Legacy Insights: Navigating the Generation-Skipping Transfer Tax



Posted by Rebecca Yingst Price | May 12, 2023 | 0 Comments

It is hard to lose a loved one.  While you are trying to cope with grief and other difficult emotions, a probate administration to address their legal and financial affairs can add additional stress and anxiety.  A lengthy probate administration often keeps the feeling of grief fresh for longer periods of time.  Our goal at Ibis Legacy Law, LLC is to help individuals and families plan ahead to minimize complications in the administration of their estates.  However, we also recognize that not everyone plans ahead, so we are here to help minimize the delays associated with the following situations:

1.The Decedent Didn't Leave a Will

When the decedent (i.e. the person who passed away) doesn't leave a Will, it makes the probate estate administration more complicated and costly for a few reasons.

First, if there is no Will that directs the appointment of an Executor (i.e. the person named in the Will to administer the Estate) in accordance with the testator's wishes, then an Administrator will be appointed. Administrator has to post a bond in order to serve.  An Administrator also has to apply to the Probate Court for authority to handle different assets like the sale of real estate, the sale of personal property, and winding down a business.  A Will generally gives the authority to an Executor to serve without bond, and to do whatever is necessary to the Probate Estate.  Both Executors and Administrators are referred to herein as “Fiduciaries” since they have a fiduciary duty to follow all legal rules and regulations and to administer the estate in the best interests of the estate beneficiaries rather than in their own best interest.

Second, it may not be readily apparent who the decedent's heirs are.  This means that before the Estate can be settled the Court must conduct a Determination of Heirs proceeding which is both time consuming and costly as it often requires notice to potential heirs via publication, the appointment of a Trustee for the unknown heirs, and the hiring of someone who specializes in finding heirs.

In short, a Will sets forth all of the decedent's choices about who is in charge of administering their estate, what authorities they have to administer the Estate, and who they want to receive the net assets of their Estate.

2.There is a Problem with the Will

In Ohio, only an original will can be admitted to the Probate Court to begin a probate estate administration.  A copy is not allowed.  If the original Will cannot be located, or multiple different copies turn up, this will delay the process because the individual seeking to admit the copy of the Will will have to go through a separate proceeding to get the copy authenticated.  If the witnesses to the Will are deceased or cannot be located, then it may not be possible to get the copy admitted to probate.  That means that the probate administration will proceed as if the decedent did not have a Will at all.

All original Wills must be properly executed in order to be admitted to Probate.  In Ohio, two independent witnesses must be there when the Testator (i.e. the person creating the Will) signs it.  All 3 must sign the Will in the presence of the others.  The dates on all 3 signatures must match.  If the Will has not been properly executed, it will not be admitted to Probate.

The Probate administration process will not begin until all of these issues have been resolved.  Therefore, not having a properly executed original Will will mean that the estate will be in limbo as these problems are sorted out. In addition, not having a Will at all slows down the process considerably for all of the reasons explained in #1.

3. Missing Contact Information for the Heirs and/or Beneficiaries

In Ohio, there are two classes of individuals who are entitled to receive notice that an Estate Administration is beginning and that a Will is being admitted to Probate.  First, are the decedent's next of kin (i.e. those who would inherit under Ohio Statute of Descent and Distribution if the decedent did not leave a Will), referred to herein as the heirs.  The Second, are any individuals and entities who are named in the Will, collectively referred to herein as the beneficiaries.

Ohio law requires the heirs/beneficiaries have to either sign a waiver of notice of the probate of the Will or receive notice of the probate of the Will via Certified Mail. If they cannot be identified and/or located, the law requires that Publication of Notice be run once per week in a publication of general circulation in the County where probate is being opened for three consecutive weeks.

Unfortunately, that is not the only delay that will be experienced if the Fiduciary does not have the proper contact information for the heirs/beneficiary.  Every time an Inventory or Account is filed, the missing heir/beneficiary will need to be served with notice via publication.  Then at the end of the estate administration, the Court will require a hearing on the final account if it does not have the consent of all of the interested parties.  Then, when the final account is eventually approved, the Fiduciary would not be able to distribute assets to the beneficiary so they will have to take additional steps to safeguard these funds for the beneficiary with the County Treasurer.

4. Decedent Was an Extremely Private Person

While few people want to publicize their personal legal and financial affairs, failing to inform any trusted individuals about the assets and liabilities of your Estate creates a lot of complications. If the Fiduciary of the estate and/or family members don't have intimate knowledge of the deceased's assets and liabilities, it can delay the process of collecting assets into the estate, preparing and filing the Inventory, paying creditors and ultimately making distributions to the beneficiaries and closing the estate. Often the Fiduciary has to go on a “treasure hunt” looking for old financial statements, tax returns, collecting tax statements at the end of the year or visiting banks that they think the Decedent may have used.  This is very time consuming.

The failure to locate all of the probate assets during the estate administration can also lead to a situation where the estate is closed, then additional assets are discovered, and then the estate needs to be reopened.  In situations such as this, it is not uncommon for estate assets to be turned over to the Ohio Department of Unclaimed Funds for safekeeping.  It can be a lengthy process for the Fiduciary to claim those funds on behalf of the Estate.

5. No Transfer-on-Death Designation

A Transfer on Death (TOD) Designation is essentially a beneficiary designation. It allows the decedent's assets to pass outside of Probate to the named individual(s).

If the decedent had any creditors, those claims must be addressed before any probate assets can be transferred.  Please note that liens on assets, such as a mortgage on a house or a car loan, are not abolished just because the decedent dies.   For example, if there is a mortgage lien against a house, the beneficiary under a TOD deed must still pay the mortgage if they want to keep the house.  The big difference is that if there is a TOD designation on the house, the beneficiary of the house would not need to address the decedent's other debts like credit card debt to receive the title to the house.  Whereas, if the house needed to pass through probate ALL of the decedent's legal debts must be addressed before the estate beneficiaries can receive any assets.

6. Creditor Claims

In Ohio, any creditors of the decedent have six months from the date of death to file their claim against the decedent's estate. These claims can take time to verify and settle. All claims must be paid in order of priority set by Ohio Revised Code Section 2117.25.  If the Fiduciary cannot satisfy all valid claims, they must pay them in order of priority or they can be personally liable.  If there are no liquid assets in the estate, then estate assets, ie., real estate, vehicles may have to be sold in the estate in order to satisfy creditors.  Worse yet, if the debts exceed the assets of the estate, the estate will have to go through an insolvency process.  If there is an insolvency proceeding, it is extremely unlikely that the beneficiaries will receive any distributions from the estate.

7.Conflicts Among Heirs

This is one of the issues that can slow down an estate administration significantly. If there is no Will, then the Administrator needs the consent of all of the heirs to sell real property.  If they are not able to get consent from all of the heirs, then they will have to do a land sale proceeding which is costly and time consuming.

If the heirs don't get along, or distrust the Fiduciary, they might file objections to the Inventory or Fiduciary's Account and drag the process out.  The Court will have to hold additional hearings to determine the veracity of the objections.  Then if there is disagreement among heirs, they often won't sign off to finalize the estate causing the Probate Court to set additional hearings. This not only prevents the estate from being finalized, it also means that the estate will incur additional administrative costs.

8. Real Estate

If there is real estate that needs to be sold in the probate estate, this can require that the estate be kept open longer. First, depending on the condition of the property, you may have to clean it out. There will be personal property that next of kin and/or beneficiaries will take which will have to be moved from the property and then items to be donated or hauled away. You will also want to go through all paperwork to either keep it as important or get rid of it to be tossed/shredded.   If there is a mortgage or other liens against the property those must be satisfied. If the Fiduciary is not able to pay the mortgage, the property may go into Foreclosure which further complicates that Estate.  Lastly, as discussed above, if the decedent did not leave a Will then the Fiduciary will need the consent of the beneficiaries to sell the property or will have to do through a land sale proceeding.

9. Multi-state Assets

If the decedent owned real property, such as, a vacation home in another state, it will have to go through that state's probate process before the Ohio probate process can be completed. This is referred to as “Ancillary Administration.” The process of ancillary probate can be time-consuming and can involve additional costs such as attorney fees, court fees, and administrative expenses.  Furthermore, the administration of an ancillary probate estate can be complicated requiring the navigation of different laws and regulations of the state in which the property is located.  As a result, an ancillary probate administration can add significant delays to the settlement of an estate, as well as increase the administrative burden and expenses.

If the decedent had enough income to require filing personal income tax returns, the Fiduciary will be responsible for filing a final Income Tax Return for the decedent.  If the Estate is large enough, an Estate Tax Return will need to be filed.   The estate will have to be kept open until all tax issues have been resolved, including the payment of any taxes due and the receipt of any refunds issued.

10. Decedent Owned a Business.

It doesn't matter if the Decedent had a small “side gig” or earned a significant income from their business, if the business was formally incorporated with the Ohio Secretary of State (i.e. a sole proprietorship, corporation or limited liability company) those business assets will have to go through Probate.  The Fiduciary will have to first make a decision whether to wind down the business or sell the business, then will often need to seek Probate Court authority to proceed.  Often the Fiduciary will need to:

  • Value the Business Interest.

In Ohio, business interests are valued differently based on the type of business entity involved.  For example, a closely held corporation is valued differently from a partnership or limited liability company.  This can make the valuation process more complex, and disputes can arise over the value of the business interests, which can further delay the estate administration.

  • Succession Planning.

There may be questions about who will take over the business after the decedent's death.  If the decedent did not have a succession plan in place, the Probate Court may need to appoint a new owner or administrator of the business.  This can be a complicated process, particularly if there are multiple heirs or stakeholders with conflicting interests.

  • Business debts and obligations.

Any business debts and obligations may need to be paid off before the business can be transferred to new owners.  Sorting out these debts and obligations can be time-consuming and can add to the complexity of the probate administration.

  • Business Taxes.

Business interests are subject to different tax and regulatory rules than personal property, therefore; there may be tax implications and other complications associated with the transfer of the business interests.  For example, there may be federal and or state tax liabilities associated with the transfer of ownership, or taxes may need to be paid on the business' income or assets.  These tax considerations can complicate the probate administration and require the assistance of tax professionals.

Addressing all of these issues usually requires the Fiduciary to go through a lengthy process in the Probate Court.  Additionally, all of the business records will likely become public record through the probate                proceeding which is not ideal for the future viability of most businesses.

How to Avoid Complications in Probate Estate Administrations

The best thing that anyone can do to avoid these complications is to plan ahead.  An experienced estate planning attorney can assist you with avoiding probate through different legal techniques including trusts and business succession planning.  It is always less time consuming and less expensive to plan ahead then for your loved ones to undo a mess that was made from lack of planning.

If you are ready to start planning, please contact us at Ibis Legacy Law, LLC at 216-991-6200.  We will help you avoid the type of complications and expenses outlined above.

Disclaimer: This content is for informational purposes only and is not intended to provide, nor should it be relied upon as, legal advice, nor does the receipt of this content create an attorney-client relationship.

About the Author

Rebecca Yingst Price

Attorney Rebecca Yingst Price has devoted her legal career to helping families and individuals with estate planning, estate and trust administration, and residential real estate. She believes that there is no substitute for proper legal planning to protect loved ones. Ms. Price has vast experien...


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