“Fancy estate plan binders hide weak contents” should be a mantra for estate planning lawyers and their clients. We have heard clients praise the appearance of leather estate plan binders; especially binders embossed with gold lettering, Unfortunately, most of those clients pay dearly for weak estate plan is that did not address their issues adequately, or addressed issues that the clients were not facing. This article advises people about proper estate plan contents for the average family.
Trusts and Wills
We have written previously that trusts and wills are tools that estate planning lawyers use to help clients accomplish estate planning goals. A hammer does not replace a wrench, and a saw does a terrible job of tightening screws. Likewise, some estate plans require wills, trusts, or both kinds of tools.
We believe that lawyers began using revocable trusts as estate planning tools in the 20th century. Revocable trusts became very popular over the past 30 years, largely because of exaggerations about their benefits. We use revocable trusts to address three kinds of issues.
Multistate Property Management
Clients that own real estate in multiple states can create complications for family members if do not use estate planning tools to avoid probate administration and those estates. Generally, if a person owns property in the person’s own name, alone, a judge must appoint someone to manage the property after the person dies. Multistate property ownership multiplies this problem and creates unnecessary complications and expenses. A revocable trust allows a property owner to manage properties in multiple states without requiring probate administration in each state when the person dies.
Investments with Multiple Financial Institutions
State and federal regulations control some financial institution functions, but account management forms and procedures vary widely among various banks, insurance companies, and investment advisors. A revocable trust provides a kind of asset container that most financial institutions understand and respect.
Some States Offer Poor Revocable Trust Alternatives
Indiana’s Transfer on Death Property Act offers tremendous flexibility for people to designate beneficiaries of real estate, vehicles, bank accounts, and many other assets without requiring them to make revocable trusts. Most other states, such as Illinois, offer only limited transfer on death and pay on death asset ownership options to avoid probate administration. People that live in those states generally have few non-trust alternatives for probate administration avoidance.
Irrevocable trusts have existed for hundreds or thousands of years. As the name indicates, an irrevocable trust usually cannot be amended or revoked directly by the person that makes it. This feature allows a person to protect important assets by transferring them to a carefully designed irrevocable trust. Because irrevocable trusts are not flexible or adjustable, highly experienced estate planning lawyers must design them carefully to avoid problems. Rising long-term health care expenses inspired many families to transfer assets to a revocable trust to protect the assets from those expenses.
Clients often ask us to prepare wills. Most people can improve their estate plans with wills, but wills do not benefit everyone equally.
If a person in a state like Indiana organizes all assets with beneficiary provisions, the beneficiary provisions will cause assets to pass to the beneficiaries. In fact, beneficiary designations and join asset ownership with rights of survivorship can override a will. For example, if someone makes a will benefiting a local charity, and then makes joint accounts with rights of survivorship or beneficiary designations for all of the assets, the charity may end up receiving nothing.
Wills for Married Couples
A married couple without children may not need wills, because the law provides that childless spouses inherit from each other. However, couples with children may want to make wills because surviving spouses must share inheritance with deceased spouses’ children.
Wills with Trusts
Elder law attorneys are increasingly using wills that contain special trusts known as “testamentary trusts.” Generally, a testamentary trust is simply a trust that is established as part of the language of a person’s last will and testament. Federal law provides asset protections for a deceased spouse’s assets held in a testamentary trust established under his or her will, but the same law does not provide such protection for assets in revocable trusts.
Powers of Attorney
We have written and spoken frequently about powers of attorney in recent years. Most people need powers of attorney so that friends and family members can help them manage personal and business affairs during times of health crisis. These are some articles we have written about power of attorney issues that people should consider and address carefully:
Health Care Directives
Indiana has four basic kinds of advance health care directives. Those tools include living wills, appointments of health care representatives, health care powers of attorney, and Physician Orders for Scope of Treatment (POST). We have written a number of articles on the subjects, including:
Timing is Everything in Planning
The only time to make an estate plan is before trouble strikes. It is too late to make a plan after a person dies or becomes disabled. Time and expense may be precious now, but the costs of time and expense multiply for people who face crises without planning, or with poor planning.
About the Authors
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers. They are also active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys.
Jeff is a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation. He is also a member of the Illinois State Bar Association and the Indiana Association of Mediators. He served as the 2014-15 President of the Indiana State Bar Association, and he is a registered civil mediator.
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