Estate Planning Attorneys Carmel, IN
Helping Transfer Your Legacy to Your Loved Ones
What will happen with your assets when you pass? Most people don’t want to think about their death. However, we view this from a different perspective – what can I do now to take care of my loved ones in the future? The Indianapolis estate planning attorneys at Hollingsworth Roberts Means are sensitive to your concerns and experts in the vast area of estate planning. We first obtain a snapshot of your assets and desired beneficiaries, then discuss the options for transfer based on personal and tax issues.
Our estate planning documents include the following:
- Family Trusts
- Charitable Remainder Trusts
- Powers of Attorney
- Living Wills
- Healthcare Representatives
- Assignments of Business Interests
- Deed Transfers
- Special Needs Trusts
Estate Planning Checklist for New and Expecting Parents
The following tips will help ensure your family is protected and provided for in case the worst comes true.
Draft a Will
This should be the first item on your to-do list. Not only can a will be utilized as a means of distributing your assets, but it can also be used to select a guardian you trust to care for your child in the event of your death. If no guardian is appointed by will, it is up to the state to find a suitable candidate, who may not be your first choice. Finally, a will lets you select who will be the executor of your estate. The executor not only ensures your assets are distributed according to your wishes, but is also responsible for filing tax returns, paying creditors, and other administrative tasks. Thus, it is important to select someone you can trust to fill this role.
Listed beneficiary plans, such as life insurance, retirement plans (401k, IRA, Roth IRA, etc.) and other plans, require you to designate a beneficiary, or beneficiaries, of the plan’s funds. While it is a major benefit that these plans avoid probate, there can be some drawbacks to the plans if you don’t update your plan’s listed beneficiaries.
For instance, say you want your life insurance to be distributed equally amongst your children, so you list your current 2 children as 50% beneficiaries each. Then, you have a third child, however, you fail to update your beneficiaries to include the third child before you pass. In this scenario, the third child would be omitted as a beneficiary and entitled to nothing from the plan. Alternatively, if you forget to update your beneficiary after they pass away, then the funds from the plan will be transferred into your estate to be probated with your other assets.
Get Life Insurance
Not only can life insurance provide your child and family with much needed support funds in the event of your death, but can also be highly valuable in ensuring your debts are paid off, allowing your child to inherit your estate unfettered by high dollar claims, such as a mortgage. Ideally, you will have at least two policies set up: one for the healthcare and maintenance of your child, the other to pay of your creditors and probate costs. Additionally, you can combine the life insurance policy with a trust to allow for long term management of the funds.
Set-Up a Family Trust
Even for those with little assets, a Family, or Minor’s Beneficiary, Trust can be a powerful tool for providing for the care and support of your children. The Uniform Transfers to Minor Act limits the amount children under the age of 18 can receive directly through inheritance, and any of the excess must be placed in the hands of a custodian. While the custodian does take care of the property until the age of 21, there are some drawbacks to this.
First, only one custodian can be appointed to manage the assets. Second, the custodial relationship ends at the age of 21, providing no long term planning. Setting up a Minor’s Beneficiary Trusts allow for co-trustees and for the trust to continue past the age of 21. Furthermore, family trusts are easy to implement, and can even be included in your will. However, we recommend setting one up during your life to take advantage of the yearly gift exclusion and fund the trust in your lifetime, reducing the size of your estate while increasing the income earning potential of the trust.
Obtain Limited Power of Attorney Documents for Your Children’s Caregivers
Not all estate planning implications require your death to have a use. Often, parents need a break and take a short vacation while leaving the kids with Grandma or another caregiver. There’s certainly nothing wrong with this, but parents should strongly consider giving these caregivers a Limited Health Care Power of Attorney for the kids and a Limited Power of Attorney for their property. The Health Care Power of Attorney can be written in a way that allows for the caregiver to make basic health care decisions in the event of an emergency, while leaving the major decisions to the parents. Similarly, the Power of Attorney over property can also allow for the caregiver to maintain the property during the owner’s absence.
Establish a Plan for College
Your newborn may be small now, but in just 18 short years, they will be all grown up and ready to go off to college. More than likely, your child won’t be the only thing to grow in that time. In the last 20 years, in-state tuition rates have increased nearly 300%, and are estimated to increase to $40,000 a year by 2030. Thus, it is important to start planning for college now, rather than the year in which your child will be applying to universities. Savings bonds and accounts can help but there are better options.
A 529 Savings Plan is a powerful and efficient tool for college savings. Not only will a 529 Plan allow for you and your spouse to contribute, but your relatives and friends as well. Furthermore, contributions to a 529 Plan may qualify you for current year tax credits and deductions. Additionally, a 529 Plan ensures that the money put into the Plan will be used for educational purposes, as the funds are not only controlled by the parent, but can only be used for educational purposes. Should a child choose to not go to college, the parent can simply change the beneficiary of the account, or even use it themselves to attend classes.
Reasons You Should Have an Estate Plan
1. Avoiding Intestacy
The main reason you should have an estate plan is ensuring your assets are distributed according to your wishes. If no plan exists when you die, your assets are distributed by the rules of intestacy. These rules can cause unwelcomed surprises for beneficiaries expecting an inheritance, and result in distributions contrary to your wishes. Many people intend for everything to go to their spouse, however, intestacy rules may result in the spouse receiving considerably less. If there are surviving children of the marriage, the spouse will be entitled to only 50% of the net estate.
Even worse, if there are surviving children from the deceased spouse’s preceding marriage and no children from the current marriage, that surviving spouse is only entitled to 25% of the estate’s real estate value. Additionally, cohabitants have no rights under intestacy. Intestacy also does not discriminate between descendants. Regardless of their involvement in your life or your wishes, your children will receive the same amount from your estate under intestacy. The final thing to note is if no surviving family can be found, then your property will go to the state, rather than a preferred charity or friend. To avoid intestacy, a will, trust, or combination of both can be utilized.
2. Avoid Unwanted Distributions by Your Spouse
For many people, the default estate plan is to leave a few specific items to their children and grandchildren, and simply leave the rest to their spouse. While this may work for some people, there are some significant considerations regarding this plan. First, this could subject your personal assets to your spouse’s creditors. Secondly, your spouse may not follow the plan you decided on, and would be free to allocate bequests as they see fit. Additionally, even if your spouse doesn’t change the beneficiaries, it is still possible that they could spend most or all of the assets, leaving nothing for your intended beneficiaries. Finally, having the assets in your spouse’s name can result in their disqualification for Medicaid and other entitlements. As with the first reason, a will and trusts can be utilized to address these concerns.
3. Medicaid Planning
As previously mentioned, estate planning can have a tremendous effect on your Medicaid eligibility. In order to qualify for Medicaid, your income and countable assets must be below a certain threshold. This is especially important for older couples who may need the money for nursing home care, or children with special needs. These types of care are very expensive and, without proper planning, result in the drying up of an estate and other resources. Also important is the fact that in determining Medicaid eligibility any assets transferred by gift will be penalized resulting in a longer period for eligibility. Therefore, it is important to start planning for Medicaid well before any issues that might require it arise, otherwise you or your spouse will have to pay for the care from your assets, reducing the size of your estate.
4. Establishing a Guardian for Your Surviving Children
Asset planning is not the only considerations for why you should have an estate plan. Without an estate plan, the process of determining who should take care of any surviving children is a messy one if there are no surviving parents. The court will consider various family members and weigh the options and other factors to determine the child’s best interest. The person selected may not be the guardian you would prefer to be taking care of your children in the event of your death. To avoid this, a will can be used to establish not only a guardian, but a alternative guardians should your primary guardian be unable to perform.
5. Providing for the Health, Education, Maintenance and Support of Your Spouse, Children or Grandchildren
Additionally, it is important to plan for the well-being of your surviving dependents. While social security death benefits may be available for this, they are often very small and short-lived. Primarily, life insurance is the go-to vehicle for providing life-long support for your dependents. Additionally, trusts can be implemented to manage your assets and produce income for your loved ones throughout their lives. Even better is the ability combine life insurance proceeds and trusts to provide long term care and management of assets for your dependents.
6. Reducing Conflict Between Your Loved Ones
While the relationship between your loves ones is most likely an amicable one, emotions can run high after a death in the family, resulting in people acting in ways they normally would not. This can lead to fighting over who should get what personal effects, who should live in the family house, and other disagreements. Creating a will can help alleviate many of these arguments by providing a certainty as to who is entitled to these items. Alternatively, trust planning can also serve this purpose, and even create a system where multiple beneficiaries are entitled to enjoy the item.
7. Provide Instruction for Funeral and Burial Desires
The distribution of estate assets is not the only source of family tension after a death. Several arguments can arise simply from the planning of the funeral and burial services. Additionally, without proper instructions, the funeral and burial can easily be conducted in a manner contrary to your personal beliefs. Finally, all of these plans can be very expensive. Without planning, these expenses will be paid from estate funds reducing the assets available to make intended distributions. A combination of wills, insurance policies and trust planning can all help address these concerns.
8. Establish a Source of Payment for Fees and Costs Relating to the Settling of an Estate
In addition to funeral and burial expenses, there will also be a myriad of additional expenses incurred in settling your estate. Primarily, the executor and their attorney will be entitled to fees for services. Additionally, there will likely be some form of taxes incurred. Finally, creditors must be notified and claims paid before the estate can distribute the remaining assets. These expenses can greatly reduce the size of the net estate if not properly planned for by a will or trust.
9. Provide for the Management of Assets and Medical Decisions in the Event of Incapacity
Not every benefit of estate planning comes after you die. There are some benefits to consider in your lifetime, such as having a plan in place if you become incapacitated. In this event, you will want someone in charge of manage your assets and medical decisions for you. Additionally, these plans will greatly alleviate family tensions regarding who should make the decisions, and what decisions should be made The simplest way to deal with these issues are by assigning Power of Attorney (for assets) and Health Care Power of Attorney (for medical decisions) to trusted person. However, living wills and living revocable trusts provide more specific instructions regarding these decisions; particularly for choices regarding the provision of life support.
10. Protect Assets from Creditors
Similar to Medicaid planning, various estate planning techniques can be used to shelter assets from creditors, while retaining a beneficiary interest. Irrevocable trusts are the primary tool for this type of planning; however, they require careful execution and cannot be designed solely as a means of defrauding creditors. Another important consideration is that placing assets in these vehicles will greatly reduce the amount of control you personally hold over the asset.
11. Income and Estate Tax Planning
The last reason for estate planning is tax considerations, while important consideration, should generally be the last consideration. Because of the tax code, very little Americans ever incur any estate tax. Additionally, income tax consequences are also minimal. Most commonly, tax consequences arise upon the receipt and subsequent sale of bequeathed property. The taxable income from such a sale is the amount realized minus the basis in the property. The basis can vary depending on how the property was transferred. If transferred as a gift, the basis remains the same; however, if it is an estate gift, the basis in the property is increased to the fair market value of the property. This results in a lower amount of taxable income. Additionally, there may be other tax consequences and you should always consult with your estate planner as to what those may be and what options are available.