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Whether or not you have ever stepped foot into an attorney’s office, you already have an estate plan. The State of Indiana provides an estate plan for everyone. If you do not take steps to change the plan, the State will decide how your assets are distributed upon your death. This collection of statutes, known as the Probate Code, is available on the State website as Title 29 Article 1 of the Indiana Code. An Indiana resident that dies without a will dies intestate, which means that the distribution of their probate assets will be determined by the State of Indiana.
Many people make designations on their retirement, investment, and other financial accounts. These designations tell the institution holding the asset what to do with it when you die.
Did you know that if you die without a will as a married person (and without children), the Probate Code says that your parents will be entitled to a portion of your assets? This can deprive your spouse of necessary resources to move on after your death. This is a surprise to most of our clients. The simple solution to this quirk in the Probate Code is to have a will prepared by an attorney knowledgeable about estate planning issues.
An attorney can discuss the best way to distribute your assets and help plan for any possible state or federal taxes that may result from your death. This may include a will, trust, or changing beneficiary designations on your assets. Typically, an attorney-prepared estate plan will also include advanced health care directives (including living will) and a power of attorney document.
Take Charge of Your Estate Plan
It is important to be informed about the estate plan that the State has provided you. If you want to take charge of your family’s future by reviewing your estate plan, please contact us to help you navigate these important issues.
What is Probate?
One of the first concerns our clients have when they meet with us to discuss their estate plan is that they want to avoid probate.
Probate is a common term for the administration of a a person’s estate through the local court system.
The probate system in Indiana is not overly burdensome but it may cause some delays in distributing assets and also exposes many of your estate documents as public records open to review.
So, when is probate required and how can clients avoid probate?
We use a simple two-prong test for determining what assets will become probate assets:
Assets that are in one person’s name (not owned jointly); and
Assets that have no agreement in place as to what happens to them when you pass away.
For married couples, there are likely no probate assets (and probate is not required) on the first death.
Married couples tend to own assets jointly and any individual assets (such as retirement assets) have beneficiary designations.
One common expression we use for married couples is that “we are planning for the second death.”
It is not until the second death that a probate estate is likely to occur.
How to Avoid Probate
The are several simple approaches to avoid probate if the client desires it. All of the approaches to avoid probate either deal with the first prong or second prong of our probate test.
A revocable trust is the first approach. When you put your assets in a revocable trust, it is no longer a probate asset because it is no longer in your name alone; it is owned by the revocable trust.
Owning assets jointly is the next way to fail the first prong and avoid probate.
By changing ownership of assets from individual to joint ownership, you are postponing probate until the death of the surviving joint owner.
Making a transfer on death designation for assets that you keep in your individual name. This creates an agreement as to what happens to the asset and it now fails the second prong.
Changing beneficiary designations to your family and friends.
This is a common method used for retirement accounts and life insurance proceeds.
This also creates an agreement as to what happens to the asset.
These approaches can seem simple but it is important to meet with an attorney that can review your objectives and goals while making the decision how to best handle your estate plan.
We have met with clients that have similar assets but very different goals or family situations; these clients end up with different estate plans.
Your advance health care directives address who will be in charge of making medical decisions on your behalf if you cannot make those decisions for yourself. The directives also allow the nominated person access to your private health information. The last part of your directives allows you to make choices regarding end-of-life treatments that your designated person will use in making those decisions on your behalf.
When you are faced with the loss of a loved one, the legal aspects of settling an estate or trust can be overwhelming. We will work closely with you in the administration of the estate or trust.
We will assist you in the collection, appraisal, and preservation of assets and ensure that all interest, dividends, or other incomes are received. We will help you sort out the claims and liabilities which must be paid and work to minimize the taxes and administrative costs. We will prepare and file all required pleadings, reports and returns.
If you are thinking about a person to put in charge, we recommend someone that is organized and will be able to keep accurate records. This person should also be able communicate with all of your potential heirs.
Your estate plan will consist of a few different documents. Some of the documents that we prepare are listed below. Additional documentation may be needed for your particular situation.
A will provides for the disposition of your property upon your death. It provides you the opportunity to specify who will receive your property, who will manage your estate (your personal representative), and who you would like to act as guardian of your minor children. A will may be revoked or changed at any time before your death (although it is possible to create a will which cannot be changed).
Living Trust (Revocable Trust)
A living trust allows you to avoid probate and keep your financial matters private; however, it does not avoid death taxes. During your lifetime, you are the trustee of the trust and can change the terms of the trust. Upon your death or disability, the successor trustee would manage the trust property and distribute the trust assets to accordance with the terms of the trust. In conjunction with establishing a trust, it is important to actually transfer your assets to the trust.
General Durable Power of Attorney
A power of attorney appoints another person to act on your behalf. The person appointed is your “attorney-in-fact” and has a fiduciary obligation to act on your behalf. A general durable power of attorney is unlimited (covers all acts) and will continue to be effective even if you are incapacitated. A general durable power of attorney will hopefully eliminate the need for a court-appointed guardian in the event you are unable to manage your own affairs.
Advance Health Care Directives
Advance Health Care Directives appoint another person to make your health care decisions in the event you are unable to do so. They also typically information that states, in the event of a terminal illness, life prolonging procedures are not to be used or are to be withdrawn if they have already been used.