Over the last several decades, many people in Northwest and West Central Ohio have purchased trusts that were often marketed as “the best way to avoid the evils of probate.”
Because a trust is a legal document, it must be prepared by an attorney. Many trusts have been created by local attorneys. However, some trusts were created by out-of-area attorneys, many of whom invited people to come to a “free” steak dinner to learn how to “protect your assets.”
As an aside, the “free steak dinner” marketing that has been used by some attorneys has been so frowned-upon that the Supreme Court of Ohio’s Professional Conduct Committee issued new rules last month to regulate how attorneys can market themselves during their “free steak dinner meetings.”
The generic statements of “protection” and “safety” that were often mentioned in conjunction with the preparation of trusts in the 1970s through the early 2000s were and are often significantly misunderstood.
The type of trust that most people in our region have, by itself, provides no liability protection for a person’s assets. There are ways to protect assets from liability, but a trust is not one of those ways.
Similarly, almost no trusts protect assets from being used to pay for nursing home care. People who “think” or are “pretty sure” their trusts will help protect assets from being used to pay for nursing home care are almost always wrong.
There are specific trusts that may be able to be used to shield some assets from having to be used to pay for nursing home care. Most of those trusts are relatively new, primarily in order to adapt to the newest Medicaid laws and rules. If your attorney did not tell you that the sole or primary purpose of your trust was to plan for Medicaid/nursing home, your trust almost certainly does not address Medicaid/nursing home care.
Notably, in 2007, Ohio completely re-wrote its laws regarding trusts. Trusts prepared before 2007 can still be valid, but the new laws allow trusts to be more efficiently administered without confusion or unanswered questions that were a part of the old law and that are still embedded in many older trusts.
Also, many of the trusts that were prepared before 2013 were designed to minimize Ohio and federal estate taxes. However, Ohio repealed its estate tax in 2013, and the federal amount that can be passed to heirs tax-free is now over $5 million per person. Therefore, large parts of certain older trusts no longer serve a purpose and can lead to wasted money in administration by the person’s family and heirs.
Finally, in many instances, assets were not properly titled in the trust when the trust was prepared. Similarly, unfortunately, some attorneys did and do little or no follow-up to help clients continue to properly title assets in their trusts after the trust is created. And, remarkably, some new regulations indicate that some assets that were previously, properly in trusts should no longer be in trusts.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-523-5523. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.