policies, outdated beneficiaries create some of the most common estate planning mistakes. A periodic beneficiary audit is indispensable heading into 2026. For example, in a recent matter, an IRA owner with an account valued at approximately $1 million had never updated his beneficiary designation after his spouse passed away. Because no contingent beneficiary was listed, the account was forced to go through probate, resulting in roughly $44,000 in legal and court fees. A simple review and update of the beneficiary designation, naming either a trust or an appropriate individual, would have allowed the account to pass directly to the intended recipient outside of probate, avoiding unnecessary expense and delay.

2. Planning for Modern Family Dynamics

Today’s estate plans must account for increasingly complex family structures. Blended families, cohabitating partners, unmarried parents, and multi-generational households require carefully drafted provisions to avoid litigation or inequitable results.

Consider these questions when advising or reviewing a plan:

  • Should the surviving spouse inherit everything outright, or should assets be placed in trust to protect children from prior relationships?
  • Are guardianship nominations up to date, especially for families with minor children?
  • Does the plan contemplate adult children who may need asset protection due to divorce, debt, or personal struggles?
  • Is there a plan for digital assets, social media accounts, and electronic financial records?

Proactively addressing these issues ensures clarity, minimizes conflict, and reflects the realities of modern life.

3. Retirement Accounts and SECURE Act Considerations

The SECURE Act and its subsequent updates have significantly changed how inherited retirement accounts are handled.

Most non-spousal beneficiaries are now required to withdraw all assets within 10 years, a rule that can accelerate taxes and complicate estate distributions.

Clients should:

  • Reassess whether their beneficiary designations remain appropriate and tax-efficient
  • Confirm that any trust named as beneficiary is drafted in compliance with the SECURE Act
  • Consider how required distributions may affect beneficiaries who previously expected “stretch IRA” treatment
  • Evaluate whether Roth conversions before 2026 could help reduce long-term tax burdens

Because retirement accounts are often among a family’s largest assets, coordinating these accounts with broader tax and estate strategies is increasingly essential.

4. Estate Planning for Business Owners

Estate planning for business owners requires a unique lens.

Key areas to review include:

  • Business Succession Plans: Who will run the company? Is there a buy-sell agreement in place? Has the valuation been updated recently? Can the business interest pass outside of probate via a trust or a transfer-on-death agreement?
  • Tax Exposure: The potential reduction in the federal exemption amount may significantly impact family-owned businesses whose value is tied up in illiquid assets.
  • Management Continuity: Many plans are silent on what happens operationally during temporary incapacity.

Without clear planning, families may face operational disruption, conflict, or forced sale of the business.

5. Incapacity Planning: The Most Overlooked Risk

While most people focus on how their assets will be distributed after death, planning for incapacity often presents more immediate challenges.

The rising costs of long-term care, increasing rates of cognitive decline, and the complexity of medical decision-making make proactive preparation essential as Americans continue to live longer.

Heading into 2026, every estate plan should include:

  • Updated powers of attorney with broad and modern authorities
  • Clear health care directives
  • A well-considered strategy for funding long-term care (insurance, savings, Medicaid, or hybrid)
  • Management of digital records, online banking, and even crypto assets if necessary

The more detailed and intentional the planning, the easier it is for loved ones to step in during an emergency.

6. Communicating Your Estate Plan to Loved Ones

A well-crafted plan is only effective if key individuals understand it. Many disputes arise not from the estate plan itself but from beneficiaries being surprised or unprepared. It’s encouraged to share the general structure of your plan, identify who you have named as executor, trustee, or agents, and explain the intentions behind the key decisions. This will significantly reduce confusion and conflict.

Final Thoughts: Taking Action

Estate planning is not a one-time task – it is an ongoing process that evolves with your life, family, and financial circumstances.

Whether you’re starting your estate plan or updating existing documents, taking action ensures:

  • Greater financial security for your family
  • Reduced tax exposure
  • Clear decision-making authority
  • Preservation of your legacy

To revisit or start your estate plan, give us a call at 216-573-3723 or email me at dan@baronlawcleveland.com.

Estate and Succession Planning for Business Owners: Protecting Your Company, Family, and Legacy

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Estate planning for business owners is not just about distributing assets after death—it’s about ensuring business continuity, protecting your family’s financial security, minimizing taxes, and preserving the legacy you worked so hard to build. Unlike individuals whose wealth may be concentrated in retirement accounts or personal investments, entrepreneurs and small business owners often have a significant portion of their net worth tied directly to their company. Without a comprehensive estate and succession plan, your business could face probate delays, leadership disputes, tax burdens, and operational instability at the worst possible time.

Below are the key steps every business owner should take to protect their company, family, and long-term legacy.

Step 1: Inventory Business and Personal Assets
Step 2: Define Your Business Succession Plan
Step 3: Establish a Trust to Protect Business Assets and Avoid Probate
Step 4: Create or Update Buy-Sell Agreements
Step 5: Plan for Estate Taxes and Business Liquidity
Step 6: Align Estate Planning Documents with Corporate Agreements
Step 7: Communicate Your Estate Plan to Key Stakeholders
Step 8: Review and Update Your Estate Plan Regularly

 

Step 1: Inventory Business and Personal Assets

A comprehensive estate plan begins with a clear inventory of both business and personal assets. For small business owners, this includes ownership interests in LLCs, corporations, partnerships, and sole proprietorships, along with related governing documents.

Business assets—such as equipment, intellectual property, real estate, and contracts—should be evaluated alongside personal investments, retirement accounts, and insurance. Proper titling and ownership alignment are essential for effective trust funding and tax planning.

Step 2: Define Your Business Succession Plan

A well-designed business succession plan is central to estate planning for business owners. Succession planning answers a crucial question:

Who will take control of the company if you are no longer able to lead it?

Some business owners intend to transfer ownership to children or family members. Others prefer to sell the company or allow business partners to buy out their interest. In certain situations, owners want to separate economic benefits from management control—allowing heirs to receive income from the business without participating in day-to-day operations.

Clearly defining your succession strategy:

  • Prevents family conflict
  • Protects business continuity
  • Ensures capable leadership
  • Preserves the value of your company

Step 3: Establish a Trust to Protect Business Assets and Avoid Probate

One of the most effective estate planning tools for entrepreneurs is a trust.

A revocable living trust allows business owners to maintain control during their lifetime while ensuring seamless transfer of ownership upon death. By transferring business interests into the trust, the company can avoid probate and continue operating without court intervention.

For business owners concerned about estate taxes, creditor protection, or long-term asset preservation, irrevocable trusts may offer additional benefits:

  • Reduce estate tax exposure
  • Protect assets from creditors
  • Preserve wealth for future generations

For many entrepreneurs, trust-based planning offers the flexibility and control necessary to protect both family and business interests.

Step 4: Create or Update Buy-Sell Agreements

For business owners with partners, a buy-sell agreement is a critical component of both estate planning and business succession planning.

This legally binding agreement outlines what happens to an owner’s interest in the event of:

  • Death
  • Disability
  • Retirement
  • Voluntary departure

A properly structured buy-sell agreement can:

  • Establish a valuation method
  • Restrict ownership transfers to outside parties
  • Require remaining partners to purchase the departing owner’s shares

This prevents unwanted third parties—including heirs who may not be involved in the business—from gaining control.

Many small business owners fund these agreements with life insurance, providing immediate liquidity so surviving partners can purchase the deceased owner’s interest without disrupting business cash flow.

Step 5: Plan for Estate Taxes and Business Liquidity

Estate tax planning is particularly important for high-value businesses. Even profitable companies can face liquidity challenges if a significant estate tax bill becomes due.

Without proper planning, heirs may be forced to sell business assets—or the entire company—to satisfy tax obligations.

Advanced estate planning strategies include:

  • Lifetime gifting
  • Valuation discounts for business interests
  • Use of irrevocable trusts
  • Life insurance to provide liquidity

These tools help ensure your business remains intact while meeting financial obligations.

Step 6: Align Estate Planning Documents with Corporate Agreements

A common mistake in estate planning for business owners is failing to coordinate legal documents.

Operating agreements, shareholder agreements, and partnership contracts often contain transfer restrictions or succession provisions that may conflict with estate planning documents.

Coordination between estate planning counsel and corporate advisors ensures that all documents work together seamlessly. This reduces the risk of litigation, delays, or unintended ownership transfers.

Step 7: Communicate Your Estate Plan to Key Stakeholders

Even the most well-designed estate plan can fail without proper communication.

Business partners, successors, trustees, and immediate family members should understand the general structure of your plan and their roles and responsibilities within it.

Transparency reduces uncertainty and prevents disputes that could threaten business stability after your passing. You don’t need to share every detail – but clarity around expectations is critical.

Step 8: Review and Update Your Estate Plan Regularly

Estate and succession planning for small business owners is not a one-time event.

Your plan should evolve as your business and personal life change. Key triggers for updates include:

  • Business growth or sale
  • New partners or ownership changes
  • Tax law changes
  • Marriage, divorce, new children

Reviewing your documents every 2 to 3 years—or after major life or business events—ensures your strategy remains aligned with your goals.

Final Thoughts: Building a Comprehensive Estate and Succession Plan

For business owners, estate planning is about far more than asset distribution—it is about business succession, tax efficiency, asset protection, and legacy preservation.

A comprehensive estate plan that includes a trust provides clarity, stability, and peace of mind. Taking proactive steps today safeguards your company’s future tomorrow—and ensures that your hard work continues to benefit your family and community long after you are gone.

To schedule an appointment to analyze your business, contact our office at 216-573-3723 or email me at dan@baronlawcleveland.com.

The Transfer of Your Home to A Trust: Potential Insurance Issues

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Written by Carter Bednar, Esq.

Transferring one’s home into a trust is a key step in estate planning. It allows control over who inherits the home and avoids probate upon the homeowner’s death, a primary goal of estate planning. However, failing to properly insure one’s home could lead to an insurance provider denying a claim, rendering all the hard work put into planning worthless.

What is a Trust?

A trust is a legal agreement in which property is transferred to a trustee, who manages the property for the benefit of beneficiaries designated by the trust’s creator, also known as the grantor. Trusts can take various forms, including revocable trusts that can be amended and modified, or irrevocable trusts that cannot be changed. When property is transferred into a trust, regardless of the type, the trust becomes the legal owner of the property.

The Risk of Trust Ownership

The hidden risk of transferring home ownership is that an insurance provider may deny a claim because the legal owner and named insured do not match. Since insurance providers base their coverage decisions on legal ownership, they may deny a claim if the insurance policy does not properly reflect the change in ownership.

How to Properly Insure a Home in Trust

The first step is to contact your insurance provider. Informing your agent as soon as possible of the new ownership structure can help avoid any potential gaps in coverage. The next step is to request that your trust be listed as an additional insured or named insured. This step is crucial as it provides your trust with an insurable interest in the property. The last step is to review your insurance policy and ensure that your liability coverage is sufficient.

Key Considerations

Placing one’s home into a trust is an invaluable estate planning tool, but it is essential to update this change in ownership on one’s insurance policy. Waiting too long to make this update can create a gap in coverage and potentially lead to a claim denial. It is also important to correctly name the trust on the policy, and working with your estate planning attorney can help ensure the trust is listed properly.

The One Big Beautiful Bill Act (OBBBA): What It Means for Estate Planning in 2026 and Beyond

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The One Big Beautiful Bill Act (OBBBA): What It Means for Estate Planning in 2026 and Beyond

After months of negotiation and speculation, Congress has passed the One Big Beautiful Bill Act (OBBBA), a sweeping tax reform bill that significantly reshapes estate planning, trust taxation, and alternative minimum tax (AMT) policy. Building on the framework of the 2017 Tax Cuts and Jobs Act (TCJA), the OBBBA introduces permanent changes with far-reaching implications for high-net-worth individuals, families, and estate planners.

There are certainly a lot of provisions in this “big” bill so I’ve created a breakdown of which specific parts are most likely to affect your estate plan:

Expanded and “Permanent” Estate, Gift, and GST Tax Exemptions

Perhaps the most consequential change in the OBBBA is the permanent increase to the estate, gift, and generation-skipping transfer (GST) tax exemptions. Under the 2018 Tax Cuts and Jobs Act (TCJA), the exemption was set at $13.99 million for individuals and 27.98 million for married couples; now, beginning January 1, 2026, the exemption increases to $15 million for individuals and $30 million for married couples, indexed annually for inflation. Contrary to what some believe the exemption is not permanent, however, there is no set expiration for these amounts at this time. Thus, even if your net worth isn’t over $15 million, you should always consider implementing tax planning strategies within a trust because congress could reduce the exemption at any time.

SALT Deduction Expansion and Trust “Stacking” Strategy

In a move aimed at alleviating the tax burden in high-tax states, the OBBBA increases the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 starting in 2026. The cap phases out for taxpayers with adjusted gross income (AGI) above $500,000 and is fully eliminated at $600,000.

While this provision sunsets in 2030, it opens the door to advanced planning opportunities. One strategy is trust “stacking,” or using multiple non-grantor trusts to claim multiple $40,000 SALT deductions. Each trust is treated as a separate taxpayer and may be able to pay and deduct its own state and local taxes, potentially offering significant federal income tax savings. However, the IRS closely scrutinizes aggressive implementations of this tactic, so careful structuring is essential.

Charitable Giving and Private Foundations

The OBBBA leaves much of the charitable giving landscape intact, but introduces a few notable changes. The 60% AGI limit for cash contributions to qualified public charities is now permanent. Additionally, a new 0.5% AGI floor means only contributions exceeding that threshold are deductible, encouraging “bunching” strategies to maximize tax benefit in a given year.

New “Trump Accounts” for Minors

The bill introduces government-seeded investment accounts for U.S. citizens under 18 with Social Security numbers. Eligible children born between 2025 and 2028 will receive a $1,000 government contribution, with up to $5,000 per year in additional contributions allowed (plus a $2,500 employer contribution exemption from gross income). These funds grow tax-deferred and are unavailable for withdrawal until the child turns 18. The initial $1,000 grant is certainly advantageous, but unless you have already maxed out your child’s 529 savings plan, that remains a better place to park additional funds dogeared for future educational expenses, as they come with more flexibility and better tax advantages for parental contributions.

The Alternative Minimum Tax: Relief for Many, But Not All

The Alternative Minimum Tax (AMT), a parallel tax system aimed at ensuring higher-income taxpayers pay a minimum amount, was substantially curtailed by the TCJA. The OBBBA makes permanent many of those AMT reforms, preserving higher exemption amounts ($88,100 for single filers and $137,000 for joint filers) and reducing the number of individuals affected.

However, the phaseout thresholds for AMT are set to revert to 2018 levels: $500,000 for singles and $1 million for joint filers. That means fewer people will pay AMT, but some higher earners may still be caught in its net, especially those in high-tax states or with complicated income profiles. Importantly, these AMT changes do not affect trusts and estates, which continue to be subject to more stringent AMT thresholds.

Beyond the Big Bill

Estate planning is crucial for protecting your family’s future, regardless of legislative changes. While tax laws may shift, your personal goals and family needs remain constant. Estate planning ensures your assets are distributed according to your wishes—not left to the default rules of probate courts. It allows you to name guardians for minor children, appoint someone to manage your affairs if you become incapacitated, and provide clear instructions for your care and financial matters. Even if your estate is well below the taxable threshold, having a plan in place helps prevent family disputes, costly delays, and unintended outcomes.

Beyond taxes, estate planning is about protecting the people you care about and preserving your legacy. Ultimately, estate planning is not about how much you have, but what you want to happen with what you have. A changing tax landscape may require updates, but it should never be a reason to delay or dismiss planning altogether. The true purpose of estate planning is to provide clarity, control, and peace of mind for you and your loved ones.

Key Takeaways

When new laws take effect, it is always a good reminder to review any existing documents to make sure they are still working for you and your family. Don’t forget that almost any legal provisions regarding taxes and estate plans can be changed over time through additional legislation by current or future administrations. Additionally, these changes are only regarding federal laws – it is still important to stay informed about Ohio’s state-specific laws regarding trusts, estates, and tax-advantaged planning. And, as always, your best bet for maintaining a strong plan that will provide stability and security for your loved ones is to consult regularly with a team of qualified professionals including your estate planning attorney, financial planner, and CPA.

Estate Planning Discussions

Using the Holidays to Discuss a Difficult Topic

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Charitable Estate Planning

Leaving a Legacy While Saving on Taxes Through Charitable Gifting

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Leaving a legacy to charity is a great way to support your community, make an impact, and save on taxes. There are many charitable estate planning strategies to consider and each one comes with a careful consideration. Who you’re donating to, your financial goals, the type of asset you’re donating, tax objectives, and amount of control are just a few of the many considerations every charitable estate plan must contemplate. Using the following strategies, you can design and implement a comprehensive plan.

First, Don’t Do This…

Do not name a charity as the beneficiary of a retirement or bank account. Simply do not do this! Since big banks and financial institutions can only generate revenue based on the assets under their management, they don’t always have your best interest in mind if they lose that revenue in bequeathing your estate to your selected charity.  Leaving your wealth to a stranger at a mega-corporation can cause delay and there’s no guarantee your wishes are met.  Instead, it’s best to have a trusted estate “quarterback,” a.k.a. an executor and/or trustee who will ensure your plan is properly administrated.  You can name your children, sibling, attorney, or trusted friend. Pick someone you trust as opposed to letting the bank pick a stranger.

Donating Through Your Will

A last will and testament is one method of donating to charities; however, it is the least efficient and most time-consuming. This option is better than naming a charity as a beneficiary of a retirement account, however, because here you at least have an executor overseeing and administering the estate.  You can specify certain dollar amounts (e.g., $10,000 to XYZ church) or percentages (e.g., 10% to XYZ Church), within your will and both methods would allow your charitable beneficiaries to receive their bequest.  Keep in mind that your last will does not avoid probate. Moreover, any debts against the estate would be paid first through the probate process, reducing the amount of the bequest. Nonetheless, this method is effective and acceptable.

Basic Charitable Trust Planning

Whether you already have a family trust or want to amend your current one, leaving a bequest to charity through your trust is a great way to leave a legacy.  The trust will avoid probate and also provide more control.  Unlike a last will, here you can spread out payments to your charity, leaving a legacy for years to come.  For example, you might leave $10,000 to the OSU scholarship foundation, every year, in your family name, until the funds are depleted. Moreover, since a trust would avoid probate, the assets are also protected from creditors and the estate would remain private. Finally, you once again have a “quarterback,” known as a trustee to oversee and administer the estate.

Charitable Remainder Trust

Being able to observe the organizations you’re helping is a major benefit of an irrevocable charitable remainder trust, or “CRT.” Additionally, unlike the strategies we have discussed thus far, CRTs allow you to attain an immediate tax deduction while also creating a cash flow. The trust can be funded by real property, stock, cash, or any other type of asset. However, the tax deduction and cash flow you receive will vary depending on what type of asset you’re contributing. After funding, you receive payments over time from the revenue generated from the trust. For example, your CRT might be funded by rental properties that you not only received a tax deduction for, but now you’re receiving payments from for the rest of your life.  After death, the remaining assets are given outright to the charities you’ve named.

Who’s a good fit?  The CRT is a good option if you want an immediate charitable deduction but also have a need for an income stream for yourself or another person. If you set instructions to establish a CRT at your death, it is also a good option to provide for heirs, with the remainder going to charities of your choosing.

Charitable Lead Trust

A charitable lead trust, or “CLT” is the inverse of a CRT.  It’s an irrevocable trust that generates a potential income stream for the named charitable beneficiary, with the remaining assets eventually going to family members or other beneficiaries. Donors choose the term of the trust and the amount distributed, at least annually, to charity.  The assets used to fund a charitable trust are removed from your gross estate and may not only reduce the amount of tax your estate has to pay upon your death, but may also preserve funds for your heirs. Charitable lead trusts are not tax-exempt, and you will need to decide the tax treatment of the trust when it is created.

Who’s a good fit? This is ideal if you want to pass appreciated property to heirs and reduce gift and estate tax consequences and are also comfortable with parting with the income for a number of years in return for estate and gift tax savings.

Where Do You Start?

No matter the size of your estate, developing a charitable estate plan that will be carried out according to your wishes requires three things: (1) a Certified Public Accountant (CPA) who has experience with tax and gifting; (2) a Financial Planner; and, of course (3) an Estate Planning Attorney. The combination of utilizing these three professionals could mean the difference between a significant tax break or your estate ending up in court.  For more information or to schedule a free consultation, contact Baron Law at 216-573-3723.

couple stressed by probate process

How to Avoid the Big Bad Wolf of Probate Court

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How do you ensure your family and loved ones are safe from the Big Bad Wolf of probate court?

Whether you have a comprehensive family trust or are just getting started with a basic estate plan, understanding and avoiding probate is paramount for each person considering the future of their loved ones.

What Is Probate And How Does It Work?

Probate is the process of administering, or settling, a person’s estate after their death. Laws and procedures vary from state to state, but the process largely depends on whether the deceased had a will.

If the deceased had a will, the probate court will determine whether it is valid. Then the court will follow the instructions in the will to appoint an executor and direct the distribution of assets. Assets owned jointly, held in a trust, coupled with transfer-on-death or payable-on-death accounts are not included in this distribution. After the court pays off the deceased’s debts, the remainder of the assets are distributed to the beneficiaries named in the will.

If the deceased did not have a will, the state will name an administrator for the estate and determine the beneficiaries. In Ohio, the beneficiary is typically the surviving spouse, followed by children, parents, siblings, nieces and nephews and grandparents.

Why Is Probate A Big Bad Wolf?

  1. Probate Is Inefficient – Probate is extremely time-consuming and inefficient. The minimum time to administer a single asset through probate court is 6 months. This is because creditors have 6 months to attach their interest on an asset through probate. Moreover, the average time to administer an estate in the state of Ohio is about one year.
  2. Probate Is Costly – Probate is expensive. According to the AARP, the many fees of probate (court, attorney, filing, etc.) add up to 5-10% of the value of your estate. For example, on the low (5%) end, if you have an estate with a house, retirement, and other assets totaling $500,000, your loved ones could lose at least $25,000 in probate costs.
  3. Probate Is Public – Since probate proceedings are part of a government court system, the entire process is public. This means that anyone can go online and search the docket for every probate matter filed today. In less time than it takes you to read this article, someone could determine the value of assets in your estate, beneficiaries, executors, property listed, debt, and more. Once they have this information, your loved ones are vulnerable to scams and hassles from creditors and scam artists.
  4. Probate Does Not Offer Asset Protection – The probate court serves two main functions. First, probate pays creditors all that is owed by the deceased. After debts are paid, the probate court administers its second function which is to pay beneficiaries an outright distribution of whatever is left. The court is impersonal, and cannot take into consideration important changes in relationships or financial challenges. Multiple factors including divorce, student loans, litigation, creditor issues, and/or spending issues can impact the distribution of your hard-earned money.
  5. Probate Can Cause Family Feuds – Disagreements about asset and property distribution are common. For example, a beneficiary may feel they have been short-changed and challenge the probate process. They might do this by challenging the validity of the will or the competency of the executor.

So, what can you do to avoid the above? Is a basic will a good form of estate planning? Does a will avoid probate or is there a better option?

The reality is that a basic will is your one-way ticket to probate court. With the inefficiency, cost, publicity, and weaknesses of probate, the following options are vital to protecting your loved ones.

Joint Ownership

Joint ownership is the most commonly employed method to avoid probate. Assets owned by more than one person result in the survivor taking ownership. Joint ownership examples include a joint bank account or joint home. This is significantly beneficial when avoiding probate for a residence because the transfer of assets is immediate and does not require a court-approved transfer.

The downside of joint ownership is that it does not offer asset protection. A trust must be established to deter creditors from attaching their interest in a residence or asset of a jointly held account after both parties have passed.

Beneficiary Designations

If you’ve ever engaged with a financial planner, you’ve probably filled out a beneficiary designation. These forms are very common with retirement accounts (such as a 401(k), 403(b), IRA, etc.), annuities, and other assets. Beneficiary designations are a great way to avoid probate and keep your estate private. The owner of these types of assets is required to denote primary and contingent beneficiaries in the event of death. Thus, these assets transfer directly and immediately to listed beneficiaries without the need for court.

The downside to beneficiary designations is that your assets are not protected against divorce, creditors, or litigation. For example, if your children inherit an IRA, but then get divorced, the ex-spouse may receive half of the retirement assets depending on how those assets are managed during the marriage. A trust would keep the inheritance in a ‘bloodline’ relationship to your kids and grandkids.

Transfer-on-Death (TOD)

A transfer-on-death works similar to a beneficiary designation. Assets which hold title, such as real estate, securities (stocks and bonds), vehicles and boats are registered to transfer immediately on death. This is done on the deed or title of each asset.

Payable-On-Death (POD)

Similar to beneficiary designations and transfer-on-death, PODs transfer assets without court intervention. You can name a beneficiary on assets with an account number, such as bank accounts, life insurance policies and CDs.

Family Trusts

The single best way to avoid probate while also providing asset protection is by creating a family trust.

A trust is a private legal document that allows you or an appointed trustee to manage the assets that are placed inside the trust for the benefit of trust beneficiaries. When a trust is properly drafted and funded, assets go from the owner’s taxable estate to the trust. Thus, when the owner dies, the assets in the trust are not in the owner’s estate and not subject to probate.

In addition to avoiding probate, if you are worried about a child getting divorced, concerned for a child with spending issues, or simply want to provide asset protection for your family, a family trust will accomplish all of the above.

Working With A Probate Attorney

Don’t Let the Big Bad Wolf Blow Your Plan Down!

This brief article makes obvious the importance of avoiding probate. But what other plans should you be concerned about? Is your estate plan made out of straw (a basic will), wood (beneficiary designations), or brick (family trust)? For more information on how to avoid probate, contact Dan A. Baron or Baron Law LLC by phone at 216-573-3723, or by emailing dan@baronlawcleveland.com.

If you are an executor currently navigating probate, consider consulting an attorney before executing your duties. An experienced probate attorney can help you prepare documents, collect assets, review debts, transfer titles, and ultimately save you time and money.

 

This blog is for educational purposes only; it is not intended to provide legal advice. If you’re planning for your estate and want to speak with an attorney, call 216-573-3723.

Baron Law

Advanced Directives – My Personal Experience When Planning for the Unexpected

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My Story

Like many of you reading this article, I never think a major medical disaster could happen to me or, if something did happen, that I would be competent enough to make decisions for myself. Well, as a ‘relatively young’ guy, this was not the case recently when I needed emergency surgery to prevent permanent paralysis.   Two years ago, I was practicing my golf swing on a late Thursday afternoon at Sleepy Hollow in Brecksville, Ohio.  I’m a terrible golfer and I wanted to ensure I wouldn’t embarrass myself the next day while playing with a client.  Near the end of my practice, I decided I wanted to see how hard I could hit the ball.  I hit the ball with maximum effort that ended up landing on the fairway outside of the nets.  During my swing I felt a ‘pop’ in my back and my leg went numb.  I decided to call it quits and go home to rest.

That night, while resting I leaned over to grab the TV remote.  Without warning I had excruciating pain suddenly occur in my back and my legs went limp.  I was on the floor unable to move or reach my phone. Luckily, my friend was visiting and he called EMS.   When EMS arrived, I was crying from the pain, unable to move my legs, laying on the floor.  I have never experienced anything more painful in my life. The paramedics gave me a shot of fentanyl for pain – it did nothing. Upon arriving at the hospital, the nurses gave me a shot of morphine – it did nothing. Then the doctor ordered a dilaudid.  After an hour of being on a combination of fentanyl, morphine, and dilaudid, I was finally relieved of pain and in addition, also relieved of my mental abilities.

After an MRI was performed, the doctor came to give me the news.  She said that I had a severe lateral herniated disc. The disc exploded and was piercing the nerves that control my legs.  I would need emergency surgery within the very immediate future, or I would have permanent paralysis in my right leg for life.  She explained that because the herniation was lateral, it required a more complicated approach.  It was one that she could handle, but she felt her colleague (who was on vacation) was more adept due to his experience. The doctor suggested that I wait three days, in severe pain and on multiple pain meds, to have her collegial surgeon perform the surgery. She needed to know what I wanted to do.   However, because of the effect the medications I was taking for pain, I did not have the mental competency to make this decision myself. Instead, those who I named in my advanced directives would need to make these decisions for me.

What are advance Directives?

Simply put, advance directives are legal documents that provide detailed instructions about who should oversee your medical treatment and what your end-of-life or life-sustaining wishes are. In the event you are unable to speak for yourself, like in my case of mental incapacity, the medical professionals can contact someone else who has authority to make those decisions for you. Though there are many advance directive documents out there, the three most common are Healthcare Powers of Attorney, HIPAA Authorization and a Living Will.

Healthcare Power of Attorney – A healthcare power of attorney allows you to appoint a trusted person to make all healthcare decisions in the event that you are unable to make them for yourself.

Living Will – A living will eases the burden on your healthcare POA to ‘pull the plug’ when you are in a permanent vegetative mental state.

HIPAA (Health Insurance Portability and Accountability Act) – Medical records are private and are covered under the HIPAA laws. You Healthcare POA must have the authority to obtain your medical records through a properly executed HIPAA authorization.

My Healthcare POA

By this time, I was admitted in the hospital and the surgeon needed an answer regarding when I wanted the surgery to take place.  The doctor asked to contact my healthcare POA. I said, no problem her name is Kathy and I will provide her number.  I reached for my phone and it was then I realized that I had forgotten it when EMS brought me in.  Like many of us, I did not memorize Kathy’s number so without my phone, I was stuck.  Additionally, since this was during the outbreak of COVID my friend who called EMS was not able to come into the hospital either.

The nurse taking care of me looked through my cart and noticed I already had my healthcare POA on file, naming Kathy as my Agent. I wasn’t thinking clearly so I hadn’t thought to ask the nurse to check.  It was then that I remembered, in a slight daze, that I practice what I preach.   Three years earlier I completed all of my advanced directives and made sure to upload them with all three major hospitals: Cleveland Clinic, University Hospital, and Metro.

The hospital called my Healthcare POA and she came to my rescue.  As a nurse herself, she knew exactly what medications I was on and how to interpret the medical situation.  Moreover, and critically important, she knew how to handle the insurance barriers that come with getting medical treatment.  Had I not completed my Healthcare POA, Living Will and HIPAA several years prior, I may have had a surgery from an inexperienced surgeon or worse yet, may have been paralyzed for life.  Additionally, had I not uploaded these precious documents with my local hospitals, I would not have had my healthcare agent’s phone number.

When I preach to clients about maintaining updated advanced directives I am preaching from experience.  I didn’t need them, until I needed them! Advanced directives are easy to obtain and require minimal effort to have them uploaded to local hospitals.  I implore you to have them drafted by an attorney or at the very least, complete them the next time you’re at your family care physician. For more information or to learn how Baron Law can help you complete your advanced directives, contact us at 216-573-3723.