by Dan McCarthy | Dec 15, 2021 | Estate Planning, Trusts and Wills
A trust is a great mechanism for handling estate business and it can be beneficial to anyone with any number of assets. You want to keep your affairs private and stay out of probate court? Maybe you have stepchildren? You want to leave money to your favorite charities? Or you own a small business and you’re concerned about liability. Perhaps you have a child with special needs. You have an elderly parent who might need government benefits. And so on. There are lots of situations where a trust is just the thing.
In an ideal world, a trust runs like a well-oiled machine. The creator of the trust is even-handed and fair in where he wants his money to go. The recipients of trust funds – the beneficiaries – want the best for all, including themselves. The trustee – the person entrusted with managing the money in the trust – is conscientious and responsible. She invests wisely. She provides beneficiaries with regular accountings of how those investments are doing. She pays beneficiaries earned interest right on time. When the trust has served its purpose, she pays out assets and winds up the estate.
That’s the ideal world. Not everybody lives there, unfortunately. Individual trustees can be inexperienced, overworked, overwhelmed, intentionally uncooperative, or even abusive or dishonest. Beneficiaries can become anxious and suspicious, with or without reason. And grit gets in the gears.
If you are a beneficiary who’s concerned that the trustee is not living up to her duties, we suggest a stepped approach. Start by being nice and assuming the best intentions. Specifically, identify what’s troubling you. Try to sit down with the trustee to discuss your concerns. Disagreements may turn out to be misunderstandings that can be worked out amicably.
If you don’t have a copy of the trust document, ask for it. Don’t believe what you’re told about what the trust says. You as beneficiary have the right to read the document and to make sure that what you think you’re entitled to is in fact what you are entitled to.
Beneficiaries have the right to know where trust funds have been placed, how much income the funds have earned, and how much the trustee has spent on expenses and commissions. If your trustee has not provided you with an accounting, ask politely in writing. Request that the trustee responds within a specified reasonable time. If your request is simple – for example, you’re only asking for a copy of the trust document – that time could be short. If you want an accounting, allow the trustee more time to calculate expenses and reconcile accounts.
If all goes well, the situation may be resolved at that point.
If not, though, act immediately. Don’t merely hope things will take care of themselves. Your time to go to court is limited and you may be penalized for not acting promptly. Call an experienced trust-and-estate lawyer. General practitioners may be good negotiators, but they are probably unfamiliar with current trust-and-estate law. You need an attorney who has extensive experience with trustees or executors who have mishandled an estate or otherwise breached their duties. And remember – you need your own attorney, not the attorney who drafted the trust.
You and your attorney can then choose the optimal way to reach your goals. Maybe simply a letter from the attorney to the trustee will do the job. If it doesn’t, though, it may be time to go to court. Your attorney will advise you.
But what if you think the trustee is actually stealing? Misappropriating your inheritance? Isn’t that a crime? A police matter?
Yes, but. The police won’t pursue a case unless the trustee has actually embezzled or absconded. Otherwise, if your trustee has invested funds recklessly, or lost money, or won’t communicate with you, those are civil disputes that are resolved in probate court, not criminal court. The probate judge can force uncooperative trustees to act, or, if necessary, may remove the trustee altogether if she is unfit or the situation otherwise warrants.
In sum, an individual serving as trustee is responsible to communicate honestly and openly with beneficiaries, gather and invest property of the estate, and to account for the property that passes through. That can be a big job, so allow your trustee some latitude if possible. But life being what it is, drama and chaos can break out, especially if familial relationships aren’t what they could be wished for.
If you find yourself in that situation, we would be happy to talk with you about how we could help provide support and expertise, to move toward a happier solution. If you need assistance or would like to talk about your specific situation, contact our Cincinnati office at (513) 815-7006.
by Dan McCarthy | Dec 1, 2021 | Estate Planning, Trusts and Wills
Cryptocurrency is a digital asset and as such needs to be addressed differently than traditional estate planning assets. Crypto-assets may comprise significant individual wealth in the forms of cryptocurrencies like Bitcoin and noncurrency blockchain tokens. If you own any of these asset classes, addressing complex challenges to secure, transfer, protect and ultimately gift crypto-asset wealth is crucial to your estate plan.
Estate planning may seem incompatible with decentralized cryptocurrency systems. Joel Revill, CEO of Two Ocean Trust, says, “The idea of handing over your crypto-assets or your private keys to someone else goes against that original ethos of the self-sovereign asset.” Continuing about the asset class, he admits, “A self-sovereign asset is a wonderful concept, but when you put it into the context of succession planning or multigenerational planning, you begin to appreciate the fragility of that custody.”
Understanding Crypto-Assets
Whether you bought Bitcoin early and are managing millions or have more modest sums, understand when formalizing a plan for your crypto-assets, they are vulnerable to being lost forever without preparing to convey the access information to a beneficiary. A private key (public/private key encryption), typically alphanumeric characters, is known to the crypto-asset owner and permits access to the currency’s value through a distributed digital system called a blockchain. If your spouse or other heir is not crypto or technically savvy, they may have no clue how to access your crypto-assets without explicit instructions.
Suppose you have a small number of crypto-assets on an exchange such as Kraken, Binance, Coinbase, or others. In that case, the focus of your estate plan is to leave a comprehensive trail of information to your fiduciary so that they may locate and access the account. This trail can be as direct as a list of the crypto-asset on your schedule of trust assets with certainty that the successor trustee has login protocols to the client’s account on the exchange.
Does My Cryptocurrency Need to Go into a Trust?
For those with more extensive cryptocurrency assets, seeking professional help to establish a custodian and trustee may be necessary. You can use one or a combination of these solutions that help you both protect and make your estate plan for digital assets:
- Share your seed phrase (master password) and private keys with a very trusted family member or friend.
- Divide your seed phrase and private keys among multiple highly trustable individuals so that no one person has complete control of your digital assets.
- Create a trust and transfer into the trust crypto-asset ownership with a designated loved one or corporation to serve as trustee.
- Put your crypto-assets in custody, such as a software application or hardware wallet.
- If you have the technical expertise, you may prefer to use a dead man’s switch app.
- Implement a cascading multi-signature wallet, thus dividing responsibility instead of a self-sovereign wallet.
Digital asset custodian services like BlockFi, Unchained Capital, Anchorage, Casa, Genesis, and more also provide secure protection for crypto-assets alongside trustee services. Many of the trusts created for cryptocurrency are lifetime discretionary trusts; however, there is no widely accepted digital asset estate plan template. Some owners prefer a simple approach while others tend to the very complex; still, others favor flexibility.
Beyond the safe storage and ultimate successful transfer of digital cryptocurrency, ownership is the question of what your beneficiary will do with the asset. There are tax implications when transferring or possibly selling digital assets. In this instance, some of the more traditional capital gain tax strategies are applicable. The inheritor can hold until their short-term gain becomes a long-term gain, thus reducing the tax consequence. They might also offset capital gains with capital losses or sell in a low-income year. Each beneficiary will have to weigh their financial situation to identify the best approach for themselves.
Cryptocurrencies are ushering in a new age where primary estate planning documents like a will are not enough to meet the digital needs of this asset class. The nature of cryptocurrency is somewhat volatile as improper passing of digital requirements may mean the loss of the asset in total. If you need assistance or would like to talk about your specific situation, contact our Cincinnati office at (513) 815-7006.
by Dan McCarthy | Nov 24, 2021 | Estate Planning, Trusts and Wills
You would hope your living will is properly prepared and your resuscitation instructions or DNR (do not resuscitate) are in order. While your wishes in a living will may be appropriately documented, that does not guarantee the instructions will be carried out as you stated. The frightening truth is that mistakes about your end-of-life instructions are made while you are at your most vulnerable. Dr. Monica Williams-Murphy, medical director of advance-care planning and end-of-life education for Huntsville Hospital Health System in Alabama has said, “Unfortunately, misunderstandings involving documents meant to guide end-of-life decision-making are surprisingly common.”
The underlying problem is that doctors and nurses have little if any training at all in understanding and interpreting living wills, DNR orders, and Physician Orders for Life-Sustaining Treatment (POLST) forms. Couple the medical professionals’ lack of training with communication breakdowns in high-stress environments like a hospital emergency ward where life and death decisions are often made within minutes, and you have scenarios that can lead to disastrous consequences.
In some instances, mix-ups in end-of-life document interpretation have seen doctors resuscitate patients that do not wish to be. In other cases, medical personnel may not revive a patient when there is the instruction to do so resulting in their death. Still other cases of “near misses” occur where problems were identified and corrected before there was a chance to cause permanent harm.
There are some frightening worst-case scenarios, yet you are still better off with legal end-of-life documents than without them. It is imperative to understand the differences between them and at what point in your life you may change your choices based on your age or overall health. To understand all of the options available it’s important to meet with trusted counsel for document preparation and to review your documented decisions often as you age. In particular, have discussions with your physician and your appointed medical decision-maker about your end-of-life documents and reiterate what your expectations are. These discussions bring about an understanding of your choices before you may have an unforeseen adverse health event, and provides you with the best advocates while you are unable to speak for yourself.
There are several documents that may be appropriate as part of your overall plan. Each of those is discussed below, and we are available to answer any questions you may have about them.
A living will is a document that allows you to express your wishes about your end-of-life care. For example, you can document whether you want to be given food and hydration to be kept comfortable, or whether you want to be kept alive by artificial means.
A living will is not a binding medical order and thus will allow medical staff to interpret the document based on the situation at hand. Input from your family and your designated living will appointee are also taken into account in your best decision-making strategy while you are incapacitated. A living will become activated when a person is terminally ill and unconscious or in a permanent vegetative state. Terminal illness is defined as an illness from which a person is not expected to recover even though they are receiving treatment. If your illness can be treated this would be regarded as a critical but not terminal illness and would not activate the terms of your living will.
Do not resuscitate orders (DNRs) are binding medical orders that are signed by a physician. This order has a specific application to cardiopulmonary resuscitation (CPR) and directs medical professionals to either administer chest compression techniques or not in the event you stop breathing or your heart stops beating. While your living will may express a preference regarding CPR it is not the same thing as a DNR order. A DNR order is specifically for a person who has gone into cardiac arrest and has no application to other medical assistance such as mechanical ventilation, defibrillation, intubation, medical testing, intravenous antibiotic, or other medical treatments. Unfortunately, many DNR orders are wrongly interpreted by medical professionals to mean not to treat at all.
Physician orders for life-sustaining treatment forms (POLST forms) are specific sets of medical orders for a seriously ill or frail patient who may not survive a year. This form must be signed by a physician, physician assistant, or nurse practitioner to be legally binding. The form will vary from state to state and of the three instructive documents the POLST is the most detailed about a patient’s prognosis, goals, and values, as well as the potential benefits and risks various treatment options may bring about.
A power of attorney for a health care decision, sometimes referred to as a health care directive, allows you to name an agent to make decisions for you if you are unable to. Unlike a living will which only covers end-of-life decisions, a power of attorney for health care decisions allows the agent to act at any time that you cannot make decisions for yourself.
We can help you determine which documents best suit your current needs, and help you clearly state your wishes in those documents. Please contact our Cincinnati office at (513) 815-7006, we look forward to hearing from you and helping you with these important planning steps.
by Dan McCarthy | Nov 17, 2021 | Estate Planning, Trusts and Wills
This article will help you decide if a trust fits your particular circumstances. For example, maybe you have a disabled child and you want a trust to permit that child to inherit without losing government benefits. Maybe your own or your spouse’s health is heading into difficulties, and you can foresee eventually needing long-term care benefits. Trusts can avoid an expensive, public, and lengthy probate process before your beneficiaries can inherit after you pass. Or, you might be in the classic “trust fund” situation, where you’re concerned that your children won’t be able to manage money wisely.
All these are excellent reasons to consider a trust. But what kind of trust? A quick count shows there are at least thirteen different varieties. Which one is best suited to your needs? Call us.
Here’s the basic idea behind trusts, to help you understand why you might or might not need one.
What is a Trust?
Think of a trust like a treasure chest. You originally bought property or earned money in your own name. You then transfer those assets into the trust’s name – into your treasure chest, in other words. The trust treasure chest becomes a legal entity separate from you, which now holds your property in its, and no longer in your, name.
Then you identify people who will occupy the three roles involved in managing trust property. First, you are the grantor, or settlor, or trustmaker – all those words mean the same thing, the “you” in this case. Second, you appoint a trustee. That person or entity is responsible for managing trust assets and following directions contained in the trust document. Third, you decide whom you want to receive trust assets – your beneficiary or beneficiaries, in other words.
In legal terms, a trust is a fiduciary agreement among you the original property owner, your trustee, and your beneficiary. The trust document contains instructions for what you want to be done with trust property, both for how you want it invested and, also, for how you want trust assets to be distributed when you pass. Trusts are, thus, a highly efficient hybrid between a power of attorney, an asset-management vehicle, and a last will and testament, all rolled into one legal entity and document.
There are two basic kinds of trusts to understand before they split off into their thirteen-or-more different flavors: revocable or irrevocable trusts.
The Revocable Trust
A revocable trust can be thought of like a treasure chest with an open lid. As grantor/settlor/trustmaker of a revocable trust, you can get at trust assets freely.
You yourself can also occupy all three roles in a revocable trust – grantor, trustee, and beneficiary. If need be, you can also tinker with trust terms, by freely amending them to change the directions, beneficiaries, or trustees. Or, you can revoke the whole thing. Before that point, though, the trust document will be there to take care of everything you want it to.
If you should meet with an accident and lose capacity, the terms of your trust will designate a person to step in on your behalf and, thus, avoid the need to go to court to get a guardian for you. The trust will also direct who inherits, thus keeping your affairs private and out of probate court. This feature is especially important if you (formerly) and then the trust (after you created it) own real property in various states. The savings in court costs in that situation could be significant.
The Irrevocable Trust
This is the trust for you if you’re seeing the need for Medicaid long-term care benefits in your future, or you work in a field where suits are common, such as owning a small business or in the construction industry.
The disadvantage to an irrevocable trust, however, is that you will be sacrificing all or almost all control over trust assets, unlike in the revocable-trust situation. Once an irrevocable trust is established, you as grantor/settlor/trustmaker cannot directly alter the terms and, generally speaking, your access to trust money is restricted or entirely precluded – as is required in order to enjoy the potent benefits of this kind of trust.
Think of an irrevocable trust as being like the treasure chest with the locked lid. Your trustee – who generally cannot be you – is the one with the key. You yourself can no longer reach your assets. This relinquishment of control is necessary to shelter your assets from creditors or to protect your assets when entitlement to government benefits would otherwise require you to spend almost all you own first.
There are ways to draft an irrevocable trust carefully, so you can still exert your will over how assets are to be used. Just as in the revocable situation, you can impose conditions that must be met before a beneficiary can receive funds. You can designate how trust income is to be used for specific purposes like college tuition, business start-up, or travel. You can also authorize a person or entity as a “trust protector,” who can alter trust language, correct drafting errors, or create a new similar trust if the law changes.
And there you have the basics. Now you’re ready to decide whether you need a credit shelter trust, or a charitable trust, or a qualified terminable interest trust, or a blind trust, or – just come see us to figure out all the rest!
Trust Caveats
Some sophisticated trusts do convey tax benefits, but, for the most part, IRS considers revocable trusts to be invisible. You as grantor/settlor/trustmaker will still pay tax on the revocable-trust income, albeit at your individual rate and not at the prohibitive trust rate.
As for estate taxes, trusts have no effect – but, at least regarding federal estate taxes, those are currently moot for most people. They are not incurred until the value of the estate exceeds $11.4 million as of 2019.
Also, keep in mind that revocable trusts provide no protection against creditors. If you lose a legal action, a judge can force you to change the beneficiary of your trust to the winner. Irrevocable trusts are free from that kind of interference.
Still, irrevocable trusts must be established long before you run into that kind of trouble. If you create such a trust while credit problems are looming or have already arrived, you risk that your trust will be undone as a fraudulent conveyance.
Trust Your Attorney
Consult lawyers like us, who have experience and expertise in the trusts and estates area. Custom-constructing a treasure chest to fit your specific needs is a job for our specific skills. If you need assistance or would like to talk about your specific situation, contact our Cincinnati office at (513) 815-7006.
by Dan McCarthy | Nov 3, 2021 | Estate Planning
It makes sense that more aging Americans have completed wills and estate plans compared to younger Americans. Still, a significant number — 19 percent of those over age 72 and 42 percent of those between 53 and 71, according to survey data — lack any type of estate plan.
Although managing these details can seem daunting, and even depressing, the task becomes far less unpleasant with proper understanding and planning. Estate planning is essential for seniors and for their family members to be prepared in the event of a loved one’s illness or passing.
If you or an aging loved one has been putting off estate planning, start with the basics and learn why it’s important to take the focus off of the negative and shift it to the positive benefits.
Understanding the meaning of “estate”
In addition to the fear factor of planning for illness and death, many seniors dismiss its importance because they don’t understand what “estate” means, or they believe it applies only to those with significant wealth. In reality, an estate includes anything a person owns — homes or other properties, bank accounts, automobiles and additional assets, and ownership of any licenses or patents.
A person’s estate also includes any liabilities such as mortgages. These debts will need to be settled before loved ones or beneficiaries receive any compensation or death benefits. An estate plan encompasses more than distributing assets and settling debts, however. It also outlines decisions about healthcare and other key things.
The estate plan’s role in self-advocacy
Estate plans help seniors establish important guidelines that allow them to advocate for themselves. This is essential for seniors who wish to retain their independence and protect their assets. In addition to creating wills and other important documents, an estate plan allows seniors to have a say in the quality of their long-term care — whether at home or in an assisted living facility — and to qualify for associated government benefits to help pay for that care. It also helps them to protect their life savings and outline their wishes should they become incapacitated.
Elder law attorneys can help clients develop strategies to enable seniors to better advocate for themselves in these scenarios.
What’s included in an estate plan?
A properly executed estate plan typically includes a Last Will and Testament, Living Will, and Medical and Financial Powers of Attorney. Let’s take a look at what each of these things is and the purposes they serve:
- Last Will and Testament: Allows a person to determine who will inherit assets and appoint an executor who will make sure wishes are carried out.
- Living Will: Allows a person to choose the type of care he or she wants should they become hospitalized and/or incapable of making decisions independently. A Living Will would, for example, outline a person’s wishes about certain medical treatments, such as blood transfusions, or whether or not they wish to be resuscitated.
- Medical Power of Attorney: Appoints someone — generally a spouse or family member — to make decisions on a person’s behalf about medical care and treatment.
- Financial Power of Attorney: Appoints someone — also typically a spouse or family member — who can make financial decisions on a person’s behalf. This includes allowing access to bank accounts to ensure bills and mortgages continue to get paid in the event of illness or incapacitation.
Establishing Trusts
Estate planning also includes provisions for developing Trusts. Trusts allow seniors to set aside money for specific people or charities while avoiding the long, drawn-out process of probate. This allows heirs and beneficiaries to receive intended inheritances much more quickly.
While many trusts are revocable, meaning the senior can change or terminate the trust at any time, irrevocable trusts are often used to protect the assets of a senior. Whether an irrevocable trust is right for your situation depends on a number of factors, including your health, what type of care you wish to receive and how you will pay for any care you may need in the future.
If you or your loved one has been avoiding this important planning measure, now is the time to begin. Being proactive increases options and makes the process far less stressful than trying to initiate planning or make important decisions during a health crisis or death.
Cost is another reason seniors often cite for avoiding planning. However, elder law attorneys can tailor plans to specific needs, making them more affordable. If you need assistance or would like to talk about your specific situation, contact our Cincinnati office at (513) 815-7006.
