Ohio Probate Lawyer Blog

What Does “Health, Education, Maintenance, and Support” Mean for a Trustee?

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

What Does it Mean to Decant a Trust?

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 In the case of a trust, what is left behind is outdated or unhelpful provisions from the original trust instrument.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.

How Can a Trust Be Decanted?

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 origin… Read More

Expert Evaluation Requirement in Ohio Guardianships

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. 

Who Can Complete an Expert Evaluation in an Ohio Guardianship?

A Statement of Expert Evaluation in support of an application for an Ohio gua… Read More

When is Removing a Trustee Not Removing a Trustee?

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 sett… Read More

When Can You Modify a Trust for “Unforeseen Circumstances?”

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.” 

Differences Between Ohio Trust Law and Common Law

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 mo… Read More

What Are the Duties of an Agent Under a Power of Attorney?

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.

What an Agent Under an Ohio Power of Attorney Must Do

Notwithstanding provisions in the power of attorney, an agent who has accepted appointment shall do cer… Read More

Should You Make Qualified Charitable Distributions from Your IRA?

If you have an IRA, SEP IRA, SIMPLE IRA, or similar retirement plan, you have no doubt been made aware that you must take required minimum distributions (RMD) from the plan when you reach the age of 70 ½. You may withdraw more than the RMD, but withdrawing less carries a heavy tax burden: a 50% tax penalty on any part of the RMD you fail to withdraw. This penalty puts teeth in the "required" part of the phrase.

When you receive your RMD, it will be taxed to you as ordinary income, with the exception of any portion on which you previously paid tax. Because distributions are treated as ordinary income, they may bump you into a higher tax bracket or cause related problems, such as raising the amount of your Social Security benefits that is taxable, or causing your Medicare premiums to go up. If you need the income your RMD would provide, that's one thing. But what if you would prefer to forgo that extra income and the tax headaches it could bring? Is there an alternative to taking an RMD that won't result in penalties?

<… Read More

What Happens If My Heir Dies Before Me?

We tend to make our estate plans based on certain assumptions. Most of the time, we assume our children will outlive us, although we know that that doesn’t always happen. What happens if our assumption on that score proves incorrect? One question many people don’t stop to think—or find too painful to think—is “what happens if my heir dies before me?”

There are laws in place, called “anti-lapse statutes,” that are designed to prevent unintended consequences if that happens. For instance, let’s say you have three children, each of whom has three children of their own. When creating your estate plan, you make a will that divides your estate equally among your three children, “share and share alike.”

At the time you made the will, you probably weren’t anticipating that one of your children might die before you. If you did think of it, you might have assumed that your grandchildren would have inherited the share of your deceased parent.

But in Ohio, until recently, you might have been wrong about that.

Castillo v. Ott

A 2015 Ohio Supreme Court case highlighted a problem with Ohio’s anti-lapse statute. In that case, <… Read More

Electronic Wills and Ohio Probate Law

Think about the things you can do electronically that weren’t possible ten, or in some cases, even five years ago. You can order a pizza from your laptop, cash a check using your phone, monitor someone standing at your front door from miles away. You can sign, scan, and e-mail important documents. Can you, and should you, do your estate planning electronically? Let’s talk about electronic wills and recent updates to Ohio probate law.

The Problem With Electronic Wills

A typical will is printed on paper, and signed by the person making it (the testator) in front of witnesses, who also sign, attesting that the testator, who was known to them, was actually the person who signed the will. There are exceptions to this general rule—under some limited circumstances, a handwritten, unsigned will can be valid, for instance—but for many years, this has been the accepted standard.

This is not just the result of attorneys clinging to outdated ways of doing things. Generally, when the law requires people to “jump through hoops” to accomplish a legal goal, s… Read More

Estate Planning and Diminished Capacity

Estate planning attorneys are constantly telling anyone who will listen: “Make your estate plan now; don’t put it off.” Primarily, that is because life is uncertain. Even a young person in good health can be struck down by a sudden illness or accident. If that happens, it is so much easier on everyone involved to have that person’s wishes set forth in a written estate plan. But there are other reasons that we urge people not to put off their estate planning, and one of those is the risk that as they age, they will no longer have the legal capacity to make a binding estate plan. It can be painful to think about, but it’s important to talk about estate planning and diminished capacity.

In order to be legally capable of making a valid will in Ohio, the person making the will (the testator) must be able to:

  • Understand the nature of the business in which he or she is engaged;
  • Comprehend generally the nature and extent of his or her property;
  • Hold in his or her mind the names and… Read More