What is an estate?
Your estate is simply everything you own — your home, other real estate, bank accounts, investments, retirement benefits from your employer, IRAs, your insurance policies, collectibles, and personal belongings.
When you start adding it up — especially when you add in the death benefits from your insurance policies — you may find, like most people do, that you actually own a lot more than you think.
As you will see, the term “estate” has different meanings in different contexts. [Top of Page]
What is a Will?
A Will is a legal document that provides for the way in which a person’s probate property will be distributed upon death. Probate property is property that is only in one individual’s name and will not pass by title or contract to others. [Top of Page]
- Appoint an executor and successor executor.
- Appoint guardians for minor children and adult children who are legally incompetent and successor guardians.
- Appoint guardians for property management (need not be same individuals as guardians of persons).
- Provide for property distribution.Provide for a trust or life estate.
- Plan for payment of debts.
- Provide a waiver of the Executor posting bond.Designate order of death for the purpose of distribution of property in the event of simultaneous death of parties.
- Provide for distribution of property in case of potential disclaimer by a beneficiary under the Will.
- Designate the powers granted to the Executor.Provide for allocation of estate taxes.
- Provide clauses to reduce risk of Will contests.
When a person dies without a Will (or dies “intestate” as the law calls it), the “probate” property of the deceased is distributed according to a formula fixed by state law. In other words, if you don’t make a will, you don’t have any say about how your property will be distributed. If you do not make a will, then the Probate Court will appoint someone (the administrator), whom you may or may not know, to handle your estate. [Top of Page]
- Determine the names, ages, and relationship of heirs;
- Take possession of, and conserve all of the real and personal property of the decedent;
- File with the Probate Court an inventory of all the assets held in the name of the decedent;
- Receive and determine the validity of all claims against the decedent’s estate;
- File tax returns and to pay income and estate taxes;
- Make distribution of the estate’s assets to the proper persons;
- File an account of all receipts and disbursements made by the executor or administrator with the Probate Court.
- File an inventory within three months after being appointed.
- File Certificate of Notice of Probate of Will – This triggers the beginning of the three (3) month period in which the Will may be contested.
- File Ohio and Federal Estate Tax Returns within nine (9) months after the date of death.
- Account to the Probate Court six (6) months after being appointed.
Executor or administrator fees are established by the state legislature and are based on a percentage of the estate. The percentages are from 1% to 4%, depending upon the nature and value of the assets.
Attorney fees are based on various Rules implemented by each county.
Taxes that must be paid are: real estate taxes, personal property taxes, local, state, and federal income taxes, and Ohio and federal estate taxes. [Top of Page]
What is Ohio Estate Tax?
An Ohio estate tax is levied by the State of Ohio on the estate (including both probate and non-probate property) of a decedent who was a resident of Ohio at time of death. An Ohio estate tax return must be filed when the value of the gross estate exceeds $338,000, even if estate tax is owed. [Top of Page]
What is a Trust?
A trust is a useful device to manage property (this could be land, stocks, bonds, cash, etc.). Of all the tools of estate planning, it is probably the least understood and appreciated. You may do an excellent job of managing your assets when you are active and alert. When your health fails, you may need assistance. A trust can provide for others to step in and assist with, or fully assume, the management of your assets should you become incapable of handling your affairs. It is a flexible and practical tool that can be used to carry out your objectives. A trust is an instrument through which the owner (the settlor or grantor) transfers property to a custodian, called the trustee. The trustee manages the property for someone named in the instrument as the beneficiary. The trustee may be an individual, or an institution, such as the trust department of a bank. The beneficiary may receive current income or future income or principal. The same or a different beneficiary may receive the remainder of the trust at some future date. When an inter vivos or “living” trust is established, initially the settlor, the trustee and beneficiary may be the same person. [Top of Page]
- Avoids all probate and related costs–both financial and emotional.
- Can reduce or eliminate estate taxes Allows quick distribution of assets to beneficiaries.
- Preserves privacy–completely confidential Professional asset management with corporate trustee.
- Hard to contest.
- Lets you keep control, even at disability and after your death.
- May prevent a conservatorship/guardianship at disability or incompetency.
- Minimizes emotional stress on your family.
- Avoids problems of joint ownership
- Inexpensive, easy to set up, and maintain.
- Completely flexible, a revocable trust can be changed or canceled at any time.
- Protects minor children from court-imposed financial guardianships.
- Can protect dependents with special needs.
- Can incorporate terms of a pre-nuptial agreement.
- Can provide investment management, tax, accounting, and other services for your family.
- Can protect other beneficiaries against claims of creditors.
- Can preserve capital for children and grandchildren.
- Can provide professional management of property during your lifetime.
- Avoids probate administration to distribute property at death.
- Can protect against problems associated with incapacity.
- Can reduce or eliminate the rights of a surviving spouse.
- Can provide for people unable to own or control assets (i.e., minors or disabled family members).
- Can protect estates from divorce, lawsuits and judgments.