Cleveland, Ohio estate planning and elder law attorney, Daniel A. Baron, offers the following information on the definition of ADL’s and IADL’s and how to plan on Long Term Care as part of your Estate and Medicaid Plan: As we are all well aware, there is only one alternative to aging. If you are fortunate […]
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following information on the Definition and Role of an Executor of your Estate.
Being named and then carrying out the duties of an executor can be one of life’s most frightening tasks however; keep in mind that this is also an honor. Being named an Executor of someone’s estate shows that the person naming you has entrusted you with the great responsibility of making sure their last wishes are granted with respects to the settlement of their property and assets. Fundamentally, an executor of any will is responsible for making sure that any and all debts and creditors of the deceased are paid off, and that any remaining money and/or property of the estate is distributed according to the decedent’s wishes.
Bear in mind that the law does not require an executor to be a lawyer or for that matter a financial expert; however, it does require that every executor fulfill their duties with the utmost honesty and attentiveness. In other words, according to law, you have a “fiduciary duty,” that as the executor, you are going to act in good faith with regards to a person’s will.
As the executor, generally you are not entitled to proceeds from the sale of any property of the estate. The executor however, is entitled to a fee as compensation for administering the will. The fees could be mandated that it be reasonable depending on the size or involvedness of the will.
Executor Definition:
To Fulfill Specific Duties; there are many obligations that an executor of a will may have to realize, depending upon the involvedness of the will and the property to be distributed.
These duties normally include but are not limited to:
Finding the assets: The executor is responsible for finding all the decedent’s assets and for keeping the assets safe until they can be appropriately dispersed to those named in the will and/or to creditors and debtors. This controlling of assets can include upon deciding which types of assets to sell as well as what kinds of assets to keep.
Winding up the deceased’s affairs: This can cover a multitude of items to be dealt with
Locating and communicating the heirs: Locating and contacting those who have been named and who are supposed to inherit money and/or property can be a challenge at times. If the will has not been updated, people may have moved so you the executor will need to be vigilant in finding all the heirs listed. There are some cases the deceased has designated certain property/assets go directly to an individual or charity. So it is imperative that the correct heir be found.
Deciding whether or not probating the last will and testament in court is necessary: Probating a will is the process of getting a court to approve the legitimacy of the will.
Verifying that the Will has been filed in the proper probate court: This is commonly required by law even if the will does not need to be probated
Should I set up a Separate Bank Account for the Estate?
Setting up a bank account for the estate: Since it is wise not to co-mingle the Executors funds and the deceased party’s funds, the executor is typically required to keep the estate’s money separate from their own funds. Opening up a bank account in the name of the estate makes paying off creditors and the heirs so much easier and helps prove what went into the estate, came out of the estate until such time it has been completed.
Pay ongoing required payments: Monies in the estate’s bank account are used for making mortgage, insurance and any additional ongoing payments that need to be paid during the management of the will until the estate is settled with all property being sold.
Do Heirs get paid before debtors and creditors: First and foremost; all of the decedent’s debts and creditors need to be paid off before any heirs can inherit the remaining assets. The executor of the will should notify all creditors of the death of the individual and see how they wish to proceed.
Paying final income taxes: You know that there are two things certain in life – death and taxes. One of the responsibilities the executor of a will has it that they are in charge of making certain that the decedent’s income taxes are paid for the last year they were alive.
Distributing deceased’s property: If listed in the will that certain property goes to certain heirs, the job of the Executor has it to make sure that it gets to the rightful heirs and recorded that it was given to the appropriate party. If there is other property that is not named in the will, it should pass according to the laws of the State of Ohio.
If no will is in place, the party in charge is typically called the administrator and will be responsible for reviewing the state law to see who the estate’s property will pass to in “intestate succession.”
Having an Executor of your Estate is only one part to a comprehensive estate plan. For information regarding living wills, Last Will and Testaments, trusts, powers of attorney, or a pour-over will, contact Daniel A. Baron of Baron Law today at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following helpful answers to Powers of Attorney:
What If I have a Power of Attorney From another state?
Most Powers of Attorney signed in other states will be recognized in the other states. A Power of Attorney used to convey title to real estate, typically must be signed, dated, witnessed by two people, and “acknowledged” or notarized by a notary public or court official. The state laws will govern who is authorized to take “acknowledgments”. The practical question is not whether the Power of Attorney is valid, but whether a financial institution will honor it. Also, if the document refers to statutes from another state, you may have to provide a copy of those statutes.
The law may vary in the state where you signed your Power of Attorney versus the state in which you now reside. Even if the document lists the same or similar powers, the meanings may be different in the two states. Also, many states have different statutory protections for people signing a Power of Attorney.
Suffice it to say, it may be in your best interest, if practicable, that you have new Powers of Attorney executed.
Do I need to get a new Power of Attorney if I move to a different state?
When moving to a different state, you should always consult a local attorney to see whether your Power of Attorney will be as you intended.
In some states, a Power of Attorney is not “durable” unless it is “recorded”. Recorded means filed with local government. In addition, there may be special rules about how it is revoked. It would behoove you to check with a local attorney.
Again, it may be in your best interest, if practicable, that you have new Powers of Attorney executed.
A Power of Attorney is only one of the many parts to a comprehensive estate plan. For information regarding living wills, trusts, power of attorney, or a pour-over will, or further questions on Powers of Attorney, contact Daniel A. Baron of Baron Law to arrange a meeting at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following helpful answers to Powers of Attorney:
Can the Power of Attorney be used by the agent to take my money or property without my permission?
Unfortunately, you can run the risk that the agent you choose to give your Power of Attorney could abuse the power by spending your money or taking your money without your knowledge or worse without your permission. Because the agent can use the Power of Attorney to access your bank account and sell your property, it is prudent that you not give your Power of Attorney to anyone you do not trust. If you happen to have an unscrupulous agent, it can be very challenging to get back funds or property taken by the agent, because the agent usually has no money left to return as they have used it all for their benefit. The person acting as your Power of Attorney has the power to sell your property, or mortgage it. It cannot be stressed enough that you chose your Power of Attorney very wisely.
If I think someone is using my Power of Attorney to steal from me, what can I do?
If you are suspicious that your agent is abusing their powers, revoke the Power of Attorney immediately.
Next, without delay, notify all banks, brokerage firms, or other financial institutions in which you have money that you have revoked the Power of Attorney.
Finally, go to the probate court. You may either by yourself or through an attorney. Demand that the agent you suspect of absconding with your funds file a detailed account showing how your money was spent. A filing fee will need to be paid by you and you may need to possibly pay the agent for the cost of preparing the accounting documentation. Next, the court will hold a hearing at which time you can challenge the any or all of the information given in the detailed accounting. Ultimately, if the court finds the agent took your money without your authorization, you can sue the agent and/or possibly press criminal charges.
Can I revoke my Power of Attorney?
The Power of Attorney cannot be used unless the agent has it or it, or at least a copy and either you or they have given to banks, financial institutions, or others so that they think you want the agent to act on your behalf. If you have not given the Power of Attorney to anyone, you can revoke it by destroying the document.
If the eventuality the Power of Attorney has been given to the agent, an institution, or has already been recorded, you should execute immediately a revocation of the Power of Attorney that is witnessed and acknowledged in the same manner as the first Power of Attorney. Then; just as you distributed the Power of Attorney initially, you will need to furnish a copy of the Revocation to the banks, brokerage firm, or any other financial institution, and anyone else that may have a copy of the original Power of Attorney form that they know the Power of Attorney is no longer valid.
A Power of Attorney is only one of the many parts to a comprehensive estate plan. For information regarding living wills, trusts, power of attorney, or a pour-over will, or further questions on Powers of Attorney, contact Daniel A. Baron of Baron Law today at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following regarding living wills:
Before you can answer this question you must first understand what a Living will is and what purpose it serves.
A Living Will is one form of Advance Directive which clearly defines your wishes for medical care should the following occur:
A Living Will clearly states your health care intentions. This document allows you to make decisions while still cognitive such as:
The Living Will document also allows you to list any further specific instructions for your care if you become fully incapacitated.
Another form to consider securing in conjunction with a Living Will is a Health Care Proxy which is a specific Power of Attorney. A Health Care Power of Attorney authorizes a specific person you have chosen to act on your behalf to make all medical decisions (or to make sure that your medical wishes in your Living Will that you have set forth are followed), in the eventuality that you are no longer able to make these decisions yourself.
It might be in your best interested to have both a Living Will and a Power of Attorney which will set forth comprehensive guidance when it comes to your medical care in the end stages of life.
Things to consider when completing these documents:
Having a Living Will is only one part to a comprehensive estate plan. For information regarding living wills, trusts, power of attorney, or a pour-over will, contact Dan Baron of Baron Law to make an appointment at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following helpful answers to Powers of Attorney:
What is a Power of Attorney?
A Power of Attorney is a legal document you use allowing another designated person, of your choosing, to act on your behalf. It is a legal relationship in which you are the principal and the person you appoint is the agent. A Power of Attorney outlines specific powers you give to your agent. The powers can be limited or broad. An example would be, you are selling your house, but are not able to attend the closing. You can at that point give someone the power just to sign the deed in your absence. Keep in mind that most durable powers of attorney, give your agent the power to do almost anything you could or would do. In this example you may just limit the function of the Power of Attorney’s duties.
Some financial institutions, brokerage firms, or banks may require you to sign one of their own company specific Power of Attorney for their files.
Why do I need a Power of Attorney?
In the event you become unable to handle your own affairs as a result of illness, accident, or even being absent due to your job, the Power of Attorney gives your agent the power to handle your financial affairs as you would handle them yourself. Since you might not be able to execute a Power of Attorney at a time when you are disabled due to an accident or become incapacitated, or should you become unable to handle your own affairs and have no Power of Attorney, your spouse or family may have to request the Probate Court to appoint a power of attorney on your behalf. A Power of Attorney can be very helpful to both you and your family, as by naming your own agent and having a signed Power of Attorney avoids the expense of probate court and avoids naming someone who may not know and carryout your wishes.
Where should I keep my Power of Attorney?
As your Power of Attorney is an important legal document, it is recommended that you keep it in a safe and secure place. You may also want to give a copy to your agent(s) or in a safe and secure place where it can be easily found by your acting agent. Your agent may also keep a copy in case yours is lost. It is also wise to make sure your family knows where to find your Power of Attorney, or whom to ask when it is needed. And of course, your attorney will have a copy of the Power of Attorney.
What does “durable” mean?
The legal definition of ‘durable’ means the Power of Attorney will remain in effect even if the principal becomes mentally incapacitated. The powers you give to your agent will remain effective even though you are unable to give your agent updated instructions. If you have an older power of attorneys or an out of state powers of attorney, many of these still have these words, and remain in effect.
When does the Power of Attorney take effect?
The Power of Attorney becomes effective immediately upon signing the document before two witnesses and having it notarized. The agent is able to use the Power of Attorney as soon as he or she receives it. However, you may give the Power of Attorney to your agent(s) and tell the person(s) NOT to use it unless you are unconscious or unable to act for yourself. It is imperative that you know and trust the person you are asking to be your Power of Attorney.
You may opt to use a “springing” Power of Attorney which would not take effect until a specific triggering event happens, such as you become incapacitated. However, there are several issues with springing Powers of Attorney. The agent first needs an affidavit showing the triggering event has occurred before the Power of Attorney can be put into use. Then, even though the law says banks and other institutions that accept the document with the affidavit are not liable, banks have been reluctant to recognize the agent’s power under a springing Power of Attorney. Ultimately, it isn’t clear whether such a document would be accepted in other states other than your own.
Does giving someone a Power of Attorney mean I don’t have control over my money any longer?
It does not. Although you still have the right to control your money and property after a Power of Attorney has been put in place, keep in mind, you are giving your agent the ability to access your money. Although there is a risk that a dishonest or unscrupulous agent might steal your money, your agent is not supposed to use your funds in any manner with your permission. It is therefore vital to choose an agent you trust. A sound idea would be to go over the agent’s duties before you sign your power of attorney.
Do I need to update my Power of Attorney if nothing has changed?
It is always a good idea to review your Power of Attorney periodically to make sure you still agree with your choices.
There are some banks, brokerage firms, and other financial institutions that will attempt to reject a Power of Attorney that is several years old. This is mainly due to the possibility that the Power of Attorney has been revoked. This is a good thing, so that an unscrupulous agent that had their Power of Attorney duties revoked, does not gain access to your funds and deplete them. There are several options to prepare for this. If you remain competent it is very wise to re-execute your Power of Attorney every five years or so.
If unfortunately, you are no longer competent; your agent can sign an affidavit that your power of attorney is in full force and in effect and provide that to the financial institution.
A Power of Attorney is only one of the many parts to a comprehensive estate plan. For information regarding living wills, trusts, power of attorney, or a pour-over will, or further questions on Powers of Attorney, contact Daniel A. Baron of Baron Law today at 216-573-3723.
Whether you’re planning for retirement or the life of your business after your death, it’s imperative to develop a business succession plan to sooner rather than later. There is no “one plan fits all” when it comes to developing a succession plan for your business. And given that the economy is constantly changing, it isn’t surprising small business owners focus their energies on business survival, future growth, and even remaining active in business after retirement.
Business succession is about three things (1) Estate planning; (2) Retirement; and (3) Risk Management.
Estate Planning
Your estate plan should be incorporated into your business succession plan. What will happen to your company assets after you die? Who will run your business? If you want to provide for your family using your business assets, you should consider at the very least having a last will and testament. Carefully drafting your will allows you to select desired beneficiaries, elect an executor, and transfer your assets through probate. Your family will be going through a difficult time. Setting up a last will and testament in advance helps your family during that difficult time.
Retirement
When thinking about retirement, it’s important to consider your options when selling your business. Will you sell with a lump sum, installments, mix, employee buy-out, or merger? There are numerous options when planning for your retirement and taking advantage of the business you built. Thus, business succession is about planning for your exit strategy. To learn more about your options, visit this article.
Risk Management
Business succession is about limiting your risk. If you have partners within your company, you should be aware of the risks involved. For example, if your partner gets divorced, their spouse is entitled to the partner’s share in the business through the divorce proceedings. If your partner dies, you can now be partners with their spouse or estate. One option to avoid this potential risk is to create a buy-sell agreement through a cross purchase agreement or entity purchase agreement.
Business succession is an important idea that every business owner should consider. Contact your Cleveland, Ohio business succession and estate planning attorney for more information on how to set up your plan. You may also consider contacting Cleveland, Ohio law firm Baron Law LLC at 216-573-3723.
Cleveland, Ohio business succession attorney Dan Baron offers the following on estate planning and business succession:
You’ve spent a lifetime building your business and now its time for retirement. Where do you start? When developing your business succession plan, it’s important to consider all of your options. Selling and/or transferring your business will have significant implications on your estate plan, taxes, family, and financial well-being. Here are a few suggested options with a discussion on these implications.
Valuation
Regardless of whether you sell to your family, third-party, or friend, you will need a complete evaluation of your business. Many business owners overvalue their business because they’re place an emotional value on the blood, sweat, and tears they’ve spent growing their business over the years. It’s imperative to get a third-party evaluation on your business to better understand what your company is worth, and who is willing to buy.
When evaluating, your business attorney and/or financial advisor will consider several approaches to your company’s worth:
Now that you have a value, how should you sell your business in an effective way to provide a secure retirement while considering tax consequences? Let’s consider the following options.
Lump Sum
Selling your business for millions of dollars is every business owners dream. However, this may not be a viable option for several reasons. First, if selling to employees or family, these buyers may not have enough capital or credit to purchase your business’ worth. Next, selling your business outright will result in a large capital gain and tax consequence compared to taking payments over timer. It could also place you in a different tax bracket entirely. Thus, when considering selling for a lump sum, you should consult with your estate planning and business attorney to consider all the tax consequences and other planning tools available
Lump Sum + Installments
If a lump sum will create an unfavorable tax consequence, then you can structure the deal so that you take a smaller lump sum up-front and payments over time. Your business attorney will suggest taking a lump sum that is just under the threshold of a tax bracket.
Installments Only
If selling to family or employees, installment payments are an affordable way to sell your business. However, many times the business owner will still be involved when selling to employees and moreover, the business needs to be sustainable in order to receive the payments over time. In other words, you can’t get paid if they business fails over time.
Self – Cancelling Installment Note
Here the business owner gives his employees the business in exchange for a promissory note – usually purchased by employees. The promissory note is usually coupled with a personal guarantee from the employees. Payments are then made over time but cease when the business owner passes away. This option reduces capital gains and estate taxes. However, the payments made will be set at a premium set by the IRS mortality tables to account for the business owners lifetime. If the business owner lives past this time, the payments cease. If the owner dies before this timeline, the payments cease.
There are several other options business owners have when selling their business. For more information, or to request a free consultation with a Cleveland, Ohio business and estate planning attorney, contact Baron Law LLC today at 216-573-3723.
Cleveland, Ohio Estate Planning and Elder Law Attorney offers the following:
The main benefit of a Qualified Terminable Interest Property Trust is being able to control your estate after your gone. In addition, there are several tax advantages for larger estates.
Each spouse can set up a QTIP trust, leaving assets to the other in trust. When the first spouse dies, the survivor gets what is called a “life estate” in the assets that are left to the QTIP trust—that is, the survivor is entitled to any income the assets produce, and in the case of real estate, to its use. Only the surviving spouse can be named as the life beneficiary. The survivor does not, however, have full ownership of the trust assets and cannot sell them or give them away.
In order to qualify for the marital exemption, the spouse must receive all of the income from the trust and the Executor must make an election on the tax return. QTIP’s are very similar to family trusts, or bypass trusts. And in fact, many times you create a family trust in conjunction with a QTIP. The difference is that QTIP’s are more restrictive and are useful for those who are in second marriages.
There may also be several tax advantages. Here’s an example:
There are many advantages to setting up a QTIP trust. Every estate plan is unique and its important to contact an elder law and estate planning attorney who can analyze your estate. Contact Cleveland, Ohio attorney Dan A. Baron at 216-276-4282 to learn more about QTIP or other trusts. Baron Law is a Cleveland, Ohio law firm.
Utilizing “QTIP” Trusts for Families in Second Marriages
Estate planning in second marriages can be especially complicated when trying to secure the well-being of loved ones from a previous marriage. Much of the complexity arises from rights granted to a surviving spouse. In Ohio, spouses (male or female) are entitled to dower and elective share rights that often create tension between children from a prior marriage and your second marriage partner.
However, most of these uncomfortable tensions can be avoided through careful estate planning, which often includes a QTIP (or, Qualified Terminable Interest Property Trust). Such an arrangement is especially effective in providing for children from a previous marriage.
Consider the following example:
Let’s say Michael dies while married to his second wife, Kathy. Michael loved Kathy, but out of concern that she might not take the well-being of his children from a previous marriage into account, he established a will that left most of his estate (worth about $12 million including a marital home) to his children. He did, however, bequeath his $100,000.00 IRA entirely to Kathy.
And here is where things become complicated…
Unfortunately, Kathy then dies a week later intestate (without a will), so Michael’s hard-won IRA is automatically transferred to Kathy’s closest relative – her idiot brother, Frank. Because Kathy was entitled to the marital home through Ohio’s spousal rights, the marital home also transfers to Frank. The kids end up with hardly anything. Had Michael properly planned, he could have protected his children’s inheritance, provided income for his wife, and saved considerably on taxes.
QTIP Trusts
In the example above, Michael could have provided for both his children and Kathy had he created a QTIP trust or proper will. Qualified Terminable Interest Property Trusts are commonly referred to as a “Family Trust”, or “Marital Trust.” A QTIP Trust subdivides into (A) marital and (B) family Trusts: the B Trust preserves the children’s interest by restricting the spouse’s access. The remaining spouse receives income and a life estate that satisfies Ohio’s spousal rights. After the second spouse dies, the children receive the remaining assets in the B Trust.
Consider another version of the above example:
Instead of ignoring Ohio’s marital election, Michael plans ahead and created a revocable living trust with a QTIP election. Upon Michael’s death, his trust is sub-divided into an “A” and a “B” trust. Here, $5.43 million of his estate is diverted to his B trust. Kathy is the beneficiary of this B trust, with limited access and receives income from the trust. Because this trust is under the federal estate tax limit, Kathy’s estate tax is $0.00. Over the next 20 years, because of robust growth, the “B” trust is now $17 million. Upon Kathy’s death, trust “B” passes to the Michael’s sons entirely estate tax free.
The remaining $6.57 million in assets are diverted to the “A” trust. Kathy again has restricted access, but can use these funds for her health, maintenance and support. When Kathy has expenses, she uses the “A” trust and saves the “B” trust only for dire necessities. Upon her death, the “A” trust has been reduced (or eliminated) and the tax is minimal, if there is any at all. The remaining balance of the “A” trust passes to Michael’s sons.
QTIP trusts are very popular for people in second marriages. As you can see, the trust provides income for the remaining spouse, yet it preserves your children’s assets.
Prenuptial Agreements
A QTIP trust may not fit under certain circumstances. In cases where there is a disproportionate estate among spouses, a prenuptial agreement may be considered. Certain statutory rights of a decedent’s surviving spouse may be waived by a valid prenuptial agreement. In other words, people may contract for anything in life. This includes signing away your inheritance.
It’s important to remember that a prenuptial agreement may often bring tension among couples. Also, although Ohio recognizes prenuptial agreements to be valid, the state also does not allow you disinherit your spouse. In that regard, oftentimes antenuptial agreements are coupled with estate plans to provide some form of financial security for the surviving spouse.
Prenuptial agreements are valid and enforceable (1) if they have been entered into freely without fraud, duress, coercion, or overreaching; (2) if there was 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.
Prenuptial agreement agreements are a great tool when coupled with a QTIP trust. When combined together, the surviving spouse is provided income and preserved an estate for his or her lifetime. In addition, the children’s inheritance is given extra protection in case of divorce.
Summary
QTIP trusts and prenuptial agreements are two of many ways to provide security for your spouse and children. Through proper estate planning, you can provide a steady stream of income for your spouse and preserve your children’s inheritance. It’s important to consider all options when preparing your estate plan. For more information and or questions, contact attorney Dan Baron at Baron Law LLC – 216-573-3723.