Jarvis Law Office

What to Know Before You Make a Financial Gift to Loved Ones

Many seniors wish to make gifts to children or other family members during their lifetimes, whether it’s in the form of cash, real estate, or tangible personal property. Besides getting to see beneficiaries enjoy their gifts, seniors can also use those gifts to reduce the size of their estate and lessen the tax burden after they pass away. But seniors must always keep in mind that there are tax consequences and considerations to those gifts, which could end up causing a lot of problems and costing a lot of money.

One important thing to note is that the annual gift exclusion amount is $15,000 (as of 2018) per gift, for a total lifetime exclusion of $11.2 million. This means that you can give each of your children gifts up to $15,000 annually until you reach the $11.2 million exclusion. If you surpass the annual exclusion, you won’t necessarily have to pay a gift tax, but you will have to file a gift tax return. This is because any amount over $15,000 will count towards the lifetime exclusion, which the IRS will keep track of. The gift tax rate is between 18% and 40%, and the gift giver is usually responsible for paying the tax.

Another general rule of thumb is that if you’re looking for property to make a gift out of, look to property that will increase in value. This is because the property in your possession at the time of your death will impact probate fees and possibly even estate taxes, depending on the size of your estate. When your beneficiary receives the property as part of the estate, the property receives a step up in tax basis that can have a positive impact on capital gains taxes. However, making a gift of a property that will increase in value during your lifetime will make the beneficiary’s tax basis the same as yours if the property is ever sold. This can have varying tax consequences down the road, so it’s important to speak with a qualified Ohio elder law attorney to determine what your best option is when making a gift. Keep in mind, too, that making a large gift of property will impact your lifetime exclusion, which may also impact your estate taxes.

If you have more questions about tax consequences that may arise from gifting assets or money to loved ones, please contact our Ohio elder law office at 877-653-3450 to schedule a complimentary initial consultation.

 

Reduce Your Tax Burden with a Qualified Personal Residence Trust

A family home or vacation property is often the most valuable asset in estate. While the homeowner may want to leave their cherished property to children or other beneficiaries as an inheritance, taxes can quickly thwart well-meaning plans. 

The sad truth is that without proper planning, most heirs simply cannot afford the tax bills that come along with inheriting valuable property, which will usually force the sale of a beloved family home or vacation property after the homeowner passes away.

Fortunately, there is a legal tool that can help homeowners safely and responsibly pass their property down to loved ones, while significantly minimizing the taxes owed by beneficiaries after the owner’s passing. 

What is a Qualified Personal Residence Trust?

A Qualified Personal Residence Trust (or QRPT) is an irrevocable trust established by the owner of a residence for the purpose of passing down real property to beneficiaries with greater financial protection and a minimized tax burden.

With the help of an experienced Ohio estate elder law attorney, ownership of the family property is transferred into the QRPT, with the trust giving the parent (or “Grantor”) the right to occupy the property for a certain term of years. When that period ends, the ownership of the residence then passes to beneficiaries. Should the Parent/Grantor still wish to live in the property, he or she may “rent” the property from the beneficiaries at a fair market value.

Who Needs a QRPT?

A QRPT may be right for you and your family if:

• You have a cherished family or vacation home with significant value that you wish to leave to your children or loved ones
  
  
• Your children are over age 30 or have otherwise proved their financial maturity (this is important due to the irrevocable nature of the trust)
  
  
• You want to make life as easy as possible for your children after your passing by shielding them from unnecessary legal fees and excessive tax bills from the State and IRS.

 

Benefits of a QRPT

There are many benefits of creating a QRPT for homeowners and future heirs alike, including:

• Significantly reduced tax bills for beneficiaries following the owners’ death
  
  
• Protection from the parents’ creditors since the property will be off limits to satisfy debts
  
  
• The ability to transfer property responsibly to loved ones when the owner is still living, while still retaining the right to live in or use the residence as long as agreed to by the family
  
  
• The Grantor stays in complete control of the property as the trustee of the QPRT and retains all the income tax benefits of home ownership, such as property tax deductions and capital gains exclusions

• If the parent lives longer than the term of the Trust, the residence is not included in his or her estate and substantial taxes are saved.

 

If you would like to learn more about Qualified Personal Residence Trusts, or if you’d like to have your current QPRT reviewed by an experienced elder law attorney to make sure it still fits your needs, please contact our Ohio elder law office at 877-653-3450 to schedule a complimentary initial consultation.

 

How to Fund Your Revocable Living Trust

Creating a revocable living trust is one of the best strategies for avoiding probate and leaving a lasting legacy for your family. However, the true protection afforded by a trust does not come after all the documents are signed – trusts need to be fully funded in order to make a real impact on your plans. Trust funding is one area that must be done by yourself, though experienced estate and elder law attorneys will offer advice on how to fund your trust.

To fund a trust, you must take any assets or property that you’d like to be under the trust protection and turn ownership of those assets or property over to the trust. This doesn’t mean that you won’t get to control the assets or property – on the contrary, as trustee of your own trust you would have just as much control as you did when you had sole ownership. The difference is that in legal terms, the trust is a living document that holds true ownership of the property. This is how revocable living trusts help people avoid probate.

The most common items that are used to fund trusts are real property and financial assets that are titled solely in one person’s name. This is because jointly-held property is not subject to probate until the other joint-holders pass away, though joint-ownership can lead to more problems down the road. Real property is usually transferred to a trust through quit-claim deeds, which give the trust all of a person’s interest in the property.

You can also fund the revocable living trust with other property that does not have a title, such as artwork or family heirlooms. To fund the trust in this way, you would work with an experienced elder law attorney to make a list of the items you’d like the trust to own, which will then be added to the trust as a schedule. This will allow these items to transfer to your beneficiaries without going through probate, and will also leave legal documentation for your beneficiaries so they know exactly which items you intended for them to receive.

If you have any questions about revocable living trusts and funding, or if you’d like to have your current revocable living trust reviewed by an experienced Ohio will and trust attorney to make sure it still fits your needs, please contact our Ohio estate and elder law office at 877-653-3450 to schedule a complimentary initial consultation.

Everything You Need to Know About Probate in Ohio

Many people dread the Ohio probate process, and rightfully so. It is a time when you must jump through legal hoops, tediously fill out paperwork, and pay undecipherable court fees – all while grieving the loss of someone close to you. It’s no wonder that many people try to do everything in their power to make sure their loved ones can avoid as much of the probate process as possible, however there are things you can do to make the probate process is a little bit more manageable. One of the most important things you can do is to simply educate yourself about the process.

The Ohio probate process takes place after a person dies, and broadly speaking, involves opening a case with the probate court by submitting a Last Will and Testament and/or Trust document along with a death certificate. The court will then require certain forms to be filled out which detail the deceased’s financial assets and property. At the same time, the court will put out notices for creditors, so they know they have a specific amount of time to try to collect on the deceased’s debt. By the end of the process, once the debts have been settled and all of the property has been accounted for, the court will issue a ruling that the estate may be distributed to the beneficiaries.

Some probate processes are more expansive and in-depth, especially if a person leaves behind a large estate. Others are less intense and can be settled within a matter of weeks. It all depends on the size of the estate and how much of the property has to pass through probate. A simple rule here is that anything that was solely-owned by the deceased, like a car, must go through probate before it can be distributed. Jointly-owned assets, assets with beneficiaries named to the accounts, or any assets or property held by a trust do not have to go through probate, since it’s already been determined how those assets and property should be distributed.

Throughout all of this, there are certain procedures that must be followed and deadlines that must be met, which many Ohio probate attorneys have experience in handling. If you would like to learn more about the probate process, or if you’re currently involved in a probate estate and need guidance, please contact our Ohio trust and estates lawyers at 877-653-3450 to schedule a complimentary initial consultation.