ASSET PROTECTION- WHAT DOES THAT MEAN

A person interested in conserving their assets and conveying them to the next generation may have heard of the concept of asset protection. You will find it is not as simple as giving your assets to the kids and hoping for the best.  The tools used vary greatly and one should consider the least costly and most efficient process after evaluation of all the possible solutions.  The difficulty is that asset protection can mean a lot of different processes and legal tools, some simple and some very complex.  This is an area where expert advice is absolutely required.

The general rule is that your assets should be available to satisfy your expenses and payment of your creditors.  In order to shield assets from creditor claims, it is necessary to anticipate and plan in advance the transfer of title to assets before the claims arise.  Otherwise, the transferring party has likely engaged in a fraudulent conveyance, which a court can reverse.  The various forms in which  asset protection can arise might be as simple as incorporation of improvements into personal residential property,  placing property in a limited liability company, forming a family limited partnership, creating a domestic asset protection trust, (which is an irrevocable trust), or creating an offshore trust, held in a foreign country.

The complexity and cost of such transactions varies greatly.  The right choice takes into consideration many factors, including your age, health, trustee selection, potential beneficiaries, potential liability sources, and goals.  When done well, the party creating an asset protection plan can rest knowing that their goal of preservation of property has been accomplished.

A SURVIVING SPOUSES’ RIGHTS

In Ohio and in addition to other rights, a surviving spouse has a number of basic rights available to them in a probate estate. The purpose of these legislated rights is to attempt to assure surviving spouses are not impoverished or that they have resources for necessities on the death of their husband or wife. Our legal system has generally memorialized these rights in Ohio Revised Code Section 2106. The rights include but are not limited to the following which I have listed in no certain order. A spouse has a right to two automobiles of limited value that are not specifically listed in the Last Will and Testament. He or she has a right to live in their home (aka “the mansion house”) for up to a year if it is not transferred or bequeathed to them otherwise. They have the right to purchase property from the deceased spouse’s estate. He or she has a right to an “allowance for support.” This allowance depends on the money available in the estate and other factors. Additionally, the survivor receives preferential treatment on appointment as the fiduciary to their spouse’s estate. If the surviving spouse wishes to exercise any of their rights, they have 5 months after the appointment of an executor or administrator of an estate to do so. The decision to make is whether they would like to elect to take under the will or to take against the will (which means exercising the rights listed above). Depending on the estate and situation, it may behoove a widow or widower to elect against a will if they were not adequately provided for in the will. Now one reality to watch out for is a situation where the surviving spouse is completely cut out of an estate by the late spouse. Sometimes this is unintentional or intentional and almost always because the late spouse received bad counsel from whoever they held as advisors. Your advisor should be an attorney who can explain the positive and negative ramifications of an estate plan. There are many, many non-attorneys in Ohio doing a disservice to citizens by looking (and sounding) sophisticated regarding estate planning but lacking the professional competence to advise on such heavy matters.

TWO PORTLY GENTLEMEN

In October of 1843, Charles Dickens began writing one of the English languages most beloved stories. What began as his attempt to supplement his family’s meager income has in excess of 170 years, become cherished by many with its tale of special spirits, warmth to others and much of the byproduct of Christmas.

One of my favorite scenes is the oft overlooked part in Chapter One where the “two portly gentlemen” are let into the miser’s counting house by his employee, Bob Cratchit. They engage Mr. Scrooge to solicit resources for the poor and destitute. He summarily does not like the entreaty and presses them on their perspective. I wonder: what are the legal implications of their presence in his office that fictitious night? The laws impacting the scene if it occurred today could include: premises liability (what if one slip and fell?); propriety of their solicitation (were they registered with the State? would the donation be tax deductible?); agency (did the employee have the right to let them in?); trespassing (Scrooge would argue it.); hostile work environment we would need to ask Bob Cratchit); employment (was Bob an “at will” employee, independent contractor or salaried under contract?); fraud (were the two guys honorable at all or something akin to the IRS phone scammers we have today?); and the list goes on.

As we consider our lives and how they are impacted by an almost innumerable number of regulations and laws (state, federal and international), we can know well that life can be a complex bag of rules, tensions, met and unmet expectations. I hope this Christmas season we can all understand in our heart of hearts the question put forth by the two portly gentlemen from the pen of Charles Dickens. “A few of us are endeavoring to raise a fund to buy the Poor some meat and drink, and means of warmth. We choose this time, because it is a time, of all others, when Want is keenly felt, and Abundance rejoices. What shall I put you down for?”

DEPRESSION AND THE CAREGIVER GUILT

I regularly meet with sons, daughters, and spouses of an elder client who is failing. These close relatives often attempt to be the “care giver” for the failing elder, fulfilling their wish to remain at home.
While that is a laudable goal and one that many share, I always caution the caregiver to be very careful about burnout from trying to do too much, both mentally and physically. Care giving for a failing elder is stressful and when it is an around-the-clock obligation, the health of the caregiver is sometimes at risk.
Solutions are very family specific, depending upon who is available. One important theme is for a caregiver to be self-forgiving. I like the myths that my friends at Right at Home, a home health agency recently listed. Each of these (with my paraphrasing) is not true:
• I need to be perfect – no;
• I should only have positive thoughts about what I am doing – no;
• I shouldn’t talk about what I’m experiencing – no;
• I shouldn’t let others know about what is going on – no;
• My needs need to take a back seat to the services I am providing –no;
• Other caregivers are better at this than me and have a better attitude –no;
• I should do it all myself – no.
Caregivers – protect yourself. Dark, cold winter days will increase the chance for depression. Get some relief and thank you for what you do.

Protecting Americans from Tax Hikes Act of 2015 (aka PATH Act)

On December 18 last year, the above named act was signed into law. The PATH Act made permanent dozens of provisions which were set to expire. These provisions are no longer subject to expiration. This is not to be taken as tax or legal advice but merely to focus a light on the possibilities which exist for tax and legal planning toward the end of the year. Here is a sampling of the newly permanent benefits which might be of interest to different taxpayers.

1. Above the Line Deduction for Teachers’ Classroom Expenses. Kindergarten thru 12 grade teachers can deduct up to $250 of unreimbursed expenses relating to books, equipment, supplies and even some software. While that does not sound like a lot to many educators, just remember the old adage, “it all adds up” or “a nickel richer.”

2. Deduction of Mortgage Insurance Premiums. 2006 Legislation created an itemized deduction for premiums paid or accrued on qualified mortgage insurance. Generally, this type of insurance is acquired in connection with debt on a qualified residence.

3. Qualified Charitable Distributions from IRAs. In years past, persons age 70 ½ or older can exclude from gross income up to $100,0000 in “qualified charitable distributions” from either a traditional IRA or a Roth IRA. These distributions are not deductible as charitable contributions, but the exclusion from gross income is even a better result for the taxpayer. A qualified charitable distribution is any distributions from an IRA made by the trustee directly to the public charity.

4. College Tuition. Through 2016 there continues to be an above the line deduction for “qualified tuition and related expenses”. The deduction limit is $4,000 with the full deduction only available to taxpayers with adjusted gross incomes of $65,000 or less (or $130,000 for married filing jointly). If income exceeds the aforementioned limits then the maximum deduction is $2,000.

5. Conservation Easements. The limitations for contributions of property for purposes of conservation have also been expanded. It used to be in exchanged for placing qualified property into conservation like a land trust, the taxpayer could deduct 30% for any one year and carryover up to five years. Now, the he or she may deduct up to 50% of his or her contribution base with a carryover of 15 years. If he or she is what is a called a “qualified farmer or rancher” the 50% limitation increases to 100% with the 15 year carryover. To be “qualified”, the farmer or rancher’s gross income from farming or ranching concerns must exceed 50% of their total gross income. You can see where there may be opportunity for planning in situations where the taxpayer does not have an aversion to these types of conservation efforts.

These are just a few expansions available to individual taxpayers. The purpose of this article is not for tax or legal advice. Again, we are simply focusing a light on the possibilities which exist for tax and legal planning as we come toward the end of another tax year. All readers should consult with an independent professional prior to taking any action. We hope your fall continues to be wonderful as you bring in your harvest.

PREPARING FOR WINTER – AND SAVING MONEY

It has been part of the cycle of life to do certain things in season.  As we enter the fall, we see the farmers gathering the harvest, the boats of summer being put in storage, our furnace filters being replaced, leaves being raked and a host of other “fall” action items.  The holidays and family-gatherings are just around the corner.

Fall is a good time to also get your affairs in order so you can spend a comfortable, content winter by the fire or go south.   And everyone has a best way to do that – some with simple account registration changes, others with wills and powers-of-attorney, and some with trust arrangements.  Each family situation is different and what is a good fit for one might be too complex or too expensive for someone else.

Yes, trusts are great and the best tool in some situations, but don’t buy the sales pitch “You need a trust” until you meet with us, to explain where trusts work best and whether it fits your situation.   A Corvette is a great, fun car to drive but try driving to work in one through the snow.  When you have the right vehicle, you save money.

We can survive the winter that is coming but it will be much easier if we prepare now.

PUMPKIN PICKIN’

The immortal philosopher, Charlie Brown, once stated “There are three things you should never discuss with people: religion, politics and the great pumpkin.” However, my kids and I talk of the first two often and the pumpkins this time of year. We recently learned most pumpkin pie filling is actually a type of squash and not specifically pumpkin. Though pumpkins are some of the 1,000 or more types of squash currently identified. Talk about a midlife let down.

In the author’s opinion, here’s what it takes to pick a great pumpkin. First, you stake out the best place to purchase the fruit (yes, another let down!) for good value. “Good value” means the larger the size, the more solid the exterior, the better the orange shade, the greater the absence of discoloration and the more symmetrical shape, then my friend you have a good value. A great pumpkin should never be picked for the price.

Picking a great pumpkin is similar to picking a great professional. Now, I don’t mean your lawyer or doctor should be rotund, orange, full of seeds, somewhat hollow and able to win Circleville’s Pumpkin Show. What I mean is, the choice of a service should be about more than just the sticker price in making a great selection. It should consider value as well. “Value” is the sum total of all the tangible and intangible benefits received when you make payment for a service . This lesson applies to picking others to serve your needs whether they are painters, doctors or lawyers.

Finally, when going out to pick your pumpkin take a little one or two you love along for the experience. After all, the pickin’ is about peace and joy for those we have around us. Have a great fall!

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FIVE REASONS TO NEVER GIVE AN OUTRIGHT INHERITANCE TO YOUR CHILDREN

If you’re like me, you want to leave an inheritance for your children. But giving outright ownership of our assets to the kids could put everything you’ve worked so hard to leave behind at risk. Why? Let me give you five reasons and then show you the way to protect your kids’ inheritance for many, many generations.

1. Your Child’s Future Divorce
Approximately forty-two percent (42%) of our children will divorce during their lifetime. In most divorces property is divided evenly. So if you have a married child, or a child who will get married in the future, and you leave them an inheritance, and they later divorce, as much as half of their inheritance could go to their ex-spouse. You aren’t working as hard as you are to support your child’s future ex-spouse, right? Good news, there is an alternative!

2. Extreme Debt/Bankruptcy
Your child may incur such extreme debt that the only possible relief will come through bankruptcy. Possible causes of such debt are a business venture gone bad or a health event, such as addiction, mental illness, accident, or disease that results in either a temporary or permanent inability to work in combination with staggering medical bills. Bankruptcy does happen to good people, and you can ensure that the inheritance you leave behind will never be at risk due to a mistake or health issue.

3. Lawsuit
Unintended neglect that injures someone’s person or property could wipe out an inheritance you leave your children. For example, in a 2009 case in Florida, the defendants thought they were doing the neighbors’ son an act of kindness by allowing him the “fun” of driving the four wheeler around the family property. Apparently, they didn’t tell the young man about the barb wire on the property. Their good intended neglect, resulting in the decapitation of their neighbor’s son, was not seen as good by the parents or the court, who ordered the $20 million judgment. In sum, good intended, but neglectful behavior on the part of your children could wipe out any inheritance you leave them.

4. Mismanagement:
I have many clients who tell me they do not trust their children to manage money. This could mean that their children are spendthrifts, unwise investors, or easily manipulated out of the money. And, the statistics support this.

According to Prof. Jay L. Zagorsky of Ohio State University, 18.7 % of individuals who inherit more than $100,000 will spend or lose the entire inheritance. On average individual who inherit lose 50% of the money. It’s quite likely that if that inheritance was left in a different way those numbers would greatly improve. I’ll share more with you about that below.

5. Lost Work Ethic:
My father once said, “Some people can’t handle prosperity.” He was right.

For example, Thomas Stanley and William Danko in their book, The Millionaire Next Door, uncovered research showing that children who received an inheritance were worth four-fifths less than others in their same profession who didn’t. Vic Preisser, of the Institute for Preparing Heirs, says that unprepared children who inherit money are susceptible to excessive spending, identity loss, and guilt over receiving money they didn’t earn. Preisser says, “In a year to 18 months, everything falls apart — marriage, finances — and if there is a drug problem it becomes worse.” Thus leaving an outright inheritance to our kids, may do harm instead of good. But there is an alternative!

As we can see, an outright inheritance is NOT the best answer for your kids.

Our office can assist you or your family in what to do instead.

YOUR LEGACY AND SUMMER VACATIONS

A lot of discussions with clients over the years have related to technical property issues: Who gets what? How do I handle this asset? How should I treat this problem? Ownership of assets carries with it the responsibility of how to manage.
But the bigger philosophical question I raise is after you are gone, what happens? I suggest that this summer you step back from looking at individual property questions and answer the question, “What will be your legacy?”.
A part of your legacy may be great experiences with your family, such as a family reunion, a memorable road trip or summer vacation. Your legacy can include the memory of great fellowship occasions, adventures of new sights and sounds shared with family, the laughter of children and grandchildren who will be too soon gone – all on a summer vacation. Create those memories while you can. Pack your bags today.
Another definition of legacy is what survives you. It can be family memories, but those will pass with the passing of your children and grandchildren. Another could be a financial legacy that supports humanitarian charitable organizations and causes. I am blessed to have known a number of people who lived modestly, cared about people, and, because of the legacy discussion we shared in past years and their heart to help others, organizations such as the Salvation Army, Children’s Hospital, the American Cancer Society, the Leukemia Society, the local food bank, and other organizations are now receiving annual financial support from their estates that will continue for generations long after their passing.
That was part of their legacy. What is yours?

SUMMER LEARNING

At the end of each of my four years of undergraduate studies the President of school would encourage the whole student body to read at least five books over the summer. Apparently lifelong learning is important for one’s personal growth (who knew?). This summer while I have done a lot of reading, I would like to share a potpourri of things I’ve learned professionally and personally.

First, according to the American Automobile Association (AAA), Memorial Day kicks off what is known as the “100 Deadliest Days” for young drivers. Fatal crashes go up at least 16% nationally over summer days primarily due to drinking, texting and more drivers with more time.

Second, if someone needs a paternity test you can go to Job and Family Services or file a suit, which will take longer, in the juvenile, probate or common pleas court depending on your facts (this was learned for professional purposes, not personal of course).

Third, apparently if you are elderly and cut the toes out of your new orthopedic walking shoes because they don’t fit, the company will not take them for return or exchange (I knew this but my friend did not).

Fourth, some frogs slip right through the holes of your kids’ nets if the frog is too small.

Fifth, Greenfield Village in Detroit, Michigan is really impressive.

Sixth, the Psalms in the Bible are quite encouraging and challenging.

Seventh, kids are resilient creatures.

Finally, it is a good idea to organize your important legal documents and provide a plan for key people to access those documents. This avoids a lot of headaches.