Statutory Scheme of Final Disposition Authority; 2011 Amendments

INDIANA FUNERAL DIRECTORS ASSOCIATION 2011 District Meetings Disclaimer: It is always recommended that counsel be consulted regarding any individual or business planning decision. The information and/or recommendations set forth herein and/or discussed at IFDA District Meetings could vary significantly when personal and/or business facts are considered and applied to your individual situation. It will always be preferable to consult with and have the advice of your individual counsel, certified public accountant or other business advisor. I. Statutory Scheme of Final Disposition Authority; 2011 Amendments IC 25-15-9-18 Priority of persons acting as an authorized agent; persons prohibited from being an authorized agent; disputes concerning final disposition Sec. 18. (a) Except as provided in subsection (b), the following persons, in the order of priority indicated, have the authority to designate the manner, type, and selection of the final disposition of human remains, to make arrangements for funeral services, and to make other ceremonial arrangements after an individual's death: (1) A person: (A) granted the authority to serve in a funeral planning declaration executed by the decedent under IC 29-2-19; or (B) named in a United States Department of Defense form "Record of Emergency Data" (DD Form 93) or a successor form adopted by the United States Department of Defense, if the decedent died while serving in any branch of the United States Armed Forces (as defined in 10 U.S.C. 1481) and completed the form. (2) An individual specifically granted the authority in a power of attorney or a health care power of attorney executed by the decedent under IC 30-5-5-16. (3) The individual who was the spouse of the decedent at the time of the decedent's death, except when: (A) a petition to dissolve the marriage or for legal separation of the decedent and spouse is pending with a court at the time of the decedent's death, unless a court finds that the decedent and spouse were reconciled before the decedent's death; or (B) a court determines the decedent and spouse were physically and emotionally separated at the time of death and the separation was for an extended time that clearly demonstrates an absence of due affection, trust, and regard for the decedent. (4) The decedent's surviving adult child or, if more than one (1) adult child is surviving, the majority of the adult children. However, less than half of the surviving adult children have the rights under this subdivision if the adult children have used reasonable efforts to notify the other surviving adult children of their intentions and are not aware of any opposition to the final disposition instructions by more than half of the surviving adult children. (5) The decedent's surviving parent or parents. If one (1) of the parents is absent, the parent who is present has the rights under this subdivision if the parent who is present has used reasonable efforts to notify the absent parent. Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 1

(6) The decedent's surviving sibling or, if more than one (1) sibling is surviving, the majority of the surviving siblings. However, less than half of the surviving siblings have the rights under this subdivision if the siblings have used reasonable efforts to notify the other surviving siblings of their intentions and are not aware of any opposition to the final disposition instructions by more than half of the surviving siblings. (7) The individual in the next degree of kinship under IC 29-1-2-1 to inherit the estate of the decedent or, if more than one (1) individual of the same degree survives, the majority of those who have the same degree of kinship. However, less than half of the individuals who have the same degree of kinship have the rights under this subdivision if they have used reasonable efforts to notify the other individuals who have the same degree of kinship of their intentions and are not aware of any opposition to the final disposition instructions by more than half of the individuals who have the same degree of kinship. (8) If none of the persons identified in subdivisions (1) through (7) are available, any other person willing to act and arrange for the final disposition of the decedent, including a funeral home that: (A) has a valid prepaid funeral plan executed under IC 30-2-13 that makes arrangements for the disposition of the decedent; and (B) attests in writing that a good faith effort has been made to contact any living individuals described in subdivisions (1) through (7). (9) In the case of an indigent or other individual whose final disposition is the responsibility of the state or township, the following: (A) If none of the persons identified in subdivisions (1) through (8) is available: (i) a public administrator, including a responsible township trustee or the trustee's designee; or (ii) the coroner. (B) A state appointed guardian. (b) If: (1) the death of the decedent appears to have been the result of: (A) murder (IC 35-42-1-1); (B) voluntary manslaughter (IC 35-42-1-3); or (C) another criminal act, if the death does not result from the operation of a vehicle; and (2) the coroner, in consultation with the law enforcement agency investigating the death of the decedent, determines that there is a reasonable suspicion that a person described in subsection (a) committed the offense; the person referred to in subdivision (2) may not authorize or designate the manner, type, or selection of the final disposition of human remains. (c) The coroner, in consultation with the law enforcement agency investigating the death of the decedent, shall inform the cemetery owner or crematory authority of the determination under subsection (b)(2). (d) If the decedent had filed a protection order against a person described in subsection (a) and the protection order is currently in effect, the person described in subsection (a) may not authorize or designate the manner, type, or selection of the final disposition of human remains. (e) A law enforcement agency shall determine if the protection order is in effect. If the law enforcement agency cannot determine the existence of a protection order that is in effect, the law enforcement agency shall consult the protective order registry established under IC 5-2-9-5.5. (f) If a person vested with a right under subsection (a) does not exercise that right not later than seventy-two (72) hours after the person receives notification of the death of the decedent, the person forfeits the person's right to determine the final disposition of the decedent and the right to determine final disposition passes to the next person described in subsection (a). Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 2

(g) A funeral home has the right to rely, in good faith, on the representations of a person listed in subsection (a) that any other individuals on the same degree of kinship have been notified of the final disposition instructions. (h) If there is a dispute concerning the disposition of a decedent, a funeral home is not liable for refusing to accept the remains of the decedent until the funeral home receives: (1) a court order; or (2) a written agreement signed by the disputing parties; that determines the final disposition of the decedent. If a funeral home agrees to shelter the remains of the decedent while the parties are in dispute, the funeral home may collect any applicable fees for storing the remains, including legal fees that are incurred. (i) Any cause of action filed under this section must be filed in the probate court in the county where the decedent resided, unless the decedent was not a resident of Indiana. (j) A spouse seeking a judicial determination under subsection (a)(3)(a) that the decedent and spouse were reconciled before the decedent's death may petition the court having jurisdiction over the dissolution or separation proceeding to make this determination by filing the petition under the same cause number as the dissolution or separation proceeding. A spouse who files a petition under this subsection is not required to pay a filing fee. As added by P.L.237-1995, SEC.17. Amended by P.L.102-2007, SEC.3; P.L.3-2008, SEC.185; P.L.143-2009, SEC.7; P.L.101-2010, SEC.3; P.L.94-2010, SEC.8; P.L.42-2011, SEC.55; P.L.34-2011, SEC.4. IC 25-15-9-19 Effect of signing final disposition authorization; liability Sec. 19. (a) An individual who signs an authorization for the cremation, interment, entombment, or inurnment of human remains: (1) is considered to warrant the truthfulness of: (A) any fact set forth in the authorization; (B) the identity of the person for whose remains cremation, interment, entombment, or inurnment is sought; and (C) the individual's authority to order the cremation, interment, entombment, or inurnment; and (2) is personally and individually liable to pay damages in compensation for harm that: (A) is caused by; or (B) results from; the signing of the authorization for cremation, interment, entombment, or inurnment. (b) A funeral home that relies in good faith on a signed authorization for the cremation, interment, entombment, or inurnment of human remains is not civilly or criminally liable or subject to disciplinary actions for carrying out the disposition of the decedent in accordance with the instructions in the authorization. As added by P.L.34-2011, SEC.5. Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 3

II. Personal & Succession Planning (A) Wills, Trusts and Estate Planning Considerations: What Happens When You Die. (1) Indiana Intestate Succession. When an individual dies intestate... without a will, the State of Indiana decrees those persons who are to inherit your property. Indiana Code 29-1-2-1 provides that when an individual dies intestate, his/her estate goes to: (a) 100% to the surviving spouse if there is no issue or parent. 75% to the surviving spouse if there is no issue but one or both surviving parents. 50% to the surviving spouse if there is at least one child surviving or the issue of a deceased child surviving. (b) But, if the surviving spouse is a second or subsequent spouse who did not have children with the decedent, and the decedent is survived by a child or children, the second or surviving spouse takes only an amount equal to 25% of the remainder of: the fair market value of the real estate owned by the decedent minus the value of liens and encumbrances. (The fee vests in the surviving child/children as of the date of the decedent s death.) The second or subsequent spouse takes the same percentage of the decedent s personal property as set forth in (a) above. (c) The share of the decedent s net estate not going to the surviving spouse, or all the estate if there is no surviving spouse, goes to: Issue, and if all are of the same degree of kinship, they share equally; if not, they share by representation. If there is a surviving spouse, but no surviving issue, to the parents. If there is no surviving spouse or issue, then to surviving parents, brothers and sisters, and issue of deceased brothers and sisters. Each parent is treated as of the same degree as a brother or sister and shall be entitled to the same share as a brother or sister except that each parent s share shall be not less than ¼ of the net estate. Issue of deceased brothers and sisters take by representation. If there is no surviving parent or brothers and sisters, then to issue of deceased brothers and sisters. If in the same degree of kinship, all share equally; if not, by representation. If there is no surviving issue or parent, or issue of a parent, then to grandparents. If there is no surviving issue, parent, issue of a parent, or grandparents, then estate is divided into that number of shares equal to: (i) the number of brothers and sisters of the decedent s parents who survive, plus (ii) the number of deceased brothers and sisters of the decedent s parents surviving Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 4

both them and the decedent and one of the shares shall pass to each of the brothers and sisters of the decedent s parents or their respective issue, per stirpes. If there is no person mentioned above, then to the State of Indiana. Note: A parent may not receive the intestate share of the estate of the parent s minor or adult child if the parent was convicted of causing the death of the child s other parent by murder, voluntary manslaughter, another criminal act, if the death does not result from operation of a motor vehicle, etc. The share of a disqualified parent is distributed as if the disqualified parent had predeceased the child. Any part of the estate of a person not distributed by will shall be distributed under Indiana Code 29-1-2-1. (2) Requirements for a Valid Will, and Do You Need One? (a) A will must meet the statutory requirements of Indiana Code 29-1-5-1, et seq. In writing. Testator must be of sound mind, and the will must be executed voluntarily and without coercion or duress. Testator must be age 18 or older. Signed by testator. Signed and witnessed by two disinterested witnesses. (b) Considerations requiring a will. (c) Trusts. Minor children; where and with whom will they live... who will be guardian. Second or subsequent marriages. Special needs provisions for disabled children or adults. Avoiding controversies, or creating them. Special or unique estate planning or death tax considerations. (GRATS, Q-TIP s, Family Trusts, etc.) Avoiding probate... the personal revocable trust. Postponement of enjoyment, protection of children and avoiding waste. Protection of spouse and insuring ultimate transfer of assets to other generations. (3) Transfers of Property by Operation of Law. (a) Real Estate. Jointly owned realty (joint tenants with the right of survivorship): Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 5

- Passes to the surviving joint tenant; - Avoids probate on the death of the joint tenant; and - Tax considerations and basis. Tenancy by the entireties (as husband and wife or as husband and wife as tenants by the entireties): - Applies to marital real estate only; - No tax impact; - Avoids probate on death of spouse; and - Avoids creditor claims. Tenancy in common: - Does not avoid probate; - Each tenant owns an undivided percentage of the whole; - Creditor issues and forced sale; - Great potential for disputes land not easily divided; - No tax advantages; and - Common with family farms. (b) Personal Property. Joint ownership jointly or jointly with the right of survivorship: - Passes to surviving joint owner; - Avoids probate on death of joint owner; - Can result in unexpected consequences; and - Tax considerations and basis. IRAs, P.O.D., etc., Accounts: - Passes to named beneficiary; - Avoids probate on death of owner; - Tax considerations and basis; and - Can result in unexpected consequences. Life Insurance: - Passes to named beneficiary; - Avoids probate (except when estate is named beneficiary); - No income tax, and no Indiana Inheritance tax (except when estate is named beneficiary); and - Can result in unexpected consequences. Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 6

(4) Death/Transfer Taxes. (a) Indiana Inheritance Tax: No tax on life insurance transfers to beneficiaries other than when decedent s estate is the named beneficiary; No tax on transfers to surviving spouse; and Lower, graduated, rate and $100,000.00 exemption on transfers to children and other lineal descendants/ancestors. (b) Federal Estate Tax: No tax on lifetime or death transfers to spouses; $5.0 Million lifetime exemption (through 12/31/2012); and High rates on amounts exceeding individual exemption. (B) Choice of Business Entity Form; Which is Best for You/Your Firm? (1) The Sole Proprietorship. Life is great; you own it... you enjoy it... you direct it and let someone else worry about it when I m gone! Life is not so great; unlimited personal liability. No organization cost or annual entity filing or reporting requirement. Income or loss reported on Schedule C of personal income tax return. Use a CPA to monitor success, etc.; keep separate books. Can direct by will who is to have it, have option to buy it, etc. AND, if you are a licensed funeral director, Never, EVER, organize and operate your funeral home as a sole proprietorship. Why? Your business dies with you! The funeral home license issued to a sole proprietorship is not transferable from one person to another. Indiana Code 25-15-7-1 and 5. A funeral home license applies to one location only. Indiana Code 25-15-7-2. A funeral home license must have a manager (licensed funeral director) in charge of the funeral home. Indiana Code 25-15-4-1 and Indiana Code 25-15-8-2. The State Board can order transfer of all preneed contracts of a seller losing its license and unable to perform contracts. Operation of a funeral home without a funeral home license is a Class B infraction. Indiana Code 25-15-8-24. Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 7

(2) The Partnership (Indiana Code 23-4, et seq.). An agreement by or among two or more persons to organize and operate a business venture together, hopefully, for profit. Requires a formal partnership agreement and assistance of counsel. No governmental filing requirements and no regular reporting (a partnership does file tax returns and partners report income or loss by mean of a Schedule K-1 issued by the partnership; generally requires a CPA for accounting and tax advice). The partnership does not pay tax at the entity level. Partners can have different ownership/income percentages and are generally tied to the amount of each partner s capital contribution to the partnership. In Indiana, all partners are jointly and severally liable for a partner s wrongful acts or breach of trust, and jointly liable for all other debts and obligations of the partnership. The partnership agreement can provide terms for one partner to purchase the interest of a deceased partner, or can require dissolution and division of the partnership assets and debts. (3) The Corporation (Indiana Code 23-1, et seq.). A legal entity formed by one or more persons to operate a business, hopefully, for profit. Formed by filing formal Articles of Incorporation with the Indiana Secretary of State. Generally requires the assistance of counsel. Entity must have: Board of Directors (manages the business), Officers (carry out duties required by law and by the Board), and must file a biennial report with the Secretary of State advising of changes to officers, address of registered agent, etc. Annual recordkeeping requirements, minutes, etc. Shares are issued to owners in proportion to capital contributed for the purchase of shares (can be of different classes). Number of shareholders is unlimited and there is no restriction on stock classes (voting vs. non-voting) (rules are different for an S corporation). Generally, there is no personal liability to any of the shareholders; the corporate entity is liable for negligent and/or wrongful acts, not the individual investors. The entity is taxed on its earnings (profits) at the corporate level; a corporate tax return is required. Shareholders are taxed only on dividends distributed, after the entity pays taxes. (4) The S Corporation. Must file Form 2553 with the IRS and received approval notice. Only one class of shares permitted. Corporation may have no more than 100 shareholders. Profits and losses taxed at shareholder level only; corporation pays no taxes. Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 8

Special election rules apply. Maintains all other aspects of corporate organization. (5) The Limited Liability Company ( LLC ) (Indiana Code 23-18). A legal entity formed by one or more persons to operate a business, hopefully, for profit. An unlimited number of members/participants is permitted. One member is generally designated as the manager. Requires the preparation and filing of an Operating Agreement specifying duties, how the business is to be run, profits allocated, rights of members, etc. Also requires filing of Articles of Organization and Certification of Formation with the Indiana Secretary of State. Members typically contribute money or services to the LLC in exchange for a percentage of profits and ownership. No personal liability on the part of members for the negligent or wrongful acts of the LLC. Entity is not taxed (unless specially elected) and profits and losses are passed through to the members in accordance with the terms of the Operating Agreement. Can have a single member LLC. Members of the LLC are not personally responsible for the debts and/or liabilities of the entity. (6) The Limited Partnership (Indiana Code 23-16, et seq.). Similar to a partnership, but with one very important exception: in general, a limited partner is not liable for the obligations of the partnership unless the limited partner is also the general partner or the limited partner participates in actual control of the business. Certificate of Limited Partnership filed with the Indiana Secretary of State, but no reporting requirements. (7) The Limited Liability Partnership ( LLP ) (Indiana Code 23-4, et seq.). Similar to a partnership. Must file a registration statement with the Secretary of State. Mergers and entity conversions are permitted. No reporting requirements. Partner of an LLP is not personally liable, directly or indirectly, or by way of indemnity or contribution, for debts, obligations or liabilities of the LLP or other partner or partners, or for the acts or omission of any other partner solely by reason of being a partner, acting or filing to act as a partner, or participating in the business activities of the LLP. But a partner of an LLP may be liable for his/her own acts or omissions. An LLP is liable only out of its own assets for partnership debts and obligations. Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 9

IFDA Indiana Funeral Directors Association 1305 W. 96 th St. Suite A Indianapolis, IN 46260 317-846-2448 800-458-0746 Fax 317-846-6534 Copyright 2011 Indiana Funeral Directors Association. All Rights Reserved. Page 10