Author Archives: Isaac T. Heintz

Some people assume that his or her Last Will and Testament or Trust Agreement will determine who gets the assets upon his or her death.  However, there are other documents that can override the terms of a Last Will and Testament or Trust Agreement and pass outside of the probate estate or trust estate.

These documents include completed designation of beneficiary forms for assets such as retirement accounts, life insurance, bank accounts, brokerage accounts, and real estate.  We are seeing this as a growing issue, as many people have multiple accounts, with the majority of their net worth being held in retirement accounts.  When the accounts are established or updated, it is frequent to see beneficiaries being designated without any thought to the individual’s overall estate plan.  Therefore, it is imperative that the designation of beneficiary forms for these assets comply with current wishes, and are consistent with the terms of the Last Will and Testament or Trust Agreement if the same beneficiaries who receive assets by beneficiary designation are to receive the assets that are distributed pursuant to the terms of the Last Will and Testament or Trust Agreement.

Whether you’re filling out new paperwork, or moving an account from one institution to another, you will likely be asked to complete a new beneficiary designation form.

Failing to update beneficiary designation forms when life circumstances change is a common mistake.  Some changes in family relations that may require updating beneficiary designation forms are:

1.        Dissolution of a marriage (divorce) or separation.
2.         Death of a family member.
3.        Marriage.
4.        Changes regarding child, grandchild, or other beneficiary.

With a 401(k), a married spouse is essentially automatically entitled to the assets in the 401(k) unless the spouse formally waives receiving the assets by the execution of a formal waiver in the presence of a notary public.  If there is no beneficiary named and no surviving spouse, the employer’s plan documents determine who is next in line to receive the assets in the 401(k).

Under current Ohio law, payable upon death (“POD”) beneficiary designations can be made for bank accounts by completing the financial institution’s beneficiary documents.  By the same context, transfer on death (“TOD”) beneficiary designations can be made for brokerage accounts by completing the brokerage firm’s beneficiary documents.

For real estate, a TOD Designation Affidavit is effective upon death allowing the owner of the real estate to transfer the ownership of real estate upon the owner’s death to whomever the owner designates by name.  To be effective, this TOD Designation Affidavit must be recorded with the County Recorder where the real estate is located prior to the death of the owner.

Please contact Isaac Heintz (513.943.6654) of the Finney Law Firm for help with your estate planning and estate administration needs.

 

 

 

Although there is a lot of conversation and worry regarding the issue, estate and gift taxes do not affect most households.

In Ohio, there is currently no estate taxes for state taxation purposes.  The Ohio estate tax was repealed effective January 1, 2013.

There is a federal estate and gift tax that is 40% on assets subject to the tax; however, there is a large exemption that covers the average household.

The estate and gift tax exemption is the amount of money that can be transferred without having to pay estate taxes.  For 2023, the estate and gift tax exemption is $12.92 million individual, and $25.84 million for a married couple.  There will likely be a substantial reduction at the end of 2025. Unless new legislation is passed, the estate and gift tax exemption is scheduled to sunset back to the 2017 exemption amount (indexed to inflation), and will be approximately $7 million per individual, and $14 million for a married couple, depending on inflation over the next two years.

If your wealth exceeds your available estate and gift tax exemption, there is an opportunity to make gifts using the higher exemption amount prior to the sunset.  For individuals or couples close to the exemption amount after the sunset, it makes sense to explore options in order to try to avoid making the federal government a beneficiary of your estate.

If a married couple has significant wealth and is expecting to owe Federal estate taxes upon the death of the second spouse, current Internal Revenue Service Regulations allow a surviving spouse a period of five (5) years from the death of the first spouse, to elect portability.

Under current law, there is a $12,060,000 exemption from Federal estate taxes through the year 2025 (estimated to drop by approximately one-half in the year 2026), per person for estate taxes and gifts to children or other non-spouse beneficiaries during life or upon death.  Any amounts above the exemption could incur up to 40 percent in estate taxes.

Even though a surviving spouse may inherit all of the deceased spouse’s assets free of estate taxes, there may be estate taxes owed after the death of the surviving spouse.  Portability allows a surviving spouse the ability to transfer a deceased spouse’s unused exemption amount for estate and gift taxes to the surviving spouse.  This would allow the deceased spouse’s unused exemption to become available for the application to the surviving spouse’s subsequent transfers during life or upon death.

However, a surviving spouse may elect portability, allowing the spouse to have the deceased spouse’s unused exemption amount, as well as their own exemption amount, which would allow a $12,120,000 exemption from Federal estate taxes (under current law).

Portability can be elected by a surviving spouse within five (5) years from the date of death of the spouse by filing a Federal Estate Tax Return (Form 706) with the Internal Revenue Service.

Provided the Form 706 is filed within the five (5) year period, it will not be necessary to request the Internal Revenue Service to issue a private letter ruling, as was required under previous Internal Revenue Service Regulations.

Ohio law allows individuals to designate a Transfer-On-Death (“TOD”) beneficiary for real estate.  This is accomplished by filing a TOD Designation Affidavit with the applicable County Recorder.

To be effective, the Affidavit must comply with the requirements of Ohio Revised Code Section 2302.22 and be recorded prior to the death of the owner.  If the Affidavit is recorded after the owner’s death, it is not effective.

The interest of a deceased owner is transferred to the TOD beneficiaries who are identified in the TOD Designation Affidavit by name, and who survive the deceased owner.  The owner is also able to designate one or more persons as contingent TOD beneficiaries, who would take the same interest that would have passed to the TOD beneficiary had the TOD beneficiary survived the deceased owner.

If there is a designation of more than one TOD beneficiary, the beneficiaries take title to the interest in equal shares as tenants in common, unless the deceased owner has specifically designated other than equal shares or has designated that the beneficiaries take title with rights of survivorship.  If there are two or more TOD beneficiaries and the deceased owner has designated that title to the interest in the real property be taken by those beneficiaries with rights of survivorship, and one of the beneficiaries predeceases the owner, the surviving TOD beneficiary would take title to the deceased owner’s entire interest in the real estate.

The designation of multiple beneficiaries can present challenges.  One challenge is if there are multiple beneficiaries designated as tenants in common owners and a beneficiary predeceases the owner, the deceased beneficiary’s TOD interest in the real estate passes to the surviving TOD beneficiaries, and not to the deceased beneficiary’s lineal descendants.  Further, all of the tenants in common owners (and their spouses) would have to agree in connection with a mortgage or sale of the property.  To address these types of issues, the client may elect to create a trust, the Trustee of which would be designated as the TOD beneficiary.

If none of the designated TOD beneficiaries survive the deceased owner, and there are no contingent TOD beneficiaries designated, or who have predeceased the owner, the deceased owner’s interest in the real estate would be included in the deceased owner’s probate estate, and would be distributed pursuant to the decedent’s Last Will and Testament or the laws of intestacy.

For assistance with all of your estate planning and probate administration needs, contact Isaac T. Heintz (513.943.6654) or Tammy Wilson (513.943.6663). Read more about our Estate Planning practice here.

Interest in estate planning grows

The COVID-19 crisis is prompting an increasing number of people to take care of their estate plan, including reviewing and updating their existing estate plan to comply with their current wishes.  We are seeing an increased number of people thinking about having an estate plan in place in the event something should happen to them.

What does a basic estate plan include?

Estate planning can be simple or can be complex, especially during a fast moving and potentially deadly pandemic.  At a minimum, it is recommended that each individual should have:

• A basic Last Will and Testament,
• A general durable Power of Attorney, and
• Health care directives (i.e., Health Care Power of Attorney and Living Will).

By having these minimal estate planning tools in place, the Last Will and Testament will direct the individual’s wishes for the disposition of his or her assets in the event of death.  The general durable Power of Attorney allows a chosen individual to make financial decisions.  The health care directives provide the individual’s wishes for medical treatment, and designate certain chosen people to make health care decisions on their behalf, and receive health care information from their physicians.

The additional option of a trust

If an individual is looking to avoid probate of assets upon his or her death, the establishment of a Trust is a beneficial tool for this purpose. Not only does a Trust instrument allow for the disposition of assets upon the death of an individual, it avoids the necessity for probate, and is effective in reducing probate administration expenses, such as attorney’s fees, fiduciary fees, and court costs.

Social distancing and safe execution of documents 

Finney Law Firm, LLC is practicing a safe signing environment at both of our offices, and is working with estate planning clients to arrange for signing of estate planning documents at the client’s residence upon request.

Conclusion

The experienced estate planning team at Finney Law Firm, LLC is available to assist with implementing an estate plan, and reviewing and/or amending an existing estate plan.

Our goal is to continue to fulfill the estate planning needs of our clients during this crisis.

Contact Tammy Wilson (513.943.6663) or Isaac T. Heintz (513.943.6654) for your estate planning needs.

An inter vivos trust is a trust created during a person’s lifetime that becomes effective while that person (“Grantor”) is living.  As an inter vivos trust operates during the lifetime of the Grantor, it is commonly referred to as a “living trust.”

The Grantor may want to create a living trust, but may also desire to retain an interest in the trust property and control over its management, such as serving as Trustee, receiving all of the income, retaining the power to revoke or amend the trust, and keeping the right to change the beneficiaries.

Living trusts are not for everyone. Anyone considering a living trust should consult with an estate planning attorney to discuss the potential benefits and disadvantages for such person’s individual situation.

The following is a summary of some advantages of living trusts:

Provide For and Protect Beneficiaries.  The Grantor’s desire to provide for and protect someone is probably the most common reason for creating an inter vivos trust.

Minor Children.  Minor children lack the legal capacity to manage property.  A trust permits the Grantor to make a gift for the benefit of a minor without giving the minor control over the property or triggering the necessity for the minor to have a court-appointed guardian to manage that property. A trust is also more flexible and allows a Grantor to have greater control over how the property is used when contrasted with other methods, such as a transfer to a guardian of the minor’s estate or to a custodian under the Uniform Transfers to Minors Act.

Individuals Lacking Management Skills.  An individual beneficiary may lack the skills necessary to properly manage the trust property. This could be the result of a mental or physical disability, or a lack of experience in making prudent investment decisions.  By putting the money under the control of the trustee with investment experience, the Grantor increases the likelihood that the beneficiary’s interests are served for a longer period of time.

Spendthrifts. Some individuals may be competent to manage property, but are likely to use it in an excessive or frivolous manner.  By using a carefully drafted trust, a Grantor can protect the trust property from the beneficiary’s own excesses, as well as the beneficiary’s creditors.

Under the laws of the State of Ohio, the Grantor may protect trust assets by including a spendthrift provision. A spendthrift clause does two things: (1) it prohibits the beneficiary from selling, disposing of, or otherwise transferring the beneficiary’s interest, and (2) it prevents the beneficiary’s creditors from reaching the beneficiary’s interest in the trust. The spendthrift provision permits the Grantor to carry out the Grantor’s intent of benefitting the designated beneficiary, but not the beneficiary’s assignees or creditors. Grantors typically include spendthrift restrictions in a trust because they protect beneficiaries from their own lack of management of the trust property, or from disposing or selling of trust property, and also protects assets from the beneficiary’s personal creditors.

Persons Susceptible to Influence.  When a person suddenly acquires a significant amount of property, that person may be under pressure from family, friends, or other individuals or organizations who wish to share in the windfall.  An inter vivos trust can make it virtually impossible for the beneficiary to transfer trust property to other people or organizations.

Retain Flexibility.  The Grantor may restrict the beneficiary’s control over the property in any manner the Grantor desires, as long as the restrictions are not illegal or in violation of public policy.  This flexibility allows the Grantor to determine how the trustee distributes trust benefits, such as by spreading the benefits over time, giving the trustee discretion to select who receives distributions and in what amounts and frequencies, requiring the beneficiary to meet certain criteria to receive or continue receiving benefits, or limiting the purposes for which trust assets may be used, such as health care or education.

Revocation and/or Amendment.  The Grantor may amend, or even revoke, a revocable inter vivos trust during the Grantor’s lifetime.

Trustee.  The Trustee is responsible for handling the assets held in the trust, including distributing the assets according to the terms of the trust document.  Thus, the Grantor has the flexibility of designating the individual or corporate trust department of the Grantor’s choosing to serve in the role as Trustee.

Avoid Probate.  Property in an inter vivos trust or received by the trust as beneficiary upon the death of the Grantor is not part of the Grantor’s probate estate. The property remaining in the trust when the Grantor dies and all property received by the trust, is administered and distributed according to the terms of the trust; it does not pass under the Grantor’s Last Will and Testament nor by intestate succession.

Reduction in Administration Expenses.  Some expenses incurred in the administration of a probate estate include attorney’s fees, fiduciary fees, appraisal fees, and court costs. The use of an inter vivos trust may be effective to reduce these expenses because less (if any) of the decedent’s property would pass through the decedent’s probate estate.

Increased Privacy.   All probate estate proceedings are public record, and can be viewed by anyone.  Documents filed in an administration of a probate estate include, but are not limited to, the inventory of all of the decedent’s probate assets, with the date of death value of each.  Further, the names of the beneficiaries of a probate estate, as well as the assets distributed to the beneficiaries, are also public record.  By the use of an inter vivos trust, the Grantor can keep private the extent of the Grantor’s assets and their disposition.

Avoidance of Ancillary Administration for Real Property Located Outside the State of Ohio.   If a decedent owned out-of-state real property, the decedent’s Last Will and Testament is probated in the county of the decedent’s residence, with some type of ancillary administration being necessary in the state or county in which the out-of-state real property is located. This ancillary administration can be expensive, inconvenient and time-consuming, and can be avoided if the property passes by way of an inter vivos trust.

 

The laws governing the administration of a decedent’s estate in the State of Ohio provide for the collection of probate assets, payment of debts and expenses, and distribution to the beneficiaries according to the terms of the decedent’s Last Will and Testament, or if the decedent died without a Last Will and Testament, in accordance with Ohio law.

Declaration of insolvency

The Executor or Administrator (“Fiduciary”) of the decedent’s estate may ask Probate Court to declare the estate insolvent if the debts and administration expenses of the estate exceed the total value of the assets.  If there are not sufficient assets in a decedent’s estate to pay all of the debts and expenses, Ohio provides a way to pay creditors depending on the “class” of the creditor defined below and the amount due.

Presentation of claims

Under Ohio law, all claims must be presented to the Fiduciary within six (6) months of the date of death of the decedent. After the expiration of this claim period, if the estate is deemed to be insolvent, the Fiduciary would report the insolvency to Probate Court, and provide a complete list of all debts and expenses, with the amount due for each.  A hearing would be scheduled, with notice of the hearing served upon the surviving spouse of the decedent (if any), all persons having an interest in the estate as devisees, legatees, heirs, and distributees, and all creditors.

At the hearing, Probate Court would review the classification of the claims as provided by the Fiduciary, and if approved, would allow payment of the claims in accordance with Ohio Revised Code.

Classes of creditors and priorities

The class of a creditor is defined in Ohio Revised Code, which establishes ten (10) classes of claims (debts) and priorities, as follows:

• Class 1 – Costs and Expenses of Administration
• Class 2 – Funeral and Cemetery Expenses.  This class provides up to $4,000 for funeral expenses and up to $3,000 for burial and cemetery expenses.
• Class 3 – Family Allowance of $40,000.
• Class 4 – Debts Entitled to a Preference Under the Laws of the United States.
• Class 5 – Expenses of the Last Sickness of the Decedent.
• Class 6 – Additional Funeral Expenses.  If the total funeral expenses exceed the sum of $4,000 in class 2 above, then the funeral director can receive up to $2,000 more toward the decedent’s funeral bill in class 6.
• Class 7 – Nursing Home Expenses.
• Class 8 – Obligations to the State of Ohio.
• Class 9 – Debts for Manual Labor.
• Class 10 – Other Debts.

In the state of Ohio, the law is very clear that payments must be made in the specific order listed above.  No payments may be made to creditors of one class until all of those of the preceding class are fully paid.  If the assets are insufficient to pay all of the claims of one class, then the creditors of that class must be paid proportionately.

Once the approved claims and expenses are paid, the Fiduciary would report the receipts and disbursements to Probate Court for approval.  Upon approval by Probate Court, the estate would be closed.

Conclusion

In certain estates where there are assets with value, it may make sense to proceed with an insolvent estate, as the fee for the Fiduciary of the estate is a Class 1 claim.  Further, if there are sufficient assets to pay the Class 1 and Class 2 claims in full, the family allowance, as a Class 3 claim, would be paid to the extent of assets.  Therefore, the decedent’s family could possibly benefit from this approach.

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For help with your estate planning or probate matter, contact Isaac Heintz (513-943-6654) or Tammy Wilson (513-943-6663)

 

A general durable Power of Attorney granted by a person (“Principal”) to a designated attorney-in-fact (“Agent”) provides full power, authority and discretion to do all things required or permitted to be done in carrying out the purposes for which the Power of Attorney is granted as fully as the Principal could do if personally present (unless it is a Limited Power of Attorney granting specific limited powers to the Agent).

It is very important for the Principal to appoint an Agent that is trustworthy and who the Principal believes will fulfill his or her fiduciary obligations to the Principal.  No matter how selective a Principal may be in appointing the Agent, there is always the possibility of the Agent abusing his or her fiduciary obligations.

1. Theft and Improper Asset Transfers.

There is no question that an Agent acting under a durable Power of Attorney has a fiduciary obligation to the Principal, which includes both the duty to act in the Principal’s best interest, and the duty not to use the relationship improperly for the Agent’s advantage.  If an Agent transfers the Principal’s funds in a way that the Principal would not have wanted, the transfer seems abusive.  Such a transaction may even rise to the level of theft.  Many times there are cases where Agents use durable Powers of Attorney to extract money or assets from their Principals.  If the Agent is not a family member or a close friend, it seems clear that transfers of assets to the Agent are abusive.

Most people name family members as their Agents.  Determining whether a transfer is abusive becomes much more difficult in a family context.  A family member Agent who transfers funds or other assets to himself or herself may believe that the Principal would have wanted the Agent to make the transfer.

Therefore, it is important for the Principal to discuss his or her wishes with the Agent regarding transfers, and to make sure that the Power of Attorney authorizes the Agent to make any desired transfers.  If the Principal wishes the Agent to have the power to make only gifts that would qualify for the Federal gift tax annual exclusion, this limitation should be included as a provision in the Power of Attorney and also discuss it with the Agent.

Further, if a Principal does not want to grant the Agent authority to transfer assets, it is imperative that a provision be included in the general durable Power of Attorney restricting the Agent from making such transfers.

2. Interference With Principal’s Estate Plan.

An Agent may be faced with dealing with property that has been specifically disposed of in the Principal’s estate plan.  This type of interference ranges from an act by an Agent performed with the specific intent to deprive a specific beneficiary named in the Principal’s estate plan to receive a gift, to a transfer made without thought of the Principal’s estate plan.

3. Remedies for Abuse.

Attorneys are often asked what remedies are available for abusive acts by Agents appointed in a durable Power of Attorney.  In most cases, courts seem to agree that an Agent under a durable Power of Attorney is governed by some fiduciary standard.

It is possible that an improper transfer could be prosecuted as theft, and a court could order restitution to the Principal.  Also, improperly transferred funds could be recovered through a civil lawsuit for breach of fiduciary duty.  The funds may not be recoverable because the abuse cannot be proven, or because the Agent has dissipated the funds.

 

On multiple occasions, Finney Law Firm has been approached by a beneficiary of a trust when the beneficiary is concerned with the administration of the trust by the trustee.  In these types of situations, our firm has helped the beneficiary pursue and protect the beneficiary’s rights.

Although there are other rights, below you will find a summary of some of the statutory rights of a trust beneficiary.

Under current Ohio law, a trustee shall, within sixty (60) days after accepting its duties as trustee, notify the current beneficiaries of a trust of the trustee’s acceptance of the trust, together with the trustee’s name, address, and telephone number.

Further, within sixty (60) days after the date the trustee acquires knowledge of the creation of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, the trustee must notify the current beneficiaries of the existence of the trust, the identity of the settlor/grantor, the right to request a copy of the trust instrument, and the right to receive a trustee’s report as defined below.

Upon the request of a beneficiary, the trustee shall provide to the beneficiary a copy of the trust document.  Unless the beneficiary specifically requests a copy of the entire trust document, the trustee may furnish to the beneficiary a copy of a redacted trust document that includes only those provision of the trust that are relevant to the beneficiary’s interest in the trust.  If the beneficiary requests a copy of the entire trust document after receiving a copy of the redacted portion, the trustee must furnish a copy of the entire trust document.

The trustee is also required to send a trust report at least annually and at the termination of the trust, to the current beneficiaries, and also to other beneficiaries who request it.  This is commonly known as an accounting.  The report shall detail the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets and, if feasible, their respective market values.

Any beneficiary may waive the right to a trustee’s report or other information otherwise required to be furnished to a beneficiary. A beneficiary, with respect to future reports and other information, may withdraw a waiver previously given.

A trustee, in fulfilling its fiduciary obligations, must keep the current beneficiaries reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.

Please note that the above rights are not a comprehensive list of the rights of a beneficiary of a trust.

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For assistance with an Ohio trust or more generally Ohio estate planning and estate administration needs, contact Isaac T. Heintz (513-943-6654; [email protected]) or Eli Krafte-Jacobs (513-797-285; [email protected]) of our transactional team.