By David F. Bacon, Attorney at Law
Board Certified in Estate, Trust and Probate Planning
Over a decade ago my partner and I made a commitment to shift the focus of our legal practice from what had been the general practice of law including divorce, trial work, criminal, federal bankruptcy, business entities, real estate etc. to a specialized practice of law focusing on estate and business planning.
The shift in our practice was undertaken with some trepidation on our part as many of those areas of law we were then practicing were paying our bills and putting food on the table. However, we decided that the then increasing complexities in every field of law demanded that we decide upon a specialized area and practice in that area of the law and areas of law related to estate planning.
Within just a few years of our shift of focus the second Bush Presidency commenced and with it came sweeping changes to the federal estate and income tax structure. Those changes continue to occur during the Obama’s Presidency. Almost immediately the questions began as to how we were going to be able to continue to practice once the Federal Estate tax exemptions were finally phased in and the Federal Estate tax was repealed. The popular wisdom was that with the passage of the repeal of the federal estate tax that there wouldn’t be anything for us to do.
The surprise to us of course was that the then proposed phase out of the Federal Estate tax did not decrease out business. Our business actually increased as people began to reassess their estate plans and make amendments to assure that their plan conformed to the new regulations.
With the recent downturn in the economy, and I am using that term “downturn” in the most hopeful sense possible as describing current economic conditions as a “downturn” is similar to explaining the Titanic tragedy as a leak developing in the boat, we are again questioned what it is that we as estate planners will be doing in the future as no one any longer has any estate to plan. A friend recently referred to his retirement plan as his “201k” plan.
I have come at this definition of what “estate planning” actually means in many past articles and will address it again in this one.
Estate planning is not solely defined as a plan to avoid the taxation of a major fortune. Planning to pay the minimum amount of taxes is of course part of estate planning, but tax planning is not sole descriptor of estate planning any more than reciting that an automobile defines transportation. There are multiple facets to the transportation industry just as there are multiple disciplines, goals and objectives in estate planning.
So, here is a “heads up” as to some of the things which won’t change with whatever changes come to pass under the new administration’s tax strategies.
Under Ohio law you have an estate plan devised for you if you have not devised one for yourself. In Ohio if you have any asset that is titled in your name and the title to that asset remains titled in your name after you die, that asset under Ohio law will become a probate asset. Having probate assets at your death will most likely require your estate representatives to have some sort of a probate estate opened for you at your death. In Ohio the Probate Court of a decedent’s residence will most generally have primary jurisdiction (right to say) over that decedent’s estate.
Wills primarily direct the distribution of probate assets. If you have probate assets at your death and do not have a will, you will still have a probate administration of your estate. The difference is that Ohio’s laws of descent and distribution will determine who your heirs at law are and will distribute your probate assets to those folks.
It is possible to avoid the probate administration of your estate, but you have to take steps to accomplish that happening. It is possible through beneficiary designations to ensure that your assets do not remain titled in your name after your death and become probate assets, but rather pass directly to beneficiaries whom you have pre-designated. This pre-designation is something that you must do before your die. Some examples of these pre-designations are transfer on death (TOD) or payable on death (POD).
In addition to these beneficiary pre-designations it is possible during your lifetime to create and fund revocable living trusts and title your assets into these trusts. A revocable trust is a trust over which the grantor (person placing the title to the asset into the trust) has relinquished no control. The Grantor retains the right during his or her lifetime to remove any asset from the trust and to modify and or terminate the trust. Properly funded during lifetime a revocable living trust will in most instances avoid the probate administration of a decedent’s estate.
The next thing that hasn’t changed is the absolute necessity of creating powers of attorney for you. These documents enable the persons you select to make business and health care decisions for you if you are unable to make these decisions for yourself. Absent these advance directive documents, if you become disabled your loved ones will most probably be required to seek a probate guardianship over your person and or estate. This procedure is almost never necessary for an adult and most generally occurs when the disabled person has simply failed to plan in advance.
So here we are heading bravely into the New Era and lots of changes in estate planning again on the horizon. I’ll end this as my Aunt Muriel always concluded her correspondence, “More later…”
This article was written by David F. Bacon, Attorney and Ohio State Bar Association Board Certified Specialist in probate, trust and estate planning. David Bacon and Jeff Roth are partners and Jessica B. Moon is an Associate in Roth and Bacon Attorneys, LLC with offices in Upper Sandusky, Marion, Port Clinton, Ohio, and Fort Myers, Florida. They have focused their practice to provide estate and business planning concepts to their clients. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to help educate the public on concepts of law as they pertain to estate and business planning. Copyright @ David F. Bacon.