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Baron Law Cleveland - Estate Planning Attorney

Knowledge Is Power – Why Knowing The Difference Between Irrevocable And Revocable Trusts Is Critically Important.

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Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on the differences between a Revocable Trust and an Irrevocable Trust.  Contact Baron Law Cleveland to ask and have answered your questions on what the differences are and what would suit your needs best.

Your estate plan consists of many documents and covers a lot of bases. From protecting assets from creditors and litigants to avoiding probate where desirable, a comprehensive estate plan protects you while you’re living and provides for loved ones after death. Because estate plans are, by design, comprehensive, a lot of legal jargon is thrown around and often it’s difficult to keep track of all the nuance and detail. You can put your faith in your financial adviser or estate planning attorney and trust them completely with little or no understanding of what they’re actually doing. That certainly is an option, however, the better course is to ask questions and endeavor to remain informed as possible.  

That said, one of the most common questions posed during an initial estate planning consultation is, what is the difference between a revocable and irrevocable trust? Since trusts represent one of the most utilitarian estate planning tools, they have the ability to do many useful and advantageous things in regards to estate planning, understanding the difference is critical to providing context to advice dispensed by Ohio estate planning attorneys.  

 

  1. Revocable Trusts

Revocable trusts, commonly referred to as living trusts, are trusts that the grantor/settlor can change or cancel during their lifetime. The most significant aspect of living trusts is that the grantor usually keeps control over the assets placed in the living trust and, as such, receives no tax relief for those assets. Similarly, the grantor can also appoint themselves trustee of the living trust to dispense that control.  

To use a simple metaphor, a trust is a treasure chest. Putting assets in the chest, the trust, protects the assets from particular threats outside and establishes rules which govern what is placed inside. The major distinguishing characteristic of living trusts is that the grantor, owner of the trust, keeps control of the key that unlocks the treasure chest and can get at what’s inside.  

So, naturally, the next question after what is a revocable trust is, why would I want one? The advantages of living trusts are numerous but are highly particular to individual circumstances. An Ohio estate planning attorney is in the best position to judge what an individual’s needs are and the best ways to meet them. Generally, however, the primary advantages of using living trust are avoiding probate, directly providing for distribution of assets through trust beneficiary designations, privacy, trust inventories are not public record, and maintaining control of assets trusts during life and post-death.   

  1. Irrevocable Trusts  

Irrevocable trusts are trusts in which the grantor relinquishes all control and ownership over the trust and the assets used to fund the trust. Thus, the trust cannot be changed or canceled without the beneficiaries’ permission. Prior to trust formation, grantor can dictate whatever terms they desire to govern the trust, but after formation, those terms control independent of grantor’s wishes and desires.  

So, again, why would anyone give up control and chose irrevocable trusts? As mentioned previously, with living trusts, grantors keep the key to the treasure chest. With irrevocable trusts, however, the grantor gives the key to another, namely a trustee. Since grantor no longer has the key, grantor can no longer get what’s inside the chest. Since the assets in an irrevocable trust no longer belong to grantor, at least in the eyes of the law, this has major tax and legal implications. 

These tax and legal consequences are the primary advantages of irrevocable trusts, and what distinguishes revocable from irrevocable trusts. First, since control over trust assets is relinquished, the IRS does not consider trust assets to be in grantor’s taxable estate. Thus, estate, income, or gift taxes may be avoided or reduced in certain circumstances. Further, assets within an irrevocable trust enjoy protection from creditors and litigation. Of particular importance for seniors, assets within this type of trust are not counted as an asset for eligibility in Medicaid or other government assistance programs. A common tactic is to place a martial home, usually the largest asset, in trust. Thus, eligibility is maintained but the house can still be lived in. This sheltering of assets while still maintaining use is at the core of irrevocable trusts. Even though direct control is relinquished, grantors dictate the terms of the trust. Such terms often mandate to the trustee that such trust assets are used for the health, support, and maintenance of the grantors. Thus, grantors still get to enjoy and profit from assets but get the benefits of not, technically, owning such.  

Naturally, the question everyone asks is which one is best. Unfortunately, as with most things financial and legal, there isn’t a straight answer. Dependent on the circumstances, such as estate planning goals, family structure, available estate assets, either or both types of trusts may be advantageous to use. A Cleveland estate planning attorney is in the best position to judge what is most appropriate for a given situation.  

Regardless of which is most appropriate, the most critical part is funding your trust. Picking what type or types of trusts is best is the easy part. The hardest part, and the one most often overlooked, is properly funding a trust. More often than not, people think after creating the trust the work is done. This is patently false. A trust without proper funding isn’t worth the paper it’s printed on. If you’re asking yourself how do I fund my trust or is my trust funded, please contact an Ohio trust attorney as soon as possible. The security you though you bought with your trust is likely imaginary.   

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 - Daniel A Baron

Ohio’s Right to Disposition – Who Has Final Say?

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Cleveland, Ohio, Estate Planning lawyer, Daniel A. Baron, of Cleveland, Ohio, offers the following information on the issue of your Rights to Disposition after you pass.

Imagine if you will, your Uncle Harry has passed away and although he had specific wishes on what to do with his remains, there are others in a packed courtroom (immediate family members, blended family members, extended family members, friends, and lawyers) all thinking that they know what Uncle Harry’s final wishes were.

Although we always seem to hear about this situation coming out of Hollywood or New York City, you don’t have to be a celebrity to have family, friends, and lawyers be involved with what to do with your remains. Not only can this cause undue stress between family members and friends, but this can also produce large legal fees from opposing attorneys.  Ohio has a law which went into effect October 12, 2006 to prevent legal battles such as these from occurring.

Should you have questions like these, they are better answered by a qualified Estate Planning Lawyer.

  • What criteria do the courts use in deciding whether someone should be given authority to make the funeral decisions?
  • What precautionary measures are in place if the “designated person” in charge of making such decisions is not qualified or capable of making this type of decision any longer?
  • What ae some issues pertaining to funerals that arise that tend to lead to legal battles?
  • How does Ohio address these potential issues?
  • What occurs when there has been no person designated to make these decisions?
  • Is there a provision that allows someone to name a group of people rather than an individual having the right to dispose of the remains?

For answers to these and any other estate planning questions it is prudent to contact an experienced Estate Planning Lawyer. Contact Daniel A. Baron of Baron Law today at 216-573-3723 to arrange a meeting.

Helping You and Your Loved Ones Plan for the Future

Daniel A Baron Estate Planning Lawyer

Irrevocable Life Insurance Trust – Is It Right For You?

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Cleveland, Ohio, Estate Planning lawyer, Daniel A. Baron, of Cleveland, Ohio, offers the following information on establishing an Irrevocable Life Insurance Trust (ILIT). Is it the right fit for you when creating your estate plan?

When you think about life insurance, you typically are going to use this as a vehicle to plan for the possibility of passing away while still having loved ones to support. What kinds of expenses do you look to cover after you pass?

  • Mortgage expense
  • Children’s future education
  • Credit card debt
  • Vehicle loans
  • Funeral costs
  • Your spouses’ daily needs
  • Your children’s daily needs
  • Spouse and children’s health needs
  • Etc.

You may want to consider creating an Irrevocable Life Insurance Trust (ILIT).   Quite simply this is another tool to maximize your estate tax savings while still giving you the benefits of insurance coverage.  As the name states this is an irrevocable trust so you cannot remove this policy from the trust at a later date and have it revert to your personal name.  You do maintain control over it as far as naming the Trustees and the Beneficiaries and changing them at any time in the future if the need arises.

As mentioned this would serve as a great way to maximize your tax liability upon your death. Keeping in mind that when you pass away and insurance company sends your check to you, the government is waiting for their share of the funds.  So the benefits of putting your life insurance policy in the Trusts name:

  • Reduces the size of your estate, therefore reducing your tax liability
  • You can consider reducing the amount of coverage since you will not have to guard against the tax hit thus savings you insurance premium dollars
  • The cash value of the policy is protected against creditors
  • If your spouse, children, or other named beneficiaries are receiving any government aid such as Medicaid, this helps protect the benefits your beneficiaries are receiving

To see whether or not an Irrevocable Life Insurance Trust is the best fit for your tax planning situation, you need to speak with 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 creating an ILIT.  I welcome the opportunity to work with you and recommending the best solution for your needs.

Helping You and Your Loved Ones Plan for the Future

Veteran Benefits

Long Term Care – What Is Available To Veterans

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on Long Term Care assistance for those who have served in our military and including this as part of your Estate Planning:

Cleveland Estate Planning Attorney

For those of you who have served in any of our armed forces, Thank You! Because of your bravery and sacrifice, we still enjoy the many freedoms we have in this country and you make us all proud to be Americans.

Should you, as a veteran require Long Term Care and you have a service related disability, the Department of Veterans Affairs pays for your Long Term Care and for certain other eligible veterans, you may also be entitled to additional health programs as well:

  • At home care for aging veterans with Long Term needs
  • Nursing home care

In order for veterans to stay in their homes and be more comfortable there are other programs as well.

A program that was developed in 2009 which provides veterans with a Flexible Budget in which to purchase services is a Veteran Directed Home and Community Based Services Program or     VD-HCBS as it is also known by. These are services available through the Aging Network in conjunction with the Veterans Affairs

Homebound Aid and Attendence – a cash allowance is provided to veterans with disabilities and their surviving spouses to purchase community based long-term services such as homemaker services and personal care assistance as well as to purchase a home. Eligible Veterans receive this as a supplement to pension benefits.

Estate Planning Attorney

For more information on reviewing your goals for Long Term Care, what is available for our Veteran’s and incorporating this into your Estate Planning, contact Daniel A. Baron of Baron Law at 216-573-3799.

AN AB Trust – What are the benefits for your estate?

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on an AB Trust and the benefits realized from including this as part of your Tax and Estate Planning:

For Tax and Estate Planning purposes, as a married couple, maximize the use of your Federal Estate Tax Exemptions through the utilization of an AB Trust.

There are two vehicles available in which to set up an AB Trust

  • Living Will and Last Testament
  • Revocable Living Trust

The “A Trust” also referred to as the

  • Marital Trust
  • Marital Deduction Trust
  • QTip Trust

The “B Trust” is also known as the

  • Family Trust
  • Bypass Trust
  • Credit Shelter Trust

In 2011, the Federal Estate Tax Exemption   was made transferrable between married couples.  Should one pass away in 2011 or after, their entire Federal Estate Tax Exemption is not needed to avoid Estate Taxes.

If you are on your second, third, or additional marriage and have different beneficiaries, it is in your best interest to explore the benefits of the AB Trust.

The AB Trust can only function if you secure them while both spouses are alive. Don’t put off securing this beneficial part of your estate and tax planning as once you become a widow or widower, it is too late.

Below is an example of how the AB Trust works to your benefit:

For more information on setting up an AB Trust as part of your Estate and Tax Planning, contact Daniel A. Baron of Baron Law to maximize your Federal Estate Tax savings upon your passing. Contact us today at 216-573-3723.

Medicaid Planning

Applying for Medicaid? Here’s What You Need to Know About Activities of Daily Living vs. Instrumental Activities of Daily Living

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Cleveland, Ohio estate planning and elder law attorney, Daniel A. Baron, offers the following information on the definition of ADL’s and IADL’s and how to plan on Long Term Care as part of your Estate and Medicaid Plan: As we are all well aware, there is only one alternative to aging. If you are fortunate […]

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Cleveland, Ohio estate planning attorney

Grantor vs Non-Grantor Trusts

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on the differences between and Grantor and a Non-Grantor Trusts and further considerations to as part of your Tax and Estate Plan:

Baron Law Cleveland

Understanding tax benefits and pitfalls of a trust and putting together a trust which is most beneficial for your personal situation is best left to an experienced trust attorney who can explain the differences in trusts and customize your Estate Plan.

Consequently, understand that the term used; Grantor Trust and Non-Grantor Trust are important.  These terms mean very different things but are both associated with tax implications.

The Grantor is the party who establishes the trust and maintains control while living and mentally capable.

Some examples of Grantor Trusts

  • Revocable Living Trust
  • Dynasty Trust
  • Grantor Retained Annuity Trust (GRAT)
  • Spousal Access Trusts
  • The majority of Irrevocable Trusts
  • Defective Grantor Trust (IDGT or DIGIT)

When setting up your trust as part of your Estate Planning, tax planning is an integral part of each and every plan and is as individual as you are.

Planning for Tax implications

How is the trust going to be taxed? Does the American Tax Relief Act of 2012 (ATRA) affect the taxes of your trust?  By setting up a Grantor Trust you can realize a number of tax advantages.  Some of these advantages are but not limited to:

  • Sell assets to the trust and not have to pay for the gains of the sale
  • Loan money to the trust – keeping in mind that the trust must pay the minimal IRS interest rate; however the income recognized from the interest is not taxable to you
  • The trusts income tax, paid by you (the Grantor), is not viewed as a gift to the trust

Plain and simple, the assets of the trust grows, which in turn benefits the beneficiaries without paying income tax. Essentially this is a tax free gift.

Non Grantor Trust

A Non-Grantor Trust is where the donor of the assets relinquishes all control within the trust. The donor of the trust funds is not a beneficiary or a trustee and has no input on how the funds are disbursed or controlled.  When the donor establishes a Non-Grantor Trust (aka irrevocable trust) they give up their rights to amend, revoke, or terminate the trust as this now becomes the functions of the trustee(s) either acting by themselves or with a Trust Protector.

Although the assets used to establish the trust were once owned by the donor, they are now owned by the trust. Any income being generated from the assets now is the sole responsibility of the trust.  As is with the Grantor Trust, any distribution to a beneficiary must now the proper IRS forms issued and provided to the recipient.

When a non-grantor trust is established it becomes a taxable entity and a Federal Employer Identification Number is issued. This also means that an income tax return needs to be filed on behalf of the trust each year.

Understanding tax benefits and pitfalls of a trust and putting together a trust which is most beneficial for your personal situation is best left to an attorney who can explain the differences in trusts and customize your Estate Plan. Contact Daniel A Baron of Baron Law Cleveland, Ohio at 1-216-573-3723.

Cleveland Estate Planning Attorney

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.

Estate Planning Lawyer

What’s the Difference Between a Living Will and Last Will and Testament?

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following helpful answers to your questions about the difference between a Living Will and a Last Will and Testament.
Confusing these terms happens quite frequently as there are those that think that these are one in the same, however, they are entirely two distinct legal documents which cover many different needs.

A Living Will, what is it and do I need one?

 

 

Should you become extremely ill or completely incapacitated and cannot convey their medical care wishes; having a living will in place, (which is a legal document AKA as an advance directive), gives instructions as to the medical care you wish to receive.

Some of the details of a Living Will would include

  • Do I want to be placed on a breathing tube
  • Do I want a feeding tube
  • Would I rather not be resuscitated (AKA DNR – Do Not Resuscitate)

Also, at this point it would be wise to consider having a Power of Attorney put in place in the event that you do become incapacitated so that there is someone making sure that your wishes are carried out as you have communicated in your Living Will. Naming a Power of Attorney can be done at the time of penning your will.

 

 Last Will and Testament, is it different than a Living Will?

Your last will and testament, also simply known as a will, is a legal document that stipulates the transferring of your estate to somebody else by sale or gift upon your demise. Should you pass away without a will, your assets then become “intestate”.  At this time state intestacy laws govern the distribution of your assets.

If you have minor children, you should unquestionably have a will. At the same time of the writing of your will, it is possible for you to name a guardian for your minor children.  You can also name the guardian to manage the minor’s financial affairs or another party to act on behalf of the children.

As you are drafting your will, it will be necessary for you to select an Executor of your estate. The Executor is one who carries out the will’s requests throughout the process of probate.

Living Will and Last Will – when do they take effect?

Now that you are aware of the differences between a Living Will and a Last Will, you may question as to when the two take effect.

Keeping in mind that the Living Will outlines your medical wishes should you become incapacitated or seriously ill and unable to convey your wishes, this comes into play while you are still alive but unable to voice your wishes.

To stipulate your wishes of how to distribute your estate upon your passing comes into play by using a Last Will and Testament .

So as you can see a Living Will and a Last Will and testament are two separate, but very important legal documents for everyone to have in place.

Living Will vs. Last Will?

If you are pondering the questions as to whether you need a last will or a living will. The answer to that question should be very easy; just about everyone should have both. Each of these important documents are ones that every person doing their Estate Planning should secure as these offer you the peace of mind that your wishes will be followed when you can’t make them known due to a serious illness and/or incapacitation or death.

Having a last will and testament, also makes the probate process go more smoothly, and with a living will, it can provide direction to your loved ones or Power of Attorney, in making challenging decisions during a stressful and difficult time.

So when is the best time for me to get a living will and a last will?

Unless you have a crystal ball which states otherwise, the future is uncertain. Securing both a living will and a last will and testament and recording your wishes is best done sooner than later.

Both a Living Will and a Last Will and Testament are only two 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 at 216-573-3723 to make an appointment.

Living Will

Do I need a Living Will?

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Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following regarding living wills:

Before you can answer this question you must first understand what a Living will is and what purpose it serves.

A Living Will is one form of Advance Directive which clearly defines your wishes for medical care should the following occur:

A Living Will clearly states your health care intentions.  This document allows you to make decisions while still cognitive such as:

  • Whether or not you wish to be put on life support, even if for a very short time
  • Would you would like to receive pain medication of any kind
  • Is it you desire to have any nutrition available by means of a feeding tube

The Living Will document also allows you to list any further specific instructions for your care if you become fully incapacitated.

Another form to consider securing in conjunction with a Living Will is a Health Care Proxy which is a specific Power of Attorney. A Health Care Power of Attorney authorizes a specific person you have chosen to act on your behalf to make all medical decisions (or to make sure that your medical wishes in your Living Will that you have set forth are followed), in the eventuality that you are no longer able to make these decisions yourself.

It might be in your best interested to have both a Living Will and a Power of Attorney which will set forth comprehensive guidance when it comes to your medical care in the end stages of life.

Things to consider when completing these documents:

  • Who do I want and trust to make my health care decisions when I am no longer capable of making them on my own?
  • What kind of medical treatment DO I or DON’T I want?
  • How comfortable do I want to be when my life’s journey is coming to an end?
  • How do I want people to treat me?
  • What do I want my loved ones to know?

Having a Living Will is only one part to a comprehensive estate plan.  For information regarding living wills, trusts, power of attorney, or a pour-over will, contact Dan Baron of Baron Law to make an appointment at 216-573-3723.