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Can Lawyers Draft Wills for Out-of-State Residents?

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Cleveland, Ohio Estate Planning Attorney

Perhaps for most estate planning attorneys, the relationships built among clients can last for decades.  Because of the duration of the relationship, it’s not unusual for an estate planning attorney to receive requests for legal assistance from clients who have changed their residence to a state in which the attorney is not licensed.   As a Cleveland, Ohio attorney, I’m sometimes asked to prepare estate planning documents for out-of-state residents.   Recently, a Cleveland, Ohio friend asked if I would draft a will and power of attorney for his parents who reside in New York.  Thus, several questions arose: Can a Cleveland, Ohio attorney draft a will for an out-of-state resident?   At what point does an attorney’s assistance cross the line into unauthorized practice of law? Does the client’s change in residence to a state in which the attorney is not licensed require the termination of professional relationship or can it continue in some modified form?

These questions lead to what any knowledge seeker would do: a google search!  Not surprisingly, the google search did not provide a concrete answer – and it shouldn’t – so I proposed these questions to several Cleveland attorneys who have been doing estate planning for over 20 years.   One attorney said, “Sure, you can draft a will for a non-resident, but just don’t sign your name to it.”  Another attorney emphatically said, “No, drafting a will for a non-Ohio resident would be a violation of the Ohio Model Rules of Professional Conduct which prohibits the unauthorized practice of law.”   After hearing several conflicting opinions on the matter, I soon realized that this is a common issue, and deciding one way or the other can mean the difference between business as usual, or disbarment.

For the Ohio family estate planner, the main question is whether or not the family estate planner’s practice constitutes the unauthorized practice of law in another state.  The test for what constitutes unauthorized practice of law varies from jurisdiction to jurisdiction but most states have adopted model rule 5.5.  Unfortunately, no jurisdiction provides a comprehensive definition of practice of law.  As a result, the definition of the term “practice of law” is left to the courts to determine.   At this point, the federal courts have refused to hold that a state’s prohibition on unauthorized practice of law should apply only to persons who apply the state’s law and not to those who provide legal advice solely concerning federal law. See 1 Family Estate Planning Guide § 19:19 (4th ed.) See also Spanos v. Skouras Theatres Corp., 364 F.2d 161 (2d Cir. 1966).  A clear example of this involves an attorney who advertises or implies that he is licensed to practice in that state.  See The Florida Bar v. Kaiser, 397 So. 2d 1132 (Fla. 1981).  But most attorneys know enough not to promote their practice in a state they aren’t licensed to practice law.

In many instances, it’s easy to discern when an attorney is breaching rule 5.5.   In fact, courts have provided several examples of what constitutes the “practice of law” for estate planning lawyers not licensed in the state.  For example, giving legal advice concerning the application, preparation, advisability, or quality of any legal instrument or document or forms thereof in connection with the gift of property is the practice of law.  See Florida Bar re Advisory Opinion-Non-lawyer Preparation of Living Trusts, 613 So. 2d 426 (Fla., 1993).   In another case, an individual gave a client legal advice and practiced law by aiding the client in designating probate and non-probate assets, selecting a form of trust, designating various beneficiaries, and determining tax treatment.  The conduct was also considered the practice of law. See Akron Bar Ass‘n v. Miller, 80 Ohio St. 3d 6, 1997-Ohio-364, 684 N.E.2d 288 (Ohio, 1997).

Drafting a will for an out-of-state resident likely falls within one of the examples above, and therefore is unauthorized.   However a determination that the requested assistance is the practice of law in a jurisdiction in which the attorney does not hold a license is not dispositive.   Ohio rule MR 5.5 lists six exceptions to the general prohibition against the practice of law in a jurisdiction without a license.  Of the six exceptions, some allow legal representation in another state on a “temporary basis.”   The comment to the rule describes this exception in very broad terms.  It includes the following factors for determining whether the representation relates to an attorney’s practice:

1 The lawyer’s client may have been previously represented by the lawyer, or may be resident in or have substantial contacts with the jurisdiction in which the lawyer is admitted.

2 The matter, although involving other jurisdictions, may have a significant connection with that jurisdiction.

3 Significant aspects of the lawyer’s work might be conducted in that jurisdiction or a significant aspect of the matter may involve the law of that jurisdiction.

4 The necessary relationship might arise when the client’s activities or the legal issues involve multiple jurisdictions, such as when the officers of a multinational corporation survey potential business sites and seek the services of their lawyer in assessing the relative merits of each.

5 In addition, the services may draw on the lawyer’s recognized expertise developed through the regular practice of law on behalf of clients in matters involving a particular body of federal, nationally uniform, foreign, or international law. See also MULTIJURISDICTIONAL PRACTICE OF LAW ISSUES IN ESTATE PLANNING, 40 ESTPLN 23, 30, 2013 WL 2407104, 11

The Restatement (third) of Law Governing Lawyers appears to provide even more flexibility.  In the estate planning context, for instance, the Restatement includes the following example:

Lawyer is admitted to practice and has an office in Illinois, where Lawyer practices in the area of trusts and estates, an area involving, among other things, both the law of wills, property, taxation, and trusts of a particular state and federal income, estate, and gift tax law. Client A, whom Lawyer has represented in estate-planning matters, has recently moved to Florida and calls Lawyer from there with a request that leads to Lawyer’s preparation of a codicil to A’s will, which Lawyer takes to Florida to obtain the necessary signatures. While there, A introduces Lawyer to B, a friend of A, who, after learning of A’s estate-planning arrangements from A, [asks] Lawyer to prepare a similar estate arrangement for B. Lawyer prepares the necessary documents and conducts legal research in Lawyer’s office in Illinois, frequently conferring by telephone and letter with B in Florida. Lawyer then takes the documents to Florida for execution by B and necessary witnesses. Lawyer’s activities in Florida on behalf of both A and B were permissible. See Restatement (Third) of the Law Governing Lawyers § 3 (2000) § 3 cmt. e

Rule 5.5 and the Restatement may provide latitude for estate planning lawyers to practice law in other states, but drafting a will for a non-resident still appears to be forbidden.   Nonetheless, the temporary basis for representation that “arises out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice” is an exception that many estate planning lawyers rely on.   In fact, much of what estate planning attorneys do may be permissible under this exception.  For example, the following may be permissible.

  1. Preparing state income and estate tax returns for a State A decedent or the trust of a State A decedent for interests with situs in another state or preparing such returns for a State A decedent or the trust of a non-State A decedent with respect to property situs in State A.
  2. Representing non-State A clients with probate proceedings in a State A court (e.g., probates, guardianships, and trust administrations under the jurisdiction of a State A).
  3. Providing a client, who resides in State A, or a trustee of a trust, with situs in State A, with general analysis of the laws of another state without making an appearance in a court or consummating a transaction in such state.

Aside from the rules, the practical aspects of drafting a will for an out-of-state resident are not favorable.   Each state has their own set of rules with complying with the formalities of executing a will.  In Ohio, two signatures are required but in other states, three or more signatures may be required.  Thus, even though a client may come to your Ohio office to execute a will, the will may not be acceptable in other states.  Many states allow a will drafted in one state to be valid in another; however, the risk of invalidating a will based on improper execution is a risk not worth taking.

In sum, an Ohio attorney should think twice about drafting a will for a client living out-of-state.  Even if the client comes to an attorney’s Ohio office, the fact that the client resides in another state raises ethical issues.  The unauthorized practice of law is a serious violation of Ohio ethical rules and risks the possibility of disbarment.

The above is not legal advice.  Should you need advice on drafting a will, a power of attorney, divorce, or other estate planning matters, call an attorney at Baron Law LLC.  Baron Law LLC is a Cleveland, Ohio law firm representing individuals and businesses needing advice on estate planning, divorce, and business law.  Call today at 216-276-4282.

Baron Law LLC

Estate Planning – Protecting your Children Through Testamentary Trusts

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From Cleveland, Ohio Estate Planning Attorney Dan Baron:

Estate planning attorneys will tell you that testamentary trusts are a great way to protect your children and plan for your estate.  Below are 10 things to know about testamentary trusts and how they might fit into your estate plan.  To learn more, contact Cleveland, Ohio estate planning attorney Dan Baron at Baron Law LLC.

  1. What is a testamentary trust?

A testamentary trust is a trust usually coupled with your last will and testament.  Contrary to many living trusts, a testamentary trust is revocable and will not take effect until you die.  The trust provides for the distribution of all or part of an estate and often proceeds from a life insurance policy held on the person establishing the trust.   You can have more than one testamentary trust in your will.

  1. Why choose a testamentary trust?

Most often a testamentary trust is used to protect your children.  For example, if husband who has a will dies in an automobile accident, his estate would pass to his wife.  However, if both husband and wife are die in the accident, leaving their two minor children behind, a simple will will not provide a plan for the estate. Thus, a testamentary trust may provide guidelines as to how the estate is passed to their children.   There are other trusts to consider.  Contact your estate planning attorney to learn more.

  1. How do you create a testamentary trust?

As mentioned above, the most common way in Ohio to create a testamentary trust is to include the necessary language in your will.  The creator of the trust (known as the “settlor”) dedicates a Trustee who then administers trust.  For example, in the event both spouses die, the trust might make the estate pass to their children at the age of 18.  Or, the estate might pass in the even one of the kids gets married.  It is recommended that an estate planning attorney create your trust.

  1. When is a testamentary trust created?

Unlike living trusts, the money is not distributed automatically.  Many people believe that testamentary trusts avoid probate.  However, there still are some probate considerations that are involved.  In Ohio, typically a testamentary trust begins at the completion of the probate process after the death of the person who has created it.  It is recommended that an estate planning attorney help guide you through setting up the trust.

  1. What is the term?

A testamentary trust lasts until it expires, which is provided for in its terms. Typical expiration dates may be when the beneficiary turns 25 years old, graduates from university, or gets married.

  1. How is the probate court involved?

As mentioned above, a testamentary trust will not automatically take effect.  Before the creator dies,  the probate court checks up on the trust to make sure it is being handled properly.  Once the creator dies, the beneficiaries of the estate should contact an estate planning attorney to carry out the trust.

  1. Who can be the trustee of a testamentary trust?

Anyone can be a Trustee for a testamentary trust.  However, it is recommended that the Trustee be someone that the creator trusts.  The Trustee will have great responsibility in administering the deceased’s wishes.

  1. Does the trustee have to honor the terms set out for expenditures in the will?

It depends.  Ultimately it is up to the Trustee to determine whether a certain act or time has occurred in order to distribute the estate.  Some of these events are very easy to figure out.  For example, if the trust provides that the estate be distributed upon a marriage, that event is easy to determine.  Conversely, if the trust provides that a certain dollar amount be distributed upon a child “finding a good job,” it becomes more subjective for the Trustee.  Thus, it’s imperative to hire a qualified estate planning attorney to help draft a will or trust.

  1. When can I opt out of a trust?

Generally, if the person’s estate is small in comparison to the potential life insurance proceeds or other amounts that will be paid to the estate at death, a testamentary trust may be advisable.

  1. How much does it cost to set up a testamentary trust?

It is generally inexpensive to set up a will with a testamentary trust.  In most cases, attorney Dan Baron at Baron Law LLC can set up a testamentary trust for less than $1,000.  If the estate plan is more complicated, the legal fees may be higher.  If you are interested in setting up a trust or estate plan, contact a Cleveland, Ohio estate planning attorney.  Call Baron Law LLC today at 216-573-3723.  You will speak directly with an attorney who can help with your estate planning needs.

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Building a Charitable Contribution in your Estate Plan

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Estate Planning Charitable Donations

Have you ever considered incorporating a charitable donation into your estate plan?   Aside from the tax benefits, including charitable giving into your estate plan is a wonderful way to extend your legacy and show your generosity.  And contrary to public belief, charitable giving in your estate plan is not just for the very wealthy.   Through an estate planning attorney, there are several good ways to provide for your family while also giving to your favorite causes.

  1. Charitable Contributions through Your Will

The easiest and least complicated way to include a charitable contribution in your estate plan is through your will.  The amount you charitably contribute won’t reduce your income taxes, but it may decrease your taxable estate.  In addition, this may potentially increase the amount you’ll be able to leave to your heirs.  Talk with an estate planning attorney to learn more.

  1. Charitable Contributions through Your Retirement

You can also contribute to your favorite charity by donating a portion of your retirement account. Donating a retirement account is tax-effective and pretty straightforward.   A donor must simply designate the charity as the beneficiary on your account to receive the tax benefit.  Charities are exempt from both income and estate taxes.  Thus, the charity can receive 100% of the account’s value while your children or heirs receive their portion of the estate through non-retirement assets.  Consult with an estate planning attorney to learn more.

  1. Split-interest gift

Another way to make a charitable contribution is through a split-interest gift.  Through a split interest gift, you can donate assets to a charity but may also retain some of the benefits of holding those assets.  Here, the donor opens and funds a trust in the charity’s name and receives a charitable income tax deduction at the time of transfer.  Just like with other trusts, here the donor retains some rights to the property and may be able to avoid capital gains on the assets transferred.  Talk with an estate planning attorney to learn more about split-interest gifts.

Some ways to provide split-interest gifts include:

  • Charitable remainder trust (CRT): A CRT is an irrevocable trust that provides either a fixed payment or a fixed percentage to the donor (or other beneficiary) every year.  The term of the trust can for the life of the donor or a set number of years.   At a minimum, the donor must take annual payments from the trust no less than 5% but no more than 50% of the property’s fair market value.  At the end of the term, the remainder goes to the designated charity.  To maximize payments during the lifetime of the donor, the trust should appreciate value while receiving payments in the form of a percentage.   In contrast, if the trust will not appreciate in value, you’re better off receiving a fixed payment each year. Consult with an estate planning attorney to learn more.
  • Charitable lead trust (CLT): A CLT is the reverse of a CRT.  This revocable trust provides income to a charity for a set number of years, after which the remainder passes to the donor’s heirs or beneficiaries.  The CLT is a good choice for those who don’t need a lifetime of income from certain assets.  The trust is often structured to get an income tax deduction equal to the fair market value of the property transferred, with the remaining interest valued at zero to eliminate a taxable gift.  Contact an estate planning attorney to learn more about charitable lead trusts.
  • Pooled income fund (PIF):  Pooled income funds are trusts maintained by public charities. The trust is set up by donors who contribute to the fund.  Just like a CRT, the donor receives income during his or her lifetime.  After the donor’s death, control over the funds goes to the charity. The biggest benefit to a PIF is that contributions qualify for charitable income deductions as well as gift and estate tax deductions.  Talk with an estate planning attorney to learn more.

Charitable Giving is not just for the Wealthy.

There is a misconception that charitable giving is just for the wealthy; however, this is far from true.  Many people give to their alma mater or local church.  The amount does not need to be in the tens of thousands.  In fact, many people give smaller amounts by simply adding the charity in their will.  This blog is not meant to provide legal advice and is for informational purporses only.  For more information regarding wills, trusts, or charitable giving, contact Cleveland, Ohio law firm Baron Law, LLC.  Baron Law is your estate planning law firm in Cleveland, Ohio.  Call today for a free consultation at 216-573-3723.

Cleveland, Ohio attorney

Can a Beneficiary Force a Trustee to Provide Information Contained in a Trust?

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Cleveland, Ohio Estate Planning Attorney

Can a Beneficiary Force a Trustee to Provide Information Contained in a Trust?

In addition to the blog below, do you have questions regarding estate planning or trust administration?  Call Cleveland, Ohio law firm Baron Law LLC.  An attorney at Baron Law will be able to assist you and provide legal advice for all your wills and trust needs.

If you’re resident of Ohio, then as a beneficiary, you have a right to see a trust and can force the trustee to provide you a look.  Under Ohio law, the Trustee is obligated to give a copy of the trust to beneficiaries if they ask for it.  Cleveland, Ohio estate planning attorney Daniel A. Baron points to Ohio Revised Code Section 5808.13 which provides in part

“A trustee shall keep the current beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a beneficiary’s request for information related to the administration of the trust.”

The Ohio statute further provides that a trustee must:

“Upon the request of a beneficiary, promptly furnish to the beneficiary a copy of the trust instrument. Unless the beneficiary expressly requests a copy of the entire trust instrument, the trustee may furnish to the beneficiary a copy of a redacted trust instrument that includes only those provisions of the trust instrument that the trustee determines are relevant to the beneficiary’s interest in the trust. If the beneficiary requests a copy of the entire trust instrument after receiving a copy of a redacted trust instrument, the trustee shall furnish a copy of the entire trust instrument to the beneficiary. If the settlor of a revocable trust that has become irrevocable has completely restated the terms of the trust, the trust instrument furnished by the trustee shall be the restated trust instrument, including any amendments to the restated trust instrument.”

Put more simply, if you’re a beneficiary to a trust, you simply need to ask and you will be provided a copy of the trust.  Conversely, if you’re the Trustee and receive one of the requests listed above, you likely have to comply.  Beneficiaries having problems getting information from a Trustee should refer to the above statute.  Trustees who fail to respond risk being removed as the Trustee.  In addition, if there is a law suit, the attorney’s fees would be taken out of the trust, thus reducing the value to all beneficiaries.

This blog is for informational purposes only and is not intended as legal advice.  If you need an estate planning attorney, trust attorney, wills attorney, or other Cleveland, Ohio attorney contact Baron Law LLC at 216.573.3723.  You will speak directly with an Ohio attorney who can assist you with your legal needs.