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.