Wills and Probate

Probate is the process of proving the validity of the decedent’s will, appraising property, preparing an inventory of the estate, paying decedent’s bills, and distributing the estate according to the will or Ohio law. The probate process ensures that the desires of the deceased are carried out or, if there is no will, that the heirs specified by law actually receive the estate.

Any property owned by the decedent is part of the probate process. However, the following are not subject to probate: life insurance not payable to the estate, joint and survivorship property (but not joint property held as “tenants in common”), pay on death (POD) accounts, annuities, pensions or other death benefits payable pursuant to a plan or contract.

You can plan your estate by using some joint and survivorship and POD accounts, but there are some drawbacks. The more accounts and assets you have, the more difficult it is to plan your whole estate in this way. If you change your intentions, you will have to rearrange all your accounts. Changes in value can leave some heirs getting more than others, contrary to your intentions. It’s easier to have one document (i.e., will or trust) control the whole estate. Also, there have been many cases where a son or daughter has withdrawn funds in a joint account while their parent was still living. These accounts only avoid probate and do not avoid estate tax.

Prior to the repeal of the Ohio Estate Tax effective 1/1/2013, Ohio law required banks and other institutions to refrain from releasing funds on an account in the name of a deceased person. Thus, a bank would “freeze” the account and only release it to the proper person upon receipt of a tax release form. This tax release is no longer required for persons passing away on or after 1/1/2013. However, a bank may still require a death certificate, Letters of Authority showing that an Executor has been appointed by the Probate Court or other documentation before an account is released.

ADVANTAGES:

1. Attorneys fees for setting up a trust will generally be lower than fees for probate.
2. The privacy of your estate will be preserved by using a living trust. The probate inventory is a public record open to inspection by anyone.
3. Avoiding the delay of probate and immediate distribution of the estate are commonly expressed advantages. However, the trustee cannot distribute the whole estate to the heirs until estate taxes and all other debts are paid. If the trustee does so, he/she will be personally liable to pay these debts out of their own funds. However, the lack of time constraints and probate requirements will certainly be avoided and the trustee in most cases will be able to complete the administration much sooner and with less work.
4. The cost of an executor’s fee may be avoided if an executor would have been appointed who would have charged a fee. In most situations, an heir or family member can be appointed executor on the condition that he/she serves without compensation.
5. A guardianship proceeding in Probate Court may also be avoided. However, an inexpensive power of attorney may also accomplish this same objective.
6. Avoidance of estate taxes is often implied as an advantage of a living trust. Although a living trust can be part of an estate plan that eliminates estate tax, this can also be accomplished with a will. Therefore, estate tax savings is clearly not an advantage of a living trust.

DISADVANTAGES:

1. There will be present costs to create the trust and transfer costs for putting the assets into the trust.
2. There may be additional complications and requirements associated with everyday transactions once you have transferred title to all your assets into the trust. Banks, stock brokerage companies etc. may require various forms to be filled out, a copy of the trust and other assurances that the trustee is authorized to take certain actions. However, living trusts have become more commonplace in recent years and most companies can now handle trusts without too much complication
3. Upon death, the transfer to the heirs is not automatic. Various legal documents will be needed to fulfill legal requirements. An Ohio Estate Tax return must be filed for gross estates over the Ohio exemption amount shown above. This will necessitate an appraisal of all assets. Although the administrative burden is less than probate, it is certainly not absent.
4. The trustee is not accountable to a court and the supervision of the Probate Court is not available. Some of the functions of probate are for the executor to report to the court all receipts and disbursements, an accurate appraisal of assets, payment of bills and distribution to the heirs. If the executor misapplied some money or did not distribute according to the Will, the court would probably be aware of this and take action against the executor. A trustee of a living trust is typically not accountable in this fashion and the heirs may have no way of knowing if estate funds were misappropriated. Of course, the trust beneficiaries have a right to sue, but this will be more costly and involved as opposed to filing an appropriate motion in Probate Court.

Each person must weigh the above factors, consider your circumstances and desires, and make an informed decision.

Compared to an estate plan using POD, JTWRS account etc.., the above Trust offers the following advantages:

1. all assets are held under one “umbrella” which simplifies management of the assets;
2. if a change in the estate distributions is desired, the grantor only needs to amend the Trust instead of re-arranging some or all of the asset beneficiary designations;
3. no risk of changes in account values changing the desired equal (or other proportionate) distribution to the intended heirs;
4. the Trust can include a “spendthrift clause” which will protect any beneficiary who is sued, gets divorced, files bankruptcy or has any creditor claims against their share of the Trust.

You can plan your estate by using some joint and survivorship (JTWRS), POD (pay on death) and TOD (transfer on death for stocks) accounts but there are some drawbacks to this type of estate plan. The more accounts and assets you have, the more difficult it is to plan your whole estate in this way. If you change your intentions, you will have to rearrange all your accounts. This may involve trips to the bank, filling-out forms, correspondence with financial institutions and much other paperwork. Unequal changes in value can leave some heirs getting more than others, contrary to your intentions. For example, if you give Microsoft stock to one child and Ford stock to another, the stock values may change dramatically before you pass away leaving one child with a larger inheritance. Also, there have been many cases where a son or daughter has withdrawn funds in a joint account while their parent was still living. If the other person on the JTWRS account owes money to someone or is sued for a debt, this creditor can attach the funds in the account. These joint and POD accounts only avoid probate and do not avoid estate tax. If an estate plan utilizing joint and survivorship accounts is the chosen plan, then this planning should be done with the advice and assistance of legal counsel to assure that all accounts are properly set up to avoid Probate.

The Living Trust plan offers the following advantages over use of JTWRS and POD accounts: a) all assets are held under one “umbrella” which simplifies management of the assets; b) if a change in the estate distribution is desired, the grantor only needs to amend the Trust instead of re-arranging some or all of the asset beneficiary designations; c) no risk of changes in account values altering the desired equal (or other proportionate) distribution to the intended heirs; d) the Trust can include a spendthrift clause which will protect the estate share of any beneficiary who is sued, gets divorced, files bankruptcy or has any creditor claims against their share of the Trust. A Living Trust is usually the better estate planning technique for avoiding probate.

State law has traditionally provided legal procedures for involuntary commitment for mentally ill persons. However, this has not been available for persons who need treatment for alcohol and substance abuse. Family members and friends often have a difficult time convincing a person to seek treatment for alcohol and substance abuse. Until now, there has been no way to force someone into treatment.

Ohio Senate Bill 117 enacted a new provision under Ohio law providing a legal procedure to require a person to enter a treatment program for alcohol or other substance abuse. The law provides that a person may initiate proceedings in the Probate Court requesting the Court to order a person into a treatment program for alcohol or substance abuse. This petition in Probate Court may be file by a spouse, relative or guardian of the individual. The petition must allege and prove that the person is suffering from alcohol or other drug abuse and presents an imminent danger or imminent threat of danger to him or herself, family, or others. The person filing the petition must deposit with the clerk of the Probate Court half of the estimated cost of treatment and assume responsibility for full payment of the treatment.

The treatment program that is ordered by the Court includes a wide range of different types of programs. The treatment can be provided through an alcohol and drug addiction program certified under Ohio law or by an individual licensed or certified by the state medical board, the chemical dependency professionals board, a counselor, social worker, and marriage and family therapist board, or a similar board of another State authorized to provide substance abuse treatment. After the Court order is issued, the failure by the person to undergo and complete treatment is considered a contempt of court.

The above option is of course not appropriate for all persons. The spouse or family member should first consult with a substance abuse therapist to see if this is an advisable and appropriate action for the person at the present time. It is certainly better for the person to voluntarily start treatment on their own. Going to Court under this procedure should be done only as a last resort. The legal procedure is similar to Probate Court proceedings of a deceased person’s estate or a guardianship. Thus, the petitioner will also need the assistance of an attorney to file the proceedings in Probate Court.