Estate Planning in Ohio with Living Trusts

Living trusts are an estate planning tool that may be used for a number of reasons: to avoid probate; limit estate taxes; hold assets for persons until they reach a certain age; or to control finances for someone who would benefit from financial oversight. The trust document is private and it is not available for public view in probate proceedings because the assets are not subject to probate. Most persons who use a trust do so in place of probate court proceedings to transfer assets. 

The person who sets up the trust and funds the trust is the grantor or trustor. The trustee administers the trust in accordance with the grantor’s intent, purposes and desires. Beneficiaries are persons who benefit from the trust. One or more persons may, and often do, fill all three roles. For example, the grantor may also be the trustee and the beneficiary. 

Simply signing the trust document creates only an unfunded trust, that is, a trust with no assets. Funding the trust may be done during the grantor’s lifetime or through the use of a “pour-over” will or both. Pour over wills transfer property not transferred during life into the trust by way of court probate proceedings, with all the attendant advantages and disadvantages. 

One thing to consider is whether the up-front expenses of setting up the trust and transferring the assets are worth the benefits that the grantor receives in having his estate plan implemented. 

A second thing to consider is whether the lack of court oversight in the administration of the estate is desirable. Is the successor trustee capable of distributing property according to the grantor’s wishes? Where money is concerned, this may be a herculean job. Families often have many issues regarding what is fair. 

On the other hand, a trust document prescribes disposition and management of assets while the Ohio Trust Code provides safety for beneficiaries, yet avoids the disadvantages of public probate proceedings. 

A third consideration is whether a probate estate would even be necessary. If everything is passing to a spouse or child by joint bank accounts, transfer on death accounts, payable on death accounts, affidavits or transfer for real estate, and the like, there is no reason, legally, to have a trust to avoid probate because the assets will not be “probate assets”. 

However, the transfer outside of probate plan presents even more danger that a trust for assets to become dissipated outside of the grantor’s intent. For example, an adult child who is the joint owner or pay on death beneficiary may keep the funds though the parent intended the funds to be distributed to all his children by the POD beneficiary. 

However, contrary to popular belief, transferring property into a trust will not protect property from nursing home medicaid liability, and, in fact, a transfer for less than fair market value will destroy the residence exemption.