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Plan Ahead to Avoid
Probate Challenges
By:
Hillary B. Taylor
and
Michael J. Matasich
 Most
people who make a will or give away substantial assets
assume that their intentions will never be defeated.
Rarely do they realize that probate litigation – a
lawsuit challenging a will, deed, trust or gift – can
undo their wishes. Yet probate litigation can result in
the unraveling of estate plans and can be
time-consuming, costly and emotionally taxing. It is
important to consult with an estate planning attorney
and to take proper precautions when making decisions  regarding
the transfer of assets. When making a substantial gift
during your lifetime and when creating estate planning
documents such as your will and trust, or making
beneficiary designations (such as in an insurance policy
or retirement fund), payable-on-death bank accounts,
transfer-on-death deeds, and similar transactions,
proper planning can ensure your wishes are honored.
Special issues can arise when a person (the “principal”)
gives his or her child a power of attorney and expects
the child to carry out the principal’s wishes by making
gifts using the power of attorney, especially when the
gifts result in an unequal distribution among the
principal’s descendants and favor the child who acted
under the power of attorney.
A power of attorney creates
a fiduciary relationship in which one places special
confidence and trust in the integrity and fidelity of
another. Other fiduciary relationships include
individuals you rely on, such as a child or a caregiver,
or perhaps a close relative, friend or member of the
clergy. A fiduciary is required to act in the best
interests of his or her principal. However, a fiduciary
is in the position of being able to take advantage of
the other person, so special rules apply to transactions
carried out by a fiduciary.
For example,
when a fiduciary makes a
gift of a principal’s property to himself, or when a
principal relies on the fiduciary to assist with a
property transfer to the fiduciary, Ohio law presumes
that the fiduciary unlawfully, or unduly, influenced the
principal to transfer the property. It becomes the
fiduciary’s burden to prove that no such undue influence
existed, and, absent proper planning, this may be
difficult to accomplish. In the absence of any evidence
that the fiduciary did not abuse his or her power, the
court may require the fiduciary to return the gift to
the principal’s estate or otherwise turn it over to the
person deemed to be the proper recipient.
Therefore, when making a
substantial lifetime gift, a will, a trust, or other
similar transaction, or when asked by another to assist
with such a transaction, consult with an estate planning
attorney. When you work closely with a knowledgeable
and experienced attorney in planning significant
lifetime gifts, designating beneficiaries for insurance
and other death benefits and planning for the
disposition of your assets after death, the attorney
will work to ensure that all legal requirements have
been met. Additionally,
the attorney’s
involvement can interpose an element of independence
into the transaction which can minimize or eliminate the
risk that a presumption of undue influence may arise.
The Buckingham, Doolittle &
Burroughs, LLP Trusts and Estates Practice Group works
closely with the Litigation Practice Group in probate
litigation cases. But when naming fiduciaries, making
gifts, naming beneficiaries, and creating a will and
trust, the best thing that a person can do is plan ahead
to avoid challenges in the future.
Hillary Taylor
is an Associate in the Trusts &
Estates Practice
Group. She can be reached at
htaylor@bdblaw.com or
216.453.4287.
Mike Matasich is an
Associate in the Litigation
Practice Group. He can be reached at
mmatasich@bdblaw.com or
330.258.6522.
The New and
Improved Ohio Homestead Exemption Benefits All
Homeowners over Age 65
By:
Hillary B. Taylor
Effective June 27, 2007 the real property tax homestead
exemption is available to all citizens age 65 and older,
and to totally disabled people, regardless of income.
Previously, the reduction in the taxable value of
property was available to senior citizens and disabled
people based on the income of all residents of the
home. The amount of the reduction was tiered based on
income as well, with a maximum reduction of $25,000.
Under the new law, HB 119, signed by Governor Strickland
on June 30, 2007 and effective July 27, 2007, all senior
citizens, disabled people and surviving spouses of
certain qualified homeowners will receive the full
reduction of $25,000 regardless of income. The
deadline for new applications is October 1st of each
year. The first application should be filed for the
upcoming tax year during which the applicant will first
become eligible for the exemption (i.e., turn 65).
To qualify for the homestead exemption:
1. the applicant must be at least 65 years of
age, totally disabled, or the surviving spouse of a
qualified homeowner who was at least 59 years of age on
the date of the spouse’s death; and
2. he or she must own the home or manufactured
home; and
3. the home subject to the homestead exemption
must be the applicant’s primary residence on January 1
of the tax year for which the application is being
filed.
If the home is owned in a
revocable trust created by someone who presently
qualifies for the exemption, the grantor (the person who
created the trust) will generally qualify for the
homestead exemption. Under Ohio law, property
owned by an irrevocable trust does not qualify for the
homestead exemption, but if the applicant is a part
owner of the home or owns a life estate in the home, and
resides in the home, he or she can still qualify.
If the applicant received the homestead exemption credit
on his or her 2006 tax bill, there is no need to file a
new application. The applicant will automatically
receive the new homestead exemption for the next tax
year if he or she otherwise qualifies.
Note that there is also a 2.5%
tax reduction for all owner-occupied residential
property. Applications for the 2.5% reduction must be
received no later than the first Monday in June. If
real property was purchased after 1999, the purchaser
should automatically receive the 2.5% reduction.
Please contact a member of the
Trusts & Estates practice group at Buckingham, Doolittle
& Burroughs, LLP if you have questions regarding the
real property tax exemption in Ohio.
Hillary Taylor
is an Associate in the Trusts &
Estates Practice
Group. She can be reached at
htaylor@bdblaw.com or
216.453.4287.
Pitfalls and
Opportunities Under the Ohio Trust Code
By:
Ronald F. Wayne
 Even
though the Ohio Trust Code is less than a year old,
there is significant grousing by the creators (grantors)
of irrevocable trusts who are now learning that their
trustees may be required by the new law to provide
current financial and other information about the trust
to future beneficiaries over 25 years of age. This is often contrary
to grantor’s intentions at the time the trust was
created. This result obtains even if the trust
was in existence prior to the effective date of the new
trust code, January 1, 2007. Revocable trusts are
not affected until they become irrevocable.
Typically, the grantor does not
want his beneficiaries to receive any information about
the trust or even know of its existence prior to the
creator’s death or some pre-determined time in the
future, so as to not create disincentive.
Seasoned estate planning attorneys,
attuned to the wishes of their well-intentioned and
generous clients, are mounting both common sense and
Constitutional challenges to this portion of the Trust
Code. Stay tuned for curative legislation which might
undo this unfortunate result.
In the meantime, drafting trusts
which expressly provide that the trustee shall make only
the least required disclosures to beneficiaries under
the then existing law may be the only partial remedy.
On the positive side, the new Trust
Code does provide clear explanations of how a trust
creator can insulate the trust property from the claims
of his beneficiaries’ creditors and which creditors can
and cannot be denied access to trust assets to satisfy
their claims. This creates wonderful planning
opportunities for beneficiaries who are disabled or have
inclinations, addictions or traits which necessitates
that their assets be well protected for their benefit.
Please contact us to provide more
insight into these issues as they might pertain to your
estate planning needs.
Ronald Wayne
is a Shareholder in the Trusts &
Estates Practice Group.
He can be reached at
rwayne@bdblaw.com or
216.615.7349.
Disclaimers to Family Trusts
By:
George Weinstein
Careful planning is necessary to minimize taxes on large
estates. An effective strategy can be to create a family
trust, which is also known as a credit-shelter trust or
a bypass trust. At the death of the first spouse, the
estate passes into the family trust, and at the death of
the second spouse, the estate passes on to the heirs,
free of estate taxes. Nevertheless, some spouses object
to certain aspects of this strategy. An estate-planning
attorney can work with the family to help address these
concerns by creating a will that grants the surviving
spouse the “power to disclaim.”
Spouses may object to having their access to income and
principal restricted by a trustee. Instead, a spouse may
wish to receive the devise outright, even though it may
result in additional estate taxes upon his or her
death. The attitude of these spouses seems to be,
“Whatever the kids get after taxes is O.K. so long as I
can do what I want with the money during my lifetime.”
In addition, as the applicable exclusion amount
increases under present law (e.g., it is scheduled to
rise from $2,000,000 in 2006 up to $3,500,000 in 2009),
more assets would have to be tied up in trust to save
estate taxes at the second death
Giving the surviving spouse the “power to disclaim”
addresses some of the often-heard objections. The
residue of an estate can be left (either by will or
through a revocable trust) outright to the surviving
spouse, who then is given the power to disclaim (within
nine months after the first spouse’s death) all or any
portion to a family trust for his or her benefit. Two
additional provisions give greater flexibility to the
family trust: First, the spouse could have what is known
as a “five and five power,” which is a non-cumulative
right to withdraw annually the greater of $5,000 or 5%
of the aggregate value of the principal. Second, the
surviving spouse could also be given a non-general power
to appoint principal (either during life or
testamentary) among designated beneficiaries if the
power of appointment is limited by an ascertainable
standard. IRC Reg. §25.2518-2(e)(2) and (5).
This approach will give the surviving spouse a
nine-month period after the first spouse’s death to
determine his or her needs during lifetime and the
estate taxes that may be saved upon his or her own
death, as well as possible generation-skipping transfer
taxes at the second death. The limited power of
appointment will enable the surviving spouse to choose
to which family members and in what form the principal
will be left at that spouse’s death. If, for example, a
child does not treat the parent well, that child could
be removed as a beneficiary of the family trust (as well
as a beneficiary of the surviving spouse’s estate).
Of course, this approach may not be prudent if a trust
for the surviving spouse is necessary or advisable for
reasons such as inability to handle money or manage
investments, incapacity, second marriages where there
are children of the first marriage, or where the first
spouse wishes to control the passing of the estate upon
desired terms to desired beneficiaries upon the
surviving spouse’s death. But in many situations
disclaimers to family trusts offer the greatest
flexibility for devises of estates with a post-death
look-back opportunity.
George Weinstein
is Of Counsel in the Trusts &
Estates Practice
Group. He can be reached at
gweinstein@bdblaw.com or
561.241.0414.
Pending Legislation -- Ohio Senate Passes Bill to
Authorize Parents to Designate a Guardian for Their
Incompetent Adult Child
By:
Amy K. Friedmann
 Under
current Ohio law, an individual’s Durable General Power
of Attorney or Last Will and Testament may nominate a
person to serve as the guardian of her minor children if
a guardianship becomes necessary. Down the road, this
nomination is given weight by the Court as long as the
Court determines that the nominated person is competent,
suitable, and willing to accept the appointment.
Much to the relief of many families, Ohio law may soon
give this ability to the parents of an adult incompetent
child as well. On June 19, 2007, the Ohio Senate passed
Senate Bill 157, which, if signed into law, would mean
that the person nominated by the parent would be given
preference by the Court over others who apply to become
the child’s guardian. The Court would have to determine
that the nominated person is competent, suitable, and
willing. In addition, the parent’s nominated guardian
would not be given preference if the incompetent adult
child had a spouse or his own adult child, or if the
incompetent adult child had designated his own choice of
a guardian prior to becoming incompetent.
The Bill as passed by the Ohio Senate was introduced in
the House on June 20, 2007, and has been assigned to a
Committee. We will continue to monitor this important
legislation as it makes its way through the Ohio General
Assembly and, hopefully, is signed into law by Governor
Strickland.
Amy
K. Friedmann is an Associate in the Trusts &
Estates Practice Group. She can be reached at
afriedmann@bdblaw.com
or
330.643.0227.
Rules and Opportunities Under the
New Florida Trust Code
By:
Christopher Gagic
 The
Florida Trust Code, Chapter 736 Florida Statutes, became
effective July 1, 2007. The new Florida Trust Code
combines prior codified Florida trust law with
provisions adopted from the Uniform Trust Code, as well
as provisions modified from the Uniform Trust Code. The
Florida Trust Code impacts many issues related to the
creation and administration of Florida trusts.
Under the Florida Trust Code, new reporting, notice and
accounting requirements will need to be met beginning
January 1, 2008. Under the reporting, notice and
accounting rules, beneficiaries have greater rights to
access information related to trusts. The Florida Trust
Code generally applies to all existing trusts as well as
new trusts created after its enactment.
The new Florida Trust Code also enhances certain
planning options, such as creditor protection
opportunities and planning to provide for a disabled
beneficiary under the discretionary trust provisions.
With new rules and opportunities available under the
Florida Trust Code, many people may want to review their
existing revocable trusts with their Trusts and Estates
attorney at Buckingham, Doolittle & Burroughs, LLP to
determine whether revisions are appropriate to best meet
their planning goals or to address administrative
issues. Trustees of irrevocable trusts should consider
consulting with a member of the Trusts and Estates
Practice Group at Buckingham, Doolittle & Burroughs, LLP
to ensure that the trustee understands his or her
reporting, notice and accounting duties, and that the
trustee provides such information to the beneficiaries
in a proper and timely manner.
Christopher
Gagic
is a Shareholder in the Trusts &
Estates Practice Group. He can be reached at
cgagic@bdblaw.com
or
561.241.0414.
Kudos
David W. Woodburn (Akron)
was quoted in the August
20-26, 2007 issue Crain's Cleveland Business
magazine. He discussed important changes to the
new Ohio Trust Code, which was adopted on January 1,
2007.
Speaking Out
Save the Date for these Upcoming Presentations:
October 15,
2007 -
David W. Woodburn (Akron)
will present
to the Cleveland Estate Planning Institute. His topic
is entitled, "Real Estate Issues for Estate Planning."
October 16,
2007 -
Hillary B. Taylor
(Cleveland),
Ronald F. Wayne (Cleveland)
and
David W. Woodburn (Akron)
will be
speaking to the National Association of Insurance and
Financial Advisors at Signature of Solon. The topic is
entitled, "The New Ohio Trust Code: What It Means To You
and Your Business."
Out and About – Recent
Presentations:
Thomas J. Bonasera
(Columbus)
spoke to the Franklin County Trial Lawyers Association on
“What Every Litigator Needs to Know About Probate.”
Mary Sue Donohue
(Boca Raton)
presented
to a group of lawyers at Mellon Bank regarding current
trusts & estates issues.
David W. Woodburn (Akron)
spoke to Sequoia
Financial Group and Cohen & Company at an in-house
seminar regarding, "Estate Planning 101: The
Basics and Beyond."
INFORMATION ON SEMINARS OR SPEAKERS
If you are interested in obtaining information on
upcoming seminars or would be interested in having
speakers from Buckingham, Doolittle & Burroughs, LLP
make a presentation to your organization, please
contact: Lorna
Henderson, Client Relations Administrator, at
lhenderson@bdblaw.com
or 800.686.2825 ext. 86473. |
