Is anything private anymore? We live in a digital age where information is quick and abundant. While this is helpful in many circumstances, it may seem most concerning when it comes to your estate plan. Your estate plan includes sensitive information such as names, addresses, assets, liabilities, values, and designations as to who gets what, when they receive it, and how they benefit. In a time where criminal actors seek to gain private information to carry out scams, maximizing your privacy is of top concern. Here are the ABCs to maximizing your privacy in your estate plan.
A: AVOID PROBATE
“Probate” is the legal process of administering your estate after your death which is overseen by a court or judge. As part of the administration process, Ohio law requires your last will and testament to be filed with the probate court. Probate proceedings and records (including your last will and testament) are open to the public and can be seen by anyone. Many Ohio Counties provide easy electronic access to such documents through online databases. Consequently, the assets and beneficiaries identified in your will, along with sensitive family information, can be easily accessed by anyone.
Thankfully, by incorporating the right estate planning strategies, you can avoid exposing sensitive information to the public. In Ohio, the only assets subject to probate administration are those owned by the decedent alone at the time of the decedent’s death and without a designated beneficiary. The two most common strategies to avoid probate are:
- Designating direct beneficiaries on assets.
- Incorporating a revocable living trust.
Designate Direct Beneficiaries
First, designating direct beneficiaries for an asset enables it to pass to your chosen beneficiary privately and outside of the probate process upon your death. Ohio law provides the ability to designate future interests on property that does not vest or legally pass to a beneficiary until your death. Consequently, the asset does not need to be administered through probate, avoiding the public proceeding altogether.
Many assets provide for a direct beneficiary designation, such as life insurance policies, retirement accounts, bank accounts, motor vehicles, and even real estate. Life insurance policies and retirement accounts provide for a direct beneficiary to be named on the respective policy. Bank accounts and stock certificates can be marked payable on death (POD) or transferable on death (TOD). Membership interests in companies and businesses can be subjected to an assignment of interest designation. Motor vehicles can be designated with a transfer on death designation with the Ohio Bureau of Motor Vehicles. Real estate can be designated a TOD as well by recording a Transfer on Death Designation Affidavit in the county in which the property is located.
Incorporate a Living Revocable Trust
Second, incorporating a revocable living trust in your estate plan is an effective way to avoid probate. Unlike a will, the contents of a revocable living do not become public record. While designating a direct beneficiary to an asset may seem to be an efficient way to maintain privacy by avoiding the public probate process, two common shortcomings to this strategy often arise:
- Not every asset can be directly assigned.
- You may not want the beneficiary to have immediate and direct control over the asset.
For example, tangible personal property such as art, furniture, and heirlooms do not have accounts or titles associated with them. Your beneficiary may be young, at risk of going through a divorce, have a special need, or may not be able to handle money, so you would rather not give them direct access to your assets at death. This is where the living revocable trust delivers.
A revocable living trust is like a business. It exists while you are alive yet can hold assets in its own name and be designated as your beneficiary. The trust can then be drafted to continue after your death with a successor trustee managing the trust’s assets for your chosen beneficiaries. Whether your trustee distributes assets immediately after your death or manages them for years, the trust owns the assets at your death if you transferred or designated them to it during your lifetime. If your living revocable trust is formally designated to hold all of your assets at your death, no assets would be required to be publicly probated. Your last will and testament can be simplified by naming the revocable living trust as your only beneficiary to your entire estate which avoids exposure of any sensitive information.
B: BALANCE THE FLOW OF INFORMATION
Estate planning takes time and can be complex. Your estate planning attorney can have honest and open communications with you to ensure all strategies have been considered and the best ones implemented. Ohio law protects communications with your attorney, keeping them privileged and confidential. This means the flow of sensitive information is dictated by you. Once your estate plan is developed, balancing the distribution of information is critical to ensuring privacy. This balance includes deciding who gets to know about the details of your estate plan.
Balancing the flow of information often has competing interests. You may want your family or beneficiaries to knowing details about your plan preventing conflict, but you also wish to maintain your privacy. You lose a great deal of control over the privacy of your estate plan once copies are shared. Third parties, such as children, can lose sensitive information or become victims of a hacking or phishing scheme that exposes your private estate information. Rather than sharing detailed information about your estate plan with third parties, simply inform them that the plan exists and where it can be found.
C: CREATIVE TITLING
Avoiding probate and balancing the flow of information are effective ways to ensure privacy when it comes to estate planning. However, for some, it may not be fully enough to keep their ownership of certain assets private. To detach your name from an asset while you are alive from a public records search, creative titling may be necessary. Removing your name from an asset should only be done after careful and thoughtful consideration with your estate planning attorney. Some strategies to consider with your attorney include forming a limited liability company to hold an asset. This strategy typically involves naming the company in a way that does not reveal your identity. Behind the scenes, you are positioned as a member or manager of the company, while a law firm or third party is designated as the company’s statutory agent with the Ohio Secretary of State.
Another strategy to consider is using a generic name for your trust that does not include your name and then appointing a third party as its trustee, so that any titling or ownership records would not tie the asset to you. While a living revocable trust can be drafted in a way that ensures a third-party trustee manages it for your exclusive benefit during your lifetime, careful consideration must be given due to the loss of complete control and administrative costs to having a third-party trustee during your lifetime. Some trusts can be irrevocable and use a separate tax identification number, but this strategy is complex and often includes many tax considerations that should be discussed with your estate planning attorney.
For more information on the privacy of your trust, contact estate planning attorney Tim Wilson at TSW@kjk.com or Christine Sabio Socrates at CSS@kjk.com