Legal-Ease: Do I need a trust?


LEGAL-EASE

By Lee R. Schroeder - Guest Columnist



Lee R. Schroeder

Lee R. Schroeder


Whether someone needs a trust depends upon each person’s unique circumstances.

Initially, it is important to explain what a trust is and what a trust does and does not do. A trust is a set of rules. I often consider each trust to be a contract with two parties to that contract. One party to the contract is the trustee, who enforces the rules of the trust. The other party to the contract is the beneficiary, who enjoys benefits from use or possession of the property that is subject to the trust’s rules. The trustee and the beneficiary are sometimes the same person or multiple people.

A trust is very different from an LLC or corporation. For entities such as LLCs and corporations, the owners of the entities essentially own “shares” in the entity, and the entity owns the property in the entity. The beneficiary of a trust is essentially the direct owner of the property in the trust, but subject to the rules of the trust.

For example, if I have a trust that owns a farm, I still own the farm itself, just subject to the rules of the trust. However, if I own an LLC that owns a farm, I own shares (called “member units”) of the LLC, which owns the farm. That distinction is small in practical terms but big in legal terms.

Traditionally, trusts served three purposes. First, because trusts are contracts, they help family members avoid probate when someone dies. This is still true today. With a properly funded trust, the trustee of the trust can distribute the property owned by the deceased person without going through many of the understandable filings associated with managing that distribution through the legal/court process.

Second, trusts allow people to impose “rules” on those people’s heirs’ inheritances. Stated simply, if a person has a complex distribution plan for his or her assets upon death, a trust can be an easier method of carrying out that distribution plan.

Third, trusts have typically played a significant role in minimizing or eliminating estate (death) taxes. Because of Ohio’s elimination of the estate tax and the federal government’s restructuring of that tax, trusts are usually no longer necessary to minimize or eliminate estate taxes.

Notably, despite most people’s misperception, almost none of the trusts in our region protect assets from “the nursing home” or to aid in Medicaid eligibility for people who need long-term health care. There are specialized “Medicaid trusts,” but those trusts are only prepared by attorneys who are familiar with those trusts’ very strict requirements.

In my opinion, people’s ages and financial net worth are relatively small considerations in determining whether they may be best served with trusts. Usually, my analysis centers more on the complexity of the characters of assets a client owns and whether those assets (like payable-on-death bank accounts and survivorship real estate) will already avoid probate upon death. We also look at whether the client’s distribution plan for assets includes requirements on post-death use or resale of property.

Lee R. Schroeder
https://www.limaohio.com/wp-content/uploads/sites/54/2017/03/web1_Schroeder-Lee-RGB-3.jpgLee R. Schroeder
LEGAL-EASE

By Lee R. Schroeder

Guest Columnist

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 419-659-2058. 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.

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 419-659-2058. 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.

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