Opinion ID: 852511
Heading Depth: 2
Heading Rank: 1

Heading: Testamentary Dispositions by Guardians

Text: This case turns on the interpretation of Indiana's guardianship estate planning statute, Indiana Code section 29-3-9-4. Statutory interpretation is a question of law reviewed de novo. Porter Dev., LLC v. First Nat'l Bank of Valparaiso, 866 N.E.2d 775, 778 (Ind.2007) (citations omitted). Indiana law allows for the appointment of a guardian to act in the best interests of a person who is unable to care for himself or for his property. See Ind. Code §§ 29-3-1 to -13 (2004). In general, the guardian has power to conduct the protected person's affairs. Id. § 29-3-8-2. Indiana Code section 29-3-9-4 specifically authorizes the guardian to take steps directed to estate planning for the protected person. [2] As part of these estate planning powers, a guardian may dispose of the protected person's principal or income . . . in excess of that likely to be required for the protected person's future support. Excess principal or income may be disposed of (1) to minimize the protected person's income or estate tax liability and (2) for any other purpose when a disposition is in the best interests of the protected person or his or her property, spouse, or family. In either case, the court must find that the disposition is consistent with the apparent intention of the protected person based on the protected person's declarations, practices, or conduct. If there is no evidence of the protected person's intentions, the court may allow dispositions that a reasonable and prudent person would make under the circumstances. The extent, if any, that the guardianship estate planning statute authorizes dispositions of the protected person's entire estate either during life or at death is an issue of first impression. [3] For several reasons, we think the legislature did not authorize such transfers. First, the statute explicitly allows for gifts but does not authorize devises. Similarly, although section 4(a) authorizes a variety of specific steps to avoid unnecessary estate taxes (including giving to charity, relinquishing powers of appointment, and disclaiming interests in various estates), it does not mention the writing, modification, or revocation of wills. Shirley and Marvin cite Illinois's estate planning statute in support of a guardian's power to make testamentary dispositions. The Illinois statute, however, specifically authorizes a guardian to modify the protected person's will or revocable trusts. 755 Ill. Comp. Stat. Ann. 5/11a-18(a-5)(11) (West 2007). The absence of language similar to that found in the Illinois statute suggests that Indiana's statute does not include the broad power the children claim. Second, the statute allows the guardian to apply or dispose of excess principal and income. Even if the trust assets remain available to support the protected person, the creation of a revocable trust is a disposition or application of assets because it places the assets under control of others and frees the assets from supervision of the guardianship court. The trust in this case disposed of all E.N.'s assets, including those needed for his future support. It therefore is not within the transfer contemplated by this statute. Third, had the legislature intended to authorize dispositions effective at death, it surely could have described that power in a simpler way by authorizing wills, trusts, and other estate planning tools. Fourth, the principal focus of this statute is minimizing estate and inheritance taxes by reducing the protected person's assets through gifts and other estate planning mechanisms. The obvious application of such a provision is to allow inter vivos gifts of amounts below the annual gift tax exclusion to known beneficiaries. Gifts effective at the protected person's death can also reduce the taxable estate, but a disposition of an entire estate necessarily involves a transfer of some assets that generates no tax benefit because of the minimum levels required to incur any tax. Fifth, if there is no evidence of the decedent's desires, the intestate succession laws already tell us what the legislature believes is a reasonable and prudent disposition of property at death. Finally, Indiana Code section 29-1-5-8, which revokes all provisions in favor of a testator's spouse upon divorce, also provides that with the exception of revocation upon divorce, no written will, nor any part thereof, can be revoked by any change in the circumstances or condition of the testator. To the extent E.N. had a valid will, the estate plan effectively revoked it. This legislation does not authorize overriding a will made while competent based on the protected person's perceived post-incapacity desires. It may be desirable to provide a means other than a pre-incapacity will or intestate succession to dispose of a protected person's entire estate at death. The current statutes, however, do not authorize the court to write a will for the protected person, nor do they authorize the practical equivalent of a will in the form of a trust that disposes of the person's assets beyond those determined to be in excess of the person's needs. The legislature is certainly free to authorize guardians to dispose of all property at the protected person's death, but as of now it has not done so.