January 2010 "Indiana’s 2010 Estate, Trust, and Guardianship Legislation"

PLANNING FOR WEALTH & SECURITY
By attorneys Jennifer and Jeff Hawkins

Indiana’s 2010 Estate, Trust, and Guardianship Legislation

Jeff Hawkins chairs the Indiana State Bar Association’s Probate, Trust, and Real Property Section (the "PTRP") in 2010. The PTRP frequently evaluates laws affecting Indiana estate, trust, and guardianship administration, proposes new legislation to promote flexibility in the law, and comments on legislation proposed by others that may require correction or coordination with existing law.

The 2010 Indiana legislative session will begin in a few days under monumental pressure to solve Indiana government’s worsening budget crisis. In the midst of that crisis, PTRP is asking the legislature to simplify some laws and provide protection and flexibility for families to manage their affairs with more dignity and independence.

The PTRP has asked the legislature to raise death tax exemptions many times with only limited success, but the PTRP is once again proposing that the death tax exemptions for in-laws, nieces, and nephews of deceased persons to be increased. Currently, a niece, nephew, or a surviving spouse of a deceased child will only have a $500 exemption against the inheritance tax and the tax rate will begin at 7% of whatever that person inherits over the $500 exemption. Worse yet, a less closely related person or mere friend will only receive an exemption of $100 and the tax rate will begin at 10% of whatever that person inherits over the $100 exemption.

A $100 or $500 exemption will not exempt very many assets in this economy and even the simplest family heirloom can sometimes trigger a tax that requires a complicated inheritance tax return. An inheritance tax return that may cost thousands of dollars of attorney fees to prepare is required in some cases even though the actual tax that is owed may be less than $100. The PTRP's proposal to increase the death tax exemptions for class B and class C beneficiaries from $500 and $100 to $50,000 and $20,000, respectively, should eliminate some costly tax return preparation and wasteful bureaucratic procedures for smaller estates that generate very little tax revenue for the state.

The PTRP is also proposing to empower probate court judges with more flexibility to manage an incapacitated person’s assets in a guardianship. The Indiana Supreme Court decided a couple of years ago that the guardianship statute restricts a probate court judge’s authority very tightly. The PTRP has proposed that the legislature expand a probate court’s authority to make common sense decisions for an incapacitated person so that a guardian may serve the person and the person's family more effectively.

The Indiana laws that protect a married couple's home from creditor claims if the man or the woman encounters unavoidable indebtedness do not apply to couples that plan their estates with trusts. Jeff Hawkins wrote language that the PTRP has proposed to the legislature to extend that marital asset protection to a married couple’s revocable trusts so the couple is not penalized for engaging in savvy trust planning.

The PTRP has proposed several other pieces of legislation that range from allowing people to set up long-term trusts for multiple generations to revising some of the laws that the legislature passed last year that require some technical corrections and adjustments. The PTRP plans to communicate regularly with the legislature throughout the session to explain the laws that it has studied and help ensure that Hoosiers receive the best legislative results.