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Estate Planning Solution of the Week: Health Care Proxy

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Estate Planning Solution of the Week:  Health Care Proxy

What is a Health Care proxy?  How does that differ from a health care agent?  And what is the distinction between a health care proxy and a medical power of attorney?

The quickest answer is that all three terms are used to refer to someone who has the legal ability to make health care decisions on behalf of another.  However, the law varies by state as to what such a health care agent is called, what legal documents are needed, and what power is granted to that agent.

In Ohio, the term is “attorney-in-fact.”  In order to have someone make medical decisions on your behalf, you would name this person in a Durable Power of Attorney for Health Care.  Ohio does not have a standardized form to establish a power of attorney for health care.  However, there are specific requirements for a valid Ohio Health Care Power of Attorney:

  1. Your designation of an agent*
  2. Your designation of how your agent may act on your behalf
  3. Your signature and date
  4. Signature and date of two witnesses*

*Specific regulations exist as to who you may designate as your agent and who can serve as witnesses.  An attorney from Baron Law can give you the current specific requirements for the state of Ohio.

While Ohio does not have a standardized form that is required, the Ohio State Bar Association has developed forms together with several medical associations.  LeadingAge Ohio has a copy of this form available on their website: http://www.midwestcarealliance.org/aws/LAO/pt/sp/advance_directives”  You may also request a hard copy of the form on their website.

Baron Law is a firm that serves the northeast Ohio area.  For more information, or to begin estate planning for yourself or your loved ones, please contact us at 216.573.3723 or dan@baronlawcleveland.com.  State laws are specific and subject to change.  Schedule your consultation with a lawyer today to ensure that you and your loved ones are protected.

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Changes in Ohio Power of Attorney Laws

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Changes in Ohio Power of Attorney Laws

If you’re an Ohio resident concerned with the estate plan or medical care of a loved one, you should be familiar with Ohio’s laws regarding power of attorney.  Cleveland, Ohio estate planning attorney Dan A. Baron offers the following:

What is a financial power of attorney?

A financial power of attorney (POA) is a legal document an individual (the “principal”) can use to appoint someone (the “agent”) to act on his or her behalf.  This authority can be used for financial, business, and health matters.   Most often, this authority is used when an individual becomes unable to handle his or her own affairs.  However, a POA can be used for other matters such as taking care of business matters.  A principal can name one agent, or two or more co-agents, each of whom can act alone, unless the POA states otherwise.  The POA might allow for each agent to act independently, or as a group.

Changes in Ohio law

Effective March 22, 2012, Ohio adopted new laws regarding power of attorneys.   Ohio’s Uniform Power of Attorney Act, or UPOAA, focuses on preventing financial elder abuse.  The law now includes a statutory form with language designed to help prevent agents from abusing their power.  Put simply, the law now demands POA’s to be more specific.  For example, third parties such as a financial institution are not required to honor a general POA.  Now, the law asks that a POA includes specifically which types of assets and accounts the agent is allowed to control.

Ohio provides a statutory form that includes language designed to help prevent agents from abusing their power.  This form can be found in Ohio Revised Code 1337.60.   The form lists actions that an agent may or may not take and includes a section called “Important Information for Agent.”   The principal can simply check the box of the powers he or she wishes to designate.   It’s important to consult with an attorney when implementing one of these forms into your estate plan.

A power of attorney created before March 22, 2012 will still be valid; however, as an attorney to review it in light of the current law and consider using the 2012 statutory POA form.   In sum, UPOAA prohibits agents from performing certain acts unless the POA specifically authorizes them.  Because financial POA documents give significant powers to another person, they should be granted only after careful consideration.

To learn more about drafting a power of attorney, contact the law office of Baron Law LLC.  You will speak directly with Cleveland, Ohio attorney, Dan Baron.  Call today at 216-573-3723 to learn more about how Baron Law can help create your estate plan and power of attorney.

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Springing and Durable Power of Attorney – What’s the Difference?

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Springing and Durable Power of Attorney – What’s the Difference?

When planning for retirement and your estate plan, it’s important to understand how your power of attorney works.  Generally, there are two kinds: springing and durable power of attorney.  A springing power of attorney takes affect if you become incapacitated.  In comparison, a durable power of attorney becomes effective as soon as you sign the document, and continues to be effective if you are incapacitated.

Having control with a power of attorney is a big deal.  The person holding this power may have the ability to control your financial assets, medical decision, and more.  For example, a giving someone financial power of attorney powers gives them the right to make financial decisions on your behalf.  This person might trade stocks, cash in annuities, or transfer assets.  If this person has durable power of attorney, they can make these decisions even if you are not incapacitated.   State laws differ on the particulars of power of attorney, and some financial institutions may require their own versions.

With a springing power of attorney, it’s important to clarify exactly what triggers someone taking over your abilities to make decisions.  Typically, it’s when the principal becomes disabled or mentally incompetent.  However, it could be used in a variety of situations.  For example, someone in the military might create a springing power of attorney form to be prepared for the possibility of being deployed overseas or disabled, which would give a relative powers to handle financial affairs in these specific situations only.

Who determines when someone is mentally incompetent or incapacitated?  This question varies state to state.  However, in general there is usually a formal procedure that your attorney can create.  It’s smart to note in your legal document exactly what the principal considers “incapacitated” to mean.  Often times, people who create a power of attorney form include language that requires a doctor’s certification or mental incompetence or incapacitation.

For more information regarding power of attorney and other estate planning methods, contact Cleveland estate planning attorney Dan Baron at Baron Law LLC.  Baron Law is a Cleveland, Ohio area law firm practicing in estate planning, business, and family law.  Contact Dan Baron today for a free consultation at 216-573-3723.

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Estate Planning – Trends Following the American Taxpayer Relief Act.

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Estate Planning – Trends Following the American Taxpayer Relief Act.

A recent survey concluded that sixty percent of Americans are afraid they will outlive their retirement.   Thus, there has been a moving trend that people are more concerned about wealth preservation compared to wealth transfer.  For example, a fifty year-old man in the top income quintile in 1980 could expect to live 31.7 more years.  A fifty year old man in the top income quintile in 2010 could expect to live 38.8 more years.  At $75,000 per-year of spending, increased longevity creates an additional $532,500 in cost. Thus, estate planning methods have changed and the American Taxpayer Relief Act has adopted new laws conforming to the wealth preservation vision.

Up until recently, many estate planning attorneys would urge clients to include a trust in their estate planning package.  A trust is a good means to avoid creditors and shield assets from other liabilities.  However, because of the recent changes in the American Taxpayer Relief Act (“ATRA”), trusts are most often not necessary – even for the wealthy.   Pre-ATRA, an estate planning attorney would set up a trust with an amount equal to the deceased’s remaining exemption.  This is often called a “bypass trust,” or B or credit shelter trust.  Assets would often not be included in the spouse’s estate.  The balance would go to the spouse outright or to marital deduction (A) trust, eliminating tax after the first spouse dies.  In the end, these assets (plus any appreciation) will be included in the spouse’s estate.

Post-ATRA no changes the landscape for estate planning by offering several wealth preservation concepts.  First, the concept of “portability” means that the surviving spouse can add to his or her own exemption whatever amount of exemption the deceased had not used during their lifetime.  Thus, a bypass trust is not needed to avoid wasting the exemption.  However, the Deceased Spousal Unused Exemption Amount (DSUUEA) is not indexed for inflation.  In addition, ATRA now permanently sets the estate, gift, and generation-skipping transfer (GST) tax exemptions at $5 million and indexes that amount for inflation.  Therefore, in 2016 a married couple could avoid the gift tax for any amount less than $10,900,000.00 ($5.4 million x 2 for married couples).

People are living longer and the ATRA has adjusted for that.  For more information, contact Cleveland, Ohio estate planning attorney Dan Baron.  Call Baron Law LLC today.  You will speak directly with an attorney who will help you with your estate planning and tax planning needs.  Baron Law LLC is a Cleveland, Ohio law firm located in Independence, Ohio.

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Debt after Death – What Every Family Member Should Know

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Cleveland, Ohio Probate Attorney
Debt after Death – What Every Family Member Should Know

You come home one day to find a letter from a credit card company demanding $5,000 for the debt of your late husband. The credit card company demands payment and threatens to take legal action against you if the debt is not paid. Don’t be afraid of these bullies. Here’s what you need to know.

First, the credit card company is correct in their efforts to collect a debt from the estate. Debts to not die with the deceased but instead go through the estate. However, creditors cannot hold you personally liable. Instead, in most cases, creditors may only assert claims against the estate. If the debts exceed the value of the estate, then the creditors may not come after family members.

Of course, there are exceptions. When dealing with the debt of a deceased person it’s important to consider whether you’re a co-signer on a note. Each account holder can be held legally responsible for an outstanding balance. Thus, if you co-signed for a mortgage or a car loan, you are still personally responsible for the debt. Using the example above, let’s say that you never used the credit card and all the purchases were your late husband’s. Unfortunately, if you co-signed the credit card application then you’re still liable for the debts. This rule only applies to co-signers, not authorized users.

It is the role of the executor of the estate to pay the deceased person’s outstanding bills. It is recommended that executors contact a qualified probate attorney to understand the probate laws and processes. If you are not the executor of the estate but are receiving phone calls and/or letters asking you to pay, you should refer the creditor to the executor. If they are persistent, send a certified letter stating that the person is deceased and you are not responsible for paying the debt. Don’t let yourself be intimidated into paying a debt you are not responsible for. If the bill collector is making claims you don’t believe are true, such as saying you are a co-signer on the account, ask for proof. Let them know you are aware of your rights and will report them if they do not stop calling you. Harassing bill collectors can be reported to the Federal Trade Commission (877-382-4357) and state attorney general’s office.

In sum, heirs and loved ones are not responsible for a decedent’s debts. If the person incurred the debt in his name alone, creditors either receive payment through the probate process or they don’t receive payment at all. For more information regarding probate and estate planning contact Cleveland, Ohio probate attorney Dan Baron. Call today for a free consultation at 216-573-3723. Baron Law LLC is your Cleveland, Ohio estate planning law firm.

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Can Lawyers Draft Wills for Out-of-State Residents?

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Cleveland, Ohio Estate Planning Attorney

Perhaps for most estate planning attorneys, the relationships built among clients can last for decades.  Because of the duration of the relationship, it’s not unusual for an estate planning attorney to receive requests for legal assistance from clients who have changed their residence to a state in which the attorney is not licensed.   As a Cleveland, Ohio attorney, I’m sometimes asked to prepare estate planning documents for out-of-state residents.   Recently, a Cleveland, Ohio friend asked if I would draft a will and power of attorney for his parents who reside in New York.  Thus, several questions arose: Can a Cleveland, Ohio attorney draft a will for an out-of-state resident?   At what point does an attorney’s assistance cross the line into unauthorized practice of law? Does the client’s change in residence to a state in which the attorney is not licensed require the termination of professional relationship or can it continue in some modified form?

These questions lead to what any knowledge seeker would do: a google search!  Not surprisingly, the google search did not provide a concrete answer – and it shouldn’t – so I proposed these questions to several Cleveland attorneys who have been doing estate planning for over 20 years.   One attorney said, “Sure, you can draft a will for a non-resident, but just don’t sign your name to it.”  Another attorney emphatically said, “No, drafting a will for a non-Ohio resident would be a violation of the Ohio Model Rules of Professional Conduct which prohibits the unauthorized practice of law.”   After hearing several conflicting opinions on the matter, I soon realized that this is a common issue, and deciding one way or the other can mean the difference between business as usual, or disbarment.

For the Ohio family estate planner, the main question is whether or not the family estate planner’s practice constitutes the unauthorized practice of law in another state.  The test for what constitutes unauthorized practice of law varies from jurisdiction to jurisdiction but most states have adopted model rule 5.5.  Unfortunately, no jurisdiction provides a comprehensive definition of practice of law.  As a result, the definition of the term “practice of law” is left to the courts to determine.   At this point, the federal courts have refused to hold that a state’s prohibition on unauthorized practice of law should apply only to persons who apply the state’s law and not to those who provide legal advice solely concerning federal law. See 1 Family Estate Planning Guide § 19:19 (4th ed.) See also Spanos v. Skouras Theatres Corp., 364 F.2d 161 (2d Cir. 1966).  A clear example of this involves an attorney who advertises or implies that he is licensed to practice in that state.  See The Florida Bar v. Kaiser, 397 So. 2d 1132 (Fla. 1981).  But most attorneys know enough not to promote their practice in a state they aren’t licensed to practice law.

In many instances, it’s easy to discern when an attorney is breaching rule 5.5.   In fact, courts have provided several examples of what constitutes the “practice of law” for estate planning lawyers not licensed in the state.  For example, giving legal advice concerning the application, preparation, advisability, or quality of any legal instrument or document or forms thereof in connection with the gift of property is the practice of law.  See Florida Bar re Advisory Opinion-Non-lawyer Preparation of Living Trusts, 613 So. 2d 426 (Fla., 1993).   In another case, an individual gave a client legal advice and practiced law by aiding the client in designating probate and non-probate assets, selecting a form of trust, designating various beneficiaries, and determining tax treatment.  The conduct was also considered the practice of law. See Akron Bar Ass‘n v. Miller, 80 Ohio St. 3d 6, 1997-Ohio-364, 684 N.E.2d 288 (Ohio, 1997).

Drafting a will for an out-of-state resident likely falls within one of the examples above, and therefore is unauthorized.   However a determination that the requested assistance is the practice of law in a jurisdiction in which the attorney does not hold a license is not dispositive.   Ohio rule MR 5.5 lists six exceptions to the general prohibition against the practice of law in a jurisdiction without a license.  Of the six exceptions, some allow legal representation in another state on a “temporary basis.”   The comment to the rule describes this exception in very broad terms.  It includes the following factors for determining whether the representation relates to an attorney’s practice:

1 The lawyer’s client may have been previously represented by the lawyer, or may be resident in or have substantial contacts with the jurisdiction in which the lawyer is admitted.

2 The matter, although involving other jurisdictions, may have a significant connection with that jurisdiction.

3 Significant aspects of the lawyer’s work might be conducted in that jurisdiction or a significant aspect of the matter may involve the law of that jurisdiction.

4 The necessary relationship might arise when the client’s activities or the legal issues involve multiple jurisdictions, such as when the officers of a multinational corporation survey potential business sites and seek the services of their lawyer in assessing the relative merits of each.

5 In addition, the services may draw on the lawyer’s recognized expertise developed through the regular practice of law on behalf of clients in matters involving a particular body of federal, nationally uniform, foreign, or international law. See also MULTIJURISDICTIONAL PRACTICE OF LAW ISSUES IN ESTATE PLANNING, 40 ESTPLN 23, 30, 2013 WL 2407104, 11

The Restatement (third) of Law Governing Lawyers appears to provide even more flexibility.  In the estate planning context, for instance, the Restatement includes the following example:

Lawyer is admitted to practice and has an office in Illinois, where Lawyer practices in the area of trusts and estates, an area involving, among other things, both the law of wills, property, taxation, and trusts of a particular state and federal income, estate, and gift tax law. Client A, whom Lawyer has represented in estate-planning matters, has recently moved to Florida and calls Lawyer from there with a request that leads to Lawyer’s preparation of a codicil to A’s will, which Lawyer takes to Florida to obtain the necessary signatures. While there, A introduces Lawyer to B, a friend of A, who, after learning of A’s estate-planning arrangements from A, [asks] Lawyer to prepare a similar estate arrangement for B. Lawyer prepares the necessary documents and conducts legal research in Lawyer’s office in Illinois, frequently conferring by telephone and letter with B in Florida. Lawyer then takes the documents to Florida for execution by B and necessary witnesses. Lawyer’s activities in Florida on behalf of both A and B were permissible. See Restatement (Third) of the Law Governing Lawyers § 3 (2000) § 3 cmt. e

Rule 5.5 and the Restatement may provide latitude for estate planning lawyers to practice law in other states, but drafting a will for a non-resident still appears to be forbidden.   Nonetheless, the temporary basis for representation that “arises out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice” is an exception that many estate planning lawyers rely on.   In fact, much of what estate planning attorneys do may be permissible under this exception.  For example, the following may be permissible.

  1. Preparing state income and estate tax returns for a State A decedent or the trust of a State A decedent for interests with situs in another state or preparing such returns for a State A decedent or the trust of a non-State A decedent with respect to property situs in State A.
  2. Representing non-State A clients with probate proceedings in a State A court (e.g., probates, guardianships, and trust administrations under the jurisdiction of a State A).
  3. Providing a client, who resides in State A, or a trustee of a trust, with situs in State A, with general analysis of the laws of another state without making an appearance in a court or consummating a transaction in such state.

Aside from the rules, the practical aspects of drafting a will for an out-of-state resident are not favorable.   Each state has their own set of rules with complying with the formalities of executing a will.  In Ohio, two signatures are required but in other states, three or more signatures may be required.  Thus, even though a client may come to your Ohio office to execute a will, the will may not be acceptable in other states.  Many states allow a will drafted in one state to be valid in another; however, the risk of invalidating a will based on improper execution is a risk not worth taking.

In sum, an Ohio attorney should think twice about drafting a will for a client living out-of-state.  Even if the client comes to an attorney’s Ohio office, the fact that the client resides in another state raises ethical issues.  The unauthorized practice of law is a serious violation of Ohio ethical rules and risks the possibility of disbarment.

The above is not legal advice.  Should you need advice on drafting a will, a power of attorney, divorce, or other estate planning matters, call an attorney at Baron Law LLC.  Baron Law LLC is a Cleveland, Ohio law firm representing individuals and businesses needing advice on estate planning, divorce, and business law.  Call today at 216-276-4282.

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How Does a Minimum Required Distribution Affect My Retirement?

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Cleveland, Ohio Estate Planning Attorney

If your retirement portfolio contains a Simple Employee Pension (“SEP”), or Simple IRA, you need to know how the minimum distribution system works.  Cleveland, Ohio estate planning attorney Dan Baron provides the following remarks.

One major attraction to IRA’s and other estate planning tools is the ability to accumulate funds inside the plan on a tax-deferred basis. The minimum distribution rules dictate when this tax-sheltered accumulation must start coming out of a retirement plan, and, when they end.  Congress enacted the minimum required distribution rules to compel annual distributions from your retirement plan beginning typically at age 70 ½.  Estate planning and tax attorneys need to know the minimum required distribution rules because these rules set the outer limits on plan accumulations; moreover, failure to comply with rules results in penalties.

Is Your Retirement Plan Subject to the Rules?

Minimum required distributions apply to “Qualified Retirement Plans.”  IRA’s and 403(b) plans fall under the rules of qualified retirement plans.  However, Roth IRA’s are subject to the IRA minimum distribution rules only after the participant’s death.

Timing of a Minimum Required Distribution

If your retirement plan contains one of the above mentioned funds, there are many things to understand.  First, the starting point for lifetime required distributions is approximately age 70 ½ (or upon later retirement in some cases).  The starting point for post-death distributions is measured from the participant’s death.  Once the distributions start, the beneficiary must take distributions no later than December 31.  However, there are several exceptions to this rule including the “5 year exception” and rollovers.  Contact a tax attorney or estate planning attorney to learn more.

How is the Minimum Distribution Determined?

Each year’s minimum required distribution is determined by dividing the prior year-end account balance by a factor from an IRS table.  The amount is computed by dividing an annually-revalued account balance by an annually-declining life expectancy factor.  Taking more than the required amount in one year does NOT give you a credit you can use to reduce distributions in a later year.  Further, the distributions you elect cannot exceed 100 percent of the account balance.  Contact Cleveland, Ohio attorney Dan Baron to learn more on how this minimum distribution affects your retirement plant.

As you can see, there are numerous rules that affect your retirement and taxes.   Contact a Cleveland, Ohio attorney who can help you understand more about minimum required distributions or other estate planning rules.  Cleveland, Ohio estate planning Dan Baron can help you with your tax planning and estate planning goals.  Contact Cleveland, Ohio attorney Dan Baron at 216-573-3723.

 

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Creating a Business Succession Plan – Cross Purchase Agreements

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Creating a Business Succession Plan – Cross Purchase Agreements

Whether you’re planning for retirement or tragedy, having a business succession plan is imperative for business owners.  Big business or small, planning for the financial stability of your partners and employees can mean the difference between business as usual and leaving your spouse bankrupt.   Moreover, understanding the value of your business can affect your decision to sell, retire, or leave a legacy.  Cleveland, Ohio estate and business planning attorney Dan Baron has the following remarks to help you secure your financial future.

One way to create a succession plan is through a “cross purchase agreement.” Two concepts stand at the root of all cross-purchase buy-sell agreements: protection and fairness. A surviving business owner wants to be protected from interference by outsiders when a co-owner dies. Concurrently, a business owner wants to assure fair treatment of his or her heirs in the event of death.

Step One – Choose a Successor

Unless you’re selling your business – where you would normally sell to the highest bidder – picking a successor isn’t easy.  Many factors determine whether a succession plan is necessary and sometimes it can be as easy as passing the business down through a family member.  When choosing a successor, there may be several partners or family members from which the owner will have to choose, each with various strengths and weaknesses to be weighed and evaluated.  In this case, lasting resentment by some or all of those not chosen may result, no matter what choice is ultimately made.  Outside of a family business, partners who do not need or want a successor may simply sell their portion of the business to their partners in a buy-sell agreement. Talk with a Cleveland, Ohio estate planning or business succession attorney to learn more.

Step Two – Evaluate the Value of the Business

As mentioned, your succession plan may be as simple as selling it off.  But no matter whom the intended successor may be business owners must establish a set dollar value for the business, or their share of it. This can be done via appraisal by a certified public accountant (CPA) or by an arbitrary agreement between all partners involved.  Tax attorneys and business succession attorneys may also assist in the business evaluation process.  Estate planning lawyers and accountants use various metrics for evaluation business including sales, stock value, liquidity, profits, reoccurring contracts, EBITDA (Earnings before Interest, tax, depreciation, and amortization), cash flow, and more.   In addition, your estate planning attorney may evaluate your business using a number of other methods including asset based or income based evaluations.  For corporations, where the portion of the company consists solely of shares of publicly traded stock, the valuation of the owner’s interest may be determined by the stock’s current market value.

Step Three – Cross Purchase Agreements

A cross-purchase agreement is a tool used by business owners to assure that “business as usual” continues if co-owner dies. Like an entity or stock redemption agreement, the cross-purchase buy-sell agreement stipulates that:

  • A deceased owner’s estate must sell the business interest to surviving owners, and
  • The surviving owners will buy that interest.

There are no exceptions—the estate must sell and the survivors must buy.

Creating a cross purchase agreement is commonly used a usually starts with creating a life insurance policy. Once a set dollar value has been determined for the business, life insurance is purchased on all partners in the business. Then, in the event that a partner passes on before ending his relationship with his partners, the death benefit proceeds will be used to buy out the deceased partner’s share of the business and distribute it equally among the remaining partners.

A cross purchase agreement is structured so that each partner buys and owns a policy on each of the other partners in the business.  Each partner functions as both owner and beneficiary on the same policy, with each other partner being the insured; therefore, when one partner dies, the face value of each policy on the deceased partner is paid out to the remaining partners, who will then use the policy proceeds to buy the deceased partner’s share of the business at a previously agreed-upon price.

Example: How a Cross-Purchase Agreement Works

Let’s say for example that there are three partners who each own equal shares of a business worth $3 million, so each partner\’s share is valued at $1 million.  The partners are getting older and want to ensure that the business is passed on smoothly in the event one of them dies. Thus, they enter into a cross-purchase agreement. The agreement requires that each partner take out a $500,000 policy on each of the other two partners. Now, if one of the partners dies, the other two partners will each be paid $500,000, which they must use to buy out the deceased partner\’s share of the business.

One limitation to be noted here is that, for a business with a large number of partners (five to 10 partners or more), it becomes impractical for each partner to maintain separate policies on each of the others. There can also be substantial inequity between partners in terms of underwriting and, as a result, the cost of each policy.

Cross purchase agreements are just one of many ways to ensure a business’s legacy.  For more information on estate planning or business succession, contact Cleveland, Ohio attorney Daniel A. Baron at Baron Law.  Contact a lawyer today by calling 216-573-3723.  You will speak directly with an Ohio attorney who can help you with all your estate planning needs.

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Building a Charitable Contribution in your Estate Plan

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Estate Planning Charitable Donations

Have you ever considered incorporating a charitable donation into your estate plan?   Aside from the tax benefits, including charitable giving into your estate plan is a wonderful way to extend your legacy and show your generosity.  And contrary to public belief, charitable giving in your estate plan is not just for the very wealthy.   Through an estate planning attorney, there are several good ways to provide for your family while also giving to your favorite causes.

  1. Charitable Contributions through Your Will

The easiest and least complicated way to include a charitable contribution in your estate plan is through your will.  The amount you charitably contribute won’t reduce your income taxes, but it may decrease your taxable estate.  In addition, this may potentially increase the amount you’ll be able to leave to your heirs.  Talk with an estate planning attorney to learn more.

  1. Charitable Contributions through Your Retirement

You can also contribute to your favorite charity by donating a portion of your retirement account. Donating a retirement account is tax-effective and pretty straightforward.   A donor must simply designate the charity as the beneficiary on your account to receive the tax benefit.  Charities are exempt from both income and estate taxes.  Thus, the charity can receive 100% of the account’s value while your children or heirs receive their portion of the estate through non-retirement assets.  Consult with an estate planning attorney to learn more.

  1. Split-interest gift

Another way to make a charitable contribution is through a split-interest gift.  Through a split interest gift, you can donate assets to a charity but may also retain some of the benefits of holding those assets.  Here, the donor opens and funds a trust in the charity’s name and receives a charitable income tax deduction at the time of transfer.  Just like with other trusts, here the donor retains some rights to the property and may be able to avoid capital gains on the assets transferred.  Talk with an estate planning attorney to learn more about split-interest gifts.

Some ways to provide split-interest gifts include:

  • Charitable remainder trust (CRT): A CRT is an irrevocable trust that provides either a fixed payment or a fixed percentage to the donor (or other beneficiary) every year.  The term of the trust can for the life of the donor or a set number of years.   At a minimum, the donor must take annual payments from the trust no less than 5% but no more than 50% of the property’s fair market value.  At the end of the term, the remainder goes to the designated charity.  To maximize payments during the lifetime of the donor, the trust should appreciate value while receiving payments in the form of a percentage.   In contrast, if the trust will not appreciate in value, you’re better off receiving a fixed payment each year. Consult with an estate planning attorney to learn more.
  • Charitable lead trust (CLT): A CLT is the reverse of a CRT.  This revocable trust provides income to a charity for a set number of years, after which the remainder passes to the donor’s heirs or beneficiaries.  The CLT is a good choice for those who don’t need a lifetime of income from certain assets.  The trust is often structured to get an income tax deduction equal to the fair market value of the property transferred, with the remaining interest valued at zero to eliminate a taxable gift.  Contact an estate planning attorney to learn more about charitable lead trusts.
  • Pooled income fund (PIF):  Pooled income funds are trusts maintained by public charities. The trust is set up by donors who contribute to the fund.  Just like a CRT, the donor receives income during his or her lifetime.  After the donor’s death, control over the funds goes to the charity. The biggest benefit to a PIF is that contributions qualify for charitable income deductions as well as gift and estate tax deductions.  Talk with an estate planning attorney to learn more.

Charitable Giving is not just for the Wealthy.

There is a misconception that charitable giving is just for the wealthy; however, this is far from true.  Many people give to their alma mater or local church.  The amount does not need to be in the tens of thousands.  In fact, many people give smaller amounts by simply adding the charity in their will.  This blog is not meant to provide legal advice and is for informational purporses only.  For more information regarding wills, trusts, or charitable giving, contact Cleveland, Ohio law firm Baron Law, LLC.  Baron Law is your estate planning law firm in Cleveland, Ohio.  Call today for a free consultation at 216-573-3723.

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Can a Beneficiary Force a Trustee to Provide Information Contained in a Trust?

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Cleveland, Ohio Estate Planning Attorney

Can a Beneficiary Force a Trustee to Provide Information Contained in a Trust?

In addition to the blog below, do you have questions regarding estate planning or trust administration?  Call Cleveland, Ohio law firm Baron Law LLC.  An attorney at Baron Law will be able to assist you and provide legal advice for all your wills and trust needs.

If you’re resident of Ohio, then as a beneficiary, you have a right to see a trust and can force the trustee to provide you a look.  Under Ohio law, the Trustee is obligated to give a copy of the trust to beneficiaries if they ask for it.  Cleveland, Ohio estate planning attorney Daniel A. Baron points to Ohio Revised Code Section 5808.13 which provides in part

“A trustee shall keep the current beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a beneficiary’s request for information related to the administration of the trust.”

The Ohio statute further provides that a trustee must:

“Upon the request of a beneficiary, promptly furnish to the beneficiary a copy of the trust instrument. Unless the beneficiary expressly requests a copy of the entire trust instrument, the trustee may furnish to the beneficiary a copy of a redacted trust instrument that includes only those provisions of the trust instrument that the trustee determines are relevant to the beneficiary’s interest in the trust. If the beneficiary requests a copy of the entire trust instrument after receiving a copy of a redacted trust instrument, the trustee shall furnish a copy of the entire trust instrument to the beneficiary. If the settlor of a revocable trust that has become irrevocable has completely restated the terms of the trust, the trust instrument furnished by the trustee shall be the restated trust instrument, including any amendments to the restated trust instrument.”

Put more simply, if you’re a beneficiary to a trust, you simply need to ask and you will be provided a copy of the trust.  Conversely, if you’re the Trustee and receive one of the requests listed above, you likely have to comply.  Beneficiaries having problems getting information from a Trustee should refer to the above statute.  Trustees who fail to respond risk being removed as the Trustee.  In addition, if there is a law suit, the attorney’s fees would be taken out of the trust, thus reducing the value to all beneficiaries.

This blog is for informational purposes only and is not intended as legal advice.  If you need an estate planning attorney, trust attorney, wills attorney, or other Cleveland, Ohio attorney contact Baron Law LLC at 216.573.3723.  You will speak directly with an Ohio attorney who can assist you with your legal needs.