“When you talk about estate planning, most people have the same goals,” Batesville attorney Doug Wilson told about 70 attendees at an Oct. 17 meeting organized by Ripley County Extension Homemakers and the Purdue University Cooperative Extension Service office in Ripley County. “They want to make sure when they pass away, their assets are handled” in the way they desired.
What is an estate? “Everything you own” is Wilson’s answer – a home, bank accounts, Individual Retirement Accounts, investment accounts, equipment, cars, other real estate. “When you start adding it up, most people have more than they think.”
One lady told the attorney, “I don’t have very much.” She lived in a mobile home, but it turns out the client owned the land it sat on plus another farm, totalling $1.5 million in assets. “We’re not all that fortunate, but we are surprised sometimes” at the values of items when inventoried.
Everyone needs estate planning, not just the elderly. If both young parents are killed in vehicle accident, “who will take care of the children?” Wilson asked.
Estate planning is one area where procrastination is ill advised. “You’ve got to plan when you can. You can’t wait until you need it to plan.”
He detailed six common estate plans:
• Creating a will. A will names an executor and designates “who you want to receive your assets.” The attorney emphasized, “If you remember nothing else tonight, remember this: Title equals result.” He elaborated, “Your will does not control assets that are titled in joint ownership … Your will also doesn’t control items where you have named a beneficiary,” such as an IRA, life insurance policy, annuity or a transfer-on-death bank or brokerage account. When asked the cost, the attorney reported he recently completed two wills and two living wills for a couple for $125. A woman asked whether a will could be broken. “If you are competent when you write that will … as long as you made that will without being under duress … your will is valid. It’s very, very hard to set aside a will.” Wilson has seen it happen once in his 34 years of practice.
• Doing nothing. Without estate planning, the state Legislature has spelled out intestate succession rules. If a person has a spouse and at least one child at the time of death, the spouse receives half of the estate while the kid(s) get the other half. “This is very surprising to a lot of people.” If the children are minors, “the spouse may need those funds, but can’t get to them.” If a person who died doesn’t have children, but does have surviving parents, they get one-fourth of the assets. Only if there are no living children or parents does the entire estate go to the surviving spouse. Without a will, “if you don’t have any (survivors), the state of Indiana takes it.”
• Holding assets in joint tenancy, “one of the most common estate plans .... When you hold an asset (with another person), when one of the owners dies, it automatically is owned by the other owner.” He pointed out that could be problematic. If a young husband dies, a wife remarries, purchases a home together with a second husband, then she dies, “what you’ve done is accidentally disinherited your children.” Another pitfall: “If your co-owner becomes incapacitated and has a guardian appointed by the court, now you have a new co-owner” and may disagree about how to handle the asset, such as a piece of real estate.
• Making gifts. According to the attorney, “Parents often make gifts of assets to their children, thinking it may make it easier upon their death.” Federal rules say in any given year, a person can give an asset worth up to $14,000 to someone and not pay any tax and a spouse can also give another maximum $14,000. Wilson asked, “What happens if you need that asset later?” He advised, “Never give away an asset you may need in the future.” He noted if the gift’s recipient gets divorced or sued, a judge could split the asset and give half to the other party. He pointed out, “Every case is different. You need to talk about that with a competent estate planning attorney.”
• Using beneficiary transfers. One or more beneficiaries can be designated on life insurance policies, IRAs and several other assets. The speaker noted, “If a beneficiary is incapacitated, now a guardian is in charge of those funds. If your beneficiary dies before you do, and you have not named a contingent beneficiary,” the asset will go back into the estate. Persons should consider updating policies with beneficiaries named years earlier; they can be changed.
• Having a revocable living trust. The attorney said, “Trusts are being used more and more by people of all ages, whether they’re married or single and whether they have a lot of money or they don’t. Living trusts tend to give you more control over your assets than these other plans .... Unlike a will, however, a living trust does not have to go through probate,” which involves time, money and going to court. He explained, “When you set up a living trust, what you do is you transfer your assets that you own in your own name into a trust.” A trust “let’s you determine when beneficiaries receive assets after your death” to take care of especially special needs children or those who may not do well with a sudden windfall. He estimated it would cost around $1,000 to prepare a trust and all necessary paperwork for a couple.
Wilson concluded that when a couple thinks about estate planning, “you and your spouse both need to be on the same page. You need to agree what your goals and objectives are so you can work together to accomplish them.”
When it’s time to take action, “you should inventory your assets and debts. You need to select a competent estate planning attorney” who can discuss the six areas and decide on the right one or if several would be better. Unsure of which attorney to use? Persons may ask friends and the prospective attorney for references.
The final steps are to have legal documents prepared and “make sure you change the titles if you need to, to carry out the plan you want to put into effect.”
Debbie Blank can be contacted at email@example.com or 812-934-4343, Ext. 113.
First in a two-part series • Part 2: End-of-life health decisions, Nov. 1