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

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.