Client Review
Daniel Baron reviewed our Trust, Wills and HPOA. He provided good feedback as to what needed updating and any necessary additions to the documents. We didn’t have a FPOA which thanks to him we now have. He was able answer any questions we had and proved to be very flexible to accommodate our schedules when it came time to meet. I would recommend him to anyone looking to do Estate Planning
– Tom
Estate Planning Solution of the Week: Health Care Proxy
What is a Health Care proxy? How does that differ from a health care agent? And what is the distinction between a health care proxy and a medical power of attorney?
The quickest answer is that all three terms are used to refer to someone who has the legal ability to make health care decisions on behalf of another. However, the law varies by state as to what such a health care agent is called, what legal documents are needed, and what power is granted to that agent.
In Ohio, the term is “attorney-in-fact.” In order to have someone make medical decisions on your behalf, you would name this person in a Durable Power of Attorney for Health Care. Ohio does not have a standardized form to establish a power of attorney for health care. However, there are specific requirements for a valid Ohio Health Care Power of Attorney:
*Specific regulations exist as to who you may designate as your agent and who can serve as witnesses. An attorney from Baron Law can give you the current specific requirements for the state of Ohio.
While Ohio does not have a standardized form that is required, the Ohio State Bar Association has developed forms together with several medical associations. LeadingAge Ohio has a copy of this form available on their website: http://www.midwestcarealliance.org/aws/LAO/pt/sp/advance_directives” You may also request a hard copy of the form on their website.
Baron Law is a firm that serves the northeast Ohio area. For more information, or to begin estate planning for yourself or your loved ones, please contact us at 216.573.3723 or dan@baronlawcleveland.com. State laws are specific and subject to change. Schedule your consultation with a lawyer today to ensure that you and your loved ones are protected.
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
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.
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.
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.
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.
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.
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.
Cleveland, Ohio Trust Attorney
Ohio Bypass Trusts
Bypass trusts, or “credit shelter” trusts, have historically been an important estate planning tool that shields probate assets against estate taxes. Most often, a bypass trust is found in your spouse’s will. Each spouse directs that if you are the first spouse to die, then your solely owned assets be used to fund the bypass trust with up to whatever personal estate tax exemption is at the time. Since 2013, the estate tax exemption is $5.25 million. After death, money is used to fund the trust. The money can come from a variety of sources including, probate assets, assets in a revocable living trust, life insurance policies, and retirement accounts. Note however, that some retirement accounts cannot avoid certain federal taxes.
For example, say Molly dies leaving her son $1 million in a 401K plan. Molly directs the money to a trust. The trustee is to pay the trust ‘income’ to the son annually, and distribute the principal to the son when he reaches age 35. The 401k plan distributes a $million lump sum to the trustee a few days after Molly’s death. Barring an unusual provision in the trust instrument or applicable state law, the entire $1 million plan distribution is considered the trust ‘corpus.’ On the federal income tax return for the trust’s first year, the trust must report $1 million in gross income. The trustee invests the money that’s left after paying the income tax on the distribution, and pays the income from the investments each year to Molly’s son.
If properly structured, assets in a bypass trust will not be included in your surviving spouse’s estate. Instead, the money will ‘bypass’ your spouse’s taxable estate at their death and pass tax free. Any amount in excess of the current federal estate tax exemption would then be distributed outright to the surviving spouse or is used to fund a marital trust or qualified terminable interest property (QTIP) trust.
Although bypass trusts have been used for years, they have become somewhat unnecessary. Since 2013, the new laws allow a surviving spouse take up to $5.25 million tax free. This is because the new laws allow this amount under the federal estate tax exemption. Thus, unless you have a fairly large amount of assets, a living will would do the trick and allow for $5.25 million to be passed on tax free.
For larger estates, bypass trusts can offer advantages. For example, growth in the assets of a bypass trust are not excluded from the gross estate of the surviving spouse and may run up against the estate tax exemption amount in effect when the surviving spouse dies. In addition, any lifetime gifts you make that are taxable will decrease your estate tax exemption amount – decreasing the amount that can be put into the trust at your death.
For more information on trusts, living wills, or other estate planning tools, call Cleveland, Ohio attorney Dan Baron at Baron Law. Baron Law provides legal representation to business owners and individuals. Call today for a free consultation at 216-573-3723. You will speak directly with a Cleveland, Ohio attorney who can help you with your legal needs.
Cleveland, Ohio Probate Attorney
Debt after Death – What Every Family Member Should Know
You come home one day to find a letter from a credit card company demanding $5,000 for the debt of your late husband. The credit card company demands payment and threatens to take legal action against you if the debt is not paid. Don’t be afraid of these bullies. Here’s what you need to know.
First, the credit card company is correct in their efforts to collect a debt from the estate. Debts to not die with the deceased but instead go through the estate. However, creditors cannot hold you personally liable. Instead, in most cases, creditors may only assert claims against the estate. If the debts exceed the value of the estate, then the creditors may not come after family members.
Of course, there are exceptions. When dealing with the debt of a deceased person it’s important to consider whether you’re a co-signer on a note. Each account holder can be held legally responsible for an outstanding balance. Thus, if you co-signed for a mortgage or a car loan, you are still personally responsible for the debt. Using the example above, let’s say that you never used the credit card and all the purchases were your late husband’s. Unfortunately, if you co-signed the credit card application then you’re still liable for the debts. This rule only applies to co-signers, not authorized users.
It is the role of the executor of the estate to pay the deceased person’s outstanding bills. It is recommended that executors contact a qualified probate attorney to understand the probate laws and processes. If you are not the executor of the estate but are receiving phone calls and/or letters asking you to pay, you should refer the creditor to the executor. If they are persistent, send a certified letter stating that the person is deceased and you are not responsible for paying the debt. Don’t let yourself be intimidated into paying a debt you are not responsible for. If the bill collector is making claims you don’t believe are true, such as saying you are a co-signer on the account, ask for proof. Let them know you are aware of your rights and will report them if they do not stop calling you. Harassing bill collectors can be reported to the Federal Trade Commission (877-382-4357) and state attorney general’s office.
In sum, heirs and loved ones are not responsible for a decedent’s debts. If the person incurred the debt in his name alone, creditors either receive payment through the probate process or they don’t receive payment at all. For more information regarding probate and estate planning contact Cleveland, Ohio probate attorney Dan Baron. Call today for a free consultation at 216-573-3723. Baron Law LLC is your Cleveland, Ohio estate planning law firm.
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.
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.
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.
Creating a Business Succession Plan – Cross Purchase Agreements
Whether you’re planning for retirement or tragedy, having a business succession plan is imperative for business owners. Big business or small, planning for the financial stability of your partners and employees can mean the difference between business as usual and leaving your spouse bankrupt. Moreover, understanding the value of your business can affect your decision to sell, retire, or leave a legacy. Cleveland, Ohio estate and business planning attorney Dan Baron has the following remarks to help you secure your financial future.
One way to create a succession plan is through a “cross purchase agreement.” Two concepts stand at the root of all cross-purchase buy-sell agreements: protection and fairness. A surviving business owner wants to be protected from interference by outsiders when a co-owner dies. Concurrently, a business owner wants to assure fair treatment of his or her heirs in the event of death.
Step One – Choose a Successor
Unless you’re selling your business – where you would normally sell to the highest bidder – picking a successor isn’t easy. Many factors determine whether a succession plan is necessary and sometimes it can be as easy as passing the business down through a family member. When choosing a successor, there may be several partners or family members from which the owner will have to choose, each with various strengths and weaknesses to be weighed and evaluated. In this case, lasting resentment by some or all of those not chosen may result, no matter what choice is ultimately made. Outside of a family business, partners who do not need or want a successor may simply sell their portion of the business to their partners in a buy-sell agreement. Talk with a Cleveland, Ohio estate planning or business succession attorney to learn more.
Step Two – Evaluate the Value of the Business
As mentioned, your succession plan may be as simple as selling it off. But no matter whom the intended successor may be business owners must establish a set dollar value for the business, or their share of it. This can be done via appraisal by a certified public accountant (CPA) or by an arbitrary agreement between all partners involved. Tax attorneys and business succession attorneys may also assist in the business evaluation process. Estate planning lawyers and accountants use various metrics for evaluation business including sales, stock value, liquidity, profits, reoccurring contracts, EBITDA (Earnings before Interest, tax, depreciation, and amortization), cash flow, and more. In addition, your estate planning attorney may evaluate your business using a number of other methods including asset based or income based evaluations. For corporations, where the portion of the company consists solely of shares of publicly traded stock, the valuation of the owner’s interest may be determined by the stock’s current market value.
Step Three – Cross Purchase Agreements
A cross-purchase agreement is a tool used by business owners to assure that “business as usual” continues if co-owner dies. Like an entity or stock redemption agreement, the cross-purchase buy-sell agreement stipulates that:
There are no exceptions—the estate must sell and the survivors must buy.
Creating a cross purchase agreement is commonly used a usually starts with creating a life insurance policy. Once a set dollar value has been determined for the business, life insurance is purchased on all partners in the business. Then, in the event that a partner passes on before ending his relationship with his partners, the death benefit proceeds will be used to buy out the deceased partner’s share of the business and distribute it equally among the remaining partners.
A cross purchase agreement is structured so that each partner buys and owns a policy on each of the other partners in the business. Each partner functions as both owner and beneficiary on the same policy, with each other partner being the insured; therefore, when one partner dies, the face value of each policy on the deceased partner is paid out to the remaining partners, who will then use the policy proceeds to buy the deceased partner’s share of the business at a previously agreed-upon price.
Example: How a Cross-Purchase Agreement Works
Let’s say for example that there are three partners who each own equal shares of a business worth $3 million, so each partner\’s share is valued at $1 million. The partners are getting older and want to ensure that the business is passed on smoothly in the event one of them dies. Thus, they enter into a cross-purchase agreement. The agreement requires that each partner take out a $500,000 policy on each of the other two partners. Now, if one of the partners dies, the other two partners will each be paid $500,000, which they must use to buy out the deceased partner\’s share of the business.
One limitation to be noted here is that, for a business with a large number of partners (five to 10 partners or more), it becomes impractical for each partner to maintain separate policies on each of the others. There can also be substantial inequity between partners in terms of underwriting and, as a result, the cost of each policy.
Cross purchase agreements are just one of many ways to ensure a business’s legacy. For more information on estate planning or business succession, contact Cleveland, Ohio attorney Daniel A. Baron at Baron Law. Contact a lawyer today by calling 216-573-3723. You will speak directly with an Ohio attorney who can help you with all your estate planning needs.
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.
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.
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.
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 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.