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We are pleased to announce that as a part of the free Empower U adult continuing education series, Finney Law Firm attorney Isaac T. Heintz will co-present “Common Mistakes in Estate Planning” with Bill Lyon, a financial planner with  Cincinnati’s The Lyon Group.

In this session, the presenters will teach the 10 common mistakes in Estate Planning.

The program will be held on Tuesday, October 13 in the Sycamore Township Trustee room, 8540 Kenwood Road, Cincinnati, Ohio 45236 from 7:00 to 8:30 PM.  You can register for the event here.

 

There are many law firms in greater Cincinnati, some special-purpose and some full-service, and there are many title insurance companies, commercial- and residential-focused.

But as a lender, as a consumer, as an investor, as a Realtor, what are the advantages to having a robust title insurance company coupled with a full-service law firm?  We think there are several.

  • First, from a real estate transactional perspective, we offer significant depth of experience and breadth of services to residential and commercial buyers and sellers, as well as lenders: closing and title services, leases, seller financing documents, and post-occupancy agreements.  We also can handle zoning and regulatory matters relating to your property.
  • Our litigators can vigorously litigate to enforce the contracts that we write and that you sign, or defend against such actions.
  • We can handle sophisticated matters relating to bankruptcy, probate administration, and the business components of a real estate transaction.
  • Finally, our property tax valuation team can assure you are not paying more in taxes than the law requires.

We strive to produce the same high-quality product and responsive customer service across each practice area of the Finney Law Firm and with Ivy Pointe Title.  We invite you to let us show you how we can “make a difference” in your real estate matters.

Under Ohio law, individuals can avoid probate in connection with real estate by executing and recording a Transfer On Death (TOD) Designation Affidavit. A TOD Designation Affidavit is an “effective upon death deed” allowing the owner to transfer the ownership of real estate upon the owner’s death to whomever the owner designates by name. On the death of the owner, the transfer of the real estate to the transfer on death beneficiary is accomplished by filing a certified death certificate and an Affidavit in the applicable County Recorder’s Office.

During the life of the owner, the designated beneficiary has no rights to the real estate, and the recording of a TOD Designation Affidavit does not create a present entitlement to the real estate. The TOD Designation Affidavit can be revoked at any time without the consent of the TOD beneficiary. The TOD beneficiary only becomes entitled to the real estate if the TOD Designation Affidavit remains in effect on the death of the owner.

An individual can designate more than one party as a TOD beneficiary. If multiple TOD beneficiaries are designated, the division of the ownership can be varied among the beneficiaries (e.g. 10% to John Doe and 90% to Jane Roe).

The TOD beneficiary can be the trustee of the owner’s revocable trust. There are advantages and disadvantages to making a trustee a TOD beneficiary as opposed to directly transferring the real estate to the trustee to hold for the trust.

A TOD designation will lapse if the TOD beneficiary predeceases that owner; however, it is possible to designate a contingent TOD beneficiary as a means of addressing this possibility (e.g. to John Doe, if living; otherwise to Jane Roe).

Individuals who own property in “joint and survivorship” can designate a TOD beneficiary of their real estate. Only upon the death of the last surviving survivorship tenant will real estate pass to the TOD beneficiary or beneficiaries designated in the TOD Affidavit.

Please contact us if you would like to determine if a TOD Designation Affidavit is right for your estate plan.

High-income taxpayers need to be aware of the Net Investment Income Tax (NIIT).  The NIIT is a tax passed in 2010 to help pay for the Affordable Care Act, a.k.a. ObamaCare.  Below is a summary of the NIIT, and a few planning opportunities to consider to avoid/minimize NIIT.

The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts that have income above certain thresholds.  The NIIT went into effect for tax years beginning on or after January 1, 2013.

Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:

Filing StatusThreshold Amount
Married filing jointly$250,000
Married filing separately$125,000
Single$200,000
Head of household (with qualifying person)$200,000
Qualifying widow(er) with dependent child$250,000

 

At this time, the threshold amounts are not indexed for inflation.

In general, estates and trusts are subject to the NIIT if they have undistributed Net Investment Income and also have adjusted gross income over the dollar amount at which the highest tax bracket for an estate or trust begins (for tax year 2014, this threshold amount is $12,150).

In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities, and businesses that are passive activities to the taxpayer (meaning the taxpayer does not “materially participate” in the business).  To calculate your Net Investment Income, your investment income is reduced by certain expenses properly allocable to the income. 

To the extent that gains are not otherwise offset by capital losses, the following gains are examples of items taken into account in computing Net Investment Income: (i) gains from the sale of stocks, bonds, and mutual funds; (ii) capital gain distributions from mutual funds; (iii) gain from the sale of investment real estate (including gain from the sale of a second home that is not a primary residence); and (iv) gains from the sale of interests in partnerships and S corporations (to the extent the partner or shareholder was a passive owner). 

The NIIT does not apply to any amount of gain on the sale of a personal residence that is excluded from gross income for regular income tax purposes.

In order to arrive at Net Investment Income, Gross Investment Income (items described in items 7-11 above) is reduced by deductions that are properly allocable to items of Gross Investment Income.  Examples of deductions, a portion of which may be properly allocable to Gross Investment Income, include investment interest expense, investment advisory and brokerage fees, expenses related to rental and royalty income, tax preparation fees, fiduciary expenses (in the case of an estate or trust) and state and local income taxes.

Some planning opportunities to consider to help avoid/minimize the NIIT include: (i) receiving the purchase price from a sale of your closely held business or real estate over more than one year; (ii) generating losses to offset gains; (iii) renting property to your business; (iv) lending money to your business; and (v) take an active role in your closely held business.

Preparing the appropriate estate plan for an individual requires the legal skills of an attorney to put together the right documents in the right combination.  At a minimum, the following estate planning documents are recommended by most attorneys:

Last Will and Testament.  A Last Will and Testament is a legal declaration that directs the distribution of probate assets upon the death of an individual (“testator”).  Probate assets are assets held in an individual’s name at the time of his or her death that do not otherwise transfer by contract (e.g., transfer on death designations, joint and survivorship, etc.).

Probate assets are subject to the oversight of Probate Court and administered in the County in which the decedent resided at the time of death.

The Last Will and Testament includes a provision for the designation of the personal representative (Executor) of the testator’s choosing, to be appointed by Probate Court.

Without a Last Will and Testament, the property passes in accordance with the Ohio Statutes of Descent and Distribution.

Durable Power of Attorney.  A durable Power of Attorney is an instrument by which one person (the principal) appoints another person (the attorney-in-fact) as an agent authorized to perform specific or general acts for the principal.  This financial power of attorney can be a very simple document, but one that gives significant powers to the attorney-in-fact.  This estate planning tool is capable of facilitating the management of an individual’s affairs during incompetence.

 Durable Power of Attorney for Health Care.  Ohio law permits an individual to execute a Durable Power of Attorney for Health Care.  With this document, an individual can designate a person to make health care decisions if the individual is unable to make such decisions on his or her own behalf.

The individual signing the Durable Power of Attorney for Health Care must be of sound mind.  The decision maker may not be the attending physician or the administrator of any health institution involved in the patient’s care.

Generally, the person appointed in the Durable Power of Attorney for Health Care will have the authority to give informed consent, refuse to give informed consent, and to withdraw consent for any medical treatment.  However, the person holding the Power of Attorney will not be able to refuse or withdraw consent to health care needed to maintain life, except in very limited circumstances.

Living Will.  A Living Will is a document that provides a means for an individual to declare his or her intentions regarding the withholding or withdrawal of life-sustaining treatment, including CPR, when he or she is no longer competent to make an informed medical decision and is in a terminal condition or a permanently unconscious state.

Ohio’s Living Will law distinguishes between patients who are terminally ill and those who are permanently unconscious.  Although both conditions must be verified by two (2) doctors, in Ohio there are additional protective measures for the permanently unconscious.  Food and water may not be withheld from a permanently unconscious individual unless the patient has signed a Living Will with a special section in capital letters, which special section must be signed or initialed.

Under no circumstances may an individual be denied comfort care.  Comfort care is defined as the minimum amount of care administered to alleviate pain and suffering, but not to prolong life.

Last Will and Testament. A Last Will and Testament directs the distribution of probate assets upon the death of an individual (“testator”).  Probate assets are assets held in an individual’s name at the time of his or her death that do not otherwise transfer by contract (e.g., transfer on death designations, joint and survivorship, etc.).

Probate assets are subject to the oversight of Probate Court and administered in the County in which the decedent resided at the time of death.

The Last Will and Testament includes a provision for the designation of the personal representative (Executor) of the testator’s choosing, to be appointed by Probate Court.

Trust.  A Trust is a legal relationship whereby property is held by one party for the benefit of another.  There are two (2) basic categories of written Trusts; Living Trusts (Inter Vivos Trusts) and Testamentary Trusts.

The primary difference between a Testamentary Trust and a Living Trust in Ohio is that the Testamentary Trust is under the supervision of the Probate Court from the appointment of the Trustee to final distribution.  In connection with a Living Trust, the Trustee administers the Trust without the involvement of the Probate Court, except under certain special circumstances.  An advantage of a Living Trust is that the Trust, Trust assets, and distributions are not of public record.

Living Trusts are revocable or irrevocable, and are set up during the lifetime of the Grantor.  Trusts are also very useful for setting up funds for the benefit of someone who is handicapped or incompetent.  They are frequently used by parents and siblings for a “special” family member.  Trusts can also be used in Medicaid planning.

Living Trusts are often used in moderate and large estates to assist management and to avoid incurring Executor fees and reduce attorney fees at death.

Testamentary Trusts are established in the Grantor’s Last Will and Testament, and are funded, if ever, after the death of the testator.  A Testamentary Trust may never be funded because the testator may make funding contingent upon certain circumstances; for example, the Last Will and Testament may state that the Executor funds the Trust only if the testator and the testator’s spouse both die while their children are minors.

Ohio law gives Probate Court the exclusive power to direct and control the conduct of the Testamentary Trustee.   The Testamentary Trustee is required to prepare and file with Probate Court, an account of the Trustee’s administration of the Trust at least once in each two (2) years, or at any other time upon order of the Probate Court.  The account must include an itemized statement of all receipts of the Testamentary Trustee, and of all disbursements and distributions made by the Testamentary Trustee during the accounting period

An important component of almost any estate planning is a general durable Power of Attorney for financial matters.  Such a Power of Attorney allows the person granting the power (the “Principal”) to designate an attorney-in-fact to perform specific duties as enumerated in the document.  Unless a Limited Power of Attorney is being granted, the attorney-in-fact is typically granted 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.

Typically, some of the specific powers granted to the attorney-in-fact include, but are not limited to, the authority to sell, exchange, lease and otherwise dispose of the Principal’s property, to execute and deliver deeds, leases, assignments and other instruments, to sign and perform contracts and written instruments, to endorse and receive payment for checks payable to the Principal, to sign and deliver checks on accounts of the Principal, to withdraw from and deposit to the Principal’s accounts, and to add property to a revocable trust that has been created or may be created by the Principal.

As an attorney-in-fact is granted broad powers to act on behalf of the Principal, it is imperative that the attorney-in-fact understands that he or she is acting as the agent of the Principal in a “fiduciary” capacity.  A fiduciary must act in the highest good faith for the Principal’s benefit.

The attorney-in-fact must follow the instructions set out in the Power of Attorney, must use ordinary care and diligence in everything he or she does on the Principal’s behalf, and can only do the things the Principal has empowered him or her to do.  The attorney-in-fact is held to a high standard of care when acting for the Principal.  Therefore, any transaction that may be suspect, if viewed by a third party, should be avoided, which would include checks written to the attorney-in-fact and signed by the attorney-in-fact, or even signed by the Principal.  The attorney-in-fact should not do anything that does not benefit the Principal.

If you are interested in talking to our Estate Planning team regarding a Power of Attorney or any other estate planning matters, please don’t hesitate to contact us.  We look forward to making a difference for you and your family.

 

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Kevin J. Hopper is an experienced estate planning attorney whose practice has been in Anderson Township.   He has been in practice since 1978.

In August, he joined his practice with the Finney Law Firm, LLC, and brought with him his experienced paralegal, Tammy C. Wilson and their many satisfied clients.

They join attorney Isaac T. Heinz in providing advanced and sophisticated services in the areas of will, trusts, estate planning, and estate administration, and the tax and succession planning advice that comes with that practice area.  They provide these services for individuals with both large and small estates.

Please ask us how these experienced professionals can “make a difference” in planning for your future.

One of the ‘Pillars of Success’ that we build with our clients is proper Estate Planning.

  • Assuring that your assets go to your intended beneficiaries;
  • Minimizing your taxes and costs of probate administration;
  • Careful business succession planning; and
  • Healthcare and financial powers of attorney.

Finney Law Firm is pleased to announce the expansion of our Estate Planning and Administration practices with the addition of Attorney Kevin Hopper and Paralegal Tammy Wilson to our Estate Planning team anchored by Attorney Isaac T. Heintz.

Please contact our experienced estate planning team to guide you through this important process.

A recent First District Court of Appeals decision highlights the importance of a thorough and properly executed will – particularly if you are seeking to disinherit a child or grandchild.

In Chambers v. Davis, C-130645, the decedent’s will specified that her daughter and grandson were to receive nothing from the estate, and bequeathed specified items to a niece.  The execution of the will was witnessed by the niece and one other witness.  There was no residuary clause directing the disposal of any remaining assets.

In general, Ohio Revised Code Section 2107.15 invalidates bequests to a person who is one of only two witnesses to the execution of the will.  Based on this section, the Probate Court declared the bequests to the niece void.  Because there was no residuary clause directing the gift otherwise, the specific property left to the niece was then distributed as if the decedent died without a will.

Under the statute of descent and distribution, the property that had been left to the niece passed to the disinherited daughter contrary to the desire of the decedent.

The court reported that Ohio probate law requires more than a simple statement directing that the disinherited party receive nothing.  To effectuate a disinheritance, you must properly disinherit the applicable party, and bequeath your assets to devisees other than the disinherited party.

To make sure your wishes are carried out, make sure your will contains a residuary clause and is properly witnessed.