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Daniel A Baron Estate Planning Lawyer

Irrevocable Life Insurance Trust – Is It Right For You?

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Cleveland, Ohio, Estate Planning lawyer, Daniel A. Baron, of Cleveland, Ohio, offers the following information on establishing an Irrevocable Life Insurance Trust (ILIT). Is it the right fit for you when creating your estate plan?

When you think about life insurance, you typically are going to use this as a vehicle to plan for the possibility of passing away while still having loved ones to support. What kinds of expenses do you look to cover after you pass?

  • Mortgage expense
  • Children’s future education
  • Credit card debt
  • Vehicle loans
  • Funeral costs
  • Your spouses’ daily needs
  • Your children’s daily needs
  • Spouse and children’s health needs
  • Etc.

You may want to consider creating an Irrevocable Life Insurance Trust (ILIT).   Quite simply this is another tool to maximize your estate tax savings while still giving you the benefits of insurance coverage.  As the name states this is an irrevocable trust so you cannot remove this policy from the trust at a later date and have it revert to your personal name.  You do maintain control over it as far as naming the Trustees and the Beneficiaries and changing them at any time in the future if the need arises.

As mentioned this would serve as a great way to maximize your tax liability upon your death. Keeping in mind that when you pass away and insurance company sends your check to you, the government is waiting for their share of the funds.  So the benefits of putting your life insurance policy in the Trusts name:

  • Reduces the size of your estate, therefore reducing your tax liability
  • You can consider reducing the amount of coverage since you will not have to guard against the tax hit thus savings you insurance premium dollars
  • The cash value of the policy is protected against creditors
  • If your spouse, children, or other named beneficiaries are receiving any government aid such as Medicaid, this helps protect the benefits your beneficiaries are receiving

To see whether or not an Irrevocable Life Insurance Trust is the best fit for your tax planning situation, you need to speak with an experienced Estate Planning lawyer. Contact Daniel A. Baron of Baron Law today at 216-573-3723 to answer any questions you may have on a creating an ILIT.  I welcome the opportunity to work with you and recommending the best solution for your needs.

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Do I need a Trust?

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Exploring whether you need a trust may be answered below visiting this questionnaire: DoIneedaTrust.com.   In addition, you may find the following information written by Cleveland, Ohio estate planning lawyer Daniel A. Baron useful.

Even if your name isn’t Bill Gates or Warren Buffet, it does not necessarily mean that the need for you to establish a trust does not exist. If your Net Worth is greater than $100,000* and you have very specific desires as to how you would like to disperse your assets after you pass away, you should consider creating a trust.  Although you would have a will in place as well, by establishing a trust you will maximize your tax benefits.  In addition this will also protect your assets from creditors and ensure that your heirs receive the items you would like to pass onto them.  This not only pertains to liquid assets such as cash and your investments but property as well.

There are a number of different trusts available to you to create which can protect your assets and minimize your estate taxes at the end. Each of us has our own needs when it comes to protecting our assets for the next generation and to make sure that your wishes are followed after your passing.

Some of the different types of trusts you may want to discuss to see what best suits your needs:

  • Revocable
  • Irrevocable
  • Credit Shelter / A-B Trust
  • Generation Skipping
  • QPRT
  • Irrevocable Life Insurance Trust
  • Children’s Trust
  • Medicaid Trust
  • Life Estate Trust
  • Medicaid Asset Protection Trust
  • Intentional Defective Grantor Trust

To see what trust is best suited for you, contact an Estate Planning Lawyer. These are some of the topics you should be prepared to discuss:

  • Do your investments name a beneficiary or do they have a POD (payable on death) or a TOD (transfer upon death) form attached to them?
  • Do you have a child with special need that you need to have cared for after your passing?
  • Do you own any real estate out of state?
  • Do you have a unique plan of how you would like your estate divided?

*To determine your Net Worth take the sum of your total assets (cash, property, investments, etc.) and subtract your total liabilities (mortgage balance, credit card debt, etc.). Plain and simple take what is OWNED and subtract what is OWED.

To get answers to your questions as to what type of trust is best suited for your specific needs you should speak with an experienced Estate Planning lawyer. Contact Daniel A. Baron of Baron Law today at 216-573-3723 to answer any questions you may have on creating your trust.  We welcome the opportunity to work with you and recommending the best solution for your estate planning needs.

Helping You and Your Loved Ones Plan for the Future

 

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What Is A Credit Shelter Trust?

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Cleveland, Ohio estate planning lawyer, Daniel A. Baron, of Cleveland, Ohio, offers the following information on what a Credit Shelter Trust is and should it be part of your comprehensive estate planning.

If you are married and an investor, for example, consider establishing a Credit Shelter Trust. This can also be referred to as an A-B Trust and is an Irrevocable Trust.

The benefits of a Credit Shelter Trust is, that it allows the assets of the trust (up to a predetermined amount, i.e. $500,000) to transfer to the beneficiaries specified within the trust, typically your children, without any estate taxes being assessed.    Also, your spouse continues to have all rights to the assets of the trust and any income generated until the spouse passes away.

If you are a blended family, a Credit Shelter Trust might be the right tool for you as part of your comprehensive estate planning. If at the time of death of the first spouse the assets of the deceased spouse to immediately into the Credit Shelter Trust.  If the assets transferred are larger than the predetermined amount (we used $500,000 as the example), the excess assets go into a trust which qualifies for the Marital Deduction.  Since the Credit Shelter Trust is irrevocable, it has great estate tax liability advantages as well as making certain your assets are passed along to your beneficiaries, typically your surviving spouse and your children.  Establishing a Credit Shelter Trust insures that the worry of the step-parent now getting all the assets, your assets will now be distributed to the beneficiaries as you intended them.

In the event your spouse is still living and would need to dip into the trust’s assets that were set aside for your children, it would be up to your Trustee to assess the necessity of the transfer of funds. The step-parent would not have carte blanche to the funds.

For answers to any questions you may have on a Credit Shelter Trust and making it a part of or your Comprehensive Estate Planning, contact Daniel A. Baron of Baron Law today at 216-573-3723. Let’s work together to see what the best Trust is for your situation.

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Why Do I Need A Guardianship?

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Cleveland, Ohio, Estate Planning and elder law attorney, Daniel A. Baron, offers the following information on creating a Children’s Testamentary Trust for your loved ones. Is it the best option for you when creating your estate plan?

Most people understand and realize that they should name a Legal Guardian for their minor children. However, many people don’t take the necessary step further to consider the financial aspects of guardianship after a parent passes away. Creating a testamentary trust can alleviate this worry and for the most part is inexpensive to create.

Consider Establishing a Children’s Trust. 

Establishing a Children’s Trust, aka a Testamentary Trust, in your will, now creates a way for you to take care of your minor children after you have passed away. By naming a Trustee to oversee the trust allows them to take care of your children’s financial needs for everyday living and any health issues which may arise, as well as their future education needs.

What happens to your property should you pass and have minor children?

Unless specifically noted otherwise in your will, when you pass and your children are of legal age, they will automatically inherit all your property. But what happens if your children are minors?  When a Children’s Trust is established you can appoint a Trustee, or ‘Property Manager’ to oversee the property to make certain your minor children have a place to live and are cared for.  In the absence of a Property Manager being named, the courts will appoint a Property Custodian.  Depending on your individual circumstances, you may want to consider creating a Life Estate.

Should I create a trust for each of my minor children?

Upon your passing any children of legal age will automatically inherit your assets unless otherwise specified in your will. Let’s assume you have minor children, then it would be wise to set up a trust for each child and name a trustee to oversee the trust to make certain that the funds and property are used for the child’s needs and in their best interest.

If you do not wish to establish a trust for each child, consider a revocable living Trust or  Family Trust.  The Trustee(s) would handle this single trust in the same manner as if you were to set up individual trusts for each child.

When creating your Comprehensive Estate Plan you need to speak with an experienced Estate Planning lawyer. Contact Daniel A. Baron or Baron Law today at 216-573-3723 to answer any questions you may have on a creating a Children’s Trust.  I welcome the opportunity to work with you and help recommend the best solution for your needs.

Helping You and Your Loved Ones Plan for the Future

Why Every Parent Should Establish A Guardianship Within Their Estate Plan

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Cleveland, Ohio estate planning lawyer, Daniel A. Baron, offers information on why every parent should establish a guardianship for their minor children within their estate plan:

 

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When is a guardianship necessary?

It is customary for the parents of minor children to make any and all legal decisions that are necessary to keep their children safe. There may come a time however, when the minor children need a guardianship established.

Some of the reasons in which a guardianship needs to be established are but not limited to:

  • The parent or parents are deceased
  • A minor inherits assets and the parent or parents are not qualified to make legal decisions
  • The parent or parents are not or cannot take care of the minor child any longer due to illness
  • The parent or parents cannot take care of the minor child any longer due to incarceration

What is role and responsibilities of the guardian?

  • Has the right to deny certain persons to come in contact with minor child or restrict the interaction with certain persons
  • Become the minors fiduciary by keeping inventory and control of all assets
  • Investing minors child’s assets
  • Pay the minor child’s bills
  • File income taxes annually
  • Decide where the minor child shall live

In some cases if you are a guardian you may need to get permission from the courts to carry out these duties.

In addition to overseeing the over-all wellbeing of the minor child and the estate, the guardian also has the following duties:

  • If necessary, bring a lawsuit on behalf of the minor child
  • If public assistance benefits are required, apply for them
  • Apply for public housing where needed for the minor child
  • Provide a legal residence for the minor child so that the minor child attends school and receives a quality education
  • Receive and maintain any funds given to support and care of the minor child
  • Authorize any care such as medical or other care necessary to insure the wellbeing and support of the minor child

Essentially the guardian looks after the minor child just as the parent or parents would have.

For more information on setting up guardianships for your minor children or your minor or adult child with special needs, contact Daniel A. Baron of Baron Law today at 216-573-3723.

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When is a Legal Guardianship Necessary for my Parents?

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on when it becomes necessary to change legal guardianship for your elderly loved one:

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Legal Guardianship is used when a person is unable to make or make sound decisions about themselves personally or their property. These same persons can likely be or already have been a victim of fraud or undue influence.  Although a guardianship may limit a person’s rights considerably, establishing a guardianship should be used after other actions have failed or are no longer available.

In the event a legal guardianship may not be totally necessary there are some alternatives you may want to consider that will still protect your loved one:

Some rights of the elderly which may be affected once a guardianship is put into place:

  • Medical treatment consent
  • Making End of Life Decisions
  • Voting
  • Enter into a contract
  • Possess a driver’s license
  • Selling Property

It is always best if the guardian consults with the individual to make any decisions that affect that person if they are still able to make sound rational decisions. However sometimes, the guardian must make the decisions themselves if your loved one is no longer able to participate.  The guardian should always take into consideration the individuals wishes if they are known.

Let’s start the conversation about when is the best time to consider establishing legal guardianship for your loved one. For more information on reviewing your goals for Long Term Care as part of your Estate Planning, contact Daniel A. Baron of Baron Law today at 216-573-3723.

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The Importance of an Elder Law Attorney

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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 […]

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When Should You Start Planning For Long Term Care?

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on when you should start planning for Long Term Care and including this as part of your Estate Planning:

 

When should you start planning for Long Term Care? If you are under 50, the answer is – “there is no time like the present”.  Approximately 70% of today’s population will need some sort of Long Term Care sometime within their lifetime.

What you should know about planning for the future

When in later years and you are in need of skilled services or should you require rehabilitation services, Medicare pays for this type of long term care. Unfortunately, Medicare does not pay for any non-skilled assistance with your ADL’s (Activities of Daily Life) or IADL’s (Instrumental Activities of Daily Living) which tend to make up the majority of Long Term Care.

You should start thinking now about how you are going to pay for Long Term Care as it is much more expensive than you might think.

There are a number of ways you can use to pay for your long term care. Being 50 of under, this may be the best time in your life financially to start planning for long term care, rather than after you have had a serious illness or become disabled.

You may also consider securing an Advance Directive which informs your family and other loved ones how you would like your medical matters handles, should you become incapacitated and are no longer able to communicate your wishes of your medical care.

For more information on reviewing your goals for Long Term Care as part of your Estate Planning, contact Daniel A. Baron of Baron Law today at 216-573-3723.

Medicaid Planning

Applying for Medicaid? Here’s What You Need to Know About Activities of Daily Living vs. Instrumental Activities of Daily Living

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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 […]

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Grantor vs Non-Grantor Trusts

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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:

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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

  • Revocable Living Trust
  • Dynasty Trust
  • Grantor Retained Annuity Trust (GRAT)
  • Spousal Access Trusts
  • The majority of Irrevocable Trusts
  • Defective Grantor Trust (IDGT or DIGIT)

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:

  • Sell assets to the trust and not have to pay for the gains of the sale
  • Loan money to the trust – keeping in mind that the trust must pay the minimal IRS interest rate; however the income recognized from the interest is not taxable to you
  • The trusts income tax, paid by you (the Grantor), is not viewed as a gift to the trust

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.