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What If My Trustee Is Concealing Trust Assets?
Cleveland, Ohio, estate planning law firm, 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 […]
What is Probate?
Cleveland, Ohio, estate planning law firm, 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 […]
Executor’s Duties – When Should Debts Be Paid?
Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on what your duties are as an executor of an estates and when you need to pay all debts of the estate. Contact Baron Law Cleveland to answer all your questions on what your duties are and to help guide your through […]
I’ve Been Named As The Executor In A Will, Now What?
Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on what your duties are as an executor of an estate. Contact Baron Law Cleveland to answer all your questions on what your duties are and to help guide your through the upcoming events which are about to occur and how to handle any issues which may arise.
Unfortunately, a close friend or family member has passed and in their will you were appointed as executor of their estate. At the time the will was drafted maybe you gave little or a lot of thought into what being named executor actually entails. Often, it’s the former, most people have little experience administrating an estate and little reason to overthink being named an executor. So, when the time comes to handle the responsibilities of an executor, it can be a confusing and overwhelming process.
An appointment to executor is a serious affair, but an understanding of the process and expectations of an executor can limit the stress of an already stressful situation. Since most people have little experience with wills, estates, or probate, everyone finds themselves asking the same questions when they remember they’re an executor. Note, this article is only a minor overview and contacting a Cleveland estate planning attorney in event of death or a potential or actual appointment as executor is always recommended. An experienced Ohio estate planning attorney can give you personalized guidance and recommendations to take as much of the burden off you as possible.
What is an executor?
Bluntly, an executor is the person, or persons, named in a will to administrate the estate after death. The executor is the individual responsible for seeing that the final wishes of the decedent, as denoted in the will, are carried out. The appointment of an executor is a logical, and necessary, consequence for the existence of last will and testaments. At the end of the day, wills are only pieces of paper. So, without someone loyal, trustworthy, and actually willing to carry out the terms of a will, a will would be a paper tiger and estate assets wouldn’t be distributed nor posthumous debts and obligations handled. So, if you’ve been named as an executor, congratulations, you’re likely the most responsible and well-adjusted of the decedent’s friends and family.
How is an executor appointed?
Executors are formally appointed as such by explicit provision in a last will and testament. Hopefully, the will holder informs the named individual of their selection of executor, but this is not a strict requirement, just courtesy and commonsense.
Just being named as executor in a will, however, is not sufficient to confer the job. When the will is probated, the following statutory requirements are observed by the court when selecting an executor:
- The named individual must be competent to serve as executor.
- The named individual must be at least 18 years old
- The named individual must be bonded
Implicit within the bond requirement is that the named executor has good credit and no criminal record, since failure of either would likely make it next to impossible in convincing an insurance company to take the increased risk and issue an executor bond. The cost of the bond itself is paid from estate assets. Note, however, a will has the discretion to waive the bond requirement if the decedent has faith that the named executor is trustworthy and doesn’t represent a risk of pillaging or mismanaging estate assets.
As with many things within the legal system, the final approval for executor appointment lies with the probate court. So, regardless of whether the formal requirements are met, a probate court may still reject an executor election and appoint a third-party administrator if a potential executor is perceived as unfit to serve. Since, a major purpose of drafting a will is to control who distributes estate assets, naming an Ohio estate attorney as a primary or successor executor is advisable as a probate court would have little reason to protest such an appointment.
Why is an executor needed?
The duties of an executor aren’t easy, however, there is satisfaction knowing that you did right by your friend or family. The duties of an executor are specific to each particular estate, however, there is a “core” group of duties and tasks each executor must fulfill. Every executor must:
- File the will and probate petition in probate court where decedent was domiciled at time of death and petition the court for executor appointment.
- Take possession, catalogue, and value all estate property within 3 months of filing the will for probate.
- Maintain and protect estate assets for the duration of the probate proceedings.
- Directly notify creditors, debtors, financial institutions, utilities, and government agencies of decedent’s death.
- Publish notices of decedent’s death, usually a newspaper obituary, which serves as notice and starts the clock running on the statute of limitations for creditor claims on the estate.
- Pay or satisfy any outstanding debts or obligations of decedent.
- Represent decedent during probate court proceedings.
- Locate heirs and named beneficiaries and distribute respective bequests at the appropriate time.
These duties occur during the probate process, which is a major reason why probate takes many months to complete. Because probate is such a time-intensive and laborious process, many people chose trust-based estate plans that avoid probate entirely. With trusts, estate assets can be distributed right away, no executor is needed, and many mornings, which otherwise would be spent in probate court, are freed for personal enjoyment. Contact an Ohio trust attorney to see if avoiding probate through the use of trusts is right for you and your family.
What if some dies without a will so that there isn’t an executor?
If someone dies without a will, i.e. intestate, the probate court will appoint an administrator for the estate. The formal requirements for an administrator are the same as an executor except administrators must be also an Ohio resident while executors can be anyone. The duties administrators perform are largely the same as executors.
Granted, the final result of the probate process is the same regardless of whether an estate is administrated by an executor or appointed administrator, however, who knows who the court ultimately will appoint. As such, it is always preferable to elect an executor an ensure a responsible and diligent friend or family member will manage your estate and see that final wishes are followed. Those living without a will or trust are playing with fire and could end up seeing significant portions of lifetime earnings or assets going to irresponsible family members or eaten by taxes.
If I’ve been named as an executor, do I have to be one?
No, there is no legal requirement to take on the responsibilities of executor, however, resigning will likely put the surviving family in a serious bind and force a probate court to appoint an administrator. An executor resignation, prior to or during probate proceedings, must follow established procedures and use particular legal forms specific to each probate jurisdiction. Consulting an estate attorney is the best way to find out what these procedures are and if resigning is necessary in the circumstances.
Executor appointment is not a job to underestimate. Often, the labor and time spent in fulfilling the duties go underappreciated, but it is critical to wrapping up decedent’s life and giving closure to friends and family. Though sometimes thankless, executors are entitled to compensation in Ohio. Namely, if executor sells real estate or personal property, they are entitled to 4% of the first $100,000, 3% of the next $300,000, and 2% of any remaining value. Further, 1% may be charged for any non-probate assets. Executor fees and the associated tax consequences are potentially complex issues, as such, contacting a Cleveland estate attorney is sensible.
For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.
Helping You and Your Loved Ones Plan for the Future.
About the author: Mike E. Benjamin, Esq.
Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.
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.
“He who is always his own counselor will often have a fool for his client.” Old English Proverb est. circa
How Do Businesses Collect a Debt?
Cleveland, Ohio, business law firm, Baron Law LLC, Cleveland, Ohio, answers questions on the laws which need to be followed when attempting to collect a debt. For more comprehensive information contact Baron Law Cleveland to schedule an appointment if you have found yourself in a situation where you are unable to collect a debt.
Unfortunately, people don’t pay their bills on time, sometimes not at all. This is just a reality of business. Tenants fail to pay rent, purchasers don’t pay in full, and business associates don’t uphold their end of the bargain. Naturally, the human reaction is to immediately go after wrongful parties and get what you’re owed. In reality, however, debt collection is not a simple and straight forward process. That is why third-party collectors are often used. However, over the many decades and centuries of business, whether a legitimate debt was owed or not, these collectors went too far in attempting to right a wrong. In response, nowadays there are rules and regulations governing debt collection practices to prevent misconduct. As such, cavalier or aggressive debt collection practices can, ironically, make a legitimate debtor liable for more than the debt they are trying to collect on. This is why contacting the services of a local Cleveland area business attorney is so critical. A single lawsuit over debt collection misconduct can ruin a quarter, but longtime or routine debt collection misconduct can lead to bankruptcy via litigation.
- What laws apply when I’m trying to collect a debt?
The three main laws that every third-party debt collector should be aware of when collecting debts is 1) the Fair Debt Collection Practices Act, 2) the Ohio Fair Debt Collection Practices Act, and 3) the Consumers Sales Practices Act.
- FDCPA – this federal law limits the behavior and methods of third-party debt collectors who are trying to collect a debt for another, whether a real person or otherwise. Within are rules regarding timing, method, and form of contact, causes of action for misconduct, and duties of specialized debt collection personnel.
- OFDCPA – This Act primarily concerns the legal conventions and guidelines that must be observed when a debt is assigned for collection by another, i.e. a third-party creditor. The Ohio FDCPA adds additional safeguards to the Federal FDCPA in order to ensure assignees of debts are legitimate businesses with legitimate credit claims.
- CSPA – this law primarily provides causes of action for deceptive trade practices, of which debt collection is regularly a context. Various Ohio courts have said that various violations of the FDCPA constitute a violation of the CSPA in that the purpose of both acts is to prohibit both unfair and deceptive acts and any violation of the FDCPA is necessarily an unfair and deceptive act or practice in violation of the CSPA.
What are the things I can’t do when collecting a debt?
Simply, a third-party debt collector cannot engage in deceptive trade practices. What is a deceptive trade practice is a much litigated issue. However, the particulars of what conduct constitutes a deceptive trade practice are too numerous to go over here, but a local Ohio business attorney will be more than happy to fill you in on the details and makes sure you’re not violating State and/or Federal law.
The short answer though, in the context of debt collection, is that a deceptive trade practice is an activity by an individual or business that is meant to mislead or lure a debtor into paying a debt that isn’t owed, paying more than is owed, attempting to collect in an aggressive, harassing, offensive manner or failing to follow proper form when communicating with a debtor. Within the FDCPA, OFDCPA, and CSPA, there are sections which explicitly state that a violation or one or more provisions of the law is conclusively a deceptive trade practice thus justifying damages.
How much lability could I be facing for improper debt collection?
Just under the FDCPA alone, any debt collector who fails to comply with any provision of this law with respect to any person is liable to such person in an amount equal to the sum of
(1) any actual damage sustained by such person as a result of such failure;
(2) additional damages up to $1,000; and/or
(3) reasonable attorney’s fees if the court finds them justified.
How do I make sure I’m not breaking the law when trying to collect?
State and federal law must be followed to the letter when attempting in collect on a third-party debt. An Ohio business attorney can create a compliant debt collection program, complete with compliant forms and communications, to ensure any legitimate debt isn’t consumed by legal damages.
There are, however, some standard methods to remain compliant under state and federal law.
- Mini Miranda Notice – the law requires that any debt collector inform a debtor in the initial communication that “this communication is from a debtor collector. This is an attempt to collect a debt and any information obtained will be used for that purpose.” This is commonly called the mini-Miranda and puts the debtor on notice of who they are speaking with and why. If the first communication with the debtor is oral, this notice must be given orally and included in the first written communication. Regardless of who initiates communication, this notice must be given.
- Debt Validation Notice – every third-party collector must within 5 days of the initial communication send the debtor written notice containing the following:
1) the amount of the debt,
2) name of creditor that’s owed the debt,
3) statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector,
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector, and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
The purpose of this notice is to inform debtor of important rights, timing deadlines, and authenticity of the debt being pursued.
It is never fun for either the debtor, creditor, or collector to pursue an outstanding debt. Feelings get hurt, lives are disrupted, and valuable business resources and time is wasted. Therefore, it is wise to ensure that state and federal laws are not being broken on top of all that. Throwing potential litigation in with the contentious profession of debt collection begs for trouble. As such, wise debt collectors retain the counsel and guidance of experienced business attorneys to enable them to focus on recovering debts, not worrying about compliance with government rules and regulations.
You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.
Helping You And Your Loved Ones Plan For The Future
About the author: Mike E. Benjamin, Esq.
Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.
Spousal Rights – Are You Forced To Take What Is Bequeathed?
Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on how to handle your spouses will after they pass. Are you forced to take what is left to you? Contact Baron Law Cleveland to answer this question and any other questions you may have on wills and probate.
Humans are material creatures, it’s just how we’re wired. We all like stuff, we all want stuff. The only difference between people is the target of that want and the severity of that desire. Though the passing of a friend, loved one, or spouse is a mournful event whose significance shouldn’t be understated. At the end of the day, the most common question I hear when a person comes into the office with a will of a recent decedent is, “what do I get?” More often than not, the next question after that is, “what else can I get?”
Whether its due to genetics, environment, habits, or just dumb luck, women live, on average, seven years longer than men. So naturally, women are more often responsible for probating their husband’s will and receiving distributions under it. Regardless of sex, however, under Ohio law, surviving spouses are granted the ability to elect either 1) to receive the surviving spouse’s testamentary share as provided in the decedent’s will, “taking under a will;” or 2) to take against the will. This “taking against the will” is called an election to take under the law. Which option to take is a momentous decision that can affect the total windfall of the surviving spouse, the distributions to beneficiaries and heirs, and temperament of surviving friends and family. A local Cleveland estate attorney is in the best position to calculate the options and spell out the pros and cons of each.
If the surviving spouse elects to take against the will, the surviving spouse receives either one-half or one-third of the decedent’s net estate. The surviving spouse receives one-half of the decedent’s net estate unless two or more of the decedent’s children or their lineal descendants survive the decedent, in which case the surviving spouse receives one-third.
So how does one elect to “take against a will?” After the appointment of an executor or administrator, the probate court will issue a citation to the surviving spouse to elect whether to take under the will or against the will. This election must be made within the five-month statutory period or else be forever barred. If you chose to take against the will, you return the form attached to the notice and the court sets a hearing.
At the hearing to elect to take against a will, the probate judge or deputy clerk, who acts as a referee, will explain the will, the rights under the will, and the rights, by law, in the event of a refusal to take under the will. If the surviving spouse is unable to make an election due to a legal disability, the court will appointment an appropriate proxy to determine if an election to take against the will is the best course of action for the surviving spouse and, if it’s the best course of action, make the actual election.
Unless a will expressly states otherwise, an election against a will results in the balance of the net estate being disposed of as though the surviving spouse had predeceased the testator. Furthermore, unless a trust says otherwise, if a will transfers property to a trust created by the testator during the testator’s life, such as with a pour-over will, and the spouse elects against the will, then the surviving spouse is considered for purposes of the trust to have predeceased the testator, and there shall be an acceleration of remainder or other interests in all property bequeathed or devised to the trust by the will, in all property held by the trustee at the time of the death of the decedent, and in all property that comes into the possession or under the control of the trustee by reason of the death of the decedent. Again, an election to take against a will can have serious ramifications for a decedent’s estate plan. An Ohio estate planning attorney will be better able to spell out the consequences of such an election and track which estate assets may be effected by an election and in what ways.
It is important to note, however, that an election to take against a will does not alter or destroy the will for other beneficiaries. Upon an election against a will, the administrator or executor of the estate must still attempt to follow the testator’s intent and final wishes to the best of the fiduciary’s ability as to all others in a will except the surviving spouse.
The only real ways to waive or eliminate the statutory right of the surviving spouse to elect to take against a will is either a valid prenuptial agreement or antenuptial agreement. These agreements, however, are not guaranteed effective and are only valid if 1) they have been entered into freely without fraud, duress, coercion, or overreaching, 2) if there was a full disclosure, or full knowledge and understanding of the nature, value, and extent of the prospective spouse’s property, and 3) if the terms do not promote or encourage divorce or profiteering by divorce. With the recent rise of divorce rates in America nuptial agreements are steadily gaining in popularity and use. As such, consult an Ohio attorney to find out if nuptial agreements are right for you or if the nuptial agreements you already have are either valid or actually fulfilling their intended purpose.
Spousal rights were created to ensure that surviving spouses aren’t maliciously or wrongfully cut out from a will. Improper disinheritance from a will can result in a surviving spouse falling into poverty, being kicked out of a lifelong martial home, or becoming a burden on friends and family. Though it may seem unseemly to focus on material possessions when a spouse passes, the responsibilities and burdens of day to day living still persist regardless. You still need food in the fridge and a roof over your head. After all, as Langston Hughes said, “life is for the living.”
You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.
Helping You And Your Loved Ones Plan For The Future
About the author: Mike E. Benjamin, Esq.
Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.
Procedures To Shorten Or Avoid Probate Of An Estate
Cleveland, Ohio, estate planning lawyer, Daniel A. Baron, Ohio, offers the following information on what types of probate procedures shorten or avoid the need to probate and estate when speaking with your attorney when you are establishing your comprehensive estate plan.
When an individual dies, their “probate assets,” such as property not dispensed via beneficiary designations, transfer on death designations, or held within trust, go through probate.
Probate is the legal process provided by Ohio law where a probate court “sets the table” to administer a decedent’s estate. Namely, the probate court appoints an authorized fiduciary for decedent’s estate, determines the validity of a will, if there was one, oversees the determination of probate assets of decedent, and ensures probate assets are collected, maintained, and distributed to the proper parties according to decedent’s last wishes or, if there was no will, according to the laws of Ohio.
Probate is not a straight-forward process and it takes, usually, at least six months to complete and close an estate. Therefore, the two most common questions clients of estate planning attorneys ask is, why does probate take so long and how can we shorten or avoid the probate process. There’s a handful a probate processes one can use, if the circumstances of the estate qualify, within the Ohio legal codes to shorten or avoid the need to administrate probate. The following are of the few most widely used accompanied by minor explanations. Naturally, a Cleveland estate planning attorney can provide more expansive elaboration on these processes and guide you towards the ones that are best suited for a particular situation.
Filing Will for Record Only
A Will can be filed with the probate court when no probate administration is expected or required for the estate. For this type of probate proceeding, no appointment of an executor is needed. The benefits of going this route is administration costs are totally avoided but since the Will was properly delivered to the court, federal estate tax returns can be filed and exemplified copies of the filed Will are obtainable for out-of-state probate proceedings. This process is often used when certified copies of a Will are needed for administrations of out-of-state property owned by Ohio residents.
Summary Release from Administration
A summary release from administration is the most abbreviated probate proceeding for obtaining a release of assets. Usually, this type is used for small estates, such as those with minor amounts of personal property or a small bank account to distribute. The most common situation where a person would go this route is to get reimbursement from the estate for funeral expenses. Again, no executor is appointed in this proceeding.
Ohio law, however, does limit which estates may use this type of probate proceeding. This process may only if used if either:
- If value of the assets of the decedent’s estate does not exceed the lesser of $5,000 or the amount of the decedent’s funeral and burial expenses, any person who is not a surviving spouse and who has paid or is obligated in writing to pay the decedent’s funeral and burial expenses, may apply to the probate court for an order granting a summary release from administration: or
- There is a surviving spouse, the decedent’s probate assets do not exceed $45,000, the spouse is entitled to 100 percent of the family allowance, and the funeral bill has been prepaid or the surviving spouse is obligated to pay the funeral bill.
Release from Administration
A release from administration is the next tier up in regards to available abbreviated probate proceedings for obtaining a release of estate assets. No executor is appointed for this proceeding but a commissioner might be used if the facts surrounding the estate are more complicated than anticipated or if a determination of decedent’s ownership rights is necessary.
For this proceeding, the applicant certifies the nature and value of the probate assets to the court and the identity of decedent’s creditors and the amounts they are owed. If the decedent died testate, i.e. with a valid Will, the application to relieve the estate from administration is filed with the Will, along with all of the forms necessary to admit a Will for probate. Further, the decedent’s next of kin and devisees under the Will are notified and are parties to this process. If everything goes as it should and all the requirements are met, the probate court will issue an order releasing the probate assets, the payment to creditors with valid claims, and the distribution of probate assets.
Again, Ohio law does limit which estates qualify to use this type of probate proceeding. The process may be used only if either:
- There is no surviving spouse or the surviving spouse is not entitled to all probate assets and the probate assets are $35,000 or less and the decedent died on or after November 9, 1994. (Different asset levels apply for qualification if decedent died prior to this date.)
- The surviving spouse is entitled to all of the probate assets and the probate assets are $100,000 or less and the decedent died on or after March 18, 1999. (Again, different asset levels apply for qualification if decedent died prior to this date.)
Avoiding or limiting the probate process through selective use of codified probate processes is one way of preserving estate assets and saving everyone’s time. There are, however, other methods that avoid probate but also carry positive benefits for the estate, heirs, and intended beneficiaries. Creative and conscientious use of estate planning tools such as trusts, pour-over wills, and P.O.D. and T.O.D. designations can see even more savings for friends and family of a recently deceased. Contact a local Ohio estate attorney and find out the best way to plan your estate to maximize what is left behind for those you love and save time and expenses when going through probate.
You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.
Helping You and Your Loved Ones Plan for the Future.
About the author: Mike E. Benjamin, Esq.
Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.
Knowledge Is Power – Why Knowing The Difference Between Irrevocable And Revocable Trusts Is Critically Important.
Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on the differences between a Revocable Trust and an Irrevocable Trust. Contact Baron Law Cleveland to ask and have answered your questions on what the differences are and what would suit your needs best.
Your estate plan consists of many documents and covers a lot of bases. From protecting assets from creditors and litigants to avoiding probate where desirable, a comprehensive estate plan protects you while you’re living and provides for loved ones after death. Because estate plans are, by design, comprehensive, a lot of legal jargon is thrown around and often it’s difficult to keep track of all the nuance and detail. You can put your faith in your financial adviser or estate planning attorney and trust them completely with little or no understanding of what they’re actually doing. That certainly is an option, however, the better course is to ask questions and endeavor to remain informed as possible.
That said, one of the most common questions posed during an initial estate planning consultation is, what is the difference between a revocable and irrevocable trust? Since trusts represent one of the most utilitarian estate planning tools, they have the ability to do many useful and advantageous things in regards to estate planning, understanding the difference is critical to providing context to advice dispensed by Ohio estate planning attorneys.
- Revocable Trusts
Revocable trusts, commonly referred to as living trusts, are trusts that the grantor/settlor can change or cancel during their lifetime. The most significant aspect of living trusts is that the grantor usually keeps control over the assets placed in the living trust and, as such, receives no tax relief for those assets. Similarly, the grantor can also appoint themselves trustee of the living trust to dispense that control.
To use a simple metaphor, a trust is a treasure chest. Putting assets in the chest, the trust, protects the assets from particular threats outside and establishes rules which govern what is placed inside. The major distinguishing characteristic of living trusts is that the grantor, owner of the trust, keeps control of the key that unlocks the treasure chest and can get at what’s inside.
So, naturally, the next question after what is a revocable trust is, why would I want one? The advantages of living trusts are numerous but are highly particular to individual circumstances. An Ohio estate planning attorney is in the best position to judge what an individual’s needs are and the best ways to meet them. Generally, however, the primary advantages of using living trust are avoiding probate, directly providing for distribution of assets through trust beneficiary designations, privacy, trust inventories are not public record, and maintaining control of assets trusts during life and post-death.
- Irrevocable Trusts
Irrevocable trusts are trusts in which the grantor relinquishes all control and ownership over the trust and the assets used to fund the trust. Thus, the trust cannot be changed or canceled without the beneficiaries’ permission. Prior to trust formation, grantor can dictate whatever terms they desire to govern the trust, but after formation, those terms control independent of grantor’s wishes and desires.
So, again, why would anyone give up control and chose irrevocable trusts? As mentioned previously, with living trusts, grantors keep the key to the treasure chest. With irrevocable trusts, however, the grantor gives the key to another, namely a trustee. Since grantor no longer has the key, grantor can no longer get what’s inside the chest. Since the assets in an irrevocable trust no longer belong to grantor, at least in the eyes of the law, this has major tax and legal implications.
These tax and legal consequences are the primary advantages of irrevocable trusts, and what distinguishes revocable from irrevocable trusts. First, since control over trust assets is relinquished, the IRS does not consider trust assets to be in grantor’s taxable estate. Thus, estate, income, or gift taxes may be avoided or reduced in certain circumstances. Further, assets within an irrevocable trust enjoy protection from creditors and litigation. Of particular importance for seniors, assets within this type of trust are not counted as an asset for eligibility in Medicaid or other government assistance programs. A common tactic is to place a martial home, usually the largest asset, in trust. Thus, eligibility is maintained but the house can still be lived in. This sheltering of assets while still maintaining use is at the core of irrevocable trusts. Even though direct control is relinquished, grantors dictate the terms of the trust. Such terms often mandate to the trustee that such trust assets are used for the health, support, and maintenance of the grantors. Thus, grantors still get to enjoy and profit from assets but get the benefits of not, technically, owning such.
Naturally, the question everyone asks is which one is best. Unfortunately, as with most things financial and legal, there isn’t a straight answer. Dependent on the circumstances, such as estate planning goals, family structure, available estate assets, either or both types of trusts may be advantageous to use. A Cleveland estate planning attorney is in the best position to judge what is most appropriate for a given situation.
Regardless of which is most appropriate, the most critical part is funding your trust. Picking what type or types of trusts is best is the easy part. The hardest part, and the one most often overlooked, is properly funding a trust. More often than not, people think after creating the trust the work is done. This is patently false. A trust without proper funding isn’t worth the paper it’s printed on. If you’re asking yourself how do I fund my trust or is my trust funded, please contact an Ohio trust attorney as soon as possible. The security you though you bought with your trust is likely imaginary.
You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.
Helping You and Your Loved Ones Plan for the Future.
About the author: Mike E. Benjamin, Esq.
Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.
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.
Estate Planning – Documents I Should Provide My Attorney
Cleveland, Ohio, estate planning lawyer, Daniel A. Baron, Ohio, offers the following information on what documents are necessary for you to provide your attorney when sitting down to establish your comprehensive estate plan.
“Be prepared.” Boy Scouts of America
A recent survey taken by the AARP found that 3 out of every 5 Americans have no estate-planning documents, not even a simple will. Thus, money and assets they’ve spent a lifetime earning and saving are at risk from creditors, litigation, and state and federal taxation. Further, none of their friends or family know how to handle their affairs or last wishes. Even though the majority of people have not taken the necessary steps to formulate a plan when the inevitable comes, all can agree that leaving friends and family to scramble to pay your debts, settle your accounts, and divide your worldly possessions is not the best way. A time of mourning should be just that, for mourning, not for calling bankers, insurance agents, or accountants.
Hopefully, you’ve decided to take the first step and enter into the minority of Americans who proactively address what is left behind when they pass. However, a familiar question exists, how do I get started? That is, what do I need to start planning my estate?
Most, if not all, lawyers are traditional, they like things they can touch and read. So, before you meet with your attorney to plan your estate, you’re going to want to bring a few things. The following list is by no means exhaustive but will give you a good start. Collecting these documents before your meeting will save everyone time, allow your attorney to better comprehend your personal estate planning needs, and prepare you mentally so you can better communicate what you want and what your family needs out of your estate plan.
A General Accounting of your Estate
The word estate is a term that denotes all of the money, property, and debts owned by person, particularly at death. Naturally in order to plan an estate, it must be known what an estate actually encompasses. Therefore, on a piece of paper or computer spreadsheet, your going to write out your estate.
List out: your taxable accounts, your retirement accounts, any life insurance policies, any annuities, your personal residence, other real estate, any highly significant personal property (cars, furniture, artwork, jewelry, etc.), business interests, and any outstanding debts, liabilities, or obligations. For each category, split them up between those owned solely by you, those owned solely by your spouse (if married or part of a civil union), and those owned jointly.
This information is critical for tax projections and allows your attorney to take the necessary steps now, or at death, to ensure that the most property and money goes to where you want and not lost via government taxation, creditors, or litigation. There is a multitude of ways your attorney ensures estate preservation, however, knowing exactly what you have and what you want to do with it is critical. Note that this list only serves as an estimate of your estate, not an exact accounting. Your attorney will be able to advise and guide you on obtaining an accurate picture of your entire estate but this list will be the foundation for future calculations.
Life Insurance Policies
Life insurance is a common tool people use to guarantee their surviving family won’t be left in an untenable financial position in the event of death. The lump sum that life insurance proceeds guarantee can fill critical gaps in an estate plan and ensure that your loved ones are taken care of and your affairs are handled in a respectable manner. This is only possible, however, if the proper beneficiaries are designated. If not, who knows how your proceeds are spent. Therefore, ensuring the proper beneficiaries are denoted and/or updated on your insurance policies is of utmost importance. Make sure to have your attorney review your beneficiaries and file any change of beneficiary forms you desire.
Of further note for seniors, some life insurance policies, such as whole life or universal, accrue cash value which may affect Medicaid eligibility. The accumulation of cash value under particular life insurance policies counts as an asset, which if exceeds $2,000 may disqualify a person from Medicaid. Again, this is something to bring to your attorney’s attention so your estate plan can be more personalized to your needs.
Additionally, life insurance policies are often part of your taxable estate. As such, proper steps during estate planning must be undertaken to lower or avoid the tax burden on the estate. Named beneficiaries of life insurance proceeds may also face significant tax consequences from a sudden influx of cash. As such, bringing your life insurance policies to your estate attorney allows him to understand the type of insurance you possess and avoid issues with regard to beneficiary designations, Medicaid eligibility, and estate tax consequences.
Investment Portfolio
You’re also going to bring your investment portfolio to your attorney. That is, anything evidencing your 401k, owned annuities, stocks, bonds, or mutual funds, and other retirement accounts such as IRAs and Roth IRAs, regardless of whether the IRS classifies them as qualified or unqualified plans. Your investment portfolio is likely a major asset that is a significant part of your taxable estate and whose constituent parts each often have their own special rules regarding contributions, distributions, transfers, and inheritance. Bringing your investment documents to your attorney will allow him to plan your estate accordingly and inform you of the special rules, privileges, and schedules applicable to the particular investment instruments you’ve chosen.
A List of Important Property with Bequests
Generally, this is what most people think of when talking estate planning, who gets the house and who gets grandma’s heirloom necklace. In order to avoid any conflict and confusion between surviving family members over who gets what when you pass, write out a list of the biggest and most important bequests of personal and real property.
Most people list out vehicles, real estate, business interests, family heirlooms, expensive electronics, art work, etc. Pretty much anything that has high sentimental or financial value. Obviously for each item on the list write who gets what and in what way. For simple property, like jewelry, usually an individual gets a direct bequest and the item is theirs when you pass. For other property, such as real estate or business interests, usually these are split up in particular ways. For example, a business being split equally between surviving children or a house passing only to children of a first marriage. Your attorney will inform you of the multitude of ways bequests may be structured in order to satisfy your particular estate planning needs.
Thinking about and writing out your property bequests ensures your final wishes are followed and avoids familial infighting. On top of bringing this list to your attorney, bring any deeds, titles, or other ownership documents. This will expedite an estate accounting after your death for your executor and makes sure you actually own what you think you do. Far too many times families are taken by surprise by a faulty title or hidden lien or claimant on a deed. Your attorney can easily check a chain of title or confirm the validity of a deed and avoid any question of ownership down the line.
A “Managed Care Plan”
This is not to be confused with the private insurance plan you sign up for, or Ohio picks for you, when you apply and are approved for Medicaid. Managed care plans within the context of Medicaid private insurance isn’t the subject here, however, it is an important subject that should be discussed and planned for with your attorney.
Within this context, your managed care plan means a coherent idea of where and how you want to spend the last years of your life, especially in the event of deteriorating health or debilitating disease. That is, the logistics, finances, and questions surrounding issues of hospice care, managed care facilities, nursing homes, and general living as one advances in age.
For example, planning out your senior living situation will likely enable you to stay with your primary care physician and specialists longer. Often the accessibility of physicians and medical specialists are subject to geographic restriction, insurance coverage, or out-of-pocket cost. A proper estate plan can guarantee the funds exist to support continued care in the manner you’ve grown accustomed to and communicate to friends and family your medical wishes far in advance of when those questions arise. Never underestimate the value of spending the autumn of your years in clean and comfortable healthcare facilities with treatment from doctors that have an established relationship. As such, bring any contracts, agreements, or marketing materials of any health or senior living facilities you wish to go to. Every piece of information allows further personalization of your estate plan and more clearly communicates what you want to your family many years down the road.
Further, bring important legal documents such as designations for durable, health, or financial powers of attorney, any do not resuscitate orders (DNRs), and executor and administrator elections. If you don’t have any of these documents prepared, these can easily be drafted by your attorney during your estate planning.
Americans are living longer than ever before and having a plan to confront advancing age is important to ensure comfortable living and piece of mind for the family. Granted this is not an enjoyable or fun aspect of life to think about and plan out, but it is something you and your family will never regret.
Conclusion:
Bringing the listed documents and gathering up your thoughts according to the issues highlighted will give you a good head start in preparation to planning your estate with your attorney. Again, this list is not exhaustive and only touches on a fraction of the issues that addressed during estate planning. Major issues such as surviving spousal support and guardianship of minor children, among many others, must be handled too, so think about these issues as well. Estate planning is a complex process but taking a little time to gather documents and think about the future will pay big dividends to you while you’re here and make life much easier for your family when you’re not.
You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings.
For more information, you can contact Dan A. Baron of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Dan can also be reached at dan@baronlawcleveland.com.
Helping You and Your Loved Ones Plan for the Future.
About the author: Mike E. Benjamin, Esq.
Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.