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Hot Powers

Does Your Power of Attorney Contain the “Hot Powers?”

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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? These are the sorts of questions and issues typically handled by your power of attorney. As they suggest, these are critically important decisions that shouldn’t be taken lightly. Fundamentally, however, these issues can only be handled by your power of attorney if they possess authority, given by you and in writing, to do so. This is why ever since 2012, when Ohio law changed, “hot powers” are a significant topic for you to discuss with your estate planning attorney.

I. Durable Power of Attorney

To understand what hot powers are, you must understand what a power of attorney is. A financial power of attorney, also known as a durable power of attorney, is a legal document that a person can use to appoint someone to act on his or her behalf, i.e. an agency appointment. 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 a person 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.

As stated, powers of attorneys come in many forms. 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.

II. “Hot Powers”

So, where do “hot powers” fit in all this. Effective March 22, 2012, Ohio adopted the Uniform Power of Attorney Act, or UPOAA, which was focused on preventing financial elder abuse. Now, powers of attorney must include a statutory language designed to help prevent agents from abusing their power. Put simply, the law now demands power of use more specific drafting and specific denotation “hot powers.”

“Hot powers” grant extraordinary powers to your agent and often these powers can have the effect of altering your estate plan. As such, these powers must be expressly granted per statutory guidelines before they are used by your agent. The most popular of them is the power to gift money or property. “Hot powers” are often used to continue a plan of gifting, sheltering money or property from costs of late life healthcare. Specified gifting “hot powers” can gift anywhere from a limited dollar amount or unlimited, dependent on the scope of the “hot powers” granted and the goals of your estate plan. Further, this power can also be limited to a class of people, such as spouse or children.

Since this new law, third parties such as a financial institution are not required to honor a general power of attorneys. Now, the law asks that a power of attorney include specifically which types of assets and accounts the agent is allowed to control. The spirit of this change is to 1) ensure individuals specifically know and agree to the powers they are giving, and 2) there will no longer be agents running around with “golden tickets” that allow them to do whatever they want to under the sun.

III. Should you give “hot powers”

Like every question in estate planning, whether you should give “hot powers” is circumstantial. The main consideration is who will be given the powers and under what terms. As stated above, “hot powers” are extraordinary powers meaning in the wrong hands they are really screw up your life and a well-crafted estate plan.

Regardless of whether you give these powers or not, it is probably wise to have your Cleveland estate planning attorney look at your powers of attorney if it has been more than five years. The law and your personal circumstances change quite often. Note, a power of attorney created before the 2012 law change will still be valid, however, it may be deficient in expected ways, ways that could hurt you down the line. In sum, the 2012 change means agents are prohibited from performing certain acts unless the power of attorney specifically authorizes them. Because financial power of attorney documents give significant powers to another person, they should be granted only after careful consideration and consultation with experienced legal counsel.

 

Special Needs Trusts

Unique Needs, Unique Solution: Supplemental Services Trusts

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As with most persons with special needs and disabilities, the name of the game is to pay it forward. Unplanned and unthought out self-sacrifice, however, are rarely the proper ways to go about anything. Unfortunately, those families with loved ones with particularly debilitating diseases or affiliations are often solely focused on the here and now in terms of providing care. When asked, was about in 10 years? Or what about when you pass or are too old or sick yourself to provide care, what then? Regularly, these questions, though critically important, are pushed aside because to answer them would require tough choices to be made. Often these families fall back on pithy and often callous responses.  Responses such as, “everything will be fine as long as my child dies before I do” or “my other, more typical children will shoulder the burden and take care of their special needs sibling.”

Special Needs Trusts in a Nutshell

Special Needs Trusts are private agreements that allows a third party, a trustee, usually the family, to manage the assets that are placed inside the trust for the benefit of trust beneficiaries, the special needs person. There are many types of trusts, each with own its unique legal conventions and uses. The critical aspect of trusts in this circumstance is that the assets housed within them usually aren’t counted as a part of the trust beneficiary’s taxable estate. Thus, the resources placed within these trusts can be managed for the benefit of a person with special needs but still allow them to qualify for public benefits like supplemental security income, Medicaid, and other local and state government benefits. This allows grantors, those who create the trust, to provide much need stable and monetary support while still allowing often indispensable social assistance programs for their children, even long after the parents pass. Critically, these trusts seek to supplement income from assistance programs not to replace it, which is important in the eyes of the government because if a family, and by extension a special needs person, can provide for themselves than they don’t need assistance programs.  This theory is echoed in the needs and health-based requirements of many, if not all, assistance programs. The rules and requirements for local, state, and federal government assistance programs can be confusing, contract a local Cleveland area estate planning attorney today to make sure you’re informed enough to make the right choices.

Supplemental Services Trusts

Per O.R.C. § 5122-22-01(D), trusts for supplemental services, denotes the primary requirements of these trusts which allow special needs persons to benefit from them while also receiving government benefits:

“(D) Supplemental services. (1) Supplemental services are expenditures, items or services which meet the following criteria:

(a) The services are in addition to services an individual with a disability is eligible to receive under programs authorized by federal or state law or regulations, and the services do not supplant services which would otherwise be available without the existence of the trust;

(b) The services are in addition to basic necessities for such items as essential food, clothing, shelter, education and medical care, and the services are in addition to other items provided pursuant to an ascertainable standard; and

(c) The services are paid for with funds distributed pursuant to a trust which meets the requirements of section 5815.28 of the Revised Code or with funds distributed from the supplemental services fund created in section 5119.51 of the Revised Code, and the services would not be available without payment from the trust or fund.

The two main takeaways from this passage is that 1) the trust services do not replace government benefits and 2) a supplemental services trusts is the only way a special needs person would get these additional benefits.

In nutshell, a supplemental services trust is for individuals who are eligible to be served by the Ohio Department of Mental Retardation, a county board of mental retardation and developmental disabilities, the Ohio Department of Health, or a board of alcohol, drug addiction, and mental health services. With this trust, trust beneficiaries must be vetted and approved by the State Department of Disabilities or the County Board of Developmental Disabilities. The trust estate, i.e. stuff placed in trust, as of 2015, cannot exceed $242,00o.  Further, Ohio law is strict that the trust assets are used only for supplemental services, those services not provided by government assistance programs. Additionally, another hardpoint with these trusts is that upon the death of the beneficiary, a portion of the remaining assets, which must be at least 50 percent of the remaining balance, must be returned to the state of Ohio to be used for the benefits of others who do not have such a trust. Thus, pay it forward, at least in this circumstance, is written in the rock of Ohio law.

So why use a Supplemental Services Trust?

Again, the best way to demonstrate the value of these trusts is to go into the Ohio code. Per Per O.R.C. § 5122-22-01 (D)(2):

Supplemental services…include, but are not limited to, the following:

(a) Reimbursement for attendance at or participation in recreational or cultural events;

(b) Travel and vacations;

(c) Participation in hobbies, sports or other activities;

(d) Items beyond necessary food and clothing (e.g., funds for dining out occasionally, for special foods periodically delivered, or for an article of clothing such as a coat which is extra but which is desirable because it is newer, more stylish, etc.);

(e) Cosmetic, extraordinary, experimental or elective medical or dental care, if not available through other third party sources;

(f) Visiting friends, companionship;

(g) Exercise equipment, or special medical equipment if not available through other third party sources;

(h) The cost differential between a shared room and a private room;

(i) Equipment such as telephones, cable television, televisions, radios and other sound equipment, and cameras for private use by the individual;

(j) Membership in clubs such as book clubs, health clubs, record clubs;

(k) Subscriptions to magazines and newspapers;

(l) Small, irregular amounts of personal spending money, including reasonable funds for the occasional purchase of gifts for family and friends, or for donations to charities or churches;

(m) Advocacy;

(n) Services of a representative payee or conservator if not available through other third party sources;

(o) Guardianship or other protective service listed in paragraph (C)(9) of this rule;

(p) Someone other than mental health community support staff members to visit the individual periodically and monitor the services he receives;

(q) Intervention or respite when the person is in crisis if not available through other third party sources;

(r) Vocational rehabilitation or habilitation, if not available through other third party sources;

(s) Reimbursement for attendance at or participation in meetings, conferences, seminars or training sessions;

(t) Reimbursement for the time and expense for a companion or attendant necessary to enable the individual to access or receive supplemental services including, but not limited to, travel and vacations and attendance at meetings, conferences, seminars, or training sessions;

(u) Items which medicaid and other governmental programs do not cover or have denied payment or reimbursement for, even if those items include basic necessities such as physical or mental health care or enhanced versions of basic care or equipment (e.g., wheelchair, communication devices), and items which are not included for payment by the per diem of the facility in which the beneficiary lives; and

(v) Other expenditures used to provide dignity, purpose, optimism and joy to the beneficiary of a supplemental services trust.

From the extensive list of available uses for trust assets for special needs persons, it is no surprise that those persons with those trusts live and much more comfortable and fulfilling life than those without. Additionally, these trusts shoulder the burden for parents and sibling for providing much need support and care while also acting as a tool for benefit preservation. There are many options available for those family members with special needs persons, talk to an experienced Ohio area estate planning attorney to find out the best options for your family.

Helping You and Your Loved Ones Plan for the Future

Estate Planning Attorney

What Is The Difference Between A Living And Testamentary Trust?

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Your estate plan consists of many documents and covers a lot of bases. From protecting assets from creditors and litigants to avoiding probate, 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. Durable powers of attorney, QTIP elections, unlimited martial deduction, and all the many names of the many different types of trusts, to name a few.  

That said, one of the most common questions posed during an initial estate planning consultation is, what is the difference between a living and a testamentary trust? Years ago testamentary trusts were all the rage, a lot of people have them but don’t know how they work or if they are even providing any benefits to the ultimate goals of estate planning. Since trusts represent one of the most utilitarian estate planning tools, in that they have the ability to do many useful and advantageous things in regards to estate planning, understanding the difference between living and testamentary trusts is critical to providing context to any advice given by Ohio estate planning attorneys.  

  • What is trust? 

As always, we must start with the basics, what is a trust? A trust, to put it simply, is a private agreement that allows a third party, a trustee, to manage the assets that are placed inside the trust for the benefit of trust beneficiaries. There are innumerable types of trusts, each with own its respective legal conventions and purposes. A critical aspect of trusts is that the assets housed within them usually aren’t counted as a part of the trust creator’s taxable estate. Thus, when the owner of the trust creates the trust and properly funds it, the assets go from the owner’s taxable estate to the trust. Afterwards, when the owner dies, the assets are not in the owner’s estate and subject to probate. 

  • What is a living trust? 

A living trust, also called an inter-vivos trust, is simply a trust created when you are alive. They can be either revocable and irrevocable and when someone is talking about a trust, usually it’s a living trust. Living is the umbrella term for a trust and is usually paired with other descriptive terms such as family, asset protection, or revocable or irrevocable to describe the primary purpose of the trust and what it is designed to do. Living trusts must have the same basic composition as other normal trusts, a grantor, trustee, and beneficiary.   

  • What is a testamentary trust? 

A testamentary trust is created in your last will and testament, specifically, it directs your executor of the estate to create it.  Thus, unlike a living trust, a testamentary trust will not take effect until you die.  The terms of the trust are amendable and revocable, in that they can be changed at any time, which makes sense because it doesn’t come into being until after death.  

One of the major distinguishing features of a testamentary trust is the involvement of the local probate court. From the time of the settlor’s death until the expiration of the testamentary trust, the probate court checks up on the trust to make sure it is being managed properly. Court involvement is usually sought in the context of testamentary trusts because these trusts are usually created for beneficiaries who, for some reason, are unable to received and manage trust funds appropriately.  

  • When would you use one over the other?  

At the end of the day, just like every other estate planning decision, it is all circumstantial and highly depend on personal situation and estate planning goals. (Which is why estate planning attorneys ask so many questions when you first meet them.) For the sake of some definitive answer, however, there are some tried and true situations when one is preferable over the other.  

If you are interested in avoiding probate, avoiding excessive court oversight, keeping your estate private, and saving your estate money by simplifying property conveyances and avoiding potential will contests, then a living will is likely a good choice. As mentioned before, since living trusts can be created to meet almost any goal or concern of estate planning, the major deciding factors of use is initial cost and ultimate utility of a trust, i.e. there is no point buying a trust if you have nothing to fund it with.   

Testamentary trusts, on the other hand, are created for young children who may be at risk of receiving improper inheritances or trust distributions, family members with disabilities, or other who may get large amounts of money or assets that enter into the estate upon a testator’s death. Further, these trusts are often highly recommended for parents who are at risk of dying at the same time. 

A testamentary trust can set parameters on your estate and how it will be distributed and/or managed after you pass on.  For example, you might include terms that allow for discretionary distributions of $1,000 a month to be given to your children until the age of 21 in the event both parents pass. This ensure that, even if tragedy strikes, the kids will, at least in some way, be supported by their parents, whether they’re gone or not.  At the end of the day, testamentary trusts, like all trusts, allows estate control even after death. Testamentary trusts are unique, however, in that the allow for greater oversight, via the courts, in what’s going on inside the trust. This can be a double-edged sword, however, in that, depending on how long the court needs to be involved, legal fees and administrative costs could add up making this trust structure unattractive if the trust is designed to last a long time.  

Again, 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.

 

Estate Planning Attorney

Are Your Parents in a Nursing Home? Here Are Ways to Prevent Medicaid Estate Recovery

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Medicaid crisis planning has become a hot topic in estate planning. More people need Medicaid to survive the issues and problems of old age but very few actually take the time to address and plan for this all too important need. Contrary to popular belief, Medicaid is not free money. Medicaid is a needs based state and federal program which applicability is primarily focused on recipient income and assets. By waiting too long, though a person may have a sever need for Medicaid support, in the eyes of the program, they’re “too rich” to qualify. At this point, they are left waiting in a state of poverty or sacrificing a lifetime of investment and savings, the spend down, to qualify. Don’t let this happen to you.

Since Medicaid enrollment is surging across the country and the baby boomer generation is aging, the significance of Medicaid enrollment and planning cannot be understated. As always, contact a local Cleveland estate planning attorney to find out how to plan your estate to maintain eligibility for Medicaid, preserve the maximum amount of assets possible while still maintaining that eligibility, and avoid or proactively plan around the Ohio Medicaid Estate Recovery program, “MER”. The MER program is something not a lot of people have heard of, but it can potentially effect millions of senior citizens every year. The government doesn’t care that you’ve heard of the law, only that it is followed.

What is the Medicaid Estate Recovery Program?

The Medicaid Estate Recovery program is a federally mandated program which dictates that when a Medicaid recipient dies, the MER program, carried out by the Ohio Attorney general’s office, will attempt to recover from the estate what Medicaid paid for the services provided. Generally, the program will attempt to recover any medical assistance paid by Medicaid if 1) the Medicaid recipient was aged 55 years or older, 2) the Medicaid benefits were correctly paid, and 3) the recipient was permanently institutionalized, like residing in a nursing home or PASSPORT facility.

What assets are recoverable?

For purposes of the MER, the state uses an expansive definition of “estate assets,” which includes any property a Medicaid recipient had any legal ownership interest in at the time of death. Such as assets in a living trust, assets owned jointly, real property tenancies, and TOD and POD designated assets. After death, even property Medicaid determined exempt during a recipient’s lifetime, such as a house accompanied with an intent to return, household goods, or life insurance policies, are subject to recovery. That is why to be aware of the Medicaid lookback period and plan asset ownership and transfer accordingly.

What assets are except?

As a starting point, remember that to qualify for Medicaid, an individual’s countable resources must be below $1500. The good news, however, is that exempt resources and assets do not count towards this total, at least initially. The following is a non-exhaustive list of exempt resources from Medicaid.

  • One automobile – if less than $4500 or any value to the non-institutionalized spouse. This is associated with the Community Spouse Resource Allowance, consult your estate planning attorney for more information.
  • Household goods – plates, clothes, books, etc.
  • Burial plots – burial plot, gravesite, casket, urn, etc.
  • Prepaid burials
  • Qualified Medicaid annuities
  • Qualified Long-term Care Insurance Policies – these are special insurance products that most insurance companies don’t carry, contract your insurance agent. These polices provide LTC in order to avoid depleting assets spent on Medicaid for long-term care.
  • Primary residence – exempt if non-institutionalized spouse or child under 21 who is blind or disabled is living there. Institutionalized spouse can claim primary residence exemption if obtain affidavit of intent to return.
  • Sale of a house – very nuanced exemption rules but, in a nut shell, if actively attempting to sell a house and if you follow Medicaid regulations, though technically you still own property that would make not you Medicaid ineligible, this ownership and sale won’t effect eligibility.

Exemptions to Medicaid countable resources aren’t really considered in most estate plans, even those specifically geared towards preserving assets and ensuring Medicaid qualification. They do, however, become of critical importance in the context of Medicaid crisis planning. Those situations where Medicaid support is needed immediately but no proper estate planning took place in the proceedings years when Medicaid eligibility wasn’t a concern. At this point, every avenue and tactic of getting into Medicaid and sheltering estate assets is analyzed, all at the expense of the family who failed to plan is now scrambling. As any estate planning attorney or financial planner will tell you, the up-front cost of proactively planning is nothing compared to doing everything last minute in a time of dire need.

Most people have spent a lifetime amassing wealth, property, and possessions that they want to leave to friends and family. Assisted living facilities, nursing homes, and hospice care, however, are often possibilities no one contemplates, let alone proactively prepares for. Federal and state assistance programs such as Medicaid often play a critical role in providing the necessary financial support in our elder years. The MER program, however, means that the use of these programs is not without cost. A cost that is regularly not understood when the need is greatest and rarely known by the surviving family when estate assets are taken by the government for services rendered. An estate planning attorney has the knowledge and can formulate the appropriate strategies for your goals and worries to ensure that the most amount of assets go where you want them to go and not to Uncle Sam.

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.

Family Law

Divorcing Late In Life? Estate Planning Considerations You Need To Know.

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Unfortunately, “till death do us part” doesn’t seem to have the same weight or meaning that it had back in the day. Per the American Psychological Association, more than 90 percent of people marry by the age of 50, however, more than 50 percent of marriages end in divorce. Further, the divorce rate for subsequent marriages is even higher. An often-neglected aspect of divorce is the chaos it often makes of a well-crafted estate plan. Usually, the consequences of divorce in the context of estate planning isn’t realized until too late and significant time and money are wasted. The good news, however, is that these problems are easily avoided with a little foresight, or at least competent counsel from your Ohio estate planning attorney. Note, your estate planning attorney can only protect you if he knows what is going on, so, if any significant life events have occurred recently in your life, call your attorney and see if anything needs to be done.  

  • Why divorce matters in estate planning.  

First step in fixing or avoiding a problem is understanding what the problem is. So, why is divorce so significant in the context of estate planning? At the end of the day, it all focuses around who gets what and when. With marriage, in the eyes of the law, two people become one. Thus, both are owners, and both have entitlements when they split. Figuring out a fair split of all the property of marriage is regularly a contentious, long, and expensive process.  

This commingling of assets is what makes divorce so difficult, even if prenuptial agreements are in place. What’s considered separate property? What’s considered joint? Definitions vary by state, but in general separate property includes any property owned by either spouse prior to the marriage and any inheritances or gifts received by either spouse, before or during the marriage. Trusts can be used to house assets in separate ownership from a spouse, but this is not an airtight defense. Careful management and access restrictions must be drafted in the trust documents because, in the event of divorce, you can bet your bottom dollar your soon-to-be ex-spouse’s attorney will use all his wit and guile to get at whatever is in trust. 

On the opposite side, marital property is typically any property that is acquired during the marriage, regardless of which spouse owns or holds title to the property. This is almost always subject to equitable division during divorce, again, a prenuptial is no guarantee, recent case law is full of court decisions disregarding these agreements for a variety of reasons.  

Always remember that marital property isn’t just houses and cars but also pension plans, 401(k)s, IRAs, stock options, life insurance, closely held businesses and more. Further, if separately owned property increases in value during the marriage, that increase is also considered marital property. As a rule, if something holds value, it will be fought over during divorce.  Due to the complexities involved when it comes to dividing assets, a marital property agreement can help clear up any confusion surrounding the ownership of assets, but this alone is insufficient protection if you fall on the wrong side of the 50 percent divorce rate.  

  • Divorce Estate Planning Strategies  

After the long and arduous task of dividing assets, the next step is to reorganize an estate plan to match the new realities of your life. After divorce, but especially if remarriage is a possibility trusts should be established to protect your self-interests and children of your previous marriage, wills must be rewritten, often to at least counter an existing will which named a now ex-spouse as executor, and beneficiary designations must be changed, designations which often were made years ago and given little, if any, thought.   

  • Establish Trusts  

A trust, to put it simply, is a private agreement that allows a third party, a trustee, to manage the assets that are placed inside the trust for the benefit of trust beneficiaries. There are innumerable types of trusts, each with own its respective legal conventions and purposes. Trusts come in many forms and are established to accomplish many different things. A revocable living trust fits most situations and can serve as the foundation of your estate plan. While not all trusts are created equally and not all trusts afford the same level of protection, without fail trusts provide greater protection for beneficiaries than outright distributions. 

  • Update Beneficiary Designations 

To guarantee your estate planning goals are met and your money goes where you want it to, ensure that all beneficiary forms and designations are updated following marriage, divorce, or re-marriage. Life insurance proceeds and retirement accounts often represent significant portions of your estate, as such, beneficiary designations should generally pay the proceeds to your trust, if designated correctly. Trust utilization allows control while allowing these proceeds pass directly to an individual represents a risk of mismanagement or squandering. 

  • Update Last Will and Testament  

At the beginning of every will there is language specifically disavowing all previous wills and codicils. This is included as boilerplate language because people forget to do it regularly. In the same vein, especially in the context of divorce or remarriage, update your will to reflect your current familial situation. Personal property bequest, executor appointments, and guardian designations all should be current and accurately reflected in your will.   

  • Adequate Bookkeeping  

Knowledge is power and what you don’t know can hurt you. Regularly go through documents, make important designations current, and account for all of your assets. Outdated information and kill a well-drafted will, trusts, and/or beneficiary designation form. Oversights and neglect can cause estate planning headaches that are easily avoided with a little effort and regular meetings with your Cleveland estate planning attorney. 

Helping You and Your Loved Ones Plan for the Future

Daniel A Baron - Estate Planning Lawyer

What is an Irrevocable Trust?

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Cleveland, Ohio estate planning lawyer, Daniel A. Baron, offers the following information as to whether or not you should have an Irrevocable Trust as part of your comprehensive estate planning.

An Irrevocable Trust, by design cannot be modified in any fashion or terminated without the express written consent of the beneficiary or beneficiaries. Once the trust is created it stands AS IS and cannot be changed at all, notwithstanding a few exceptions.

  • Perhaps a beneficiary needs to be changed
  • Perhaps a financial institution may need clarification of a Trustees Identity
  • The beneficiary may need to terminate the trust early due to an immediate need for a large expense

Why would there exist a need for an Irrevocable Trust?

  • It protects your property held in Trust against creditors
  • It minimizes your estate tax liability
  • If you are looking to qualify for government assistance programs, i.e., Medicaid or Veterans Aid and Attendance benefits

There are three parties to a Trust:

First Party: The “Grantor” or “Settlor” who is the person or persons who establishes the trust. Keep in mind that when the Irrevocable Trust is established the “grantor” or “settlor” relinquishes all control of the assets held within the trust.

Second Party: The Trustee who are appointed by the “Grantor” or “Settlor” whose responsibilities include overseeing the assets, investments, etc., and to pay any expenses which benefits to beneficiary

Third Party:   The Beneficiary whose job it is, is to sit back relax and benefit from the income generated by the investments within the trust.

Let’s start the conversation to see if an Irrevocable Trust is the right tax planning strategy for you as part of your Comprehensive Estate Planning. For more information on reviewing your goals for your Comprehensive Estate Planning, contact Daniel A. Baron of Baron Law today at 216-573-3723.

Helping You and Your Loved Ones Plan for the Future

 

Estate Planning Attorney

I’m An Executor Of An Estate, How Do I Transfer Property To Heirs And Beneficiaries?

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Baron Law, LLC answers questions for you on transferring property to heirs and beneficiaries while acting as an executor of an estate. It is wise to always hire/consult an experienced estate planning attorney to help you navigate through the questions you may have.

Estate fiduciaries are charged with many obligations and responsibilities during estate administration, the most visible of which is the transfer of real and personal property to designated parties and legitimate creditors. The transfer of property is what everyone thinks about when talking about probate, who gets what and when. Well, just like everything else regarding estate and probate law, there are rules at follow. As always, a local Cleveland, Ohio probate attorney is in the best position to inform you on applicable rules and considerations, a quick phone call can save you a lot of time, money, and headaches.

With regard to estate property, usually the Ohio executor or administrator, sometimes even a beneficiary, must ensure that the proper documentation has been completed in order to transfer the ownership of all property whose interest is passing due the passing of decedent. What documentation is exactly needed, however, depends largely on the type of property passing, the relevant ownership rights within such property, and also whether the property is countable as a probate or non-probate asset.

Real Property

For real property that was owned by the decedent and which passes through probate, the estate fiduciary must file an application for certificate of transfer of real property with the probate court. The required contents, as mandated by Ohio law, for this application are found under Ohio Revised Code § 2113.61(A)(2). Within five days of filing the application for certificate of transfer that is statutorily compliant, the probate court will issue a certificate of transfer to be recorded in the land records where the property is located. This certificate of transfer is the document that actually transfers title for the real property to the relevant beneficiaries denoted in a will.

The procedure for transferring real property from an estate to someone other than a designated beneficiary, for example if real property is sold by an executor, however, is not handled by a certificate of transfer. Real property might be sold during estate administration to resolve outstanding obligations or expenses of decedent, or if the decedent was under contract to selling certain property. In such circumstances, a fiduciary deed would be executed by the estate fiduciary in order to convey the property. When a fiduciary deed is used, the grantor is the fiduciary and is effectively “stepping in the shoes” of the decedent for purposes of the transfer.

Personal Property

The most common personal property an estate fiduciary will handle are bank and investment accounts, especially if the decedent was on Medicaid or other government assistance. Such programs usually have strict income and property thresholds which leaves elder decedents with much smaller estates usually only comprising of an exempted personal residence and small expense account.

Typically, an estate fiduciary will transfer all of the decedent’s bank and brokerage accounts to the name of the estate during the administration. As such, new accounts will be set up under the tax identification number of the estate. In order to transfer a bank or brokerage account from the decedent’s name to the estate, the estate fiduciary usually needs to provide the financial institution which is holding the funds in the name of the decedent with a copy of the death certificate and his letters of authority to act on behalf of the estate. Nowadays, however, most bank and financial institutions have particularized processes for the release of decedent assets to the estate, so it is highly probable a death certificate and letters will not be enough. Because everything is computerized and identity theft has become so prevalent, banks and investment houses want certain forms completed and additional confirmations of the legitimacy of the transfer. An experienced Cleveland probate attorney will know what documents to present and which forms are needed for which financial institution.

Once the accounts are transferred into the name of the estate, the estate fiduciary has more control over the accounts. Before closing the estate, the estate fiduciary can transfer the account assets to the appropriate beneficiaries or liquidate as needed to sustain the costs of estate administration or pay critical obligations. The transfer is usually accomplished by directing the appropriate financial institutions to distribute the assets in kind or cash as the case may be. Again, the paperwork that is required to do this specific and a guiding hand by an Ohio probate attorney will avoid costly mistakes.

Some property, however, passes by operation of law, usually via beneficiary designation. The most common types of property are:

Concurrently owned property with rights of survivorship -This type of concurrently owned property will pass automatically to the surviving owner without regard to the terms of decedent’s will or Ohio intestacy statues, if applicable.

Life Insurance Policies – The terms of a life insurance contract usually allow the policy owner to direct by beneficiary designation where the proceeds of the policy go upon the insured’s death. As such, the proceeds pass automatically without the involvement of a probate court.

Retirement Accounts – Various employee or individual retirement accounts allow the designation of beneficiaries upon death of the owner. Same as with life insurance, cash in these accounts pass automatically without the involvement of a probate court.

Property held under Revocable Trust – Any property held under this type of trust at the time of decedent’s death will usually pass according to the terms of the trust agreement rather than be part of the decedent’s probate estate.

The acquisition, management, and distribution of estate assets is one of the most time-consuming and emotionally draining duties of an estate fiduciary. Aggressive estate claimants, pushy heirs and beneficiaries, and stubborn financial institutions make getting things where they need to go much more difficult than it otherwise should be. An experienced Ohio attorney can act as a buffer between you and those parties who would otherwise making administrating an estate much more difficult.

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

Daniel A Baron Estate Planning lawyer

What Is A Revocable Trust?

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Cleveland, Ohio estate planning lawyer, Daniel A. Baron, offers the following information as to whether or not you should have a Revocable Trust as part of your comprehensive estate planning.

When you decide it is time to do your estate planning, one decision to make is: Do I Need A Trust? If the answer is yes, then the next question is whether or not a Revocable or Irrevocable Trust is the right tool to use in your Comprehensive Estate Planning.  Although both of these are created to avoid probate, there are differences between the two.

A Revocable Trust means you can change things at any time such as;

  • Beneficiaries
  • Add items of value to the trust or remove items from the trust and so on.
  • Changing Trustees
  • Change what funds the trust
  • Eliminate the trust
  • Change amounts to be funded
  • Add Trustees

With a Revocable Trust – the Grantor or Settlor creates the trust AND can also act as the Trustee AND can be named as the beneficiary.

An Irrevocable Trust means no changes can be made (with a few exceptions) once the trust is created.

An Irrevocable Trust has three parties to the Trust; the Grantor or Settlor, the Trustee(s), and the beneficiary or beneficiaries.

  1. The Grantor or Settlor is the person who funds or establishes the Trust
  2. The Trustee is the person who oversees the trust, and
  3. The beneficiary reaps the rewards of the income generated by the investments of the trust. Although the Grantor / Settlor and the beneficiary can be the same, they cannot act as the Trustee

With a Revocable Trust you must remember if you are looking to keep investments, bank accounts, property, and any other such asset as part of the trust, the accounts must be set up in the trusts name and property must be titled to the trust.  Failure to do this while you are still living means that the assets still in your personal name at the time of your death will be subject to probate and a larger amount of estate taxes.

If you are having difficulty determining whether your situation calls for a Revocable or Irrevocable Trust, seek the advice of an experienced Estate Planning Lawyer. For more information on reviewing your goals for your Comprehensive Estate Planning, contact Daniel A. Baron of Baron Law today at 216-573-3723.

Helping You and Your Loved Ones Plan for the Future

Baron Law LLC Estate Planning Attorney

529 Plan For Your Grandchildren

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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.

In order to become Medicaid eligible, generally, one must have $2,000 or less in assets and earn only $2,205 or less per month in income. There are, however, multiple exceptions which carve out excludable assets, such as the child caregiver exception and the community spouse resource allowance. With the recent upswing in U.S. financial markets, many individuals are asking their estate planners and elder law attorneys ways to save or invest their money but not run afoul of eligibility requirements for government assistance programs such as Social Security and Medicaid. Increasing in popularly and meeting this increased need for saving and investment, 529 and 529A plans are widely being used by Ohio estate planning attorneys to great benefit and profitability.

What is a 529 Plan?

A 529 Plan is comparable to a health saving account. Money is put in and receives tax-benefits if used for educational purposes. All of the contributions made to the account grow tax-free and withdrawals are free from federal and state tax if used for qualified higher education expenses. Significantly, contributions to 529 Plans are not tax deductible. 529 Plans allow money to accrue tax free for the benefit of a designated third-party beneficiary while still retaining control of the assets by the owner prior to distribution provided such funds are spent on education.

529 Plans are a countable Medicaid asset because the owner can take their money back out at any time. As such, an individual owning a 529 Plan will face eligibility problems for government assistance programs if the money within a 529 Plan isn’t spent before applying for such assistance. The critical question is who owns the account. If owner reserves right to revoke or take the money within a 529 Plan, Medicaid will require the money to be spent on healthcare, spenddown, before eligibility for Medicaid services. Further, improper distributions, i.e. spending the money in the 529 account for medical bills instead of college, will trigger deferred taxes, plus penalties of 10 percent.

One solution to a mandatory 529 account spenddown is to legally shift the account to a family member of the beneficiary, such as a grandchild’s parents. However, though this effectively transfers control of the money to a third party thus facially making it a noncountable asset, such a transaction is still considered a transfer of assets that triggers a Medicaid penalty period if it occurs within the 5-year lookback window.

At this point, 529 Plans are not a recognized federal exception and no Ohio regulations are on the books exempting 529 Plans as a countable Medicaid asset. As such, estate and Medicaid planners must be aware that even though 529 Plans are attractive vehicles for saving, 529 Plan use may have significant consequences for seniors and individuals in need of government assistance programs such as Medicaid, Medicare, and Social Security. Contract a local Cleveland estate planning attorney to find out which saving accounts are preferable for your situation.

What is a 529 A plan?

Often referred to as a STABLE or ABLE account, 529A plans are accounts used as moderate investment vehicles to generate money to pay for approved expenses for the disabled. STABLE accounts are exempted from Medicaid and are not a countable resource. As such, having a STABLE account does not affect Medicaid eligibility. Further, the first $100,000 in a STABLE account is exempt from the Social Security Income limit.

Additionally, taxpayers can deduct contributions up to $​4,000 from their Ohio taxable income per STABLE account, per year, with unlimited carryforward of contributions over the yearly amount. This means that if contributions exceed $4,000 to a STABLE account in a year, the remainder of your contributions are carried forward to subsequent years until your entire contribution has been fully deducted. In this way, the government incentivizes maximum STABLE contributions which, in turn, reduces the financial burden on government assistance programs. Furthermore, a beneficiary’s individual contributions may also be eligible for the federal Saver’s Credit. An Ohio estate planning attorney can fill you in on the details, use, and eligibility requirements of the federal Saver’s Credit.

STABLE account earnings are not subject to federal income tax provided they are spent on qualified disability expenses. Acceptable. i.e. qualified, expenses are quite more expansive than with 529 Plans, an expense is qualified if 1) the expense was incurred at a time when an individual was suffering from an eligible disability, or 2) the expense relates to the disability, or 3) the expense assists in the maintenance or improvement of health, independence, or quality of life for a disabled individual.

Qualified expenses are not just medical expenses, but also include education, vocational, and living expenditures. Some examples include:

Tuition, books, and educational supplies and materials

Rent, mortgage, property taxes, and utilities

Transportation, qualified vehicles, and moving expenses

Vocational training

Health insurance premiums, medical equipment, treatment, and personnel

Legal fees, financial management services, and funeral expenses

If STABLE funds are used for non-qualified purposes, the owner will have to pay income taxes on the distributions, plus an additional 10% penalty. Further, the non-qualified funds can be counted as an asset/income for eligibility for government assistance programs such as Medicaid and Social Security. If you’re thinking about taking significant distributions from STABLE plans, always consult your estate planning attorney. The last thing you want is to get a disabled family member kicked off government assistance and then have to go through the arduous process of reapplying.

There are five investment options to choose from for a STABLE account, however, a financial adviser is in the best position to pick the best option for a client. A STABLE account used in conjunction with a special needs trust is an effective and powerful investment tool for those with disabled children or family members. Further, federal regulations specifically provide for tax-free rollovers from 529 college savings plans to STABLE accounts. Most people chose to rollover because either college expenditures are no longer needed or a priority in light of a recent and significant health change for a loved one.

529 college saving accounts and STABLE plans can become an indispensable saving and investment vehicle in one’s estate plan. An experienced and knowledgeable estate planning attorney is in the best position to advise you of the pro’s and con’s of each. Maintaining eligibility for government assistance while maximum personal retention of money and assets is perhaps the most common concern for clients of elder law attorneys. Both of the above mentioned tools, in the right hands, can financially provide for necessary healthcare and save or earn a lot of money for family members.

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.

My Trustee Isn’t Very Good At Their Job, Can I Get Rid Of Them?

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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.

Trusts are common estate planning tool. They are used to plan for retirement, provide for needed elder case, ensure Medicaid and other government aid eligibility, and provide for special needs children. A critical part of any trust is its trustee. The trustee is the primary agent responsible for managing trust assets and money and ensuring that the instructions and intent of the settlor are followed. At the end of day, if everything goes as planned, a trust will continue to exist and operate long after its settlor has passed. As such, the trustee is often solely responsible for the health of the trust and the welfare of trust beneficiaries.

With great power, comes great responsibility. Such is the case with trustees. In the same vein, however, most crime comes from opportunity. If there is nothing to steal, there is no chance of theft. The opposite also holds true. If you were left in an empty room with $300,000 dollars and no one was watching, how honest would you be? How honest could the ordinary man be? As such, tragically, too many trustees are found out too late to be lazy or untrustworthy and they must be removed and replaced. As with most things regarding trusts, Ohio law has set down rules and procedures to follow if you want to replace a trustee. Naturally, as with any legal question, always consult with an experienced Ohio estate planning attorney before you do anything.

Removal of a Trustee

Removal of a trustee requires serious consideration and appreciation for its consequences. Not only is it nuanced process requiring the learned help of an experienced Cleveland estate attorney, but it can also run counter to the express wishes and intent of the trust settlor. If the settlor is alive, and the trust revocable, replacing a trustee isn’t too big of a deal. But if the settlor is dead, and the trust irrevocable, now decisions have to be made that may subtract from the settlor’s goals.

A first trustee was an individual who the settlor had the utmost faith to carry out their wishes and guard their property. To go and replace them with another will affect how trust property is managed, how and when trust property is distributed, how much the trustee will demand as compensation, and the relationship between the trustee and beneficiaries. Since the power to replace a trustee shouldn’t be taken lightly, Ohio law placed rules and procedures on how and when it can be undertaken.

To start, the power to remove a trustee is primarily codified in O.R.C. § 5807.06(A). Wherein a “settlor, a cotrustee, or a beneficiary may request the court to remove a trustee, or the court may remove a trustee on its own initiative.” This by itself doesn’t say much, but evidently pretty much anyone with a legitimate interest in the trust may act to replace a trustee. The ability to do something, however, should always be paired with a valid reason why. This is where experienced Ohio estate planning counsel comes in handy. An attorney is in the best position when a trustee is just being difficult rather than derelict in their duties.

Why Remove a Trustee

Just because you can do something, doesn’t mean you should. Generally, replacing a trustee should only occur in a handful of circumstances, most of which are codified in Ohio law. Per

O.R.C. § 5807.06(B), a court may remove a trustee for any of the following reasons:

The trustee has committed a serious breach of trust;

Lack of cooperation among cotrustees substantially impairs the administration of the trust;

Because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries.

All these reasons go to a trustee’s inability to carry out their duties effectively or downright committing crimes as a trustee. A surly or unpleasant trustee is not grounds for removal, regardless of how much you dislike them. Only in extreme circumstances of incompetence, dereliction, or illegality should an action for trustee removal be undertaken. Your estate planning attorney is in the best position to judge when and if this threshold has been reached.

Importance of Successor Trustees

So, you’ve successfully removed an unsuitable trustee, now what? Naturally, a new trustee must be appointed and, of course, Ohio law provides for this possibility. Per O.R.C. § 5807.04 (C), if there is a vacancy in the trustee position, new trustee is selected using the following order of priority:

(1) By a person designated in the terms of the trust to act as successor trustee;

(2) By a person appointed by someone designated in the terms of the trust to appoint a successor trustee;

(3) By a person appointed by unanimous agreement of the qualified beneficiaries;

(4) By a person appointed by the court.

This is why selecting appropriate successor trustees, or drafting adequate methods to select them, are so important, though it is often seen as a throwaway detail when drafting a trust. At the very end of this list, a probate court has the authority to appoint a new trustee if no other methods exist. This is not an appetizing prospect for most settlors. The last thing settlors want is a court taking control out of their hands and appointing someone they don’t want or don’t know. The whole point of going through the long process of trust creation is a guarantee control of money and assets in specific and delineated ways. To have everything go right out the window because of improper successor trustee appointments is foolish. As such, proper thought and planning must go into your trustee and successor trustee appointments.

Most people don’t expect their first, or even second choices, for trustee to die, refuse appointment, or just not be very good at the job. An experienced Ohio estate planning attorney can help with the vetting process and also provide much needed instruction and guidance to selected trustees to make sure they understand the gravity of the position and possess the knowledge to do the job correctly and efficiently.

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.