Why Native Americans Families Should Re-Consider Professional Estate Planning Services

Having a well thought-out will or other estate planning instrument in place can provide peace of mind and financial benefits for any family. This is particularly true for Native American families.

The complex history of the law governing ownership and distribution of tribally-owned land and property poses/creates unique risks and concerns when it comes to the disposition of land and property upon the death of a family member. Such issues are best addressed with careful and professional estate planning legal services.

The Current Crisis in Estate Planning for Native American Families

In the past, due to the increasingly complex nature of the laws governing tribal land, the National Bureau of Indian Affairs (the BIA) provided estate planning services and maintained wills for tribal members. As a result, many Native American families chose not to seek independent professional estate planning services; they simply had no need to be concerned about effective estate planning practices, or to be aware of the pitfalls present in federal law governing tribal land.

In April of 2005, however, the BIA announced that it was discontinuing its estate planning services and would no longer store wills of tribal members. Many tribal members were left without an effective or reliable plan for their estates.

Consequently, tribal members, or those with an interest in tribal land, should take the opportunity to re-consider the benefits that a well-drafted will or other testamentary instrument can offer Native American families.

Native American also families must take certain precautions to ensure their estate planning intentions are carried out. Below are a few of the most important issues that effective estate planning can help to avoid.

A Properly Drafted Will Can Avoid a Finding of Invalid Devises or Heirs

The Indian Reorganization Act of 1934 (IRA) plays a role in determining how tribal lands can be devised by distinguishing between IRA lands and non-IRA lands. For tribes adopting the IRA, tribal lands were placed in trust with the federal government (as IRA lands). For tribes choosing not to adopt the IRA, tribal lands remained outside the application of the IRA's provisions (as non-IRA lands).

The non-uniform adoption of the IRA places Native American families in a tricky situation when drafting a will or other testamentary instrument. Different rules, each with their own exceptions, apply to IRA and non-IRA lands.

In general, IRA land must be devised (or passed on) to a Native American in a manner that preserves its trust status. Non-IRA land, on the other hand, can be devised to whomever the devisee chooses, taking it out of trust and passing on outright ownership, but to a non-Indian only.

If a will seeking to devise tribal land contains a provision failing to recognize this important distinction, the devise will be considered invalid and the federal or tribal governments will determine disposition of that land. It is unlikely that either government will consider the intent expressed by the deceased in his or her will.

An effectively drafted instrument, in contrast, can ensure that none of the provisions included in a will are invalidated due to the terms of the Indian Reorganization Act. Thus, Native American families should be sure to consult the provisions of the IRA when drafting their will and, if necessary, devise their land in a manner that preserves the trust relationship established therein.

A Will Can Avoid a Third Party Purchase or Forced Sale of Family or Tribal Land at Probate

In 2004, Congress passed the American Indian Probate Reform Act of 2004 (the AIPRA). The AIPRA has changed the way trusts are distributed among heirs if a decedent dies without a will. In certain situations where a decedent dies without a will, the AIPRA allows either (1.) any co-owner of a federally allocated parcel of land or (2.) any tribal government to petition to purchase the decedent's interest in that tribal land before the land is transferred to any heir. As a result, even a valid family heir to tribal land will be unable to contest the sale of their family's property to a third party. A valid and appropriately drafted will, however, can prevent the application of the AIRPA's petition provisions, ensuring that ownership of land passes as the decedent would have intended.

Advanced Estate Planning Can Avoid the Application of the "Single Eligible Heir Rule"

Even a Native American family with the foresight to draft a will faces some unique challenges to ensure that its terms will not be invalided as a result of federal restrictions pertaining to the devise of Indian land.

One such restriction is the "single eligible heir rule" of the AIPRA. In part meant to reverse the increasing "fractionalization" of Native American land resulting from the General Allotment Act of 1887, the "single eligible heir rule" provides that without a valid will, any interest in trust land can be inherited only by a "single eligible heir" - the oldest surviving eligible child, grandchild, or great grandchild of the deceased. (If there is no surviving heir, the tribe will take ownership.)

This result can sometimes engender disputes among children and is in contrast to state law applicable to non-Indians, which divides land equally among all children of the deceased (after provisions have been made for the spouse of the deceased).

A well-drafted will can circumvent the application of the "single eligible heir rule" and allows tribal members to devise their land to any heir and in any percentage that they choose.

A "Gift Deed" Can Provide Native American Families Some of the Benefits of a Living Trust

For many families, placing assets in a "living trust," as opposed to the use of a last will and testament, is a superior estate planning option. Because many parcels of Indian land are already held in trust by the federal government, however, Native American families face an additional hurdle when seeking to gain some of the benefits of a "living trust." Such families might instead transfer trust property through a "gift deed" to achieve a similar result.

A "gift deed," if submitted to and approved by the BIA, can be used to transfer trust property to an heir while avoiding the risks associated with the use of a last will and testament, as well as taking advantage of some of the financial benefits of a living trust. These benefits include: avoiding the probate process, keeping estate planning private, preserving eligibility for government benefits, and providing a number of potential tax savings.

Above are only a few of the unique rules applicable to Native American wills and trusts that Indian families should take into account as they consider their estate planning options. As these examples illustrate, Native American families face a number of challenges when seeking to ensure that their estates are appropriately cared for and distributed upon the death of a family member.

To ensure that your family has an effective estate plan in place that will comply with all relevant federal law, consider reading more about estate planning or contact a McKinley Irvin family lawyer.