An estate plan provides the answers to three questions:
- If you become unable to take care of yourself and to make your own decisions, who will do it for you?
- If you have children, and they are left without parents, who will raise them?
- Who will receive your property after you die?
Surprisingly, many careful, well organized people have not created an estate plan. Nonetheless, they have estate plans. Everyone does. If you have not created a plan for yourself, your plan consists of relevant sections of the Indiana Code, primarily in Title 29 (Probate), Title 31 (Family and Juvenile Law), and Title 32 (Property). Not surprisingly, such a default "plan" is likely to be suboptimal, to say the least.
Here are some characteristics of a good estate plan.
A good plan will designate someone you trust to make decisions for you if you cannot make them yourself. If you are married, that person will likely be your spouse, but a good estate plan will also provide for an alternate in case your spouse predeceases you or is otherwise unable to make decisions for you. That person should understand your values and should be familiar with your desires for medical care in the event you become terminally ill with no hope of recovery.
If you have minor children, a good estate plan plan will nominate someone you trust to raise them if they are left with no parents. Again, a good plan will provide for an alternate in case your first choice predeceases you or otherwise cannot take over your job of parenting your children. Selecting someone to raise your children is intensely personal, sometimes fraught with conflicting considerations, and should be revisited when relevant circumstances change.
A good estate plan will include a formula or mechanism for using or transferring your assets after your death. The plan should accommodate contingencies, such as the possibility that one or more of your heirs predeceases you. In simple circumstances, all that's required is a plan for trasferring assets directly to the people you want to have them, but if you have minor children, your plan will almost certainly involve a trust (either ap living trust or a testamentary trust) that provides for the health, education, maintenance, and support of your children until they reach a specified age, or a specified event occurs, triggering a final distribution of the remaining trust assets to your heirs.
A good estate plan will minimize the burden on those you leave behind. The probate process can be expensive and time-consuming, but perhaps more importantly it can impose a burden on your survivors and increase the amount of stress they experience. Transferring property outside the probate process can mitigate that burden and stress.
A good estate plan will preserve the value of your estate by reducing taxes. The issue of estate taxes is no longer as important as it used to be, at least for most people. The Indiana death tax has been repealed, and the exclusion from Federal estate tax has been increased to more than $5 million (in some circumstances, $10,000 for a married couple). As a result, far fewer estates are taxable, enabling people who are creating estate plans to focus more on the basics -- how the assets are used and distributed to heirs -- and less on more complicate strategies for reducing estate tax.