Young Adults to Have Expanded Health Insurance Access

An Ohio law that allows unmarried children or stepchildren up to age twenty-eight (28) to remain or be added to their parent’s insurance coverage becomes effective July 1, 2010.   As a result of the new law, parents should evaluate the opportunity and the cost of this new coverage.  The Director of the Ohio Department of Insurance, Mary Jo Hudson, wrote in a release that [a]n estimated 20,000 additional young adults, who are more likely than any other age group to be uninsured, will now be eligible for coverage."  The statement continued: “These changes, combined with our work to implement the recently passed federal reforms, are granting more Ohioans access to coverage and decreasing the number of uninsured Ohioans." The state reform will work in tandem with the federal law dependent age change that becomes effective September 23, 2010. Previously, only dependents up to age 19, or up to 23 years old if they were still in school, were eligible to receive coverage under their parents’ policies.

Ohio Pet Trusts

In Ohio, Pet Trusts (sometimes called Pet Care Trusts) are a relatively new legal tool used to provide for the care and maintenance of a companion animal should its owner die or become disabled. The primary purpose of a Pet Care Trust is to ensure that your beloved pet is cared for and protected as you would wish.

Millions of Americans consider their dogs, cats, exotic birds, and other pets more than just animals, and certainly much more than just personal property. Pets are often trusted friends and companions.  Pets provide emotional support, comfort, security, happiness, joy, satisfaction, and purpose. The close connections between pet owners and their pets often causes owners to desire protection, care, and consideration of the needs of their animal companions in the event they are unable to provide that care.

The law generally views pets as personal property, despite the fact that many individuals with companion animals view them quite differently than other possessions.   In fact, many people consider their pets as family members or children.     A 2005 study found that seventy-three percent of dog owners and sixty-five percent of cat owners “consider their companion animals to be akin to a child or other close family member.”  

Although many pet owners assume that a member of their family will take care of their pets after they die, the family members often do not want responsibility for the pet.  The harsh reality is that a significant number of the four to six million animals euthanized in the United States every year are pets left without care when their owners die.   Others end up in shelters and rescue charities. Some universities with veterinary schools have responded to this issue by “offering perpetual pet care programs that promise student care, including all necessary medical needs, for pets when the owner becomes disabled or dies.”  However, to avail oneself of the program an owner must make some type of donation to an “appropriate school-associated foundation.”  

Pet Trusts have, as a result, become quite popular.  One author wrote, "[t]he pet trust has earned wide acceptance despite its unique non-human and noncharitable nature and has been adopted relatively quickly compared to other novel types of trusts." 

A Pet Trust can be crafted as a stand-alone trust or as part of a another trust that you create. Pet Trusts require someone to fund them called a Grantor or Settlor. A Pet Trust will typically set aside enough money or property to care for a pet(s) during the lifetime of the pet. The Grantor selects a trustee to manage the money for the benefit of the pet, and a caretaker to manage the pet's care. The trustee should be someone trusted, who is financially responsible and cares about the pet. The caretaker should be someone who knows and loves the pet, who can provide a comfortable home and who is willing to accept the responsibility for the pet's welfare. While the same individual can act as both trustee and caretaker, it  sometimes advisable to use separate individuals to ensure proper care for a pet.

A Pet Trust will  often specify instructions regarding care of the pet. The most commonly included details are:

• identification of the pet;
• food and diet instructions;
• grooming instructions;
• Veterinary care instructions;
• compensation for the caregiver and trustee;
• how the caregiver must document expenses;
• how the trustee is to monitor the caregiver’s services;
• whether and how the trust will cover liabilities should the pet bite or injure someone or damage property;
• final burial or cremation instructions.

Many Pet Trusts address the issue of euthanasia of a pet, particularly for convenience, or reasons other than profound health concern, disability, or impairment.

Because a Pet Trust can be incorporated into the design and drafting of a revocable or irrevocable trust, the cost for many clients is minimal.  A Pet Trust can be incorporated into a Last Will and Testament, but typically has a cost separate and apart from, particularly, a simple Last Will and Testament.     

Noteworthy Changes to Coverdell Accounts Demand Consideration

Families interested in opening a Coverdell Education Savings Account this year for college savings should consider doing so before April 15. That would allow them to invest as much as $4,000 in one of these tax-advantaged accounts this year—twice the maximum for annual contributions—since money deposited before April 15 can be counted against the previous year's limit.

But families planning to use a Coverdell account to pay for pre-college education expenses should think twice about opening or contributing to an account this year. Starting next year, withdrawals from Coverdells to pay expenses from kindergarten through 12th grade will no longer be tax-free, unless Congress acts to extend that benefit, which is far from certain.

Another prospective rule change would lower the limit on annual contributions to $500 starting next year, making Coverdells less useful for college savings. Already, the $2,000 limit has made Coverdells much less popular than 529 college-savings plans, which offer similar tax benefits for college costs and a roughly $300,000 limit on contributions overall. But even some people who are putting away more than $2,000 a year for college have included Coverdells in their savings plans, because Coverdells offer a greater range of investment options than 529 plans, and more freedom to switch investments.

Another benefit that could expire at year's end is the ability of an investor to claim a Hope or Lifetime Learning tax credit for education in the same year they use Coverdell funds, as long as the tax credit and Coverdell money aren't used for the same expense. For example, an investor can take a tax credit for tuition in the same year s/he is using Coverdell money for books.  This benefit is scheduled to sunset at the end of this year,  resulting in the two tax benefits becoming mutually exclusive. 

Avoiding Sham Trusts and Trust Scams: Part I - Sham Trusts

Legitimate trusts are tools used by qualified estate planners and their clients to achieve certain objectives, including, but certainly not limited to, controlling the disposition of assets, avoiding probate, reducing administration costs, saving estate taxes, and preserving family wealth for future generations. Unfortunately, trusts are often used for improper purposes. Lurking in the shadows are con artists who promote sham trusts and trust scams for their own gain. These con artists rely on the ignorance of the public, and only education and information can prepare you for their pitch.

Sham trusts and trust scams are usually sold at high pressure seminars, by door-to-door salesmen, and on the internet. In some cases, they are recommended by well meaning but poorly informed CPA's, financial advisors, friends, or business acquaintances. The marketing techniques can be persuasive, and are aimed at all classes of people.

What is a Sham Trust?

A sham trust is any trust created for an improper or illegal purpose. For example, "trusts" or "contracts" which purport to avoid, or significantly reduce, all taxes, including all income taxes, for individuals and, in some cases, businesses, are almost always sham trusts. These often use a complex structure that involves the "irrevocable" transfer of your assets to one or more business or trust entities which you control. The promoters claim that the arrangement will significantly reduce or eliminate state and federal income taxes.

Although there are legitimate estate tax objectives that may be accomplished with trust planning, income tax planning is quite a different matter. Generally speaking, someone is going to have to report taxable income, as well as pay income taxes thereon. While there are legitimate credits, deductions, and exemptions available under state and federal law, there is no trust or business entity into which you can convey all of your property and thereby avoid all income taxes. These trusts sometimes come with seductive names. Moreover, when the justification for the trust somehow involves the unconstitutionality of the IRS or of income taxes, you are best advised to seek additional or alternate legal counsel.

Avoiding Sham Trusts and Trust Scams - Part II - Trust Scams

Although trusts are excellent tools used by legitimate professionals to accomplish a variety of worthwhile objectives, there are a wide variety of con artists who prey upon the public using the lure of trust planning. These con artists rely on the ignorance of the public. They generally provide poorly conceived and implemented estate plans, poor service, and often do more harm than good to their customers. These schemes are usually encountered at high pressure seminars.

What is a Trust Scheme?

Several years ago, the Supreme Court for the State of Ohio fined a company and a group of individuals including several attorneys one million dollars for selling unnecessary and potentially damaging legal services to seniors. Several years later, the State of Ohio fined a pre-paid insurance company and a group of attorneys for similarly cheating seniors. The State of Texas is currently investigating a Ponzi scheme in which seniors are alleged to have lost tens of millions of dollars. What these schemes have in common is that each involved the marketing and sale of living trusts.

Living trusts are so advantageous and so readily accepted by the general public that scam artist will often sell a living trust as a front for selling some other illegitimate scheme or investment. Once confidence of the public is attained, the sham artist will sell the client stock in companies that do no exist, unregistered and risky securities, poorly capitalized limited partnership interests, and just about any fraudulent investment or business scheme imaginable. Promising returns that are usually too good to be true, the scam artist assures their clients that the investment is safe. The scam artist is almost never an attorney, and the trust is almost always incidental to their "product." Moreover, the investments that they offer are almost always unwise.