Should You Avoid Probate?

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Many people have heard that they should avoid probate but don’t understand why. What is probate and should you avoid it?  Probate is the proving and acceptance by the Court of the Will. After death, the Will is presented to the Probate Court. Upon approval of the Court, the Will is admitted to probate. Probate also refers to the process by which the decedent’s assets are distributed to the heirs. One advantage to the probate process is that known creditors are sent a timely notice of administration which is also published in the newspaper. If they do not file a claim within three months of the newspaper publication, they cannot later pursue the debt from the heirs.  Another advantage, in some situations, is court oversight of family conflicts and supervision of the Personal Representative. The probate process terminates when the decedent’s assets have been distributed to the heirs or beneficiaries entitled to it, after the payment of taxes, expenses, and claims.

So why might you want to avoid probate?  Since probate estates pass through the court, this makes the Will and other related documents part of the public record.  When you avoid probate, there is no public proceeding and privacy is maintained.  However, when there is no probate estate, creditors are permitted to pursue heirs for nine months after the death versus the three month creditor claim period with a probate estate.  One key thing to keep in mind is that avoiding probate does not mean avoiding taxes.  Taxes are owed in both probate and non-probate estates.

 

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Organizing Your Digital Accounts

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Almost everything people do now is online. If you die or become incapacitated, your loved ones will need to access your online digital accounts. If they don’t have access, how will they monitor your automatic payments? Take care of your bank accounts? Or even manage your Facebook page? Indiana’s new laws make it much easier for your attorney-in-fact and/or Executor to access your digital accounts, but this can still be a time-consuming process. In order to help your loved ones and keep the process simple, it would be beneficial to create a list of your user names and passwords for digital accounts.

Do not put this private information in your Will because your Will is made public after you die. You could put the information in a Trust if you have one, but this would not be practical either because you may change, update, add, or delete your digital accounts. The best idea is to create a list with all of your digital accounts and their access information (like user names, passwords, PINs, etc.) It’s important that you keep this list up-to-date with the most current information. Be sure to include information on how to access your computer, Internet provider, email accounts, blogs, websites, photo storage sites, social networking accounts, online subscriptions, online banking, mortgage provider, retirement plans, automatic bill paying, software applications, and cell phones.

To help you organize your information, we’ve created a packet for you to fill in with your information and keep with your legal documents. The packet has space for you to fill in with information about your digital accounts and your tangible accounts. If you keep the packet up-to-date and keep it with your legal documents, then your loved ones will have a much easier time helping you if you become incapacitated or die.

Premarital Agreements

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A Premarital Agreement (also called a Prenup) is a written contract created between two people before they are married. It typically lists each person’s assets and debts and specifies what each person’s property rights will be after marriage. Couples create Premarital Agreements for a number of reasons. Some couples who have children from prior relationships may want a Premarital Agreement to ensure that their children receive a certain amount of property. Other couples may simply want to clarify their financial rights and responsibilities during marriage. Premarital Agreements can prevent potential arguments about how property will be divided in the event of a divorce.  Also, they can protect spouses from each other’s debts.

Premarital Agreements can help, not only in the event of divorce, but also in the event of a spouse’s death. The Agreement stipulates who receives what property when a spouse dies.  This overrides statutory rights of surviving spouses. It can even take priority over a person’s Will, if the Agreement was fairly negotiated between the spouses.  This allows individuals to develop their own estate plans free from the fear that their wishes might be overridden after death.

If a couple does not have a Premarital Agreement, how is their property divided? State law determines who receives what property at divorce or death. This division of property applies to assets acquired during marriage and can apply to property acquired before marriage, such as inheritance accounts. If a couple does not want the state to decide who receives what property, then they should create a Premarital Agreement. At divorce or at death, the Court will carefully examine the Premarital Agreement. If it finds that the Agreement is unfair or fails to meet state requirements, then it will not be considered. It is important, then, to make sure that couples create a legally valid and understandable Premarital Agreement. Do you think you need a Premarital Agreement? Schedule an appointment today and one of our attorneys will be happy to help you.

Credit Shelter and A-B Trusts

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Credit Shelter Trusts and A-B Trusts allow a married couple to minimize estate taxes when passing assets on to heirs. The trusts are structured so that upon the death of the first spouse, the assets specified in the trust (up to a maximum dollar value) are transferred to the trust. A key benefit to this type of trust is that the spouse maintains rights to the trust assets and the income they generate during the remainder of his/her lifetime; however, the assets will not be included in the taxable estate at the second death.  The surviving spouse can even be the Trustee of the trust.

Many Credit Shelter and A-B Trusts were created to avoid estate tax at a time when the federal estate tax exemption was only $600,000. However, the federal estate tax exemption is now $5.45 million in 2016. Many of these trusts that currently exist should now be terminated. If an estate tax liability is no longer an issue, the fact that the Credit Shelter Trust does not get a stepped-up basis at the death of the second spouse, creates an unnecessary capital gains tax liability. Indiana Code section 30-4-7-6 allows individuals to draft a Family Agreement to terminate a Credit Shelter Trust. Contact our office for more information.

2016 Hot Topics for Indiana Lawyers

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This year is the fifth annual Hot Topics for Indiana Lawyers. The event will be held on September 22 and 23 from 8:30 a.m. to 4:00 p.m. at the Grand Wayne Center, 120 W. Jefferson Blvd. The event will count for 12 CLE credits, which includes 1.5 ethics credits.

Our attorneys, Tracy Troyer and Leah Good, will be speaking at the event on Thursday, September 22. The title of their presentation is “Estate Planners: Medicaid Law.” They will speak with the assembly about the 2016 Indiana law changes regarding Medicaid.

For more information on attending, please check out the Allen County Bar Association website.

Medicaid and Medicare: Which Pays for What?

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Medicaid and Medicare are both health care programs that give financial aid to those in need. It’s important to know what each program covers so that you can use the programs to your advantage.

Medicaid

What is it? Medicaid is a federal and state program that aims to provide medical coverage to those in financial need. In Indiana, the Family and Social Services Administration (FSSA) has primary responsibility over this program. Each state has its own qualifications for eligibility, but eligibility usually depends on the person’s income and assets. The program is available to individuals of all ages – including the blind, disabled, elderly, individuals under the age of 19, women who are pregnant, and families with children.

What will it pay for? Medicaid pays for long-term care costs for the elderly, blind, and disabled in a Medicaid-approved facility. This coverage lasts as long as the individual remains eligible. Waiver services are also available for an individual to receive Medicaid benefits while residing in an assisted-living facility or an at-home care program.

Medicare

What is it? Medicare is a federally run health insurance program for the elderly and disabled. It is meant for individuals over the age of 65, or for individuals with certain disabilities under the age of 65.  A person’s eligibility for Medicare does not depend on his/her financial status. In Indiana, an individual can apply for Medicare at the local Social Security office.

What will it pay for? Medicare has four parts to its services. Part A assists with expenses related to hospital stays; and Part B assists medical needs like doctor’s services and out-patient hospital expenses for a monthly premium of $104.90. Medicare Part A will cover up to 100 days of coverage in a nursing facility if the patient was admitted to a hospital for at least three days and entered the nursing facility within 30 days. Although Medicare covers up to 100 days of stay, it does not cover all expenses associated with the stay. Medicare will fully cover the first 20 days of a patient’s stay and partially cover the remaining 80 days. A Medicare recipient can also purchase additional coverage in the forms of Part C, which includes health plans like HMOs and PPOs, and Part D, which includes prescription drug coverage.

Case Study: Dissolution of Marriage – Inheritance Accounts

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When a married couple decides to file for the dissolution of their marriage, the assets and property must be divided between the two. In Indiana, the law governs that the trial court will divide the property of the couple in a just and reasonable matter, or follow the premarital agreement if there is one. This property includes assets owned by either spouse before the marriage, acquired by either spouse in his or her own right after the marriage and before the final separation, or acquired by their joint efforts. This “one pot” theory of marital property ensures that all marital assets are subject to the trial court’s power to divide and award. However, the presumption of equal division may be rebutted by a party who presents evidence than an equal division would not be just and reasonable because of the contribution each spouse made to the acquisition of property.

A recent Court case affirmed that a spouse must overcome the presumption of equal division in order to have different distribution. In the case, the husband and wife married in 1978. During the marriage, the wife inherited property and funds after the deaths of her mother and uncle. She deposited the funds from the estates into multiple bank accounts in her name only. The husband had various sources of income, including worker’s compensation funds. In 2013, the husband filed a petition for dissolution of marriage and requested the trial court apply the presumption of equal division of the marital estate. However, the wife requested that the trial court award a 65/35 percent distribution in her favor due to the income disparity.

The trial court decided that a 65/35 percent distribution was not warranted and instead awarded an equal distribution. The issue went on to the Court of Appeals, who reversed and remanded. The Court noted that the wife had presented several specific facts related to the inheritance accounts that supported her claim. A person’s inheritance alone does not necessarily dictate how property should be divided, but the inherited property should be considered with relevant evidence and contextual facts. In this case, the wife kept the inheritance accounts solely in her name and for her use. Her husband was unaware of the specifics of the accounts and did not have access to or use the accounts. Since the wife met her burden of overcoming the presumption of an equal division, the case was remanded to determine the proper division of the marital estate.

Diaper Dash 5K Run/Walk

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Healthier Moms and Babies (HMAB) is hosting a Diaper Dash 5K Run/Walk to raise awareness for its mission and to help collect much needed diapers for the babies of women they serve. Proceeds from the race will go to support the HMAB mission of preventing prematurity and improving birth outcomes in Allen County. HMAB accomplishes this by providing prenatal health education through in-home case management and group support sessions to the community’s most at-risk pregnant women.

The Diaper Dash will be fun for the whole family! Runners and walkers are encouraged to dress up in a diaper, baby costume, or other fun baby related costumes. You can even dress up in a nostalgic costume that remind you of your childhood. The race will be timed, and there will be gender specific commemorative tech shirts and food trucks available. Registration is $25 for early registration and $35 for late registration (after August 24th). Kids’ registration is $15 for early and $25 for late registration. Kids will also receive a commemorative cotton t-shirt. Registration is non-refundable.You can register here.

HMAB is also asking for a donation of diapers or wipes with the registration fee. Diapers can be purchased through the Target HMAB Registry and will be shipped to the HMAB office or can be brought the day of the race. A donation of diapers is not a requirement to participate but is greatly appreciated.

Dressing up is also not a requirement but a fun twist. There will be pictures taken in the pavilion for you to share with your friends. Awards will be given to the top three overall males and females, top masters male and female, and individual group age winners. There will also be an award for the best single and group costumes. Early registration packet pick-up will be on Friday, September 23 from 5:00 to 8:00 pm at:

Fleetfeet Sports

5661 Coventry Lane

Fort Wayne, IN 46804

Fleetfeet Sports is located in the Village of Coventry behind Starbucks. You can register at the packet pick-up but a shirt is not guaranteed. The race will be held Saturday, September 24 at:

Foster Park, Pavilion #1

3900 Old Mill Road

Fort Wayne, IN 46807

Check-in and late registration will be held from 7:30 to 8:10 am but a shirt is not guaranteed. The run will begin at 8:30 with the walk beginning immediately following. The awards ceremony will be at 9:30. If you can’t make it but would still like to donate, feel free to donate here.

Senior Savings Protection Act

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There is a new law called “The Senior Savings Protection Act.”  On July 1st, Indiana enacted this law which creates new rules and responsibilities for individuals associated with a broker-dealer in a supervisory, compliance, or legal capacity.  The Act requires those individuals to take action in certain situations when working with a client who is a financially endangered adult.

A financially endangered adult is defined as someone who is age 65 or older or a younger person who is not able to manage his/her property because he/she is mentally ill, intellectually disabled, or suffering from some other type of incapacity, such as dementia.  The triggering events requiring the individual to take action are when he/she has reason to believe financial exploitation of the financially endangered adult has occurred, has been attempted in the past, or is currently being attempted.

If there is financial exploitation, then the individual is required to make a report to Adult Protective Services or to a law enforcement agency and also notify the securities commissioner.  After these mandatory notifications are made, the individual may also choose to notify the adult’s immediate family members, legal guardian, trustee, attorney-in-fact, or others who have been previously agreed to in a customer agreement.

Furthermore, the individual can refuse to make disbursements from the adult’s account or from an account of which the adult is a beneficiary if he/she has reason to believe the disbursements will result in financial exploitation.  If a disbursement is refused, the individual must notify all parties authorized to transact business on the account as well as Adult Protective Services.  However, if the individual believes a party authorized to transact business on the account is involved in the exploitation, that person is not entitled to notification.

An individual is immune from civil liability when acting in good faith under this new law.  The commissioner will be making training resources available on these issues on the Secretary of State’s website by September of next year.

What Happens to Your Digital Assets When You Die?

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In 1996, there were 36 million users on the Internet. Now, only 20 years later, the numbers have grown over a 100 times that to 3.6 billion users. You probably use the Internet on a daily basis – checking social media, doing online banking, communicating via email, or surfing the web. In today’s world, most people live their life online. So what happens to your digital assets when you become incapacitated or die?

First of all, what are your digital assets? A digital asset is an electronic asset that you have a right to or an interest in. It includes things such as emails, online bank accounts, iTunes, online storage areas, websites, social media, online credit card/bill payments, and more. As of July 1, 2016, the Indiana code has updated and expanded its statute on digital assets. The amendments to this statute increase the ability a fiduciary has to access your digital assets. “Fiduciary” in this statute refers to personal representatives, attorneys-in-fact, guardians, and trustees. Some of the amendments include:

  • Fiduciaries have the right to a catalog of electronic communications or digital assets
  • Fiduciaries can access the content of electronic communication sent or received by the individual
  • A distributee under a Small Estate Affidavit can also access the catalog and content of  any digital assets for a decedent
  • Attorneys-in-fact who are given general authority over electronic records, reports, and statements are authorized to do the following:
    • Gain access to any computer, storage device, network, communications device, or other computing machinery that the principal owns, leases, or otherwise has license to access
    • Gain access to any user account the principal maintains with an online service provider
    • Access, retrieve, copy, or store: (A) the content of an electronic communication; (B) a catalog of electronic communications sent or received by the principal; or (C) any other digital asset in which the principal has a right or interest
    • Perform any act in connection with the preparation, execution, filing, storage, or other use of electronic records, reports, and statements concerning the principal’s affairs

The expansion of these powers make it much easier for your fiduciary to access your digital assets. However, with the growing number of online accounts, it could be very difficult and time-consuming for your fiduciary to find all the online accounts that you are associated with. To help solve this problem, we have a packet called “Information for My Heirs” available on our website. This packet allows you to keep all your important information in one place, making it easier for your family when you pass. The last section in that packet refers to a list of usernames and passwords. It would be advisable to create this list for your important online accounts and keep the list with your packet.