INDIANA LAW UPDATE: PROBATE AND TRUST MATTERS (SB 355)
While several bills were submitted during the 2015 legislative session, with regard to probate and trust legislation, only SB 355 made its way to the governor’s desk for signature. Several other bills were introduced but not passed during this session. SB 355 addressed several matters and is summarized below.
I.C. § 9-17-2-2, I.C. § 9-17-3-9, I.C. § 9-29-4-4, and I.C. § 9-31-2-30. The references to “individual” or “individuals” in these statutes were deleted and replaced with “person” or “persons”. This change will now allow clients to name a trust as a transfer-on-death beneficiary of a motor vehicle or watercraft.
I.C. § 16-36-1-2, I.C. § 16-36-1-5, I.C. § 16-36-1-6, I.C. § 16-36-1-7, I.C. § 16-36-1-8, I.C. § 16-36-1-10, I.C. § 16-36-1-11, I.C. § 16-36-1-12, I.C. § 16-36-6-9, I.C. § 16-36-6-13. Definitional changes were made to Indiana’s health care consent statutes which will allow non-individuals to make health care decisions for individuals who are unable to do so. The definition of “representative” now includes a corporation, trust, limited liability company, partnership, business trust, estate, association, joint venture, government or political subdivision, agency, instrumentality or any other legal or commercial entity.
I.C. § 29-1-1-3. In the definition of “Claims”, the references to “funeral expenses” and “the expense of a tombstone” have been removed in subsection (a)(2). A new definition in subsection (a)(10) entitled “expenses of administration” has been added. Expenses of administration include expenses incurred by or on behalf of a decedent’s estate in the collection of assets, the payment of debts, and the distribution of property to the persons entitled to the property, including funeral expenses, expenses of a tombstone, expenses incurred in the disposition of the decedent’s body, executor’s commissions, attorney’s fees, and miscellaneous expenses. The practical effect is that a family member who has paid the funeral and burial expenses prior to opening of the decedent’s estate no longer has to file a claim to obtain reimbursement from the estate. Also, in new subsection (a)(21), the definition of “Person” has been expanded and includes an individual, a corporation, trust, limited liability company, partnership, business trust, estate, association, joint venture, governmental or political subdivision, agency, instrumentality, and any other legal or commercial entity.
I.C. § 29-1-8-10. This statute was added to address transfers to a testamentary trust established in the decedent’s Last Will and Testament. It applies only to a nonprobate transfer by a transferee that is a testamentary trust and admitted to probate. Under this new statute, the nonprobate transfer is considered effective upon the decedent’s death if the decedent’s Last Will and Testament is admitted to probate. One example would be the transfer of life insurance proceeds pursuant to the beneficiary designation upon the decedent’s death to a testamentary trust established under the terms of the Last Will and Testament. This transfer does not constitute a part of the decedent’s estate and is not subject to creditor’s claims. It is also not deemed a transfer by the decedent or by the decedent’s will for all other purposes of the Indiana Code.
I.C. § 29-1-14-9. This statute was amended to clarify the priority of claims in a decedent’s estate. Although funeral and burial expenses are defined as “expenses of administration” under I.C. § 29-1-3-3(a)(10), they are carved out of the claim category of “costs and expenses of administration” in the claim priority statute. In other words, costs and expenses of administration are first in line to be paid from the decedent’s estate, and reasonable funeral expenses, expenses of a tombstone, and expenses incurred in the disposition of the decedent’s body are second in line for payment.
I.C. § 29-3-9-1. The phrase “health care” was added to this statute to clarify that parents of minor children can delegate their authority to others for health care decisions, support, custody, or property of their minor children. Under Indiana law, a parent or parents can delegate this authority pursuant to a properly executed power of attorney for a period up to 12 months. This type of power of attorney can be utilized if the parent is in the armed services, is about to be deployed, and needs the minor child’s/children’s grandparent(s), aunt, uncle, brother, sister or even close family friend to make these decisions for the minor child/children. Another use of this type of power of attorney is when parents are going on vacation and need someone (e.g., grandma and grandpa) to make these decisions for the minor child/children while they are out of town.
I.C. § 30-4-2.1-11.1. A new statute was added to the trust code in order for the legal doctrine of “incorporation by reference” to apply to trusts. This new statute states that if a trust refers to a writing of any kind, the referenced writing, whether subsequently amended or revoked, as it existed at the time of the execution of the trust, is to be given the same effect as if set forth at length in the trust. The referenced writing must be clearly identified in the trust and must be in existence at the time of the execution of the trust.
I.C. § 30-5-6-4.1. This is another new statute added to Indiana’s Power of Attorney statutes. Now, an attorney-in-fact (commonly referred to as the “power of attorney” who exercises powers or duties under a Power of Attorney document) can request the Court to review and approve an account of all transactions entered into by the attorney-in-fact. The statute applies regardless if the attorney-in-fact’s authority has been revoked or whether an accounting has been requested by someone under I.C. § 30-5-6-4. The attorney-in-fact must file a petition to settle and allow an account with the Court exercising probate jurisdiction in the county where the “Principal” (the person who executed the power of attorney document) resides. The filing fee is paid from the Principal’s assets. The statute requires service of the petition on certain persons. Objections can be filed by these persons. If the Court reviews and approves the accounting and notice is provided to certain persons, the attorney-in-fact is discharged from liability as to the transactions disclosed in the accounting (absent fraud, misrepresentation, inadequate disclosure, or improper notice). The discharge from liability is binding on all interested persons.
I.C. § 30-5-6-4.2. This new statute has also been added to Indiana’s Power of Attorney statutes. Any claim against the attorney-in-fact which has not been previously barred by adjudication under I.C. § 30-5-6-4.1 discussed above, by consent or by limitation, is barred against any person identified in I.C. § 30-5-6-4.1 if a person (or the person’s parent, if a minor, or the person’s guardian) receives an accounting of all transactions entered into by the attorney-in-fact and fails to commence a proceeding under I.C. § 30-5-9-11 within 2 years. However, the rights to recover from an attorney-in-fact for fraud, misrepresentation or inadequate disclosure are not barred by the 2 year statute of limitations.
I.C. § 30-5-6-4.5. This statute was amended to allow the attorney-in-fact to use the Principal’s assets to hire legal counsel or an accountant to defend his/her actions as it relates to the filing of the petition to settle and allow an account (discussed above).
I.C. § 32-17-14-3. New definitions for “Intangible personal property” and “Tangible personal property” were added to Indiana’s Transfer on Death Property Act.
Although only 1 bill made its way out of the 2015 legislative session, SB 355 contains many changes related to health care consent, estates, trusts, and powers of attorney. As is always the case, be on the lookout for more changes to come in the 2016 legislative session.
Please note that this post is only a brief summary of SB 355 and does not constitute legal advice nor does it establish an attorney/client relationship. Should you have specific questions regarding the above, please contact Benjamin T. Ballou at Hodges and Davis, P.C.
Hodges and Davis, P.C. - August 2015