Death & Probate by: Kurt Bachman

I am asked by clients all the time the question: Do I need a Trust to avoid probate in Indiana? The simple answer is: No. The more accurate answer is: It depends.

Probate is the legal process by which a court of competent jurisdiction appoints an executor / administrator / or personal representative (synonymous terms often used interchangeably), to pay expenses of a decedent; and, to gather, collect, value, and transfer assets of a decedent to the next of kin or properly designated heirs. This process is public and can become cumbersome, lengthy, and expensive. Trusts are often used to legally avoid going through this process. However, setting up and completely funding Trusts can also be expensive and complicated in their own right. The good news is that Indiana statutes provide residents with the ability to avoid probate without utilizing a Trust by properly designating Payable on Death (P. O. D.) and Transfer on Death (T. O. D.) beneficiaries on all real and tangible or intangible personal property. P.O.D. beneficiary designations are typically used for liquid accounts (checking and savings), money market accounts, CDs, and other cash or cash equivalent assets. T. O. D. beneficiary designations are typically used for illiquid assets such as titles to boats, cars, trucks, and deeds to real estate, condominiums, etc. If done properly, P.O.D. or T. O. D. beneficiary designations can replace the utilization of Trusts to avoid probate completely. In this regard, P.O.D. or T. O. D. beneficiary designations are colloquially referred to as the “Poor Man’s Trust” because they are relatively inexpensive and simple to use.

The manner in which title is held and the value of the assets owned at the time of death are key factors to evaluate in determining whether or not P.O.D. or T. O. D. beneficiary designations will accomplish the goal of legally avoiding the probate process entirely. As long as Indiana residents do not pass away failing to P.O.D. or T. O. D. designate more than $50,000.00 in cumulative value of real and personal property, no formal probate court proceedings are necessary to transfer that property at death. The significance of the $50,000.00 number is also currently set by Indiana statutes. That is the current threshold below which assets can be transferred at death by means of only a small estate affidavit, and not the appointment of an executor or personal representative having to probate an estate of a decedent. If a person dies with more than $50,000.00 in “probate assets” (i.e. something titled in their sole name with no beneficiary), that person’s assets cannot be transferred simply by affidavit but instead must require the appointment of an executor or personal representative to do so. Therefore, it is advisable to utilize the P.O.D. and T. O. D. statutes to avoid passing away with more than $50,000.00 in cumulative value of real and personal property in one’s sole name.

Of course, setting up properly designed P.O.D. or T. O. D. beneficiary designations may require the services of an experienced Elder Law attorney. For example, you can designate T. O. D. beneficiaries on your real estate that you own, but this requires the preparation, notarization, and recordation of a T. O. D. deed to your property. In addition, you may designate contingent P.O.D. or T. O. D. beneficiaries; but, care must be taken in how you do this to be certain that you are not incorrectly and unwittingly designating beneficiaries contrary to the default provisions of the statutes. Depending on the exact language used, you may have mistakenly sent property to a family member that was unintended to receive that property. For instance, the statutes refer to the initials LDPS as lineal descendants per stirpes; and, if you do not realize the effect of those terms, your designation could end up distributing property to the wrong descendant. However, the cost of setting up properly designed P.O.D. or T. O. D. beneficiary designations is far outweighed by the benefits of not paying to create, fund, and administer a Trust set up solely to avoid probate.

Please consult your elder law attorney if you have concerns about the implications of utilizing the P.O.D. and T. O. D. statutes in your estate planning.

Kurt R. Bachman is a member of the National Academy of Elder Law Attorneys, Inc. and is a Veterans Affairs Accredited Attorney.

Beers Mallers Backs & Salin, LLP | 108 W. Michigan Street | LaGrange, Indiana 46761 krb@beersmallers.com | ph: (260) 463-4949 | fax: (260) 463-4905

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