The Testamentary Trust

Pick an age, any age…

For married couples with minor children, I’ll oftentimes recommend drafting a “testamentary trust” into the will. When the first spouse dies, the surviving spouse takes everything (which usually occurs through joint titling anyway). When the remaining spouse dies, if the children are under a certain age—say, 21 or 25—the will states that the sole heir of the estate is a trustee. The will further designates that the trustee is to hold the property in trust for the benefit of the children. Once the youngest child reaches a certain age, the trustee is to distribute the remaining trust assets to the children.

What 18-year-old is good with money?

There are two big advantages to this setup. First, it allows you to prevent the children from having complete control over a potentially large inheritance at age 18. Suppose you and your spouse pass and are survived by two teenaged-children. Your will names a guardian, and that person is appointed guardian of your children. While the inheritance belongs to the children, the guardian still has a level of control over the money…but that automatically ends when the child turns 18. If, instead, you create a testamentary trust (with your will) and name the guardian as trustee, then the children do not automatically have full control over the inheritance at 18. You can designate any age you wish. And even though the money “belongs” to the trustee, the trustee is holding the money for the benefit of your children. The guardian cannot just do with the money what he or she pleases (there are protections in place in the law of trusts).

Flexibility

The second benefit of a testamentary trust is flexibility. Suppose that you don’t have a testamentary trust, and each teenaged-child receives one-half of your estate. One of the children contracts a disease and incurs substantial medical bills, eating up her share of the estate. Now, if that child decides to attend college, she has a hard time paying for it. But if a trust exists, the trustee has some discretion in how to distribute the assets. The trustee could use trust property to pay for the medical bills and still help that child pay for college. Your first thought might be, “That doesn’t seem fair to the other child.” But if you and your spouse were alive, you most likely wouldn’t say to the child that got sick, “Well, since you contracted this disease, we aren’t going to help you with college. That just wouldn’t be fair to your brother.”

Here to help

During your consultation with me, these are the sorts of things we talk about. I’m here to help take care of your loved ones.

–Joel Dendiu

Do I Need a Will?

The setup

Let’s suppose you are married with no children and have the following assets:

  1. A house.
  2. Two cars.
  3. A checking account.
  4. An IRA.

Let’s further suppose that the house, both cars, and the checking account are titled jointly, and your spouse is a 100% beneficiary of the IRA. One more thing: the house has a transfer-on-death deed, the two cars have transfer-on-death registrations, the checking account is Payable on Death (POD), and the IRA has a 100% contingent beneficiary, all to a brother that you love dearly (a decision that your spouse agrees with).

Some scenarios

Do you need a will? Let’s see what happens in various scenarios. Scenario 1: you die; your spouse survives. Since everything is joint, it all passes immediately to your spouse, and the IRA pays out to her. Great (other, of course, than you being gone). Scenario 2: you and your spouse die at the same time (in a plane crash). Since everything has a form of POD, it all goes to your brother, and the IRA pays out to him as the 100% contingent beneficiary. Great, again.

What about all your “stuff”?

But there are also some not so great scenarios and issues. If your brother predeceases you, and you and your wife both pass, your property is distributed according to the intestacy (that is, without a will) laws of Indiana, which might place your property in the hands of people you never intended. In Scenario 2 above, your personal property is technically not accounted for. There’s no form of POD for personal property, which means that it also would pass according to intestacy laws. And even if you are very careful about getting everything that you can titled jointly and everything that you can titled with a POD provision, it’s possible that you will miss something. Perhaps you forgot about a bank account or forgot about some stock that you own.

Will as “safety net”

A will can remedy all of these issues. You can name who will take your personal property. You can name who will take in the event your brother predeceases you. And you can name who will take the “residue” of your estate (that is, everything that you own, including things you may have forgotten about). While there are possible scenarios in which not having a will might be okay, having a will is almost always preferable. It can and does act as a safety net. Let me help you make sure that all contingencies are accounted for.

–Joel Dendiu

Survive/Predecease Provision

The provision

One of the provisions that I generally place in the wills of married couples is a “survive/predecease” provision. It reads something like, “If my said spouse dies under circumstances that render it difficult or impossible to determine which of us died first, then I shall be presumed to have survived my said spouse.” This provision doesn’t often come into play, but it can make a difference.

An example

Suppose I leave everything first to my wife and then to our three children in equal shares, and my wife does the same. We both die in a house fire. First of all, without the survive/predecease provision, two estates would most likely have to be opened simultaneously (one for me, and one for my wife), and that just creates extra cost, time, and confusion. With the survive/predecease provision in place, if most everything we have is titled jointly (e.g. house, cars, bank accounts), then all of my wife’s property immediately passes to me, which then gets placed into my estate and passed to my children. This is a lot simpler than two estates.

How do we choose?

Second of all, it may be the case that I have more Payable on Death accounts with contingent beneficiaries than my wife does, which is the real reason that we chose me as the “survivor.” I might have an IRA (which cannot be titled jointly) that names my spouse as the 100% beneficiary and my children as 33% contingent beneficiaries, while my wife has no such IRA. If it’s presumed that I pass first, then the IRA pays out to my wife, and then that money is placed into her estate (since she died in the fire, too). There’s technically nothing wrong with this, but money in an estate does not go to the heirs immediately; it takes time. Our kids will still get the money in the IRA, like we wanted, but the process is delayed. If, instead, it’s presumed that my wife passes first, then our kids will get the IRA payout without the money going through the estate. When I pass, the IRA will “see” that my wife has already passed and move on to the contingent beneficiaries (our children). The end result is that our kids will get the money much faster.

Flipping a coin

If neither spouse has a larger number of Payable on Death accounts, then we’ll generally flip a coin for the “survive/predecease” provision (or you can decide between the two of you who you think is better able to survive a catastrophic event; I know my wife is tougher than me). But it’s important to have such a provision no matter what in order to avoid potentially having two simultaneous estates.

–Joel Dendiu

Charitable Giving at Death

Specific bequests

You may find yourself with a desire to give to a charitable organization, such as a church, at your death. There are a number of ways in which you might accomplish this. First, you could put a “specific bequest” in your will. It would look something like this: “I give $500 to Church X.” But while there is a time and a place for specific bequests, I generally discourage them. If you change your mind regarding the amount, or if you change churches and no longer want to donate to Church X, you have to change your entire will (which means a lot of formalities, like signing in the presence of two witnesses).

POD to Church X

There are, generally, better options. You could, for example, create a separate bank account that is payable on death to Church X. During your life, you have full control over that account. If you originally fund the account with $500 but later decide you want to give more or less to Church X, all you have to do is transfer money into or out of the account. When you die, the money left in the account automatically goes to Church X. If you decide you no longer want to give to Church X, you can either close the account, or you can make the account payable on death to Church Y (which is a lot easier than redoing your will).

Uncle Sam loses out

Finally, there is a third, and sometimes best, option for giving to a charitable organization. It’s a little more complicated to understand, but it can be well worth the intellectual investment. Suppose you have a tax-deferred retirement account (that is, your contributions have not been taxed, but the withdrawals will be taxed), like a traditional IRA. Suppose you have $50k in that retirement account, and you have $25k in an ordinary checking account. If you leave $5k to Church X from your checking account and everything else to your daughter, then your daughter is left with $70k ($20k from the checking account, and $50k from the IRA). But your daughter will have to pay at least some tax on the $50k she received from the IRA. Instead, you could name Church X as, say, a 10% beneficiary of the IRA (amounting to $5k). Church X, as a charitable organization (tax-exempt), does not have to pay tax on the $5k it receives from the IRA. In this situation, each party (Church X and your daughter) is left with the same amount, but your daughter’s tax liability is reduced. The only party that loses out is Uncle Sam (albeit in a completely legal way).

More than just a drafter

My role for you is more than just a document drafter. I’m also a planner. I can help you set things up so that those you care about most are provided for in the best way possible. Now, if you enjoy paying taxes, we can plan that way, too. But my guess is that you are interested in creative solutions like the one described above. I look forward to serving you!

–Joel Dendiu

Service of Process in Indiana

You got served!

In a previous post, I discussed serving a party by sheriff. To “serve” a party means to provide him with legal notice of, for example, a lawsuit that you have filed against him. If a party does not receive notice, any judgments entered against him are most likely void. If, therefore, you can’t find a person, you’ll probably have a hard time getting a judgment against him (even if you have a very strong legal claim).

The more expensive option

In the prior post, I also mentioned that service by sheriff is more expensive than, say, serving by certified mail, return receipt requested. Certified mail provides the sender with proof of mailing, and the “return receipt requested” requires the addressee to sign for the mail, thus providing proof of receipt. Taking such a route is a valid form of legal service. The party, however, may simply refuse to sign for and/or accept the parcel. He, of course, won’t know what’s in it until he has opened it, meaning he doesn’t automatically have a “heads up” that he should refuse to sign.

Tougher to dodge

That’s one of the biggest reasons that it’s often advisable to pay the extra cost of service by sheriff. The sheriff (or, more likely, one of his deputies) will personally deliver the required documents to the person’s home (generally, a copy of the lawsuit complaint and a summons, which is a document from the court that orders the person to appear). It’s a lot tougher to dodge the sheriff than it is to dodge the mailperson (or refuse the letter that he is carrying).

If you need to file a lawsuit, I can help you with all of these decisions. Your problem becomes my problem, and, with all due respect, I can probably handle your legal problem a lot better than you can. Please call or email to set up a consultation.

–Joel Dendiu

Providing Objectivity

The cost of a case

The filing fee for a civil case in St. Joseph County is $141 (a small claims case is $60 cheaper). If you want the Sheriff to deliver the summons (the legal document that tells a person that she has been sued), you must pay an additional $13. Why you would use the Sheriff instead of, say, certified mail is a topic for another day. What’s important for this post’s purposes is that before you’ve even hired an attorney (like me), you’re out $154.

More on flat fees

That $154 brings a few thoughts to mind. First, I’ll shamelessly (again) plug my flat-fee philosophy: when I quote you a fee for my services, that $154 (if you are retaining me to initiate a civil lawsuit) is included. Most attorneys, when speaking with you about fees, will say, “This case will cost you X dollars per hour plus costs.” The $154 isn’t included. There isn’t necessarily anything wrong with that. I just want you to be aware of the facts. And I want you to know that when I say that when you hire me, you pay one fee and you are done, I really mean it.

Just not worth it

The second thought which comes to mind is that there are lots of times when it just isn’t worth it to file a lawsuit. Suppose your neighbor backs into your yard and causes $200 worth of damage to your landscaping. You ask the neighbor to pay up, but she refuses. With these facts, you could probably file in Small Claims Court, which means $94, not $154. I give you a quote (this is just a hypothetical) of $300 for your claim. Is it worth it to you?

Objectivity

That’s the tough question that I will help you answer. That’s something that I can help provide you with: objectivity. You’re seeing red. You’re ticked at your neighbor who won’t pay up, which might lead you to do something silly, like spend $300 to get $200. But it might be worth it to you just to see your neighbor pay or just to make sure that your neighbor doesn’t do it again. These are the sorts of things that I can help you think through. I might lead you to the conclusion that you shouldn’t file a lawsuit. That would stink for me because I like getting paid. But I have an ethical obligation to counsel you in the best way possible, even if that means not moving forward. And that ethical obligation is one that I will follow every time.

–Joel Dendiu

Protective Orders in Indiana

General thoughts

There are multiple types of protective (sometimes called “restraining”) orders in Indiana. Before discussing them specifically, it’s beneficial to keep a few general thoughts in mind. First, any type of protective order will not guarantee that someone won’t be able to harm you, but a protective order can certainly help your chances. Second, if you don’t have a protective order against someone, and you fear for your safety, call the authorities. Don’t think, “There’s a person on my front porch yelling obscenities and threatening to hurt me, but since I don’t have a protective order, I can’t do anything.” You absolutely can do something, and that something is contacting the police.

Order of protection

In Indiana, an actual order of protection can only be obtained by the victim of domestic or family violence, a sexual offense, or stalking. That means that if your neighbor is yelling things at you but isn’t your family member or significant other, hasn’t sexually assaulted you, and isn’t stalking you, then you can’t get a protective order against your neighbor (though you still might consider calling the police). But if someone does fit into one of those three categories, then you can petition the court for an order of protection. There is no filing fee for such a petition, but there may be attorney fees. If the judge chooses to grant your petition, she can craft the order in all sorts of ways (e.g. staying a certain distance away from your home and place of work, not calling you or speaking to you, etc.).

Workplace Violence Restraining Order

A second type of protective order in Indiana is called a Workplace Violence Restraining Order. If, at your place of work, you are the victim of stalking and/or battery, your employer may seek, on your behalf, an order from the court which directs the individual to stay away from you at your job. As with the order of protection, there is no filing fee. But a Workplace Violence Restraining Order must be sought by your employer, not you.

Just a piece of paper

As with court judgments, a protective order is just a piece of paper. It doesn’t do much on its own. But the police will have a copy of the protective order, and this fact provides you with additional safety. Perhaps, pre-protective order, a suspicious character walks repeatedly in front of your house at odd hours of the night. It reaches the point where you call the police. The police come but say that the individual hasn’t done enough to warrant intervention. But it turns out that this person has been and is stalking you, and you are able to convince a court of this fact. The court provides you with an order of protection which includes, among other things, a statement that the individual may not come within 500 feet of your home. Now, post-protective order, when the individual walks by your house, the game is up: when you call the police, they can remove or arrest him because he has violated a court order. The person doesn’t have to have done anything else.

Seek help

If you find yourself in situations like this, make sure you contact the authorities. But if you need additional assistance, contact me.

–Joel Dendiu

Collecting On a Judgment

Something bad happened to you

Someone did something bad to you. That “something” also happened to give rise to a “cause of action” against the “someone.” This, unfortunately, is an often-overlooked point: not every bad thing that happens to you is against the law or even gives you the right to file a lawsuit. Well, you technically have the right to file a lawsuit that doesn’t have any merit, but judges don’t look kindly on such actions, and I certainly won’t be filing it for you.

Just a piece of paper

But suppose that in this case, the law did give you a remedy for the bad thing that happened to you, and you actually won your claim in court. Congratulations! What do you do now? As my Torts professor said on my first day of law school, “A judgment is just a piece of paper. It doesn’t get you paid.” And that’s completely true. The judge is not going to collect your money for you.

Options

You have options once you’ve received a judgment in your favor. Under certain circumstances, you may be able to get an order of execution. This isn’t as grim as it sounds. The order is to the sheriff and instructs the sheriff to seize property of the other party. This might be the property at issue in the lawsuit (say, the person stole your car). Or it could be property unrelated to the lawsuit that is simply seized and then sold to pay off the judgment. Again, this option isn’t always available.

Another possible way of collecting arises from the following fact: a judgment becomes a lien (or interest) in any real property that is owned by the losing party within the county where the judgment is recorded. To sell real property (that is, land), you generally need clear title. A lien on your property means your title to your land isn’t clear. Before the property owner can sell, she has to take care of the lien, which means paying you off.

Proceedings supplemental

For various reasons, however, neither of the above methods is usually the route taken in order to collect a judgment. You probably don’t know about any of the personal property of the losing party, and it’s very possible that she doesn’t own any real estate (which means no liens against her real property). The most typical approach is called “proceedings supplemental.” Proceedings supplemental is a process in which the court orders the losing party to appear in court and answer questions about her assets so that you can figure out how to collect your judgment. You might ask the losing party about savings accounts, motor vehicles, or jobs. Once you have that additional information, you can take subsequent steps to collect (for example, garnishing the other person’s wages).

I wish it were easier, but that’s the law of Indiana. Collecting isn’t always an easy process. I can help and look forward to hearing from you.

–Joel Dendiu

Distributing Without Administration in Indiana

Not greater than $50,000

In Indiana, if the decedent’s (that is, the person who died) estate is, less liens and encumbrances, valued at not greater than $50,000, then the decedent’s estate, under certain circumstances, may be distributed “without administration.” Distributing an estate “without administration” can be less complicated and time-consuming than the more traditional process. It’s not, however, appropriate in every circumstance. Part of your initial consultation with me is determining which path to take.

Liens and encumbrances

An example of “liens and encumbrances” is a mortgage. So if I die with $20,000 in cash and an $80,000 house that has a $60,000 mortgage balance, my estate would potentially qualify for distribution without administration (since, less liens and encumbrances, my estate has a maximum value of $40,000).

Use the experts

Distributing an estate without administration is yet another example of the large number of options and possibilities in the world of estate planning. These aren’t things you should be tackling yourself; there is simply too much to know. You may be able to figure it out on your own and do an acceptable job in the same way that you can do some plumbing work at home (that is, assuming you aren’t a plumber) and end up with a passable result. But in the same way that your plumbing work can have serious consequences, so can your legal work. You wouldn’t want the creditor of a decedent filing a lawsuit against you for distributing the decedent’s estate without administration when the law did not allow you to do so.

–Joel Dendiu

POD Accounts, Joint Accounts, & Taking Care of Your Executor

Joint accounts and POD accounts

As I’ve written about before, estate planning isn’t just about planning for death; it’s also about strategically setting things up during your life. A good example of this involves bank accounts. If you are married and want your spouse to have complete access to a bank account, making the account “joint” is generally the way to go. The spouse has full power over the account during your life, and when you die, the account automatically passes to him or her. The account does not become a part of your estate. One advantage of such a setup is that your spouse doesn’t have to wait for the probate process in order to access the funds.

A Payable on Death (POD) account operates in a similar fashion at death but differently during your life. If the account has only your name on it and is POD to your spouse, then during your life, your spouse does not have power over the account (for example, he or she cannot make withdrawals from it). But when you die, whatever is in the account automatically passes to him or her, just like in the case of the joint account.

An unfunded executor

You might ask yourself, “Why don’t I just make all of my accounts this way? Then my assets don’t have to go through probate, which means that I don’t have to pay court costs and lawyers like Joel.” While there may be a time and a place for this, there are many situations in which this sort of a setup would be disastrous. Let’s look at an example. I, Joel, die with the following assets, will provisions, and heirs:

  1. $10,000 in cash (in a POD account payable to my spouse).
  2. A house valued at $100,000 (with no mortgage).
  3. Spouse and son named as heirs (75% to spouse, and 25% to son).
  4. Son named as executor of my estate.

To review, the executor is the person who administers the estate (that is, the person who makes sure that property is distributed according to Indiana law and the testator’s wishes). My spouse is entitled to the $10,000 automatically as a result of the account being POD, meaning the $10,000 doesn’t go into the estate. That just leaves the house, which my spouse and son share a 75/25 percent interest in. My spouse and son agree to sell the house and divide the proceeds. But there’s a problem: how is my son, as my executor, supposed to pay for the process of selling the house specifically and the process of administering my estate generally? I haven’t left the executor any “liquid funds.”

A better option

The executor has access to an asset (the house), but that asset can’t really be used to pay for necessary expenses upfront (like court costs, realtor fees, property taxes and insurance while the house is on the market, etc.). A better option would have been to not make the bank account POD nor make the account joint, thereby making the cash part of the estate. Then the executor has resources to administer your estate.

But what about your poor spouse who now gets $10,000 less? Well, careful planning can take care of that. Under the first plan, your spouse was going to get (before estate administration expenses) $85,000 ($10,000 in cash, and $75,000 from the sale of the house). If you simply give your spouse 77% and your son 23%, your spouse will still end up with approximately $85,000 (before estate administration expenses). And now you have an executor who can actually administer your estate because he has access to liquid funds.

Lots of possibilities

As you can see, there are all sorts of possibilities, plans, contingencies, and unforeseen circumstances when it comes to estates and estate planning. I can help with all of that. I can make sure that those you love are taken care of during your life…and even after.

–Joel Dendiu