Estate Planning and Probate

An estate plan provides the answers to three questions:

  1. If you become unable to take care of yourself and to make your own decisions, who will do it for you?
  2. If you have children, and they are left without parents, who will raise them?
  3. Who will receive your property after you die?

Surprisingly, many careful, well organized people have not created an estate plan. Nonetheless, they have estate plans. Everyone does. If you have not created a plan for yourself, your plan consists of relevant sections of the Indiana Code. Not surprisingly, such a default "plan" is likely to be suboptimal, to say the least.

A Good Estate Plan

Here are some characteristics of a good estate plan.

A good plan will designate someone you trust to make decisions for you if you cannot make them yourself. If you are married, that person will likely be your spouse, but a good estate plan will also provide for an alternate in case your spouse predeceases you or is otherwise unable to make decisions for you. That person should understand your values and should be familiar with your desires for medical care in the event you become terminally ill with no hope of recovery.

If you have minor children, a good estate plan will nominate someone you trust to take care of them in the short term and ultimately raise them if they are left with no parents. Again, a good plan will provide for an alternate in case your first choice predeceases you or otherwise cannot take over your job of parenting your children. Selecting someone to raise your children is intensely personal, sometimes fraught with conflicting considerations, and should be revisited when relevant circumstances change.

A good estate plan will include a formula or mechanism for using or transferring your assets after your death. The plan should accommodate contingencies, such as the possibility that one or more of your heirs predeceases you. In simple circumstances, all that's required is a plan for transferring assets directly to the people you want to have them, but if you have minor children, your plan will almost certainly involve a trust (either ap living trust or a testamentary trust) that provides for the health, education, maintenance, and support of your children until they reach a specified age, or a specified event occurs, triggering a final distribution of the remaining trust assets to your heirs.

A good estate plan will minimize the burden on those you leave behind. The probate process can be expensive and time-consuming, but perhaps more importantly it can impose a burden on your survivors and increase the amount of stress they experience. Transferring property outside the probate process can mitigate that burden and stress.

A good estate plan will preserve the value of your estate by reducing taxes. The issue of estate taxes is no longer as important as it used to be, at least for most people. The Indiana death tax has been repealed, and the exclusion from Federal estate tax has been increased to more than $5 million (in some circumstances, more than $10,000,000 for a married couple). As a result, far fewer estates are taxable, enabling people who are creating estate plans to focus more on the basics -- how the assets are used and distributed to heirs -- and less on more complicate strategies for reducing estate tax.

Estate Planning Tools

Here are some of the tools that the estate planning attorneys at Harshman Ponist will use to help you construct a good estate plan.

Powers of attorney and an appointment of health care representative are the most useful estate planning tools for dealing with the possibility that you may, at some point, become unable to manage your own affairs or make your own decisions. A power of attorney is an instrument that authorizes a person (your attorney-in-fact) to take actions or make decisions on your behalf. Depending on the way it is written, a power of attorney can be effective immediately or it can take effect only upon some future event, such as your incapacity. A power of attorney that takes effect later is called a springing power of attorney.

Many estate plans include two types of powers of attorney – a general power of attorney that authorizes your attorney-in-fact to take almost any action or make almost any decision that you could take or make yourself. Usually, however, the general power of attorney that forms part of an estate plan excludes health care decisions. Those are addressed by a health care power of attorney, which is generally combined with an appointment of a health care representative.

The combination of a health care power of attorney and an appointment of a health care representative can give someone you trust the authority to make essentially any health care decision on your behalf, including the decision to withhold or to withdraw extraordinary measures to keep you alive. You may choose to supplement those documents with either a living will or a life-prolonging procedures declaration that informs your health care providers and your health care attorney-in-fact/representative of your wishes.

An important thing to understand about powers of attorney is that they never give the attorney-in-fact the authority to do anything over your objection, at least if you are competent to object.

Wills and trusts generally form the foundation of an estate plan. A will, of course, is the instrument you use to declare how you want your estate to be distributed to our heirs after you die. A will can also be used to nominate a person to serve as the guardian of your minor children, and it will name a personal representative to administer your estate and see that it is distributed in accordance with your wishes.

Your will may also create one or more trusts, typically for the benefit of your minor children. Because they are created by your will, they are called testamentary trusts. You will can provide for some or all your asset to be placed in a trust, name one or more trustees, name one or more beneficiaries, and specify how the trust assets are to be used, and ultimately distributed to, the beneficiaries.

A living (or inter vivos) trust can be used as alternative to a will and testamentary trusts. In contrast to a testamentary trust, a living trust is created while you are still alive. Typically, you name yourself as the trustee and the original beneficiary so that you are managing the trust assets for our own benefit. A living trust is usually a revocable trust, which means you can revoke it at any time before you die. Upon your death, the trust becomes irrevocable, and a successor trustee named in the trust document takes over the management of the assets. The trust document also names the beneficiaries and includes instructions for the use, and ultimately distribution, of the assets for their benefit. In other words, your estate ends up in essentially the same situation as if you created testamentary trusts in a will, but the path to get to that point is different. In particular, the assets in a living trust are not subject to probate, so there is no delay in the assets being available for the benefit of your beneficiaries. Generally, you will still have a will even if you have a living trust, but it will be a simple “pour-over” will that transfers into your living trust any assets that you failed to transfer while you were alive.

One of the most recent estate planning tools is a declaration of standby guardianship. Although your will can nominate someone to be named as the guardian of your minor children, that guardianship will not be effective until your will is admitted to probate and a court names that person as guardian. In the meantime, the person you entrusted with your children may need to enroll your children in a new school or take them to the doctor for checkups, vaccinations, or treatment. Until the guardianship is established, that person has no authority to do those things.

That’s where a standby guardianship comes in. A standby guardianship is basically a temporary guardianship that takes effect immediately upon your death. Typically, the standby guardian is the same person your will nominates to be a permanent guardian. If that person takes the necessary actions, the standby guardian will remain in place until the permanent guardianship is established, providing for the seamless care of your children.