Kathryn T. Joseph & Associates, Inc.

Cleveland Estate Planning Blog

Estate plan approaches for transferring IRA funds

Ohio residents who are planning their estates need to make decisions about how to distribute all of their assets, including individual retirement accounts. These tax-protected savings accounts allow owners to designate beneficiaries. The beneficiary designation on the IRA cannot be overturned by designations in other estate plan documents, like a will. Account holders have multiple options for how to disburse funds after death, and other elements of the estate plan, like a trust, could support the goals of benefactors.

Spouses often inherit IRA funds. Depending on their age, spouse beneficiaries can roll over the assets into a new IRA to continue tax protection. People also have the option to bequeath these leftover retirement funds to children or other loved ones. These beneficiaries have can choose to place the money into an inherited IRA to prevent immediate taxation. If the beneficiary could be a minor upon receiving funds, the will needs to name a custodian to manage the money until the child reaches the age of majority. Using a trust to hold the funds for the child and naming the trust as beneficiary could successfully transfer the assets while maintaining control. Trusts, however, involve administrative costs that need to be considered against the potential benefits.

Risk mitigation important consideration for trustees

An increasingly complex legal and financial environment has developed in Ohio and elsewhere as a large multi-generational wealth transfer has begun. One market intelligence firm estimates that the next three decades will oversee a wealth transfer of $16 trillion. With more estates holding substantial assets, the potential risks of legal problems are rising. New forms of trusts have emerged, and the people tasked with administering them should fully consider their fiduciary responsibilities and personal liabilities.

As trusts have expanded their purposes, the types of assets held by them has also diversified. Estate planners now use trusts to manage more than stocks, bonds and real estate. People have developed trusts to hold assets like collectibles, art, and family businesses. A trust containing an operating business could confront the trustee with a choice between representing the interests of trust beneficiaries or other company shareholders. Complicated trusts often require a team of trustees, which introduces the possibility of disputes between trustees.

How to choose a trustee

Ohio residents who want to establish trusts as a part of their estate plans may wonder how they should choose the trustee. It is important to consider who to choose to serve as a trustee carefully in order to make certain that the trust will be administered in the best interests of the beneficiaries.

When people first prepare living trusts, they will normally be named as the initial trustees and will administer their own trusts during their lifetimes. If the initial trustees are married, their spouses will normally then assume the roles of trustees. When the spouses die, the trustees who will assume the duties are known as successor trustees. It is important to be careful when choosing who will serve as the successor trustees.

What happens when Mom and Dad can no longer manage money?

If your contact with your aging parents, due to job responsibilities or geographical distance, is sporadic, you may miss the first indicators that one or both is experiencing mild cognitive impairment. It can be shocking to visit after several months and see obvious signs of poor judgment or worrisome behavioral changes.

What should adult children do?

Using a durable power of attorney

Ohio residents who are creating an estate plan might want to consider including a power of attorney. A power of attorney gives a person the ability to act as another person's agent in financial or legal matters.

Usually, a durable power of attorney is better than a nondurable power of attorney. The problem with a nondurable power of attorney is that it no longer applies if the principal becomes incapacitated, but a main reason to include a power of attorney as part of an estate plan is so that the agent can step in if the principal becomes incapacitated. This gives the agent the ability to handle issues such as filing the principal's tax return.

Why self-prepared wills can be a problem

Many Ohio residents become concerned about estate planning after they have children, experience a health scare or learn that a friend or family member has passed away. In some cases, these individuals may be tempted to make use of boilerplate wills and other estate planning forms found online.

In some cases, doing one's own estate planning doesn't do any harm. The trouble is that many people don't realize the complexities of their estates and family relationships, and end up with an incomplete or insufficient plan that can create significant heartache and difficulties for their survivors.

Strange final requests and estate planning

One of Ohio's most interesting residents left behind an iconic method of food packaging along with a very unusual final request on his will. The inventor of the famous and tubular Pringles can of potato chips was 89 years old when he passed away in Cincinnati. In 2008, his children learned that the late chemist, who was known for his lively sense of humor, wanted to be buried inside a Pringles can.

It is not clear whether his final request was included in his will or as part of his estate planning documents. However, his children carried out his final request by stopping at a Walgreen's drugstore before they arrived at the funeral home. Reportedly, his survivors agreed that they had to use an original flavor Pringles can.

Role of residence trusts in estate planning

Ohio residents have a number of options available to them for asset protection against taxation, business succession and the protection of heirs against their own bad habits or the cunning of others. In some cases, beneficiaries and trustees face a learning curve when it comes to handling trust property and carrying out the instructions.

A qualified personal residence trust is one of several types of irrevocable trusts. This means assets become trust property and are removed from the benefactor's control immediately. The special exception of a QPRT is that owners can stipulate a certain number of years they can retain the option to live in the home before it is available to the beneficiary.

Even at a young age, a will is helpful

You're still young, so you may not think you need to worry about having a will. While you could live to be 70 or even reach 100, there's also the possibility that you could pass away much sooner.

The idea that younger people don't need a will is false. Not having a will means you have no say in what happens to the items you have if you pass away. For example, if you have a life-insurance policy, the state will determine whom it is paid to instead of following your wishes.

Act changes things for Medicaid beneficiaries with disabilities

Ohio residents who benefit from Medicaid might be familiar with special needs trusts (SNTs). These irrevocable trusts make it possible for an individual with disabilities to store their assets. In a first-party special needs trust, the trust can only consist of assets that belong to the beneficiary of the trust. Before the 21st Century Cures Act, which became law on Jan. 1, individuals with disabilities faced hurdles in creating first-party special needs trusts.

In 1993, the Omnibus Budget Reconciliation Act became law. The draft that became judicially enforceable did not recognize individuals with disabilities as having the legal capacity to create trusts. Therefore, individuals with disabilities who were legally competent, and thus able to create a trust, had to have a family member, such as a parent or grandparent, establish the trust for them.

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Kathryn T. Joseph & Associates, Inc.
Executive Commons West
29425 Chagrin Blvd.
Suite 305
Cleveland, OH 44122

Toll Free: 888-335-6650
Phone: 216-245-0504
Fax: 216-765-8817
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