TALK TO AN ESTATE PLANNING LAWYER

Indiana State Bar Association

October 13, 2014

Jeff R. Hawkins Hawkins law PC 999 North Section St. PO Box 382 Sullivan, IN 47882 812-268-8777 Jeff@HawkinsLaw.com www.HawkinsLaw.com

TALK TO AN ESTATE PLANNING LAWYER

Contents 1. Introduction ............................................................................................................................. 1 2. Definitions............................................................................................................................... 1

2.1. Estate, trust, and guardianship definitions ....................................................................... 1 2.1.1. Affidavit of heirship. ............................................................................................... 1 2.1.2. Administrator. ......................................................................................................... 2 2.1.3. Ancillary administration. ....................................................................................... 2 2.1.4. Beneficiary. .............................................................................................................. 2 2.1.5. Bequest. .................................................................................................................... 2 2.1.6. Certification of trust. .............................................................................................. 2 2.1.7. Claim. ....................................................................................................................... 2 2.1.8. Claimant................................................................................................................... 3 2.1.9. Common-law marriage. .......................................................................................... 3 2.1.10. Decedent. .............................................................................................................. 3 2.1.11. Declaration of trust. ............................................................................................ 3 2.1.12. Descendant. .......................................................................................................... 3 2.1.13. Devise. ................................................................................................................... 3 2.1.14. Devisee. ................................................................................................................. 3 2.1.15. Devolution. ........................................................................................................... 4 2.1.16. Distributee. ........................................................................................................... 4 2.1.17. Executor. .............................................................................................................. 4 2.1.18. Estate. ................................................................................................................... 4 2.1.19. Fiduciary. ............................................................................................................. 4 2.1.20. Heir. ...................................................................................................................... 4 2.1.21. Guardian. ............................................................................................................. 4 2.1.22. Guardianship. ...................................................................................................... 5 2.1.23. Guardianship code. ............................................................................................. 5 2.1.24. Guardian ad litem. .............................................................................................. 5 2.1.25. Guardian of the person. ...................................................................................... 5 2.1.26. Guardian of the estate. ........................................................................................ 5 2.1.27. Guardian’s deed. ................................................................................................. 5 2.1.28. Incapacitated........................................................................................................ 6 2.1.29. Irrevocable trust. ................................................................................................. 6 2.1.30. Legacy. .................................................................................................................. 6 2.1.31. Legatee.................................................................................................................. 6 2.1.32. Letters of administration. ................................................................................... 6 2.1.33. Letters of guardianship. ...................................................................................... 6 2.1.34. Letters testamentary. .......................................................................................... 7 2.1.35. Nonprobate transfer. ........................................................................................... 7 2.1.36. Per capita. ............................................................................................................ 7 2.1.37. Personal representative....................................................................................... 7 2.1.38. Personal representative’s deed. .......................................................................... 7 2.1.39. Per stirpes............................................................................................................. 8 2.1.40. Petition for probate will without administration. ............................................ 8

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2.1.41. Pour over will. ...................................................................................................... 8 2.1.42. Power of appointment. ........................................................................................ 8 2.1.43. Prenuptial agreement. ......................................................................................... 8 2.1.44. Probate. ................................................................................................................ 8 2.1.45. Probate administration. ...................................................................................... 9 2.1.46. Probate code......................................................................................................... 9 2.1.47. Probate estate....................................................................................................... 9 2.1.48. Revocable trust. ................................................................................................... 9 2.1.49. Self-proving affidavit. ......................................................................................... 9 2.1.50. Small estate affidavit. ........................................................................................ 10 2.1.51. Special personal representative........................................................................ 10 2.1.52. Spousal allowance. ............................................................................................. 10 2.1.53. Spousal share. .................................................................................................... 10 2.1.54. Spread the will of record. ................................................................................. 10 2.1.55. Supervised administration. ............................................................................... 10 2.1.56. Testate. ............................................................................................................... 11 2.1.57. Testator. ............................................................................................................. 11 2.1.58. Testamentary capacity. ..................................................................................... 11 2.1.59. Testamentary trust. ........................................................................................... 11 2.1.60. Trust. .................................................................................................................. 11 2.1.61. Trust instrument. .............................................................................................. 11 2.1.62. Trustee’s deed. ................................................................................................... 12 2.1.63. Undue influence. ................................................................................................ 12 2.1.64. Unsupervised administration. .......................................................................... 13 2.1.65. Will...................................................................................................................... 13 2.1.66. Will contest......................................................................................................... 13 2.1.67. Witness. .............................................................................................................. 13

2.2. Asset ownership definitions ........................................................................................... 13 2.2.1. Cotenants. .............................................................................................................. 13 2.2.2. Joint tenants with rights of survivorship. ........................................................... 14 2.2.3. Life estate. .............................................................................................................. 14 2.2.4. POD. ....................................................................................................................... 14 2.2.5. Remainder interest................................................................................................ 14 2.2.6. TOD. ....................................................................................................................... 14 2.2.7. Tenants by the entirety. ........................................................................................ 14 2.2.8. Tenants in common. .............................................................................................. 15

2.3. Bank account, investment account, and real estate definitions. ..................................... 15 2.3.1. Abstract of title. ..................................................................................................... 15 2.3.2. Appraisal. ............................................................................................................... 15 2.3.3. Bank. ...................................................................................................................... 15 2.3.4. Certificate of deposit. ............................................................................................ 15 2.3.5. Checking account. ................................................................................................. 16 2.3.6. Credit union. .......................................................................................................... 16 2.3.7. Deed. ....................................................................................................................... 16 2.3.8. Encumbrance......................................................................................................... 16 2.3.9. Index. ...................................................................................................................... 16

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2.3.10. Insurable title. .................................................................................................... 16 2.3.11. IRA...................................................................................................................... 17 2.3.12. Marketable title. ................................................................................................ 17 2.3.13. Money market account. .................................................................................... 17 2.3.14. Multiparty account. ........................................................................................... 17 2.3.15. Pension................................................................................................................ 17 2.3.16. Quitclaim deed. .................................................................................................. 17 2.3.17. Quiet title action. ............................................................................................... 18 2.3.18. Record. ............................................................................................................... 18 2.3.19. Retirement Plan. ................................................................................................ 18 2.3.20. Savings account. ................................................................................................ 18 2.3.21. Title insurance commitment. ............................................................................ 18 2.3.22. Title insurance policy. ....................................................................................... 18 2.3.23. Title search. ........................................................................................................ 19 2.3.24. Transfer on death deed. .................................................................................... 19 2.3.25. Nursing home resident account. ....................................................................... 19 2.3.26. Warranty. ........................................................................................................... 19 2.3.27. Warranty deed. .................................................................................................. 19

2.4. Loan transaction and property tax definitions. ............................................................... 20 2.4.1. Assessment. ............................................................................................................ 20 2.4.2. Judgment lien. ....................................................................................................... 20 2.4.3. Mechanics lien. ...................................................................................................... 20 2.4.4. Mortgage. ............................................................................................................... 20 2.4.5. Promissory note. .................................................................................................... 20 2.4.6. Prorate. .................................................................................................................. 21 2.4.7. Transfer fee............................................................................................................ 21 2.4.8. Sales disclosure form. ........................................................................................... 21 2.4.9. Transfer record. .................................................................................................... 21 2.4.10. Property tax lien. ............................................................................................... 21 2.4.11. Tax lien. .............................................................................................................. 22 2.4.12. Tax sale. .............................................................................................................. 22 2.4.13. Tax title deed...................................................................................................... 22

2.5. Tax definitions................................................................................................................ 22 2.5.1. Adjusted basis........................................................................................................ 22 2.5.2. Annual gift tax exclusion. ..................................................................................... 23 2.5.3. Basis. ....................................................................................................................... 23 2.5.4. Capital asset. .......................................................................................................... 23 2.5.5. Capital gains tax. ................................................................................................... 23 2.5.6. Death tax. ............................................................................................................... 23 2.5.7. Estate tax................................................................................................................ 23 2.5.8. Fiduciary income tax. ........................................................................................... 23 2.5.9. Gain. ....................................................................................................................... 24 2.5.10. Gift tax. ............................................................................................................... 24 2.5.11. Income tax. ......................................................................................................... 24 2.5.12. Inheritance tax. .................................................................................................. 24 2.5.13. Transfer tax. ...................................................................................................... 24

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2.6. Insurance and annuity definitions. ................................................................................. 25 2.6.1. Annuity................................................................................................................... 25 2.6.2. Deferred annuity. .................................................................................................. 25 2.6.3. Funeral trust. ......................................................................................................... 25 2.6.4. Group term life insurance. ................................................................................... 25 2.6.5. Life insurance. ....................................................................................................... 25 2.6.6. Term life insurance. T........................................................................................... 26 2.6.7. Variable annuity.................................................................................................... 26 2.6.8. Whole life insurance. ............................................................................................ 26

2.7. Government benefits definitions. ................................................................................... 26 2.7.1. Aid and attendance benefits. ................................................................................ 26 2.7.2. Look-back period. ................................................................................................. 26 2.7.3. Medicaid................................................................................................................. 26 2.7.4. Medicare. ............................................................................................................... 27 2.7.5. Qualified income trust. ......................................................................................... 27 2.7.6. Representative payee. ........................................................................................... 27 2.7.7. Resource. ................................................................................................................ 27 2.7.8. Social Security Disability Insurance.................................................................... 28 2.7.9. Social Security Retirement Insurance. ................................................................ 28 2.7.10. Supplemental Security Income. ....................................................................... 28 2.7.11. Transfer. ............................................................................................................. 28 2.7.12. Veteran. .............................................................................................................. 29

2.8. Advance directives and Principal-appointed agent definitions. ..................................... 29 2.8.1. Appointment of healthcare representative. ........................................................ 29 2.8.2. Attorney-in-fact. .................................................................................................... 29 2.8.3. Do not resuscitate. ................................................................................................. 29 2.8.4. General power of attorney. .................................................................................. 30 2.8.5. Health care power of attorney. ............................................................................ 30 2.8.6. Limited power of attorney.................................................................................... 30 2.8.7. Living will. ............................................................................................................. 30 2.8.8. Physician Orders for Scope of Treatment. ......................................................... 31 2.8.9. Power of attorney. ................................................................................................. 31 2.8.10. Springing power of attorney............................................................................. 31

3. Advising clients about estate planning issues. ...................................................................... 32 3.1. Advice about wills. ......................................................................................................... 32

3.1.1. Do I need a will? .................................................................................................... 32 3.1.2. Is my will still valid? ............................................................................................. 33 3.1.3. Can I buy a computer program that lets me make a legal Indiana will? ........ 33

3.2. Asset transfer questions. ................................................................................................. 34 3.2.1. Will I be liable for my family member’s debts if I receive an inheritance? .... 34 3.2.2. Which is better, a will or trust? ........................................................................... 34 3.2.3. Should I put my family members on my deed or accounts? ............................. 34 3.2.4. Is it true that I can give $10,000 per year to each of my family members? ..... 36 3.2.5. What can I do to make sure that my disabled [or irresponsible] beneficiary does not lose the inheritance? ............................................................................................ 37

3.3. Trust questions. .............................................................................................................. 38

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3.3.1. Is it true that if I make a living trust the government cannot get my money? 38 3.3.2. Is it true that I can save taxes by making a living trust? .................................. 39

3.4. Guardianship and power of attorney questions. ............................................................. 39 3.4.1. Can my power of attorney put me in a nursing home? ..................................... 39 3.4.2. Can I get a power of attorney to take care of my demented family member in the nursing home? ............................................................................................................... 39 3.4.3. I am my family member’s guardian, so…? ........................................................ 40 3.4.4. Will I be liable for my family member’s debts if I serve as guardian or attorney-in-fact? .................................................................................................................. 40

3.5. Advance directive questions........................................................................................... 41 3.5.1. Can I change my living will? ................................................................................ 41 3.5.2. What can I do to make sure that I do not end up as a vegetable? .................... 41 3.5.3. What can I do to make sure that no one can pull the plug on me? .................. 41

3.6. Questions about unmarried, cohabiting domestic partners. ........................................... 41 3.6.1. How can my partner and I share assets and make sure that the surviving partner gets everything?..................................................................................................... 41 3.6.2. How can I make sure that my partner can manage things for me if I become disabled? .............................................................................................................................. 42

4. Conclusion. ........................................................................................................................... 42

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TALK TO AN ESTATE PLANNING LAWYER 1. Introduction

Modern estate planning practice spans the broad practice spectrum from very rudimentary services for impoverished people to complex, multigenerational planning for multimillionaires. Many estate planning lawyers focus on one extreme or the other and few try to straddle across the middle. This outline focuses on services that estate planning attorneys commonly rendered to people of modest means. Lawyers that take phone calls during the Talk to a Lawyer program may receive questions from people toward whom this pro bono effort is targeted, but some volunteers may receive complex questions from callers that can afford the cost of sophisticated estate planning services. Therefore, this outline will also attempt to distinguish the kinds of issues that volunteers should address from issues that exceed the scope of this pro bono service project. This outline features a large volume of definitions at the very beginning because it is helpful to understand estate planning jargon when a client tries to use jargon in a conversation. There is a tremendous amount of misinformation floating around in the public that causes people to believe best and falsehoods. Sometimes, a client’s adhesion to a word or phrase will miss communicate the client’s intentions. If the lawyer understands the jargon and can ask some definitional questions, the lawyer may save tremendous time by redirecting the conversation away from inappropriate terminology. This outline makes little attempt to cite statutes, regulations, or case law. Presumably, a volunteer lawyer will have little time to conduct research during a telephone call in this volunteer project. Therefore, this outline explains the estate planning subject in a conversational manner that is appropriate for a non-lawyer audience. Statutory and case law quotes appear sometimes when the language is so important that the risk of misunderstanding the concept is too great to merely paraphrase the law. Volunteers are welcome to seek more detailed information from the author by telephone call or email. 2. Definitions

2.1. Estate, trust, and guardianship definitions

2.1.1. Affidavit of heirship.

A lawyer may use an affidavit of heirship to make a record in an estate or in the county real estate records of the family relationships that extend between a deceased person and people claiming property rights by inheritance. The affidavit usually identifies the specific familial relationships between each person in a family tree and recites the intestate transfer rules of the Indiana Probate Code to explain how title has passed through the deceased person’s family tree to the present generation of owners.

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2.1.2. Administrator.

An administrator in probate law is a person appointed as a fiduciary by the court having probate jurisdiction to administer the estate of an intestate decedent. The term may also apply to an administrator appointed by the probate court as a substitute for another person nominated by the deceased persons will when there are no other successors named in the will that are willing and able to serve. The term, “personal representative,” is a more encompassing term that includes executors and administrators. In the ancient practice of probate law, wills and probate pleadings still sometimes use gender-specific terms such as “administrator” for a man and “administratrix” for a woman. Those antiquated gender distinctions also still appear sometimes for “executors” and “testators.”

2.1.3. Ancillary administration.

Ancillary administration is estate administration in a state other than the state in which the decedent resided before death. Ancillary administration is most commonly required when a decedent owned real estate in a state other than the decedent state of residence.

2.1.4. Beneficiary.

A beneficiary is a person to whom a will or trust provides an asset, income, or other rights.

2.1.5. Bequest.

A bequest is a provision in a person’s will to distribute real property to a beneficiary, but it is sometimes used interchangeably with “devise.”

2.1.6. Certification of trust.

A certification of trust is a document prepared with content specified by the Indiana trust code to give information about a trust, it is trustee, in the trustee’s powers. The certification of trust is commonly given to third parties in lieu of a copy of the trust agreement or declaration of trust.

2.1.7. Claim.

A claim in probate law is a written notification filed by a creditor of a deceased or incapacitated person in the court case in which the deceased person’s estate is being administered by a personal representative or in the court case in which an incapacitated person’s estate is being administered by a guardian. In the case of a claim against the decedent’s estate, most creditors must file their claims in the estate within three months after notice of administration has been issued to known and ascertainable creditors and published in the local newspaper. Estate creditors that do not receive notice of administration may file claims up to nine months after the decedent’s death. Government agencies, however, have no time limit for filing claims. Some claims are prioritized above others in the priorities are generally categorized and prioritized as costs of administration, statutorily specified priority claims, and nonpriority claims. There is no

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significance to a claim’s order of filing as long as the claimant files the claim before the statutory deadline. All claims of a particular priority level share equal priority, regardless of when they were filed before the deadline. A claim may be for money or performance and it may be due currently or contingent upon some future event. A mortgage creditor does not have to file a claim to preserve the mortgage, but if the underlying debt exceeds the value of the mortgage collateral, the creditor must file a timely claim to receive payment from the estate for the deficiency. A claim has the same effect as a lawsuit filed against the deceased person’s estate or an incapacitated person’s guardianship and the rules of trial procedure will apply to the case, except as otherwise specified by the probate code.

2.1.8. Claimant.

A claimant is a person filing a claim in a decedent’s estate or an incapacitated person’s guardianship.

2.1.9. Common-law marriage.

Common-law marriage does not exist in Indiana. In states that retain the common-law marriage concept, a cohabiting couple will be deemed married after a certain period of cohabitation.

2.1.10. Decedent.

A decedent is a person who has died.

2.1.11. Declaration of trust.

The declaration of trust is a kind of document that creates a trust. In Indiana, most trusts are created by trust agreements, but both concepts are effective under Indiana law.

2.1.12. Descendant.

A descendent is a child, grandchild, or a person born to a child or grandchild. Unless otherwise specified in a person’s last will and testament or trust instrument, the term includes a and adopted person, but it does not include a step-child.

2.1.13. Devise.

Devise means to provide for the distribution of an asset or right to a beneficiary through a will or trust.

2.1.14. Devisee.

The devisee is a beneficiary of a devise.

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2.1.15. Devolution.

Devolution is the passage of ownership from a decedent to an heir under the intestate transfer provisions of the Indiana Probate Code or a devisee under a will. Under Indiana law, title devolves immediately upon an intestate decedent’s death or upon the admission of a testate decedent’s will to probate, subject to the power of the personal representative to divest title by selling or encumbering the devolved asset. With respect to real estate, a personal representative loses the power to divest title if the clerk of the probate court does not issue letters testamentary or letters of administration within five months after the decedent’s death.

2.1.16. Distributee.

Distributee is a person entitled to distribution from an intestate decedent’s estate under the intestate transfer provisions of the Indiana Probate Code or from a testate decedent’s estate under the decedent’s will.

2.1.17. Executor.

An executor is a fiduciary nominated by a decedent’s will to serve as the personal representative of the decedent’s estate.

2.1.18. Estate.

An incapacitated person’s estate all of the person’s assets, regardless of whether the person shares ownership of the assets with someone else. Probate lawyers often use the term “probate estate” for assets of an estate to which the probate code pertains, which are only those assets that the decedent owned without a trust or provisions for any other person to have rights of survivorship in the assets after the decedent’s death.

2.1.19. Fiduciary.

A fiduciary is a person appointed to manage the assets, debts, income, expenses, and other rights and obligations for another person, commonly referred to as the principal, or for a decedent’s estate. The term includes personal representatives, guardians, and attorneys-in-fact.

2.1.20. Heir.

An heir is a distributee of an intestate estate.

2.1.21. Guardian.

A guardian is a person appointed by the probate court to serve as the legal representative of an incapacitated person or minor. Unless the letters of guardianship specify otherwise, a guardian is the guardian of the person and estate of the incapacitated person or minor.

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2.1.22. Guardianship.

A guardianship is the court case and responsibility of a guardian to manage the matters entrusted to the guardian by a probate court for an incapacitated person or minor. It should be noted that special provisions require that notice of all guardianship proceedings be given within a certain timetable to the US Department of Veterans Affairs for any petition for appointment of guardian of a veteran of the US Armed Forces.

2.1.23. Guardianship code.

The Indiana guardianship code is not really a unified code in the same sense as the Indiana Probate Code. Matters pertaining to the legal representation of minors incapacitated persons appear throughout Indiana Code Article 29-3. Provisions for the interstate transfer of guardianships and protective proceedings appear in Indiana Code Article 29-3.5.

2.1.24. Guardian ad litem.

A guardian ad litem is a person appointed by a court to represent the interests of an incapacitated person, a minor, or the contingent rights of unborn persons. The guardian ad litem is often a lawyer. Unlike a lawyer’s typical role of representing a party in court in an attorney-client relationship, a guardian ad litem has investigatory and discretionary responsibility to act in the best interest of the person or people whom the guardian ad litem is appointed to represent, even if the represented person or people object to the guardian ad litem’s recommendations or actions.

2.1.25. Guardian of the person.

A guardian of the person is a guardian appointed with specific authority and responsibility to manage only the physical custody and health of an incapacitated person or minor.

2.1.26. Guardian of the estate.

A guardian of the estate is a guardian appointed with specific authority and responsibility to manage everything except the physical custody and health of an incapacitated person or minor.

2.1.27. Guardian’s deed.

Guardian’s deed is a deed conveying real estate by a guardian. In order to transfer real estate from the guardianship, the guardian must petition for authority to convey the real estate according to transfer restrictions set out in the guardianship code. Generally, a guardian’s deed merely conveys real estate and does not warrant as to the quality of the real estate title or any other attribute of the real estate or its improvements.

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2.1.28. Incapacitated.

A person is “incapacitated” if the person “cannot be located upon reasonable inquiry,” or if the person requires help managing the person’s property or personal well-being “because of insanity, mental illness, mental deficiency, physical illness, infirmity, habitual drunkenness, excessive use of drugs, incarceration, confinement, detention, duress, fraud, undue influence of others on the individual, or other incapacity, or the person has a developmental disability.” This is an essential element of a court must find before the court can consider a person incapacitated and in need of guardianship.

2.1.29. Irrevocable trust.

Generally speaking, an irrevocable trust is a trust that the creator of the trust cannot terminate or modify. Many irrevocable trusts, however, reserve certain rights for the trust’s creator to do things like receive income, modify beneficiary distributions through changes in the trust creator’s last will and testament, exchange property with the trust, or replace trustees. Irrevocable trusts are very complex instruments that nonlawyers and lawyers and experience with estate planning should usually refer to experience estate planning lawyers. Under certain circumstances, an irrevocable trust can be modified by court order if the trust instrument contains serious errors or ambiguities, or if circumstances have changed that make it impossible to fulfill the trust’s original purpose.

2.1.30. Legacy.

The concept of a legacy in probate law is the provision for distribution of assets or rights to a beneficiary or group of beneficiaries. The term does not appear in the Indiana Probate Code.

2.1.31. Legatee.

A legatee is the beneficiary of a legacy. The term does not appear in Indiana Probate Code.

2.1.32. Letters of administration.

Letters of administration are the official statement by the probate court clerk of the appointment and powers of the administrator of an estate. Letters of administration generally do not state any restrictions, but a court can order the clerk to issue limited letters of administration.

2.1.33. Letters of guardianship.

Letters of administration are the official statement by the probate court clerk of the appointment and powers of the guardian. The probate court can order the clerk to issue limited letters of guardianship. If the guardianship is segregated between the guardianship of the estate and guardianship of the person, each such guardian will receive letters of guardianship of the estate or person as the case may be.

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2.1.34. Letters testamentary.

Letters testamentary are the official statement by the probate court clerk of the appointment and powers of the personal representative in a testate estate.

2.1.35. Nonprobate transfer.

A nonprobate transfer is a transfer of asset ownership upon a decedent’s death outside of the provisions of the probate code. Examples of nonprobate transfers includes assets titled to a revocable trust before the decedent’s death, assets owned by the decedent and a cotenant as joint tenants with rights of survivorship or as tenants by the entirety, asset ownership established with provisions for the designation of and distribution to beneficiaries without regard to a will or trust. Examples of asset ownership established with provisions for the designation of and distribution to beneficiaries without regard to a will or trust include beneficiary provisions on stock brokerage accounts, annuities, and life insurance policies; and the designation of POD or TOD beneficiaries under the Indiana Transfer on Death Property Act (Indiana Code Chapter 32-17-14). Generally, creditors cannot make claims against nonprobate transfers, but creditors can make claims against some nonprobate transfers through the time-sensitive and procedurally-demanding provisions for liability of nonprobate transferees for creditor claims and statutory allowances under Indiana Code Chapter 32-17-13. It is notable that some transfers that pass outside of a probate estate, such as distributions from life insurance policies and annuities, are excluded from the nonprobate transferee liability statutes.

2.1.36. Per capita.

Per capita is the concept in which the distribution that would otherwise be equal across a generation is redistributed among the surviving members of that generation and the descendants having the closest degree of relationship to a deceased member of the generation. For example, a per capita distribution to two surviving siblings and a deceased third sibling’s two children would allocate a 25% share to each of the four distributees instead of distributing 1/3 to each of the surviving siblings and 1/6 to each of the deceased siblings children.

2.1.37. Personal representative.

A personal representative is the catchall phrase to include executor or administrator. It is the preferred term to describe that fiduciary position appointed by the probate court to administer a decedent’s estate.

2.1.38. Personal representative’s deed.

A personal representative’s deed is a deed made by a personal representative of a decedent’s estate. Generally, a personal representative’s deed merely conveys real estate and does not warrant as to the quality of the real estate title or any other attribute of the real estate or its improvements.

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2.1.39. Per stirpes.

Per stirpes is the concept in which the distribution that would otherwise be equal across a generation is not redistributed among the surviving members of that generation and the descendants having the closest degree of relationship to a deceased member of the generation. For example, a per stirpes distribution to two surviving siblings and a deceased third sibling’s two children would allocate 1/3 to each of the surviving siblings and 1/6 to each of the deceased siblings children instead of distributing a 25% share to each of the four distributees.

2.1.40. Petition for probate will without administration.

A petition for probate of will without administration is the petition by which the petitioner proposes to the probate court to spread a decedent’s will of record.

2.1.41. Pour over will.

A “pour over will” is the nickname of a will often made in conjunction with a revocable trust. As the nickname implies, the will’s sole beneficiary is the trust. The purpose of the will is to consolidate assets lying outside the trust into the trust for centralized management and final distribution.

2.1.42. Power of appointment.

A power of appointment is a power given to someone or retained by someone to do something with a trust or estate. The general power of appointment gives the power’s holder the ability to significantly direct the trust or estate affected by the power and causes the value of the subject assets to be counted as the property of the holder for federal estate and gift tax purposes. A limited power of appointment may be limited to such simple matters as the power to substitute property of equal value for property in the trust or estate or the power to designate distributions among a specified group or class of distributees.

2.1.43. Prenuptial agreement.

Generally, fiancés waived future rights as spouses in a prenuptial agreement to protect each person’s property and rights from claims by the other person in dissolution of the marriage or in the estate of a deceased spouse. In particular, most prenuptial agreements waive the statutory rights of spousal allowance and spousal share so that each spouse may plan his or her estate without concern for the other spouse’s interference through the enforcement of statutory rights.

2.1.44. Probate.

The term is used in the probate code simply means to cause a decedent’s will to be admitted by the probate court for entry into the county will record. It will should be admitted to probate in the decedent’s county of residence. The term is often misused to describe the entire administrative process of administering a decedent’s estate. Many

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people will say that they want to avoid “probate” without understanding the term’s definition.

2.1.45. Probate administration.

Probate administration is the entire administrative process of administering a decedent’s estate from the petition for appointment of a personal representative to the order approving the final account on a supervised estate or the closure of an unsupervised estate three months after the personal representative files an affirmed closing statement.

2.1.46. Probate code.

The Indiana Probate Code is Indiana Code Article 29-1. Miscellaneous provisions about Indiana nonresident decedents, missing persons, and other sundry issues related to probate administration appear in Indiana Code Article 29-2.

2.1.47. Probate estate.

A probate estate is the assets that the decedent owned without a trust or provisions for any other person to have rights of survivorship in the assets after the decedent’s death.

2.1.48. Revocable trust.

Revocable trust is a trust established by a person who has retained the authority to revoke or modify the trust instrument during the person’s lifetime. It is common for a revocable trust instrument to appoint the trust’s creator to serve as the initial trustee. Revocable trust are the most common kind of trust. Most revocable trust become irrevocable upon the creator’s death. Some revocable trusts are made jointly by two or more people, each of whom has reserved some or all of the authority to revoke or modify the trust instrument, either with the approval and joint participation by the other trust creators, or independently of them. Joint revocable trust serve important purposes, but they can also create complicated problems.

2.1.49. Self-proving affidavit.

The self-proving affidavit is part of a last will and testament that functions as an affidavit to prove that the testator and witnesses sign the will in each other’s presence and that the testator expressed to the witnesses the intention for the will to serve as the testator’s last will and testament. A will that lacks a self-proving affidavit must be accompanied by a proof of will in which the witnesses or some other person testifies to authenticate the will and prove that the testator and witnesses sign the will in each other’s presence and that the testator expressed to the witnesses the intention for the will to serve as the testator’s last will and testament. Although it is preferable for a self-proving affidavit to appear with separate signatures after the signatures on the will by the testator and witnesses, the probate code allows a self-proving affidavit to be incorporated as part of the will with only one set of signatures by the testator and witnesses.

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2.1.50. Small estate affidavit.

A small estate affidavit is an affidavit prepared in accordance with Indiana Code § 29-1-8-1 to induce a holder of a decedent’s assets to deliver possession of the assets to the decedents distributees if the probate estate value, minus liens and encumbrances, does not exceed $50,000 and more than 45 days have passed since the decedent’s death. The affidavit helps distributees of a small estate settled the decedent’s business cost-effectively without the more costly and time-consuming details of probate administration. The statute specifies very particularly the information that the affidavit must contain.

2.1.51. Special personal representative.

A special personal representative is a personal representative appointed by the probate court to manage a specific transaction or issue. Usually, a special personal representative is appointed when the court determines that the primary personal representative is unable or unwilling to conduct necessary estate functions because of a conflict of interest or other inhibition.

2.1.52. Spousal allowance.

Every spouse of a decedent is entitled to receive the first $25,000 of the decedent’s probate estate assets, regardless of contrary provisions of the decedents will, unless the couple waived such spousal rights before marriage in a prenuptial agreement. If a decedent’s will provides for distribution to the spouse, the spouse will be entitled to receive both the $25,000 allowance and the distribution under the will.

2.1.53. Spousal share.

The spousal share is a spouse’s right to receive distributions from a decedent’s probate estate under the intestate transfer provisions of the Indiana Probate Code, regardless of contrary provisions of the decedents will, unless the couple waived such spousal rights before marriage in a prenuptial agreement. A surviving spouse must choose whether to accept distributions under the decedent’s will or elect to take distributions from a decedent’s probate estate under the intestate transfer provisions of the Indiana Probate Code.

2.1.54. Spread the will of record.

The colloquial term “spread the will of record” means to present a petition for probate of a decedent’s will to the probate court and secure the admission of the will to the will record under an order admitting the Will to probate. Generally, the term means that the petitioner wants to probate the will without administration.

2.1.55. Supervised administration.

Supervised administration is the general rule of estate administration in which the court supervises the personal representative in the personal representative must petition the court for authority to take most actions with respect to the payment of claims and

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distribution of income and assets, and account to the court for such payment or distribution.

2.1.56. Testate.

Testate means that a person died leaving a last will and testament.

2.1.57. Testator.

Testator is the person who makes a last will and testament to govern the person’s estate.

2.1.58. Testamentary capacity.

"The capacity of a settlor that is required to ... amend ... a revocable trust is the same as the capacity of a testator that is required to make a will." Ind.Code § 30-4-2-10(b). Every person is presumed to be of sound mind to execute a will. Gast v. Hall, 858 N.E.2d 154, 165 (Ind.Ct.App.2006) (citing Hays v. Harmon, 809 N.E.2d 460, 464 (Ind.Ct.App.2004), trans. denied ), reh'g denied, trans. denied. To rebut this presumption, a party must show that the testator, at the time of executing his will, lacks the mental capacity to know: " (1) the extent and value of [her] property; (2) those who are the natural objects of [her] bounty; and (3) their deserts, with respect to their treatment of and conduct towards [her]." Id. It is the testator's mental capacity or soundness of mind at the time she executes the document at issue that is controlling. Id. However, evidence of the testator's mental condition before the date of execution is admissible as it relates to the testator's mental state at the time she executed the document at issue. Id.

2.1.59. Testamentary trust.

The testamentary trust is a trust that is expressed within the text of a person’s last will and testament. A simple example of a testamentary trust is a provision of a will that distributions to minors will be held in trust until the miners reach a specified age. Testamentary trust were the primary instruments that created trust before the emergence of revocable trusts 40 to 50 years ago. Revocable trust have become so common, that many people find testamentary trust bewildering and confusing. A testamentary trust does not begin its existence until the testator’s last will and testament is admitted to probate.

2.1.60. Trust.

A trust is a fiduciary relationship in which the fiduciary holds title to asset for the benefit of beneficiaries under the terms and conditions of a trust instrument. A trust may be revocable or irrevocable and it may be made inter vivos (taking effect during life) or causa mortis (taking effect after death).

2.1.61. Trust instrument.

The trust instrument can be a trust agreement, declaration of trust, or a testamentary trust contained within a testator’s last will and testament. The Indiana trust code requires that a trust instrument provide written evidence of the terms of the trust bearing the signature of

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the settlor or the settlor's authorized agent. Except as required in the applicable probate law for the execution of wills, no formal language is required to create a trust, but the terms of the trust must be sufficiently definite so that the trust property, the identity of the trustee, the nature of the trustee's interest, the identity of the beneficiary, the nature of the beneficiary's interest and the purpose of the trust may be ascertained with reasonable certainty.

2.1.62. Trustee’s deed.

The trustee’s deed is a deed conveying real estate from a trust by trustee. Although many trustee deeds convey title without warranting title quality, the trustee’s deed can include the same warranties of title as a warranty deed.

2.1.63. Undue influence.

Undue influence is "‘the exercise of sufficient control over the person, the validity of whose act is brought into question, to destroy his free agency and constrain him to do what he would not have done if such control had not been exercised.’" Gast, 858 N.E.2d at 166 (quoting In re Estate of Wade, 768 N.E.2d 957, 962 (Ind.Ct.App.2002), trans. denied). Undue influence is an "intangible thing that only in the rarest instances is susceptible of what may be termed direct or positive proof." Gast, 858 N.E.2d at 166. That difficulty is enhanced by the fact that one who seeks to use undue influence does so in privacy. Id. Accordingly, "undue influence may be proven by circumstantial evidence, and the only positive and direct proof required is of facts and circumstances from which undue influence reasonably may be inferred." Id. The following circumstances tending to support an inference of undue influence may be properly considered by our Court: (1) the character of the beneficiary; (2) any interest or motive the beneficiary might have to unduly influence the testator; and (3) the facts and surrounding circumstances that might have given the beneficiary an opportunity to exercise such influence. Id. "Undue influence is essentially a question of fact that should rarely be disposed of via summary judgment." Id.

Under Indiana law, a confidential relationship sufficient to support an undue influence claim may arise as either a matter of law ("confidential relationships as a matter of law”) or under the particular facts of a case ("confidential relationships in fact”). Carlson v. Warren, 878 N.E.2d 844, 851 & 851 n. 3 (Ind.Ct.App.2007). Among those confidential relationships as a matter of law are the relationships between a parent and child and between a principal and agent. Id.; see also Supervised Estate of Allender v. Allender, 833 N.E.2d 529, 533 (Ind.Ct.App.2005), reh'g denied, trans. denied. These relationships raise "a presumption of trust and confidence as to the subordinate party on the one side and a corresponding influence as to the dominant party on the other." Allender, 833 N.E.2d at 533. The law will impose a presumption that a transaction was the result of undue influence where the plaintiff's evidence shows that: (a) there was such a relationship; and (b) the dominant party benefits from a questioned transaction. Id.; see also Carlson, 878 N.E.2d at 851. The burden then shifts to the dominant party to rebut the presumption by providing "‘clear and convincing evidence’" that the dominant party "‘acted in good faith, did not take advantage of [the] position of trust, and that the transaction was fair

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and equitable.’" Carlson, 878 N.E.2d at 851 (quoting In re Guardianship of Knepper, 856 N.E.2d 150, 154 (Ind.Ct.App.2006), clarified on reh'g, trans. denied ); see also Allender, 833 N.E.2d at 533 (explaining that the presumption of undue influence may be rebutted if dominant party establishes "clear and unequivocal proof that the questioned transaction was made at arm's length and thus valid" ). In Re Rhoades, 993 N.E.2d 291, 300-01 (Ind.App. 2013).

2.1.64. Unsupervised administration.

Unsupervised administration is estate administration in which the court authorizes the personal representative to proceed without supervision by the court so that the personal representative can act without petitioning the court for authority. A court may grant unsupervised administration if the decedent’s will authorizes unsupervised administration or the distributees consents to unsupervised administration in writing. A court can revoke unsupervised administration by its own decision or upon the motion of any party.

2.1.65. Will.

As used in this outline a will is a person’s last will and testament, by which a person nominates a personal representative and specifies how and to whom the person’s assets will be divided and distributed.

2.1.66. Will contest.

It will contest is a dispute within the administration of a decedent’s estate over the authenticity or validity of one or more wills. Generally, a will contest must be commenced within the time limit for filing claims. Objections to the probate of the will include arguments against a will’s authenticity because of forgery or other fraud, arguments that a proffered will is superseded by a more recent will, or that the will was established through mistake, fraud, duress, or undue influence.

2.1.67. Witness.

As used in most of this outline, “witness” refers to the two disinterested people required to sign a person’s last will and testament. A request to a witness is invalid unless the witness would have received the same distribution if the will did not exist. A witness can also be one or more people who sign as a witness or witnesses to attest to the signature of the maker of a living will or appointment of healthcare representative, but a healthcare representative cannot witness the appointment by which the principal appoints the healthcare representative..

2.2. Asset ownership definitions

2.2.1. Cotenants.

Cotenants are co-owners of something.

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2.2.2. Joint tenants with rights of survivorship.

Joint tenants with rights of survivorship are cotenants that have survivorship rights that entitle the surviving cotenants to receive ownership of the interests of the deceased cotenants. If a joint tenant transfers his or her interest in the co-owned asset to anyone other than the other cotenants, the conveyance terminates the rights of survivorship between the transferee of the transferred interest and the remaining cotenants.

2.2.3. Life estate.

A life estate is an ownership right that entitles the owner to possessing control the asset in which the person owns a life estate interest during the owner’s lifetime. The owner of a life estate is known as the “life tenant,” may sell or convey the life estate, but the life tenant cannot sell or convey permanent ownership of the underlying asset.

2.2.4. POD.

POD means pay on death. Is a concept established under the Indiana Transfer on Death Property Act to describe the beneficiary designation in which the owner of an asset retains all the rights of ownership, including the power to revoke or change the beneficiary designation. The beneficiary has no rights in the property during the owner’s lifetime, but the beneficiary has survivorship rights that entitle the beneficiary to receive ownership of the asset is a nonprobate transfer upon the death of the owner. The terms “POD” and “TOD” are interchangeable with identical meanings. Traditionally, POD accounts were established on bank deposit accounts.

2.2.5. Remainder interest.

A remainder interest is the ownership right that is subject to a life estate. The holder of a remainder interest usually has no power to control the possession and enjoyment of an asset and may not deprive the life tenant of possession. The owner of the remainder interest acquires full ownership of the asset upon the death of the life tenant. The remainder interest owner may sell or transfer the remainder interest, but the buyer or transferee of the asset takes the remainder interest subject to the life tenant’s right to possess and use the asset.

2.2.6. TOD.

TOD means transfer on death. The term has the same meaning and effect as POD. Traditionally, TOD accounts were commonly established for investment accounts.

2.2.7. Tenants by the entirety.

Tenants by the entirety are cotenants that were married to each other as spouses when they acquired real estate title. Tenants by the entirety enjoyed equal rights to possession and enjoyment of real estate and rights of survivorship upon the death of a cotenant. A tenant by the entirety cannot convey any ownership rights in the real estate without the tenant’s spouse joining in the conveyance. Likewise, except as has been determined in

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federal courts with respect to debts owed by a tenant by the entirety to a federal government agency, a creditor of a tenant by the entirety may not attach a lien against the tenant’s real estate interests unless both spouses owe the debt to the creditor.

2.2.8. Tenants in common.

Tenants in common are cotenants that do not have survivorship rights. A cotenant share of a co-owned asset passes to the distributees of the deceased cotenant’s estate.

2.3. Bank account, investment account, and real estate definitions.

2.3.1. Abstract of title.

An abstract of title is a book or pamphlet prepared by a title company to state a summary or display copies of documents evidencing the conveyance and encumbrance of title. Traditionally, the title company would prepare an abstract and an attorney would read the abstract and issue a written opinion of title specifying title defects and prescribing curative actions to remedy title defects. Title insurance has almost completely replaced abstract of title in real estate transactions.

2.3.2. Appraisal.

An appraisal is an appraiser’s opinion of the fair market value of an asset. An appraiser is a person with sufficient professional education and experience to know the value of the asset. A real estate appraiser must be licensed by the Indiana Real Estate Appraiser Licensure and Certification Board. A certified real estate appraisal is a written appraisal issued by a licensed Indiana real estate appraiser.

2.3.3. Bank.

The bank is a financial institution regulated by state or federal bank regulators. Most banks are owned by shareholders. Most banks provide lending and deposit services. Some banks also operate trust companies that provide fiduciary services such as personal representatives, trustees, guardians, and attorneys-in-fact. Banks can also provide insurance and investments that used to be restricted to investments and insurance companies.

2.3.4. Certificate of deposit.

A certificate of deposit is usually a bank or credit union deposit account in which the depositor deposits money for a specified duration in exchange for a slightly higher interest rate than the institution pays for savings accounts and checking accounts. There is usually an early withdrawal penalty if the depositor tries to withdraw the money before the deposit term expires.

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2.3.5. Checking account.

A checking account is a deposit account at a bank or credit union. Some investment brokerage companies also offer accounts that resemble checking accounts in many ways. A checking account entitles the owner of the account to pay money by issuing checks drawn on the account. Many checking accounts also have debit card rights that entitle parties to withdraw funds through ATM machines. Most checking accounts do not pay interest on deposits and many have minimum deposits and a variety of fees.

2.3.6. Credit union.

The credit union is a financial institution similar to a bank that is owned by “members,” who would be referred to as depositors if they deposited money in a bank. Typically, a member must pay a modest investment of less than $100 to become a member and open an account. Only members may conduct business through the credit union. Most credit unions offer deposit and lending services. Many credit unions permit members to do almost everything that members could do at a bank, except that few, if any, credit unions offer trust services for non-bank investment services.

2.3.7. Deed.

A deed is an instrument by which a real estate owner conveys real estate ownership. The deed conveys ownership immediately upon the execution and delivery of the deed by the owner to the transferee. A deed must be recorded in the office of the recorder of the county in which the real estate is located in order to perfect title transfer in the transferee. If the transferee does not record the deed, title may become encumbered by the grantor’s judgment creditors. Also, an evidentiary issue arises sometimes about an unrecorded deed as to whether the grantor transferred title by delivering the deed to the grantee. Deed recordation eliminates the issue of delivery because it is prima facie evidence of delivery if the deed is recorded before the grantor’s death.

2.3.8. Encumbrance.

Encumbrance is any right that anyone may have in someone else’s real estate. Encumbrances include restrictions on use, conveyance, and development, liens, claims of entitlement possession, easements, rights-of-way, reversionary rights, and rights to invade the real estate service for development of oil, gas, or minerals.

2.3.9. Index.

Index is used in this outline to indicate a cross-referencing system in the county recorder’s office by which the recorder as a notation citing the official identification of one recorded instrument on the record of a previously recorded instrument.

2.3.10. Insurable title.

Insurable title is title that a title insurance company considers sufficiently marketable to be marketable title.

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2.3.11. IRA.

An IRA is an individual retirement account. The original owner of an IRA deposits income into the account before paying income taxes on the income. If the owner withdraws money from the IRA before reaching the age of 59 1/2, the owner will have to pay income tax on the withdrawn funds and an additional 10% tax. An owner must begin withdrawing required minimum distributions (RMDs) when the owner reaches the age of 70 1/2. In order may fund the IRA directly, or through a fund to fund transfer from the owners other retirement accounts such as a 401(k), 403B, Keogh, SEP, or other tax-deferred retirement plan.

2.3.12. Marketable title.

Marketable title is title "which has no defects of a serious nature, and none which affect the possessory title of the owner, ought to be adjudged marketable." Staley v. Stephens, 404 N.E.2d 633, 635 (Ind.Ct.App. 1980) (quoting Kenefick v. Schumaker, (1917) 64 Ind.App. 552, 565 116 N.E. 319, 323(Ind.Ct.App. 1917)).

2.3.13. Money market account.

A money market account is an investment account that may have check-writing privileges similar to a checking account. Most banks and investment companies offer money market accounts.

2.3.14. Multiparty account.

Two or more people can own a multiparty account as “parties.” Usually, a party has rights of withdrawal and rights of survivorship. Ambiguities sometimes arise when a person “adds” and other person to the account without defining whether the new person is a party or agent. If the new person is a party, then the new person acquires ownership of the account equal to the original party and survivorship rights. If the new person is merely an agent, then the agency will terminate upon the death of the party and the agent will have no rights of survivorship.

2.3.15. Pension.

A pension is a retirement benefit in which an employer pays periodic income to a retired employee. Generally, the employee has no right to withdraw money from the pension plan, but is only entitled to receive periodic payments, usually monthly, during the retired employee’s lifetime. Some pensions entitle a retired employee’s spouse or children to receive pension payments after the retired employee’s death.

2.3.16. Quitclaim deed.

The quitclaim deed is a deed that excludes warranties of title.

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2.3.17. Quiet title action.

Quiet title action is a lawsuit in which the plaintiff alleges superior real estate title against defendants, whose claims of appear to diminish or encumber the plaintiff’s title. A favorable judgment in a quiet title action can cure title defects if the plaintiff is entitled to the relief that the plaintiff claims.

2.3.18. Record.

Record is used as a verb in this outline to describe the process of causing a document to be recorded as a record of the county recorder’s office.

2.3.19. Retirement Plan.

As used in this outline, most retirement plans are tax-deferred investment plan in which an employed taxpayer invests or deposits income without paying tax on the income. Earnings on the retirement plan accumulate without requiring the taxpayer to pay taxes on the earnings. All withdrawals from the plan by the owner or the owner’s beneficiaries trigger income tax on the original investments and the earnings thereon. A Roth IRA is the exception to the tax attributes of a retirement plan.

2.3.20. Savings account.

A savings account is a bank or credit union account that entitles the depositor to earn a modest interest rate on the deposit. Some savings accounts have minimum deposits and a variety of fees.

2.3.21. Title insurance commitment.

The title insurance commitment is the preliminary document issued by a title company as agent of the title insurance underwriter, in which the commitment promises to ensure title in the proposed insured party upon the satisfaction of requirements specified in schedule B-1, subject to the title insurance exceptions expressed in schedule B-2. Upon the satisfaction of those conditions, including the payment of the title insurance premium and search fees to the title company, the title company will issue a title insurance policy on behalf of the title insurance underwriter that the title company represents as agent.

2.3.22. Title insurance policy.

The title insurance policy is a policy of title insurance issued upon the payment of a title insurance premium and search fees, and the satisfaction of conditions stated in a title insurance commitment. The title insurance policy can be an owner’s policy of insurance or a lender’s policy of insurance. An owner’s policy of insurance insures title for the property owner and a lender’s policy of title insurance insures the title of the lenders mortgage lien against the real estate.

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2.3.23. Title search.

The title search is research conducted by title company in the offices of the county recorder and county clerk to determine the current ownership of real estate and any existing limitations upon that ownership.

2.3.24. Transfer on death deed.

A transfer on death deed is a deed by which an owner designates a beneficiary under the Indiana Transfer on Death Property Act. A transfer on death deed can be made by an owner or by a grantor in a conveyance of the real estate to the owner. The preferred format for an owner to state the beneficiary designation is as follows: [owner’s name] warrants and conveys to [owner’s name], TOD [beneficiary’s name]. If the beneficiary is a descendent of the owner, the beneficiary’s survivorship rights will pass to the beneficiary’s descendants if the beneficiary dies before the owner. If the beneficiary is not a descendent of the owner, but the owner wants the beneficiary’s survivorship rights to pass to the beneficiary’s descendants if the beneficiary dies before the owner, the deed should include after the beneficiary’s name the acronym “LDPS,” meaning lineal descendent per stirpes, to add the survivorship rights to the descendent of the non-descendent beneficiary. An owner may change the beneficiary designation by making a new transfer on death deed or recording any other written instrument expressing the owner’s intention to change the beneficiary designation, recording the new transfer on death deed or instrument in the county recorder’s office, and indexing the document to the previous transfer on death deed.

2.3.25. Nursing home resident account.

The nursing home resident account is usually a co-mingled account maintained by a nursing home in its accounting system in which a nursing home resident may deposit money to be used by the nursing home resident for personal needs such as snacks, haircare, or other miscellaneous personal expenses.

2.3.26. Warranty.

A transferor, by means of a warranty deed, guarantees that the real estate is free from all encumbrances and that he will warrant and defend the title to the land against all lawful claims. Keilbach v. McCullough, 669 N.E.2d 1052, 1054 (Ind.App. 1996) (citing Rieddle v. Buckner, 629 N.E.2d 860, 864 (Ind.Ct.App.1994).

2.3.27. Warranty deed.

A warranty deed is a deed that includes the grantor’s warranty of title. It warranty deed can be a general warranty deed or a limited warranty deed. A grantor may make a limited warranty deed by expressly limiting the scope of warranties.

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2.4. Loan transaction and property tax definitions.

2.4.1. Assessment.

A property tax assessment is a determination by the county assessor of the taxable value of real estate or property tax purposes. Indiana requires property tax assessments to reflect the fair market value of the assessed property. property tax assessment is a kind of appraisal, but it is not the same thing as a real estate appraisal because different standards apply to the two kinds of valuation systems.

2.4.2. Judgment lien.

A judgment lien is an interest in real estate that a person acquires through an award of judgment in favor of the judgment lien holder against the property owner. The judgment lien attaches to the defendants real estate located within the county in which the judgment is entered automatically upon the entry of the judgment in the court’s judgment record in that county clerk’s office. A judgment lien cannot attached to the interests of a tenant by the entirety unless both spouses of the tenancy by the entirety are defendants and judgment lien debtors under the entry of the judgment.

2.4.3. Mechanics lien.

Mechanics lien is an interest in real estate that a person acquires under the Indiana mechanics lien statutes to secure payment to a construction contractor or construction materials provider of the value of labor and materials provided by the contractor or provider to a landowner, plus court costs and attorney fees. Mechanics lien statutes require the contractor or materials provider to record a notice of mechanics lien in the recorder’s office of the county in which the real estate is located within a statutorily specified deadline, but the mechanics lien statutes have different notice standards and requirements for residential and commercial properties. The contractor or materials provider must foreclose the mechanics lien within one year after recording the notice of mechanics lien in the county recorder’s office.

2.4.4. Mortgage.

A mortgage is a document that imposes a lien upon real estate title to secure a borrower’s performance of obligations to a lender under a promissory note. A mortgage must be recorded in the recorder’s office of the county in which the real estate is located. If a borrower defaults on performance of the obligations to lender, the lender may file a foreclosure lawsuit to force the real estate to be sold by the county sheriff at a sheriff sale so that the proceeds of the sale can be applied toward the satisfaction of the loan.

2.4.5. Promissory note.

A promissory note is a written instrument in which a borrower promises to repay a loan to a lender. Most promissory notes are “negotiable,” which means that a lender can sell or transfer ownership of the promissory note, but some promissory notes are expressly non-assignable, and thus nonnegotiable.

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2.4.6. Prorate.

Prorate, as used in this outline, means the allocation of property taxes that will be due after the date of a real estate sale transaction, but for which the county has not yet issued property tax statements. Proration is used to cause a real estate seller to pay a fair share of the real estate taxes that have already imposed a lien upon the real estate automatically as a matter of law. Typically, the number of elapsed days of the year up to and including the date of closing is divided by 365 to determine the decimal portion of the year in which the seller held title and the decimal is multiplied against the previous year’s total annual property tax shown in the title insurance commitment to determine the seller’s share of the property taxes that will not become due and payable until the following calendar year. The closing agent usually deducts the sellers prorated share of property taxes from the purchase price as a credit to the buyer, and then the buyer will the obligated to pay the entire amount of property taxes and assessments when the county treasurer issues property tax statements in the next calendar year.

2.4.7. Transfer fee.

A transfer fee is the fee charged by a county auditor to transfer the record of property ownership on the auditor’s property ownership records for property tax purposes. Transfer fees vary from county to county. Some counties charge a separate fee for each property described in a deed that has a property tax parcel number, regardless of whether the deed is made as a gift or sale. Other counties only charge a transfer fee for real estate sales. The county auditor is required to stamp all deeds with a notation of whether the auditor has entered the transfer in the transfer records, but the auditor is not required to make such a notation on a transfer on death deed. This causes a problem sometimes if a transfer on death deed includes a conveyance of ownership from one person to another. A lawyer making a transfer on death deed to transfer the title should verify whether the auditor has made a transfer record notation.

2.4.8. Sales disclosure form.

A sales disclosure form is a data collection document that Indiana law requires parties of all real estate sales to submit to the county assessor with deeds before the deeds may be recorded. The form includes information about the parties names, addresses, phone numbers, the value of the sale, and various terms and conditions of the transaction. The form is used by the county assessor to accumulate property tax valuation data to support the property tax assessment system.

2.4.9. Transfer record.

A transfer record is the record maintained by the county auditor of the various property owners for property tax purposes.

2.4.10. Property tax lien.

The county imposes a tax lien on all real estate other than real estate that is entitled to property tax exemption. A tax lien attaches to real estate automatically every year to

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enforce payment of property taxes and assessments for that year that are due and payable in the following calendar year.

2.4.11. Tax lien.

A tax lien is a lien imposed by a state or federal tax collection agency other than a property tax lien, when the agency believes a taxpayer has failed to pay taxes. A federal tax lien attaches to property when the Internal Revenue Service files a notice of tax lien in the county recorder’s office. An Indiana state tax lien attaches when the Indiana Department of revenue files a tax warrant in the county clerk’s office of the county in which the real estate is located.

2.4.12. Tax sale.

The tax sale is a sale by the county to recover unpaid property taxes and assessments. The defaulting taxpayer has a right to redeem the property by paying to the county auditor the tax sale purchaser’s purchase price, reasonable cost of giving notice to the taxpayer, and interest on the purchase price from the date of the tax sale to the date of redemption before the end of the redemption period. The tax sale purchaser must give notice to the defaulting taxpayer and any other person that has an ownership or encumbrance interest in the real estate (such as a mortgage holder on a mortgage loan) of the right to redeem the property. After the redemption period ends, the tax sale purchaser must provide proof of notice to the defaulting taxpayer and other interested parties and petition the county circuit court for an order for tax title deed. The court then orders the county auditor to issue a tax title deed to the tax sale purchaser.

2.4.13. Tax title deed.

The tax title deed is a deed issued by a county auditor to attack sale purchaser. Tax sale laws have a notorious reputation for complexity and logical imperfections that have induced title insurance underwriters to refuse to ensure title acquired by tax title deed without a quiet title action to cure any procedural defects caused by the tax sale process. Because most banks require title insurance before making mortgage loans, properties acquired by tax title deed tend to be less marketable and ineligible as collateral for mortgage loans.

2.5. Tax definitions.

2.5.1. Adjusted basis.

Adjusted basis is the basis value that results from additions and subtractions to basis under the US Internal Revenue Code. A person can increase the adjusted basis by investing more money into the asset, such as in the case of the construction or substantial remodeling of the building, without claiming an income tax deduction. A person decreases the adjusted basis by claiming income tax deductions such as depreciation against the basis. When an asset passes from the decedent to the decedent’s distributees or beneficiaries, basis is adjusted to the fair market value of the asset as of the decedent’s date of death.

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2.5.2. Annual gift tax exclusion.

Each person has an inflation-adjusted, annual gift tax exclusion for federal gift tax purposes. In 2014, the annual gift tax exclusion value is $14,000 per donor and per donee.

2.5.3. Basis.

Basis is the value of a person’s investment in an asset. Generally, basis does not equal the fair market value of the asset.

2.5.4. Capital asset.

A capital asset is an asset that is defined as a capital asset in the Internal Revenue Code. Generally, a capital asset is an asset that has a durable value and is not subject to income tax deduction for its purchase cost. Examples of capital assets include real estate; artwork: equity securities such as stocks and membership interests in limited liability companies; and intellectual property such as copyrights patents and trademarks.

2.5.5. Capital gains tax.

The federal capital gains tax is a tax imposed upon capital gains. The capital gains tax rate for short-term gains is the same as the income tax rate. Congress has changed the long-term capital gains tax rate over the years and the rate is now dependent upon the value of the taxpayer’s total income.

2.5.6. Death tax.

Death tax is a slang term for transfer taxes imposed upon the death of the decedent. After the repeal of the Indiana inheritance tax, the only to which the slang term applies is the federal estate tax.

2.5.7. Estate tax.

The federal estate tax is a transfer tax on the value of transfers exceeding the federal estate tax exemption. In 2014, the federal estate tax exemption’s inflation-adjusted value is $5.34 million. If a decedent has not given gifts during the decedent’s lifetime worth more than the applicable annual gift tax exclusions, the decedent’s distributees and transferees may receive the decedent’s assets free of the federal estate tax if the total value of the decedent’s assets does not exceed the estate tax exemption value.

2.5.8. Fiduciary income tax.

State and federal tax agencies impose income tax on trusts and estates. The federal fiduciary income tax has the same income tax rates as individual ordinary income taxes, but the tax bracket amounts are much smaller so that an estate or trust will reach the maximum tax rate on less than one tenth of the income value of the maximum individual income tax bracket. However, if the trust or estate distribute income to the beneficiaries,

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the estate or trust can claim a distribution deduction for the entire amount of the distribution and eliminate the tax for the trust or estate. Any income distributed by the trust or estate to his beneficiaries will be taxable to the beneficiaries at their individual income tax rates.

2.5.9. Gain.

Gain is the value by which the sale value of an asset exceeds its adjusted basis.

2.5.10. Gift tax.

The federal gift tax is a transfer tax imposed upon transfers during a person’s lifetime. The gift tax shares the same inflation-adjusted exemption as the estate tax, the value of which is $5.34 million in 2014. If a person gives a gift to a donee worth more than $14,000 in one year, the donor can either pay gift tax on the excess value or claim part of the $5.34 million inflation-adjusted gift tax exemption. If the donor claims part of the gift tax exemption, the exemption claim depletes that part of the exemption for purposes of the estate tax and gift tax. Federal law provides that a transferor must report every gift of value in excess of the annual gift tax exclusion, but the penalty for failing to file a gift tax return is a percentage of the tax that would have been to if the tax had been paid. If the gift does not trigger a tax payment obligation because the gift does not exceed the donor’s remaining gift tax exemption, the penalty for failure to file a gift tax return will be zero because the penalty value is a percentage of the zero gift tax value.

2.5.11. Income tax.

Income tax is a tax on the income of a taxpayer. Taxpayers include individuals, corporations, trusts, estates, and some other non-individual entities. Generally speaking taxable income is interest, earnings from employment, or payments from transactions other than the return of investment principal. Some interest is tax exempt when it is paid on bonds and other debt instruments issued by federal, state, county, or local governments or government agencies. Receipt of a gift and inheritance is not taxable income, but it may be subject to a transfer tax.

2.5.12. Inheritance tax.

Indiana had a transfer tax known as the inheritance tax until the Indiana General Assembly repealed the inheritance tax in 2013 retroactively to January 1, 2013. Beneficiaries of decedents it died on or after January 1, 2013, do not owe inheritance tax. Beneficiaries of decedents that died before January 1, 2013, may still owe inheritance tax and interest on the tax if they did not file inheritance tax returns and pay inheritance taxes. As with many other taxes, unpaid inheritance taxes automatically impose inheritance tax liens on decedents’ Indiana real estate.

2.5.13. Transfer tax.

A transfer tax is a tax such as the federal estate tax, gift tax, generation-skipping transfer tax, and the former Indiana inheritance tax. The tax is imposed upon the value of an asset

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that is transferred during the transferor’s life or after the transferor’s death to the extent that the value exceeds the value of the various transfer tax exemptions.

2.6. Insurance and annuity definitions.

2.6.1. Annuity.

An annuity is a contractual arrangement in which a person usually pays money to an insurance company in exchange for the right to receive periodic payments from the insurance company. Some annuities pay money during a specified period of time or during the lifetime of an individual known as the annuitant. Some annuities also pay death benefits to beneficiaries designated to the issuing insurance companies by the annuity owners. Annuities and life insurance policies have similar attributes because they are issued by insurance companies and the relationship of investment and benefit payment depends in part on the age and gender of an individual. In the case of an annuity, that individual is the annuitant.

2.6.2. Deferred annuity.

The deferred annuity is an annuity that accumulates value and does not pay scheduled payments to the annuity owner. The owner may withdraw part of the annuity, subject to certain withdrawal restrictions and penalties for early withdrawal.

2.6.3. Funeral trust.

A funeral trust was traditionally an irrevocable trust held by a bank or trust company and funded by an individual to prepay the individual’s funeral expenses. The term can also refer to a life insurance product commonly sold by funeral homes to people interested in prepaying their funeral expenses. Both concepts are often referred to as prepaid funerals.

2.6.4. Group term life insurance.

Group term life insurance is term life insurance issued to a group of people. The death benefit of a group term life insurance policy is often very modest, but the premiums are often discounted or paid by the groups sponsor. Group term life insurance is a common employee benefit and a benefit provided as a marketing tool for banks and other institutions.

2.6.5. Life insurance.

Life insurance is a contractual arrangement in which a person pays a lump sum or periodic premium payments in exchange for an insurance company’s payment of money upon the death of the person named in the life insurance policy as the insured to beneficiaries designated to the insurance company by the insurance policy owner. Although the insured may own the policy, another person could own the life insurance policy. The proportional relationship of premiums to death benefit depends in part upon the age, gender, and health of the insured for most policies.

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2.6.6. Term life insurance. T

erm life insurance is insurance that has no investment component that accumulates value over the duration of the insurance policy.

2.6.7. Variable annuity.

A variable annuity is an annuity with a variable growth factor. Variable annuities commonly offer guaranteed minimum rates of return on investment and index the right to return to the performance of various investment indices.

2.6.8. Whole life insurance.

Whole life insurance is a life insurance policy that includes an investment component that accumulates in value over the life of the insured. The accumulating value is commonly referred to as the cash surrender value.

2.7. Government benefits definitions.

2.7.1. Aid and attendance benefits.

Aid and attendance benefits are need-based benefits provided by the US Department of Veterans Affairs to qualifying disabled veterans to help them pay for health and living expenses.

2.7.2. Look-back period.

Medicaid has a two-part rule to discourage people from transferring assets for the purpose of expediting qualification for Medicaid benefits. The first part of the rule is the look-back period and the second part is the transfer penalty. The look-back period is the most commonly known, but the lease commonly encountered part of the rule. Under the look-back rule, an uncompensated transfer of assets will not affect a Medicaid applicant’s eligibility if the transfer occurred at least 5 years before the Medicaid application date. If, however, the person transfers and asset and applies for Medicaid within 5 years after the transfer, Medicaid proceeds to the transfer penalty part of the rule to determine the applicants Medicaid eligibility.

2.7.3. Medicaid.

Medicaid is a federal, needs-based benefit system administered by the states to help people pay medical expenses. Various categories of Medicaid benefits exist based upon beneficiaries’ ages, disabilities, and needs for assistance. Medicaid provides different eligibility and administrative standards for unmarried beneficiaries and married beneficiaries. Most eligibility standards include limits on the value of beneficiaries’ resources and income.

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2.7.4. Medicare.

Medicare is a federal health insurance program funded by payroll deductions of employed taxpayers. Most Medicare beneficiaries must be older than sixty-five years old to qualify for benefits, but beneficiaries of Social Security Disability and Supplemental Security Income benefits can qualify for Medicare. Medicare pays for skilled healthcare and some rehabilitative and therapeutic care if a beneficiary has been hospitalized as an inpatient for three or more days and discharged directly to a rehabilitation facility. Several rules apply to a beneficiary’s entitlement to payment of rehabilitative expenses, including the duration of payments, whether the beneficiary has received payment for previous services within a certain period of time, and whether the rehabilitative care is beneficial to the beneficiary. Medicare Part D is prescription drug coverage under a plan for which a beneficiary must pay insurance premiums to the insurance company that serves as the Part D provider. Medicare beneficiaries are also encouraged to maintain supplemental insurance coverage called Medicare Part B supplements to help pay for medical expenses that Medicare Part A does not cover.

2.7.5. Qualified income trust.

A qualified income trust, commonly referred to as a QIT trust or Miller trust, is an irrevocable trust established to prevent a Medicaid beneficiary’s income from disqualifying the beneficiary from Medicaid benefits. States that use federal Supplemental Security Income standards to determine financial eligibility for Medicaid restrict the amount of gross income a Medicaid recipient can earn. The amount of gross income in excess of the limit is called the special income level or SIL. If a Medicaid recipient establishes such a trust and arranges for the value of the SIL to be deposited each month into the trust, and if the deposits are spent only on qualifying medical expenses, the SIL will not disqualify the Medicaid recipient for Medicaid benefits.

2.7.6. Representative payee.

Representative payee is an agent who applies for representative payee status to help a recipient of Social Security Retirement Insurance, Social Security Disability Insurance, or Supplemental Security Income benefits manage the benefits.

2.7.7. Resource.

A resource is an asset under Medicaid law that does not qualify for exemption. Resource exemptions differ for married and unmarried Medicaid beneficiaries. Resource exemptions include personal goods and effects, limited prepaid funeral plans, income-producing property, and other resources worth up to $2,000. Additionally, if the spouse of a Medicaid beneficiary still lives independently at home, the spouse may keep the home, any income-producing real estate, one vehicle of unlimited value, and up to half of all countable resources if one half of the countable resources value does not exceed a specified value that is subject to federal cost-of-living adjustments, which value limit is $117,240 in 2014.

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2.7.8. Social Security Disability Insurance.

Social Security Disability benefits, commonly known as “SSD,” are non-needs-based benefits that all employed taxpayers support through payroll withholdings. In order to qualify for SSD, an applicant must prove that the applicant is officially disabled to be unable to earn income as an employee.

2.7.9. Social Security Retirement Insurance.

Social Security retirement income is the income benefit that all employed taxpayers support through payroll withholdings. Social Security retirement income is not need space, but is based upon the amount of contribution that each benefit recipient has paid into the Social Security system during the recipients working years. Social Security retirement income is not subject to income tax unless the recipient’s ordinary income exceeds value specified by law.

2.7.10. Supplemental Security Income.

Supplemental Security Income, commonly known as “SSI,” is a needs-based federal income benefit. In order to qualify for SSI, a beneficiary must meet certain disability, income, and resource standards.

2.7.11. Transfer.

A transfer under Medicaid law is a transfer or assignment of ownership of an asset or rights to receive a stream of income without comparable fair market value consideration. For example, if someone sells a property worth $100,000 for $1, Medicaid will treat the transfer as a sale for the price of one dollar and a gift of $99,999. Medicaid law will also treat the spouse of a deceased person as having made a transfer if the deceased person did not make an estate plan that provides adequate provisions for the surviving spouse. Uncertainty exists about what constitutes adequate provision and the Indiana Family and Social Services Administration has engaged in litigation with some Medicaid applicants, but none of the litigation has established published appellate precedents.

Transfer penalty.

The transfer penalty is a concept under Medicaid law intended to discourage Medicaid applicants from giving away assets to expedite their eligibility for Medicaid coverage. A Medicaid applicant is disqualified for payment of nursing home expenses for a period of time after the applicant enters a nursing home and the applicant’s resource value drops below the $2,000 resource eligibility standard. The duration of the transfer penalty is calculated dividing the value of the transfer by the published state average monthly nursing home room and board costs, which value was $5,733 as of July 1, 2014. For example, if a person transferred $50,000, the transfer penalty period would be 8.72 months, which would be applied as a penalty of 8 months and 21 days. Unfortunately, a transfer penalty does not begin to disqualify a Medicaid applicant until the applicant is already admitted to a nursing home or requires nursing home-level care AND the person has already spent the total resource value down to $2,000. If the transfer value is very

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large, Medicaid applicant will experience the very undesirable circumstance of being unable to pay for nursing home care privately and disqualified from critically important Medicaid benefits to pay for the nursing home care. Under those circumstances, if the applicant cannot recover the transferred assets from the transferees, the applicant may become dependent upon care from family and friends or the very limited taxpayer resources of the office of the local township trustee.

2.7.12. Veteran.

A veteran is a retired member of the US Armed Forces.

2.8. Advance directives and Principal-appointed agent definitions.

2.8.1. Appointment of healthcare representative.

An appointment of healthcare representative is a document by which a person may delegate healthcare decision-making authority to one or more other people, including the right to withhold life-prolonging procedures commonly known as “life-support.” An appointment of healthcare representative must be signed by the principal or by another person under the direction of the principal and by a witness other than the healthcare representative. An appointment of healthcare representative is revocable as long as the principle as the mental capacity to revoke the instrument. The healthcare representative cannot use the appointment of healthcare representative as long as the principal is conscious and has sufficient capacity to form informed consent under the Indiana healthcare consent laws. The healthcare representative is required to try to communicate with the principal but a doctor may issue an opinion that the principal lacks the ability to give informed consent and thereby certified the healthcare representative’s authority to act on behalf of the principal. Other than the requirements stated above, there is no statutory form specified by law for an appointment of healthcare representative.

2.8.2. Attorney-in-fact.

An attorney-in-fact is the person who may principal authorizes to act as the principal’s legal representative under a power of attorney.

2.8.3. Do not resuscitate.

A do not resuscitate order is a written order issued by a physician licensed to practice medicine for a terminally ill patient. A do not resuscitate order typically orders healthcare providers to withhold or withdraw wife prolonging procedures and provide pain management and comfort care. An out of hospital do not resuscitate order carries the same effect as a do not resuscitate order issued within a hospital, but a copy of the order must be presented to healthcare providers to prevent the healthcare providers from providing life-saving treatment.

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2.8.4. General power of attorney.

A general power of attorney is an unrestricted power of attorney. A principal can appoint multiple attorneys-in-fact to serve simultaneously or appoint a single attorney-in-fact with a succession of successor attorneys-in-fact. An attorney-in-fact may act on behalf of the principal in any action except the execution of the principles last will and testament or the filing of a petition for dissolution of marriage or legal separation from the principal spouse. Because a general power of attorney is so incredibly all-encompassing, it is very important for the principal to select an attorney-in-fact carefully and make sure that the attorney-in-fact possesses sufficient integrity and competence to serve the principal’s best interests effectively.

2.8.5. Health care power of attorney.

A health care power of attorney is a power of attorney that is limited to the delegation of healthcare decision-making authority. A health care power of attorney is an alternative to an appointment of healthcare representative. A health care power of attorney must be signed by the principal or by another person under the direction of the principal in the presence of a notary public and certified by the notary public. A health care power of attorney must comply with the requirements of the Indiana Power of Attorney Act and incorporate language from the Indiana informed healthcare consent laws. In order for a healthcare power of attorney to authorize the attorney-in-fact to withhold life-prolonging procedures, the statutes say that the power of attorney must have a living will attached to the healthcare power of attorney, which is not a requirement for an appointment of healthcare representative. The choice between a health care power of attorney and an appointment of healthcare representative is a matter of professional opinion, regarding which many estate planning lawyers differ. This author usually prefers to deal with healthcare issues in an appointment of healthcare representative.

2.8.6. Limited power of attorney.

A limited power of attorney is a power of attorney that contains restrictions or conditions upon the powers of the attorney-in-fact. Although a limited power of attorney can be very useful in specific circumstances, the limitations of a power of attorney can greatly reduce the value of the power of attorney if the principal needs the attorney-in-fact to do things that the limited power of attorney does not authorize.

2.8.7. Living will.

A living will is a document for specification of the provision of end-of-life procedures, the form of which document is completely prescribed by Indiana statute down to the location of the signature line. A living will does not take effect unless the principal’s attending physician certifies in writing that (1) the principal has an incurable injury, disease, or illness; (2) the principal’s death will occur in a short time; and (3) wife-prolonging procedures will nearly artificially prolong the dying process. Living wills have fallen out of favor with most knowledgeable doctors and estate planning attorneys because they almost never become activated by the requisite written certification by the

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attending physician. In this author’s opinion, living wills give the principals false confidence that intensely emotional end-of-life decisions will be made without burdening their families.

2.8.8. Physician Orders for Scope of Treatment.

A Physician Orders for Scope of Treatment document, commonly known as “POST,” is a form prescribed by the Indiana State Department of Health in which a qualified patient and the patient’s doctor can specify the kinds of treatment that healthcare providers may provide to the patient if the patient is unable to consent to healthcare. The definitions on the back side of the POST form specify the qualifying category patient categories for which the document may be established, but a qualified patient is generally a patient that has a terminal illness or a serious, chronic health condition that is uninsurable. The POST form provides a hybrid advance health care directive that can replace a living will in some circumstances that would not qualify for a do not resuscitate order. Patients that do not meet POST qualifications cannot use the POST form.

2.8.9. Power of attorney.

A power of attorney is an instrument by which a principal authorizes an agent to serve as the principal’s legal representative during the principal’s lifetime. The Indiana Power of Attorney Act allows the principal to incorporate power specified in Indiana Code Chapter 30-5-2 by reference and modify any of those provisions by specifying the changes in the power of attorney document. The power of attorney may be effective immediately upon execution by the principal or it may spring upon the occurrence of a condition precedent. Indiana honors powers of attorney executed under the laws of other states. The power of attorney may be terminated by any writing communicated to the attorney-in-fact that communicates that the attorney-in-fact’s authority has ended. Generally, an attorney-in-fact retains authority until the principal communicates notice of the termination to the attorney-in-fact. Some government agencies use their own forms of power of attorney, including the entered US Internal Revenue Service, the Indiana Department of Revenue, and the Indiana Bureau of Motor Vehicles. Most government agencies do not recognize the authority of an attorney-in-fact under powers of attorney other than powers of attorney issued by such agencies.

2.8.10. Springing power of attorney.

A springing power of attorney is a limited power of attorney that does not take effect until the occurrence of a specified condition precedent. One of the most common conditions precedent for a springing power of attorney is the issuance of a written opinion by the principles position that the principle is disabled or unable to manage the principles estate because of injury or illness.

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3. Advising clients about estate planning issues.

3.1. Advice about wills.

Clients often have questions about wills. Although a will can provide useful benefits in an estate plan, is only a tool and cannot solve every problem or serve every purpose. This outline segment will identify issues and concepts to help answer some of the most common questions about wills.

3.1.1. Do I need a will?

The answer to this question depends upon a few factors.

3.1.1.1. First, if the person is married and the couple owns all of their assets together with neither person owning assets individually to the exclusion of the other, rights of survivorship will cause all of the asset ownership to pass to the surviving spouse upon the death of the other spouse. It is possible that that both spouses would die almost simultaneously in an accident, so I will may be useful if other factors in this analysis indicate that usefulness. As a practical matter, simultaneous death is so rare that I have never had an estate planning client die in a simultaneous death situation in twenty-two years of estate planning practice and have only known of three specific simultaneous death cases in Indiana during that time.

3.1.1.2. Second, if the person intends to leave assets to any minor children or disabled beneficiaries, a will is very useful to control the management of assets for such beneficiaries and specify who will be in charge of that management responsibility.

3.1.1.3. Third, if a married person has children by different parentage than the person’s spouse, a will may be useful to determine how the person’s estate will be distributed. This becomes very complicated, however, because a surviving spouse has statutory rights to receive $25,000 and a percentage of the deceased spouse’s assets, regardless of the provisions of the deceased spouse’s will unless the couple made a prenuptial agreement before they were married. Also, if a will provides that the surviving spouse will receive all of the decedent’s assets, the surviving spouse may make a will that leave no provision for the deceased spouse’s beneficiaries. It is possible for a husband and wife to make wills that restrict their ability to disinherit each other’s families, but that kind of planning is complicated and loaded with ethical issues that test even the most qualified estate planning lawyers. If both spouses do not agree on the contents of their wills, a surviving spouses rights may override the deceased spouse’s will and eliminate most of the value of the will, other than a provision for the appointment of a personal representative other than the surviving spouse.

3.1.1.4. Fourth, if the person has stable, adult children and is either unmarried or married to the parent of the person’s children, and if the person wants to treat all of the children equally, Indiana’s intestate transfer provisions of the Indiana

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Probate Code automatically provide for the equal distribution of assets among those children. Therefore, the only value of will in that circumstance is to nominate a personal representative.

3.1.2. Is my will still valid?

A will does not become invalid unless it was invalid when it was made or a person revokes it by making a new will or destroying the old will. A better question is to ask whether the will still solve the person’s problems. Another superior problem is to ask whether the person’s personal and family circumstances have changed so much that the old will either increases problems or fails to solve the new problems. It is almost impossible to answer the stated question during a brief telephone conversation because an estate planning attorney needs to dig into the persons personal and family issues and ask the person what outcomes they want the will to achieve under those circumstances.

3.1.3. Can I buy a computer program that lets me make a legal Indiana will?

There is almost no good answer to this question because most answers from lawyers seem self-serving. I usually begin answering the question by saying that it is not possible for me to know whether a will satisfies the Indiana will execution requirements unless I have a chance to read the will.

I once responded to a client’s question about whether a will was legal by saying that the client could go into a clothing store and ask the store clerks to sell them “clothing” without specifying the color, style, or size of the clothing and they could be assured of buying “clothing,” but the person may not want to be caught dead wearing the clothing. Likewise, it is not difficult to satisfy Indiana’s will execution requirements enough for a will to be “legal,” but the will may be completely inappropriate and useless for the person.

My wife encountered a will prepared by a decedent in which the decedent became confused about specific bequests of assets to her children and accidentally left one of the children as the property of his siblings. Obviously, that will produced a ridiculous and impossible result, but it demonstrates humorously the pitfalls of amateur will preparation.

Perhaps the best answer to the question would be to say that, “you get what you pay for and you may get little or nothing from a will that cost little or nothing.” It is better to hire a professional lawyer to prepare a will properly than to waste time and money on a botched document prepared by an amateur.

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3.2. Asset transfer questions.

3.2.1. Will I be liable for my family member’s debts if I receive an inheritance?

A deceased person’s beneficiaries are usually not liable for the decedent’s debts and legal obligations.

If the decedent’s assets are administered through probate administration, creditors will file claims in the estate and the claims will be paid from the estate assets to the extent that the assets are adequate to pay the claims. If the claim values exceed the estate asset values, the claimants will be paid pro rata shares in proportion to the total value of claims within each respective claim priority category, and claimants will be stuck with the unsatisfied portions of the claims. In that case, the beneficiaries will receive no distributions from the estate, but they will not be liable for the claimed efficiency.

Each beneficiary of a nonprobate transfer may be liable to creditors under the provisions for liability of nonprobate transferees for creditor claims and statutory allowances under Indiana Code Chapter 32-17-13, but that liability is limited to the value of the nonprobate transfer.

3.2.2. Which is better, a will or trust?

Estate planning attorneys differ in opinions about this question.

3.2.2.1. This author’s philosophy begins with the notion that probate administration is an unnecessary burden for small, cohesive families, so they should make an estate plan with nonprobate transfers through trust or other nonprobate transfer systems instead of relying on probate administration of a testate or intestate estate.

3.2.2.2. If a person has dysfunctional family members are beneficiaries, a revocable trust may be a good way to prevent malicious people from undermining an estate plan by destroying a last will and testament that this satisfies them because a revocable trust plan is usually funded with deeds and other asset ownership devices that identify the existence of a revocable trust independently of the trust instrument.

3.2.2.3. Alternatively, however, if the person entrusts the last will and testament to a reliable third-party in safekeeping, the third-party may be able to present the last will and testament to the personal representative for supervised probate administration so that the court can serve as a referee to maintain discipline among the beneficiaries and protect the personal representative from harassment from the beneficiaries.

3.2.3. Should I put my family members on my deed or accounts?

The answer to this question is almost always, “no!” The reasons why people ask this question and the analysis behind the answers are as follows:

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3.2.3.1. Clients often want to add family members to accounts for convenience purposes so that the family members can pay bills when the clients become incapacitated. If a person wants to make sure that the bills get paid, and if the person has competent and trustworthy friends or family, the person should make a power of attorney to appoint such people to serve as attorneys-in-fact.

When a person adds another person to a bank account, the new person often ends up categorized within the bank records as an additional “party.” An analysis of that term appears within the definitions portion of this outline for “multiparty accounts.” The most common unintended consequence of a multiparty account is that the second party acquires survivorship rights over the account in spite of the original party’s intention for the account to be distributed among multiple beneficiaries.

It is possible to establish the second person as an agent with signatory authority, but clerical personnel at banks and other financial institutions often get confused about that distinction and failed to document the account correctly.

3.2.3.2. Some clients think that they can avoid taxation by adding other parties to accounts or real estate ownership. The only taxation that the people could typically be thinking about with that notion would be transfer taxes. However, no transfer tax can be avoided by establishing any kind of cotenancy or other form of shared ownership that causes ownership to pass to the surviving cotenants or co-owners. Furthermore, the 2013 Indiana inheritance tax repeal and the establishment of the federal transfer tax exemptions as high as $5.34 million in 2014, most clients lack sufficient estate values to worry about transfer taxes.

3.2.3.3. Other clients think that they can protect assets from the cost of nursing home care by adding other people to accounts and real estate title. This thought is often driven by a client’s money-conscious family members, who fear for their inheritance.

It is generally unwise to transfer asset ownership as an asset-protection strategy to protect assets from nursing home costs because the Medicaid transfer penalty system disqualifies any Medicaid applicant that transfers assets without receiving payment or exchange equal to the fair market value of the transferred assets unless the transfer occurs more than 5 years before the Medicaid applicant applies for Medicaid. If a client is young enough that it is unlikely that the client would require nursing home care, the client may be forfeiting the use and enjoyment of an asset prematurely. Alternatively, if the client is relatively aged and unhealthy, 5 years is a very long time of risk exposure to Medicaid disqualification for such a person and most confident estate planning attorneys will be very hesitant to recommend or even participate in such transfers.

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3.2.3.4. A common and simple estate planning strategy for real estate is for a person to transfer a remainder interest in real estate to family members and retained life estate.

I often explain this concept to clients by describing an hourglass in which sand falls from the top chamber to the bottom chamber over a period of time. I explain that the top chamber resembles a life estate that entitles the owner to enjoy the possession, use, and control of real estate for the rest of the person’s life. I explained that the bottom chamber resembles the remainder interest that the person gifts to family members to assure that they will receive full ownership of the real estate when the person dies. Continuing with the hourglass analogy, the last grain of sand to fall out of the top chamber resembles the person’s death. At that time, the figurative upper chamber of the hourglass disappears and the bottom chamber of the hourglass ponds a new top chamber with falling sand that represents the lives of the family members to whom the person conveyed remainder interests.

The transfer of remainder interests with retained life estates was a useful long-term care planning strategy before Indiana Medicaid law changed on November 1, 2009. Prior to that time, the transfer penalty began automatically the month after a transfer was made and a healthy person could endure a transfer penalty without adverse effects if the person could remain independent from a nursing home throughout the duration of the transfer penalty. Medicaid law changed on November 1, 2009, by expanding the look-back period of five years and delaying the start of the transfer penalty period until spends resources down to $2,000 and requires nursing home care or nursing home level of care. For these reasons, risks of the life estate and remainder interest strategy often outweigh the benefits and I usually discourage clients from using it.

3.2.4. Is it true that I can give $10,000 per year to each of my family members?

This question illustrates the persistent power of estate planning mythology in coffee shops and beauty salons across the country. Analysis of the origin and best responses to the question is as follows:

3.2.4.1. The origin of the $10,000 value is the former value of the annual gift tax exclusion that is defined in the definitions of this outline (now escalated by inflation adjustments to $14,000). As explained in the discussion of the gift tax and the annual gift tax exclusion in the definitions, a person should really only be worried about the value of annual gifts to each beneficiary if the person’s wealth approximates or exceeds $5.34 million or the inflation-adjusted future value of the estate and gift tax exemption. Therefore, if the person is worried about the gift tax consequences of such gifts, such worries are unfounded unless the person is a multimillionaire with asset values near or above$5.34 million.

3.2.4.2. People often misunderstand that the present annual gift tax exclusion amounts or one of its predecessor values has some relationship to Medicaid

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law. The only annual gift value that appears in Indiana Medicaid law is the $1,200 de minimis gift value. Under that rule, a person can give a total value of up to $1,200 worth of gift to all transferees each year without suffering a transfer penalty. It is important to note that the de minimis gift value applies to the total value of all gifts – not the value of each gift to each beneficiary. For example, if a person gives $1,200 to each of two beneficiaries, the first $1,200 will be exempt under the de minimis gift rule, but the second $1,200 will trigger a transfer penalty. If an elderly person is thinking about the Medicaid consequences of a gift, the person may want to reconsider whether to make a gift. It may be better for the person to keep very detailed records of all gifts and make sure that the total value of all gifts does not exceed $1,200 per year.

3.2.5. What can I do to make sure that my disabled [or irresponsible] beneficiary does not lose the inheritance?

I placed this question under asset transfer issues because the answer could go several directions.

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3.2.5.1. A person with a substantial amount of money could set up a third-party special needs trust in a will or revocable trust so that a future trustee could manage assets for a disabled beneficiary without disqualifying the beneficiary from critically important public benefits like SSI and Medicaid.

3.2.5.2. A person with more modest means could provide for a disabled beneficiary’s inheritance to pass by will, trust, or nonprobate transfer to a recognized pooled income trust such as the ARC of Indiana trusts. The ARC trusts have special federal approval to hold and administer funds for disabled Medicaid beneficiaries without interfering with the beneficiaries’ Medicaid eligibility. ARC trustees have training and experience to use trust assets to supplement a disabled beneficiary’s quality of life in a Medicaid-compliant manner. The ARC trusts also qualify as charitable beneficiaries for purposes of tax-deductible gifts from a disabled beneficiary’s friends and family.

3.2.5.3. A person can establish a third-party discretionary trust for a will or revocable trust for an irresponsible beneficiary to prevent the beneficiary or the beneficiary’s creditors from squandering or garnishing the trust assets. One of the biggest practical problems of such trust is that irresponsible beneficiaries tend to be very needy and demanding to the great consternation of trustees. Also, the value of the trust assets would need to be somewhat substantial to justify the time and expense required to establish and administer the trust. Ultimately, the person needs to decide the degree to which it is reasonable to micromanage a beneficiary’s inheritance from the grave. Sometimes the best advice is that that kind of micromanagement is not worth the battle.

3.3. Trust questions.

3.3.1. Is it true that if I make a living trust the government cannot get my money?

This question presumes that the government wants to get the person’s money and asks whether a living trust can forgo the government’s intentions. The federal state County or local government agency may want to collect tax revenue or acquire property for public use under eminent domain, but there are a few other circumstances in which the government would want to have someone’s property.

A “living trust” is a common term for a revocable trust that appoints the creator to serve as the original trustee and reserves in the trust’s creator complete authority to revoke or modify the trust. Generally speaking, if a creditor can force a person to pay money or sell assets to satisfy the debt, the same creditor can force the trustee of a person’s revocable trust to satisfy the debt in the same manner. Therefore, the strategy described in the question will fail.

If the question relates to whether the government could take a person’s property if the person goes to a nursing home, the question’s premise misstates the government’s relationship to nursing home residents. For the most part, no government agency is

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involved in a nursing home resident’s business unless the resident applies for Medicaid. In that case, the government will usually not try to take the person’s property, but the value of a person’s property may exceed the person’s resource allowance and, therefore, disqualify the person for Medicaid eligibility. However, if a person qualifies for Medicaid because the person has income-producing real estate, the state can open a probate estate and file a claim against the estate to recover reimbursement for Medicaid benefits paid out on the decedent’s behalf. A revocable trust may blunt the state’s ability to collect against the real estate for Medicaid reimbursement purposes because it would require the state to collect under the time-sensitive and procedurally demanding provisions for liability of nonprobate transferees for creditor claims and statutory allowances under Indiana Code Chapter 32-17-13. A transfer on death deed can have the same effect as a revocable trust on the state’s ability to collect against the real estate for Medicaid reimbursement purposes.

3.3.2. Is it true that I can save taxes by making a living trust?

The answer to this question is almost a resounding “no!” For most people, there are no taxes that would impose a burden on a person other than property taxes and capital gains taxes. The $5.34 million exemption from federal gift taxes and estate taxes eliminates those taxes as threats for most people. However, for those people with wealth close to or above $5.3 million, some trust language can help minimize taxes for married people, regardless of whether the language appears in a couple’s wills or separate revocable trusts.

3.4. Guardianship and power of attorney questions.

3.4.1. Can my power of attorney put me in a nursing home?

Part of this question gives me an eye twitch because it refers to the person whose title is “attorney-in-fact” with the power of attorney document under which the principal has appointed the attorney-in-fact. Ocular spasms notwithstanding, the question expresses a very rational fear about being admitted to a nursing home involuntarily. Although a person can terminate a power of attorney, a malevolent attorney-in-fact could use the power of attorney to dominate and control an aged and physically weak principal abusively. The principal’s beneficiaries could recover ill-gotten assets from an abusive attorney-in-fact with claims of undue influence, but that would not comfort the principal during the abuse. Therefore, it is important to only appoint people as attorneys-in-fact if they have sound integrity and the capability of managing the responsibility prudently. We often like to avoid the need for guardianship, but abuse and unethical attorney-in-fact or mismanagement by an incompetent attorney-in-fact cannot be better than the burden of a guardianship.

3.4.2. Can I get a power of attorney to take care of my demented family member in the nursing home?

A principal cannot grant a power of attorney unless the principal has sufficient mental capacity to understand the nature, consequences, and appropriateness of the power of

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attorney. If a person is so demented that they require nursing home care, they probably lack adequate mental capacity to make a power of attorney. These cases sometimes run deep in gray area, but the only way to manage the business of an incapacitated person if the person has not granted a power of attorney before the onset of the incapacitating condition is to petition the court for guardianship. Part of the preparation for a guardianship is to seek written physician opinions of the subject person’s mental capacity. If the physician is willing to say that the person is not disabled, it may be possible for a person to make a power of attorney. Otherwise, the physician’s opinion will be good evidence of sufficient incapacitation to justify the appointment of a guardian. If the attorney believes that there is any reason to expect conflict within the person’s family, it may be worthwhile to seek a mental health opinion from a qualified neurologist so that the quality of the opinion will be more likely to survive scrutiny in litigation.

3.4.3. I am my family member’s guardian, so…?

I left the point of this question unresolved because it is premise signals misinformation. Usually, a guardian is represented by counsel and the guardian would ask such a question of the guardian’s attorney. If the “guardian” is asking you this question, you should question whether the person is really a guardian. More likely than not, the person is a caregiver that has not been appointed by a court to serve as guardian. The person may also be an attorney-in-fact or an appointed healthcare representative. It is important to pin down the basis of the person’s authority before trying to answer the person’s question. If the person is a guardian, then questions about such things as fees paid to the guardian or the guardian’s attorney, transfer of assets, or sale of assets must be proposed in a petition to the court having jurisdiction over the guardianship before the Guardian can engage in the proposed actions. If the person is neither a guardian, nor an attorney-in-fact under a general power of attorney, then the person probably cannot do anything without such authority. If the person is a healthcare representative or a healthcare attorney-in-fact, then the person can make healthcare decisions within the scope of the appointment, but the person cannot make financial or other business decisions without additional authority.

3.4.4. Will I be liable for my family member’s debts if I serve as guardian or attorney-in-fact?

Generally, a person’s fiduciary is not liable for the principal’s debts and legal obligations. However if the fiduciary creates the debts or legal obligations without making adequate provision for satisfaction of the debt to legal obligations, the fiduciary may be liable to the extent of the unsatisfied debts and legal obligations. Therefore, it is important for a guardian or attorney-in-fact to be careful about fiduciary actions that create debts or legal obligations.

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3.5. Advance directive questions.

3.5.1. Can I change my living will?

If this person is actually referring to a living will, as that term is defined in the Indiana Code, the person may certainly change the person’s living will. However, you should ask some questions to find out whether the person is actually talking about a “living will,” a “living trust,” a “life estate,” or a “last will and testament.” The person could also change the person’s living trust or a last will and testament, but a person cannot change a life estate if the person has conveyed a remainder interest and reserved a life estate because the remainder interest conveyance is irrevocable.

3.5.2. What can I do to make sure that I do not end up as a vegetable?

This question expresses a common fear that someone will and life in the stereo typical vegetative state. Indiana and many other states established living wills over the past forty years to address this concern, but for reasons described in the definition of a living will in this outline, living wills have failed to deliver on their promises. If a person has a terminal or cognitively degenerative condition, the person may be able to make a physician orders for scope of treatment document with the person’s doctor. Otherwise, the person may want to appoint a healthcare representative or healthcare attorney-in-fact to make those decisions if the person becomes incapacitated. It is a good idea for the person to think about the kinds of functions that the person would want to be able to carry out as minimum standards of a desirable quality of life and communicate those standards to the person’s healthcare decision makers clearly enough that the decision-makers will understand how to act in such a healthcare crisis. No one is officially omniscient to anticipate every situation perfectly, and euthanasia is illegal in Indiana, so we all risk potentially undesirable end-of-life circumstances.

3.5.3. What can I do to make sure that no one can pull the plug on me?

Indiana has a statutorily prescribed document called a Life-Prolonging Procedures Will Declaration in Indiana Code § 16-36-4-11 that is the polar opposite of a living will. A Life-Prolonging Procedures Will Declaration specifies the use of all life-prolonging procedures that would extend the person’s life. This author has only seen one client request that document in the past two decades.

3.6. Questions about unmarried, cohabiting domestic partners.

3.6.1. How can my partner and I share assets and make sure that the surviving partner gets everything?

This question used to create problems under the Indiana inheritance tax because unmarried domestic partners were treated as Class C transferees under the inheritance tax and were subjected to a 10% tax rate with only a $100 exemption. Few people keep records of asset acquisition, and so it was difficult to prove the surviving partners financial contribution to the asset ownership and avoid taxation of the entire asset value. The Indiana inheritance tax repeal in 2013 eliminated all of these issues. Therefore,

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cohabiting partners can make wills, trusts, and nonprobate transfers to accomplish this goal just like the provisions that everyone else can make.

3.6.2. How can I make sure that my partner can manage things for me if I become disabled?

This is an extremely important issue. Although the Indiana Healthcare Consent Act authorizes a person’s parents, spouse, adult siblings, and adult children to make healthcare decisions if the person is incapacitated, the act provides no relief for unmarried people to make those kinds of decisions for each other. Likewise, family members have prioritized standing above the incapacitated persons unmarried domestic partner to petition for guardianship of an incapacitated person. Therefore, the couple should make a comprehensive estate plan with wills, powers of attorney, and either appointment of healthcare representatives or healthcare powers of attorney to empower each other to take care of the other upon death and through health crises.

4. Conclusion.

It is impossible to anticipate all the questions that callers may pose during the talk to a lawyer program. As in most areas of the law, it is best for lawyer to admit ignorance and refrain from guessing about the answer to a question. Hopefully, each volunteer will have time in the presence of mind to consult this outline and find a thoughtful answer that this outline suggests or supports. I congratulate and thank each volunteer for undertaking this important public service project.

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