Covid-19 Photo

COVID-19 and the Continuing Importance of Powers of Attorney

/in /by

Certainty in this uncertain time is peace of mind many families are finding themselves without. The Covid-19 pandemic is highlighting harsh realities of life all of us were aware of but chose to ignore. One such reality is the importance of comprehensive and up-to-date estate planning. Many parents, grandparents, established business owners, and seasoned professionals are all awaking everyday to the potential of expensive and long-term hospitalization with the chance of persisting and life-changing health consequences. One can’t fight Covid-19 directly, it isn’t a person or thing to combat with force or wit, however, mitigation and foresight are always available. Estate planning will allow you to proactively get your affairs in order and, worst case scenario, if you become infected, allow you to rapidly and intelligently respond in a way that meets you and your families unique needs. Whether you have no estate plan or are looking to update an existing plan, where should you start? Given the current health crisis, taking a look at your powers of attorney, or POAs, is a good place to start.

Power of Attorney

A comprehensive estate plan provides the instructions necessary for estate administration, via a will, while tax relief and flexibility with asset distribution can be accomplished via trusts. Critical issues and decisions during life, however, must be addressed separately. That is where your powers of attorney come into play. A power of attorney comes in many forms, but its primary purpose is to grant authority to one or more responsible parties to handle financial or health decisions of a person in the event of illness or other incapacity. Life, and its associated obligations and burdens, tend to continue regardless of one’s physical or mental health. As many families are finding out, the bills keep coming due regardless of COVID-19. Powers of attorney are protection that ensures affairs are handled and medical wishes are followed even if you are lacking capacity in mind or body.

In your estate plan you will want both a financial power of attorney and a healthcare power of attorney. Both are agency agreements that grant another individual the authority to make decisions, within a certain sphere of decisions whose terms you dictate, on your behalf. A financial power of attorney, as the name suggests, grants your agent the authority to make financial decisions for you. Managing investments, buying selling land or property, representing you in business negotiations, etc. Healthcare power of attorney works the same way but with healthcare decisions. If you are incapacitated or otherwise can’t decide for yourself, your agent will decide who your doctor is, what treatment you undergo, what medication should be administered, etc.

As always, the terms, powers, and limits for your agents are decided by you in the documents that appoint your agent. If you want to add limits on how long they are appointed, what issues they can or cannot decide, or when exactly their powers manifest, you can do so. Furthermore, you always possess the authority to dismiss them outright or appoint someone new.

Powers of attorney are important to have because spouses or family members will face difficulty and frustration gaining access to things like bank accounts and property that is in your name only. This can be especially damaging within the context of business or professional relations in which the “gears of industry” must keep moving. Regrettably, if an individual trusted to handle the business if something happens doesn’t possess the authority to so, significant or even fatal business consequences may result. The same goes for medical decisions, often treatment decisions must be made right there and then. Hesitation may mean permanent damage or death to you and if someone doesn’t have express authority to make those decisions, things get confusing, messy, and take a lot longer.

If you decide not to draft one or more powers of attorney and you end up incapacitated, then, in certain situations, a court is forced to appoint either a guardian or conservator and the family is effectively cut off from independently managing the relevant affairs of the incapacitated family member. Further, if a court is forced to action, the entire process will take longer, cost more, be public knowledge, and is immensely more complex than it otherwise should be. Having an experienced Ohio estate planning attorney draft the appropriate POAs can avoid a lot of headache and save a lot of money down the line.

Even with the uncertainly pandemics bring, certain estate planning questions always linger. Who will manage my finances and investments if I am sick or incapacitated? Who will pick what doctor treats me or if a risky but potentially lifesaving procedure should be performed? What if I am put on life sustaining medical support? In what situations and for how long will I remain on such support, if I want to be on it at all? These types of issues and questions also must be addressed and accounted for by your estate plan. That is why finding and working with experienced Cleveland estate planning attorneys are so critical. These types of decisions and potential consequences for your life and wellbeing are not things that should be done on the fly or with doctors and stressed out family members demanding a decision. Unfortunately, with COVID-19 cases becoming more and more prevalent with each passing day, the necessity of proper POAs is crystal clear and those without these documents are scrambling to find estate planning attorneys who are open and still taking clients. If your estate planning documents, especially POAs are out of date or incomplete, contact a local estate planning attorney right away. Courthouses and government agencies are closing daily, and you don’t want to find yourself without the stability of critical legal documents during this most unstable time.

COVID-19, for good or ill, has and will continue to change how we live, work, and survive. Fortunately, one aspect of life that has largely gone untouched is estate planning. Estate planning was smart to do before Covid-19 and it still is. Northeast Ohio has felt the touch of this disease like every county in the world has. Cleveland estate planning attorneys are working around the clock to meet the historic demand for quick and immediate estate planning and are currently utilizing more teleconferencing and remote legal services than ever before to make their existing and new clients comfortable and secure. Social distancing and stay-at-home orders are all proactive protection measures that the majority of Americans are following, even if they cause financial hardship or social strain. Estate planning also represents a proactive protection measure, however, it seldom causes any financial or social pain, it actually prevents them. As such, it’s strange that 50% of people don’t even have a simple will. Considering the ongoing crisis, make sure you and your family are in the 50% that protects, not the 50% leaving everything to chance.

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

/in /by

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.  

Advanced Directives and Your Estate Planning

/in /by

What are Advanced Directives?

Advance directives are a set of documents where you are appointing another individual to make medical decisions on your behalf. Typically, we have in these documents a living will, HIPPA authorization, and then health care power of attorney.

How Are These Documents Used?

Living Will- A living, will not to be confused with the last will and testament, is used where you are telling the world that you do not want to be kept on life support in the event that you have little to no brain activity. Instead of leaving that decision on your loved ones, you’re making the decision for yourself that you don’t want to be kept artificially alive.

Healthcare Power of Attorney- The agent of your healthcare power of attorney can make decisions about your health, such as a risky surgery.

HIPPA Authorization- You are giving your loved ones or your agent the ability to obtain medical records as well as something as simple as attending a doctor’s meeting.

How Can You Obtain These Documents?

There are a few ways that you can obtain these documents. One way is through the Cleveland Clinic or Metro Health; any big hospital has standard forms that you can complete.

However, we recommend you discuss these options with an attorney so you can discuss what you want and make sure that is carried out in the right manner.

If you are unsure if you have these advanced directives in place, if you know you need these documents, or if you are putting together some estate planning, this is a really important step. Contact us today to get a free consultation or visit us online to learn more.

Estate Planning Attorney Baron Law

D.I.Y. Estate Planning: Saving a Dollar Now, Lose a Thousand Later

/in /by

D.I.Y. Estate Planning:  Legal Zoom, Rocket Lawyer, and Youtube has granted an unprecedented amount of legal information to the public. Online forums, blogs, and television allow people to converse at any time and anywhere about pretty much anything. Nowadays ordinary people can undertake their own legal research, legal drafting, and, if necessary, personal representation.  Just because you can do something, however, doesn’t mean you should. Google searches and online videos are not a substitute for the advice and guidance of an experienced Ohio attorney and many people put themselves in a bad position after they convince themselves that an attorney is simply not necessary.

At the end of the day, do-it-yourself legal services is all about saving money and time. People don’t want to spend hundreds if not thousands of dollars on legal services and spend the time conversing and meeting with an attorney. Online legal materials, at least the cheap or free ones, are great at providing a false sense of security, that everything is straight-forward, do X and you’ll get Y.

Law firms hear the same problems and fix the same issues from self-representation every day. People who, after a quick google search, start drafting their own wills, LLCs, and contracts. People who put their faith in a disinterested corporation and a handful of document templates. Legal Zoom and Rocket Lawyer are not law firms and they do not represent you or your interests, they explicitly say so on their websites. They cannot review answers for legal sufficiency or check your information or drafting. An experienced Cleveland estate planning attorney, however, properly retained and with your best interests in mind will accomplish everything you expect, and often more.

Hired attorneys are under legal and professional obligations to do the best job possible. They don’t want to get sued for malpractice, they want you to pay your legal bill, and they want you to refer your friends and family. A particular client is concerned with a tree, while the attorney pays attention to the forest. A proper attorney will draft documents correctly with established legal conventions in mind, legalese isn’t something done for attorneys own benefit, it has a definitive and beneficial purpose. A lot of trouble is caused by D.I.Y. legal drafters and estate planners due to typos or the inclusion of legalese for legalese sake. Further, a knowledge of federal, state, and local law along with local procedure and jurisdictional customs is necessary to obtain a proper outcome with minimal cost and stress. At the end of the day, the legal system is made up of people, knowing who to talk to and when is a large reason why attorneys are retained.

We live in a brave new world, never before has so much legal information been so readily accessible to so many. In the same vein, never before has our lives been so complex and estate planning matches this. Attorneys do more than drafting and research, they advise you on the best ways to protect your family and assets in light of an ever-changing legal landscape and your own personal life and dreams. Often do-it-yourself legal services are simply not worth the risk and lull you into a false sense of security. Ultimately, you need your estate planning documents to do what you expect them to. As such, call of local Ohio estate planning attorney and make sure yours are done right.

Guardianship and Your Estate Planning

/in /by

What is Guardianship?

A guardianship is where a person has the legal authority to care for another.

Are There Different Types of Guardianships?

Minor Children-The most common type of guardianship is with minors. If something happens to children under the age of 18, then you need someone to act as a parent. A misconception is that if you appoint someone as a godparent over your child, this does not give that person legal authority over your child.

Elderly- As we get older, we may need someone who can watch after us and make sure we are getting what we need and doing what we need to as well.

Adults with Special Needs- Guardianship is also needed for adults with special needs so that they have someone to watch over them.

How do I Establish Guardianship?

With planning, there are three ways to appoint someone as a legal guardian, through:

  • Power of Attorney
  • Will
  • Trust

Without planning, you have to go through a court order which is far more expensive and gives you less power.

When Should You Establish Guardianship?

Anyone with children should immediately establish guardianship. The thing is, you never know what is going to happen, and that is why it is best to plan for the future just in case. If it is on your mind, do it now.

If you need to establish guardianship over your children, an elderly loved one, or a loved one with special needs; you can also learn more by visiting our website or by contacting us at Baron Law today.

power of attorney

Financial Power of Attorney | Baron Law | Cleveland, Ohio

/in /by

Financial power attorney (POA) is a set of documents that you’re giving your agent the ability to act and make financial decisions on your behalf. They’re most commonly used in an elder law scenario. They can also be used in a crisis scenario, if you are overseas, a business owner, and you need to elect someone to make those decisions on your behalf.

Are There Different Types of Powers of Attorneys?

General and Limited:

A general power of attorney gives your agent the ability to govern any part of your estate plan. Whereas, a limited power of attorney is restricted from having control over certain aspects of your estate that you deem fit.

Springing and Current:

A springing power of attorney only allows your agent to act when a certain offense occurs. Whereas, a current power of attorney can act at any time. We recommend that clients have a current power of attorney because it can be difficult to really point out a point time when the springing power returning comes into effect.

How Do I Know if My Financial POA is Up-To-Date?

Financial power of attorney laws changed in 2012, so if you have not updated your power of attorney since then, you’ll want to get it updated as soon as possible.

In addition, you’ll want to look for hot powers in your financial power of attorney, which are:

  • Gifting Powers
  • Powers Over Beneficiary designations
  • Powers Over Retirement Accounts
  • Ability to Make Trusts
  • Safety Deposit Boxes

These are the hot powers, and if you don’t have those, then financial institutions may not warrant your financial power of attorney. It’s really important that you look for these in your document.

Estate planning can seem like a big hassle because they are so many levels which require close detail. If you want to make sure your financial POA is up-to-date and can really act on your behalf, contact us at Baron Law today.

Baron Law Estate Planning Attorney

Preventing Children From Blowing Through Their Inheritance

/in /by

Blood is thicker than water and we get to pick our friends, not our families. There are a lot of pithy and whimsical sayings that have been passed down through the generations that attempt to explain and characterize the complex and often contradictory nature of family relations. When it comes to deciding who gets the money and stuff after a family member dies, often, tragically, the baser natures of our family members are on full display.

Trusts are an ubiquitous estate planning tool that a lot of people have heard about but not a lot of people know the details of how they work. Trusts afford privacy for trust assets, control over how, when, and if trust assets are distributed, and potential protection against creditors, litigants, divorce, and greedy family members. All these benefits associated with trusts sound great but how exactly is all this accomplished? Once again, consulting with an experienced Cleveland estate planning attorney is always the quickest and best way to get your estate planning questions answered.

  • What are spendthrift trusts/provisions?

A common concern for estate planners is, how do I prevent my descendants from wasting their inheritance? A quick look at any one of the innumerable stories of multi-million dollar lottery winners who end up broke and destitute a few years later illustrates how most who come into vast sums of money quickly tend to spend that money unwisely. Now, if you decide using a trust is right for you and your family, within the structure of your trust, you can write in terms that will lower the opportunities for named beneficiaries to squander their trust distributions. Though not %100 foolproof, spendthrift trusts and spendthrift provisions are very common tools for trust makers to use to protect their trust and protect trust beneficiaries from themselves.

In Ohio a spendthrift trust is a trust that imposes a restraint on the voluntary and involuntary transfer of the beneficiary’s interest in trust assets assigned to that particular beneficiary.

Under Ohio law, specifically the Ohio Trust Code, spendthrift provisions are terms within a trust which restrain the transfer of a trust beneficiary’s interest. Spendthrift provisions block both voluntary transfer of trust assets stemming from the beneficiary action and volition and involuntary transfer of trust assets, usually from creditors or assignees whose claims are usually traceable back to a named trust beneficiary.  See O.R.C. § 5801.01 (T).  As a general rule, a spendthrift provision is valid under the UTC only if it restrains both voluntary and involuntary transfer.

For illustration purposes, here is an example of a bare bones spendthrift provision. Note, an experienced estate planning attorney would not solely rely on the follow language to protect you.

“A. Spendthrift Limits. No interest in a trust under this instrument shall be subject to the beneficiary’s liabilities or creditor claims  or to assignment or anticipation.”

How do they work?

Looking at the legal definition for spendthrift trusts and spendthrift provisions, it may be difficult to understand how these operate and, consequently, how they may be beneficial. In a nut shell, if a trust is or has a spendthrift provision, in most circumstances, trust assets are not subject to enforcement of a judgment until it is distributed to the beneficiary. This means that a trust beneficiary cannot use trust property that is assigned to them as collateral for a loan or to pay off a civil judgment.

 Thus, spendthrifts can prevent creditors, litigants, or the beneficiaries themselves from reaching into the trust to take assets contrary to the terms of the trust. This “reaching in” usually stems from beneficiary misconduct. Note, however, in some circumstances, spendthrift can be circumvented. Namely, in the case of certain child support obligations and claims of the State of Ohio or the United States. Whether spendthrifts can be circumvented depends highly on the nature of the claim against the trust and the nature and language of the trust. An experienced Ohio estate planning attorney is in the best position to determine if and when a particular creditor can reach past a spendthrift and get at trust assets.

Why do I need them?

Put bluntly, no one likes having their money or property taken from them. Or in this instance, by creditors, litigants, or claimants of beneficiaries uncontemplated by the language of the trust. A primary reason for any grantor in making a trust is to ensure control of trust assets. So, if unknown third parties reach into a trust due to a beneficiary doing something unwise, it goes contrary to express wishes of the grantor and all the effort that went into making a trust.

Further, premature distributions of trust assets can have serious consequences for trust management. The “internal finances” of a trust are often based upon assumptions regarding the amount of money/assets within trust accounts and predetermined distribution times. So, if money/assets are taken early this can lead to premature exhaustion of trust funds which may affect the whether future trust distributions can occur at all, in that trustees can’t distribute what isn’t there. Further, premature distribution may leave trustees with insufficient assets to pay trust taxes or administrative costs. There is also the unfairness of premature distribution, why should beneficiaries who followed the terms of the trust get their distributions later or in a lesser amount than the beneficiary who has creditors, civil judgments, or owes back child support.

The importance of comprehensive and effective drafting a trust terms cannot be understated. Often it is what is left out of trust documents which end up hurting grantors and trust beneficiaries. Spendthrift trusts and spendthrift provisions can come in a variety of forms to match the needs and desires of a particular grantor. The utility of spendthrifts, however, can only be enjoyed by grantors if a competent Ohio estate planning attorney is used in the formulation and drafting of a trust. Never underestimate the importance of matching good legal counsel with comprehensive estate planning.

Helping You and Your Loved Ones Plan for the Future.

Special Needs Self Settled Trusts

The Three Flavors of Special Needs Trusts: #3 Self-Settled Trusts

/in , , /by

The federal “Special Needs Trust Fairness Act,” enacted in December of 2016, changed the law to allow individuals with special needs to create their own special needs trust. Ohio law, in response, has changed to coincide with this recent change. Currently, a mentally or physically disabled person may create a self-settled trust to hold their own assets and avoid them being counted for Medicaid or other public assistance program eligibility. Usually the need arises to make this type of trust when a person with special needs receives a legal settlement or inheritance while already eligible and receiving government assistance.

In a nutshell, “self-settled” special needs trusts are simply trusts established by the disabled beneficiary with the beneficiary’s own money and assets.  The devil, however, is in the details. Self-settled special needs trusts are, by regulatory requirements, only available to those persons who are 1) disabled and 2) are under 65 years of age. Further, the trust must be appropriately drafted to include language that mandates that the cost of Medicaid services actually paid on the individual’s behalf will be paid back to Ohio at the individual’s death. Thus, in an indirect way, the Department of Medicaid and other government program will get their money and be reimbursed, at the point of death, but the individual reliant on government assistance can still maintain eligibility. Therefore, both parties win. Note, however, the use and drafting of self-settled special needs trusts is nuanced. For example, with these trusts once a beneficiary reaches 65, the trust can no longer be funded with new assets or money. Yes, what is already in the trust will remain protected, but flexibility and control is lesser than with other types of special needs trusts. As such, always consult an experienced Cleveland area estate planning attorney when deciding which type of special needs trusts is appropriate for you and your family.

A self-settled special needs trusts are often referred to as a “Medicaid payback trust.” Both names refer to the same type of trust, however, the later name focuses on the primary characteristic, and requirement, of a self-settled special needs trust, in that any Medicaid resources or services received by the beneficiary will be paid back from the assets housed within the trust. A partial corollary is a Miller trust. A Miller trust houses income for those receiving nursing home care that would otherwise put them over the income thresholds for the Medicaid income cap. The income is kept in trust and used to pay for care, but relevant here, names the State of Ohio as a beneficiary under the trust. Thus, the State of Ohio can recover the total amount of Medicaid payments made to an individual after death.

Self-settled special needs trusts are different from Miller trusts in that they allow for a much greater breath of resources allowed to be placed in trust and does not set the State of Ohio as a direct beneficiary under the trust. Naming a person or entity as a trust beneficiary grants them certain rights and privileges which, in certain circumstances, can lead to headaches and issues for the special needs person and their families.

Often self-settled special needs trusts are estate planning instruments of last resort. Usually within the context of an unexpected windfall going to a person with special needs. Going the self-settled route also places administrative labor and costs of the trust on the special needs person. Further the requirements of specific drafting to be legally operative under Ohio law is usually something laypersons are ill-equipped to do themselves. As such, always consult an experienced Cleveland area estate planning attorney when deciding which type of special needs trust is good for you and your family. The stakes are too high to do things ill-informed.

Helping You and Your Loved Ones Plan for the Future

Special Needs Trust #2 photo

The Three Flavors of Special Needs Trusts: #2 Pooled Trusts

/in , , /by

Baron Law LLC, Cleveland, Ohio, offers information for you to reflect upon while you are setting out looking for an estate planning attorney to help protect as much of your assets as you can. For more comprehensive information contact Baron Law Cleveland to draft your comprehensive estate plan to endeavor to keep more of your assets for your heirs and not hand them over to the government by way of taxes.

In order for those with special needs to qualify for government assistance programs such as Social Security Income and Medicaid, they must meet health, income, and asset thresholds. In other words, at least on paper, potential recipients must be quite poor to receive benefits. As such, just like to initially receive benefits, if special needs person is already receiving these benefits they must maintain the established thresholds of assets and income, or lack thereof. So, an inheritance, receiving an accident or medical malpractice settlement, or merely amassing too much money in an account can kick these people off of much needed benefits due to violating the standards set down by managing government entities and departments. In the hopes of preventing this outcome proactively, many people turn to special needs trusts.

Special Needs Trusts: Revisited

A special needs trust allows a disabled person to, theoretically, shelter an unlimited amount of assets for their needs without being disqualified from government benefits.  As hinted to above, this is because the assets held in a special needs trust properly drafted by experienced Cleveland attorneys are not counted as individual resources for purposes of qualifying for benefits.  On paper, at least in the eyes of the government and taxman, the beneficiaries of special needs trusts meet their asset and income thresholds. As a consequence, those special needs persons lucky enough to have a special needs trusts have access to more money, which can be spent on comforts, necessities, housing, and much needed medical care. Though we in this country are lucky to have government assistance programs available to us, anyone with a loved one solely dependent on them will tell you it’s certainly not enough. A properly drafted special needs trust will provide extra care and life satisfaction for disabled loved ones regardless of whether supporting family members are around for many years or pass away suddenly.

Pooled Special Needs Trusts

As mentioned in previous blogs, there are many “flavors” of special needs trusts. One such type is a “pooled” special needs trust. The focal point with this trust is maximizing potential gains from money funded into the trust, minimizing administrative costs, and delegating trust management to experienced personnel. In a nutshell, pooled trusts are a method to provide benefits of a special needs trusts without having to do the administrative legwork yourself.

As a rule, pooled trusts are required to be run by non-profit companies or organizations. The company or organization running the pooled trust drafts a master trust agreement that dictates the terms of the trust and the relationship between the trust and all participants.

In almost all cases, the pooled trust is run by a professional administrator. After establishment of the trust, money is transferred into the pooled trust to fund a particular individual’s stake in the trust. This single source of funding is then pooled with other people’s money to make one big pot, hence the name pooled trust. This pot is then controlled and invested, usually by an investment manager, similar to the way a hedge fund or other investment group operates.

The major takeaway is the “pooled” aspect of this particular trust. In theory, because there are many sources of funding brought together and utilized tactically, a pooled trust can make more stable investments and provide additional management services that other types of special needs trust cannot. Again, this increased investment power and potential returns coupled with lowered administrative costs, because it is borne by a large group instead of the individual and also an individual trustee does not need to be vetted and appointed, is also with the added benefit of the special needs beneficiary still being able to receive government benefits.

Unique Issues with Pooled Special Needs Trusts

The most obvious potential issue with pooled trusts is control, or lack thereof for individual participants. With a pooled trust, the trust assets are managed by people selected by the non-profit organization and not by anyone associated with an individual participant. This, in turn, means unassociated individuals and trust terms dictate how investments proceed and when disbursements occur, pretty much in a take it or leave it style. Once money is surrendered and placed into the pooled trust, individual participants how no say over how it is spent or when it will be distributed.  Additionally, it is a little known and little advertised fact that after the special needs beneficiary passes, some or all of their particular trust account will be kept to help with continued funding for the pooled trust. As always read the fine print and be completely sure you know what you’re signing up for.

With pooled trusts you make undertake a pro’s vs. con’s analysis, lack of control versus potential gains that might be indispensable in providing of critical healthcare costs for those with special needs. Consult an experienced Cleveland estate planning attorney who is familiar with drafting and administrating special needs trusts in order to find out potential options and they best course to take. Further, before signing on the dotted line to participate in any pooled trust, have an experienced Ohio estate planning attorney review the master trust agreement. Often these documents are very massive and have many hidden terms that can have profound impacts on your and your loved ones with special needs.

Helping You and Your Loved Ones Plan for the Future

Special Needs Trusts

The Three Flavors of Special Needs Trusts: #1 Third-Party Trusts

/in , , /by

Estate Planning law firm Baron Law Cleveland offers the following part 1 of a three part series of explaining the difference trusts available for those who have loved ones with Special Needs.  Dan Baron of Baron Law can advise what is best trust for your situation as the trusts are as individual as your loved one.

According to recent statistics for the National Organization on Disability, nearly 1/5 of all Americans, almost 54 million, have a physical, sensory, or intellectual disability. Every one of those 54 million have parents, siblings, family members, and loved ones who want to ensure they are comfortable and provided for. As with many things with special needs persons, the solution for providing for them isn’t straightforward or simple. This is where special needs trusts often play a pivotal role in providing support and estate planning peace of mind.

Special Needs Trusts: A Primer

Special Needs Trusts, as their name suggests, are trusts. As trusts, they hold the common characteristics and features shared by all trusts. A trust, to put it simply, is a private agreement that allows a third party, a trustee, to manage the assets that are placed inside the trust for the benefit of trust beneficiaries. There are innumerable types of trusts, each with own its respective legal conventions and purposes. A critical aspect of trusts is that the assets housed within them usually aren’t counted as a part of the trust creator’s taxable estate. Thus, when the owner of the trust creates the trust and properly funds it, the assets go from the owner’s taxable estate to the trust. Afterwards, when the owner dies, the assets are not in the owner’s estate and subject to probate.

The distinguishing aspect and purpose of special needs trusts, sometimes referred as supplemental needs trusts, is that resources placed within these trusts can be managed for the benefit of a person with special needs but still allow them to qualify for public benefits like supplemental security income and Medicaid. This allows grantors, those who create the trust, usually in this instance parents of someone with special needs, to provide much need stable and monetary support while still allowing often indispensable social assistance programs for their children, even long after the parents pass. Third-party trusts seek to supplement income from assistance programs not to replace it.

Third-Party Special Needs Trusts

In general, there are three types of special needs trusts: Third-party trusts, self-settled trusts, and pooled trusts. Of focus here is third-party special needs trusts. The name denotes the defining characteristic of this trust, that a third-party set up a trust and funded the trust. This is also its most critical aspect because the funds and/or assets in the trust never belonged to the beneficiary with special needs, the government is not entailed to reimbursement for Medicaid payments made to the beneficiary nor are these assets taken into account when calculatng either initial or continued eligibility for government assistance programs for the special needs person.

These trusts are usually set up as a part of a comprehensive estate plan that initially provides a place to house gifts given by family members during their life to someone with special needs and later to also house inheritance from these same family members when they pass. Third-party special needs trusts are often denoted as beneficiaries on life insurance polices or certain retirements accounts. Further, these trusts can also own real estate or investments in the name of the trust but for the ultimate benefit of the person with special needs.

Advantages of Third-Party Special Needs Trusts

A big advantage of third-party special needs trusts is that, while the grantor is living, funds in the trust usually generate income tax for the grantor, not for the special needs beneficiary. This shift in taxation is dependent on proper drafting which is why experienced counsel is always recommended with special needs trusts. This tax shift avoids the hassle and stress of having to file income tax returns for an otherwise non-taxable special needs beneficiary and also having to explain the income to the Social Security Administration or other interested government entity.

Additionally, because it a trust, ultimately what happens after the special needs beneficiary is controlled by the grantor, you. Thus, the grantor always retains control and upon the special needs beneficiary’s death, the assets in the trust pass according to the grantor’s express wishes, even longer after death, and usually to the grantor’s surviving family member or other charitable institutions. This means the special needs person is always provided for, and far-above those people solely dependent on government assistance, and the money, at the end, will continue to do good for either your family or the world at large.

Helping You and Your Loved Ones Plan for the Future