Even in bad times, lawyers say estate planning is a good thing

In an economy racked by uncertainty, many people take a "wait and see" attitude toward purchases and planning of all kinds. More than a few have watched the value of their homes fall or their retirement investments stumble -- and they're waiting until the economy recovers to forge ahead.

That's not a wise move, according to estate-planning experts. Local lawyers say it's critically important for people to protect their assets, even if they're currently somewhat diminished, to make sure holdings will go to the right people at the right time with a minimum of trouble and expense.

It's true some people are gun-shy right now, said David Mears, a Highland attorney who has done estate planning for nearly four decades.

"A will or estate planning are the last things some people want to think about," Mears said. "And right now, there are serious concerns about the economy. But it's important to have a plan and to review it every few years."

Jack O'Drobinak, a Schererville attorney who counsels many clients, said business isn't down for his firm, but he surmises many are putting off longer-range planning.

"Yes, assets may be down, but that makes it even more important to protect them," O'Drobinak said. "Everyone needs a clear plan for his or her estate and good advice on protections from unnecessary costs and taxes."

Estate planning allows people to leave their assets to the people they choose and under the conditions they prefer. One group of clients that rarely ignores such planning is parents of disabled children who want to leave clear instructions on the future care and financial support of their offspring.

But others, including many whose assets may be few or who only have life insurance proceeds to bequeath, often don't take the necessary precautions.

"Even with insurance policy beneficiaries clearly delineated, there can be issues," advised Michael Miller, who practices law in Valparaiso and has many estate-planning clients. "If a beneficiary is deceased at the time of the client's death, there need to be additional instructions, to avoid problems or holdups in disbursement of proceeds."

Miller said even simple arrangements -- for instance, the new "transfer on death" deed with which a person could leave a house to three surviving children -- can be problematic if not all the children want to sell the house.

Lawsuits to resolve such issues just eat away at the assets.

Protecting assets is one critical advantage of estate planning. Documents like living trusts can outline specific instructions and disbursements and make it possible to avoid probate court where a judge becomes involved, and costs escalate.

In addition, estate planners keep abreast of current law. Federal estate tax rates change and must be considered. In 2010, there is no estate tax, for instance, but the tax is set to return in 2011 with an exemption of $1 million.

If it sounds confusing, that's because estate planning can be complicated.

Most people are not versed in the ins and outs of wills and trusts, estate taxation or laws that affect everything from real-estate transfers to life-insurance policies. Estate planning is also affected by laws, both federal and state that are subject to constant change. For instance, some states collect inheritance tax and others do not (Indiana does, Illinois does not).

And even people who decide to give away as much of their money or assets before death to direct the goodies where they want them to go should get legal advice on current laws -- there's a federal tax on gifts over certain amounts.

Gary Bonk, a Schererville lawyer who has done estate planning since 1986, said the best bet is for everyone to get some legal advice.

"Estate planning may be taking a hit due to the sour economy, but its value is great," Bonk said. "People usually have more assets than they realize and very specific wishes about their disbursement. Without some expert help, it's hard for a person to determine what kind of plan they need to have in place."

The basics are still complex

A review of your estate plan every two to four years is essential. Change is constant: you may have changes in beneficiaries or assets, and tax and estate laws routinely change. An estate planner can help you make the required updates and revisions.

Many families believe they have so few assets an estate plan is unnecessary. This is not true. We often have more assets than we realize, although some assets may become important only after our death. The most notable asset of this type is life insurance. Whether you consider yourselves a family of substantial means or one with little or no assets, estate planning should be done.

An inheritance tax is an assessment made on the portion of an estate received by an individual. Eleven states still collect an inheritance tax. They are: Connecticut, Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania and Tennessee.

An estate tax is levied on an entire estate before it is distributed to individuals.

In all states, transferring assets to a spouse are exempt from the tax. In some states, transfers to children and close relatives also are exempt.

Estate tax changes are inevitable. Under current law, the basic federal estate-tax exemption for 2009 is $3.5 million, and the top estate-tax rate is 45 percent. (Transfers between spouses typically are tax-free.)

In 2010 the tax is scheduled to disappear entirely -- only to reappear in 2011 with a $1 million exemption and a top rate of 55 percent on the largest estates.

While a Last Will and Testament is an important part of any estate plan, there's one main drawback to having your assets pass under the terms of your will: the property must go through probate before your loved ones will be able to have access to it. Probate can take anywhere from nine months to several years, which means your family will have limited and sometimes no access to your assets until probate has been completed.