Study commission repeal endangering probate code needs

Since the Probate Code Study Commission was eliminated as part of a 2014 law that reduced the number of interim study committees, certain legislators and attorneys have mounted an effort to get the commission reinstated.

The Indiana General Assembly is again considering a bill that would bring back the probate body. Senate Bill 31 has passed second reading in the Senate and has picked up bipartisan support, but a similar bill considered during the 2015 session got all the way through the upper chamber before it died in a House of Representatives committee.

Jeffrey Kolb of Kolb Roellgen & Kirchoff LLP in Vincennes said he is optimistic about the bill’s chances this year, but he quickly acknowledged he is an optimist by nature.

Kolb and his colleagues on the Probate, Trust & Real Property Section of the Indiana State Bar Association said the commission is vital. Tracing its roots back to 1950, the commission has served to review proposals, draft legislation and make recommendations to the Legislature.

Probate law is a vibrant area but also can be very detailed and confusing to those unfamiliar. A change to one provision can ripple through the probate code and upend two or three other sections.

The commission brought attorneys and elected officials together to discuss and brainstorm on updates and amendments. Its work carried weight in the Statehouse and, per Indiana Code, could be used by the courts to interpret and apply the state’s probate law.

Kolb, who sat on the commission after being appointed by Gov. Otis Bowen, said the consequences of not having the interim study body are substantial.

“We run the risk of (making) bad law and not keeping Indiana law current,” he said. “But more important, we just lose that exchange of information between lawyers and legislators.”

Unexpected repeal

Probate attorneys were surprised when the Legislature disbanded the commission.

ISBA probate section chair Paul Crowley of Butler & Crowley in South Bend explained the commission was the conduit between the section and the General Assembly. The probate section would recommend proposals for addressing areas that were concerning or needed more clarity. Then the commission would consider the matters and determine the best way to move forward in the Legislature.

The commission’s work covered a range of issues. Among them were the Power of Attorney Act of 1991 which, Kolb said, was ahead of its time, and 2011’s House Enrolled Act 1055, which prevented “granny snatching.” No longer can family members move an elderly relative out of state solely to apply for guardianship.

However, Senate Enrolled Act 80 in 2014 overhauled the interim study structure by establishing 17 committees and repealing 30. Some in the repealed category had their duties shifted to a new committee but the Probate Code Study Commission was among the committees that were completely erased.

Sen. Joe Zakas, R-Granger, introduced Senate Bill 31 this session, which would bring back the commission. He could not be reached for comment.

Before it was repealed, the commission consisted of 10 lay members and six legislators. During the 2013 interim session, the commission’s last, the group met three times and recommended three pieces of legislation. The work consumed about $8,700 of its $16,500 budget.

Jenkins

Sarah Jenkins, partner at Faegre Baker Daniels LLP, speculated the Legislature may have done away with the commission in the spirit of making government smaller and saving money, but she said, “if we’re not thinking critically about these (probate) issues, we’re not doing our constituents any favors.”

Doing without

Without the commission to vet bills, legislators have to sort through probate matters on their own. They are taking a piecemeal approach by proposing bills that address a particular problem of a constituent but often these measures would produce unforeseen harm if enacted. In addition, more thoughtful proposals suggested by probate attorneys are having trouble getting traction.

“The commission served a vital role to ensure we got knowledgeable legislators looking critically at these issues,” Jenkins said.

Dible

Jeff Dible, partner at Frost Brown Todd LLC, recently testified in a handful of hearings to try to stop some probate bills that he believes never would have been introduced if the commission still existed.

One bill, Senate Bill 192, would require a guardian of a protected person to notify the immediate family if the individual is staying at another residence or admitted to a health care facility. Listing the people included in the definition of “immediate family,” like spouses, children, siblings, and stepparents, Dible raised the concern that the bill contained no safeguards for protected persons who are estranged from all or certain relatives.

During the 2015 session, Senate Bill 305 was introduced regarding non-trustee fiduciaries. The measure specified the powers and duties of these individuals and imposed some limitations on liability. Dible called it an important bill but he lamented that because nobody understood the purpose, it never had a hearing.

He believes if the commission had taken a look at the measure, it might have at least gotten a hearing in committee.

Problems ignored

Also in the absence of the commission, attorneys warn that some issues are not being addressed at all.

In particular, Kolb pointed to the growth of dynasty trusts. These allow assets to be protected for multiple generations, but while other states have enacted laws enabling these trusts to be established, Indiana has not made the changes to its probate code that would permit them.

Consequently, the states that allow dynasty trusts, such as South Dakota, Ohio, Georgia and Florida, are advertising in Indiana and enticing Hoosiers to house their dynasty trusts across state lines. As a result, Indiana is losing the tax revenue generated by these trusts and attorneys are losing the work that comes from constructing these trusts for clients. Members of the state bar association’s probate section estimated $1 billion in assets have been moved out of state.

Jenkins pointed out another problem that may unnecessarily be increasing the workload on attorneys and the courts.

Indiana, along with Florida, does not allow the enforcement of no-contest clauses in wills. Every other state permits these in terrorem clauses, with some exceptions, but Indiana’s prohibition seems to be inciting claims without probable cause or claims that have not been properly vetted, Jenkins said.

Presently, most of these cases, even those claims that have no value, are being settled to avoid the cost of litigation. Having such a law in Indiana would decrease the number of wills being contested, Jenkins said, or at least get the beneficiaries to think long and hard about bringing a lawsuit.

Dible credited the commission with distinguishing real problems from bogus ones and determining which solutions were best. Now, even if a bad idea does not become law, it still takes up the Legislature’s time, he said.•