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Estates Planning Lawyer

I Recently moved to Ohio from another State? Do I Need To Update My Power of Attorney?

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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.

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Incorporating Long Term Care to Avoid Accidents and Falling

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Cleveland, Ohio estate planning and elder law attorney, Daniel A. Baron, offers the following information on Long Term Care and incorporating it into your Estate Planning:

Elder Care Attorney Cleveland Ohio

If you are over aged 65, a fall could leave you incapacitated or worse, it could be fatal. Having a Non-fatal fall could leave you unable to care for yourself for either a short period of time or a long period of time.  Should this happen, who is going to pay for your Long Term Care?

One in every three Americans falls each year. Falls for the elderly are the leading cause of non-fatal and fatal injuries for those aged 65 or older.

If you happen to fall you run the risk of:

  • Head Injuries
  • Broken Bones
  • Hip fractures
  • Significant loss of independence

If you should take a fall and you are over the age of 75 the chances of you being admitted to a skilled nursing facility are four times greater.

Even if you should fall and do not sustain a major injury, you become fearful of falling again and thus becoming less active. With this said, there are steps you can take to reduce your risk of falling.

Information Source – National Council on Aging

Six steps to Reduce Your Risk of Falling

In order to help your aging loved one, friend, or neighbor follow these steps to reduce their risk of falling.

Enlist their support in taking simple steps to stay safe. For example:

  • Ask your aging loved one, friend, or neighbor if they have a concern about falling.
  • Although many older adults recognize the risk of falling exists, they do not believe it will happen to them, or if they fall they will not be hurt – even if they have fallen in the past.
  • A good place to start is by sharing NCOA’s “Debunking The Myths of Older Adult Falls”. If they show a concern about falling, dizziness, or balance suggest they discuss it with their Health Care provider who can assess their risk and suggest programs or services that could help

Discuss current health conditions

  • Ask your aging loved one, friend, or neighbor if they are experiencing problems managing their own health
  • Ask whether or not they are having trouble remembering to take their medications, or are they experiencing any side effects
  • Ask if it is getting more difficult for them to do things they used to do easily
  • Ask if they are taking advantage of ALL the preventative benefits now offered under Medicare such as the Annual Wellness visit. Encourage them to speak openly with their health care provider about ALL their concerns

Ask about their last eye checkup

  • If your aging loved one, friend, or neighbor wears glasses or contact lenses, make sure that their prescription is current and they are using their glasses or contact lenses as advised by their eye doctor
  • Keep in mind that wearing tint changes glasses or contact lenses can be hazardous when going from bright sun into darkened buildings and homes. A simple strategy is to change glasses upon the entry into a building OR stop until the tint has changed
  • Bifocals can also be problematic on stairs, so it is VERY important to be extra cautious on the stairs. For those already struggling with low vision, consult with a low-vision specialist for ways to make the most of their eyesight.

If you are noticing your aging loved one, friend, or neighbor is holding onto the walls, furniture or someone else while walking or if they have difficulty arising from a chair:

  • These are signs that it might be time to see a physical therapist
  • A trained physical therapist can help your loved one improve their balance, strength, and gait through exercise
  • They may also suggest that your loved one use a cane or walker. The physical therapist will also offer guidance on how to use these aids.  Make sure you heed their advice
  • Poorly fit aids can actually increase your risk of falling, so make sure that all aids are fitted correctly

Talk about their medications

  • If your aging loved one, friend, or neighbor is having difficulties managing their own medications or they are experience side effects, encourage them to discuss their concerns with their doctor or pharmacist
  • Suggest they review their medications each time they get a new prescription
  • Your loved one may find it useful to use a chart of some sort to keep track of their medications and their scheduling. Adding a time medication dispenser that can be refilled every week or month by a family member, friend or neighbor can promote peace of mind and ensure that medication is being taken as prescribed
  • Be aware if your aging loved one, friend, or neighbor is taking non-prescription medication that may contain sleep aids – including painkillers with “PM” in their names. These can contribute to balance issues and dizziness.  If your aging loved one is having sleeping difficulties encourage them to speak with their health care professional for different alternatives

Do a walk-through safety assessment of their home

There are many simple and inexpensive ways to make a home safer. For Professional Assistance, contact an Occupational Therapist.  Some examples for making your loved ones home safer:

  • Lighting: Increase lighting throughout the house especially at the top and bottom of stairs.  Ensure that lighting is readily available when they are getting up in the middle of the night
  • Stairs:  Make sure there are two secure railings on both sides of the staircase
  • Bathrooms:  Install Grab bars in the tub/shower area and near the toilet.  Make sure that grabs bars are installed in places where your loved one will be able to use them as intended.  Consider installing an ADA toilet which has a higher seat then standard toilets.  Perhaps having a shower chair would help as well as installing a hand held shower.

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

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The Marital Deduction – What are the benefits?

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on The Marital Deduction as well as other Tax Planning Advice and what to make part of your Estate Planning.

What are the benefits?

The most important deduction a married couple has is the The Marital Deduction.  The amount of assets which can be passed upon death from one spouse to the other is unlimited and is also used to defer ALL estate taxes until the surviving spouse passes.  Current tax laws allow one spouse to give the other spouse assets where there is little to no tax imposed upon the transfer of these assets.  No matter what the value of the assets which are being transferred, whether it is $50,000 or $50,000,000.

What if there is a divorce?

If you happen to be divorced from your spouse, you can still pass assets to the ex-spouse after you pass with little or no tax being imposed if it is stated in the divorce decree.

My spouse is not a U.S. Citizen – Do the same tax laws apply?

The Marital Deduction is unlimited as long as both spouses are U.S. Citizens. So what happens when one of the spouses is not a US Citizen?

Should the first spouse to pass away be a U.S. Citizen and the surviving spouse a noncitizen of the U.S., unfortunately the unlimited marital deduction for Federal Estate Taxes is not available.

However, the taxes can be deferred by setting up a Qualified Domestic Trust (AKA QDOT), and having the assets pass through this specialized trust.

Should you own real property, consider adding this to the trust as the taxes will be deferred until the noncitizen spouse passes away.

For more information on The Marital Deduction and implementing other tax savings ideas as part of your Estate and Tax Planning, contact Daniel A. Baron of Baron Law to maximize tax savings upon your passing.  Contact us today at 216-573-3723.

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What is a Trust Protector?

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on a Trust Protector and their Role and benefits realized as part of your Comprehensive Estate Plan:

Who is a Trust Protector?

As it sounds, a Trust Protector is appointed to oversee the assets in the trust and to protect against the trustees so that they do not give into temptation and embezzle from the trust or squander the assets of the trust with unnecessary fees or legal issues.

Having a Trust Protector typically was only used with the upper echelons of society but some may say that if there is a trust, there should be a Trust Protector.   It is wise to appoint a Trust Protector especially in cases that the trust will be a long term trust such as:

  • Trust for your spouse so that they will live a certain lifestyle after you pass
  • Your children, grandchildren, or other heirs, that need to reach a goal in life prior to releasing the funds of the trust
  • Charitable goals – what is your legacy

Upon setting up a trust and should the trust have more than one trustee, there is a possibility of issues coming up which are believed to not be in the best interest of the trust. Having a Trust Protector can potentially quash any conflicts which may arise.  In addition, a Trust Protector can be very beneficial in other instances where conflict may arise.

Can I appoint anyone to be my Trust Protector?

You can appoint anyone you would like to protect your trust. Some ideas may be:

  • Someone who is close to your family
  • A Certified Public Accountant (CPA)
  • An attorney
  • Corporate Entity or Bank
  • Financial Planner CFP

What are the duties of a Trust Protector and Why would I need one?

Additional duties of a Trust Protector are, but not limited to:

  • If the trustee or trustees are performing in such a manner that is not advantageous to the beneficiaries of the trust OR are being unresponsive, the Trust Protector has the authority to remove the trustee and replace them if necessary.
  • Should any disputes or conflicts arise between the trustees, the Trust Protector’s Role is to resolve the disputes.
  • If there is a change of status with any of the beneficiaries, it would be the Trust Protector’s responsibility to update the trust accordingly.
  • Should there be any new beneficiaries which needed to be added, the Trust Protector would make the necessary changes to the Trust.
  • The Trust Protector also has VETO power of any financial / investment decisions which may not be in the best interest of the trust and it’s beneficiaries.
  • If the laws governing trusts change, the Trust Protector has the ability to amend the trust if the changes are advantageous to the trust.
  • The Trust Protector can manage the amount of money the trustees can spend by setting a dollar amount and/or requiring two signatures on a check before it can be released. The dollar amount will be predetermined upon the penning of the trust so that all the trustees and the Trust Protector are aware of this stipulation.
  • The Trust Protector has the ability to dissolve the trust for specific reasons such as;

 

  • There are no more funds in the trust as they have been released to the heirs as set forth in the trust and will

 

  • The goals of the heirs have been met and all the funds are released therefore leaving no assets in the trust

It is wise to put in writing what role you would like the Trust Protector to have handling your assets. To start a discussion  on your personalized comprehensive estate plan, including; living wills, trusts, power of attorney, or a pour-over will, or further questions on a Trust Protector, contact Daniel A. Baron of Baron Law.  Baron Law provides estate planning services for the greater Cleveland, Ohio area.  Contact us today at 216-573-3723.

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What Recourse Do I Have if My Power of Attorney is Stealing From Me?

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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.

 

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What Is a Power of Attorney and Do I Need One?

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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.

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Difference Between a Trustee and Executor Within a Testamentary Trust

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Cleveland, Ohio Estate Planning Dan A. Baron Explains the Difference Between an Executor and Trustee:

Estate planning can be complicated and sometimes difficult to bear when charged with the responsibility as executor or trustee of an estate. If you have minor children, then you probably have set up some form of testamentary trust coupled with your will and power of attorney. Within these estate planning documents, there are designated executors and trustees that have been carefully selected to administer your estate after you pass. It’s important to talk with your executor and trustee and let them know their responsibilities after your’re gone. Below is a quick summary of the difference between executor and trustee of a testamentary trust.

The Executor’s responsibility is to liquidate or otherwise gather all estate assets, pay any outstanding bills and then transfer assets from the name of the decedent to the beneficiaries named in the Will (most often the decedent’s children). They also make any necessary filings with the court and attend any court hearings. Most Executor’s elect to use an attorney to help them with this so the process runs smoothly. Once all assets are in the name of the beneficiary, the Executor’s job is done. The complexity of the estate will determine how long the Executor is needed.

In comparison, a Trustee receives the assets from the Executor and then, with court approval, invests the trust assets in savings account, investment accounts, or whatever they deem appropriate. Most importantly, the Trustee manages the funds and makes distributions to the trust beneficiary (usually children) when needed (i.e. to pay school tuition, living expenses, doctor bills, etc.). Most clients set a maturity age of 25. When the children reach the age of 25, the trustee distributes the balance of the trust funds and that particular child’s trust is terminated. The Trustee will be required every two years to make reports to the court as to the value of the trust. As you can imagine, the length of time the Trustee will be needed will depend upon the age of the children.

If you would like to learn more about the responsibilities and an executor and trustee, or have questions, contact our office at 216-276-4282. You will speak directly with an Cleveland, Ohio estate planning attorney who can help you set up a trust, will, power of attorney, medicaid planning, and more. If you would like to attend one of our FREE seminars, please visit this link.

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Springing and Durable Power of Attorney – What’s the Difference?

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Springing and Durable Power of Attorney – What’s the Difference?

When planning for retirement and your estate plan, it’s important to understand how your power of attorney works.  Generally, there are two kinds: springing and durable power of attorney.  A springing power of attorney takes affect if you become incapacitated.  In comparison, a durable power of attorney becomes effective as soon as you sign the document, and continues to be effective if you are incapacitated.

Having control with a power of attorney is a big deal.  The person holding this power may have the ability to control your financial assets, medical decision, and more.  For example, a giving someone financial power of attorney powers gives them the right to make financial decisions on your behalf.  This person might trade stocks, cash in annuities, or transfer assets.  If this person has durable power of attorney, they can make these decisions even if you are not incapacitated.   State laws differ on the particulars of power of attorney, and some financial institutions may require their own versions.

With a springing power of attorney, it’s important to clarify exactly what triggers someone taking over your abilities to make decisions.  Typically, it’s when the principal becomes disabled or mentally incompetent.  However, it could be used in a variety of situations.  For example, someone in the military might create a springing power of attorney form to be prepared for the possibility of being deployed overseas or disabled, which would give a relative powers to handle financial affairs in these specific situations only.

Who determines when someone is mentally incompetent or incapacitated?  This question varies state to state.  However, in general there is usually a formal procedure that your attorney can create.  It’s smart to note in your legal document exactly what the principal considers “incapacitated” to mean.  Often times, people who create a power of attorney form include language that requires a doctor’s certification or mental incompetence or incapacitation.

For more information regarding power of attorney and other estate planning methods, contact Cleveland estate planning attorney Dan Baron at Baron Law LLC.  Baron Law is a Cleveland, Ohio area law firm practicing in estate planning, business, and family law.  Contact Dan Baron today for a free consultation at 216-573-3723.

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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.

Bypass Trusts

Ohio Bypass Trusts – Cleveland, Ohio Attorney

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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.