Common Estate Planning Questions

estate planning

What is an “Estate”? There are two ways of defining an estate. The “probate estate” includes all property which is in your sole name at the time of death, whether real estate, tangible personal property such as cars, furnishings, and jewelry, or intangible personal property such as stocks, bonds, mutual funds, bank accounts, etc. The “taxable estate” includes not only the probate assets, but can also include jointly owned assets, P.O.D. accounts, retirement plans, life insurance, annuities, Trust assets, or anything else in which you held an interest at death.

 Should I consider a Trust? Maybe. Trusts can be an important estate planning tool for some people. Trusts may be inappropriate for others. Like a Will, a Trust can be used to direct how your estate assets will be distributed.  A Trust can be set up during your lifetime or at the time of your death. Some advantages of a Trust include planning to minimize taxes, protecting assets for minors, providing for a scheduled payout over a period of time, and shielding assets from your beneficiaries’ creditors. In addition, a Trust which is set up during your lifetime (a living Trust) will avoid probate administration of Trust assets and maintain confidentiality since the Trust, unlike a Will, won’t be made a part of the public record. Also, a Trust can be used during your lifetime to manage assets in the event that you become incompetent or simply wish to turn things over to another individual or professional trustee.

How can gifts become part of my Estate Plan? As the size of your estate increases, the amount of death taxes that will be paid when you die also increases. If you feel that you have more assets than you will ever need, one method of reducing the amount of death taxes is to make gifts during your lifetime so that your estate will not be so large when you die. Every year you can give up to $12,000 per donee to an unlimited number of individuals without incurring a gift tax. The result is that your heirs receive part of their inheritance at an earlier date and pay less estate and inheritance tax at your death. Another gifting alternative is a Charitable Trust which can benefit both a charitable and a noncharitable beneficiary. However, if your net worth is more modest and death taxes are not an issue, gifting significant amounts may not be appropriate. This is because gifts could have an adverse impact if you ever enter a nursing home and deplete your assets. We will carefully analyze your situation when a gifting plan is developed.

 What else do I need to make my Estate Plan complete? During your lifetime, it is important for you to make your wishes known regarding what happens if you become incapacitated. With a Power of Attorney, you can choose an individual who will step in and handle your financial affairs during the times you are unable to do so for yourself. (Read more at Durable vs. Limited Powers of Attorney). Without a Power of Attorney, it may be necessary at some point to initiate the expensive process of having the court declare you “incompetent” and appoint a guardian for you. (Guardianships in Indiana and Establishing a Guardianship in Indiana). Most people would also like to make their wishes known regarding who is to make health care decisions for them and whether or not they would like heroic measures to be taken when their death is imminent.  You can do so by signing Advance Directives for Health Care which include choices regarding your Health Care Power of Attorney, Living Will, and Health Care Representative.

Types of Trusts

 

trust blocks

A Trust is an agreement between you and the Trustee for the Trustee to manage, invest, and distribute the property you put into the Trust. Some advantages a Trust can offer over a simple Will is the avoidance of probate administration, the confidentiality of your estate plan, the control of assets for minors, and the asset management during your lifetime. You should always consult an estate planning attorney to determine if you really need a Trust. If your attorney advises you to use a Trust, then there are a variety of Trusts that might be appropriate for your estate plan.

Testamentary vs. Inter Vivos. A Testamentary Trust is created in your Will and becomes effective when you die. An Inter Vivos, or Living, Trust is created during your lifetime, funded during your lifetime, and used to manage assets before your death as well as after.

Revocable vs. Irrevocable. A Revocable Trust means that you keep the power to change the Trust. You can modify any part of the Trust at any time or even completely revoke it if you choose. Upon death, most Trusts become irrevocable, making your wishes permanent at that time. An Irrevocable Trust generally means that you cannot change or revoke the Trust. (Amendments can be made by the Trustee, but it is more difficult than amending a Revocable Trust).  In some cases, an Irrevocable Trust is preferred for tax or Medicaid planning purposes.

Self-Declaration of Trust vs. Third-Party Trustee. A self-declaration of Trust names you as the Trustee of your own Trust. You would have total control over your Trust assets, and you would name a successor Trustee who would step in at your death or incapacity to administer the Trust. If you want the management of the Trust property to be in the hands of another individual or professional during your lifetime, you can name a third-party Trustee.

Intestate vs. Testate

Testate means that you die with a Will whereas intestate means you die without a Will. Creating a Will is the only way to make your wishes known.  Many people never get around to signing a Will or think that they don’t own enough to worry about estate planning.  Unfortunately, if you die without a Will, Indiana law requires a certain disposition of your assets depending on who survives you, and the Court will decide who serves as the Personal Representative of your estate.  It is rare that the law and the Court will accurately reflect your wishes, unless you make them known in your estate plan.  A Will is an essential component of every estate plan and includes provisions regarding how your estate is to be divided, how debts and taxes are to be paid, who should be appointed guardian for your children, and who will serve as the Personal Representative of your estate.

If you die without a Will, then your property and assets will be distributed according to the Indiana laws of intestacy. The law of intestacy is the state’s predetermined plan for what happens to your assets. For Indiana, your estate will be distributed as follows:

DYING WITHOUT A WILL IN INDIANA
Your Spouse’s Share

(if first spouse)

Your Spouse’s Share

(if subsequent spouse)

Your Children’s Share

Your Parent’s Share

When you are survived by a spouse & children

50%

 

25% of net value or real estate

+

50% personal property

 

50%

-or-

remainder of real estate

+

50% personal   property

0%
When you are survived by a spouse and a parent, but no children 75% 75% n/a

25%

 

When you are survived by a spouse but no parent and no children 100% 100%  

 

 

 

Unmarried, with children  

 

 

 

100% in equal shares, per stirpes

0%

 

Unmarried with no children

 

 

 

 

 

 

         100%

to parents and siblings in equal shares, per stirpes, but each parent no less than 25%

If none of above, then to grandparents; if no grandparents, then to siblings of parents, per stirpes.  If none, then to the State.

“Per Stirpes,” under Indiana law, means that the share of a deceased person will pass to the descendants of the deceased person, in shares determined by the origin of the relationship of the survivors, by right of representation, and not “per capita.”  By example, if a deceased heir left three children, each would inherit 1/3 of that share.

What is a Will and Do You Need One?

will

A Last Will and Testament is a formal legal document where you decide exactly how and in what portion you want your assets and property to be distributed upon your death. You can choose any number of recipients of your property, whether they be family members, friends, or charities. The Will is witnessed and signed by a person who is at least eighteen years old, of sound mind, and under no undue influence at the time of signing the will.

In a Will, you decide who will be the person in charge of administering your estate, called the “Personal Representative.” If you’d like to know more about what a Personal Representative does, read more on our blog at “Duties and Responsibilities of a Personal Representative.” Another decision you make in a Will is determining how final expenses and taxes are paid. An important aspect of a Will for parents is the ability to designate a guardian for your minor children. Without a Will expressing your wishes, the Court will choose who is appointed as guardian for your children.  Also, you can decide whether or not the court should supervise the administration of your estate.

The Wills we prepare at Troyer & Good also provide you with the opportunity to make a handwritten list of your wishes for your jewelry, furniture, family heirlooms, etc. This list is called the “Memorandum of Personal Property” and is available for download on our website. You can add to the memorandum at any time without the formality of signing a new Will.  Because we refer to it in your Will, it is legally enforceable upon your death.  Without a Will, such a letter or memorandum would not hold up in court.

You may have heard about a “Living Will.” Is this the same thing as a Last Will and Testament? No, they are not the same document. Your Last Will and Testament is a document that directs what happens to your property, bank accounts, stock, CDs, and other assets when you die. You specify amounts of money or certain property to the named individuals or charities in your Will.  On the other hand, a Living Will has nothing to do with what happens to your assets after you die. A Living Will is a legal document that lets your doctors and family know your desires regarding medical treatment at an end of life situation. For a further discussion, see “What are Advance Directives for Health Care?” and “The Difference Between a Living Will and a DNR.”

Do you really need a Last Will and Testament? Yes! It is the only way to express your wishes regarding your assets and property, your children’s guardian, and your administration preferences.  Without a Will, your estate will be distributed according to the Indiana laws of intestacy. Read more at “Intestate vs. Testate” to understand what this means.

When Your Special Needs Child Turns 18

special needs
Happy family moments

When someone turns 18, he/she has the legal right to make decisions concerning his/her health care, finances, and other life decisions. In order for these decisions to be legally binding, the person should be competent to understand the decision to be made and the consequences of that decision. However, what should you do if your child has special needs and turns 18?

If your child is diagnosed with a mental illness or disability, it does not automatically mean that he/she is unable to make decisions. At times, though, your child may not be competent enough to make financial or healthcare decisions. If that is the case, a guardianship may be necessary. A guardianship should only be considered when no less restrictive options are available. Appointing a guardian over your adult child is a serious issue. Establishing and maintaining a guardianship is difficult, costly, and time consuming.  As ordered by the Court, the guardian will make all decisions for the protected person’s personal life and property (depending on the guardianship). This means that the protected person will lose a great deal of independence.

If a guardianship is necessary, there are several factors to consider. Generally, Courts prefer that the parents be appointed as guardian over the special needs child. If the parents are unavailable, then an adult sibling or other adult relative would be preferred. If there are no relatives that can serve as guardian, then a close friend is considered, or (if none) a professional. For more information on guardianships, see our posts Guardianships in Indiana and Establishing a Guardianship in Indiana.

Because a guardianship is costly, is time consuming, and takes away a person’s independence, alternatives to a guardianship should be considered. Some of the alternatives to a guardianship are below and can be used alone or in combination with others:

  • Special Needs Trust: A Trust designed for beneficiaries who are disabled
  • Family Guidance: A family member who can provide advice and help to a disabled individual
  • Assistive or Supported Living Services: Programs, providers, or professionals who can assist the disabled individual in the few areas he/she needs help with
  • Durable Power of Attorney: Appointing a legal representative to make financial decisions if the person is competent
  • Financial Representative: Representative payees or joint ownership of bank accounts to help the person manage his/her finances

The Indiana POST Program

fav 20

On July 1, 2013, the POST program became legally valid throughout the state of Indiana. What is the POST program? This program provides a new advance health care planning tool. It is designed for patients with an advanced chronic illness or terminal condition. The goal of this tool is to ensure that the patient’s treatment preferences are honored. The preferences for life sustaining treatments are documented as medical orders on the POST form, including treatments like resuscitation, medical interventions, comfort care, hospitalization, mechanical ventilation, antibiotics, and artificial nutrition. It must be reviewed and signed by a physician to be activated. This form transfers throughout the health care system and the orders are valid in all settings. Use of this form should lead to better identification and respect of patient’s preferences for end of life treatment.

Does a person need both an Advance Directive for Health Care and the POST form? Advance Directives for Health Care are generally intended for everyone. It is a legal form where you appoint someone to act as your attorney-in-fact for healthcare decisions in the event you are unable to do so yourself. All patients are strongly encouraged to create Advance Directives for Health Care. (See What are Advance Directives for Health Care?) On the other hand, POST forms are specifically designed for patients who are seriously ill and whose death within a year would not be a surprise to the patient’s physician. It is encouraged for seriously ill patients to ensure that their end of life treatments are honored. Completion of POST forms is highly recommended for hospitalized patients being discharged to nursing homes or to their own home with hospice or home health care. However, the use of a POST form is always voluntary. Because it is a medical order, the POST form is the document that is most likely to ensure that the patient receives the treatment that he/she wants.

In most cases, the original POST form should remain with the patient. Family members and caregivers should know where the form is located. The patient can provide a copy to his/her health care facilities so it can be kept in the file. Each patient can complete a POST form with his/her physician. If a person does not have legal capacity, a legally appointed guardian or representative can complete the POST form on his/her behalf.

If you think you or someone you know would benefit from the POST form, then you can download this form at http://www.indianapost.org/. The form must be signed by a physician to be valid.

Durable vs. Limited Powers of Attorney

POA

A Power of Attorney is a legal document which appoints a person (the “Attorney-in-Fact”, AIF) to act on your behalf.  You can name more than one AIF, or you can name a primary and a contingent, or back-up AIF, who would step in if the primary AIF became unable to serve.  You can grant either general or limited authority to your AIF, and the authority can last for your lifetime or for a limited period of time.

A durable Power of Attorney authorizes your AIF to act on your behalf even if you become incapacitated and unable to handle matters on your own. A durable Power of Attorney can become effective immediately and continue after you become incapacitated – throughout your lifetime. You can revoke a durable power of Attorney so long as you have legal capacity.  The powers granted in a durable Power of Attorney are typically quite broad and give the Attorney-in-Fact authority to handle your banking, financial, and real estate transactions, among other things.

A limited Power of Attorney places restrictions on the AIF’s general powers. For example, a limited Power of Attorney could be in place for a specific event, such as a real estate closing or contract signing, if you were out of town or unavailable. The limited Power of Attorney would then terminate after the event is completed.

Call our office or visit our website at www.troyergood.com to set up an appointment to discuss your needs for a Power of Attorney.