ESTATE PLAN CHECKUPS - YOU PROBABLY NEED ONE

Planning for death unnerves some people so much that they never reconsider their plans or they avoid planning altogether. Many people assume (incorrectly) that their wills or trusts need no updates. Laws and family situations change enough that 5-year-old wills and trusts can be obsolete. Everyone needs an estate plan checkup periodically.

CARRIAGES, MOTELS & LIVING TRUSTS

When Henry Ford introduced the Model T, cars drove many carriage makers out of business (pun intended). You see several dilapidated or abandoned motels along U.S. 40 between Terre Haute and Indianapolis because Interstate 70 rerouted highway traffic several miles to the south and robbed the motel operators of their guests. This same this kind of shift can make wills and revocable trusts (often called "living trusts") worthless.

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. The surviving spouse of a deceased parent of children by a prior marriage gets $25,000, 25% of all real estate value, and 1/3 to 1/2 of everything else, regardless of the deceased person's will or trust. If you share bank accounts, investments, or real estate with your groom or bride, your widower or widow could take your children's inheritance and leave them with an unpaid funeral bill.

DEATH TAX

Modestly wealthy people planned their estates to avoid death tax in 1982 because the federal estate tax credit only protected $225,000 of wealth, the top tax rate was 70%, and the top Indiana inheritance tax exemption was only $10,000. The estate tax credit exemption rose to $625,000 in 1998, the top tax rate fell to 50%, and the top Indiana inheritance tax exemption rose to $100,000 in 1997. Today, the estate tax credit protects up to $5,430,000, the top estate tax rate has dropped to 40%, and the Indiana legislature repealed the Indiana inheritance tax in 2013. If your estate plan dealt with death taxes in the 1980s or 1990s, the plan is probably too burdensome for your family now.

NURSING HOME

The average Indiana nursing home stay cost less than $3,000 per month ($36,000 per year) in the 1990s, but the average was $5,733 per month ($68,796 per year) as of July 1, 2014. 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!

Married couples can protect some of their 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 estate planning issues. If you want your plan to achieve your goals, schedule a planning checkup with your estate planning lawyer.

Find more information about mediation, estate and business planning, wills, trusts, and Medicaid issues for nursing home residents at www.hawkinslaw.com, like our Facebook page, follow Jeff R. Hawkins on Twitter, or call us for an appointment at 812-268-8777.

Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers. Jeff is a Fellow of the American College of Trust and Estate Counsel and the 2014-15 Indiana State Bar Association President . © Copyright 2015 Hawkins Law PC. All rights reserved.