» Trusts

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

Protect Your Will and Trust From Challenges

A court challenge to a will or trust is something no one wants, but few people actively try to avoid. If your last will and testament, or your trust, are challenged after your death, it can be devastating on many levels. As you might expect, such a challenge is usually time-consuming and costly. But even more important to many people, will and trust contests can lead to permanent rifts in a family. Even if the financial outcome is what the person making the will or trust intended, the personal fallout may not be able to be repaired. Fortunately, Ohio now offers a new tool to protect  your will and trust from challenges.

In March 2019, testators (creators of wills) and settlors (creators of trusts) will have the opportunity to have their wills and trusts declared valid before their deaths, a process called ante-mortem procedure. This process is not entirely new; Ohio residents have had the ability to have their wills declared valid during their lifetimes for years. However, the prior statute did not include the opportunity to va… Read More

Abatement of Legacies: What Does it Mean?

Most of the time, when someone leaves a will, their assets are distributed according to the terms of the will, after all of the debts of the estate are settled. Occasionally, though, a last will and testament will make bequests that just cannot be fulfilled; there are not enough assets left in the estate. When that happens, who gets shortchanged? Do some heirs receive their entire bequest, while others get little or none of what was "left" to them? Abatement of legacies is the law of who gets what, and how any shortfalls are handled.

Why would abatement of legacies be necessary? Who would leave their heirs assets that they didn't have? Most people don't intend to do that, of course. But the reality is that the value of an estate can go up and down between the time a will is written and the time it becomes necessary to distribute assets. In addition, estate debts can be higher than anticipated, particularly if the last illness of the deceased person incurred significant medical bills.

Put simply, there are often the same number of people at the table, but the size of the pie is smaller. The question then becomes: how is the pie divided? Do some people leave the ta… Read More

Six Years In: Ohio Domestic Asset Protection Trusts

Just over six years ago, on December 20, 2012, Governor John Kasich signed into law the Ohio Asset Management Modernization Act of 2012 (AMMA). AMMA, which took effect in March of 2013, has been described as “a quiet revolution in Ohio law.” The law put in place a number of changes regarding the management of property, many of which served to limit the rights of creditors against Ohio residents and asset holders. Perhaps the most significant of these was the new ability to create an Ohio domestic asset protection trust (DAPT). Domestic asset protection trusts are available in seventeen states. What exactly is a DAPT, and what distinguishes it from other types of trusts?

A DAPT is an irrevocable self-settled trust, of which the creator (known as the settlor or grantor) is permitted to be a beneficiary, and may be the primary beneficiary. In addition, the trust is structured so that the settlor is given access to funds in the trust. A properly-drafted DAPT also has a feature that lends it its name: creditors of the settlor are unable to reach the assets in the trust. It is noteworthy that the trust only protects assets from possible future creditors. A settlor cannot p… Read More

QTIP Trusts for Second Marriages

Second marriages can open a new and joyful chapter in life, especially after a bitter divorce or the pain of a first spouse’s death. Unlike a first marriage, in which your whole future lies ahead, by the time you arrive at the threshold of your second marriage, you have some history. That history often includes children from the first marriage. Your children are an important part of your life, and you want to continue planning for their futures, even as you embark on your own with a new spouse. The tension between these—the desire to leave a legacy for your children while also providing for your spouse—can complicate estate planning. This is why estate planning professionals sometimes recommend QTIP trusts for second marriages.

A QTIP, or Qualified Terminable Interest Property trust, is authorized by language in Internal Revenue Code Sections 2056(b)(7) and 2523(f). What can a QTIP trust do for you and your family? It can prevent unintended outcomes in the event of your remarriage a… Read More

Changing a Trust for the Benefit of Disabled Beneficiaries

An increasingly common estate planning practice is the establishment of a revocable living trust in which the creator (settlor) is also both the trustee and the beneficiary during his or her lifetime. After the settlor’s death the trust, which was revocable during the settlor’s life, becomes irrevocable, and a successor trustee takes over, distributing or managing the trust for the benefit of one or more beneficiaries. What happens when one of those beneficiaries is disabled? More and more, we are receiving questions about changing a trust for the benefit of disabled beneficiaries.

The potential problem is that the trust may include language dictating that the disabled beneficiary’s share of the trust be held in trust for his or her lifetime, and that distributions be made according to a particular standard, such as for “health, maintenance, education, and support.” If, like many disabled individuals in Ohio, the beneficiary needs Medicaid benefits, will the trust interfere with his or her ability to qualify for benefits?

Medicaid in Ohio is administered by county offices of the Ohio Department of Jobs and Family Services (ODJFS). ODJFS is likely to fin… Read More

Ohio Gun Trusts: What You Need to Know

If you have made an estate plan, you have probably considered how you will dispose of property ranging from your home down to your wedding ring. But if you own certain firearms, you may need to take special steps to transfer them in a way that offers clarity and protects your loved ones from unwittingly violating gun laws.  Ohio gun trusts can streamline the transfer of firearms, making life simpler not only for your survivors, but for the executor of your estate.

What is the purpose of an Ohio gun trust? Primarily, to ensure compliance with federal law. Certain firearms are regulated by the National Firearms Act of 1934 (NFA), and by Title II of the Gun Control Act of 1968, a revision of the NFA. Weapons governed by these laws include short-barreled rifles, short-barreled shotguns (including sawed-off shotguns), machine guns, silencers, and grenades. Firearms covered by these federal laws may be referred to as "NFA firearms" or "Title II firearms."

NFA firearms are required to have a serial number and must be registered with the federal bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). These weapons may only be possessed and used by the registered own… Read More

Ethical Issues in Trust Administration

Ohio trustees are fiduciaries, bound to act in the best interests of the beneficiaries of the trusts they are managing. As such, they frequently face ethical dilemmas regarding their duties.  Let's talk about some of the ethical issues in trust administration, along with suggestions for addressing them.

Most trustees have the best of intentions, but may not anticipate some of the scenarios that could arise in the course of their administration of the trust. By considering some potential ethical pitfalls in advance, trustees can be better prepared to handle these situations.

Certain duties are imposed on trustees by Ohio statute. These include a duty of communication, which requires a trustee to "keep the current beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.” Trustees also have a duty of confidentiality, by which they are bound to "administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries" and of course, as with Ohio law.

These ethical obligations are in many ways analogous to those th… Read More

Five Things You Might Not Know About Your Revocable Trust

More property now passes outside probate when Ohio residents die than through the probate process. This is due to the increasing popularity of so-called "will substitutes to avoid probate, including trusts, and options such as joint ownership of property and "transfer-on-death" accounts. Revocable trusts, so called because they can be revoked while the creator (settlor) is alive and has legal capacity, are probably the most popular will substitutes. There is good cause for the popularity of revocable trusts; in addition to avoiding probate (which saves time and money for beneficiaries), they are less likely to be challenged in court than a will. Significantly, if the settlor of a living trust becomes legally incapacitated, the successor trustee named in the trust instrument can step into the settlor's shoes to manage trust assets. This avoids the need for the family to go to court to appoint a guardian or conservat… Read More

Revoking or Amending a Living Trust: What You Should Know

Living trusts are an increasingly popular estate planning tool because they allow for both control and flexibility: the creator (also called settlor or grantor) of the trust can use and control trust assets just as if they were in his or her own name during life; after death, assets in the trust pass seamlessly to named beneficiaries under the guidance of a successor trustee. An attractive feature of living trusts for many people is that assets in a trust do not need to go through the probate process. Another advantage of living trusts is the ability to change, or even revoke them, if the settlor wishes. Here's what you should know about revoking or amending a living trust.

When Should You Revoke or Amend a Trust?

Any major life event should prompt you to at least review your estate plan, and possibly to update it. Such events include marriage, divorce, the death of a spouse, and the birth or adoption of a child or grandchild, among others.

If you find your trust is no longer adequate for your needs, the question becomes: do you amend or revoke it? Unless your original purpose for creating the trust no longer exists, an amendment is probably preferable.… Read More