2 good enough reasons to create a trust

You don’t need a trust just for the tax benefits. There are other reasons, such a probate avoidance/privacy and protecting young beneficiaries. Probate is a formal process where a decedent’s property is administered and distributed. Probate is public and there is no privacy. Additionally, there are unneeded expenses. While avoiding probate is important, asset protection is more important. In probate, assets could pass to young individuals who may be over 18, but not able to handle assets and the responsibilities of an inheritance.

A trust can be drafted to protect the individual many years beyond 18 years of age, and still allow the beneficiary to receive distributions for health, maintenance, and education, but still protect the assets held in the trust. There are so many more reasons to use trusts for one’s estate plan, but PRIVACY and PROTECTION are enough to allow one to take note of their importance.

COVID 19 & Estate Plans

One thing I discovered during the pandemic is many people realized that they were not going to live forever, and they needed an estate plan. COVID 19 did not make planning and executing estate plans easy. Many high-risk workers and essential workers were eager to get their plan in place. Many older people wanted to implement changes in their current estate plans. Accomplishing document signing during the pandemic has proved challenging as Wills require two disinterested adult witnesses and power of attorney for health care and living wills do not require witnesses if the documents are signed before a Notary Public. I became creative in helping my clients sign their estate planning documents while adhering to COVID protocols.

COVID-19 has highlighted the necessity of a well-thought-out estate plan. At the same time, the pandemic has made it more difficult for clients to get these documents that are necessary in place. I have attempted to be creative in solving this current problem while also maintaining “social distance”. Under Ohio law, a Will must be signed in the physical presence of two disinterested adult witnesses. Other estate planning documents, such as Living Wills or Durable Power of Attorney for Health Care do not require witness so long as the documents are signed in front of a notary public. Ohio has not created any new legislation during the pandemic that would change Ohio’s in-person witnessing requirement, even though electronic Will witnessing is under review. In 2019 Ohio allowed for Ohio notarizations to be performed electronically by special authorized online notaries. Some attorneys are witnessing the documents outside or even reviewing the documents via Zoom and then having the clients obtain their own witnesses.

Top 5 Advice Topics for Estate Planning

  1. Your 18-year-old high school student does need a Health Care Power of Attorney, Living Will, and HIPPA authorization.
  2. Your revocable living trust does NOT protect your assets from a nursing home.
  3. You must review old life insurance policies.
  4. You can keep your assets in your family and not to ex-spouses or creditors.
  5. You must review your estate plan often as families change and laws keep on changing. Good estate planning is not a one-and-done deal.

Why Collaborative Divorce?

Why should you be interested in collaborative divorce?

There are many reasons one could be interested in a collaborative divorce. It may be because you are interested in retaining some control instead of giving that control to the Court system. It may be that you want to work in a process that allows for joint problem solving to maximize all potential benefits. It could be because you want to prepare and plan for a future for your children. It may be that you want to keep your financial matters private. It may be that you do not want a high conflict matter where you would prefer to be respectful and focus on the needs of both parties.

What is a collaborative like? What should I expect?

Initially, the parties and their respective collaborative counsel review and sign a written commitment whereby the parties will, through a series of planned team meetings, negotiate a settlement. The parties agree that should they resort to litigation they will no longer be able to have their respective counsel represent them. The parties agree to fully disclose all assets and debts and agree to actively problem solve using interest-based negotiation. There are four steps to the interest-based negotiation model. The first is a transparent and voluntary exchange of information. The second is identifying interests and values. The third step is to generate and create all available options by brainstorming. The final step is to mutually assess the available options and find which best fits. The goal is full resolution.

Additional information.

Ohio passed the Ohio Collaborative Family Law Act in December 2012. This Act recognized the collaborative process as an alternative for couples who no longer wish to be married. It defined the attributes of a collaborative process.

How to Advise Clients with Diminished Capacity

Capacity is a term involving the mental ability to understand one’s actions. Of course, capacity can vary day to day and with new situations. Having diminished capacity can happen for a myriad of reasons, such as an accident, a stroke or even a mental health reason. Sometimes that capacity can be reversed while other times it cannot. It is difficult when a loved one has diminished capacity and wants to make changes to their estate plan as they must made choices regarding their health and financial matters. And each choice requires a certain amount of capacity.

A client must be able to understand a Will or Trust is being made and the client must understand what they have and be able to identify people (family and friends) who would have a claim to their estate and understand their relationship with those people.

To appoint a health care agent, a client must understand the scope of what they are doing in appointing someone to manage their health care. When creating a health care power of attorney, a client just needs to know that they are giving their power to someone else to make health care decisions on their behalf.

 

Can I transfer my property via a quitclaim deed into my trust without affecting my title insurance?

The topic of transferring real property comes up often in my estate planning practice. A typical scenario is when a trust is created for a couple or a single person and we choose to transfer the real property via a quitclaim deed into a trust. The question that arises is, “what happens to our title insurance policy?” The question at hand is whether the transfer of property via quitclaim deed invalidates the title insurance policy that the client already has in place on their real property. The answer is no, it does not so long the person who quitclaims the property into the trust is also the settlor (the person who creates the trust) of the trust. If the owner quitclaims the property into a trust where they are not the settlor then then will have to file a Form 107.9, which is a title insurance endorsement that amends the existing title insurance policy by adding an additional insured to the coverage.

If you have any questions regarding estate planning issues, please contact Anna M. Petronzio. apetronzio@ps-law.com, 216-381-3400.

Dynasty Trusts: is this a trust for you, your children and …?

Dynasty Trusts: is this a trust for you, your children and your great-great-great grandchildren?

For whatever reason I have had a bunch of clients ask me about dynasty trusts this week. So, I thought that might be “a sign” that I should write an article about it. I suppose a good place to start is by defining what a dynasty trust is and what it does.

A dynasty trust is a long-term irrevocable trust created to pass wealth from generation to generation without incurring transfer taxes such as the gift tax, estate tax and generation-skipping transfer tax so long as assets remain in the trust. The defining characteristic is the duration of the trust and can be drafted to last for multiple generations, so long it does not violate the Rule of Perpetuities, if this rule exists in your jurisdiction. Thank you, Suffolk Law- Wills and Trusts. On to what a dynasty trust does. A dynasty trust mitigates the impact transfer taxes, helps shield your wealth from creditors and money grubbing soon-to-be ex-spouses and the bad choices of your future beneficiaries. It also helps ensure your assets are invested for the benefit of your children, grandchildren and future generations. This all sounds great, right? What are the downsides, you ask? The first potential downside is you have to choose the rights assets to place in a dynasty trust, such as life insurance, tax-exempt bonds, real estate or an asset that offers high potential appreciation and little to no transfer tax. Since income created within a dynasty trust is taxed more heavily it makes sense to place assets into the trust that are non-income generating. In addition, the trust is irrevocable, so once you (the grantor) places the assets into the dynasty trust there is no turning back or changing your mind as the grantor does not have the right to revoke or even to amend the trust. That is a biggie. Also, the trustee should be a professional trustee as they are usually given some discretionary powers to distribute income and/or principal to the beneficiaries and using a pro allows there to be consistency in the administration of the trust, especially as this trust is supposed to be for the long haul. Moreover, the trustee must follow strict rules to qualify for the annual exclusionary gifts for any dynasty trust that contains life insurance. If trustee fails in his/her duties of properly sending out a Crummey Letter the result could be expensive. Finally, the question I ask is whether it is your intention to shackle your children so that you could preserve wealth for your future great-great-great grandchildren? Maybe you just are thinking about your children or even grandchildren. Of course, dynasty trusts have a time and place and just the right grantor, but the question remains is whether this trust is right for you.

If you have any questions regarding estate planning issues, please contact Anna M. Petronzio. apetronzio@ps-law.com, 216-381-3400.

2018 Tax Brackets, Tax Rates and Standard Deductions

I am not a tax attorney. Since the tax reform affects everyone who pays taxes, I thought I should share it. The Republican Tax Cut & Jobs Act (tax reform) the 2018 tax brackets, tax rates and standard deduction amounts have been revised. Many are still focusing on the 2017 taxes for tax filing purposes, but these have not been impacted by the by the tax reform. So, it is on to the 2018 tax brackets, which are below:

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LGBT Estate Planning

Everyone should have a solid estate plan no matter what their sexual orientation. Estate planning for the LGBT community, however, is critical. It will provide protection even in the face of discrimination and when people may not be willing to recognize your relationship, even if married. The necessity of an estate plan is needed for times of incapacity, such as an illness or accident. Without an estate plan in place the parties may leave their spouse or partner without the ability to make any decisions on their behalf.

The case U.S v. Windsor allowed federal benefits to be made available to spouses in same sex marriages. In the matter the U.S. Supreme Court struck down the Defense of Marriage Act, which was a federal law which defined marriage as between a man and woman ONLY. The case made sure to allow all married couples to be treated equally under federal law. Later, in Obergefell V. Hodges, the Supreme Court ruled that there is a constitutional right to get married, which includes same sex marriages and that same sex marriages in one state must be recognized by all states. Finally! U.S. Supreme Court ruled that the Constitution allows for same-sex couples to marry, effectively overturning remaining restrictions in place in states. Just because the Supreme Court ruled on marriage equality does not mean that discrimination and resistance towards same sex couples does not exist. Unfortunately, we know otherwise.

The right estate plan can help alleviate any potential issues allowing same sex married couples to get all the state and federal benefits and avoid probate and maintain privacy. For unmarried same sex couples, the right estate plan can allow the partners to make health care decisions on each other’s behalf, make financial decisions on each other’s behalf and allow one another to inherit from each other all the while avoiding probate. If minor children are involved, a proper estate plan can allow the couple to nominate a Guardian and Custodian for the children. I am not sure why anyone would risk not having a proper estate plan in place for themselves.

If you have any questions regarding estate planning issues, please contact Anna M. Petronzio. apetronzio@ps-law.com, 216-381-3400.