It is important to note that most estate planning documents must meet strict legal requirements to be valid. It is important to consult with an experienced attorney to ensure that your estate planning documents are worded in a way that completely and accurately conveys your desires and ensures that they will be honored upon your death.
Wills
A will is the most commonly used estate planning tool to control actions that other people will take after your death. These include: the distribution of your assets, naming a guardian for your minor children, paying your debts and taxes, cancelling any debts owed to you by another person, transferring property into an existing trust, designating a trusted person to administer your estate (called an “executor”) and naming an attorney to assist your executor. Without a will, you are said to have died "intestate" and your property passes pursuant to “intestate succession,” a statutorily prescribed method of distributing your assets.
Living Wills
A Living Will is not a traditional “will”, but instead is an instrument that states your wishes for your care in the event that you become terminally ill or permanently unconscious. In a Living Will you can state your instructions as to whether or not, under those circumstances, you desire treatment to prolong your life, reduce pain, or provide nourishment. A Living Will provides guidance to families and health care providers and provides protection for health care providers who honor your wishes. These documents can be modified to adhere to your religious or spiritual beliefs.
Health Care Power of Attorney
A Durable Power of Attorney for Healthcare names a person (called an “agent”) who will be responsible for making decisions on your behalf if you are incapacitated and unable to make decisions for yourself. This power lasts only as long as you are incapacitated. A living will provides guidance for your “agent” regarding what decision to make. We recommend that you give a copy of your Living Will and Health Care Power of Attorney to your doctor, a family member, and/or the person you name as your agent.
Durable Power of Attorney
A “Durable” Power of Attorney, sometimes described as a Power of Attorney for financial matters, or referred to simply as a “Power of Attorney”, designates a certain person of your choice to handle your financial affairs. It is meant to be used in the event you become ill or incapacitated. The person you name will then be able to perform many duties such as paying your bills, managing your bank accounts, and investing your assets. This document gives complete control of your finances to another person so it is important to choose the person carefully. The law says that this person has a “fiduciary duty”, and must act responsibly only on your behalf.
Trusts
A trust is created when you execute a written trust document (called a "declaration of trust"), which states your intention to hold specific property in trust for yourself and/or other named beneficiaries. Because trusts tend to be more complex in nature than wills, it is important to retain an experienced attorney to draft your trust language and advise you regarding the type of trust that is right for you. Generally, there are two kinds of trusts that can be created: a living trust, which becomes effective while you are still alive, and a testamentary trust, which becomes effective upon your death. Both can be used as estate planning tools.
A living trust can be revocable, meaning that you can change it or revoke it, or remove assets from it; or it can be irrevocable, which means that you cannot change it without the court’s permission. It is usually created by you, for your benefit (you are the “beneficiary”). You can be the trustee or you can name a different trustee, or a co-trustee. Typically a trust will name successor trustees. A trustee has control over the trust property and as such can sell it, mortgage it, or do whatever you could do with it if it were held in your name. The trust language controls what the income and principal of the trust is used for both during your lifetime and after your death and can be as simple or detailed as you choose. Upon your death, the principal of the trust (all of the assets you’ve placed in it) is used according to your direction. It can be distributed directly to beneficiaries or it can be used for the benefit of others.
There are several advantages to a living trust. First, your estate can avoid probate, as the assets placed in the trust are no longer owned by you but are owned by the trust itself. Your beneficiaries, then, can receive their portion of your estate without waiting for your estate to pass through probate. In addition, it allows you to control the circumstances under which your beneficiaries receive the trust’s property. For example, you can set up a trust for your minor children and state that they are not to receive the property until they are age 30 or that the funds can only be used for educational purposes, etc. You can also name a successor or co-trustee who will take over the management of the trust in the event you ever became incapacitated. Finally, upon your death, a revocable trust becomes irrevocable and can distribute your assets without paying the debts of your estate. Your estate creditors, then, are not required to be paid first unless you so direct; instead, your estate goes to your designated heirs. A trust also offers privacy since it is normally not filed in probate court. ***
However, there are several caveats. To successfully avoid probate, the property in question must be placed into the trust before you die. If the property is not placed into the trust before your death (but is done after your death through a pour-over will), the property must pass through probate. . Also there are limits to how long your trust can control what happens to your property before final distribution.
Estate Tax Issues
Payment of estate taxes can significantly diminish the size of a person’s estate, thereby reducing the amount that each beneficiary receives. Developing an estate plan with an experienced attorney serves to minimize estate taxes by reducing the value of the assets that pass through probate in order to avoid the assessment of unnecessary taxes.
- What Estates Are Subject to Taxation?
If your estate is worth more than a specific amount (this amount is different depending upon the year of your death), then your estate is subject to a federal estate taxes. For example, in 2008, the first $2 million of your estate would be exempt from federal estate taxes, while put the rest of the sentence here thanks
anything over that amount would be subject to a tax rate of 45 percent.
Unless congress acts Any property left to a spouse is exempt from federal estate taxes as long as the spouse is a U.S. citizen. However, these assets will be subject to federal estate taxes upon the recipient spouse’s death. Careful planning with an experienced attorney can minimize these taxes.
Similarly, your estate could be subject to the Ohio Estate Tax. Currently, if your estate is worth more than $338,333.00, it will be subject to an Ohio Estate Tax of 6 to 7 percent.
- What is Subject to Taxation?
All of your probate estate--whatever passes under your will or by intestate succession--plus most nonprobate transfers, such as the value of any asset transferred into a trust within three (3) years of your death will be subject to taxation. Assets placed in an irrevocable trust more than three (3) years prior to your death, nonprobate assets, and assets with survivorship rights (ex: held jointly or transferable on death) are not subject to federal taxation.
DISCLAIMER: This website and its contents are intended to provide general information and are NOT intended to constitute legal advice. All viewers are warned not to rely on the materials posted here but instead to seek counsel for legal advice tailored to meet their individual needs. The attorneys at Slive & Slive have more than 30 years of experience helping clients plan for the future. Your understanding is a priority, and your satisfaction is a priority, and your satisfaction is our goal. Your phone calls will be returned promptly and your needs addressed timely. In addition to our weekly hours, our Cleveland offices offer Saturday morning appointments and we accept all major credit cards. Please contact us today for a free initial consultation.
