Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on the importance of having an Elder Law Attorney to help plan for your future: Elder law attorneys are sometimes considered “authorities” as, although they can handle a wide range of other legal issues, they primarily focus on the needs of older adults and also […]
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on an AB Trust and the benefits realized from including this as part of your Tax and Estate Planning:
For Tax and Estate Planning purposes, as a married couple, maximize the use of your Federal Estate Tax Exemptions through the utilization of an AB Trust.
There are two vehicles available in which to set up an AB Trust
The “A Trust” also referred to as the
The “B Trust” is also known as the
In 2011, the Federal Estate Tax Exemption was made transferrable between married couples. Should one pass away in 2011 or after, their entire Federal Estate Tax Exemption is not needed to avoid Estate Taxes.
If you are on your second, third, or additional marriage and have different beneficiaries, it is in your best interest to explore the benefits of the AB Trust.
The AB Trust can only function if you secure them while both spouses are alive. Don’t put off securing this beneficial part of your estate and tax planning as once you become a widow or widower, it is too late.
Below is an example of how the AB Trust works to your benefit:
For more information on setting up an AB Trust as part of your Estate and Tax Planning, contact Daniel A. Baron of Baron Law to maximize your Federal Estate Tax savings upon your passing. Contact us today at 216-573-3723.
Cleveland, Ohio estate planning and elder law attorney, Daniel A. Baron, offers the following information on the definition of ADL’s and IADL’s and how to plan on Long Term Care as part of your Estate and Medicaid Plan: As we are all well aware, there is only one alternative to aging. If you are fortunate […]
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on the differences between and Grantor and a Non-Grantor Trusts and further considerations to as part of your Tax and Estate Plan:
Understanding tax benefits and pitfalls of a trust and putting together a trust which is most beneficial for your personal situation is best left to an experienced trust attorney who can explain the differences in trusts and customize your Estate Plan.
Consequently, understand that the term used; Grantor Trust and Non-Grantor Trust are important. These terms mean very different things but are both associated with tax implications.
The Grantor is the party who establishes the trust and maintains control while living and mentally capable.
Some examples of Grantor Trusts
When setting up your trust as part of your Estate Planning, tax planning is an integral part of each and every plan and is as individual as you are.
Planning for Tax implications
How is the trust going to be taxed? Does the American Tax Relief Act of 2012 (ATRA) affect the taxes of your trust? By setting up a Grantor Trust you can realize a number of tax advantages. Some of these advantages are but not limited to:
Plain and simple, the assets of the trust grows, which in turn benefits the beneficiaries without paying income tax. Essentially this is a tax free gift.
Non Grantor Trust
A Non-Grantor Trust is where the donor of the assets relinquishes all control within the trust. The donor of the trust funds is not a beneficiary or a trustee and has no input on how the funds are disbursed or controlled. When the donor establishes a Non-Grantor Trust (aka irrevocable trust) they give up their rights to amend, revoke, or terminate the trust as this now becomes the functions of the trustee(s) either acting by themselves or with a Trust Protector.
Although the assets used to establish the trust were once owned by the donor, they are now owned by the trust. Any income being generated from the assets now is the sole responsibility of the trust. As is with the Grantor Trust, any distribution to a beneficiary must now the proper IRS forms issued and provided to the recipient.
When a non-grantor trust is established it becomes a taxable entity and a Federal Employer Identification Number is issued. This also means that an income tax return needs to be filed on behalf of the trust each year.
Understanding tax benefits and pitfalls of a trust and putting together a trust which is most beneficial for your personal situation is best left to an attorney who can explain the differences in trusts and customize your Estate Plan. Contact Daniel A Baron of Baron Law Cleveland, Ohio at 1-216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on The Marital Deduction as well as other Tax Planning Advice and what to make part of your Estate Planning.
What are the benefits?
The most important deduction a married couple has is the The Marital Deduction. The amount of assets which can be passed upon death from one spouse to the other is unlimited and is also used to defer ALL estate taxes until the surviving spouse passes. Current tax laws allow one spouse to give the other spouse assets where there is little to no tax imposed upon the transfer of these assets. No matter what the value of the assets which are being transferred, whether it is $50,000 or $50,000,000.
What if there is a divorce?
If you happen to be divorced from your spouse, you can still pass assets to the ex-spouse after you pass with little or no tax being imposed if it is stated in the divorce decree.
My spouse is not a U.S. Citizen – Do the same tax laws apply?
The Marital Deduction is unlimited as long as both spouses are U.S. Citizens. So what happens when one of the spouses is not a US Citizen?
Should the first spouse to pass away be a U.S. Citizen and the surviving spouse a noncitizen of the U.S., unfortunately the unlimited marital deduction for Federal Estate Taxes is not available.
However, the taxes can be deferred by setting up a Qualified Domestic Trust (AKA QDOT), and having the assets pass through this specialized trust.
Should you own real property, consider adding this to the trust as the taxes will be deferred until the noncitizen spouse passes away.
For more information on The Marital Deduction and implementing other tax savings ideas as part of your Estate and Tax Planning, contact Daniel A. Baron of Baron Law to maximize tax savings upon your passing. Contact us today at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on a Qualified Domestic Trust and the benefits realized from including this as part of your Tax and Estate Planning:
The specific goal of a Qualified Domestic Trust (or QDOT) is to defer Federal Estate Tax on assets which are transferred from a spouse who is a US Citizen upon their death to the other spouse who is not a citizen of the US. If your marriage consists of both a US Citizen and a non US Citizen and your assets are minimally several million which the non US Citizen spouse has the possibility of inheriting, it would be wise for you to secure a Qualified Domestic Trust.
What are some of the tax issues for spouses who are not US Citizens?
In the absence of Qualified Domestic Trust the non-citizen spouse now has to pay Federal Estate Tax on any assets transferred from the US Citizen spouse into the non-citizen spouse’s name, just as any other party who inherits assets from any other person when they pass.
What happens when no Qualified Domestic Trust exists and the spouse who is the
US Citizen passes away first?
If the surviving spouse is a non-citizen of the US, then as stated previously, Federal Estate Taxes will need to be paid on any assets which transfer to the surviving spouse. The surviving spouse would not have the unlimited Marital Deduction as it is should both spouses be US Citizens. Paying the Federal Estate Taxes is the government’s way of collecting taxes so that the non-citizen spouse does not take all the assets back to their native country and avoid paying the necessary taxes.
There are two avenues which could be taken to avoid paying any inheritance tax:
There are a number of requirements however set forth for set up a Qualified Domestic Trust after the spouse who is a US Citizen passes away, but it can be done. If your family situation is such that one spouse is a US Citizen and the other is not and has no intention of becoming one, it would be most advantageous for you to contact an Estate Planning Attorney to set up a Qualified Domestic Trust while you are both still living and of sound mind.
For more information on setting up a Qualified Domestic Trust as part of your Estate and Tax Planning, contact Daniel A. Baron of Baron Law to maximize your Federal Estate Tax savings upon your passing at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on a Trust Protector and their Role and benefits realized as part of your Comprehensive Estate Plan:
Who is a Trust Protector?
As it sounds, a Trust Protector is appointed to oversee the assets in the trust and to protect against the trustees so that they do not give into temptation and embezzle from the trust or squander the assets of the trust with unnecessary fees or legal issues.
Having a Trust Protector typically was only used with the upper echelons of society but some may say that if there is a trust, there should be a Trust Protector. It is wise to appoint a Trust Protector especially in cases that the trust will be a long term trust such as:
Upon setting up a trust and should the trust have more than one trustee, there is a possibility of issues coming up which are believed to not be in the best interest of the trust. Having a Trust Protector can potentially quash any conflicts which may arise. In addition, a Trust Protector can be very beneficial in other instances where conflict may arise.
Can I appoint anyone to be my Trust Protector?
You can appoint anyone you would like to protect your trust. Some ideas may be:
What are the duties of a Trust Protector and Why would I need one?
Additional duties of a Trust Protector are, but not limited to:
It is wise to put in writing what role you would like the Trust Protector to have handling your assets. To start a discussion on your personalized comprehensive estate plan, including; living wills, trusts, power of attorney, or a pour-over will, or further questions on a Trust Protector, contact Daniel A. Baron of Baron Law. Baron Law provides estate planning services for the greater Cleveland, Ohio area. Contact us today at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following helpful answers to your questions about the difference between a Living Will and a Last Will and Testament.
Confusing these terms happens quite frequently as there are those that think that these are one in the same, however, they are entirely two distinct legal documents which cover many different needs.
A Living Will, what is it and do I need one?
Should you become extremely ill or completely incapacitated and cannot convey their medical care wishes; having a living will in place, (which is a legal document AKA as an advance directive), gives instructions as to the medical care you wish to receive.
Some of the details of a Living Will would include
Also, at this point it would be wise to consider having a Power of Attorney put in place in the event that you do become incapacitated so that there is someone making sure that your wishes are carried out as you have communicated in your Living Will. Naming a Power of Attorney can be done at the time of penning your will.
Last Will and Testament, is it different than a Living Will?
Your last will and testament, also simply known as a will, is a legal document that stipulates the transferring of your estate to somebody else by sale or gift upon your demise. Should you pass away without a will, your assets then become “intestate”. At this time state intestacy laws govern the distribution of your assets.
If you have minor children, you should unquestionably have a will. At the same time of the writing of your will, it is possible for you to name a guardian for your minor children. You can also name the guardian to manage the minor’s financial affairs or another party to act on behalf of the children.
As you are drafting your will, it will be necessary for you to select an Executor of your estate. The Executor is one who carries out the will’s requests throughout the process of probate.
Living Will and Last Will – when do they take effect?
Now that you are aware of the differences between a Living Will and a Last Will, you may question as to when the two take effect.
Keeping in mind that the Living Will outlines your medical wishes should you become incapacitated or seriously ill and unable to convey your wishes, this comes into play while you are still alive but unable to voice your wishes.
To stipulate your wishes of how to distribute your estate upon your passing comes into play by using a Last Will and Testament .
So as you can see a Living Will and a Last Will and testament are two separate, but very important legal documents for everyone to have in place.
Living Will vs. Last Will?
If you are pondering the questions as to whether you need a last will or a living will. The answer to that question should be very easy; just about everyone should have both. Each of these important documents are ones that every person doing their Estate Planning should secure as these offer you the peace of mind that your wishes will be followed when you can’t make them known due to a serious illness and/or incapacitation or death.
Having a last will and testament, also makes the probate process go more smoothly, and with a living will, it can provide direction to your loved ones or Power of Attorney, in making challenging decisions during a stressful and difficult time.
So when is the best time for me to get a living will and a last will?
Unless you have a crystal ball which states otherwise, the future is uncertain. Securing both a living will and a last will and testament and recording your wishes is best done sooner than later.
Both a Living Will and a Last Will and Testament are only two of the many parts to a comprehensive estate plan. For information regarding living wills, trusts, power of attorney, or a pour-over will, or further questions on Powers of Attorney, contact Daniel A. Baron of Baron Law at 216-573-3723 to make an appointment.
Revocable trusts, commonly referred to as revocable living trusts, can be changed or terminated during a person’s lifetime as long as they are competent. The creator of the trust, referred to as a “grantor” is usually the initial trustee and maintains full control over the assets placed in the trust. A successor trustee is named to manage the trust assets if the grantor becomes incapacitated or passes away.
This type of trust is attractive because you can update your beneficiaries, change which assets are included in the trust, and update how assets will be distributed.
Revocable trusts avoid probate and allow you to maintain privacy. In addition to saving time and money associated with the probate process, you can protect your family’s documents from becoming part of public record.
Upon death, a revocable trust becomes an irrevocable trust and cannot be changed. At this point, the successor trustee must follow the instructions in the trust document to distribute the trust’s assets.
Learn more about the key similarities and differences of revocable and irrevocable trusts here.
Revocable trusts are funded during the grantor’s lifetime, while testamentary trusts are funded after the death of a testator, or creator of a will.
Testamentary trusts are also called will trusts because they are created inside a will and do not take effect until you pass. Unlike a revocable trust, this type of trust will go through probate costing you time, money and your privacy.
A revocable trust can:
Joint trusts are often utilized by married couples to cover joint or individual assets and to specify what happens upon the death of each spouse. Typically, when the first spouse passes, the living spouse becomes the trustee and gains control over the trust. Then, when the surviving spouse passes, a successor trustee takes over management and distributions.
Bloodline trusts are created to ensure that spouses of intended heirs do not inherit in the event of divorce or death. Instead, if a child passes or divorces, their children (i.e. your grandchildren) would become the beneficiary.
Parents or grandparents of a disabled child can establish a special needs trust as part of their estate plan. This type of trust helps protect private funds for the disabled loved one without putting their eligibility for government-offered benefits at risk. There are three main types of special needs trusts:
It’s important to remember that a revocable trust is just one part of a comprehensive estate plan. For example, in many cases, a revocable living trust is created alongside a pour over will. The pour over will is designed to work together with your living trust, and acts as a backup plan to ensure all of your assets are directed into your trust.
After it has been determined that a revocable living trust should be part of your estate plan, an attorney can walk you through these key steps:
Once you are confident in these decisions, your estate planning attorney can draft the trust document and begin assisting you with funding the trust.
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.
Cleveland, Ohio Estate Planning and Elder Law Attorney offers the following:
The main benefit of a Qualified Terminable Interest Property Trust is being able to control your estate after your gone. In addition, there are several tax advantages for larger estates.
Each spouse can set up a QTIP trust, leaving assets to the other in trust. When the first spouse dies, the survivor gets what is called a “life estate” in the assets that are left to the QTIP trust—that is, the survivor is entitled to any income the assets produce, and in the case of real estate, to its use. Only the surviving spouse can be named as the life beneficiary. The survivor does not, however, have full ownership of the trust assets and cannot sell them or give them away.
In order to qualify for the marital exemption, the spouse must receive all of the income from the trust and the Executor must make an election on the tax return. QTIP’s are very similar to family trusts, or bypass trusts. And in fact, many times you create a family trust in conjunction with a QTIP. The difference is that QTIP’s are more restrictive and are useful for those who are in second marriages.
There may also be several tax advantages. Here’s an example:
There are many advantages to setting up a QTIP trust. Every estate plan is unique and its important to contact an elder law and estate planning attorney who can analyze your estate. Contact Cleveland, Ohio attorney Dan A. Baron at 216-276-4282 to learn more about QTIP or other trusts. Baron Law is a Cleveland, Ohio law firm.