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What is a Trust?

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Cleveland, Ohio Trust Attorney

What is a trust?  What is the difference between a revocable trust and an irrevocable trust?  Why might my estate plan include either one?

Simply put, a trust helps manage your assets and provides clarity for the future.  A trust is a tool that may be used to achieve your financial goals.  There are different types of trusts for specific situations, from special needs trusts for family members with disabilities to charitable trusts that allow charitable giving while maintaining income as needed.  Trusts also fall into the categories of revocable (or living) trusts and irrevocable trusts.

Differences between a revocable and irrevocable trust

  1. Changes or modifications

An irrevocable trust generally cannot be changed or modified under any circumstances, whereas a revocable trust can be modified or revoked at the discretion of the Grantor.  However, the Grantor may maintain a special power of appointment in an irrevocable trust giving him or her the freedom to modify the beneficiaries without changing the benefits.

  1. Property ownership and asset protection

Assets placed in an irrevocable trust no longer belong to the Grantor.  The trust has its own identity.  The Grantor may still use assets for his or her benefit as specified in the trust, but he or she does not own the assets (much like leasing). Creditors cannot claim assets from the Grantor in this case, as the Grantor does not own the assets.

In a revocable trust, the Grantor retains complete ownership of the property.

  1. Estate taxes

As seen above, in an irrevocable trust, the Grantor no longer owns the property.  Thus, it is not included in the value of property at the time of death.  A revocable trust does not change ownership, and thus the value of the property would be included at the time of death. However, keep in mind the unlimited marital exclusion.  Surviving spouses may effectively pass their estate, tax free, to their spouse.  In addition, the 2016 estate tax exclusion is $5.34 million.

  1. Trustees

With an irrevocable trust, the Trustee should be an independent person chosen by the Grantor.  The Trustee should not be a family member, as this could create conflict.  However, with a revocable trust, the Grantor most often serves as the Trustee, maintaining control over the assets in the trust.

  1. Income tax effects

With an irrevocable trust, the trust is its own entity and typically has its own tax identification number and is responsible to file a 1041.  For a revocable trust, the Grantor still owns the assets and files everything on their 1040.

As seen above, the main purpose of an irrevocable trust is to protect assets.  The main purpose of a revocable trust is to avoid probate, simplifying the transfer of assets.  Determining the reason for the trust will allow the Grantor to make an informed decision about what type of trust is best for his or her situation.

And as with all legal and financial planning, laws change, so a consultation with an attorney is advised before creating a trust or any estate plan.  For more information, or to speak with an expert, contact Baron Law LLC at 216-573-3723 or email Dan@baronlawcleveland.com.

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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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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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Living Trusts vs. Testamentary Trust

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Living Trusts vs. Testamentary Trusts

Cleveland, Ohio Estate Planning Attorney Dan Baron:

If you’re planning for your Ohio estate plan, then you’re probably lost among the many estate planning terminologies. However, there are numerous estate planning methods to provide safety and security for your family.  There are many ways to achieve this including living trusts, testamentary trusts, wills, legacy trusts, power of attorney’s and more.    If you have minor children (under the age of 18) it is often suggested to implement a testamentary trust into your last will and testament.  How is this different from a living trust you ask?  Here ‘s some additional insight…

First, if you’re trying to decide between a trust or a will, please see this link. However, if you have children, a testamentary trust is often recommended for your estate planning needs.  A testamentary trust is created in your last will and testament.  Thus, unlike a living trust, a testamentary trust will not take effect until you die.  The terms of the trust are amendable and revocable – they can be changed at any time.   It is highly recommended to include a testamentary trust in your will for parents who are at risk of dying at the same time.

Example: Husband and Wife have $1,000,000 in assets including a house, stock, and automobiles.  Both Husband and Wife die in a car accident and leave behind three children ages 4,6, and 11.  Because their children have not reached the age of 18, they may not have a claim to the money until they reach the age of maturity – age 18.

A testamentary trust can help avoid the scenario above.  Through the trust, you may set parameters on your estate.  For example, you might include terms that allow for $1,000 a week to be given to your children in the event both parents pass.  Or, you might hold off on giving your children any money until they reach the age of 21, 25, attain a degree, get married, etc.  Having a testamentary trust allows you to control your estate even after your death.  Note however that if only one parent dies in the example above, the testamentary trust does not take effect.  Instead, most often times the dying spouse leaves all of the estate to their spouse.  In that instance, the remaining spouse would determine how and when the money is distributed among the children.  Side note – you cannot disinherit your spouse…

Contrary to a testamentary trust, a living trust – or inter-vivos trust – takes effect at its creation. These trusts can be either revocable or irrevocable.   Inter-vivos is Latin for “among the living persons.”  So, if I were to decide to give you my boat, then that would be an inter-vivos transfer.  Typically, a living trust must contain a trustee (a person responsible for carrying out the wishes of the creator), and a beneficiary (the persons receiving the benefit of the trust).  In Ohio, you as the creator of the trust may not be the beneficiary of the trust unless you elect to set up an Ohio legacy trust.  Put simply, a living trust is one that is created during your lifetime.   Living trusts are often recommended for those who wish to avoid probate or want to keep their assets private.

For more information, contact Cleveland, Ohio estate planning attorney Dan Baron at Baron Law LLC.  Baron Law is a Cleveland, Ohio are law firm practicing in the areas of estate planning, divorce, business law, and securities litigation.  Contact an trust attorney at Baron Law today at 216-573-3723.  You will speak directly with an attorney who can answer all your trust and estate planning questions.

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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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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.

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What is the Difference Between a Trust and a Will?

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This blog will help you understand some of the core differences between a will and trust, but it is not intended to provide legal advice.  If you’re planning for your estate, contact Dan Baron at Baron Law LLC. Call and speak directly with an attorney at 216-573-3723.

Most people have heard the terms “will” and “trust,” but not everyone knows the unique differences between the two.  Both trusts and wills are useful estate planning tools, but can serve different purposes.  Most importantly, both can work together to create a complete estate plan.

The main difference between a will and trust is that only a will passes through probate.  (Visit here for additional information on understanding probate).  Generally, probate is a process that involves the court who oversees the administration of the will and ensures the will is valid. The court will also administer the property making sure it gets distributed the way the deceased wanted.   Thus, an authenticated will will pass through probate while a trust most likely will not.  Courts do not need to oversee the distribution of a trust, which can sometimes save time and money.  In addition, many people favor a trust because they can be very private.  On the contrary, a will can sometimes become public record.

A trust is a legal arrangement where one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.”  A trust usually has two types of beneficiaries — one set that receives income from the trust during their lives and another set that receives whatever is left over after the first set of beneficiaries dies.

Another difference between a will and a trust is that a living will goes into effect only after you pass, while a trust takes effect as soon as it is created.  Through probate, a will determines who will receive your property at your death and it appoints a legal representative to carry out your wishes.  This person is called the trustee.   In comparison, a trust may be used to distribute property before death, at death or afterwards.  A will covers any property that is only in your name when you die. It does not cover property held in joint tenancy or in a trust.

Both wills and trusts each have their advantages and disadvantages.   For example, a will allows you to name a guardian for children and to specify funeral arrangements, while a trust does not. On the other hand, a trust can be used to plan for disability or to provide savings on taxes. (See elderlawanswers.com for more information).

Hopefully this blog has helped you understand some of the differences between a trust and a will.  If you are planning for your estate, or would like additional information, contact Dan Baron at Baron Law LLC.   Call today at 216-573-3723. You will speak directly with an attorney who can help you decide whether a will or trust is best for your estate planning needs.

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What is Probate?

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