The situation you’re about to read about sounds like a question that might end up on the Ohio bar exam—but don’t let that stop you from reading! The problem really is an interesting one, and more to the point, something that could end up affecting the property of you or someone you love. Even more importantly, we will tell you how to avoid a loss that you might not have ever seen coming.
If you have been reading this blog for awhile, you have heard about transfer on death accounts, which allow an account holder to place a designation on a bank or other financial account so that, when they die, the account automatically passes to the transfer on death (TOD) designee. But TOD designations aren’t only for bank accounts. You can transfer securities, vehicles and even real estate with a TOD designation, which is a beneficiary designation. A significant advantage of a TOD designation is that it allows the asset in question to pass immediately, an… Read More
Any estate planning attorney worth his or her salt will recommend to clients that they execute powers of attorney (POA) for both healthcare issues and finances. Many people tuck these documents in a drawer, feeling secure in the knowledge that they'll be ready to use when needed. With healthcare powers of attorney, that is generally true.
But an unfortunate scenario with financial powers of attorney unfolds often. A person, called the principal, executes a power of attorney allowing another person, her agent, to take certain actions on her behalf should she become incapacitated. When that day arrives, the agent, with POA in hand, goes to the bank or investment firm to transact business on behalf of the principal. Expecting no issues, the agent is shocked to find out that the bank will not honor the POA. Unfortunately, at that point, the principal lacks the legal capacity to execute new POAs that comply with the financial institution's requirements.
W… Read More
If your marriage is headed toward divorce, or if you’re in the thick of a divorce right now, estate planning probably isn’t on your mind. If you’ve recently come through a divorce, you may not want to think about estate planning, either; you probably don’t want to see another lawyer for a good, long time. If you’re dealing with divorce, some reluctance to dive into estate planning is understandable. Unfortunately, it may be more important to create or update an estate plan now than ever. Here’s what you need to know about estate planning before, during, and after divorce.
When we speak of estate planning before divorce, we mean before the divorce case is even filed, rather than before it is final. If your spouse files for divorce and blindsides you, you may not have the opportunity to do pre-divorce process estate planning. But if you are planning to file, or suspect your spouse is moving in that direction, there are some estate-planning actions you may want to take.
Wh… Read More
When you consult an attorney about estate planning, you trust that he or she is going to consider your goals and devise a plan to meet them. In general, most attorneys do. But as the saying goes, “You don’t know what you don’t know,” and it may not occur to you to tell your attorney that you want help with asset protection. Unfortunately, it also doesn’t occur to many attorneys to ask their clients about this critical issue. As a result, attorneys and clients focused on one goal, such as minimizing taxes or business succession planning, might make asset protection mistakes in estate planning. Let’s talk about some of the common mistakes, and how best to avoid them.
First off, let’s define “asset protection.” Asset protection is a type of financial planning intended to protect assets from creditors and keep them available for you or your intended beneficiaries. Some estate planning tools and techniques leave assets vulnerable to the claims of creditors, including divorcing spouses.
You may not have known to raise the issue of asset protection with your attorney, but he or sh… Read More
Trustees given the responsibility of administering a trust know that their rights and responsibilities are determined by the trust instrument, and by state law. Many trusts are “discretionary” trusts, which means that distributions are made in the trustee’s discretion, often for the “health, education, maintenance and support” of one or more beneficiaries. This standard is referenced in the Internal Revenue Code section 2041(b)(1)(A), and many creators of trusts (settlors) appreciate this standard for distributions because it helps to avoid the risk of transfer taxes. Other trusts are "wholly discretionary" and provide maximum asset protection for beneficiaries. But what does “health, education, maintenance, and support” mean in terms of making trust distributions?
The answer to that question depends in part on how much discretion the trust instrument gives to the trustee. As a general rule, a trustee must exercise the discretionary power to make distributions Read More
We have received a number of questions recently about trust decanting. What is it? Whom does it benefit? When is it a good idea? And just what does it mean to “decant” a trust?
Decanting a trust is done for the same reason you might decant a bottle of vintage wine: to leave something undesirable behind in the old container, while preserving the good in a new one. In the case of wine, what is left behind is residue in an old bottle. In the case of a trust, what is left behind is outdated or unhelpful provisions from the original trust instrument.
Trust decanting is generally done with irrevocable trusts, which are, as the name implies, difficult to amend or revoke. Not all states allow trusts to be decanted, but Ohio is one of about 25 that does. Of course, state law regarding trust decanting must be followed.
In a nutshell, if a trustee has the authority to make distributions for the benefit of certain beneficiaries, he or she can make distributions in further trust for the benefit of those same beneficiaries. Under Ohio law, a trustee may have absolute power to make distributions of principal from the original tru… Read More
Becoming the guardian for another adult is a serious matter. A guardian is appointed for an adult when they are deemed legally incompetent: in other words, they are so mentally impaired that they are incapable of taking care of themselves or their property. This mental impairment might be the result of a mental or physical illness; Alzheimer's or other dementia; severe developmental disability; or chronic substance abuse. Someone who is so impaired needs a legal guardian to step into their shoes and make decisions about their finances, their personal business, or both. Granting these powers to a guardian, of course, removes them from the incompetent person (also known as the ward). Ohio courts do not make this transfer of power lightly; there is an expert evaluation requirement in Ohio guardianships.
It stands to reason that a court would not create a guardianship without documentation that it is necessary. Here are the answers to some of the most common questions we get about the expert evaluation requirement.
A Statement of Expert Evaluation in support of an application for an Ohio guardian… Read More
Removing the trustee of an Ohio trust is not something to be done lightly, for good reason. The creator of a trust (settlor) selected a successor trustee he or she had faith in to administer the trust as the settlor intended. Therefore, the Ohio Trust Code (Section 5807.06(B) ) only permits the removal of a trustee by a court if the trustee has committed a serious breach of trust; if there are co-trustees who cannot cooperate to administer the trust; or if the trustee is unfit or unwilling to administer the trust effectively, or has failed to do so. So, even if the beneficiaries do not like a choice of trustee, an Ohio court will respect the settlor’s appointment of a trustee. But when is removing a trustee not removing a trustee?
The answer is before the successor trustee has stepped into that role. A successor trustee, by definition, does not become the trustee immediately: he, she, or it succeeds the settlor or initial trustee. (We say, “he, she, or it” because a successor trustee may be an organization like a bank. as well as a person.)
A typical setup is that a settlor creates a trust and serves as trustee during his or her lifetime. After the settlor… Read More
It has always been possible for a court to modify a trust for unforeseen circumstances. Traditionally, a court could allow or order a trustee to deviate from a term of the trust if, due to circumstances not known to or anticipated by the trustmaker (settlor), complying with that provision would “defeat or substantially impair the accomplishment of the purposes of the trust…”
Section 5804.12(A) of the Ohio Trust Code (OTC) gives even broader authority to modify a trust for unforeseen circumstances: “The court may modify the administrative or dispositive terms of a trust or terminate the trust if because of circumstances not anticipated by the settlor modification or termination will further the purposes of the trust.”
Ohio law, which is based on the Uniform Trust Code (UTC), has three important distinctions from the traditional (common law) position. First, under Ohio law, a trust cannot only be modified for unforeseen circumstances, it can be terminated early. Second, Ohio law permits the court to modify… Read More
If you have an estate plan, it should include a durable power of attorney. A durable power of attorney provides you with protection in the event you are incapacitated during your lifetime and cannot manage your own business and financial matters; the word "durable" simply means that the document remains valid even though you are legally incapacitated. If you are incapacitated, a person you have named as your agent can seamlessly take care of your financial responsibilities and decisions. What are the duties of an agent under a power of attorney?
Ohio law provides clear instructions for agents in Ohio Revised Code section 1337.34. The statute divides duties into two categories: duties that an agent has regardless of the provisions in the power of attorney, and duties that an agent has unless the power of attorney provides otherwise.
Notwithstanding provisions in the power of attorney, an agent who has accepted appointment shall do certai… Read More