House in Trust with Mortgage

Can I Put My House In A Trust If It Has A Mortgage?

More and more people are becoming ever more concerned with either protecting their assets, maintaining eligibility for Medicaid, or leaving as much as possible to children and future grandkids. As such, more and more people are realizing the remarkable utility of trusts within their estate planning. One’s residence often represents the most significant asset an individual or couple possesses, and for many, financial assistance is needed to purchase it, that is mortgages. A common question presented to Cleveland estate planning attorneys is, can protect my house with a trust if it has a mortgage? As with any legal question, the answer is not black and white. 

  • What is trust? 

To understand how the what, when, and how of funding your trust with a mortgaged house, 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, and if the trust is drafted properly, are further ignored for the purposes of Medicaid eligibility. Further, trust assets pass via the beneficiary designations set down when the trust was created. These conveyances via beneficiary designation are much simpler, quicker, and cost-effective then going through probate and can be halted or expedited when circumstantially advantageous depending on the terms of the trust.   

  • When can a mortgage be called?  

The next basic to understand is when can your bank come after your house, i.e. a bank calling on a mortgage. A mortgage being called is when a financial institution/holder of the mortgage demands that the full amount of a mortgage be paid. When this can occur is conditional and which events will trigger are often denoted within the mountain of legal documents that physically make up your mortgage. In the context of funding a trust with a mortgaged house, your “due-on-sale clause” is what your estate planning attorney will be concerned about.    

A “due-on-sale clause” is a contract provision which authorizes a lender (your bank), at its discretion, to collect on the loan, i.e. declare it immediately due and payable if all or any part of the property, or an interest therein, securing the real property loan is sold or transferred without the lender’s prior written consent. This is fair because banks depend on mortgages getting paid off, or at least foreclosed, and the mortgage contract is between you and the bank, not the potential buyers and the bank.  

  • How can a mortgaged house in placed in trust without having the mortgage called?  

Any “due-on-sale clause” facially seems to be a death nail to any thought of funding trust with a mortgaged house, I mean, not many people have thousands, if not hundreds of thousands, of dollars in liquid assets to immediately pay off a house. This is where the Garn-St. Germain Depository Institutions Act of 1982 comes into play and your estate planning attorney earns his money. The relevant part of the Garn-St. Germain Act in the context is 12 U.S. Code § 1701j–3, subsection d, as follows:  

(d) Exemption of specified transfers or dispositions.  With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon— […] 

(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property; … 

So, to bring everything back down to Earth, this subsection possesses the two “prongs” of the Garn-St. Germain test, occupancy and beneficiary status for the trust makers for the mortgaged house. When there is a mortgage, a trust must be properly drafted to include specified reserved occupancy language in the trust to satisfy the occupancy prong of Garn-St. Germain. Simply, the trust makers, you, must specifically reserve the right to live in the house. Further, in some way, the trust makers, must be a trust beneficiary. The beneficiary status prong usually isn’t an issue with self-settled trusts given their nature, i.e. trusts made with the intent to provide some tangible benefit to the trust makers. An argument can be made that the reservation of occupancy rights inherently makes the settlors beneficiaries, however, more cautious estate planning attorneys further make trust makers income beneficiaries as well.  

Facially, drafting a trust to satisfy the prongs of the Garn-St. Germain test appears straight-forward, however, care must be taken when making your trust. The interplay between the actual language of a trust can have profound effects on taxation, ownership, inheritance, and eligibility for state and federal assistance programs whose admittance guidelines are based on income and asset thresholds.    

Now it is important to note that the issue of a mortgage is an issue apart from Medicaid eligibility, though often the two are interrelated. Addressing both concerns requires the same solution, precise drafting of trust language that is statutorily compliant.  Under the Garn-St. Germain Depository Institutions Act of 1982, placing the home in the MAPT does not trigger the “due on sale clause” contained in most mortgages provided certain steps are taken and legal standards are satisfied. Thus, with a knowledgeable estate planning attorney, you can remain Medicaid eligible and avoid Medicaid Estate Recovery, while still living in your home and paying the mortgage as you always have.  

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LTC Medicaid Rejected

My LTC Policy Was Rejected By Medicaid, What Now?

Common scenario for Cleveland estate planning attorneys. Estate planning client comes in distraught. They did the smart and sensible thing, they purchased a long-term care insurance policy years ago to help cover the cost of later-in-life medical costs. They recently applied for Medicaid thinking their LTC policy wouldn’t be counted for calculating their Medicaid eligibility. Unfortunately for them, they received rejection letter from the Ohio Department of Medicaid saying they didn’t meet the asset requirements. Now, the Medicaid benefits, that they were counting on and always thought were readily available no longer are. Now, their estate plan is seriously threatened, and they are scrambling to make sense of the situation and found out what went wrong.

As the old saying goes, the best-laid plans of mice and men often go awry. The relationship between long-term care insurance polices and Medicaid eligibility is not a simple one. As with anything involving government bureaucracy, what you don’t know can hurt you and an experienced guide is worth his weight in gold. Two lessons often taken to heart far too late to avoid tough decisions and missed opportunities.  So, what happened to the person above? The best way to illustrate what happened is to answer the two most common questions anyone in that situation would ask.

Why did my LTC policy get rejected from Medicaid?

Only certain long-term care policies that comply with the guidelines set by the Ohio Long-Term Care Insurance Partnership program count as qualified policies and therefore aren’t countable Medicaid resources. So, what polices are “qualified?”

Per the Ohio Department of Insurance, for a LTC policy to qualify, insurance companies’ policies must meet several requirements, including:

  • The policy must have been issued after Sept. 10, 2007
  • The insured must be a resident of Ohio when coverage first becomes effective
  • The policy must be a federally tax-qualified plan based on the Internal Revenue Service Code (qualified plans can lower federal taxes, but they have benefit triggers that are less flexible than those required by nonqualified plans)
  • The policy must meet strict consumer protection standards (standard fee-look period, coverage outlines, mandatory informational disclosures, etc.)
  • The policy must include certain protection against inflation (the most common inflation protection automatically increases benefits each year by 5%)

So, if you have a long-term care policy, but don’t know, or worse hope without knowing, if it is a qualified policy, you’re likely in for a rude awaking when you apply for Medicaid.

What do I do now that my LTC policy was rejected by Medicaid?

Before any definitive answer or plan can be formulated, certain information about a Medicaid applicant must be answered definitively. At the very least, the information and/or documents needed are:

  1. LTC policy documents – should be overt on whether it was sold/defined as a qualified LTC policy.
  2. Rejection notice from the department of Medicaid – reasons for reject and any explanation regarding why the submitted policy was rejected.
  3. How does the applicant know their LTC policy is a qualified one?
  4. Contacting the insurance carrier to find out the exact details of the LTC policy in dispute.
  5. Where and how did an applicant purchase the LTC policy.
  6. Did the applicant receive the required CSPA complaint disclosures and documents (if was sold non-qualified policy but received CSPA docs could an indication of potential fraud).
  7. The realities of applicant’s current financial situation and health needs.

This last point is really the starting point and is exactly why you retain the services of experienced estate planning attorneys. Every estate planning attorney starts with the same questions, what do you need, what do you have, and prove it. No intelligent planning or decisions can be made until you know exactly where you stand. Further, in this context, the realities of where you stand are even more important because now your options are limited and you are, in a way, at the mercy of the Ohio Department of Medicaid.

If you have been rejected by Medicaid you are essentially in the realm of Medicaid crisis planning, where important questions must be asked, and tough decisions must be made. If someone is applying for Medicaid, the need is now and a solution must be found. One such critical consideration is the current need for care and the potential penalty period. To illustrate, let’s say a rejected applicant has a $400,000 non-qualified LTC policy. As of right now, with current Medicaid penalty divisor of $6,570, 400K/6,570 = approximately 61 months of Medicaid ineligibility, a little more than 5 years.

With this five-year Medicaid ineligibility period on the horizon, options are limited. Namely you can either appeal the rejection or resort to Medicaid spenddown. Medicaid spenddown is a beast all its own, is never something anyone wants to do, and largely depends on how ineligible for Medicaid you are, based on your current income and assets. For most, however, the good news is this situation and Medicaid spenddown, if the proper Ohio estate planning attorneys are used, will never be a worry because they will have done things the right way and won’t be subject to any nasty surprises. Failure to surround yourself with the right advisors, regretfully, often leads to  uncomfortable discussions and decisions that will have to be made sooner rather than later.

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Daniel A Baron - Estate Planning Lawyer

What Is An Irrevocable Trust?

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

 

Daniel A Baron Estate Planning lawyer

What Is A Revocable Trust?

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 Cleveland Ohio

I Have A 529 Plan, Am I Medicaid Eligible?

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 […]

Estate Planning Attorney - Baron Law

I Need Medicaid, How Can I Keep My Home?

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.

Caring for elderly loved ones, yourself or others, is not cheap. Assisted living facilities, nursing homes, and hospice care can easily run thousands of dollars a month and, as such, most people cannot afford to pay for it out of pocket for very long. We’ve all heard the horror stories, people stuck in dilapidated or abusive care facilities or having to spend every last cent just for a bed in a proper facility. No one expects to spend the last years of their lives in such an appalling state, but tragically, it happens more often than you think. To combat this, many resort to relying on government assistance to pay for managed care. To qualify for that assistance, however, many people must “spend down” their assets or reduce their income in order to become eligible for government programs, namely Medicaid.

The thought of having to choose between either having a fire sale and/or willingly living in a crummy facility and/or becoming a burden on your family is hardly an attractive prospect. Everyone wants to pass as much of their money and assets on to friends and family and no one wants to become a burden. Medicaid is well aware of this and imposes a five-year “look back” period for eligibility to ensure that people don’t simply transfer their money and assets away to qualify for government benefits.

There are estate planning strategies available, however, that will allow major assets to stay within the family while still maintaining Medicaid eligibility. The Caregiver Child Exemption, also known as the Adult Child Caregiving Exemption, is perhaps the one of most popular Medicaid planning tools available to preserve assets while maintaining eligibility. An estate planning attorney is in the best position to advise you on the best course of action given your particular circumstances but becoming familiar with the landscape and legal language of Medicaid will help you make the best decisions when the time comes for action.

Why should I care/How does this benefit me?

We are all naturally self-interested, so the first question everyone asks is, how does the Medicaid Caregiver Child Exemption benefit me?

In a nutshell, this is an exemption to the five-year lookback for Medicaid eligibility that can allow you to stay in your home instead of a nursing home or assisted living facility and still receive Medicaid assistance. Regardless of how nice a managed care facility is, everyone is more comfortable in their own home. The Medicaid Caregiver Child Exemption increases the amount of time you can spend in your own home before the realities of your own health force to into a more intensive care facility.

How does the Medicaid Caregiver Child Exemption work?

To qualify for the Exemption, the caregiving child must live in the home with their parent(s) for at least two years prior to the parent becoming eligible for Medicaid benefits. Further, the caregiving child must provide a level of care that effectively prevents the parent for needing to stay in a nursing home or assisted care facility. This at-home care saves the Medicaid program money and frees up much needed bed space in Medicaid approved facilities, hence the reason Medicaid offers the Exemption in the first place.

To effectively understand how the Exemption operates, and exploit it to the fullest extent, one must understand its constituent parts. Note, all the following criteria must be satisfied in order for the Exemption to apply.

What’s a “Child” under the Exemption?

A child under the Exemption is limited only to a biological or legally adopted child. A niece, nephew, grandchild, cousin, aunt, uncle, or stepchild does not count. Medicaid constricts eligible transfers only to direct decedents in order to prevent abuse of the Exemption and because, more often than not, our children are the ones who are going to step up and provide the needed care for parents.

To prove a qualifying family relationship, usually a birth certificate or adoption certificate is used.

What’s a “Home” under the Exemption?

The only “homes” eligible for the Exemption are those of primary residence. No vacation homes, secondary residences, or rental properties. Further, the child caregiver and the parent must reside together for the entirety of the two years. Medicaid wants to ensure the home is actually being used to provide healthcare for the parent in lieu of a managed care facility. If an adult child and parent are living together for an extended period of time, its more likely the Exemption is being used for legitimate purposes rather than a cover for an improper transfer of property.

To prove a qualifying home, evidence such as utility bills, tax returns, of government ID’s for both the parent and child caregiver for at least two years prior to Medicaid eligibility are sufficient.

What’s “Care” under the Exemption?

A child simply living with a parent, cooking meals, doing laundry, picking up medication, is not enough. The amount and manner of care must be enough to establish to Medicaid that the labors of the child caregiver is the reason why the parent isn’t in a nursing home or assisted living facility. If such labor is the difference between the parent staying at home or taking up a bed in a professional facility, then the non-disqualifying transfer of the home to the child is justified.

Establishing the proper level of care is the hardest criteria to prove. This is usually established by having the primary care physician of the parent complete and sign a Medicaid form clearly documenting the care provided by the child. Legal documentation that the care of the child prevented institutionalization of the parent during the two-year lookback is required as well. Any additional documents from family, friends, and medical professionals demonstrating the labors of the child caregiver is beneficial as well.

How to Apply

You don’t file or apply to use the Exemption in the conventional sense. When applying for Medicaid, you also submit the documentation establishing the transfer of your home to your child qualifies for the Exemption. Obtaining the required documentation to prove the applicability of the Exemption is the hardest part. Further, because the burden of proof lies with the applicant, Medicaid will show no leniency for mistakes or omissions.

This is why Medicaid planning and retaining legal counsel is so critical. The Exemption criteria should be met as soon as practical, so the two-year look back can start running as soon as possible. Further, an attorney can ensure all the documentation and forms are properly filled out, executed, and mailed to the proper government agency. Last the thing you want is to find out you have months or years of additional Medicaid ineligibility because an additional penalty period was accrued due to improperly gifting your home to your child.

What if I mess up and the Exemption doesn’t apply?

If the transfer of the home was improper, Medicaid will deny that the Exemption apples, consider the house a qualifying asset, and a penalty period will accrue in proportion to the value of the house. This means on top of the two years that the child caregiver must live with a parent before Medicaid eligibility, a period of further ineligibility is added. This period is determined based on the dollar amount of value of the house divided by either the average monthly private patient rate or daily private patient rate of nursing home care in Ohio.

The home that you lived in for years, if not decades, is one of your most valuable assets, both financially and emotionally. Old age, however, means significant money is needed to live comfortably, even more so in the event of illness or disease. Wise use of the Medicaid Child Caregiver Exemption can cut off years of Medicaid ineligibility and enable comfortable and convenient caregiving for families with ailing parents. Use of the Exemption, however, is not guaranteed and proper steps must be taken. This is why an experienced estate planning attorney can mean the difference between living in your own house receiving much-needed government assistance or waiting years for help or being forced in live in second-rate managed care facilities.

Also, should an elderly individual already be receiving Medicaid benefits, the family should contact a local Cleveland estate planning attorney and find out if the Medicaid Child Caregiver Exemption is still available.

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. 

Probate Lawyer Baron Law LLC

Probate – What Is It?

Cleveland, Ohio, estate planning law firm, 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 […]

Baron Law Cleveland Attorney

I’ve Been Named As The Executor In A Will, Now What?

Cleveland, Ohio, estate planning law firm, Baron Law LLC, Cleveland, Ohio, offers the following information on what your duties are as an executor of an estate.  Contact Baron Law Cleveland to answer all your questions on what your duties are and to help guide your through the  upcoming events which are about to occur and how to handle any issues which may arise.

Unfortunately, a close friend or family member has passed and in their will you were appointed as executor of their estate. At the time the will was drafted maybe you gave little or a lot of thought into what being named executor actually entails. Often, it’s the former, most people have little experience administrating an estate and little reason to overthink being named an executor. So, when the time comes to handle the responsibilities of an executor, it can be a confusing and overwhelming process.

An appointment to executor is a serious affair, but an understanding of the process and expectations of an executor can limit the stress of an already stressful situation. Since most people have little experience with wills, estates, or probate, everyone finds themselves asking the same questions when they remember they’re an executor. Note, this article is only a minor overview and contacting a Cleveland estate planning attorney in event of death or a potential or actual appointment as executor is always recommended. An experienced Ohio estate planning attorney can give you personalized guidance and recommendations to take as much of the burden off you as possible.

 

What is an executor?

Bluntly, an executor is the person, or persons, named in a will to administrate the estate after death. The executor is the individual responsible for seeing that the final wishes of the decedent, as denoted in the will, are carried out. The appointment of an executor is a logical, and necessary, consequence for the existence of last will and testaments. At the end of the day, wills are only pieces of paper. So, without someone loyal, trustworthy, and actually willing to carry out the terms of a will, a will would be a paper tiger and estate assets wouldn’t be distributed nor posthumous debts and obligations handled. So, if you’ve been named as an executor, congratulations, you’re likely the most responsible and well-adjusted of the decedent’s friends and family.

 

How is an executor appointed?

Executors are formally appointed as such by explicit provision in a last will and testament. Hopefully, the will holder informs the named individual of their selection of executor, but this is not a strict requirement, just courtesy and commonsense.

Just being named as executor in a will, however, is not sufficient to confer the job. When the will is probated, the following statutory requirements are observed by the court when selecting an executor:

  1. The named individual must be competent to serve as executor.
  2. The named individual must be at least 18 years old
  3. The named individual must be bonded

Implicit within the bond requirement is that the named executor has good credit and no criminal record, since failure of either would likely make it next to impossible in convincing an insurance company to take the increased risk and issue an executor bond. The cost of the bond itself is paid from estate assets. Note, however, a will has the discretion to waive the bond requirement if the decedent has faith that the named executor is trustworthy and doesn’t represent a risk of pillaging or mismanaging estate assets.

As with many things within the legal system, the final approval for executor appointment lies with the probate court. So, regardless of whether the formal requirements are met, a probate court may still reject an executor election and appoint a third-party administrator if a potential executor is perceived as unfit to serve. Since, a major purpose of drafting a will is to control who distributes estate assets, naming an Ohio estate attorney as a primary or successor executor is advisable as a probate court would have little reason to protest such an appointment.

Why is an executor needed?

The duties of an executor aren’t easy, however, there is satisfaction knowing that you did right by your friend or family. The duties of an executor are specific to each particular estate, however, there is a “core” group of duties and tasks each executor must fulfill. Every executor must:

  1. File the will and probate petition in probate court where decedent was domiciled at time of death and petition the court for executor appointment.
  2. Take possession, catalogue, and value all estate property within 3 months of filing the will for probate.
  3. Maintain and protect estate assets for the duration of the probate proceedings.
  4. Directly notify creditors, debtors, financial institutions, utilities, and government agencies of decedent’s death.
  5. Publish notices of decedent’s death, usually a newspaper obituary, which serves as notice and starts the clock running on the statute of limitations for creditor claims on the estate.
  6. Pay or satisfy any outstanding debts or obligations of decedent.
  7. Represent decedent during probate court proceedings.
  8. Locate heirs and named beneficiaries and distribute respective bequests at the appropriate time.

These duties occur during the probate process, which is a major reason why probate takes many months to complete. Because probate is such a time-intensive and laborious process, many people chose trust-based estate plans that avoid probate entirely. With trusts, estate assets can be distributed right away, no executor is needed, and many mornings, which otherwise would be spent in probate court, are freed for personal enjoyment. Contact an Ohio trust attorney to see if avoiding probate through the use of trusts is right for you and your family.

What if some dies without a will so that there isn’t an executor?

If someone dies without a will, i.e. intestate, the probate court will appoint an administrator for the estate. The formal requirements for an administrator are the same as an executor except administrators must be also an Ohio resident while executors can be anyone. The duties administrators perform are largely the same as executors.

Granted, the final result of the probate process is the same regardless of whether an estate is administrated by an executor or appointed administrator, however, who knows who the court ultimately will appoint. As such, it is always preferable to elect an executor an ensure a responsible and diligent friend or family member will manage your estate and see that final wishes are followed. Those living without a will or trust are playing with fire and could end up seeing significant portions of lifetime earnings or assets going to irresponsible family members or eaten by taxes.

If I’ve been named as an executor, do I have to be one?

No, there is no legal requirement to take on the responsibilities of executor, however, resigning will likely put the surviving family in a serious bind and force a probate court to appoint an administrator. An executor resignation, prior to or during probate proceedings, must follow established procedures and use particular legal forms specific to each probate jurisdiction. Consulting an estate attorney is the best way to find out what these procedures are and if resigning is necessary in the circumstances.

Executor appointment is not a job to underestimate. Often, the labor and time spent in fulfilling the duties go underappreciated, but it is critical to wrapping up decedent’s life and giving closure to friends and family. Though sometimes thankless, executors are entitled to compensation in Ohio. Namely, if executor sells real estate or personal property, they are entitled to 4% of the first $100,000, 3% of the next $300,000, and 2% of any remaining value. Further, 1% may be charged for any non-probate assets. Executor fees and the associated tax consequences are potentially complex issues, as such, contacting a Cleveland estate attorney is sensible.

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.
“He who is always his own counselor will often have a fool for his client.” Old English Proverb est. circa

 

Estate Planning Lawyer - Daniel A Baron

QPRT – Can I Benefit From One?

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

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

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

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

Frequently asked Questions:

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

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

Helping You and Your Loved Ones Plan for the Future

Estate Planning Lawyer - Daniel A Baron

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

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