What happens to a person's property if they die without a will?
A: If a person (decedent) dies without a will, and their property has not been transferred to a living trust or otherwise designated to transfer on their death to another person, then such property will be distributed according to Ohio's Statute of Descent and Distribution (ORC 2105.06). Dying without a will is referred to as dying intestate. In such situations, the probate court will appoint an administrator to ensure that the decendent's debts are paid and that property is distributed according to the Statute of Descent and Distribution.
How can I avoid Probate?
A: Probate can be avoided by several means. The most common ways of avoiding probate are creating and funding living trusts, establishing beneficiary designated transfer on death accounts (bank accounts, retirement accounts, life insurance, etc.), re-titling property to transfer on death to another person (e.g., car or real property titled to transfer on death, real property held in joint tenancy with rights of survivorship, etc.).
By placing property into a trust, do I still have to pay estate taxes on the property?
A: Property that is placed in trust or otherwise passes outside of probate is still generally included in the decedent's estate for calculating estate taxes. However, certain trusts, such as an AB Trust or an irrevocable trust, can allow one to pass property in a manner that reduces and sometimes eliminates estate taxes. However, both types of trusts require giving up all or some control over assets. Irrevocable trusts require giving up entire control over estate assets, and AB trusts require that the surving spouse only receive trust principal during her lifetime for certain purposes, such as for health, education, maintenance, and support. Generally, this has little impact on most estates, but it could limit the type of spending a surviving spouse could engage in, particularly for luxuries, if there are beneficiaries likely to challenge the surviving spouses use of trust property that is ultimately designated for the beneficiary.
What are the current estate tax rates?
See my estate tax page.
After my trust is created, what do I have to do?
A: A living trust must be funded to avoid probate and to be an effective estate planning tool. Otherwise, property is included in the descendant's estate and will pass through probate, and then generally pour-over from the will into the Trust. If the trust is not funded during lifetime, its usefulness in avoiding probate is eliminated. It can still be useful in providing for administration and delayed distributions to children or young adults, however.
How do I fund my trust?
A: Your trust can be funded by assigning your personal assets to the trustee of the trust, and by naming the trustee of your trust as the beneficiary of any accounts you own. Often, the trust is named as a contingent beneficiary in case the spouse predeceases the account holder. Real property (land) may also be titled in Ohio to tansfer on death to the trustee of the trust.
How long does the probate process take?
A: The probate process generally takes between 4-6 months for simple estates without any estate tax issues. If the decedent's estate owes federal or state estate taxes, additional time may be required to prepare the returns. If the decedent was involved in litigation or a claim is brought by the executor or administrator of the estate, then the probate process could last 1-3 years, depending on the situation. During this time, distributions to beneficiaries may or may not be made. Because an executor or administrator may be personally liable for any deficiencies, often times distributions are not made until any estate taxes are paid and all creditors are paid (or the time for them to make a claim has run.)
Do I need a trust if all my property is named as joint tenancy with rights of survivorship, transfer on death, or otherwise to a designated beneficiary?
A: A trust may not be necessary, but a trust can add flexibility not otherwise available in transfer on death or beneficiary accounts. With a trust, for example, property can be added upon your death, and held until your children have reached the age of majority, with principle being distributed for health, education, maintenance and support. The principle would then be distributed outright when the kids reach certain ages (such as 1/3 at age 21, 1/2 at age 30 and the remainder at age 35.) In addition, a trust can allow you to name various beneficiaries and trustees for the property, allowing one to more easily divide property equally or according to one's wishes. The beneficiary designated accounts may limit the number of contingent beneficiaries, which could result in property being added back into your estate if the designated individual predeceases or dies simultaneously with the owner of the property. In addition, it is much harder to divide property between multiple beneficiaries using transfer on death accounts. Moreover, in larger estates, trusts may be used to reduce and often eliminate estate taxes; generally, such savings cannot be achieved without them. For example, life insurance proceeds that are payable to one's estate are included in calculating Ohio's estate tax, but are not included if they are paid to someone else, including a trustee. Therefore, a trust can prevent life insurance proceeds, which may quickly place a decedent's estate over the Ohio estate tax exemption amount, from being added into the gross estate inadvertently for calculation of the Ohio estate tax. Often a spouse is named as the primary beneficiary and the trustee of the trust as the backup.