UPDATES

For most people the answer is a resounding “yes”, though not for the most commonly assumed reason.  Too many times for me to count, I have had clients tell me that they want to avoid probate because by doing so they will avoid estate taxes.  This is not true.  Probate and estate taxes are not linked.

Among the most important reasons to avoid probate are to minimize administrative expenses and to provide privacy.  In my experience the bureaucratic nature of probate administration typically adds thousands of dollars of costs to the process of identifying, collecting, and valuing a decedent’s assets, paying allowable bills and taxes, and making distributions to heirs and beneficiaries.  Further, since all probate assets must be valued in court filings, those filings are available for public inspection.  In Cincinnati, Ohio, where a large part of my legal practice is located, every single court document is available on-line for everyone in the world to read.  So, with a few keystrokes,  everyone, from nosy neighbors to scamming charlatans, can know what a person’s probate estate is comprised of, what it is worth, and the nature and value of assets distributed to heirs and beneficiaries.  This makes me very uncomfortable.

Probate can be avoided by various means.  I am a big fan of using trusts, because trusts have the flexibility to overcome a multitude of unforeseen events.  Assets that are titled in trusts avoid probate.  Other ways to avoid probate are to make bank accounts payable on death (POD) to one or more designated beneficiaries and making brokerage accounts, automobiles, and real estate (Ohio only) transferrable on death (TOD) to one or more designated beneficiaries.  I don’t recommend that bank accounts be held jointly with children except for checking accounts with balances limited to an amount necessary to pay monthly expenses.   IRAs and other retirement plans should have beneficiary designations, as should life insurance policies.

It is necessary to regularly review trusts, beneficiary designations, and the status of joint accounts to assure that they achieve your estate planning goals.

Steve Hoffsis

The fall of 2011 is the best time to evaluate whether your real estate tax obligations can be reduced.  In 2011, all county auditors in Ohio completed their triennial update to re-set property values for the next three years.  So, in most cases, the values set in 2011 will affect the assessed value of your home or business property for taxes payable in 2012 through 2014.

If you live in Ohio you have received or will receive an updated property valuation from your local county officials.  Carefully review the proposed new valuation, keeping in mind the fact that on average, home values have dropped approximately thirty percent nationwide since 2006.

To challenge the new valuation you will need to file a formal, written complaint with your county Board of Revision between January 1 and March 31.  Otherwise, the opportunity is lost until the following year.  To succeed in front of the Board of Revision you will almost certainly need a qualified real estate appraiser to prepare an appraisal and to testify at the hearing.

While real estate taxes differ from municipality to municipality, a reduction in value of $25,000 to $35,000 for a Cincinnati homeowner typically justifies the costs of retaining legal counsel and an appraiser.  In addition, a reduction in value tends to set a new, lower baseline, for future increases in your real estate’s assessed value.
If you would like more information about filing a complaint with your Board of Revision then please contact me.
Steve Hoffsis

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