There is no perfect estate plan that fits everyone. Like many types of planning, the beginning point is to determine what it is you are trying to accomplish. Most would agree that a major goal is to be sure as much of your wealth as possible goes to your intended beneficiaries at your death. But does that involve planning for estate taxes, avoiding probate, or controlling the distribution of assets long after your death?
Estate taxes have become a concern for fewer people. The Ohio Estate Tax was repealed in 2013. And the Federal Estate Tax only applies to taxable estates exceeding a value of over $5 million. Even if it does not appear that an estate tax issue will arise, clients should re-visit the issue if they inherit large sums or win a substantial lottery prize.
“Probate” is from the Latin verb “probare,” meaning “to prove.” To probate an estate is to prove the Will and the persons entitled to receive assets from the decedent’s estate. In Ohio, the processing of an estate is done through the Probate Court. That process involves Court costs, usually hiring an attorney , and mandated processes. Normally, a probate estate cannot be closed until at least six months from the date of death.
Avoiding probate can be accomplished by the use of trusts, or by titling assets in non-probate form. One can create a trust while living (an “inter vivos” or “living trust”), or a trust that doesn’t come into being until death (a “testamentary trust”). In either case the trust, through its trustee, must own the individual’s assets. The Trust Agreement or Declaration of Trust directs what happens to the Trust’s assets. Alternately, one can avoid probate by beneficiary designations, or by owning assets jointly with rights of survivorship. Such assets would pass according to their ownership, instead of through the probate process.
Another consideration is whether the timing of distributions is important to the family. A Will provides that, at death, assets are distributed and the estate is closed. If the planner wishes assets to be available for one beneficiary’s use, and later go to another; or if distributions should be made at certain intervals or at certain ages, a Trust may prove a better choice than a Will.
An estate plan should be contoured to the individual. If you don’t know why your estate plan contains the plans it does, it may not be truly “your” estate plan.
An attorney is not required, but the legal procedures must still be followed. Saving attorney fees may cost the family more in frustration and correction of mistakes. “Do it yourself” approaches may ultimately cost more in the long run. As is often stated, “A lawyer who represents himself has a fool for a client.”