CURRENT ISSUES IN THE AREAS OF ESTATE, TAX
AND PERSONAL AND BUSINESS PLANNING
The information that follows summarizes some of the current issues in the areas of estate, tax and personal and business planning which may be of interest to you. Although this information is accurate and authoritative, it is general in nature and not intended to constitute specific professional advice. For professional advice or more specific information, please contact my office.
37th Annual Judge Robert H. Staton Indiana Law Update. I will be speaking at the 37th Annual Judge Robert H. Staton Indiana Law Update at the Indiana Convention Center on September 10, 2015, concerning elder law developments. Among the topics that I will cover will be the ABLE Act for which information was included in our August 2015 newsletter, Indiana’s enlargement of the Long Term Care Partnership Program protection, proposed changes to the VA pension rules, a recent Indiana case concerning the unauthorized practice of law, a Florida Supreme Court advisory opinion barring non-lawyers from engaging in Medicaid planning, and a possible change in the legal position of the Family and Social Services Administration regarding transfers to a surviving spouse’s testamentary special needs trust and the impact that such an arrangement can have on the surviving spouse’s Medicaid eligibility. The Indiana Law Update is an annual program addressing changes in the law in numerous legal areas. This will be the third year that I have addressed elder law developments. My presentation materials, or at least a substantial part of them, will be available on my website for review very shortly after the program takes place.
Recent Indiana Statutory Changes. Among the numerous changes in Indiana law which became effective July 1, 2015, are the following:
Section 18 of Senate Enrolled Act 355 (SEA 355) adds “health care” to the powers that can be delegated by parents or guardians. I.C. 29-3-9-1 allows a parent of a minor or a guardian (other than temporary guardian) of a protected person to delegate to another person for a period not exceeding 12 months certain powers relating to support, custody and property of the minor or the protected person. Health care is now included as one of the powers that can be delegated.
Section 20 of SEA 355 allows entities to be a health care representative appointee under I.C. 16-36-1. Prior to this change, only an individual could be named to consent to or refuse health care for the person granting the health care powers.
Section 21 of SEA 355 adds a new section, I.C. 30-5-6-4.1, which allows a past or present attorney-in-fact to provide an accounting and then to seek judicial approval of the accounting, cutting off later objections. Notice of the hearing must be given to the persons who are listed in the statute with time to object. The attorney-in-fact is protected from further liability except when (1) notice is not given, (2) the accounting is inadequate, or (3) a misrepresentation occurs. If this procedure is not used, then under a new section, I.C. 30-5-6-4.2, actions against the attorney-in-fact for matters pertaining to the accounting are limited to two years after the receipt of an accounting, but the limitation does not apply to claims based on fraud, misrepresentation or inadequate disclosure.
Section 19 of SEA 355 adds a new section to the Indiana Trust Code, I.C. 30-4-2.1-11.1, making it clear that a trust may incorporate by reference a document in existence at the time of the execution of the trust. The language is similar to that provided for incorporation by reference in wills under the Indiana Probate Code.
A Bad IRA Planning Idea. A common planning approach for people who do not think through the process is to name a person as beneficiary of an IRA, a 401k, or another qualified arrangement with the “understanding” or even the “promise” by the named beneficiary that he or she will designate certain other beneficiaries following his or her death for any of the remaining funds. For example, it is relatively common for a spouse to be named as a beneficiary, often when the spouse is a second or subsequent spouse with whom the plan participant did not have children, with the understanding that the second or subsequent spouse would then name the children as the surviving spouse’s beneficiaries. Many people take the same approach with life insurance. Often the idea is that the subsequent beneficiaries are younger, and rather than to establish a trust, the parties will rely on the first named beneficiary to see to it that proper arrangements are put in place following the death of the owner of the plan who designated the spouse or other first named beneficiary. Of course, there is no assurance that the first named beneficiary will in fact honor the promise, but even if the first named beneficairy’s intentions are honorable, many things can happen to frustrate the understanding of the parties and the contemplated plan. What happens if the first named beneficiary predeceases the owner or dies very shortly after the owner of the plan, or is incapacitated and must deal with long term care issues? What will happen if there are creditor claims? It must be remembered that the funds in the IRA or other qualified plan will be taxable when they are received by the first named beneficiary, and it may not make sense from a tax perspective for the first named beneficiary to receive the funds, pay the taxes, and then dole the funds out to the other beneficiaries. There are numerous other pitfalls to this type of an informal plan. Better approaches to the problem may be either simple or complex depending on the particular circumstances and the family dynamics. There is no substitute for proper planning and obtaining professional advice.
Additional Information. Future issues of this Newsletter will address other issues of current interest. Please contact my office with any questions that you might have.