PLANNING FOR WEALTH AND SECURITY

By attorneys Jennifer and Jeff Hawkins

YOUR LAST WILL AND TESTAMENT MAY NOT HAVE THE LAST WORD AND YOUR LIVING TRUST MAY KILL YOUR ESTATE

Planning for death unnerves some people so much that they never reconsider their plans. They rest assured that their wills or trusts will never change and their estates will pass to their families according to their plans. Unfortunately, the legal and social environments change so much that 5 year old wills and trusts may be obsolete. Everyone needs an estate plan checkup periodically.

CARRIAGES, MOTELS & LIVING TRUSTS

What happened to carriage makers when Henry Ford introduced affordable cars? Studebaker learned to build cars, but automobiles drove (pun intended) many carriage makers out of business. Why are there so many dilapidated or abandoned motels on U.S. 40 between Terre Haute and Indianapolis? Interstate 70 rerouted highway traffic several miles to the south and robbed the motel operators of their guests. Could this kind of shift ruin your wills and revocable trusts (often called “living trusts”)? Yes!

SECOND MARRIAGE

Divorce and remarriage splices 2 families into 1 family. If an attorney doesn’t set up a premarital agreement before you walk down the aisle again, your new marriage may destroy your old estate plan. Indiana entitles the surviving spouse of a second marriage to a share of land and money, plus $25,000 of personal property or money, even if your will leaves everything to your children. If you share bank accounts, investments, or real estate with your groom or bride, your widow or widower could take your children’s inheritance and leave them with an unpaid funeral bill. A surviving spouse may claim $25,000 from an estate, living trust or joint bank account owned with a child, even if a will or trust excludes the surviving spouse.

DEATH TAX

Hordes of farmers and business owners planned their estates to avoid death tax in 1982 because the federal estate tax credit only protected $225,000 of wealth and the top tax rate was 70%. The estate tax credit protection rose to $625,000 in 1998 and the top tax rate fell to 50%. Today, the estate tax credit protects up to $1,000,000 and the top tax rate has dropped to 49%. Next January, the estate tax credit protection will jump to $1,500,000 and the top tax rate will slide to 48%. Estate tax avoidance plans restrict wealth management to reduce the estate tax. If you own less than $1,000,000 of wealth now, your estate tax avoidance plan may cramp your style needlessly.

NURSING HOME

Nursing home care costs between $40,000 and $50,000 annually in our community nowadays. Old laws permitted people to protect wealth from those costs with living trusts. A living trust will no longer save a dime of wealth if you or your spouse enters a nursing home. If anyone tells you something different about living trusts, they are either ignorant of the law or they want to steal your money! Period!

A new law lets married couples protect wealth with special kinds of wills. If, for example, a stroke or other disability lands the husband in a nursing home, the wife’s will can shift the family wealth into a testamentary trust that provides benefits for the disabled husband’s lifetime, and distributes the wealth to the children after their father’s death. Couples may still have living trusts, but the wills should be rewritten to make this kind of plan possible.

GET AN ESTATE PLAN CHECKUP

This article only contains samples of the factors that may disrupt your estate plan. Only an estate and trust lawyer with elder law experience can spot the full array of issues amidst these tumultuous changes. If you want your plan to achieve your goals, you must take your plan to a lawyer periodically for a checkup.

THIS ARTICLE IS NOT LEGAL ADVICE. ALWAYS CONSULT AN ATTORNEY DIRECTLY BEFORE RELYING UPON THIS ARTICLE OR CHANGING AN ESTATE PLAN.

© HAWKINS & HAWKINS LLC 2003. All rights reserved. For further information, readers may call the authors at 812-268-8777, or 812-847-7000. Previous editions of this column are archived on the Internet at www.hawkinslaw.com.