General Information When Considering Planning for a Will

The older we get, the shorter time becomes. 

At some point in everyone’s life, they will begin thinking about what will happen to those they love and the property they own when the inevitable happens.  This brief note is intended to give some guidance to help you direct your thoughts when considering end of life planning.

Ownership of Property

You may already have a form of end of life planning in place.  Many people own their property jointly with another person. 

Joint ownership can take many forms.  Property owned jointly as “tenants in common” will remain the separate property of the owners at their death, in the same proportion as they own it in life.  It will then become a part of their estate, to be distributed as a Will may provide. 

Property owned “with the right of survivorship” will automatically become the property of the other joint owner at the death of one of the owners.  This property will not become a part of your estate, and your Will has no effect on its distribution.  For those reasons, it is important for you to know how you own your property when thinking about planning.  Property owned with the right of survivorship will go to the other joint owner at your death, no matter what your Will may say. 

But what happens to that property after your death?  It then passes according to the wishes of the survivor.  If the survivor has no Will, or the property has no other joint owner with survivorship rights, then it will pass according to the laws of your state regarding inheritance when there is no Will.  Relying on joint ownership is then often not enough when considering how you wish your property to be distributed when you are gone.

You may also have property that is subject to a contractual arrangement with a beneficiary.  Many 401(k) accounts or other stock accounts have beneficiary provisions.  Much like life insurance, these accounts will go to the designated beneficiaries, regardless of a Will or trust.

A Will or a Trust?

Many people have heard that by establishing a “living trust” they can save the expense and time of going through probate. 

In fact, several years ago, unscrupulous attorneys often went door to door selling “Trust Kits” to anyone who would listen.  Charges would be anywhere from $5,000.00 to $10,000.00 to establish a living trust.  Much of that was unnecessary, and it was sold with the line that it would save thousands in taxes and probate costs. 

While it is true that a living trust may save some costs and time for probate, the living trust is not a panacea for several reasons.  First, it is usually much less expensive up front to prepare a Will.  While it may save probate costs later, a living trust is more expensive now.  Why?  Because it will generally be more complex. 

In addition, in order for a living trust to work, it has to be funded.  You will be required to transfer your property to the trust by deed or title work.  All of that costs money. 

Will a living trust save you taxes?  It depends.  For most of us, the Federal Estate Tax is not going to affect our estates.  The Federal Estate Tax Exemption amount in 2011 is five million dollars.  Whether it remains that amount or is increased or decreased is not permanently resolved, and likely never will be.  With the current political climate, a guess would be that it would likely not be reduced beyond three million dollars in the foreseeable future.  If your estate is likely to be larger than that, then a trust may hold some tax advantages for you. 

However, in Indiana, the state inheritance tax will find you, probate or trust.  Luckily, the state rate is far less than the federal estate tax.  Even with a trust, at your death, an inheritance tax return will still need to be filed. 

Deeds may still need to be prepared and titles will need to be transferred. 

So what about a Will and probate?  There will generally be more costs after your death for probate of a Will and the transfer of property.  However, for most estates, the average costs will generally be between $2,500.00 and $8,000.00.   In larger estates, costs will be more.  In smaller estates, costs will be less. 

Time will also be a factor in probate, as most probate estates are not settled for six to nine months.  That time may or may not work in your favor.  If all of your bills are paid, then the wait may be unnecessary.  However, if probate is begun, many states provide that claims against an estate are cut off if not presented to the probate court within a specified period of time.  This “claims cut-off date” may be beneficial if there are numerous claims outstanding. 

So, a Will or a Trust?  It may depend for the most part on your own preferences and ability to pay.  Do you want to pay now or later?  Will one save you more money on taxes, or will another?  And do you want to make transfers of your property now to fund a trust or wait until your death for the process to occur?

Specifics for your attorney

In either event, you will need to think about several things when doing end of life planning.  Have an idea about these things when seeing your attorney:

1.      Who or what are the objects of your bounty?  Your spouse?  Your children?  Charitable organizations?  Friends or other relatives?  These are highly personal decisions.  As a subset of that, are their personal items or heirlooms you want to leave to certain individuals?  Consider making a list.

2.      What is the approximate net value of your property after all of your bills are paid?

3.      How do you own your property?  Jointly or singly?  Do you have life insurance?  If so, who is the beneficiary?  Ask yourself the same for other accounts.

4.      Who do you want to name to make sure that your wishes are carried out?  This could be a Personal Representative or a Trustee.  Many people select their spouses first, and a trusted child or friend second.

5.      Do you have minor children?  If so, who would you want as their guardian in the event of a catastrophic loss of their mother and father?  Do you want minor children to have their portion of your property in a trust?  If so, who should be the trustee?  What ages do you want the children to receive their inheritance?  Even with older children, are there special needs you should consider?

6.      Have you planned your funeral?  What type of burial do you want?  Where do you want to be buried?

7.      Do you have someone to assist you if you become incapacitated?  If so, who?

8.      Do you have someone to assist you in making healthcare decisions if you cannot make them?

9.      What kind of care would you want if you were nearing death and you had no hope for recovery?  Would you want artificial nutrition or hydration?

A Final Note

While there may be other items to consider in your particular case, if you think about the things listed here before seeing your attorney, you will be further ahead in your planning than many people. Planning for your estate after your death may be slightly complicated, but your survivors will be glad you did.

Daniel J. Vanderpool is an attorney in Warsaw, Indiana.  During his career, he has served as a judge and an attorney, seeing both sides of complex issues.  As a part of his practice, he provides services for planning estates and trusts, and assisting individuals after the death of a loved one.  Vanderpool Law Firm PC provides a website regarding the firm at www.vanderpoollaw.net. The information provided here is given as general information and specifically for the State of Indiana.  It should not be considered personal advice about your unique situation.  Speak with an attorney of your choosing when finalizing your plans.  This article was prepared February 2, 2011.