You have probably seen ads in the newspaper for living trusts. One of the reasons given is they avoid the need for probate and thus save the attorney fees and costs of probate. The fact is there are other, less costly, alternatives available to you in Indiana.

Inexpensive Options To Probate

Some of you do not know what probate is, and to understand the alternatives we must start there. Probate is the opening of an estate to collect the deceased person’s assets, pay that person’s bills and to divide the remainder among the heirs. It involves the preparation and filing of a petition and other papers with the appropriate court. If there is a Will, it is submitted with the petition. A person is appointed by the court to administer the estate in accordance with the directions of the Will that dictate who the beneficiaries are and what they are to receive. If there is no Will, the beneficiaries are identified by the intestate succession laws, which first provide for a surviving spouse and children. If none exist, others such as parents and siblings are next in line. Estates rarely include all of the assets. The estate only includes the assets that do not pass to someone else upon your death by reason of a beneficiary designation, title/ownership, or another means.

Many of you have life insurance. Unless you name your estate as the policy beneficiary, the life insurance is not an asset of your estate. The benefits will pass to the persons that you designate as the beneficiaries and in the amounts designated. Your beneficiaries after your death submit a claim with the life insurance company and are paid the proceeds of the policy. Beneficiary designations are also used on retirement accounts and annuities.

The manner in which you title some assets also determines if those assets are part of your estate. If you are married and own a home or other real estate that property is usually titled in both names as husband and wife. Upon your death, your spouse becomes the sole owner by recording an Affidavit of Survivorship. The property is not an estate asset. No probate is required. Cars, boats, bank accounts are other items that are usually titled. If that title has another person listed with you as the owner, the survivor is entitled to the asset and may claim it without probate. To do so, the survivor may need to file an affidavit, or complete forms at the bank. These assets are not part of your probate estate.

For many years Indiana has also authorized TOD (Transfer on Death) or similar designations that allow you during your lifetime to identify who you want to get the asset upon your death. That person has no ownership or right to the asset until your death. These designations are easily changed if you have a change of mind and they do not affect your right to sell the asset or use the asset during your lifetime. Assets with a TOD or similar designation are not probate assets.

In 2009 Indiana enacted laws that expanded your ability to designate who gets what upon your death without the costs of probate. You can now use a Transfer on Death Deed (TODD) for any real estate you may own. A TODD is a deed in which you state that upon your death the person or persons you name are to receive the property. It must satisfy the usual requirements of a deed and it must be properly recorded during your lifetime to be effective upon your death. You retain sole ownership while alive. You can sell the property, lease it or mortgage it without interference from those who are named in the TODD. You can also change who the recipients are by recording another, superceding TODD, if you change your mind. Like TOD designations, the TODD avoids the need for probate proceedings. The recipients only need to record an Affidavit of Survivorship to establish ownership after your death.

In 2009 the Indiana legislature also enacted a companion to the TODD that applies to all other tangible personal property. It requires a deed of gift, bill of sale or other writing intended to transfer the asset to a beneficiary upon your death. The document must clearly state the transfer to the beneficiary is to be upon your death. It must satisfy the legal requirements for transferring the asset during your life, it must be signed by you, and it must be notarized. Basically you can use this to cover all of your other assets and thereby avoid probate altogether.

These alternatives to probate proceedings are not suited for everyone. About 1% of the population have assets worth in excess of five million dollars and may be subject to federal estate taxes (Indiana has no inheritance tax). This fortunate group will usually benefit by complicated and expensive tax avoidance planning.

Some of you may have children who are still minors or have special needs and may benefit from using trusts and other more complicated alternatives to name someone to manage your assets to provide funds for those children. However, most of you can use the alternatives to probate that are mentioned in this article.

You will save money and maintain all of your rights to the assets during your lifetime. If you do so you should still have a Will that should cover anything that might fall through a crack. This provides you with a safety net that only involves probate proceedings if the crack is too large because there is still one other probate avoidance tool. If those assets have a value of less than $50,000, they can be collected by your heirs by using an affidavit. So, who needs probate? Only a few do if you utilize the tools that are mentioned in this article.

For more information on options to probate,  give our Indianapolis law firm a call and we can help you with your situation