Frequently Asked Questions about Estate Planning and Our Practice
Serving clients throughout Indiana, Illinois and Michigan
- What is estate planning?
- Are there any estate planning training or certification programs that you recommend?
- What is an estate?
- When should I start my estate plan?
- Should I have an estate plan?
- What sorts of instructions are included in an estate plan?
- How can an estate plan prevent a conservatorship proceeding?
- What about books on estate planning?
- What are some typical estate planning documents?
- What is a quitclaim deed?
- What is spousal allowance?
Estate planning allows you to consider alternatives and set up legally effective arrangements that would meet your specific wishes if something happens to you or those you care about. Good estate planning is more than just a simple will. Estate planning also typically minimizes potential taxes and fees, and sets up contingency planning to make sure your wishes regarding healthcare treatment are followed.
On the financial side, a good estate plan coordinates what would happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401(k) plan), and other property in the event you become disabled or die.
On the personal side, a good estate plan specifies your wishes regarding healthcare matters. If you are ever unable to give the directions yourself, someone you select would do that for you, knowing when you would want heroic measures authorized and when you would prefer they pull the plug.
Yes, the Association of Chartered Senior Financial Planners (ACSFP) offers the CSFP-Chartered Senior Financial Planner designation to legal and insurance professionals. This designation ensures that ethics, tolerance for risk and proper strategies are used when developing retirement planning and asset protection strategies for clients. Mr. Sawyier is a member of the ACSFP Advisory Board and recommends its programs for proper estate planning training.
The term “estate” consists of all the property a person owns or controls. This includes property held solely in his or her name, in a partnership, in a joint ownership arrangement, or through a trust, and all other monies that would be generated on the person’s death, such as through life insurance. It includes:
- Real property and things attached to it (houses, buildings, barns, etc.)
- All personal property (automobiles, bank accounts, stocks and bonds, mutual funds, stock options, cash, furniture, jewelry, art, collectibles, etc.)
- All businesses and business interests (sole proprietorships, partnerships, corporations, joint ventures, and the goodwill, inventory, tools and equipment, accounts receivable, and other property of a business)
- Powers of appointment (the right to direct who gets someone else’s property)
- Life insurance and annuity contracts, pension benefits, IRAs, 403(b) accounts, etc.
- All debts and obligations owed to others
- All claims you have against others, such as for pain and suffering from an auto accident
The only time that you can prepare and implement an estate plan is while you are alive and have legal capacity to enter into a contract. If you are unable to manage your own affairs or suffer from some other disability that affects your legal capacity, your estate plan may be effectively challenged. Others may assert that you lacked capacity at the time you created the plan, or that you were subjected to fraud, coercion, or undue influence during the creation and implementation of your plan.
To prevent these kinds of challenges, the best time to start an estate plan is now, while you have the capacity to do so.
You should have an estate plan if:
- You are the parent of minor children
- You have property that you care about
- You care about your healthcare treatment
If you do not have minor children, do not care about your property, and have no concerns about your healthcare treatment, then you do not need an estate plan. But if you meet any of the categories above, you should have an estate plan.
An estate plan consists of one or more documents that set forth instructions. Some documents are used to control healthcare decisions, others control your property in the event of your incapacity, and still other documents will control the distribution of your property in the event of your death.
An estate plan uses several tools that can prevent the court from gaining jurisdiction over your affairs.
- A Living Will or Directive to Physicians determines if artificial life support systems are to be used or withheld.
- A Durable Power of Attorney for Health Care provides authority to a person you trust to make decisions regarding healthcare treatment when you are unable to provide informed consent.
- A Durable Power of Attorney for Property authorizes a person to act in your place and stead in the event of your incapacity. This attorney-in-fact can manage your financial affairs without any court intervention.
- A Trust or Family Limited Partnership holds property; the Trustees or Partners manage the property held by either of these entities.
- Both the Trust and the Family Limited Partnership continue to manage the property even if you are incapacitated.
Thus, a properly prepared estate plan can enable you to avoid a Conservatorship proceeding over your estate. Compared to the cost of a Conservatorship proceeding, an estate plan can be very attractive.
As you begin the process, caveat emptor (let the buyer beware). There is a lot of information out there; while some of it is very good, some is misleading at best.
There are many over-the-counter guides to estate planning available at bookstores. Some are decent; most are awful. If you are planning to do it yourself, be prepared to spend a fair amount of time on this project.
Several of the following documents are typically part of the estate planning process:
- A Will, sometimes called a Last Will and Testament, enables you to transfer property you hold in your name to the person(s) and/or organization(s) you want to have it. A Will also typically names someone you select to be your Personal Representative (or Executor) to carry out your instructions and names a Guardian if you have minor children. A Will only becomes effective upon your death, and after it is admitted to probate.
- A Durable Power of Attorney for Health Care or Health Care Proxy appoints a person you designate to make decisions regarding your healthcare treatment in the event that you are unable to provide informed consent.
- A Living Will or Directive to Physicians is an advance directive that gives doctors and hospitals your instructions regarding the nature and extent of the care you want should you suffer permanent incapacity, such as an irreversible coma.
- A Durable Power of Attorney for Property appoints a person you designate to act for you and handle financial matters should you be unable or perhaps unavailable to do so.
- A Living Trust can hold legal title to and provide a mechanism to manage your property. You can select the person or persons you want — often even yourself — as the Trustee(s) to carry out the instructions you want in the Trust and name one or more Successor Trustees to take over if you cannot. Unlike a Will, a Trust usually becomes effective immediately, continues in force during your lifetime even in the event of your incapacity, and continues after your death. Most Trusts are revocable, which allows the person who creates the Trust to make future changes and modifications and even to terminate it. (If the Trust is irrevocable, changes, modifications and termination are very difficult, and sometimes impossible, although such Trusts often carry some tax benefits.) Trusts also help you avoid or minimize the expenses, delays and publicity of probate.
- A Family Limited Partnership can be used to own and manage your property in a similar manner to a Trust, but with additional tax planning techniques available. Family Limited Partnerships are typically used for those who have large estates and thus have a need for specialized estate planning in order to minimize federal and state estate/death/inheritance taxes as well as provide elements of asset protection.
In general, a quitclaim deed is a deed that conveys a grantor’s or seller’s complete interest or claim in certain real property, but does not warrant or profess that the title is valid. If the grantor has complete interest in the property at the time of conveyance, a valid and complete transfer of property occurs. However, if the grantor has no interest in the property, no interest in the property will be passed to the grantee. Additionally, the quitclaim deed will not provide any recourse to the buyer in this instance.
In contrast, with a warranty deed, a grantor guarantees that he or she holds clear title to a piece of real estate and has the right to sell it. Generally, a warranty deed contains one or more covenants of title and expressly guarantees the grantor’s good, clear title. If a warranty deed is used in the transfer of real estate, the grantee has some recourse against the grantor if the grantor does not have complete title to the real estate.
A seller who does not know whether his title is good or bad usually uses a quitclaim deed in conveying real estate. Of course, the purchasing of title insurance will protect you against title defects that arise later in time.
Indiana recognizes a spousal allowance and a spousal election right. Under Indiana statutes, a surviving spouse has the right to a $25,000 spousal allowance plus one-half of the deceased spouse’s probate estate if the deceased spouse’s will left the surviving spouse less than one-half of the probate estate. However, Indiana law is unsettled as to the validity of a transfer of property to a trust (and out of what would otherwise be the probate estate) in order to defeat the surviving spouse’s right to one-half of the probate estate. The Indiana Appellate Courts have looked at the intent of the transferor, the timing of the transfer, and the physical condition of the transferor when determining whether property transferred to a trust is to be counted in the elective share calculation. Therefore, the utmost caution is advised in even attempting to create a trust to defeat the spousal election without that spouse’s full knowledge and consent.