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Estate Planning Attorney Baron Law

D.I.Y. Estate Planning: Saving a Dollar Now, Lose a Thousand Later

D.I.Y. Estate Planning:  Legal Zoom, Rocket Lawyer, and Youtube has granted an unprecedented amount of legal information to the public. Online forums, blogs, and television allow people to converse at any time and anywhere about pretty much anything. Nowadays ordinary people can undertake their own legal research, legal drafting, and, if necessary, personal representation.  Just because you can do something, however, doesn’t mean you should. Google searches and online videos are not a substitute for the advice and guidance of an experienced Ohio attorney and many people put themselves in a bad position after they convince themselves that an attorney is simply not necessary.

At the end of the day, do-it-yourself legal services is all about saving money and time. People don’t want to spend hundreds if not thousands of dollars on legal services and spend the time conversing and meeting with an attorney. Online legal materials, at least the cheap or free ones, are great at providing a false sense of security, that everything is straight-forward, do X and you’ll get Y.

Law firms hear the same problems and fix the same issues from self-representation every day. People who, after a quick google search, start drafting their own wills, LLCs, and contracts. People who put their faith in a disinterested corporation and a handful of document templates. Legal Zoom and Rocket Lawyer are not law firms and they do not represent you or your interests, they explicitly say so on their websites. They cannot review answers for legal sufficiency or check your information or drafting. An experienced Cleveland estate planning attorney, however, properly retained and with your best interests in mind will accomplish everything you expect, and often more.

Hired attorneys are under legal and professional obligations to do the best job possible. They don’t want to get sued for malpractice, they want you to pay your legal bill, and they want you to refer your friends and family. A particular client is concerned with a tree, while the attorney pays attention to the forest. A proper attorney will draft documents correctly with established legal conventions in mind, legalese isn’t something done for attorneys own benefit, it has a definitive and beneficial purpose. A lot of trouble is caused by D.I.Y. legal drafters and estate planners due to typos or the inclusion of legalese for legalese sake. Further, a knowledge of federal, state, and local law along with local procedure and jurisdictional customs is necessary to obtain a proper outcome with minimal cost and stress. At the end of the day, the legal system is made up of people, knowing who to talk to and when is a large reason why attorneys are retained.

We live in a brave new world, never before has so much legal information been so readily accessible to so many. In the same vein, never before has our lives been so complex and estate planning matches this. Attorneys do more than drafting and research, they advise you on the best ways to protect your family and assets in light of an ever-changing legal landscape and your own personal life and dreams. Often do-it-yourself legal services are simply not worth the risk and lull you into a false sense of security. Ultimately, you need your estate planning documents to do what you expect them to. As such, call of local Ohio estate planning attorney and make sure yours are done right.

What is the Difference Between a Trust and a Will in Estate Planning?

What is a Will?

A will is a basic document outlining your wishes for your estate. It identifies an executor of your estate and provides the opportunity to divide your assets among your beneficiaries. This tool allows you to control the future care for any minor children and division of your assets. Without a will, the laws of your state will determine how your assets are divided. Therefore, a will is the minimum estate plan you need to care for your family and your assets. However, the purpose of a will is to guide the probate court to act in accordance with your desired plan.

What are the limitations with a will?

Probate

A will does not avoid probate court, and the average time to administer a will through probate is 18 months, while the minimum is six months. The length of this process can place a burden on the family left behind, and it allows creditors to make claims on any debts you owe.

Cost

Probate requires a number of fees–on average 5-7% of the value of the estate.

Public Transaction

Anything that goes through probate is public information. This means that both your assets and the way you choose to divide them become public, able to be found online in detail.

What is a Trust?

A trust is another form of estate planning that allows you to divide your assets as you desire. While this is similar to a will, a trust allows greater control and bypasses the limitations of a will as seen above.

A trust avoids probate, thus freeing your assets and your family from the court system. As such, probate fees are also avoided, and your personal information (assets and beneficiaries) is kept private.

What are other benefits of a trust?

Taxes

Saving on taxes is one benefit of a trust. However, given current tax laws, this is not an advantage unless your estate’s value is over 10 million dollars. Note, though, that this exemption is subject to change, and tax benefits may become more valuable.

Asset Protection

This is the biggest reason people use trusts over wills. Trusts allow for greater protection of the estate in case of something unexpected such as a beneficiary who develops a credit issue, or the possibility of a divorce.


If you are realizing that estate planning is more important and less simple than you thought, Baron Law will walk you through every step to ensure that your family and your assets are protected. To learn more about the difference between a will and a trust, or to begin planning for your future, contact the estate planning attorneys at Baron Law today.

Six Month Creditor Claim Blog Photo

Six-Month Creditor Claim Period

Payment of the decedent’s debts is one of the basic responsibilities of an estate fiduciary. Ohio law specifically provides that the fiduciary of an estate shall proceed with diligence to pay the debts of the decedent. The critical questions remain, however, of who to pay and when to pay them. Unless a fiduciary is confident that the estate will have more than enough assets to pay all of the debts of the decedent, it may actually be better not to pay any debts received until the expiration of the creditor’s claim period. Under Ohio law, legitimate creditors have six months to present their claims. When such period expires, only the majority of legitimate debts claims against the estate will remain because if specified claims are not brought timely, they are foreclosed as a matter of law. At this time it can be determined whether or not there are sufficient probate assets with which to pay the debts or if the estate is insolvent. Most people, however, are ignorant of this little wrinkle of Ohio probate law. As such, when a loved one or friend passes, always contact an experienced Ohio probate attorney.

All too often a gung-ho fiduciary starts paying estate debts without a comprehensive accounting of estate assets or complete list of debts and obligations. This results in payment of debts which may have fallen off after the creditor’s claim period or, more seriously, if Ohio statutes are not fully complied during estate administration or assets are prematurely distributed, potential personal liability for a fiduciary. This means that if a surviving spouse, heir, beneficiary, or legitimate creditor should have gotten something from the estate that a fiduciary mistakenly gave away, the fiduciary must personally pay them their share, whatever the amount or value of the asset. This looming threat of personal liability is a significant reason why must appointed fiduciaries seek the counsel of experienced Cleveland estate planning and probate attorneys.

It cannot be understated the significant windfall potential for an estate if the six-month creditor’s claim period is waited out. The difficulty, however, is convincing friends, heirs, and devisees to be patient. Easier said than done. Now, after the debts of the estate are settled and verified and the time has come to pay them, unless the decedent’s will provides otherwise and/or in the absence of sufficient cash or other liquid assets to satisfy the debts, payment is made from the proceeds of the sale of: 1) tangible personal property which has not been specifically devised, then 2) specifically devised tangible personal property, then 3) non-specifically devised real property, and finally 4) specifically devised real property.

Good Ohio legal counselors always advise their client to be wary. A common point, but often overlooked one, of avoiding probate via beneficiary designations or trust usage is privacy. If everything passes via will, anyone anywhere can look up the estate online and see what is going on. A little information in the wrong hands can do a lot of damage. For example, a recent client came into a piece of property of the east side of Cleveland. Naturally, the previous owner failed to property taxes for many years. Lo a behold a nice company called the client and offered to negotiate, settle, then pay off the back taxes, for a nominal fee of course. Client, being uninformed, agreed on the spot and gave out his credit card information. The estate had been closed for quite some time, way past the six month creditor claim period, and now the client has new problems to deal with. All this could have been avoided with a quick 30-second phone call with their Cleveland estate planning attorney, don’t make the same mistake they did.

Helping You and Your Loved Ones Plan for the Future

Special Needs Trust #2 photo

The Three Flavors of Special Needs Trusts: #2 Pooled Trusts

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 for those with special needs to qualify for government assistance programs such as Social Security Income and Medicaid, they must meet health, income, and asset thresholds. In other words, at least on paper, potential recipients must be quite poor to receive benefits. As such, just like to initially receive benefits, if special needs person is already receiving these benefits they must maintain the established thresholds of assets and income, or lack thereof. So, an inheritance, receiving an accident or medical malpractice settlement, or merely amassing too much money in an account can kick these people off of much needed benefits due to violating the standards set down by managing government entities and departments. In the hopes of preventing this outcome proactively, many people turn to special needs trusts.

Special Needs Trusts: Revisited

A special needs trust allows a disabled person to, theoretically, shelter an unlimited amount of assets for their needs without being disqualified from government benefits.  As hinted to above, this is because the assets held in a special needs trust properly drafted by experienced Cleveland attorneys are not counted as individual resources for purposes of qualifying for benefits.  On paper, at least in the eyes of the government and taxman, the beneficiaries of special needs trusts meet their asset and income thresholds. As a consequence, those special needs persons lucky enough to have a special needs trusts have access to more money, which can be spent on comforts, necessities, housing, and much needed medical care. Though we in this country are lucky to have government assistance programs available to us, anyone with a loved one solely dependent on them will tell you it’s certainly not enough. A properly drafted special needs trust will provide extra care and life satisfaction for disabled loved ones regardless of whether supporting family members are around for many years or pass away suddenly.

Pooled Special Needs Trusts

As mentioned in previous blogs, there are many “flavors” of special needs trusts. One such type is a “pooled” special needs trust. The focal point with this trust is maximizing potential gains from money funded into the trust, minimizing administrative costs, and delegating trust management to experienced personnel. In a nutshell, pooled trusts are a method to provide benefits of a special needs trusts without having to do the administrative legwork yourself.

As a rule, pooled trusts are required to be run by non-profit companies or organizations. The company or organization running the pooled trust drafts a master trust agreement that dictates the terms of the trust and the relationship between the trust and all participants.

In almost all cases, the pooled trust is run by a professional administrator. After establishment of the trust, money is transferred into the pooled trust to fund a particular individual’s stake in the trust. This single source of funding is then pooled with other people’s money to make one big pot, hence the name pooled trust. This pot is then controlled and invested, usually by an investment manager, similar to the way a hedge fund or other investment group operates.

The major takeaway is the “pooled” aspect of this particular trust. In theory, because there are many sources of funding brought together and utilized tactically, a pooled trust can make more stable investments and provide additional management services that other types of special needs trust cannot. Again, this increased investment power and potential returns coupled with lowered administrative costs, because it is borne by a large group instead of the individual and also an individual trustee does not need to be vetted and appointed, is also with the added benefit of the special needs beneficiary still being able to receive government benefits.

Unique Issues with Pooled Special Needs Trusts

The most obvious potential issue with pooled trusts is control, or lack thereof for individual participants. With a pooled trust, the trust assets are managed by people selected by the non-profit organization and not by anyone associated with an individual participant. This, in turn, means unassociated individuals and trust terms dictate how investments proceed and when disbursements occur, pretty much in a take it or leave it style. Once money is surrendered and placed into the pooled trust, individual participants how no say over how it is spent or when it will be distributed.  Additionally, it is a little known and little advertised fact that after the special needs beneficiary passes, some or all of their particular trust account will be kept to help with continued funding for the pooled trust. As always read the fine print and be completely sure you know what you’re signing up for.

With pooled trusts you make undertake a pro’s vs. con’s analysis, lack of control versus potential gains that might be indispensable in providing of critical healthcare costs for those with special needs. Consult an experienced Cleveland estate planning attorney who is familiar with drafting and administrating special needs trusts in order to find out potential options and they best course to take. Further, before signing on the dotted line to participate in any pooled trust, have an experienced Ohio estate planning attorney review the master trust agreement. Often these documents are very massive and have many hidden terms that can have profound impacts on your and your loved ones with special needs.

Helping You and Your Loved Ones Plan for the Future

Wage Garnishment

Wage Garnishment Guide For Employers

Not everyone pays rent on time, pays child support, or pays back a debt in full. Recently, wage garnishment has become a popular option for individuals or businesses to collect on debts or outstanding obligations.  Wage garnishment is rarely a method of first resort, it is time-consuming and stressful, but often creditors are left with little option. Any human resources officer or treasurer will agree, they are never excited to receive papers from the local court regarding a wage garnishment on an employee. Though instructions almost always accompany orders for wage garnishment, it is smart business to have at least a basic understanding of wage garnishments and your duties as the employer. No business wants a minor annoyance to turn into a significant problem due to carelessness.   

  • What is Wage Garnishment? 

First step, as always, is to define wage garnishment. A wage garnishment occurs when a creditor attempts to petition a court to withdraw money directly from a debtor’s paycheck. There are many different types of garnishment but wage garnishment specifically targets the debtor’s income stream via direct deductions from their paychecks. Money is taken out based on a specific amount decreed by a court and a creditor receives this money bit by bit until the debt is repaid.   

Both Ohio and federal wage garnishment law limit the maximum amount that can be taken from a debtor’s paycheck, usually approximately 25% of the wages to be garnished. Also, depending on the date of filing and date a debt accrued, bankruptcy may release a debtor from their obligation to payback a debt. Further, Ohio law provides debtor exemption limits on money and property that are eligible to be garnished. But for employers whose employees are being pursued for a wage garnishment, there are procedures and rules they must follow when they receive official notice of a court proceeding to collect a debt because, at the end of the day, the employer is sending someone else’s hard-earned money to satisfy a debt this person cannot or does not want to pay.     

  • As an employer, what does wage garnishment entail? 

Initially, you will receive a packet of documents from the court. This is usually multiple copies of the affidavit, order, and notice of garnishment and answer of employer, multiple copies of the notice to the judgment debtor and request for hearing, and, usually, single copies of both the interim and final report and answer of garnishee. An employer has anywhere between five and seven business days from the receipt of the court documents to respond to the court, i.e. mail back the affidavit, order, and notice of garnishment and answer of employer respectively. One copy is returned to the court, one is kept for your records, and one goes to the employee. Instructions on how to respond will be on the paperwork and the party filing for garnishment is responsible in filling in certain important information, like the total amount of the debt and rate of interest. The employee subject to garnishment will also receive two copies of the notice to the judgment debtor and request for hearing forms.  

Employers are ordered to begin withholding wage on the first full pay period after the employer receives the garnishment. The amount of withholding is capped at 25% after all allowable deductions are taken out, but the precise amount to be withheld is on the employer to calculate correctly based upon the information provided in the garnishment documents. The garnishment will continue until the debt is paid in full or until a court order is received telling the business toc cease garnishment. Unfortunately, processing wage garnishments aren’t as simple as sending a check to the court. Particular paperwork and accounting must be filed at statutorily defined times, such as a copy of the Interim Report form within 30 days after the end of each employee pay period and Final Report form after the debt is paid in full. Consult with an experienced Cleveland business attorney if you have any questions about your responsibilities or obligations as an employer.  

  • How long must an employee’s wages be garnished?  

An employer must withhold funds until one of the following occurs: 1) the debt is paid in full, 2) the creditor terminates the garnishment, 3) a court appoints a trustee and halts the garnishment, 4) filing of a bankruptcy proceeding, 5) a garnishment of higher priority is received (however, if the higher priority garnishment does not take the maximum amount that can be withheld, the remainder should be used to satisfy the other garnishment.), 6) another garnishment is received from a different creditor and the old garnishment has been processed for a certain length of time as denoted in the local court rules, see an attorney if this circumstance arises.   

  • What if an employer refuses to process a wage garnishment?  

Processing wage garnishments are a pain for businesses and they are only entitled to deduct $3.00 per garnishment transaction. Naturally, the next question is, why do them at all? Well, the wage garnishment documents are essentially an order from the court and disregarding or ignoring them can open a business up to contempt of court proceedings. Contempt can result in fines, damages for attorney’s fees, and court costs, and, in the end, the contempt business will still be forced to process the wage garnishment. Thus, ignoring and failing to respond or process to wage garnishment is not a viable option, and since employers only have a few days to respond, complete and return mail the forms as soon as received. Every business attorney will say the same thing, you don’t have it like it, just do it.  

Note, simply firing the relevant employee is not an option either, an employer may not discharge an employee solely because of a garnishment by only one creditor within any one year. Even in the case of multiple and habitual wage garnishments, always consult an experienced Ohio business attorney before terminating an employee solely for this cause. 

 

Business Attorney Baron Law

The Difference Between Business As Usual And Bankruptcy. Here Are Two Ohio Laws That All Business Owners Must Know!

Every business and every business owner should be aware if and how the Consumer Sales Protection Act (“CSPA”) and/or the Home Solicitation Sales Act (“HSSA”) effects their business. On the first day of law school, every new law student learns that ignorance of the law is no defense. The same applies to business owners. In the context of CSPA or HSSA violations, being unaware of the law, which in turn leads to noncompliance of the law, can open you up to thousands of dollars in damages, discretionary rescission of expensive contracts, and ruin your hard-earned professional reputation. The CSPA and HSSA are lengthy statutes which cover a multitude of business and scenarios and, as such, require an experienced hand to walk you through all the wrinkles and hurdles. If your personal knowledge of these statutes is lacking, never hesitate to contact an experienced Cleveland business attorney. A little forethought now, can save you a whole lot later.    

  • What is the CSPA and HSSA? 

The Ohio CSPA is located under Chapter 1345 of the Ohio Revised code. In a nutshell, the CSPA prohibits “suppliers” from committing unfair or deceptive acts or practices in connection with a “consumer transaction.” Naturally who is and is not a “supplier” and what is or is not a “consumer transaction” under the CSPA are pivotal first points of analysis. Further, the CSPA does not stand alone. The CSPA works in conjunction with Ohio’s HSSA. Again, to simplify everything, the CSPA is a list of things considered unfair or deceptive acts or practices and denotes potential avenues for redress of legal grievances for harmed customers. On top of the CSPA, the HSSA also provides an additional list of things considered unfair or deceptive acts or practices and denotes potential avenues for redress of legal grievances for harmed customers but with slightly different triggering circumstances, i.e. the existence of a home solicitation sale, hence the name, and different recovery options for customers.  

  • Why should business owners care about the CSPA and HSSA? 

Many businesses and industries are subject to the laws and requirements of the CSPA and HSSA without even knowing it. Thus, these businesses are running around selling services and completing jobs all the while exposing themselves to massive amounts of potential liability. Remember, ignorance of the law is no defense and all it takes is one persnickety consumer to ruin your whole fiscal year and eat all your profits through litigation.   

In the context of home improvement, residential contractors, HVAC, roofers, electricians, landscapers, concrete work, repairs companies, and other home sale situations, to name only few, if a company has committed an unfair and deceptive trade practice, a consumer often has 1) the right to cancel the agreement, 2) receive a full refund, and 3) depending on the circumstances may not even have to return any materials or pay for any labor already performed.  

The CSPA includes a non-exclusive list of specific acts and practices that are conclusively “unfair and deceptive” and therefore violate Ohio law. The CSPA, via the HSSA, also includes specific “home solicitation sale” remedies, one of which includes a statutory right to a three-day right to cancel period when the contract is signed at the consumer’s residence. Every seller must notify the buyer of his or her right to cancel the sale and provide the buyer with a “Notice of Cancellation” form that the buyer can use to cancel the sale, both the notice and the form to cancel have specific statutory requirements. If the supplier fails to include notice and proper language regarding this 3-day right in the contract or use the proper forms, consumers are entitled to cancel their agreement whenever they wish because the 3-day timer never started. Courts have said in these situations that the right to cancel never expired, even many years after the job was done. Only following the law by delivering proper documents does a supplier start the clock. In turn, this allows homeowners to bring a claim for a refund or to get out of paying money owed on a contract well after the two-year statute of limitations under the CSPA has run out. 

  • Recent changes in the CSPA and HSSA. 

As previously stated, the CSPA and HSSA together represent a list of unfair and deceptive trade practices which often triggers liability for the offending company. Ohio Senate Bill 227, which became effective on April 6, 2017, added a new practice to this list that is conclusively violative, as in if you do it, legally there is no discussion over whether it was “unfair and deceptive” under the CSPA, it just is. This new violation is: 

“[T]he failure of a supplier to obtain or maintain any registration, license, bond, or insurance required by state law or local ordinance for the supplier to engage in the supplier’s trade or profession is an unfair or deceptive act or practice.” 

In short, under current Ohio law, even the most careful and observant supplier can violate the CSPA/HSSA by failing to timely renew any registration, license, bond, or insurance that the supplier is required to maintain under state or local law. As such, ignorance can no longer be the standard operating procedure for services such as HVAC, electrical, plumbing or refrigeration work, and other suppliers of home services. Further, for businesses who use outside contractors or other temporary workers, the risk is even more severe. Now you must be sure not only are you and your employees bonded and licensed, but any contractors have the proper paper work as well, even though technically, they are not your employees. Often courts find the burden is on the business to make due diligence and ensure compliance, responsibility must fall somewhere, and it sure isn’t going to fall on the consumer. 

Furthermore, albeit a more minor change, Senate Bill 227 also updates the Notice of Cancellation requirements under the HSSA to include fax or e-mail options, which the supplier must provide. In turn, the customer/buyer can now cancel the sale by delivering the Notice of Cancellation “in person or manually” or by “facsimile transmission or electronic mail” to the seller. As such, even a minor oversight such as not including fax or e-mail cancellations options on standard forms can open up a world of litigation pain on an unknowing business. 

A law without consequences is a paper tiger. You may ask yourself, who cares if technically my business engages in unfair or deceptive acts or practices. Well, for CSPA and HSSA violations, often customers are entitled to triple damages and attorney’s fees, good for them, bad for business owners. No stretch of the imagination to see a couple of CSPA/HSSA lawsuits can kill a profitable business real quick. Notice, under Ohio law it doesn’t matter if failure of compliance was willful or inadvertent, the only thing that matters is did you break the law. This is why it is important to maintain a good and ongoing relationship with a local Cleveland business attorney. Often the legal requirements for local business are buried deep within local ordinances and administrative code. Remember, what you don’t know can hurt you and, just like everything else with a business, it is on owners to stay current, but most especially, compliant with any recent changes in Ohio law.  

 

Estate Planning Attorney

What Is The Difference Between A Living And Testamentary Trust?

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 Lawyer

Common Questions With Inherited IRA’s

Most of us don’t have millions of dollars in liquid assets to fund our retirements. Ordinary people use common investment tools such as traditional IRAs, Roth IRAs, simplified employee pension plans (“SEPs”), and savings incentive match plans for employees (“SIMPLE IRAs”) to pay for healthcare and living expenses in old age. The main goal for any retirement plan is for an individual or couple to outlive their savings, and often, if proper planning is implemented, this is the case. So, what happens to these retirement accounts after their owners pass away? What do sons, daughters, brothers, sisters, or even close friends do with these accounts if they are named beneficiaries? This is often where inherited IRAs and their confusing rules regarding mandatory distributions come into play. Though creating an IRA is simple, when it comes to inheritance and asset distribution, most people don’t know where to start. That is why an advance discussion with a Cleveland estate planning attorney or tax advisor can give you the information needed to avoid unintended consequences with inheriting an IRA.    

  • What is an Inherited IRA? 

A cavalier attitude for IRA owners and their beneficiaries can lead to paying higher taxes, triggering penalties, or giving up future opportunities for tax-advantaged, or tax-fee, growth. This first step to avoiding these outcomes is to know what an inherited IRA is. 

In a nutshell, an inherited IRA is a retirement account that is opened when a person inherits an IRA or employer-sponsored retirement plan after the account holder dies. The assets held in the deceased individual’s IRA is transferred into a new inherited IRA in the beneficiary’s name. Usually, the account is transferred, inherited, via a beneficiary designation. This is why inherited IRAs are also referred to “beneficiary IRAs.” The rules that govern the transfer of the account assets, however, depends heavily on whether the beneficiary is a spouse or non-spouse. 

The big concern with inherited IRAs is the schedule for required mandatory distributions, namely when do they have to begin. When required mandatory distributions must begin and how they are measured is nuanced and depends on a variety of factors such as beneficiary age, age of the deceased own, type of IRA, income needs, and creditor protection concerns. Most people are unfamiliar of all the rules and considerations associated with inheriting IRAs, as such, always talk to an experienced Ohio estate planning attorney if you have any doubt with the proper course of action in your circumstances.  

  • Options for Spouses 

The name of the game for spouses is rollover. Spouses can transfer the deceased spouse’s IRA into their name and defer distributions until required mandatory distributions are triggered. (When, however, these distributions must start is a fact sepcfiic question to bring up with your attorney). This rollover allows tax-advantaged growth of the IRA funds to continue with no interruption. It is critical, however, that the spouse take no direct control of inherited IRA funds or else a taxable event will be triggered. The good news is surviving spouses have 60 days from receiving inherited distributions to roll them into their own IRAs without a problem as long as no issues regarding required minimum distribution are present. Note, though rollover is often the most popular option, you always have the option to cash out the IRA, just be aware of what benefits you’re forfeiting and also any potential penalties and/or personal tax liabilities.   

  • Options for Non-Spouses 

Unfortunately, non-spouses do not have the option to rollover and the rules for them are quite a bit more complex. Option one for non-spouses is to disclaim all or part of the deceased owner’s IRA assets. This decision must be made within nine months of the original IRA owner’s death and before possession of the assets occurs. This is usually done by named beneficiaries who wish to avoid being kicked up to a higher tax bracket which, in turn, would practically eat everything inherited anyways via state and federal taxation. 

Option two is to cash out the IRA either immediately or within five years. Taxes will be paid on the amount of distribution, but no 10% IRA early withdraw penalty will accrue. With this option the IRA assets must be exhausted by December 31st of the fifth year following the original IRA owner’s death. This five-year period allows some planning to occur to mitigate any potential tax hit, but, if an IRA is large enough, state and federal taxes will eat a large part regardless.  

Option three is to transfer assets from the deceased owner’s IRA into an inherited IRA and take required minimum distributions in order stretch out the potential tax hit and fully exploit the tax-advantage status of an inherited IRA. As a general rule, the IRS requires non-spouse inherited IRA owners to start taking required minimum distributions starting December 31 after the year of death of the original account owner, and each year thereafter. Also, distributions from inherited IRAs taken before age 59½ are not subject to a 10% early withdrawal penalty in most cases. The rules and guidelines regarding these required mandatory distributions can be confusing and are highly dependent on the particular facts surrounding the IRA inheritance.  

The calculated amount of required mandatory distributions for non-spouses is determined via IRS life expectancy tables, IRS required mandatory distribution guidelines, and IRS criteria based on your age, life expectancy, number of named beneficiaries, type of original IRA, and age of deceased IRA owner. When distributions must start, if at all, how much each distribution must be, and whose life expectancy will govern the distribution schedule are each questions that all competent estate planning attorneys will discuss with you and plan for. Planning IRA inheritance for non-spouses is no easy task but it represents an often critical retirement issue that goes unaddressed and causes massive tax problems for beneficiaries.  

Most people who use retirement accounts are at least semi-knowledgeable when it comes to creating and managing IRAs, but very few are concerned about what happens after they pass on. This is where your legal and tax advisers come in. Proper planning and conversation with your estate planning attorney can avoid higher taxes for beneficiaries, triggering penalties, and giving up future tax-advantaged, or tax-fee, growth. Properly planning for retirement not only is a concern for you, but also for the friends and family you leave behind.  

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.  

Helping You and Your Loved Ones Plan for the Future

Baron Law Cleveland Ohio

Planning for Crisis: Advance Directives

Estate planning is an expansive concept. Fundamentally, estate planning seeks to create a detailed plan for your finances, healthcare, and assets for the reminder of life and after death, to the extent physically possible and within the means of the estate planner. Though it would be nice if a crystal ball existed and told us what to do, how to do it, and when to do it, estate planning must resort to educated guesses and client preference.

An experienced Cleveland estate planning attorney knows there are limitations on his abilities. Some matters can’t be foreseen or preplanned for, such as changes in relevant law or undisclosed heirs or assets. There are also limitations brought on by estate planning clients themselves, such as financial restrictions or outright refusal to take the advice of experienced counsel or professionals.  These limits aside, most people looking to plan their estate are concerned with the usual issues affecting us all. Principally, ways to ensure money exists for the rest of life and instructions and preferences regarding necessary medical care. For most, the extent necessary medical care is planned for extends only to telling adult children whether or not they want to be kept alive in the event of a coma or other traumatic injury. Needless to say, this is not good enough and will most likely be forgotten or disregarded. Any Ohio estate planner worth their salt would not let you get away with such half-measures regarding critical medical treatment, and this brings us to advance directives.

What are advance directives and why do I need them?

Simply put, advance directives are legal documents that provide detailed instructions about who should oversee your medical treatment and what your end-of-life or life-sustaining wishes are. Thus, in the event you are unable to speak for yourself, such in the event of coma, traumatic injury, or terminal disease, your family and medical professionals can refer to your advance directives and find out what you want to do.

There are multiple advance directive documents which convey your medical wishes and/or gives authority to another to make medical decisions on your behalf. Which particular document is needed is highly dependent on your medical circumstances, usually focusing on the type of medical treatment contemplated/needed and whether or not you have capacity to make medical decisions yourself. Though there exists many advance directive documents out there, the two most common are healthcare powers of attorney and living wills.

Durable Healthcare Power of Attorney

A healthcare power of attorney allows you to appoint a trusted person to make all healthcare decisions in the event that 1) you become terminally ill and are unable to make your own healthcare decisions or 2) are either temporarily or permanently unable to make medical decisions for yourself. The person you designate with this authority has the power to carry out your wishes and make all other necessary decisions about your medical treatment and other healthcare matters.

Make sure after completing your healthcare power of attorney to at least file it with your primary care physician/provider. The document cannot act to protect you if no one knows about it or knows where it is. Though similar to your financial power of attorney, a healthcare power of attorney only concerns issues of medical treatment. Both work in concert to provide whomever you chose to act in your best interest the legal authority to do so. Talk with your Cleveland estate planning attorney to make sure your powers of attorney are valid and up-to-date.

Living Will

Your living will, sometimes called a healthcare proxy, is almost always paired with your healthcare power of attorney. A living will is a document that conveys your particular instructions to certain medical situations, principally impending death or prolonged terminal conditions, i.e. accepting or declining of life saving medical care. Lesser issues, such blood transfusions or non-life threatening organ or tissue transplants are covered under a healthcare power of attorney. That is why it is important to have both in effect, so all your bases are covered.

Often estate planning clients say that they have communicated their wishes about life sustaining treatment, however, often how it really turns out, friends and family are unaware of an incapacitated person’s medical directives or they may choose to discount or ignore previous conversations, believing that you will pull through against all odds and medical advice. By memorializing your medical directives via a living will, medical staff will consult the document at the appropriate time and carry out your wishes. This takes the stress of critical care decisions off the shoulders of loved ones and removes any opportunity for foul play or misinterpretation. Be sure to consult with your Ohio estate planning attorney to make sure your living will is up-to-date and complies with any recent changes in Ohio law.

Other Types of Advance Directives: DNR’s and Donor Registry Forms

 It is worth noting a few additional advance directive documents as well, namely Do Not Resuscitate Orders and Organ/Tissue Donor Registry Enrollment Forms. Both documents respectively seek to further clarify your medical wishes. DNRs are used when a medical emergency occurs and alerts medical personnel that a person does not wish to receive CPR in the even that the heart or breathing stops.  Organ/Tissue Donor Registry Enrollment Forms supplement your healthcare power of attorney and living will in that it ensures your wishes concerning organ and tissue donation will be honored.

 The general rule is advance directives only come into effect when you are unable to make you own decisions about medical treatment. All advance directive documents allow you to plan ahead by sharing your healthcare instructions with your doctors and family if you become unable, even only temporarily, to make medical decisions yourself. Advance directives help ensure your wishes are followed if you become seriously injured or unconscious. Contact a local estate planning attorney and make sure your have these important documents in place.

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.

Family Law

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

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