If you plan to leave a substantial amount of assets and property to your loved ones, an Indiana living trust can simplify the process. By transferring your assets to a living trust, you will enable your heirs to avoid the expense and time of probate. You can also leave instructions for when you want beneficiaries to receive your assets, in case you want them to reach a certain age first. A living trust is a key tool in estate planning, and below, we will answer all of your questions about creating a living trust in Indiana. For hands-on help with your estate planning, use SmartAsset’s financial advisor matching tool.
How to Create a Living Trust in Indiana
You can establish a living trust in the Hoosier State by taking the following steps:
Choose the type of trust you want to create. You probably want a revocable one, which allows you to make changes, maintain control of assets and cancel the trust. Irrevocable ones, as their name suggests, are permanent. If you’re married (and your children are only from that spouse), you also probably want a joint living trust. If you’re in a marriage from later in life or have children from previous relationships, you more likely want two single trusts.
Take inventory of your assets and decide which ones you will go into the trust. Your house and other real property should go in. But things like bank accounts and life insurance policies do not need to, since you can avoid probate by simply telling the bank and life insurance company who your beneficiaries are (those accounts are payable or transferable on death). That said, as long as you are creating a trust, you may decide to simplify things by putting everything in it.
Name a trustee who will have the authority to manage the assets in the trust. If you appoint yourself, you’ll also need to designate a successor trustee. This person would take control of the trust after you die.
Create the trust agreement by using software or hiring an attorney.
Sign the trust document in front of a notary.
Fund your trust by transferring assets and property into it. Depending on the complexity of your estate, you may want the help of a lawyer and financial advisor.
What Is a Living Trust?
A living trust is a legal framework for assigning who should receive property when the owner (or trust grantor) dies. Unlike a will, it’s also an entity that holds the assets while the owner is alive. The primary aim of a living trust is to avoid probate, a court process that can take months – and even years if the estate is especially complicated.
The grantor designates a trustee to manage the assets in the trust. You can name yourself as the trustee, but will also need to name a successor trustee for when you die. If the distribution of your property is not to happen immediately after your death or if the beneficiary is disabled, the trustee will manage the assets for as long as necessary.
You can fund a trust with various types of assets and physical property including the following:
- Bank deposit products such as savings accounts, money market and checking accounts
- Investments such as stocks, bonds and mutual funds
- Certificates of deposit (CDs)
- Real estate property
- Life insurance policies
You can transfer most assets into your trust by changing the titles of your assets from your name (or names if you’re married and are creating a joint trust) to the name of the trust. You can also change certain beneficiary designations for some assets to your trust.
How Much Does It Cost to Create a Living Trust in Indiana?
The cost of creating a living trust in the state of Indiana will vary, depending on several factors. You can establish one yourself with the assistance of different software. This move may put the price tag at a few hundred dollars. If you turn to an attorney, which is highly recommended for sizable estates, the price can easily stretch beyond $1,000. The total price depends on lawyer rates and the complexity of your estate.
Despite the outlay, hiring an attorney will probably pay off in the long run. There are plenty of pitfalls when going the DIY estate planning route. Remember, this is a legal document. Doing it on your own requires at least some legal knowledge and financial acumen, especially if complex assets are involved.
Why Get a Living Trust in Indiana ?
Indiana does not use the Uniform Probate Code, so probate in Indiana can take some time. Until the court process is finalized, your assets are frozen – including bank accounts, unless you have set up joint ownership or payable-on-death accounts.
So if your heirs will have trouble paying the bills on your estate while it is frozen, a living trust will enable them to avoid this predicament. Own property in several states that have long probate periods? That’s all the more reason for setting up a living trust, which will also save your heirs from having to pay the attorney and court costs associated with probate.
Another reason to get a living trust is that your heir is disabled. In this case, the trustee will manage the trust and follow your instructions for providing for your beneficiary. Also, a living trust is a good choice for people who want to postpone the distribution of assets until heirs reach a certain age. (With a will, assets are distributed once probate concludes.)
Additionally, if privacy is a concern, a living trust will not make your estate a matter of public record.
Who Should Get a Living Trust in Indiana?
Indiana established a simplified probate process for estates under $50,000. But in many cases, your home alone may push your estate beyond this threshold. So anyone that plans to transfer more than that in assets and property can benefit from an Indiana living trust.
Living Trusts vs. Wills
Even if you establish a living trust in Indiana, you will still want to make a will to cover what’s not in the living trust. Without a will, property that’s not in your trust goes to your spouse, children and other relatives as dictated by Indiana state law. This could mean that property that’s in your name only and that you assumed would go to your spouse could partly go, by law, to your children. A will and living trust ensure the distribution of your assets according to your wishes.
Additionally, a will allows you to name an executor (as opposed to the state appointing someone) and determine how taxes and debt should be paid. If you die when your children are young, a will permits you to establish their guardianship and how a child minor’s inherited assets that aren’t in the trust shall be managed.
This chart shows the differences between living trusts and wills to give you a better understanding of the estate planning documents:
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in Indiana
Indiana does not levy an estate tax, so there are no state estate taxes to avoid. It also has no inheritance tax (there was one but it was repealed, effective as of 2013).
There is the federal estate tax, but it applies only to very wealthy families. The federal government currently imposes an estate tax on property valued at more than $11.4 million ($22.8 million for couples filing jointly).
If you and your spouse expect to owe federal taxes, you can minimize the hit by creating a bypass trust (also called an AB trust). But due to its complexity, we highly recommend that you work with a financial advisor and attorney when establishing this kind of trust.
In addition, you can reduce the size of your estate while you’re alive by taking advantage of gift tax limits. Each year, you can give a certain amount to various individuals ($15,000 to each recipient in 2019) without reducing your lifetime gift and estate tax exclusion.
The Bottom Line
Because Indiana has not adopted the Uniform Probate Code, setting up a living trust will enable your heirs to avoid a lengthy probate period – and its costs. To make sure it’s done properly, you’ll probably want to hire a lawyer, which can put you at least $1,000 out of pocket. For especially large estates, a qualified financial advisor is also essential.
Estate Planning Tips
- Estate planning is as complex as it is important. But you don’t have to do it alone. Consider working with a qualified financial advisor who can give you peace of mind that your assets are being managed smartly. You can find one by using our advisor matching tool. After answering a few questions about your goals, it recommends up to three local advisors.
- Don’t wait until you reach a certain age to start planning on how to transfer your property and assets. Anything can happen and you want to make sure your loved ones are cared for long after you’re gone. So avoid estate planning mistakes by starting now.
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