Many times, certain areas of the legal world can be confusing and easily misunderstood. We at Butcher Elder Law have laid out below some common areas of confusion to help answer some of your questions.
- Business Succession Planning
- Probate and Trust Administration
- Wills, Trusts, and Powers of Attorney
Business Succession Planning
Sam Butcher helps business owners explore tax efficient options to sell their business and minimize taxes, or transfer it to the next generation and to preserve their financial security.
We, at Butcher Elder Law, work to protect your business interests and ensure that an effective plan is in place to continue business in the event of the unanticipated incapacity or death of the business principal.
Probate and Trust Administration
What is probate?
Probate is one of the most misunderstood proceedings in all of the law. Essentially, probate is the process of presenting of your original last will and testament to the court for its approval and appointment of your executor. Unbeknownst to most people, your executor is not free to act on your behalf after your death unless and until he has been properly appointed by the court. This process to get him appointed is called probate.
Many clients come to our office indicating they want to avoid probate. That is not always necessary but may be well worth consideration. The reason? The probate process requires “heirs” to agree that the will is that of the deceased person and consent to the appointment of the executor. Unfortunately, this cannot always be accomplished as easily as hoped for and anticipated.
The surviving spouse, for example, may be incompetent, one of the children may be estranged and unable to be located, or one of the heirs may be mentally incapacitated and therefore lack the legal capacity to consent to the authenticity of the will and appointment of the executor. Sometimes, the kids won’t sign even when we thought they would. In all of these cases, additional, costly and time-consuming legal procedures must be employed in order to proceed with the administration of the estate. The executor cannot be appointed until all of the heirs have been located, all have capacity, or are personally represented by another with legal authority for them who does have capacity, and agree. Failing to agree requires no effort by the heir beyond simply not signing the waiver and consent form necessitating that the Court schedule a hearing.
It is very important that you have a will. If you die without a will, the state will decide who gets your assets, and, more importantly, who the administrator of your estate will be. If you have minor children, then your will must name the guardian of those minor children whom you wish to have appointed or the state will decide who will raise your children.
The worst part of probate is having to deal with lengthy and expensive legal requirements involving the courts to do what you believe you should be able to do automatically, all while your survivors are dealing with the loss of a loved one.
Probate takes a minimum of six months, but rarely is an estate open and closed within six months. In many cases, if you are unable to meet all the requirements to the satisfaction of the Court, or if there is any contest to the will or the administration of the estate, it could linger for years.
Interestingly, you do not need to employ the attorney who drafted the will for probate. It is important when you pick a probate lawyer to ensure they are experienced in probate and, more importantly, they have a process in place to bear the burden of keeping the estate moving for you so you don’t have to attend to it constantly. Much of our work can be done by paraprofessionals, thus minimizing the cost to you and your family.
Let the experience and trust of Butcher Elder Law support you and your family.
Wills, Trusts, and Powers of Attorney
Wills and Trusts – Basic Estate Planning Documents
All people need, at a minimum, a basic estate plan. What is essential for you? In our opinion everyone needs a will, health care power of attorney, and financial power of attorney.
A Will contains your simple instructions to the court as to who will get the assets you own after you die and who will ensure that your wishes as expressed in your Will are carried out (your Executor). Without a Will, your assets will go to the people the State of Ohio dictates, which may not agree with what you would want. More importantly, if you do not have a Will, the state will dictate who is in control of your assets and the distribution process.
Most people execute “Sweetheart Wills” – i.e., everything to my wife or everything to my husband. A properly drawn Will should have “stand by” provisions for underage or disabled beneficiaries. Many people do not want underage beneficiaries to receive large sums of money on their 18th birthday which is all that is provided for in most Wills.
Additionally, today many people receive some form of state or federal benefits to help pay for burdensome medical expenses due to a disability. Naming them as beneficiary in your Will could instantaneously disqualify them from those state and federal benefits they are receiving.
A properly drawn Will should have a stand by Special Needs Trust so you can still leave your bequest to a beneficiary with a disability without worrying about your bequest to them disqualifying them from their state or federal aid. And lastly, for those who consider it necessary, appropriate, or advantageous to do so, a Will can incorporate a trust at your death to set up protection of the assets for your family members left behind that would provide them use of the assets without making the assets available to their spouses in divorce, lawsuits, creditors, or nursing homes.
Unfortunately, since the trust is in the Will, it must still go through probate to be created and will not be automatically created upon your death.
Contact Butcher Elder Law to discover the different types of Wills and which type is best suited for your needs.
Joint and Beneficiary-Designated Accounts
Many people consider joint accounts, beneficiary-designated accounts, or payable-on-death accounts to avoid the need for a will. While these provisions may bypass the need for a will and provide that the joint account holder or designee will receive your assets immediately after your death, there is no protection or guidance in the event that individual is not able to receive it, or should you become incapacitated prior to death.
If, for example, you own something joint with a spouse and she is disabled at the time of your death, all your assets will go to her and then be available to pay for her costs in a nursing home. Additionally, if you own assets joint with your children, those assets can be lost to your children’s creditors. If your child ends up in bankruptcy or divorce, oftentimes your assets may end up in the hands of a child’s former spouse or the bankruptcy court in favor of your child’s creditors.
Thus, having joint accounts or beneficiary-designated accounts can be very dangerous. In limited circumstances, they work, but we recommend a comprehensive review of your accounts to determine the risks to your family and the best way to hold title to your assets.
Health Care Power of Attorney and Living Will
Many people confuse a Health Care Power of Attorney and a Living Will. A Health Care Power of Attorney is a legal document that authorizes someone to make your healthcare decisions for you in the event you are unable to do so. These decisions often relate to life and death. A Living Will, on the other hand, is a legal document you create that states what your wishes are with regard to whether you want to be kept alive by heroic measures in a life and death situation.
Typically, Living Wills indicate whether or not you want to be kept alive with artificial respiration, intravenous or tube-type feeding, or other more extreme medical support. Unfortunately, most standard Health Care Powers of Attorney and Living Wills fail to deal with the everyday issues of your healthcare needs in the event of your incompetency.
We recommend you work with us at Butcher Elder Law to ensure that the proper instructions are included in your healthcare documents.
Personal Care Plan
A personal care plan is a detailed set of instructions for your loved ones that identifies the specific request you have with regard to your care if you become mentally incapacitated.
Many of us think of incapacity as being slouched over in a wheelchair drooling on ourselves. In fact, many people are physically healthy, aware and awake, but unable to articulate their wishes, preferences, likes and dislikes. In these circumstances, you can preset instructions as to what type of care you want provided for you should you need assisted living or nursing home care. These instructions include preferences for describing your personal hygiene needs, your access to the outdoors, your desire and guidelines for visiting family, going to public places, the theater, what you like to eat, what you like to watch on TV, hobbies, books, other reading materials, and your preferences for attending religious services. This can be a very important guide in helping your family members care for you in the way you would want them to without leaving it up to chance that they will know what you want.
Power of Attorney
A Power of Attorney is a legal document that authorizes another person to handle your legal or financial matters. Most Powers of Attorney are valid when signed. That is, after signing the Power of Attorney, the individual appointed can go and empty your bank account immediately.
A Power of Attorney is essential to have, as without it, your family may be required to file a legal proceeding seeking guardianship over you. This process involves a court, lawyers and usually costs $3,000 to $5,000, and can take up to a year. A properly drawn Power of Attorney, on the other hand, may cost as little as $150.
The state has created “Statutory Powers of Attorney” that are used by many law firms and may even be available in stationary stores. Unfortunately, while these provide general powers and authority, we consider them to be “blank checks”. The reason is that these documents give broad authority without any instructions of how that authority is to be exercised. If there is a disagreement as to how it’s being used, the courts will have to decide whether the agent acted properly.
Statutory Powers of Attorney sometimes also fail to give enough of the necessary powers. The Statutory Power of Attorney, for example, does not permit your agent to access safe deposit boxes, create trusts, do asset protection planning, or perform Medicaid planning in the event of your disability. These, along with many other powers that are not included, are essential to have in an estate planning context if one of those issues were to happen to you.
Contact us at Butcher Elder Law to learn more about how to create a Power of Attorney that will meet your needs, but also include specific instructions so there are no disagreements or lawsuits between family members.
Irrevocable Trusts are used predominantly for two purposes: tax avoidance or asset protection.
Tax Planning Trusts
The two most common taxes to avoid are income and estate taxes. Income taxes can be as high as 39.6 percent and, though the threshold for paying any estate tax is $5.25 million, the current top estate tax rate is 40%. There are many different types of trusts to minimize or avoid these taxes. They include:
- Grantor Retained Trusts / (GRAT / GRUT)
- Charitable Remainder Trusts / (CRAT / CRUT)
- Charitable Lead Trusts / (CLAT / CLUT)
- Qualified Personal Residence Trust (QPRT)
- Irrevocable Life Insurance Trust (ILIT)
- Qualified Domestic Trust (QDOT)
- Intentional Grantor Trust (IGT)
Each of these trusts provides different tax saving opportunities. A primary concern with any of these trusts, however, is that they require the grantor (i.e., the person creating the trust) to give up control of the assets placed in the trust. The grantor is also prohibited from making changes to the trust after it is created and basically must give up his rights. While this may seem extreme, people opt to create these trusts to avoid the alternative of having a substantial portion of their estate going to the government in taxes.
Asset Protection Trusts
Asset Protection Trusts are not as restrictive as Tax Planning Trusts. They ensure the grantor is able to protect his assets from liabilities during his lifetime, from lawsuits, nursing homes, or other predators and creditors.
Asset Protection Trusts, unlike Tax Planning Trusts, can allow the grantor to retain full control of their assets, and even retain the right to change the beneficiary and the method, manner or timing of distribution. A careful balance, however, must be maintained between the amount of access and “benefit” the grantor wants to retain and the amount of protection from creditors, predators, and nursing homes he desires.
While the grantor often gives up some rights to his assets, he does not need to give up any right to his assets for the benefit of his family. Assets transferred to an irrevocable Asset Protection Trusts can be used to support children, grandchildren or any other family members at any time that the grantor deems appropriate. The only requirement to achieve asset protection is that the grantor must give up access for himself or herself, up to the extent he wishes to protect it from creditors and predators.
Asset protection planning has become much more flexible and friendly over the past decade, and many of our clients at Butcher Elder Law favor it to ensure that their lifetime accumulation of assets is not lost needlessly to lawsuits, nursing homes or other predators and creditors.
Additionally, Butcher Elder Law is aligned with other highly qualified experts when it is necessary to address a range of diverse client needs. These experts include geriatric care managers, financial advisors, home healthcare givers – medical and non-medical, funeral directors, CPAs, insurance agents and bankers, among others.