Beachwood Estate Planning and Elder Law Blog

Hugh Hefner's estate plan is a good model for others

While Ohioans may differ in their opinions of Hugh Hefner and the way in which he lived his life, they might all benefit by learning about how he planned his estate. Hugh Hefner planned his estate so effectively that he was able to live out his life without worry and still leave his estate to his beneficiaries with little worry that they would fight.

Hefner started his business in 1953 with an initial investment of $8,000 and grew it into a multimillion-dollar enterprise. With the advance of the internet, his business started losing money. He wisely partnered with a private equity firm in 2011 to buy back the Playboy stock, retaining a 37 percent interest in the company with an agreement that he could remain living in the Playboy mansion until his death and that the company would pay him an annual stipend of $1 million.

Reasons to have a trust in an estate plan

Ohio residents who are creating an estate plan might want to consider a trust. While some people may think of trusts as only being for wealthy people, they actually have a number of uses. A trust simply refers to a legal relationship that names a trustee, who might be the person who creates it, manages assets for its beneficiaries and has the titles to those assets. The assets contained in the trust might be a home, investments or other types of property.

Among the potential uses of a trust are reducing estate taxes, avoiding probate and creating charitable giving opportunities. Trusts allow a person to control how assets will be distributed, allow for detailed estate planning in the event a person is incapacitated, maintain an estate's integrity and allow for creative solutions to complex family situations such as caring for a special needs child.

Different types of trusts

Ohioans who are thinking about how to handle their estates might want to familiarize themselves with the different types of trusts that might benefit them. There are many that can be used to accomplish different purposes, allowing the grantors to ensure that their families will be provided for and their wishes will be followed.

Some people establish testamentary trusts in their wills. These trusts will be funded with whatever assets that the wills direct, and they are useful for people who do not wish to fund trusts while they are still living. People who have adult children with disabilities may benefit by setting up special needs trusts. These trusts pay for the children's needs without hindering their ability to receive Social Security Disability and Medicaid.

Planned giving

An estate plan is an important tool for Ohio individuals to distribute their assets after death. One common goal is to divide property according to a person's wishes. Many people have a strong commitment to community nonprofits. Through their estate plan, the planned giving option allows them to benefit their favorite charities.

Some of the planned gift options include charitable gift annuities and IRA charitable rollovers. Donors can reap financial benefits through tax deductions. In addition, their heirs will not have to deal with heavy tax burdens in the future. These tax benefits make it advantageous for donors to give large gifts to their favorite charitable organizations.

Choosing the best beneficiary for your IRA

An individual retirement account is an investment that helps people save money for retirement. When an IRA holder passes away in Ohio, a beneficiary can take over the remaining assets in the fund. Choosing a beneficiary can be a difficult task for those who have no knowledge of estate planning.

When spouses inherit IRAs, they can transfer the accounts into their own names. If the beneficiaries are under the age of 70 and a half, they will not have to withdraw a required minimum distribution (RMD). The RMD is a minimum amount that the IRA owner must withdraw each year after reaching the age of 70 and a half.

How retirees can pay for long-term care

For many Ohio residents who are preparing to retire, being able to pay for long-term care is among their biggest concerns. Some assume that Medicare will pay for long-term care. However, this is not always the case as Medicare only pays for a limited amount of long-term care under certain circumstances.

The other two ways retirees can pay for long-term care is to use insurance or pay out-of-pocket. Before they can plan ahead, however, retirees need to have an understanding of what costs are associated with the long-term care options they have available. If they have a loved one who receives long-term care, they may already have an idea. If they do not, however, they should contact assisted living and nursing home facilities. Those who have enough liquid assets or equity in their home to pay for this care may do so by paying out-of-pocket.

Things to keep in mind when choosing a trustee

Ohio residents who are creating an estate plan might want to use a trust as part of it. Creating a living or revocable trust involves choosing a trustee. If the person setting up the trust is married,both spouses serve as co-trustees. When both have passed away, there is a named successor trustee who takes over the trust. The successor trustee may be a relative, a friend, a professional or an entity such as a bank.

Many people may want to choose their children as trustees. However, there may be some disadvantages associated with this. Administering a trust is time-consuming and complicated. Asking a child to take this on while also struggling with grief can be an enormous burden. Problems may also arise when multiple children are named as trustees if there is conflict between them. Naming a friend can create a burden as well, and there should be money set aside in a trust to compensate that friend. A trust with a significant amount of non-cash property may require a great deal of time to manage.

The advantages of trusts over 529 plans

Many families in Ohio can benefit from a 529 education savings plan. It allows for tax-free growth of assets inside the account, and contributions are generally deductible at the state level. Another benefit is that it features clear investment plans that parents can understand. In some cases, parents can even change who the beneficiary of the plan is. However, there may be a better strategy for funding a child's education that could also have estate planning benefits.

For those who have an estate worth more than the $5.49 million estate tax exemption, it could be possible to directly fund educational expenses. This is ideal because educational expenses paid directly to a college or university do not count toward a person's gift exemption of $14,000 per year. A parent can also put money into a trust that can be used for educational expenses or any other purpose as defined by trust documents.

Reasons to have a funeral trust

Ohio residents who have not discussed funeral plans or payment with family members or who do not have life insurance policies set up to cover funeral expenses might want to consider creating a funeral trust. This may be unnecessary for a person who has enough money to cover long-term care expenses and who does not want money to be inaccessible. However, a funeral trust can be helpful for family members because it can relieve them from having to make decisions in a time of stress and grief.

A person can choose between a revocable or irrevocable trust. A revocable trust can be altered or canceled by its creator while an irrevocable trust cannot. However, an irrevocable trust has other advantages. If a person is required to pay down assets in order to access Medicaid or other government services, the money in an irrevocable funeral trust may be considered exempt from this requirement.

Why estate plans are important for everyone

Estate planning is not something that just exists for wealthy people. Ohio residents should have estate plans in place because they help to protect their loved ones while allowing them to have control over how their assets and other affairs will be handled.

There are several parts of a good estate plan. People should have such things as advanced directives that contain living wills so that they can define the type of care that they want to receive if they become incapacitated and are unable to speak for themselves. They should also have medical powers of attorney that give a trusted person decision-making authority over their medical care. If people do not have these documents in place, the choices will be made for them by others.

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