5 Things Your Sunbury Ohio Estate Planner Should Have Covered
1) How to Avoid Probate Court:
Many estate plans begin and end with a creation of a Last Will and Testament. However, Will’s do not avoid probate court. Probate is the process of administering the estate with court supervision. Like most things that involve the court system, it can be slow, complicated, and expensive.With one of our four Estate Planning offices located near Sunbury, Ohio we make it our mission to educate our Sunbury area clients on how best to avoid probate court. Sometimes the best way is to use a Trust but a Trust is not always necessary. You can also avoid probate court with beneficiary designations, like PODs (payable on death) and TODs (transfer on death). However, there are downsides to using beneficiary designations alone. For example, a TOD Affidavit can be used in Ohio to pass property without probate court and without a Trust. However, a TOD on real estate in Ohio will give what are called “dower rights” to a son-in-law and daughter-in-law upon your death. These dower rights can cause problems in many families where the in-law is uncooperative or gets greedy and uses his or her dower right to leverage what he or she wants. Further, POD and TOD can cause family strife as it requires all of the beneficiaries to work well together. Let’s be honest, when money is involved families can squabble. Therefore, your Estate Planner should have had the conversation of how to avoid probate and which way might be best for your family.
2) How to Minimize the “New Estate Tax”:
January 1st of this year, the SECURE Act passed. This law changed how retirement accounts are withdrawn during your lifetime and after your death. The most negatively impactful change is the change to how fast your beneficiaries must withdraw from your retirement accounts after your death. Prior to the law change, a non-spouse beneficiary was able to “stretch their inherited IRA” over their lifetime. This spread out the tax on the pre-taxed portion of your retirement accounts over many years which allowed your beneficiaries to stay in a lower tax bracket. The new law requires that most non-spouse beneficiaries must withdraw your entire retirement within 10 years after your death. This means a great boon to State and Federal coffers since the shorter withdrawal window means many of your beneficiaries will be forced into a higher tax bracket while they are forced to withdraw from your retirement account. For decades, Estate Planners have planned to minimize the old estate tax. However, with the estate tax exemption being over 11.5 million per person (at the time of this article), estate planners have forgotten how to minimize taxation for their clients. At Cooper, Adel, Vu we believe that, with the passing of the SECURE Act, the estate tax is back with a vengeance. Therefore, we are proactively helping our clients minimize the effect of the new “estate tax”. We are doing this by helping them manage withdrawals of their own retirement accounts during their lifetime. With proactive steps clients can reduce the overall income tax of their retirement accounts by utilizing their own lower income tax brackets during their retirement years to convert to a ROTH in a tax efficient manner. We also can minimize the effect of the SECURE Act by creating trusts designed specifically to spread the tax of the retirement account over as many beneficiaries as possible to keep tax rates low after your death.
3) How Powerful are the Powers within your Power of Attorney:
Not all Powers of Attorney are the same. There are, of course, financial and legal Powers of Attorney and there are Healthcare Powers of Attorney. However, even within the world of financial and legal Powers of Attorney there are levels of powers. For example, you could have a very limited POA designed to work only in a very specific circumstance. Most Ohio residents will get a very generic statutory POA from their local Estate Planner. Although good for many circumstances, we at Cooper, Adel, Vu have found that these generic POAs are not helpful in the case of a catastrophic healthcare event that causes custodial long term care. If someone needs custodial long term care, the expense is enormous and in many cases they will eventually need the assistance of public benefits to pay the bill. Most of the POAs do not have the powers needed to allow transfer of assets, without limitation, between spouses or certain Trusts designed to help them qualify for public benefits. Most POAs are simply not powerful enough. As both Estate Planners and as Certified* Elder Law Attorneys our firm is uniquely positioned to recommend what’s needed in your estate plan that could help us preserve your assets should long term care become a reality.
4) How to Protect your Assets from a Nursing Home Spend Down:
In addition to having the right type of POA, your Estate Planner should have spent some time on whether or not it makes sense to consider proactive Nursing Home planning. This can mean longterm care insurance, but because of the cost and limitations of longterm care insurance it usually means proactive legal planning is necessary to reduce the “Medicaid spend down” of assets. Medicaid, the public benefit that helps pay the cost of a nursing home, has strict rules regarding what’s needed to qualify for benefits. Many of those rules do not apply if you plan 5 years prior to applying for Medicaid. Therefore, the time to consider what you should do to protect assets is when you set up your estate plan, far in advance of a nursing home stay. As both Estate Planners and Certified* Elder Law Attorneys we understand that certain Trusts designed to help avoid probate and family strife can also help protect assets from a Nursing Home Spend Down. Most trusts have no nursing home protection included and for good reasons. What is needed, is the conversation about what type of nursing home protections makes sense for you.
5) How to Protect your Child’s Inheritance from a Divorce and for the Bloodline:
What happens in the years after you pass away? Some would say “Who cares? I’m gone!”. However, many of our clients do care and for this reason: they want to make sure that their assets go strictly to their children and grandchildren; not only at the time of their death, but even long after they are gone. For example, if a child inherits assets from you, commingles those assets with their spouse, then later they divorce, what happens to the inheritance? Our clients don’t want the inheritance to be intentionally or accidentally commingled. They want the inheritance to stay protected from a divorce. To do that, you create a trust for the child. Not a trust for you that ends at your death, but a trust that continues on for the life of the child. These trusts can even then be hard-wired to pay out to your grandchildren versus going to your child’s spouse who might re-marry or might favor step-grandchildren over your own grandchildren. We call these trusts “Heritage Trusts” and, in addition to divorce and bloodline protections, these trusts can even be designed to protect your child’s inheritance from creditors or be designed to prevent them from being kicked off of public benefits for which they would otherwise qualify, like Medicaid and Supplemental Security Income (SSI).
If your Estate Planner did not cover these 5 topics with you, consider speaking to one of our Certified* Elder Law Attorneys near Sunbury Ohio, or one of our other 3 locations. Let us help you get your ducks in a row with a comprehensive evaluation of your estate planning needs. Attend one of our free workshops or schedule a free consultation today!
Author: Daniel H. Vu, Certified* Elder Law Attorney
*Certified by the National Elder Law Foundation and the Ohio State Bar Association as specialists in the field of Elder Law.