So, you’re all set - you have made the decisions, you have finalized your will, living will, powers of attorney, and other estate planning documents.....but do you remember where you put them?  A lost estate plan is as effective as no estate plan at all. Unfortunately, lost estate plans are all too common and can lead to big headaches for your loved ones down the road. 

A vital part of the estate planning process is storing your documents in a safe place and making sure your friends or loved ones know where to find them.  Where should you store your estate planning documents?  While any safe place will do, below are a few good options:

• A fireproof safe in your home. Make sure your family and/or executor knows how to access the documents.

• A safe deposit box. Again, make sure family members or appointed agents have full access to the safe deposit box.

• Your lawyer's office. Some attorneys will store wills on behalf of their clients. Make sure your loved ones know how to get in touch with your lawyer to access your documents.

• Your local probate court. By filing your will with your local probate court prior to your death, if such advance-filing is available, you can eliminate the risk of losing your will.

• Your doctor's office. Providing copies of your health care power of attorney and living will to your doctor's office can save your loved ones time and energy needed to search for these documents when they become necessary.

The most important part of storing your estate plan is letting your friends and loved ones know where your documents can be found for ease of access when the need arises.  It is also a good idea to store a list of your bank accounts, contact information for your financial planner and attorney, email and social media accounts, and all passwords in a safe place that can be accessed by your loved ones in the event of your incapacity or death.  As always, the best way to ensure proper execution of your estate plan is to plan ahead.

If you are like most Americans, the largest non-financial asset you will own at the time of your death will be your home.  When it comes to your estate plan, one way to transfer real estate, whether land, a house, or both, is through a bequest by will.  Real estate can also be transferred through use of a trust.  Indiana and Ohio offer an alternative option for those who wish to gift their real estate to specific individuals at the time of their death.  A Transfer on Death Deed allows owners of real estate to transfer real property outside of the probate process.

The real estate transfer on death option works much like the transfer on death or payable on death designations that banks and financial institutions utilize for the transfer of financial assets after death.  By executing and recording a Transfer on Death Deed, the owner of real estate can seamlessly transfer his or her property to a named beneficiary or multiple beneficiaries at the time of the owner's death.  During his or her lifetime, the owner retains ownership of the real estate.  Upon the death of the owner, ownership of the property can be transferred quickly to the beneficiary by simply recording an Affidavit of Death with the recorder of the county in which the real estate is located. 

Here are a few helpful facts about the transfer on death option for real estate transfers:

1. After executing and recording a Transfer on Death Deed, the owner retains full ownership of the property.  This means that the owner is not subject to eviction by the beneficiary and retains his or her homestead exemption.

2. The owner can still mortgage or sell the real estate during his or her lifetime even after making the transfer on death designation.  The sale of real estate cancels a transfer on death designation, but the owner can certainly make the designation on any new real estate purchased.

3. The transfer on death designation can be changed or removed from the owner's real estate at any time.

4. Real estate that transfers on death is transferred outside of the probate process upon the death of the owner, which can save time and money.

If you are looking for ways to avoid the probate process, a Transfer on Death Deed is a wonderful option to consider.

We typically utilize wills to distribute our assets after death.  When we retain assets until death, the probate process will be involved and our wills dictate how we would like our appointed executor, or personal representative, to distribute our assets.  However, if you set up a trust during your lifetime, called an “inter vivos” trust or a “living” trust, you can utilize your will to fund your trust with any assets that you did not transfer into the trust during your lifetime.

If you created a living trust, you may or may not have transferred all of your assets, including personal property, real property, or financial accounts, into the trust.  Your trust may be used to provide for the support of a loved one or yourself during your lifetime.  Typically, income derived from trust property is distributed according to the terms of your trust.  Your trust also likely provides a blueprint for how the trust should function in the event of your death.  Upon your death, the trust may continue to operate unchanged, the distribution of trust assets may be modified, or the trust may terminate.

An effective estate planning tool for individuals who have a living trust is a pour-over will.  A pour-over will simply directs that all of the assets you own outside of your trust at death be “poured over” into your trust upon your death.  This means that after your death, assets that you did not place into a trust during your lifetime, whether purposefully or accidentally, become a part of that trust.  As such, the assets covered by your pour-over will can be managed and distributed according to the terms of your existing trust.

A pour-over will allows you to retain full ownership and control over your assets until death, while still allowing your assets to pass according to your trust.  In directing that all assets go into an existing trust, a pour-over will can make the probate process go more smoothly by eliminating uncertainty as to how assets should be distributed.

Summer is finally here, and that means vacation time for many. Below is a quick checklist to make sure your estate plan is ready to go before you head out of town.

1. Review Beneficiary Designations. If you have a will, you have likely designated beneficiaries to receive your probate assets (meaning assets that will pass through the probate process) if you pass away.  Non-probate assets such as retirement accounts, life insurance policies, and other financial assets may include beneficiary designations as well.  Transfers to these beneficiaries will occur almost automatically and outside of the probate process upon your death.  Take some time to make sure your beneficiary designations are up to date.

2. Designate Powers of Attorney. It is important to make sure you have powers of attorney established in the event that you are in an accident and need someone to make medical or financial decisions on your behalf.  If you have not established powers of attorney and something happens to you, a court will intervene to appoint someone to handle these decisions on your behalf. Plan ahead to appoint your preferred representative and to save time, money, and headaches for your loved ones.

3. Choose a Guardian for Children. If you have young children, it is a good idea to make a guardianship appointment in your will. You may also wish to select a trustee to manage any assets you plan to pass to young children should something happen to you. 

4. Make Documents Accessible. Before you leave for vacation, store your estate planning documents in a safe place, and make sure your loved ones know how to access your documents should the need arise.  A lost or hidden estate plan will be of no use to anyone.

5. Don't Wait! You have spent months or even years planning and saving for your vacation, so why put off updating your estate plan until minutes before you leave?  Updating your estate plan does not have to be painful - getting started is the key.

There are a number of errors that can be made during the drafting process that can damage the effectiveness of your will.  Five of the most common mistakes to avoid in drafting your will include:

• Vague or Unclear Wording: When you are drafting a will, it is important to use clear and specific language. After you pass away, your will should provide a clear understanding of your last wishes that can be easily carried out by your loved ones. Clear wording can reduce confusion and tension after your death, leaving a helpful guide for friends and family.
  

• Forgotten Assets: Oftentimes when drafting a will, individuals will forget to account for certain assets, or perhaps new assets that will be acquired after the will is drafted. Assets that are not passed by will are distributed according to state intestacy laws. If assets are left out of your will, distribution of your assets upon your death may be delayed as the probate court determines who is entitled to the assets. By utilizing a residuary clause in your will, you can ensure that any forgotten assets will pass to an individual of your choosing rather than according to a court order.
  

• Improper Appointments: When deciding who will be responsible for distributing your assets after death, it is important to select an executor (sometimes called a personal representative) who will be capable of filling this often heavy role. Additionally, if you have minor children, it is a good idea to appoint a competent guardian in the event that your child is left with no surviving parents. Assigning the roles of executor and guardian should not be taken lightly. It can be helpful to discuss these decisions with potential appointees.
  

• No Updates: If you have had a child, acquired new assets, gotten married or divorced, or lost a loved one, you may need to update your existing will to account for these changes. As stated above, any assets not distributed through your will are going to pass according to state intestacy laws. If you made specific gifts or assigned roles to named individuals in your will, you may wish to make changes to account for new or severed relationships.
  

• Lost Wills: After you have created a will, it is important to let loved ones know where your original will can be found in the event that you pass away. A probate court will require a signed original copy of your will. If your will is lost or inaccessible after you pass away, the probate process could be delayed, distribution of your assets could be postponed, and your will could even be rendered ineffective.

The estate planning process can seem overwhelming at first. If you are getting ready for your first estate planning appointment, it can be less daunting to break the decision-making process down into a handful of categories. Below is an outline of the most important topics for consideration to help you set a good foundation for your estate plan.

1.     Beneficiaries 

• If you are married, you will likely pass your assets to your spouse.  If you are unmarried or if your spouse predeceases you, would you like to leave your assets to children, family members, or charities?  It is a good idea to think about where you would like your assets to go in the event that you and your children, if any, all pass away. 

• If you have minor children, who should manage your assets on their behalf until they reach adulthood?

• Are there any specific items that you would like certain individuals to receive upon your death?

2.     Guardian

• If you have children under the age of 18, who would you like to appoint as guardian in the event that you pass away before your children reach age 18?

3.     Executor/Personal Representative/Trustee

• Who would you trust to distribute your assets according to your will and/or trust?  Spouses typically take on this role for each other, but you may wish to choose a backup or multiple backups in the event that your spouse is deceased or otherwise cannot serve.

4.     Financial Representative (Power of Attorney)

• Who do you trust to handle your personal business on your behalf such as paying bills, cashing checks, filing tax returns, and so on in the event that you become incapacitated?

5.     Health Care Representative (Power of Attorney)

• Who do you wish to appoint to make medical decisions on your behalf in the event that you become incapacitated?

6.     Living Will

• If a physician determines that you are in a terminal state and you are incapable of making your own decisions, you may use a living will to express your wish to receive life-prolonging care, or to receive comfort care only.

As we are unfortunately witnessing, the only thing for certain is uncertainty. Establishing an estate plan can provide assurance for you and your loved ones in many ways. A complete estate plan allows you to:

1. Designate a representative to manage your finances and personal business in the event of your incapacity;

2. Appoint an individual to make medical decisions on your behalf in the event of your incapacity;

3. Instruct caregivers on your preferences for end-of-life medical care;

4. Direct the distribution of your assets to individual or organizational beneficiaries after your death;

5. Select a qualified personal representative or executor to manage the distribution of your assets after your death; and

6. Provide support to beneficiaries over time through scheduled or conditional distribution of assets after your death.

Implementing an estate plan can provide peace of mind for you as well as your family and loved ones that your affairs will be managed according to your wishes.

If you own real estate, your real property will likely be your most valuable non-financial asset at the time of your death. In addition to financial value, real property often holds sentimental importance for families. For many parents, the transfer of real property to children is a major estate planning consideration. A number of options for the transfer of real property to children or other beneficiaries as part of an estate plan are detailed in a recent piece in USA Today.

1. Gifting the property during your life is a generous transfer that relives you of ownership responsibilities, but can result in capital gains tax consequences for the beneficiary.

2. Putting the property into trust allows you to transfer property to beneficiaries upon your death while avoiding the probate process with the tax benefit of a step-up in basis for the beneficiary.

3. Bequeathing the property by will provides a stepped-up basis for the beneficiary, but the property will be transferred through the probate process.

4. Selling the property during your life to the intended beneficiary can provide for your retirement, but may have tax consequences for both parties.

5. Adding a transfer on death designee on the property allows you to transfer your property to the beneficiary upon your death while avoiding probate and capital gains tax consequences.

When contemplating the transfer of real property as a part of your estate plan, it is important to weigh the pros and cons of all options based upon your unique circumstances and goals.

While there has been much speculation surrounding changes to federal gift and estate tax law, such legislation has not yet passed through both houses of Congress. Though subject to change if legislation eventually passes through the Senate, the below items highlight the landscape of federal gift and estate tax law as of January 1, 2022:

• The lifetime exclusion amount for federal gift and estate taxes increases to $12,060,000 per person, or $24,120,000 for a married couple. These amounts are set to decrease on January 1, 2026, unless new legislation is enacted.

• The federal lifetime exclusion amount remains “portable,” meaning an individual’s unused exclusion amount transfers to his or her surviving spouse with the proper election on the decedent’s estate tax return.

• The annual federal gift exclusion amount increases to $16,000 per person, or $32,000 for a married couple.

• The step-up in basis (valuing property received from a decedent at fair market value as of the date of the decedent’s death) remains in effect for 2022 as proposals to eliminate the stepped-up basis were not passed by Congress.

The Build Back Better Act that passed through the House of Representatives in November of 2021 does include some adjustments to current federal gift and estate tax law. If the Act passes through the Senate this year, we may see changes to the above and other aspects of federal gift and estate tax law. See this piece from JD Supra for more extensive discussion of current federal gift and estate tax law.

If you went through a major life event in 2021, the coming year may be a good time to review and update your existing estate plan. A major life event could include a move out of state, marriage, divorce, birth of a child, or loss of a loved one resulting in an inheritance. Taking the time to review the below considerations after a significant life change can minimize confusion and complications that can result from an outdated estate plan:

• Is your executor still the best-suited individual in your life for managing your estate after you pass?

• Are the primary and contingent beneficiaries named on your accounts up to date?

• Is the guardian you selected for your children still your top choice to fill this role?

• Should you utilize a trust to provide an income stream to loved ones without turning over control of assets?

This comprehensive piece from CNBC highlights these and several other helpful tips to keep your estate plan up to date.

Wishing everyone a safe and happy holiday season, and all the best in the new year to come!

Ready or not, the holidays are upon us. If you plan to take some time to relax with family and friends, this could be a good opportunity to start having discussions about your estate plan or perhaps estate plans for aging family members. Conversations surrounding estate planning often require delicateness. To get the wheels turning, it can be helpful to approach the topic in a casual way without pressure to make quick decisions. Below are a few questions that might help get these conversations started.

1. Are there any specific gifts of jewelry, family heirlooms, or other items that you plan to give to designated individuals after you pass away?

2. Who would you trust to make medical decisions on your behalf if you cannot? Do you have any preferences when it comes to your medical care?

3. Do you plan to give your assets to your children, charities, or both after you pass away?

4. Is there a friend or family member you feel would be best suited to distribute your assets as you wish after you pass away?

5. If you become incapacitated, who would you like to handle your personal business such as banking decisions on your behalf?

6. Have you ever considered who you would feel comfortable selecting as the guardian for your children?

Views on life and death vary widely, so it is best to approach conversations regarding estate planning with gentleness. While such conversations are a necessary starting point in an important process, gauging and meeting comfort level can help to ensure productivity.

This week marks eight years in business, and I am so thankful, as always, for the continued support of my family, friends, clients, and professional connections. Over the past year, I had the opportunity to complete estate plans for over 250 clients and to meet and assist many more in other ways.

Clients often ask how in the world I ended up in estate planning. Though I typically respond that I grew up around my father’s real estate and estate planning law practice, the truth is that I find great fulfillment in meeting my clients and their families, learning about their lives, and helping to organize their affairs into a plan that makes sense to accomplish their goals. While the thought of our own mortality can be disturbing and these conversations can be difficult, what could be more important than coming to terms with the good and bad in life, evaluating our relationships, and making sure we take care of those we love?

To experience the emotions in the hearts of my clients as they work through meaning and relationships to come to a place of peace and relief is truly powerful. Everyone’s lives are uniquely beautiful, even when they are messy. Particularly during the COVID-19 pandemic, most have endured unfamiliar stress, and many great suffering. Now more than ever, there is great joy and beauty to be found in always choosing to see the good in others and to remain generous with grace, even when it is difficult or inconvenient.

Thank you to my clients for entrusting me with your estate plans. I look forward to all that year nine has in store.

When it comes to personal belongings, value cannot always be defined in monetary terms. Oftentimes, value lies in unique meaning. An item of personal property could be an important gift received or represent a cherished memory. As you create your estate plan, it is important to communicate your intentions and consider the wishes of loved ones to acknowledge and preserve the meaning attached to specific items of personal property.

Although it can be difficult to define the value of our personal belongings to others, we all possess items that we hold dear to our hearts for special reasons. For instance, two of my children have a rare genetic condition. When my affected son was three months old, already facing numerous challenges, he was hospitalized with an illness. The night we returned home, which happened to be Valentine’s Day, my oldest daughter walked in the door after her dance class holding a pencil eraser in the shape of a ring. My daughter told me that her dance teacher allowed the dancers to choose a small gift to celebrate the holiday and that she had selected this gift for me. Nearly four years later, hardened by the sun and time and glued together in several places, this ring still sits on my windowsill as a constant reminder of the difficulties we have overcome and the pure, meaningful love of my children. A simple pencil eraser is one of my most cherished belongings, and I will make sure that my daughter receives this gift from me in the future.

We may also be unaware of the value that others place on our personal belongings. This can lead to hurt feelings or conflict between loved ones when a death occurs and assets are distributed. Parents, for example, may not realize that a child holds on to special memories involving an item of personal property from their childhood home, even if that item seems otherwise insignificant. As you work to develop your estate plan, it is a good idea to talk to family and friends about your personal belongings to learn if there are any specific items they wish to receive after your death.

Specific bequests of personal property can be made during your lifetime, or such gifts can be outlined in the body of your will. In Indiana, specific bequests can also be designated through a memorandum of tangible personal property. As long as the memorandum is referred to in the body of your will, you can create this list of specific bequests at a later date without updating your will.

Although meaningfulness can be difficult to comprehend or explain, it should never be discounted.

If you have children, an estate plan can ensure that they are taken care of physically and financially according to your wishes in the event of your death. Below are just a few ways your estate plan can be used to transfer assets to your children, establish responsible financial management of your assets for the benefit of your children, and appoint a caretaker for children under the age of majority.

• Appoint a guardian for young children in your will

• Name your children as beneficiaries of your assets and possessions in your will

• Select a trustee to manage assets on behalf of your children in a testamentary trust created in your will until your children reach a specific age or fulfill specific conditions

• Utilize a living trust to leave assets to your children privately outside of the probate court

• Control the distribution of assets to children over time with a trust

For more information on the mechanics of wills and trusts, see this recent Yahoo! News article.

With a second marriage can come more complicated estate planning needs, particularly if spouses bring their own children to the marriage. Existing plans should be updated to reflect a change in spouse as well as gifts to each spouse’s children. Below are five considerations for establishing an estate plan for a blended family:

1. Update beneficiaries on life insurance policies and financial accounts, as well as power of attorney appointments.

2. Make sure that your second spouse and any children between the two of you are provided for as you wish in your wills.

3. Consider making unequal bequests to children depending upon what each spouse brings to the marriage and each child’s personal situation.

4. Make gifts while you are still alive to take advantage of the annual exemption amount and to have the opportunity to watch your children enjoy these gifts.

5. Seek legal advice to help navigate the complexities involved in planning for a blended family.

More ideas and information can be found in this recent piece provided by the AARP.

Although a will is a useful tool for transferring assets after death, many types of assets actually transfer before the will comes into play. Assets that transfer outside of a will do so without the involvement of a probate court. All remaining assets then transfer to beneficiaries according to the will through the probate process. As such, it is important to keep both will and non-will beneficiary designations in mind when establishing your estate plan. So, which assets will pass outside of your will, thus avoiding probate?

• Assets owned jointly with rights of survivorship

• Real estate, financial assets, and other property titled in the name of a living trust

• Financial assets with listed beneficiaries or transfer on death designations such as 401(k)s, IRAs, or other retirement accounts, investment accounts, and annuities

• Proceeds of life insurance policies with named beneficiaries

• Property such as a home or vehicle that has a designated transfer on death beneficiary

• Checking, savings, and other accounts with payable on death or transfer on death designations

It is helpful to think about a will as a catchall for assets that do not transfer to previously-designated beneficiaries. In addition to establishing a will, make sure to keep beneficiary designations up to date to insure your assets are distributed according to your wishes.

“Do I need a will or a trust?” is one of the first questions asked at the beginning of the estate planning process. The answer always depends on the goals of the individual for his or her estate plan. Understanding the key characteristics of a will versus a trust can help you decide how best to achieve your estate planning goals.

Wills

• Clear expression of wishes for transfer of real estate

• Clear expression of wishes for transfer of personal belongings

• Clear expression of wishes for distribution of financial assets

• Selection of a guardian for minor children

• Selection of executor or personal representative to manage distributions according to the will

• Becomes public once submitted to probate

• Assets that pass through a will are subject to the probate process and fees

• Generally less expensive to set up than a trust

• Typically utilized even when a trust is established to “pour over” assets into the trust that were not retitled into the trust during the testator’s life

Trusts

• Clear expression of wishes for transfer of real estate

• Clear expression of wishes for transfer of personal belongings

• Clear expression of wishes for transfer of financial assets

• Selection of a trustee to manage trust assets

• May be used to set up distributions to beneficiaries over a period of time

• Funded during the grantor’s life by retitling of assets

• Remains private outside of the probate process

• Generally more expensive to set up than a will

For more information on the topic of wills versus trusts, take a look at this recent piece from MarketWatch.

Did you know that beneficiary designations made on life insurance policies and retirement accounts will trump beneficiary designations listed in a will? What is the difference between per stirpes and per capita? These are important factors to understand as you create and maintain your estate plan.

Whenever beneficiaries are listed on life insurance policies or certain types of financial accounts, those beneficiaries will receive the proceeds upon the policy or account holder’s death regardless of the beneficiary designations listed in the decedent’s will. The beneficiary designations in a will apply only to assets that do not already have a designated beneficiary.

Typically, primary and contingent beneficiaries can be named on life insurance policies as well as retirement and other financial accounts. If your primary beneficiary passes away before you or simultaneously with you, your contingent beneficiary or beneficiaries will receive the proceeds. Whenever you go through a major life change such as a marriage, a divorce, or the birth or death of a child or grandchild, it is a good idea to review your beneficiary designations both in your will and on your financial assets.

It is also important to understand the difference between per stirpes and per capita beneficiary designations. With a per stirpes designation, you ensure that the heirs of a listed beneficiary will receive that beneficiary’s share if the beneficiary dies before or with you. Alternatively, a per capita distribution would result in the distribution of assets only to surviving beneficiaries, leaving nothing to the heirs of predeceased beneficiaries. As such, your goals for the transfer of assets to family and loved ones should be considered when making the decision to include a per stirpes or per capita beneficiary designation.

A recent piece in Kiplinger’s offers more information on items to consider when making beneficiary designations.

April 16th marks National Healthcare Decisions Day in the United States. Ahead of NHDD, results from a recent study by VITAS Healthcare shows that the COVID-19 pandemic has inspired Americans to consider their own healthcare plans and wishes for end-of-life medical care. Although more Americans are recognizing the need for a healthcare plan in the face of the COVID-19 pandemic, a large percentage of Americans still fail to establish a written plan and discuss their wishes with loved ones.

Put a Plan on Paper and Communicate to Loved Ones

A written plan is the first critical step in making sure your healthcare wishes are carried about by your caregivers. Discussing your plan with loved ones is also important to help alleviate confusion and stress in the event that you become very ill or need end-of-life care. The controversy and guilt that may result when family or loved ones are forced to make decisions regarding your care without your guidance could last for years after you pass away. Below are two important healthcare decision documents.

Healthcare Power of Attorney

The healthcare power of attorney allows you to select one or more individuals to make decisions regarding your medical care in the event that you are incapable of doing so. This document outlines the scope of your agent’s powers regarding your medical care. Powers may include the authority to consent to care, admit or discharge you from a hospital or other care facility, have access to your medical records, make plans for the disposition of your body, and everything in between according to your personal wishes.

Living Will

A living will expresses your wishes for end-of-life medical care. If you are in a terminal state as determined by a physician and incapable of making a decision regarding your end-of-life care, your living will can take over as the legal representation of your wishes. By taking this decision out of the hands of loved ones, you can help prevent disagreement and regret for those you leave behind.

Communicating healthcare wishes to loved ones is an imperative but often forgotten aspect of a healthcare plan. When the time comes to put your healthcare wishes to work, clarity and understanding will make this process much more manageable for your loved ones.

The thought of planning for the worst can seem overwhelming. Breaking down the estate planning process into five manageable steps can help focus your efforts.

1. Establish a plan for health care. By setting up a health care power of attorney and living will, you provide a written guide for your loved ones and health care providers should a medical problem arise. Beyond simply creating these documents, it is important to communicate your plans to your loved ones so they are aware of your wishes in advance.

2. Select and notify an executor. Your executor will take on the role of distributing your assets according to your will. This role can be time-consuming and complex, so it is a good idea to speak with your executor prior to making this appointment to make sure he or she understands the duties involved.

3. Make sure financial affairs are in order. Although privacy is often a concern when it comes to financial affairs, some level of transparency may be necessary to protect financial assets and to set beneficiary expectations. A financial power of attorney allows you to choose a trusted, capable individual to handle your financial affairs in the event of your incapacity. You may wish to discuss your current financial situation as well as your financial goals with your P.O.A. and future beneficiaries to alleviate confusion upon your incapacity or death.

4. Execute a will and communicate its contents with interested parties. Your will spells out how your assets will be distributed upon your death, whether that be to family, friends, or charities. Communicating your wishes to expected beneficiaries in advance can help minimize conflict after you pass away.

5. Compile all important financial, legal, and medical documents. Make sure that your will and other estate planning documents, as well as information relating to your financial assets, life insurance policies, real estate, vehicles, and the like are easily accessible and notify necessary individuals where these documents can be found.

For further discussion and information, take a look at this recent article from Kiplinger.