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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 that at… Read More

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 conservato… Read More

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

Can a trust be changed after its creator has died? Unfortunately for beneficiaries, the answer is an almost certain "no." Let's talk about how trusts operate, and what that means for beneficiaries after the death of the trust creator, also known as the grantor, settlor, or trustmaker.

There are various types of trusts, but the most common and well-known is the revocable living trust, often just called a "living trust." Like all trusts, revocable living trusts involve three parties: the grantor; the trustee, to whom the trustee gives property to hold and manage; and the beneficiary, who benefits from the assets in the trustee's care. The trust instrument is the document that creates the trust, defines the rights and responsibilities of the parties, and sets the terms of the trust.

When someone makes a revocable living trust, they can occupy all three roles: grantor, trustee, and beneficiary. In most ways that matter, things are much the same as when the grantor owned the property in their own name. The grantor has complete control and use of the property in the trust, can make changes to the terms of the trust, and even end the trust altogether. The ability to termi… Read More

For various reasons related to tax issues and drafting challenges, joint trusts have not historically been popular with Ohio estate planning attorneys. Due to changes in tax law in the past several years (most notably an increase in the amount couples can exclude from estate tax), joint trusts have become a more attractive option for many couples. What is a joint trust, and should you consider having one?

Basics of Joint Trusts

All trusts have three roles: the grantor or trustmaker who creates the trust; the trustee who manages trust assets and makes distributions, and one or more beneficiaries, who receive distributions from the trust. A trust may be revocable during the grantor's lifetime, or irrevocable, meaning that the grantor gives up all control of assets once they are in the trust, and the grantor cannot revoke or amend the trust without the permission of all beneficiaries.

A joint trust is a revocable trust. Both parties to the trust are grantors of the trust, as well as both trustees and beneficiaries. In short, they have complete control over all trust assets, just as they did when those assets were in their own name before they were placed in t… Read More

If you have worked hard to save for your family's future, the last thing you want to have happen is for those assets to go to waste or end up in the hands of someone other than your loved ones. If you have an intended beneficiary who is young and impulsive, or has a history of poor money management, you need to think long and hard about protecting their inheritance. A spendthrift trust may be the solution.

Having a will is important, but leaving someone assets in a will means that they receive their entire inheritance when the estate is settled. If they want to cash that check, buy a brand new convertible with part of it, then speed down the road throwing hundred dollar bills out the back, no one can stop them.

As a general rule, a living trust is more helpful than a will, in that the trustee may be able to control the flow of assets into the beneficiary's hands. Unfortunately, most trusts may not protect trust assets from creditors. That's where wholly discretionary spendthrift trusts come into the equation.

What is a Spendthrift Trust?

A wholly discretionary spendthrift trust is designed to protect trust assets and anticipated distributions from a… Read More

Trusts come in many forms and serve many purposes, including avoiding probate, protecting assets from creditors, and offering tax benefits. Many people also use trusts to protect beneficiaries whom they fear would not be able to manage assets if they inherited them outright. But what if you have a beneficiary that you trust to manage their financial affairs? You can still help them reap the other benefits of a trust while granting them more control over the assets in it. Learn how a Preservation Trust™ provides asset protection and income tax flexibility.

A Preservation Trust™ is more commonly known as a beneficiary-controlled trust. Beneficiary-controlled trusts are a subset of dynasty trusts. Using a Preservation Trust™, you can grant your beneficiary the authority to manage trust assets while still protecting the assets in the trust for their use and for that of future generations.

What is a Preservation Trust™ and How Does it Protect Assets?

A Preservation Trust™ is a trust in which the primary beneficiary also serves as the controlling, or primary, trustee. This allows the beneficiary to have nearly the same level of control over trust asset… Read More

What's the difference between taxable income and accounting income when administering a trust? Taxable income and accounting income may be different on paper, but they are both important, and it's important to understand how they differ.

What is Trust Accounting Income?

Trust accounting income, or TAI, is the income that is available to distribute to the income beneficiary of a trust. The formula for calculating TAI is all income of the trust, less expenses attributable to income.

Ohio, like most states, has adopted the Uniform Principal and Income Act (UPIA). This law allocates income and expenses as follows: operating income and expenses, depreciation of assets, interest, rents, royalties, and dividends are allocated to accounting income. Taxes on accounting income are also allocated to income. Capital gains and losses, capital improvements and extraordinary repairs to trust property, casualty gains and losses and insurance recoveries are allocated to principal. Taxes on trust principal are also allocated to the principal.

Why is it important to know exactly what the trust's accounting income is? Certain trusts (known as simple trusts) are require… Read More