Ohio has eliminated the Estate Tax; and the Federal Government has increased the Estate Tax Credit to $5,430,000 per person with spousal portability which has made Estate Planning for tax purposes less relevant.
However, there are other very important reasons why Estate Planning is very important.
Clients with young children need to be concerned about the future of their children in the event of their untimely death. A typical Will will designate who should physically care for the minor children following the death of a parent. In the event of the death of only one parent, the survivor is automatically the custodial parent. However, in the event of the death of both parents, consideration must be given as to who will be in charge of the minor child’s assets. And who will be responsible for the care of the minor children. Normally, the same person can be designated as both the Guardian of the Estate as well as the Guardian of the person of the children. In some instances, however, it is advisable to separate the responsibilities. An example would be where the person designated as the Guardian of the person of the children may not be financially responsible and in that instance, another person should be named as the Guardian of the estate of the children. The Guardianship terminates upon the children reaching their 18th birthday. Whatever funds are remaining, automatically becomes the children’s’ funds. This may not be a desirable effect, particularly if there are substantial assets involved.
THE NEED FOR A TRUST.
In situations where there may be sizeable assets but well below the Federal exemption, the Trust is ideal for those who want to insure that the minor child’s assets will be held and protected for the benefit of the child until the child reaches a suitable age. Also, a Trust may be used to create a family legacy to control the disposition of the assets within the family blood line.
Another planning tool with a Trust is that the assets left in trust for the benefit of the children can be protected from creditors and the child’s spouse, in the event of a divorce. Likewise, the funds can be controlled by the Trustee to avoid the child from frivolously spending and wasting their inheritance.
Another important factor is that by having one’s assets in a Trust, avoids Probate. This is normally an extended process but it can be costly and time consuming. Unlike with a Trust, any assets inherited by the heirs through probate become the assets of the Beneficiary without any protection as afforded by a Trust.
With a Trust, in the event of a second marriage where there may be children from prior marriages, careful planning needs to be thought out and agreed upon by other partners of the second marriage. This can be accomplished more smoothly and clearly by use of Trusts. More specific assets can be designated for specific beneficiaries with proviso and contingencies in the event of one of the partner’s premature death to provide that partner’s children from a prior marriage.
IN EVENT OF DISABILITY.
With a Trust, in the event of mental incapacity, the Trustee is able to provide and manage the disabled person’s financial affairs and the person’s business interests without the necessity of appointment of a Guardian. Normally, in the event of a person’s disability where the person is unable to manage his or her finances, a guardianship will generally be required. This is an expensive and time consuming process requiring annual reports to be filed with the Probate Court. With a Trust, this process can be eliminated.
If you need further information or advice regarding your Estate Plan, please feel free to call, Joseph T. Svete at 440-286-9571.