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Daniel A Baron - Baron Law Cleveland

Dying Without A Will – A Mess for Your Family To Clean-up

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Baron Law LLC, Cleveland, Ohio, offers information for you to reflect upon while you are setting out looking for an estate planning attorney to help protect as much of your assets as you can. For more comprehensive information contact Baron Law Cleveland to draft your comprehensive estate plan to endeavor to keep more of your assets for your heirs and not hand them over to the government by way of taxes.

No one likes it think about death, and even less people actively prepare for its inevitable occurrence. With everything that makes up life, job, family, recreation, there aren’t enough hours in the day to do what we need to do or want to do, let alone do what we despise. Thinking about death and how life will continue on regardless of whether we are here or not isn’t a fun concept people like to dwell on. Estate planning, or lack thereof, has tremendous consequences for surviving friends and family. A proper estate plan can mean the kids get to go college and the surviving spouse gets to stay in the house and doesn’t have to get a second job. No estate plan means the martial home gets sold to pay off debts and necessities or the surviving kids blow through an investment portfolio shrewdly managed for 25 years in 6 months. A local Cleveland estate planning attorney can create a customized estate plan with supporting documents to ensure that your friends and family are in the best position when your gone and avoid familial infighting and asset waste.  

Apart from the absolute chaos and/or squandering of a lifetime of assets which may result from a lack of estate planning, what are the practical consequences of not having a will?  When a decedent does not have a valid will in existence at the time of death, a decedent is deemed to have died intestate and Ohio intestacy laws govern how estate assets are managed and distributed. Ohio intestacy laws may be avoided altogether with proper estate planning. It is important, however, to be familiar with these laws because they may apply for a variety of reasons in a variety of situations. Sometimes intestacy laws will control even if a valid will is subject to probate administration. Conversely, sometimes Ohio intestacy laws may not apply even if a decedent died intestate. As such, since the controlling law for dying without a will can be flexible, an estate planning and/or probate lawyer is highly recommended.  

One example where intestacy laws are inapplicable even if decedent died without a valid will is where the estate assets in question would not have been part of the decedent’s probate estate if the decedent had a will. An example of this situation is property that is owned jointly with right of survivorship. This type of ownership will pass to the surviving joint owner by operation of law irrespective to the terms of the decedent’s will or intestacy statutes. The same is true for bank accounts or other assets with valid payable on death (POD) or transfer on death (TOD) designations. Property that the decedent transferred to a trust during life will not typically become part of the decedent’s probate or intestate estate.   

The most common situation where intestate law applies is when a will is declared invalid by a probate court because it was not executed in accordance with the requirements under Ohio law. The same holds true if a will is set aside for other reasons, such as fraud in the execution. Further, even if a decedent’s will is found valid and is not set aside, there can be many circumstances where intestacy laws still apply. One such circumstance is that a will fails to dispose of all of the decedent’s property because it does not have a residuary clause. This outsight is becoming more common with the use of services like Rocket Lawyer and LegalZoom. Ensuring that estate planning documents are properly executed, drafted, and filed is a major reason why estate planning attorneys are employed and retained. Doing it yourself may be cheaper in the short-term, but when it counts the most, self-drafted estate document all too often fail to make the grade.  

So, apart from not knowing whether intestacy laws will apply or not, what’s the big deal dying intestate?  

In a nutshell, dying intestate can have serious consequences for surviving friends and family and, most importantly, can affect the amount of  estate money and assets available, who those assets go to, and when those assets are distributed. First off, dying intestate means a decedent has very little, if any, direct control over who gets what and when. That is decided per the laws of intestacy. So, if you have two children, one is rich and doesn’t need any more money and the other has addiction issues and can’t be trusted, but you have a niece who just got accepted to Harvard but can’t afford it, too bad, you can’t help out your niece if you die intestate. Further, dying intestate means the court has to administrate the estate, which takse a lot longer than direct bequests in a will. Instead of potentially almost instantaneous transfer of money and assets, you likely have to wait at least six months to distribute estate assets. During this time, surviving friends and family are angry they haven’t gotten their share, the legal fees are running for the attorney, the fees are running for the estate administrator, and you’re paying taxes and upkeep on any estate assets that require such.  

Furthermore, subjecting an estate to intestate administration means creditors and litigants have almost free reign to bring claims against intestate assets. If an estate is properly planned and organized, there are ways to protect most if not all of an estate’s assets from these outside threats. As previously mentioned before, an intestate estate requires an administrator. This person is appointed by the probate court, it may be a family member, it may not be. Hopefully, they will be competent, responsible, and honest, but if an estate fiduciary isn’t proactively appointed, who know who’ll be appointed. Ohio law subjects estate fiduciaries to steep penalties for incompetence and misconduct, there is a reason for this. History is rife with examples of fiduciaries wasting or absconding with estate assets. After you’ve spent a lifetime working, saving, and building, why put it all in the hands of a strange or irresponsible or inexperienced family member. This is why Ohio estate attorneys exist, to help you protect a lifetime of labor and give to the people you love.  

Choosing to die intestate certainly is one way to do it but it is hardly the best way. Spending a little time to sit down with a probate attorney or estate planner will ensure that you’re proactively thinking about the future and putting your friends and family in the best possible situations and avoiding needless stress, confusion, and time waste. A last will and testament is the “core” of any estate plan. If you don’t have anything else, you must have a will. Simply put, its foolish not to even take this basic step.  

You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.  

 Helping You And Your Loved Ones Plan For The Future

About the author: Mike E. Benjamin, Esq.  

Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.   

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.

 

I’ve Changed My Mind, How Do I Modify Or Revoke My Trust?

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Baron Law LLC, Cleveland, Ohio, offers information for you to reflect upon while you are setting out looking for an estate planning attorney to help protect as much of your assets as you can.  For more comprehensive information contact Baron Law Cleveland to draft your comprehensive estate plan to endeavor to keep more of your assets for your heirs and not hand them over to the government by way of taxes.

People change their minds. Circumstances change, family dynamics shift, realities, needs, and desires are fluid. Estate plans reflect the lives of their owners at the moment of their creation. As such, the want, and sometimes need, to adjust and change an estate plan is common. And since a major part of many people’s estate plans are one or more trusts, it is important to understand when, how, and if you can change the terms your trusts or eliminate them outright.

Modifying or revoking an existent trust is not a straight forward prospect. Trusts fundamentally are legal agreements and thus, are bound by Ohio law and procedure. Trusts bring with them a multitude of benefits, from tax incentives, asset protection, and privacy. The other side of trust use is the conformity with the law and strict adherence to, sometimes burdensome, procedure. The law must ensure any changes to trust terms are legitimate and do not improperly harm the settlor, named beneficiaries, or trust assets. What can or cannot be changed within a trust and who can or cannot effectuate that change largely depends on the type of trust and the circumstances of its creation. The modification or revocation of an existing trust is a nuanced area of law, as such, an experienced Ohio estate planning attorney should be retained at the earliest possible opportunity.

The first question to ask regarding changing a trust is, what type of trust do you have? Though there exist numerous types of trusts out there, the focus here is between revocable and irrevocable trusts. Generally, modification or revocation by a settlor is not available for irrevocable trusts. Hence, the significance of the irrevocable nature of irrevocable trusts. (Though recent changes in Ohio law made it possible to overcome the difficulties to revoke or amend an irrevocable trust, that is a topic for a later discussion.) So, amending or revoking a trust primarily concerns revocable trusts. The next question is how many settlors, i.e. trust makers, are there?

Only one Trust Maker

If there is only one trust maker for a revocable trust, revoking or amending a trust is straightforward. Either follow the instructions in the trust documents or use a method that is highly likely to follow the intent of the individual who made the trust, curiously in this instance, you. Ohio law provides:

The settlor may revoke or amend a revocable trust by substantial compliance with a method provided in the terms of the trust or, if the terms of the trust do not provide a method, by any method manifesting clear and convincing evidence of the settlor’s intent… O.R.C. § 5806.02 (C).

Clear and convincing evidence is a legal term of art that means, in this context, the method of revocation or amendment is highly and substantially more probable than not to be true to the intent of the trust settlor. Obviously, this is a subjective standard so, in most cases, if you give a good faith effort and act honestly with no nefarious purpose, you should be alright. Even more obvious is that this situation can be avoided, and no subjective standard need be considered, if the terms of your trust are competently and comprehensively drafted, properly addressing the possibility of revocation and/or amendment within the terms of the trust. This is why an experience Cleveland estate planning attorney is critical, you really can’t put a price on good legal drafting.

Two or More Trust Makers

If there are two or more settlors, it gets more complicated because each party has an equal say in modifying or amending the trust. Thus, the rules attempt to strike a balance between the party who wants a change and the party who doesn’t, focusing primarily on the type(s) of trust property effected by the potential change. Ohio law provides:

If a revocable trust is created or funded by more than one settlor, all of the following apply:

To the extent the trust consists of community property, either spouse acting alone may revoke the trust, but the trust may be amended only by joint action of both spouses.

To the extent the trust consists of property other than community property, each settlor may revoke or amend the trust with regard to the portion of the trust property attributable to that settlor’s contribution.

Upon the revocation or amendment of the trust by less than all of the settlors, the trustee shall promptly notify the other settlors of the revocation or amendment.

Since Ohio is not a community property state, the rule regarding community property is really only relevant in situations where Ohio couples or joint owners possess property in foreign states which follow community property law, such as Wisconsin or California. For most, the non-community property rule applies most of the time. Here, trust amendment or revocation power is tied to original trust property ownership. This is why accurate and timely accounting of trust funding is paramount, so you can track who put what in and have evidence to back it up. Again, this is why an experienced Ohio estate planning attorney is important, he’ll remind you to keep an accounting of your trust funding to provide for this possibility. Granted, this rule does not expressly provide how to account for jointly owned property put in trust. Ohio law does address this possibility, however, it won’t be examined at this time. Ask your estate planning attorney if you’re looking to amend or revoke a joint trust which was funded with jointly owned property.

Ohio law also allows your power of attorney and guardian of the estate to revoke or amend a trust, however, only to the extent expressly authorized by both the terms of the trust and the authority given to your agent. Make sure the terms of your power of attorney and/or guardianship provide for this contingency. Changing a trust in anyway is a serious action that deserve serious consideration of its consequences. Consult a local estate planning attorney to make sure this is the best course of action and any hidden pitfalls are revealed before acting.

Helping You And Your Loved Ones Plan For The Future

 

About the author: Mike E. Benjamin, Esq.

Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.

 

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What Is An Estate Plan, Part II – Life Documents? 

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Baron Law LLC, of Cleveland, Ohio, offers the following information on different components of an Estate Plan.  To see what plan is best suited for your needs, contact Baron Law, LLC, Cleveland, Ohio

In a previous post, last will and testaments, guardianships, and letters of intent were explored. These documents however, only provide a partial estate plan and focus primarily on conveying one’s wishes and property in the event of death. Estate plans, at least those competently prepared, are comprehensive and should also provide guidance and instructions for critical situations during life as well.  

Who will manage my finances and investments if I am sick or incapacitated? Who will pick what doctor treats me or if a risky but potentially lifesaving procedure should be performed? What if I am put on life sustaining medical support? In what situations and for how long will I remain on such support, if I want to be on it at all? These types of issues and questions also must be addressed and accounted for by your estate plan. That is why finding and working with experienced Cleveland estate planning attorneys are so critical. These types of decisions and potential consequences for your life and well being are not things that should be done on the fly or with doctors and stressed out family members demanding a decision.  

Power of Attorney 

A will provides the instructions necessary for estate administration while trusts provide tax relief and flexibility with asset distribution, however, both primarily operate postmortem and fail to address critical issues prior to death. That is where your powers of attorney come into play. A power of attorney comes in many forms but its primary purpose is to grant authority to one or more responsible parties to handle financial or health decisions of the decedent in the event of illness or other incapacity. Life, and its associated obligations and burdens, tend to continue regardless of one’s physical or mental health. Powers of attorney are protection that ensures affairs are handled and medical wishes are followed even if you are lacking capacity in mind or body.  

 In your estate plan you will want both a financial power of attorney and a healthcare power of attorney. Both are agency agreements that grant another individual the authority to make decisions, within a certain sphere of decisions whose terms you dictate, on your behalf. A financial power of attorney, as the name suggests, grants your agent the authority to make financial decisions for you. Managing investments, buying selling land or property, representing you in business negotiations, etc. Healthcare power of attorney works the same way but with healthcare decisions. If you are incapacitated or otherwise can’t decide for yourself, your agent will decide who your doctor is, what treatment you undergo, what medication should be administered, etc.  

As always, the terms, powers, and limits for your agents are decided by you in the documents that appoint your agent. If you want to add limits on how long they are appointed, what issues they can or cannot decide, or when exactly their powers manifest, you can do so. Furthermore, you always possess the authority to dismiss them outright or appoint someone new.  

Powers of attorney are important to have because surviving spouses or family members will face difficulty and frustration gaining access to things like bank accounts and property that is in your name only. This can be especially damaging within the context of business or professional relations in which the “gears of industry” must keep moving. Alas, if an individual trusted to handle the business if something happens doesn’t possess the authority to so, significant or even fatal business consequences may result. The same goes for medical decisions, often treatment decisions must be made right there and then. Hesitation may mean permanent damage or death to you and if someone doesn’t have express authority to make those decisions, things get confusing, messy, and take a lot longer.  

If you decide not to draft one or more powers of attorney and you under up incapacitated, then in certain situations a court is forced to appoint either a guardian or conservator and the family is effectively cut off from independently managing the relevant affairs of the incapacitated family member. Further, if a court is forced to action, the entire process will take longer, cost more, be public knowledge, and is immensely more complex than it otherwise should be. Having an experienced Ohio estate planning attorney draft the appropriate POAs can avoid a lot of headache and save a lot of money down the line.  

 Living Will 

 Your living will, sometimes called a healthcare proxy, is usually paired with your healthcare power of attorney. A living will is a document that conveys your particular instructions to certain medical situations, principally impending death or prolonged terminal conditions, i.e. accepting or declining of life saving medical care. Lesser issues, such blood transfusions or non-life threatening organ or tissue transplants are covered under a healthcare power of attorney. That is why it is important to have both in effect, so all your bases are covered.   

Often estate planning clients say that they have communicated their wishes about life support, however, often how it really turns out, friends and family are unaware of an incapacitated person’s medical directives or they may choose to discount or ignore previous conversations, believing that you will pull through against all odds and medical advice. By memorializing your medical directives via a living will, medical staff will consult the document at the appropriate time and carry out the your wishes. This takes the stress of critical care decisions off the shoulders of loved ones and removes any opportunity for foul play or misinterpretation. Leaving any agency to family and friends to decide whether or not you live or die is traumatic, regardless how often and loudly say you don’t want life support.  Living wills, considering the literal life determining authority they convey are subject to strict rules regarding drafting and execution. As such, an experience Cleveland estate planning attorney must be retained.  

 HIPAA Authorization 

 This estate document is relatively straight forward and gives medical providers the authority to disclose protected medical information. The Health Insurance Portability and Accountability Act is a Federal law that established national standards on healthcare providers which protected patients’ healthcare information. Within this Act, there is are privacy rules that dictate when, how, and to who protected healthcare information may be used or disclosed. A HIPAA authorization is a form that memorializes your permission for healthcare providers to tell your friends and family what is going on with you if you are ever sick/injured and hospitalized.   

Failure to draft and properly execute this authorization can lead to serious consequences for your family and future medical treatments. Your loved ones will be stressed out if the doctors can’t tell them what is going on with you and time and money will be wasted if they also must navigate the convoluted hospital bureaucracy. Often it takes months just to get in to see a general practitioner, how long do you think it would take for multiple hospital administrators to get around you not having a HIPAA authorization filled out in advance? A little foresight and pre-planning goes a long way.     

Powers of attorney, living wills, and HIPAA authorizations combined with wills, guardianships, and letters of intent make up the lion’s share of any comprehensive estate plan. These documents alone, however, don’t adequately address all the issues and concerns people have regarding planning their estate. Questions of preferable tax treatment for estate assets, avoiding probate, and Medicaid planning, to name a few, are all things better addressed by smart use of T.O.D. designations and trust-based strategies. Planning your estate is a particularized process crafted to your needs and wants. Contact an Ohio estate planning attorney to find out the best way to plan and protect your assets and money in the event of known and unknown problems.  

You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Dan A. Baron of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Dan can also be reached at dan@baronlawcleveland.com.  

About the author: Mike E. Benjamin, Esq.  

Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.   

Disclaimer: 

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.  

 

What Is An Estate Plan, Part I – Death Documents

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Baron Law LLC, of Cleveland, Ohio, offers the following information on different components of an Estate Plan.  To see what plan is best suited for your needs, contact Baron Law, LLC, Cleveland, Ohio

Estate planning is a concept that many people know about, but few fully understand. To most, planning an estate consists simply of establishing a trust or drafting a will. Granted, these are indispensable aspects but such a limited view only serves to handicap successfully preparing for impending mortality.

Aside from ensuring assets pass to heirs a comprehensive estate plan can address a innumerable issues and provide effective solutions. Estate plans may be tailored to provide consistent income for retirement, guarantee responsible individuals are in place in moments of crisis, and medical wishes are communicated and followed. At the end of the day, however, an estate plan is simply a collection of legal documents. Each legal document has a specific purpose, possesses particular advantages, legal conventions, and applicable situations. Nevertheless, most estate plans do consist of a “core” of legal documents that are often advantageous to have regardless of health or financial situation. An estate attorney will draft the documents critical for a given situation but the following is a list of the “core” legal documents that will likely make up any estate plan.

The following consists of the typical documents within a traditional estate plan and is by no means exhaustive. Estate plans are reflective of their owners and are tailored specifically to that person or couple and the needs of surviving family members and financial interests. Again, an attorney is in the best position to advise and guide you on what the major estate planning concerns are and the best legal methods to take. This part of a two-part series discusses the estate planning documents largely concerned with providing instructions in the event of death.

Last Will and Testament

A last will and testament is the document most people associate with estate planning. The will memorializes the “last wishes” of a decedent and guides surviving friends and family on how to split up an estate according to the beneficiary designations and instructions present in the document. There are many types of wills and each one is drafted uniquely for the individual and their estate.

Though wills are specifically created, all share important uses and common characteristics. Again, wills bequest particular money and assets to chosen friends and family. Further, they provide for the how and when such bequests will take place. Some instruct money only to be given on an 18th birthday or only between children of a first marriage. Of critical importance, wills are also the primary method of election of guardians for minor children or disabled familial charges and executors of the estate. The provision of guardianship, a clear plan for property distribution post death, and executor election are the primary incentives for drafting a will. Addressing all is an utmost necessity for ensuring peace of mind for those left behind.

Wills, with some exceptions, all possess the same legal conventions controlling their creation. The point of these legal rules is to ensure the legitimacy of the will, the authenticity of the last wishes evidenced by the document, and protect estates from predatory practices and opportunists. Generally, a legally operative will must be in writing, signed by testator of sound mind, and witnessed by two competent witnesses.

While most estate assets are covered under a will, some assets are not. The following are an example common asset outside of a will, also sometimes referred to as non-testamentary assets: retirement accounts, life insurance proceeds, and property owned jointly with right of survivorship. Non-testamentary assets are normally bequeathed by independent beneficiary designations within the documents of creation or on associated accounts. As such, these assets normally do not undergo probate and are available to beneficiaries much quicker than assets passed via a will and the longer probate process. Distinguishing between testamentary and non-testamentary assets can have critical tax consequences for an estate, as such, please consult an estate attorney for guidance.

Wills are a mainstay and common tool for estate planning, however, its drafting can rapidly grow in complexity due to a convoluted family structure or an expansive estate. Again, an attorney should be retained to draft a will thus ensuring last wishes are effectively communicated and legally valid within a probate court. Failure to draft a will or an improperly drafted or implemented one may result in assets going to improper parties, an undesired executor administrating an estate, irresponsible or unknown guardians for minor children, or undue legal fees and court costs.

Guardianship Designations for Minor Children

A critical concern for most people with young children is, who is going to take care of my children if I’m not here? Ensuring that financially stable friends or family willing to raise children exist affords piece of mind to parents in the event of sudden or unexpected death. Also, proactively addressing guardianship lets parents pick like-minded guardians in regards to personal, lifestyle, or religious views so surviving children are still, at least partially, raised in the manner they desire.

The easiest way to designate a guardian is to name that person or persons in the last will and testament. Then upon death, if the children are not yet 18, a probate court in most situations will appoint the named individuals as guardians according to the specified instructions. A simple will guardian designation, however, may not be convenient or appropriate in certain situations. Family compositions often change, such as in divorce or estrangement, or previously nominated guardians pass away thus negating the express wishes within a will. As such, amending or redrafting a will every time a different guardian is preferable can be time consuming and expensive.

Another way, however, exists to appoint a guardian outside of a will. An independent writing, other than a durable power of attorney, signed, witnessed, notarized, and filed with the appropriate probate court, specifying an appropriate guardian, is sufficient to convey such responsibilities. This method is relatively inexpensive and affords more flexibility to concerned parents. This independent writing method is not meant to affect any other issue or provision within a last will and testament other than appointment of guardians in the event of death. Note, an attorney will be able to resolve and watch for any potential issues regarding contradictory guardianship designations in separate estate planning documents.

Unfortunately, not everyone is blessed with a stable home life or responsible extended family. As such, proper guardian designation documentation is important and alleviates stress for parents, especially within the context of debilitating disease or deteriorating health. Further, appropriate designation avoids the involvement of child services and the courts in determining custody, eliminates the prospect of child trauma and stress upon children and concerned family during transition, and ensures surviving children have no opportunity to become wards of the state.

Letter of Intent

The aforementioned documents taken together serve to mostly illustrate and communicate a decedent’s final wishes. Everything, however, is subject to interpretation. Take the phone game most people played as children for example. A message begins at one end of a chain and, through repetitive communication and subtle shifts in language and understanding, comes out at the end completely different than how it started. A letter of intent fills in any gaps in understanding and prevents manipulation, subtle or overt, of estate instructions.

A letter of intent is a simple document that provides comprehensive instructions for what the decedent views is the most critical information and desired outcomes of an estate plan. The letter, however, is an informal document that is not legally binding upon a probate court. That being said, courts generally rely on them during probate proceedings because there is no greater authority than a decedent’s own words. After all, the entire point of probate is to distribute estate assets as close to a decedent’s intent as possible after the fact. Common instructions within a letter of intent include: guardian designations for minor children, if not detailed in a last will and testament, specific methods for bequests, the location of assets, funeral details, and the locations of estranged family members or friends chosen as beneficiaries. A decedent’s letter of intent in an additional effort to eliminate any confusion or room for interpretation within an estate plan.

Further, a letter of intent may serve as an alternative to adding on to an existing will independent of a codicil. Again, the letter itself is not legally binding like a codicil would be but it is relatively inexpensive, quick, and may serve as a viable substitute in a crunch. In Ohio, codicils are governed by strict legal conventions while letters of intent are not. As such, letters may be the document of last resort in situations of impending mortality or incapacity. As most probate judges agree, something is better than nothing. Note, however, a letter of intent is never a substitute for a will. Always consult with an attorney regarding how to best utilize a letter of intent in conjunction with other estate planning documents.

Your last will and testament, guardianship designations, and letter of intent are all critical estate planning documents, however, taken together they only offer partial protection and primarily focus on providing instructions after death. In the next part of the series the estate documents of the living will, HIPPA authorization, and healthcare and durable powers of attorney, which concentrate on providing instructions during life, are explored. Taken together, all the documents explored during this series can provide comprehensive protection for the most critical issues of both life and death.

You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings.

For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.

Helping You and Your Loved Ones Plan for the Future.

About the author: Mike E. Benjamin, Esq.

Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.

Disclaimer:

The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor Baron Law LLC cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, the author and Baron Law LLC make no warranties regarding the herein information or any results arising from its use. Furthermore, the author and Baron Law LLC disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.

Estate Planning Lawyer Baron Law Cleveland

Executor’s Duties – When Should Debts Be Paid?

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Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on what your duties are as an executor of an estates and  when you need to pay all debts of the estate.   Contact Baron Law Cleveland to answer all your questions on what your duties are and to help guide your through […]

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Baron Law Cleveland Estate Planning Attorney

Spousal Rights – Are You Forced To Take What Is Bequeathed?

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Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on how to handle your spouses will after they pass.   Are you forced to take what is left to you?  Contact Baron Law Cleveland to answer this question and any other questions you may have on wills and probate.

 

Humans are material creatures, it’s just how we’re wired. We all like stuff, we all want stuff. The only difference between people is the target of that want and the severity of that desire. Though the passing of a friend, loved one, or spouse is a mournful event whose significance shouldn’t be understated. At the end of the day, the most common question I hear when a person comes into the office with a will of a recent decedent is, “what do I get?” More often than not, the next question after that is, “what else can I get?”  

Whether its due to genetics, environment, habits, or just dumb luck, women live, on average, seven years longer than men. So naturally, women are more often responsible for probating their husband’s will and receiving distributions under it. Regardless of sex, however, under Ohio law, surviving spouses are granted the ability to elect either 1) to receive the surviving spouse’s testamentary share as provided in the decedent’s will, “taking under a will;” or 2) to take against the will. This “taking against the will” is called an election to take under the law. Which option to take is a momentous decision that can affect the total windfall of the surviving spouse, the distributions to beneficiaries and heirs, and temperament of surviving friends and family. A local Cleveland estate attorney is in the best position to calculate the options and spell out the pros and cons of each.  

If the surviving spouse elects to take against the will, the surviving spouse receives either one-half or one-third of the decedent’s net estate. The surviving spouse receives one-half of the decedent’s net estate unless two or more of the decedent’s children or their lineal descendants survive the decedent, in which case the surviving spouse receives one-third.  

So how does one elect to “take against a will?” After the appointment of an executor or administrator, the probate court will issue a citation to the surviving spouse to elect whether to take under the will or against the will. This election must be made within the five-month statutory period or else be forever barred. If you chose to take against the will, you return the form attached to the notice and the court sets a hearing.   

At the hearing to elect to take against a will, the probate judge or deputy clerk, who acts as a referee, will explain the will, the rights under the will, and the rights, by law, in the event of a refusal to take under the will. If the surviving spouse is unable to make an election due to a legal disability, the court will appointment an appropriate proxy to determine if an election to take against the will is the best course of action for the surviving spouse and, if it’s the best course of action, make the actual election.  

Unless a will expressly states otherwise, an election against a will results in the balance of the net estate being disposed of as though the surviving spouse had predeceased the testator. Furthermore, unless a trust says otherwise, if a will transfers property to a trust created by the testator during the testator’s life, such as with a pour-over will, and the spouse elects against the will, then the surviving spouse is considered for purposes of the trust to have predeceased the testator, and there shall be an acceleration of remainder or other interests in all property bequeathed or devised to the trust by the will, in all property held by the trustee at the time of the death of the decedent, and in all property that comes into the possession or under the control of the trustee by reason of the death of the decedent. Again, an election to take against a will can have serious ramifications for a decedent’s estate plan. An Ohio estate planning attorney will be better able to spell out the consequences of such an election and track which estate assets may be effected by an election and in what ways. 

It is important to note, however, that an election to take against a will does not alter or destroy the will for other beneficiaries. Upon an election against a will, the administrator or executor of the estate must still attempt to follow the testator’s intent and final wishes to the best of the fiduciary’s ability as to all others in a will except the surviving spouse.   

The only real ways to waive or eliminate the statutory right of the surviving spouse to elect to take against a will is either a valid prenuptial agreement or antenuptial agreement. These agreements, however, are not guaranteed effective and are only valid if 1) they have been entered into freely without fraud, duress, coercion, or overreaching, 2) if there was a 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. With the recent rise of divorce rates in America nuptial agreements are steadily gaining in popularity and use. As such, consult an Ohio attorney to find out if nuptial agreements are right for you or if the nuptial agreements you already have are either valid or actually fulfilling their intended purpose.   

Spousal rights were created to ensure that surviving spouses aren’t maliciously or wrongfully cut out from a will. Improper disinheritance from a will can result in a surviving spouse falling into poverty, being kicked out of a lifelong martial home, or becoming a burden on friends and family. Though it may seem unseemly to focus on material possessions when a spouse passes, the responsibilities and burdens of day to day living still persist regardless. You still need food in the fridge and a roof over your head. After all, as Langston Hughes said, “life is for the living.”  

You don’t have to be rich to protect what you’ve spent a lifetime trying to build. To find out whether a trust is right for your family, take the one-minute questionnaire at www.DoIneedaTrust.com. There are a number of different trusts available and the choices are infinite. With every scenario, careful consideration of every trust planning strategy should be considered for the maximum asset protection and tax savings. For more information, you can contact Mike Benjamin of Baron Law LLC at 216-573-3723. Baron Law LLC is a Cleveland, Ohio area law firm focusing on estate planning and elder law. Mike can also be reached at mike@baronlawcleveland.com.  

 Helping You And Your Loved Ones Plan For The Future

About the author: Mike E. Benjamin, Esq.  

Mike is a contracted attorney at Baron Law LLC who specializes in civil litigation, estate planning, and probate law. He is a member of the Westshore Bar Association, the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Federal Bar Association for the Northern District of Ohio. He can be reached at mike@baronlawcleveland.com.   

 

 

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Ohio Revocable vs. Irrevocable Trusts in Estate Planning

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Learn the similarities and differences and get help understanding which is right for your estate plan.

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Estate Planning Lawyer - Daniel A Baron

Qualified Personal Residence Trusts

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Cleveland, Ohio, estate planning lawyer, Daniel A. Baron, Ohio, offers the following information on whether a Qualified Personal Residence Trust should be part of your comprehensive estate planning.

For wealthier families, a great tool to manage your future tax savings would be to transfer the liability of owning a property for which you may end up paying estate taxes on, to a Qualified Personal Residence Trust, or QPRT.

In 2017 the gift exemption was set at $5.49 million, therefore, creating a QPRT permits you to make better use of this exemption. This allows anyone with a substantial estate and the likelihood of facing future transfer taxes, the opportunity to place a residence, be it a primary home, a secondary home, lake, mountain, or ocean side getaway, in a QPRT.  Transferring of this property is a lifetime transfer of residence in exchange for a rent free use of the home for the entire term of the trust.  Should the grantor survive the term of the trust, the property can either remain in the trust for the benefit of the beneficiaries or transfer outright to the beneficiaries.  Either way, successfully establishing a QPRT reduces the gift tax or estate tax cost.

You must keep in mind that this a federal tax exemption and some states may still impose a tax on the value of the property, but it still remains a great tool to maximize your estate taxes upon your passing.

Frequently asked Questions:

  • When should I utilize a QPRT
  • What requirements need to be met to qualify a property for the QPRT tax reduction
  • Does a mortgage impact the QPRT transfer
  • Are there any tax consequences connected with a QPRT

To see whether or not a Qualified Personal Residence Trust is the right estate tax savings plan for you, contact an experienced Estate Planning lawyer. Contact Daniel A. Baron of Baron Law today at 216-573-3723 to answer any questions you may have on a QPRT or any other trust.  We welcome the opportunity to work with you recommending the best solution for your needs.

Helping You and Your Loved Ones Plan for the Future

Planning for Married Couples Using Portability and Bypass Trusts

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Planning for Married Couples Using Portability and Bypass Trusts

 As Seen Published in the Cleveland Metropolitan Bar Journal

Significant expansion of the federal estate tax exclusion has dramatically changed how estate planning professionals plan for married couples.   In 2000 when the federal estate tax exclusion was merely $675,000 and federal tax rates peaked at fifty-five percent (55%), bypass trusts or “credit shelter trusts” were a popular means of sheltering wealth to preserve assets for a surviving spouse and children.   Today however, the exclusion amount has grown to an astounding $5.49 million per-spouse which is now “portable” and can be carried over to the surviving spouse’s estate.  Thus, significant changes in recent years have compelled estate planning attorneys to consider the concept of portability versus bypass trusts.

What is a Bypass Trust?

Bypass trusts are historically an effective tool designed to minimize estate taxes by sheltering wealth into a trust.   The concept is pretty straightforward: every individual is afforded an exemption amount that permits their estate to transfer to a surviving party without suffering loss to federal estate taxes.  Conversely, before portability, married couples would lose one of these exemptions at the death of the first spouse.  At the death of the second spouse, if the value of the estate exceeded the surviving spouse’s exemption, it would be taxed at the federal estate tax rate.   For example, when the exemption amount was $675,000 in the year 2000, a person dying with $1 million in his or her estate would result in $178,750 in federal estate taxes because the remaining $325,000 over the exemption is taxed.

Married couples could avoid these tax implications by directing some of their estate to a bypass trust that would support the needs of the surviving spouse, while also sheltering that portion of the estate from unnecessary taxation. This may be accomplished by dividing the estate into two portions.  Instead of leaving the entire estate to a surviving spouse, the deceased spouse leaves assets for their children in one trust account and a separate trust account for the surviving spouse’s benefit.  Assets placed in the separate trust account for children reduce, if not eliminate, estate taxes entirely.

Advantages for Larger Estates Using Bypass Trusts

With larger estates, bypass trusts may be a better planning option when considering the financial and tax implications for married couples.  By far the greatest advantage is that appreciation of the trust assets and undistributed income will not be subject to federal estate tax upon the surviving spouse’s passing.   This is especially important for assets in the decedent’s estate that may appreciate drastically before the surviving spouse’s death.  In addition, if intergenerational planning is important, bypass trusts are likely a better option over portability because they allow for use of the generation-skipping tax exclusion of the first spouse to pass.  Portability is not available for the generation-skipping tax exemption thus, portability would simply not work.

Providing Asset Protection

Aside from the tax implications, asset protection will sometimes compel the need for establishing a bypass trust over portability.   If properly drafted, the trust creates a certain level of asset protection for children and a surviving spouse.  Coupled with credit shelter spendthrift provisions, the trust may preclude the assets from being attacked by the creditors of trust beneficiaries.  This form of asset protection is particularly important and commonly used for beneficiaries who are in a “shaky marriage” and/or who have spending issues.  While a surviving spouse may not have obvious significant creditor or litigation risks (like being a surgeon or professional athlete), creditor protection should always be on the horizon.  When compared to portability, the fact remains that estate planning using bypass trusts can remain relevant at nearly all levels of net worth if the driving reason for the trust is a non-tax concern.

Disadvantages

Bypass trusts serve an important and necessary purpose to preserve an estate against creditors and divorce.  However, for smaller estates, this protection comes with taxable consequences.   Unlike the use of portability, there is no second step-up in basis at the death of surviving spouse.   For smaller estates, this could leave beneficiaries paying a great deal in income tax upon the disposition of the asset.  Further, undistributed income of the trust can be subject to higher income tax rates than individuals.  In addition, although minimal, there may be an added annual expense of filing a trust tax return.  Finally, the use of bypass trusts will require the retitling of assets which can sometimes be tedious and relatively costly.

What is Portability?

The American Taxpayer Relief Act of 2012 has been a game changing concept when planning for married couples.   Since the Act, portability is now a permanent part of the federal estate tax system, which means each spouse’s estate tax exclusion that is unused at death is portable and can be carried over to the surviving spouse.   It has effectively doubled the exemption amount for combined assets of married couples to over $10 million.  With portability, assets are stepped up in basis at the death of the first spouse, and then are stepped up again at the death of surviving spouse.   For families with larger retirement assets, portability has proven to have several advantages.

Advantages of Portability

The biggest advantage for using portability, especially for smaller to medium estates, is the use of step-up in basis.   This is in contrast to using a bypass trust, where the assets are stepped up at the death of the first spouse, but not at the death of the second spouse.   Compared with bypass trusts, there is no need to retitle assets or divide assets into separate trust shares when using portability.    For the most part, portability is simple and can be utilized even in lieu of estate planning prior to death.

Downside to Portability

If the client’s goal is to protect assets of beneficiaries from remarriage, creditors, and/or divorce, then portability is probably not the only planning tool that should be considered.   With portability, a portion of inherited assets are subject to the surviving spouse’s present and future creditors, as well as creditors in bankruptcy and, if the surviving spouse remarries and then divorces, to ex-spouses.   Additionally, portability is not available for the generation-skipping tax exemption.    Although retitling of assets is not required, the use of portability is not automatic.   Timely estate tax returns must be filed and may require additional cost from tax professionals.

A Quick Comparison

Let’s assume Ken and Kathy have a combined net worth of $10.98 million.   Ken dies in 2016 and Kathy dies in 2026.  During this 10-year period we will assume the federal estate tax rate will be forty percent (40%) and they live in a state with no estate or income tax.

Using Portability

Ken forgoes setting up a trust and instead relies on portability. Let’s assume that over the ten-year period after Ken’s death,   the total estate grows at a modest five percent (5%) annually.  This would yield a total combined estate of $17.88 million when Kathy dies in 2026. Not taking into account inflation, Kathy’s total estate tax exclusion will be both Ken’s unused portion plus her own, totaling $10.98 million.  Consequently, the total amount subject to estate tax is $6.9 million ($17.88m – $10.98).  At a forty percent (40%) tax rate, the possible resulting federal estate tax is $2.76 million.

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Portability Chart

Using Bypass Trusts

Now let’s assume that Ken created a bypass trust which at death would become irrevocable and funded the family trust account to its maximum of $5.49 million.  When Kathy dies 10 years later, all of the appreciation within the family trust will escape estate tax.  Here, the resulting taxable estate is $3.45 million opposed to $6.9 using portability.  Kathy still maintains her $5.49 exclusion resulting in the total estate tax of $1.38 million.

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bypass trust chart comparing portability

In sum, portability has the benefit of simplicity and $5.49 million of a portable exemption.  For smaller estates without intergenerational or asset protection concerns, portability appears to be the better option.  On the other hand, regardless of the size of the estate, bypass trusts remain effective at all levels of net worth if the driving reason is non-tax related.    Estate planning goes well beyond the comparison of portability versus bypass trusts and careful consideration of the client’s needs should be implemented into every plan.   For more information, contact Baron Law LLC at 216-573-3723 or dan@baronlawcleveland.com