Q: What is estate planning?

A: Estate planning is the process of legally structuring the future distribution of current and projected assets. You are not required to have an estate plan, but having one will ensure that your wishes are carried out following your death. If you die intestate (without a will), the laws of Indiana will determine who receives your property which may or may not reflect your actual wishes.

Q: When should I start my estate plan?

A: It’s never too early to start, regardless of net worth or family status. The sooner you implement your wishes, the less chance there is of family disharmony after you are gone and the greater the chance that you provide for the individuals you wish to continue to support to after you are gone.

Q: How often should I review my estate plan?

A: Every two to four years, you should look over your plan to see if you need to revise that plan due to significant life events, tax law changes, or the addition of family members. You can make changes to your estate plan any time, as long as you are competent to do so.

Q: What is the difference between a will and a trust?

A: Both are useful estate planning devices, but they serve different purposes. One of the main differences between the two is that a will only goes into effect after you die, while a trust is effective as soon as you create it. Your will states how your property is to be distributed upon your death, is subject to probate, and names a personal representative who is to carry out your wishes. A trust can be used to distribute property before death, at death, or after death, and may not be subject to probate.

Q: What is a general power of attorney?

A: A general power of attorney gives one or more persons the power to act on your behalf in regard to your finances and your other assets, if you are unable to do so. The power of attorney may give temporary or permanent authority to act on your behalf and can take effect immediately or in the event of a certain circumstance. One important reason to use a general power of attorney is to prepare for situations when you may not be able to act on your own behalf due to absence or incapacity.

Q: What happens if you do not have a general power of attorney but are unable to handle your own affairs?

A: It may be necessary for a court to deem you incapacitated and appoint a guardian to act on your behalf. There is greater expense and time involved in obtaining a guardianship than there is in executing a general power of attorney.

Q: Does a power of attorney supersede a guardianship?

A: Yes. If you have executed a power of attorney and a guardianship is established for you, the power of attorney supersedes the guardianship.

Q: Is a general power of attorney still effective after your death?

A: No, the general power of attorney ceases at your death and the attorney-in-fact no longer has authority to act.

Q: What is a health care power of attorney?

A: A health care power of attorney is specifically designed to grant access to your medical information and hold the power to make decisions concerning your medical treatment. A health care power of attorney allows you to appoint one or more persons to make health care related decisions on your behalf if you are unable to do so.

Q: What is probate?

A: Probate is the legal process that takes place after someone dies. Probate gives someone the authority to gather the decedent’s probate assets, pay debts and taxes, and eventually transfer assets to the people who inherit them.

Q: When is probate necessary?

A: Only assets that a decedent owned in his or her own name, exceeding a total of $50,000, need to go through probate. All other assets (such as jointly titled assets or beneficiary designated assets) pass to new owners without oversight from the probate court.

Q: How long does the probate process last?

A: The probate process can take anywhere from six months up to one year or more, depending on the situation.

Q: Is there an alternative to probate?

A: Yes! If the total probate estate is worth less than $50,000, a simple affidavit can be prepared for someone receiving property from the decedent. That affidavit is then provided to the holding institution (a bank, for example), and the institution will turn over the property. A contingency to this process is that the property is not able to be turned over for 45 days (or 5 days if it is for the transfer of a vehicle) following the decedent’s date of death.

Q: Will there be death taxes due as a result of my death?

A: The Indiana state inheritance tax was repealed for deaths on or after January 1, 2013, which means that no inheritance tax will be assessed by the State of Indiana as long as the decedent died on or after January 1, 2013.

The current federal estate tax exemption is $5.45 million; this will increase to $5.49 million as of January 1, 2017. Unless the value of your assets is greater than that amount, your estate is not taxable. Beginning in January 2011, estates of decedents survived by a spouse may elect to pass any of the decedent’s unused exemption to the surviving spouse, essentially allowing married couples to give away during life or transfer at death almost $11 million worth of assets without owing tax.
State and federal tax laws are always changing, so there is a chance that these laws could be changed or modified in the future.

Q: When does a gift become subject to the federal gift tax?

A: Currently, a gift totaling more than $14,000 to one person in one year is considered a taxable gift and may generate potential gift tax. Although you may not immediately owe gift tax upon making a gift, a gift totaling more than $14,000 still requires the preparation and filing of a federal gift tax return.

Q: When should I plan for my long-term care needs?

A: If you are planning on purchasing long-term care insurance (LTCI), the prime age to do so is around 55 (in order to receive premium rates). There are various types of LTCI offering differet levels of protection for you and for your assets. You should weigh your options carefully, and be sure to ask about the benefits of Indiana Parnership Plans.

If you are preparing for eventual government assistance - typically through the VA or Medicaid - then the answer depends on the source of the assistance. Eligibility for Aid and Attendance through the VA can be obtained quickly, but requires that the recipient (and his or her spouse, if applicable) have less than $80,000 in assets, including vehicles, real estate, investments, bank accounts, etc., regardless of whether they are owned by the applicant or the applicant's spouse. It is possible to protect your assets and still receive VA benefits with careful planning.

If you are planning with the goal of eventually becoming eligible for Medicaid, then the best time to plan is at least 5 years before you believe you will need ongoing care. Since predicting that date is difficult, you should consider factors such as your personal health, your family's health history, how much control you need over your assets, your personal finances, and how soon you or your loved one will need traditional Medicaid or Medicaid waiver services.

Q: What is Medicaid for the aging?

A: Medicaid is a jointly funded, Federal-State health care program for persons who are financially eligible. Medicaid provides financial resources for medical needs, rehabilitation, and long-term care both at home and in nursing homes.

Q: Do I qualify for Medicaid?

A: To qualify for Medicaid in the State of Indiana, you must be a resident of Indiana, a U.S. Citizen, age 65 or older, (or blind or disabled) and meet certain medical requirements consistent with the level of care requested. Additionally, there are strict income and resource guidelines with which you must comply. If the applicant has gross income in excess of the income limit, a Qualified Income Trust (often called a Miller Trust) must be established before the applicant will be eligible for Medicaid. The cap on personal resources of the applicant is strictly enforced.

Q: Do I have to spend all my money on healthcare to be eligible for Medicaid?

A: No. While the party applying for Medicaid cannot have more than $2,000 in his or her name, proper planning will enable him or her to protect assets for ongoing care, as well as for future distribution to loved ones.

Q: Should I just give everything away?

A: Maybe, if you do not expect to need long-term care for at least five years. Medicaid has the right to look at your transfers for the last 60 months. A transfer occurs any time a valuable asset (real estate, money, investments, vehicles, insurance policies, etc.) has been given to another party for less than fair market value. Giving away your assets can cause a penalty, resulting in a self-pay period with your long-term care provider. It is possible to plan around a penalty, and sometimes a penalty may become part of the Medicaid application plan.

Additionally, what makes sense for your estate plan and taxes may not make sense for Medicaid eligibility. Tax law allows for as many gifts of $14,000 per person (as of 2016) as an individual may wish to make in any given year. Medicaid only allows for $1,200 (in total, not multiple gifts of $1,200) to be gifted in any given year.

Q: Can I use a revocable trust or a living trust to prepare for Medicaid?

A: No. A revocable trust is a good tool for estate planning, but because the trust can be changed by the settlor, Medicaid treats the assets of a revocable trust as though they are still owned by the settlor.

Q: Do I need to be in a nursing home to receive Medicaid benefits?

A: No. There are several forms of medicaid, and while some require beneficiaries to be living in a nursing home, it is possible to receive Medicaid for the Aged, Blind, or Disabled while living at home, in an assisted living facility, or in a nursing home.

Q: Does Medicaid for the aging have a time limit?

A: No, Medicaid will pay for long-term care in a nursing home for as long as an individual qualifies for the care, even it if this means several years of care.

Q: Can a beneficiary be added to your real estate?

A: Yes, a beneficiary can be added by preparing a Transfer on Death Deed. This allows you to designate a beneficiary to receive your property at your death. This transfer can be changed or revoked anytime during life, and the real estate does not transfer until death. A Transfer on Death Deed also allows you to avoid the probate process.

Q: When should I contact my attorney if I want to do a 1031 exchange?

A: You should discuss your wishes with your attorney before you sign an agreement to sell your property.

Q: Why do a 1031 exchange?

A: 1031 exchanges offer the opportunity to defer or gain taxes recognized on the sale of property.

Q: What is like-kind property?

A: The Internal Revenue Code Section 1031 states that “no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.” Like-kind property can include an exchange of real estate for real estate (Single Family Rentals, Duplexes, Apartments, Commercial Properties, Farm Ground), equipment for equipment, and cattle for cattle.

Q: When is a 1031 exchange applicable?

A: It is applicable whenever a property owner intends to sell any property that is not his or her primary residence (and falls under the definition of like-kind property) and plans to buy another like-kind property within 180 calendar days following the closing of the property sold.

Q: Can there be more than one propert in a 1031 exchange?

A: Yes, there are no limits on the number of relinquished properties that can be included in the same 1031 exchange.

Q: What is a reverse 1031 exchange?

A: A reverse exchange occurs when the new property, intended to replace the current property, is purchased before the current property is sold.

Q: How is a Limited Liability Company (LLC) formed and maintained?

A: An LLC is formed by one or more individuals, as owners. The owners, called “Members”, file Articles of Organization and enter into an Operating Agreement. An LLC must file a biennial report with the Indiana Secretary of State.

Q: How is a Corporation formed and maintained?

A: A Corporation is a separate legal entity. It is formed by filing corporate organization forms and by designating shareholders, each with a specific number of shares. The Corporation also creates a Board of Directors and Officers to oversee the corporate business. Corporations must file tax returns and maintain business bank accounts and records that are separate from personal accounts. Shareholder meeting minutes, board of director meeting minutes, and other corporate records are also necessary.

Q: How is an LLC taxed?

A: Generally, an LLC may choose to have its income taxed as if it were a partnership or a corporation.

Q: How is a Corporation taxed?

A: A corporation may choose to have its income taxed at the Corporation level or at the Shareholder level.

Q: What are the advantages of forming an LLC?

A: The following are key advantages of forming an LLC:

Asset Protection: LLC’s provide limited liability protection to their members, who are not typically personally liable for the business debts and liabilities of the LLC. Creditors of the LLC cannot typically pursue the personal assets (house, savings account, etc.) of the members to pay business debts.

Flexible structure: LLC’s are free to establish any organizational structure agreed upon by the members. LLC’s can be managed by the members or by managers.

Flexibility: An LLC has a flexible management structure. The flexibility evolves from the statute's phrase “unless otherwise provided in the operating agreement”. This allows business owners to create a structure tailored to business owner’s requirements by entering into an Operating Agreement.