Ohio Estate and Special Needs Planning

Selecting a Trustee

In choosing an executor (named in a will), that person's responsibilities typically end within 13 months of their appointment by the court.  In choosing a trustee of a trust, that person's responsibilities can last for years.  What characteristics do you look for in someone when you are considering designating him or her as trustee of your trust, a position that could last for a long time?  This article, written by Bill Roberts and posted by Professor Beyer in the Wills, Trusts and Estates blog, helps to clarify the process of choosing a trustee.  (Scroll down to article posted on November 24, 2011.)

Second Marriages and Estate Planning

I have seen many couples who had prior marriages and children from prior marriages with the typical mirror wills:  everything to my spouse, then to my children.  This is a huge mistake.  Bob and Jane--second marriage for both--have one child each from their previous marriages.  Bob dies and all his assets go to Jane; Jane dies and all her assets (including assets that she inherited from Bob) go to Jane's child.  Bob's child has been left out of the picture, possibly unintentionally.

I believe the best estate planning tool here would be a trust for Bob and Jane that would provide for certain distributions to certain beneficiaries at certain times. 

For a good article on the topic, see Estate Planning for the Twice Married.  (Thank you to Professor Beyer, for posting this on his blog Wills, Trusts & Estates Prof Blog.)

When Your Relative Dies with Debt

Typically you are only responsible for the debts of your spouse if he or she dies.  I liked this post in the Wills, Trusts & Estate blog regarding what you should know, and do, if you have a relative (parent, usually) who dies with debt:  http://lawprofessors.typepad.com/trusts_estates_prof/2010/09/what-to-do-when-your-relative-dies-with-debt.html.

Tips for Avoiding a Fight Over Your Estate

Many estate planning clients fear fighting among heirs, which causes anxiety when making tough decisions regarding choosing an executor, distribution of assets, and other decisions.  There are ways for estate planning clients to minimize any fighting among heirs.  Thank you to Wills, Trusts & Estates Prof Blog for posting the following November 27, 2009 U.S. News article by Phillip Moeller, "8 Tips To Avoid Nasty Estate Surprises."

A summary of these tips:

1. Select a good, solid attorney who hasn't done any work for any of your beneficiaries.
2. Select an executor who can get along with your family, perhaps even a professional fiduciary if no one else could successfully fill this role.
3. Discuss your intentions with family before the will is drafted, taking away the surprise after death and making loved ones aware of personal wishes and desires.
4. Take state law into account, creating trusts to bypass probate if probate is especially burdensome under applicable state law.
5. Update the will or trust often so that challenges become more difficult.
6. Title assets appropriately so that the assets pass through or outside probate as intended.
7. Consider a no-contest clause coupled with testamentary gifts adequate to discourage disputes.  
8. Allow the estate some leeway with distribution of assets so that beneficiaries can agree to a distribution that suits them best. 
   

You are the Executor: Now What?

The following is a guest post by Matthew W. Gibson, attorney.  Note that the following information is specific to Ohio.

            One of the first questions a person who has been named as an Executor in a decedent’s Will should ask is whether probate is actually necessary.  If a decedent has no assets that need to be transferred through probate, then probate can be avoided.  Assets that do not need to be transferred through probate include:         

            (i)   real estate or other assets held jointly with rights of survivorship;            

            (ii)  bank accounts, CDs, life insurance policies, retirement accounts, or other assets with beneficiary, or “transfer-on-death” designations; and            

            (iii)  annuities.             

            Often times, an individual who is named as an Executor has trouble moving past this first question because the individual has no idea what assets the decedent owned.  If you cannot find bank statements or life insurance policy information among the decedent’s possessions, a great place to locate assets is the decedent’s most recent Form 1040 and the accompanying Schedules, which should help identify a fair amount of asset and debt information.  Another place to look for asset information is in the county Auditor records, which are a matter of public record and often times readily available on-line.            

            Once the Executor has located the decedent’s assets, if there are no assets that need to pass through probate, the Executor should file an Application to File Will for Record Only (standard form 2.0A).  If there are assets that need to pass through probate, a summary proceeding may still be available that can greatly reduce the time and expense associated with probate.  An attorney experienced in probate matters should be able to assist you in determining whether a summary proceeding applies.            

            Many individuals who are named as Executors, either before or while they are finding asset information, come across bills, sometimes boxes of bills, and naturally have questions about the payment of debts.  Unsecured creditors, such as credit card companies, are typically only entitled to collect from a decedent’s probate estate, so any assets that do not need to pass through probate are not subject to unsecured creditors’ claims.  Moreover, unsecured creditors have a low priority among estate creditors, and are generally not entitled to payment until administration costs and expenses, funeral expenses, and the family support allowance of up to $40,000 are all paid.  If any individual named as an Executor is uncertain as to whether these higher priority payments can be made, the Executor should contact an attorney to determine if it is wise to refrain from paying unsecured creditors. 

             If you have been named as an Executor in a decedent’s Will and are at all uncertain as to what to do, you should contact an attorney who handles probate matters to assist you in navigating the probate process.           

Matthew W. Gibson is an attorney in the law firm of Jones, Troyan, Pappas & Perkins located in Powell, Ohio.  He can be reached at www.jonestroyan.com or call (614) 888-8500 ext. 132.

Retirement Accounts and Beneficiary Designations--Myths and Misconceptions

The following is a great post from "You and Yours Blawg" about myths and misconceptions regarding designating a beneficiary for your retirement plans.

At the start of the new year, many people take a look at their qualified retirement plans (IRA, 401(k), etc.) as they plan savings goals for the new year. But what if you aren't the one getting the benefits, because you have died? How are the benefits getting to your family? Below is a list of some Myths and Misconceptions about Retirement Plan benefits (which can also be thought of a as a list of what NOT to do).

1. My Retirement Plan is distributed the same as my Will. WRONG! Your Retirement Plan is distributed according the Beneficiary Designation you complete for each Retirement Plan.
2. If I don't name a Beneficiary, my Retirement Plan will be distributed to my Estate. MAYBE. Some Retirement Plans say that if there is no beneficiary, it will pass to your Estate. Others give a list of people who will receive the plan in order of priority (spouse, children, etc.). However, if a Retirement Plan is payable to your Estate, there are negative income tax consequences (remember - you haven't paid any income taxes on these assets yet) that are best avoided. Also, for domestic partners or similar, there are never any default provisions for payment to the surviving partner - a Beneficiary Form must be completed.
   
3. If my spouse is named as Beneficiary and we are divorced, she is automatically no longer the Beneficiary. WRONG! Unless you act to change your Beneficiary Designation, your ex-spouse is still your primary beneficiary - not a situation you want to be looking down on from the great beyond. File the Change of Beneficiary when you file for separation.
4. If my minor children are named as Beneficiaries, and I created a trust for them in my Will, then the Retirement Plan will be distributed subject to those trust terms. WRONG! Unless you name the trust created for your children as the Beneficiary of the Retirement Plan, your darling angels will get access to all the Retirement Plan funds at the mature age of 18 (or 21).
5. I know who are my Designated Beneficiaries. MAYBE. Many times a person thought they filed out a Beneficiary Designation, but didn't, or thought they named Contingent Beneficiaries, but didn't, or thought they named a trust for this children, but didn't. You should check or change your Beneficiaries today. A Change of Beneficiary form can usually be downloaded right from the website holding the assets.
   

Financial Planning for a Special Needs Child

Financial planning is essential to estate planning for a special needs child.  Local financial planning expert Judd Clark wrote an excellent post for the Autism Puzzle blog.  Click here to read his article.

Why You Need a Properly Executed Will

Most people have heard of Byrd and Melanie Billings, the Florida couple who were murdered in their Florida home, and left behind 12 special needs children.  Byrd Billings left no will or trust, but Melanie Billings left a will.  Unfortunately, the Court found that the will was invalid under Florida law because it was not executed properly (it was not signed in front of two witnesses).  (Slain Couple Leaves Behind Twelve Special Needs Children and No Valid Will, Wills, Trusts & Estates Prof Blog, October 12, 2009.)  Now, Florida intestacy law will determine how the Billing’s assets are distributed and a Court will determine who will serve as the children’s guardian.  

If you have no will, the state of Ohio has intestacy laws that will determine how your assets are distributed, and the Court will determine the guardian of your children.  If you would like to make these decisions instead of the state, have a will prepared and properly executed.  In Ohio, a properly executed will be signed at the end by the testator (person who made the will) and witnessed and signed by two competent witnesses.

Estate Planning with Limited Liability Companies

Thank you to Powell, Ohio attorney Matthew W. Gibson for today's guest post:

Limited liability companies (LLCs) are typically thought of in the context of business formation, but they can also be a valuable tool in estate planning.  To understand how the use of an LLC might work in estate planning, consider the following hypothetical:

      A 55-year-old individual, who we will call John, owns a house worth $500,000, has $1,000,000 in a savings account, has $2,000,000 in a retirement account, and owns five multi-family rental properties, each worth $300,000.  John has three children who are between the ages of 15 and 25.  He would like his children to inherit his estate and eventually take over the rental properties, but John is not ready to pass control of the rental properties onto them just yet. 

      If John transfers the rental properties to an LLC, he can take advantage of otherwise unavailable (1) liability protection, and (2) gifting possibilities. 

•  LIABILITY PROTECTION:  If a tenant is injured on a rental property and John was not personally negligent or otherwise responsible, only the LLC is liable, and John’s house, savings account and brokerage account cannot be reached by that tenant.  John can even shield the other rental properties from such claims if each of the rental properties is placed into its own separate LLC.  Conversely, if John ever has creditors of his own, those creditors will have a difficult time reaching the rental properties, especially if John gifts interest in the LLC to his children. 

• GIFTING POSSIBILITIES:  John should consider transferring non-managing membership interest to his children.  A careful gifting plan can (1) allow John to control the rental properties until he wishes to pass managing membership interest to his children, and (2) save John’s estate up to $800,000 in federal and Ohio estate taxes.

There are a number of other benefits to LLCs, including management flexibility and lower income taxes as membership interest is transferred to children in lower tax brackets.  As a rule of thumb, anybody concerned about federal estate tax or business/investment succession planning should talk with an experienced estate planning attorney about the use of LLCs.

Matthew W. Gibson practices law in Powell, Ohio with Jones, Troyan, Pappas & Perkins, 1472 Manning Parkway, Powell, Ohio 43065; www.jonestroyan.com.  He can be reached at (614) 888-8500 ext. 132.

What to Take to the Hospital

Going to the hospital is usually stressful, and when we are stressed, we often do not think clearly.  This is why I really like--and want to share--this blog post from Massachusetts attorney Leanna Hamill. 

Are You considering Naming a Trust as a Beneficiary of your IRA?

In “Trust as Beneficiary of IRA is Popular” (Wall Street Journal, August 29, 2009), this question is asked:

    "My wife and I are both over 65 and are doing some estate planning. Can I transfer funds from a traditional IRA to a trust without immediately being taxed? What would be the tax consequences of making the trust the beneficiary of my IRA?"

To read how a trust can be a beneficiary of an IRA, click here.