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Trusts are not a necessity for family

Dear Lawyer Mark: I saw an ad on TV about trusts, and was wondering if I should get one.

They said that when I die, my family will have to pay a bunch of money to lawyers and to the probate court, not to mention taxes. I don’t have much, but what I have I want to pass on to my kids. — Wondering

Dear Wondering: Trusts can be very useful things to help people with “wealth management,” but the reality is that most people can get the same things done cheaper and easier through other methods, and don’t really need a trust.

The main question attorneys ask clients seeking information is “why do you want a trust?” Unless the answer is “to control all the money for years even after I die,” probably the other methods will work just as well.

A trust is a legal arrangement set up where all the property you give to the trust is held and managed by a “trustee.” The person setting up the trust and giving the property to it is called the “settlor” and the people receiving the monies or property later are called the “beneficiaries.” If the settlor can dissolve the trust at any time during his or her lifetime, it is called a “revocable trust.”

As the ad said, putting everything into a trust can avoid probate costs, but the cost of setting up the trust could actually be even higher. Instead, you can do things such as have the bank make all your accounts “payable on death” to one or more people. If you do that, one of the beneficiaries can provide the bank with a death certificate, and the bank will transfer the accounts to them, rather than going through a probate court.

Likewise, Ohio has a “Transfer on Death Affidavit” that lets you do the same thing with real estate: the owner signs an affidavit identifying the property and who she wants it to go to after she dies, then files it with the Recorder’s office. If she doesn’t cancel it before she dies, the beneficiary can record the death certificate and another affidavit, and the property gets transferred, again outside of probate court.

Finally, a person can own property in Ohio with someone else in a “joint and survivor” fashion. When a person dies in this circumstance, the other owner then receives all of that property.

Trusts usually do not impact estate taxes, because in most cases, there won’t be estate taxes anyway. Ohio abolished estate taxes a few years ago, and for 2020 the federal government allows you an exemption of 11.58 million dollars. Because the government allows a surviving spouse to have the “unused” part of a spouse’s exemption, that means a married couple can transfer an estate of 23.16 million dollars without estate tax consequences. If you’ve got more than that, you probably need to sit down with the lawyer, accountant, insurance agent and financial planner that I assume you already have on retainer, and come up with a comprehensive plan.

The one other area where trusts may be of significant use is a gun trust, which I will discuss in an upcoming column.

Thought for the Week: Never spend your money before you have earned it. -— Thomas Jefferson

It’s The Law is written by attorney Mark K. McCown in response to legal questions received by him. If you have a question, please forward it to Mark K. McCown, 311 Park Avenue, Ironton, Ohio 45638, or e-mail it to him at lawyermark@yahoo.com. The right to condense and/or edit all questions is reserved.