Cincinnati Probate Attorney Topics: Improper Distributions

There is a common misconception that by creating a Will your assets avoid Probate. In Ohio, using a Will does not allow your assets to avoid Probate.

Once assets are in Probate, the executor (if the person dies with a Will) or administrator (if the person dies without a Will) cannot immediately distribute assets without some risk of personal liability. The executor should only distribute assets after the inventory is approved, after the Will contest period has expired, and after confirming with the Cincinnati Probate Attorney that it is proper to make distributions.

Cincinnati Probate Attorney
The Probate Process

If a distribution from the estate is made to a beneficiary or heir, he or she is liable to return the assets or the proceeds from the assets to the estate if they are necessary to satisfy the share of a surviving spouse who elects to take against the Will or if the Will is set aside (in a contested action).

After distribution, a distributee will be personally liable to a claimant who presents a valid claim. Thus, it is important for a beneficiary not to spend any funds distributed until the Estate is closed and approved by the Probate Court.

If Estate funds are not sufficient to pay creditors (including the sums returned by beneficiaries), the executor or administrator will be liable to the extent that the sum of the remaining assets of the estate and the assets returned are insufficient to satisfy the claims. The executor or administrator may provide for the payment of rejected claims or claims in suit by setting aside an amount sufficient for paying the claims. In this case, assets are set aside for the payment of the claims in a manner approved by the Probate Court.

In this type of estate administration matter, each claimant for whom assets are to be set aside is provided notice, in the manner as the court shall order, of the hearing upon the application to set aside assets and shall have the right to be fully heard as to the nature and amount of the assets to be set aside for payment of the claim and other conditions claim.

In some cases, the court, as a condition to any distribution, may require any beneficiary or heir to give a bond to the state with surety approved and in an amount determined by the court, conditioned to secure the return of the assets to be distributed, or the proceeds from the assets or as much of the assets as may be necessary to satisfy the claims.

The best option for the person in Cincinnati, Ohio managing a Probate Estate is to work with his or her attorney to ensure distributions are proper. Distributions without this legal guidance create more legal problems for the executor and the beneficiaries.

Feel free to contact Cincinnati Probate Attorney Elliott Stapleton to review your potential Estate Administration matter in Hamilton County, Butler County, Clermont County, or Warren County.

Sources: Chapter 2117: PRESENTMENT OF CLAIMS AGAINST ESTATE of the Ohio Revised Code

Estate Planning Attorney

Helping Families

As a Probate and Estate Planning lawyer, Elliott Stapleton enjoys helping families protect what they earn, limit unnecessary expenses, and transfer assets to the right person, at the right time. To achieve this goal, Elliott acts as a long-term advisor to clients and their family

Elliott provides multiple online legal resources for Estate Planning, Probate, Business and Succession Planning. The articles include important legal topics as well as a Legal Guide to Estate and Financial Planning.

Complimentary Consultation

In the initial consultation, you will discuss your goals, options for achieving those goals, and the flat rates for legal services. To schedule a complimentary appointment call 513-334-0099 or connect via email.

Cincinnati, Ohio Estate Planning Attorney, Elliott Stapleton, provides comprehensive legal services in the areas of Estate Planning, Wills, Trusts, Special Needs Trust, Planning After Divorce, Prenuptial Agreements, Health Care Documents, Advanced Directives, Living Wills, Revocable Living Trusts, Irrevocable Trusts, Durable Power of Attorney, Estate Tax Planning, Transfer and Gift Taxes, Business Planning, Succession Planning, Financial Planning, Buy-Sell Agreements, Limiting Liability Companies (LLC), Asset Protection. Attorney, Elliott Stapleton, serves clients in the Cincinnati metro area including, the cities of Cincinnati, West Chester, Blue Ash, Mason, Montgomery, Hyde Park, Sharonville, Springdale, Wyoming, Ohio.

Estate Income Tax

The Executor (or other person charged with the decedent’s property) must file the final tax return for a decedent. This final return is due the year following the date of death. For deaths in 2013, the final return would be due in 2014; provided however, if the decedent did not file their return (which would be likely if the person died in January or February), the Executor must also file the previous year’s return.

In addition to the income realized prior to death, the Executor is also responsible for filing the income taxes after the date of death. This would be on a 1041 and would be for the period following the decedent’s death if that income is above $600.00. Here is a link to the IRS instructions on 1041 filings.

Here is an example: John dies on May 30, 2013. The Executor must file John’s 1040 (as well as any state or local taxes) for the income received from January 1, 2013 – May 30, 2013.  For income received by the Estate after the date of death, the Executor must file a 1041 for the Estate (June 1, 2013 – December 31, 2013).

Cincinnati Probate Guide: Loss of a Spouse

If you are married or have parents who are married, at some point you will either directly or indirectly deal with the loss of a spouse.  The purpose of this article is to provide a straightforward guide to avoid common mistakes and oversights during what is already an emotional time.

How do you start?

After losing a spouse, the most important thing to do is ask for help. Working with a trusted adviser will help you ensure that all legal and financial obligations are taken care of without the worry of missing something along the way.

In most cases your family and friends will offer emotional support. With good intention, some may also offer explanation on what should happen or how the law works. While such support is appreciated,  because everyone’s legal and financial situation is different, it is important to consult with professionals to determine the next steps.

Who should I contact?

The following is a list of Organizations you will need to contact:

☐ Social Security.  You must inform Social Security of your spouse’s death. If you are receiving Social Security benefits, those benefits may change.

☐ Pension Provider.  If your spouse was receiving a pension, you will want to contact the provider to stop future payments and determine if there is a death benefit.

☐ Employer.  If your spouse was still employed, you need to let the employer know of his or her passing. The employer may have offered a life insurance policy which would need to be claimed.

The following is a list of Professionals you will need to contact:

☐ Attorney.  The most important professional to contact is an experienced estate attorney. There are many legal considerations which, if not properly addressed, will result in unnecessary loss.  If you do not work with an experienced Estate and Probate Attorney, I offer a free consultation to discuss the process and (if necessary) the flat rate for Probate services.

☐ Financial Adviser.  Before making changes in your retirement funds, bank accounts, or investing life insurance proceeds, it is best to speak with a financial adviser.  If you have lost a spouse, you may have also lost a source of income or health benefits. Based on these conditions, your investment strategy should be reassessed.

☐ Accountant.  For the year of your spouse’s death, a tax return is still necessary. In between the time of your spouse’s death and the date the Estate is resolved, if there was income in excess of $600.00 a 1041 form must also be filed with the IRS to claim income taxes.  In addition, if there was a loss on the sale of assets in the Estate you may want to file a 1041 to apply that loss to offset future gains.

All of these are issues for which professionals can provide sound advice to make certain your loved one’s estate and your future are secure.

This Legal Article was written by Elliott Stapleton a Probate and Estate Planning Attorney in Cincinnati, Ohio. Elliott Stapleton is a Partner with CMRS Law in Cincinnati.

Life Insurance Beneficiary Designations

This video covers how a life insurance policy avoids Probate court and transfers without reference to the Last Will and Testament in Ohio. It is important to confirm your policies are up-to-date and reflect the proper beneficiary.

A common mistake is for the owner of a life insurance policy to forget to update his or her beneficiary designation; and assuming that their Will covers the transfer of this asset.

In Ohio, a Will does not control the transfer of a death benefit from life insurance; unless no beneficiary is listed. If no living person is listed as a beneficiary, the entire amount passes through Probate.

Ohio Legacy Trust (Ohio’s Self Settled Trust)

Ohio recently passed legislation which allows for the creation of a Legacy Trust. A Legacy Trust is used for creditor protection of your assets, during life, in an irrevocable trust.

If you create this type of creditor protection trust, you are limited to distributions of annual income and 5% of the principal each year. The Trust assets can be used to pay the income tax for the trust assets as well as to pay debts, expenses, or taxes of your Estate.

This creditor protection trust does have some exclusions. These exclusions include transfers to the trust with intent to defraud a specific creditor, child support, alimony (if the transfer was after marriage), and claims that occur within 18 months after a valid transfer.

For a Legacy Trust to be valid it must have a trustee who is not the settlor of the trust. The trustee also be located in the State of Ohio. The Settlor of the trust can retain a power to remove the Trustee and to veto a transaction.

Contact Elliott Stapleton  to schedule a consultation to discuss creditor protection and trust planning.

Estate Tax Law Update for 2013

Federal Estate Tax and Ohio Estate Tax Law

Ohio Estate Tax

Governor John Kasich signed in to law, on July 2, 2011, a full repeal of the Ohio Estate Tax. This repeal took place and is effective after January 1, 2013. For those who died in 2011 and 2012, there will still be an Ohio Estate Tax.

For those individuals who died prior to January 2013, the Estate Tax rate in Ohio is 6% on assets above the $338,333.33 exemption, up to $500,000, and a 7% tax on assets above $500,000.00.

Federal Estate Tax

For 2013, each individual has an effective credit of approximately $5 million. The new Federal Estate Tax rate for 2013 will be 40% for assets above the credit.

There is also a concept known as Portability. This allows a spouse to transfer all assets to the surviving spouse, pay no tax at the first spouse’s death (there is an unlimited marital deduction which results in no Federal Estate Tax for assets given to a surviving spouse), and transfer the $5 million dollar credit to the surviving spouse.

One requirement for transferring the credit to a surviving spouse is that a Federal Estate Tax Return must be filed after the first spouse’s death. Further, there are restrictions on the transfer of this credit in subsequent marriages.

Naming an Executor

If you are married, the surviving spouse is typically appointed as the Executor. Similarly, if there is only one beneficiary he or she should also be appointed as the Executor.

An Executor must be at least 18 years old to be appointed by the county Probate court. When creating your Ohio Will, this consideration must be taken into account.

Beneficiary Designation

There is a common misconception regarding beneficiary designations. The person you list on your beneficiary designation for a life insurance policy, retirement account, or bank account will receive that asset regardless of what you have in your Will.

In fact, your beneficiary designations avoid Probate. By avoiding Probate these assets go directly to the beneficiary listed. It is possible for this asset to pass through Probate.

If you list your Estate as beneficiary or if the person listed (and contingent beneficiaries) are deceased the asset will not avoid Probate. This substantially increases the costs of administration and makes the asset subject to creditor claims.

Updating  Beneficiaries

The most common estate planning mistake is to have an out-of-date beneficiary designation. For example, if you are recently married (or divorced) you may not have updated your beneficiary designations. Even if you updated your Will to add (or remove) a spouse the beneficiary designation controls who receives the asset.

Review your beneficiary designations regularly to ensure the provider has the correct person listed. You can consult with your human resources department or financial advisor to verify your designations are up-to-date.

Executor of an Ohio Will

An Executor is appointed by the local county Probate Court to manage the distribution of assets consistent with the instructions in your Will. Executrix is the female version of an Executor.

This process of administration includes:

–      Collecting all Probate Assets;

–      Creating an Inventory;

–      Paying all expenses (including the funeral bill, court costs, attorney’s fees, estate taxes, and creditor claims) of the Estate;

An Executor is typically compensated for his or her services. Here is a link to calculate the potential executor fee.