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Testamentary Trusts

Cleveland, Ohio Estate Planning Attorney Dan A. Baron offers the following on Testamentary Trusts.

Testamentary trusts are a great way to plan and safeguard your assets for minor children.  In other uses testamentary trusts can be used for beneficiaries with addictions or disabilities.   Unlike most trusts, testamentary trusts are incorporated into your last will and testament and are funded only after the creator’s death.   The biggest reason people use testamentary trusts is because they are able to control their assets after they die.

For example, if Mom and Dad die in a car accident leaving behind two young children, they would not want their $500,000 estate being left in the hands of nine and ten-year old.    Instead, Mom and Dad create a last will and testament and incorporate language that appoints a guardian for the children and trustee of their testamentary trust.   The trust parameters outlined for the Trustee to follow often include broad language like “to provide for the health, education, and well-being of my children.”   The trustee controls the money and then distributes it to the children as they need it.  Most often, the remaining balance left in the trust is distributed to the children once they reach the age of 25.

It’s important to remember that unlike most trusts, testamentary trusts do not avoid probate.  Instead, testamentary trusts are created after the probate process is complete.  Assets left from probate fund the trust and the trustee is then responsible for carrying out the wishes of the deceased.  Once the assets are in trust, they are protected from creditors and litigation.  However, there is no asset protection for the creators before death.

To learn more about testamentary trusts and how they might be beneficial for your estate plan, contact Baron Law LLC today at 216-573-3723.  You will speak directly with an attorney who can assist you.


The information contained in this article is provided solely for convenience purposes only and all users thereof should be guided accordingly. This article is not meant to provide legal advice. If you wish to receive a legal opinion or tax advice on the matter(s) in this report please contact our office and we will speak with you directly. 


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What is Estate Planning?

What is estate planning?  Estate planning concepts have changed over recent years because today, more Americans fear outliving their retirement than death itself.  In fact, from 1980 to 2010 Americans are now living on average 8 years longer than before.   This extended life expectancy requires on average an additional $422,000 to live ‘comfortably.’  People have traditionally associated estate planning with the transfer of assets after their death.   For example, after the passing of a loved one you must consider the transfer of the home, bank accounts, retirement accounts, etc.  Estate planning now centers around three things: you, your loved ones, and your community.

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Most importantly, as the pyramid shows, estate planning is about you.  Before planning for the transfer of assets to your loved ones, you must first have assets to transfer.  It’s imperative to have a smart financial plan in place and be able to protect the wealth you’ve earned over your lifetime.   As your wealth grows, you should consider the tax consequences, risks, and even healthcare needs associated with your estate.

Healthcare has especially become a big topic under the umbra of asset protection.  Even larger estates can end up zeroing out with nursing home costs being upwards of $10,000.00 per-month.  But when you put yourself at the base of your estate planning pyramid, you might consider methods to protect your assets from the spenddown of Medicaid.  Asset protection methods like long-term care insurance plans and wholly discretionary trusts that can help save a portion of your assets from Medicaid.

Although charitable gifts are usually not the most important part of an estate plan, they may come in handy to save you thousands on income taxes.   You can take upwards of 30% or more of a deduction from income taxes by creating a charitable remainder trust.  Then you receive income over your lifetime from the trust and the money is passed on as your legacy to your favorite charity.

As you can see, estate planning involves more than just transferring your assets on to your loved ones.  There are numerous ways to provide for you and your family with a carefully and well-thought out plan.  Contact your Cleveland, Ohio estate planning attorney to start creating your plan today.  For a free consultation, contact Cleveland attorney Dan A. Baron at 216-573-3723.

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Difference Between a Trustee and Executor Within a Testamentary Trust

Cleveland, Ohio Estate Planning Dan A. Baron Explains the Difference Between an Executor and Trustee:

Estate planning can be complicated and sometimes difficult to bear when charged with the responsibility as executor or trustee of an estate. If you have minor children, then you probably have set up some form of testamentary trust coupled with your will and power of attorney. Within these estate planning documents, there are designated executors and trustees that have been carefully selected to administer your estate after you pass. It’s important to talk with your executor and trustee and let them know their responsibilities after your’re gone. Below is a quick summary of the difference between executor and trustee of a testamentary trust.

The Executor’s responsibility is to liquidate or otherwise gather all estate assets, pay any outstanding bills and then transfer assets from the name of the decedent to the beneficiaries named in the Will (most often the decedent’s children). They also make any necessary filings with the court and attend any court hearings. Most Executor’s elect to use an attorney to help them with this so the process runs smoothly. Once all assets are in the name of the beneficiary, the Executor’s job is done. The complexity of the estate will determine how long the Executor is needed.

In comparison, a Trustee receives the assets from the Executor and then, with court approval, invests the trust assets in savings account, investment accounts, or whatever they deem appropriate. Most importantly, the Trustee manages the funds and makes distributions to the trust beneficiary (usually children) when needed (i.e. to pay school tuition, living expenses, doctor bills, etc.). Most clients set a maturity age of 25. When the children reach the age of 25, the trustee distributes the balance of the trust funds and that particular child’s trust is terminated. The Trustee will be required every two years to make reports to the court as to the value of the trust. As you can imagine, the length of time the Trustee will be needed will depend upon the age of the children.

If you would like to learn more about the responsibilities and an executor and trustee, or have questions, contact our office at 216-276-4282. You will speak directly with an Cleveland, Ohio estate planning attorney who can help you set up a trust, will, power of attorney, medicaid planning, and more. If you would like to attend one of our FREE seminars, please visit this link.

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How Do I Avoid Probate?

Successful Probate Avoidance Strategies

If saving time, money, and court supervision is right for your family, then avoiding probate is right for your estate plan.  There is a common misconception that having a will avoids probate. This is completely false.  Having a will does NOT avoid probate.  There are however many simple ways to avoid probate and some strategies that even offer asset protection.   But regardless of what estate planning method you choose, avoiding probate will avoid costly fees for your children and time consuming court proceedings. Here are a few helpful methods to consider.

Joint Ownership

Joint ownership is the most common method of probate avoidance and does not require the help of an attorney or other professional.  Assets owned by more than one person result in the survivor taking ownership.  Joint ownership examples might include a joint bank account or marital home.   This is significantly beneficial when avoiding probate for a residence because the transfer of assets is immediate and does not require a court approved transfer.   If you have a joint bank account, most banks require a simple death certificate and identification to transfer the account to the remaining account holder.  In lieu of a trust, the downside of joint ownership is that it does not offer asset protection.  Creditors may still attach their interest in a residence or asset of a jointly held account.

Beneficiary Designations

If you ever received life insurance or engaged with a financial planner, you’ve probably filled out a beneficiary designation.  These are very common with retirement accounts (401(k), 403(b), IRA, etc), life insurance, annuities, and other assets.  Here you simply designate the names of those you wish to receive the assets after your death.  Beneficiary designations are a great way to avoid probate and keep your estate private.  The transfer of assets is swift and does not require court approval.  If you name your minor children as beneficiaries, it is recommended that you appoint a guardian because a minor cannot take control such an account.  Once again however, the downside to beneficiary designations is that these assets are not protected against divorce, creditors, or litigation.  For example, if your children inherit an IRA but then get divorced, the ex-spouse is will receive half of the retirement assets.  (See trusts below for asset protection)


A transfer on death affidavit works just like a beneficiary designation.  Here the “TOD” allows you to designate the person or entity to receive your assets upon your death.  Just like a beneficiary designation, the TOD avoids probate while transferring assets swiftly and without court approval.  This method saves time and cost for commonly titled assets like a home, automobile, boat, and more.

Payable on Death

Similar to Transfer on Death Accounts, POD’s also transfer assets seamlessly through naming a beneficiary. Here the difference is that POD’s usually refer to checking accounts, savings, and certificates of deposit while TOD’s refer to brokerage accounts, stocks, securities, and mutual funds. Both TOD’s and POD’s do not offer asset protection.


The single best way to avoid probate while also providing asset protection is by creating a trust.  A properly drafted trust is completely private, avoids probate, provides asset protection, and is advantageous for tax purposes (for larger estates).  There are numerous trust planning strategies available for all different types of estates.  For example, some trusts may be changed or modified during your lifetime (called revocable living trusts) or may not be changed (called irrevocable living trusts).  Other trusts may pay taxes themselves while others allow the trust beneficiary to pay taxes.  Regardless of what trust strategy is used, a properly drafted trust will ensure that your children and/or beneficiaries receive asset protection, favorable tax considerations, and probate avoidance.

To learn more about probate avoidance or trust planning strategies, contact an attorney at Baron Law LLC at 216-573-3723 or  Baron Law LLC is a Cleveland area law firm providing legal services in the areas of estate planning, probate, wills and trusts, Medicaid planning, and more.

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Springing and Durable Power of Attorney – What’s the Difference?

Springing and Durable Power of Attorney – What’s the Difference?

When planning for retirement and your estate plan, it’s important to understand how your power of attorney works.  Generally, there are two kinds: springing and durable power of attorney.  A springing power of attorney takes affect if you become incapacitated.  In comparison, a durable power of attorney becomes effective as soon as you sign the document, and continues to be effective if you are incapacitated.

Having control with a power of attorney is a big deal.  The person holding this power may have the ability to control your financial assets, medical decision, and more.  For example, a giving someone financial power of attorney powers gives them the right to make financial decisions on your behalf.  This person might trade stocks, cash in annuities, or transfer assets.  If this person has durable power of attorney, they can make these decisions even if you are not incapacitated.   State laws differ on the particulars of power of attorney, and some financial institutions may require their own versions.

With a springing power of attorney, it’s important to clarify exactly what triggers someone taking over your abilities to make decisions.  Typically, it’s when the principal becomes disabled or mentally incompetent.  However, it could be used in a variety of situations.  For example, someone in the military might create a springing power of attorney form to be prepared for the possibility of being deployed overseas or disabled, which would give a relative powers to handle financial affairs in these specific situations only.

Who determines when someone is mentally incompetent or incapacitated?  This question varies state to state.  However, in general there is usually a formal procedure that your attorney can create.  It’s smart to note in your legal document exactly what the principal considers “incapacitated” to mean.  Often times, people who create a power of attorney form include language that requires a doctor’s certification or mental incompetence or incapacitation.

For more information regarding power of attorney and other estate planning methods, contact Cleveland estate planning attorney Dan Baron at Baron Law LLC.  Baron Law is a Cleveland, Ohio area law firm practicing in estate planning, business, and family law.  Contact Dan Baron today for a free consultation at 216-573-3723.

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What is Probate?