Estate Planning Update: Federal Estate Tax No More?

Introduction – Estate Planning Today

For years, the primary goal of estate planning attorneys was minimizing or eliminating estate taxes at both the federal and state level. In 2010, the state of Oklahoma abolished its estate tax. Now, the federal government may do the same. That’s according to a blueprint that the Trump Administration and key Congressional committees released today. It’s called the Unified Framework for Fixing Our Broken Tax Code.

How Would the Unified Framework Impact Estate Planning?

The proposal would eliminate the federal estate and generation-skipping transfer taxes, which in 2017 apply to estates valued at greater than $5.49 million. What does that mean for you? If enacted into law, individuals would be able to pass unlimited sums of money to their heirs tax-free. Although relatively few Americans pay federal estate taxes, this would nevertheless represent a significant shift in the focus of estate planning. Rather than worrying about taxes, estate planning attorneys and their clients could concentrate on avoiding probate and protecting heirs from creditors and lawsuits. What’s more, clients with complex estate plans might have an opportunity to simplify their documents.

Conclusion – Estate Planning Attorneys and Clients Stay Tuned

It remains to be seen whether there’s enough support in Congress for this plan. However, given the ramifications of such a major change to our tax laws, estate planning attorneys and their clients should closely monitor the proposal’s progress.

Making Oklahoma Probate Easier

Probate is the court-supervised process of a distributing a deceased person’s property and money. Due to the time and costs involved, one should strive avoid it. However, for a variety of reasons, that is not always possible. What, then, can the Personal Representative do to make it easier? Here are three tips:

Follow Orders of the Probate Court

Personal Representatives have a fiduciary duty. This means the law requires them to act in the best interests of the estate. During a typical probate case, the court will enter a variety of orders – from authorizing the sale of property to decreeing distribution. The Personal Representative should strictly comply with all court orders.

Communicate with Family During Probate

Often, lack of communication is the biggest source of friction between the Personal Representative and other family members. Throughout a probate case, the law mandates notices to heirs and beneficiaries under the Last Will and Testament. Yet, the Personal Representative should go a step further and inform the parties even when formal notice is unnecessary. I advocate a family meeting at outset to help everyone get on the same page.

Keep Track of Probate Expenses

The Personal Representative usually incurs expenses and receives income. It is important that he or she keep track of receipts and disbursements as they occur. Before being discharged, the Personal Representative must file an accounting. If the Personal Representative does not keep accurate and timely records, there could be a delay in closing the estate.

Conclusion

In a time of grief, probate is the last thing anybody wants to endure. But the Personal Representative can facilitate a less burdensome experience by following court orders, communicating with family and keeping track of expenses. One more thing: Oklahoma probate laws are complex and highly technical. While some are inclined to represent themselves, I highly recommend employing competent counsel. For more on the duties of a Personal Representative, click here.

Estate Planning 101: Revocable Living Trusts

Estate planning and revocable living trusts. Between summer vacations, outdoor activities and backyard barbeques, it may not be top of mind. However, with the Fourth of July behind us, now is a good time to address this issue before the back-t0-school rush. Today I am beginning a series of posts entitled Estate Planning 101. The first topic is revocable living trusts.

Revocable Living Trust Defined

A revocable living trust is a legal arrangement whereby a person (the trustor) transfers property to another (the trustee) who manages it for beneficiaries. Because the trustor can amend or terminate the arrangement, it is called revocable.

How Do You Create It?

The trustor creates a revocable living trust by signing a legal document and transferring their property to the trustee. The process of transferring one’s assets to the revocable living trust, which estate planning attorneys call “trust funding”, is a vital step. Absent funding, the estate plan will be ineffective. For most people, funding entails signing new signature cards for bank accounts, completing beneficiary designation forms for IRAs, 401(k)s and life insurance policies and recording deeds for real property including the primary residence.

The Advantages of Revocable Living Trusts in Estate Planning

First and foremost, revocable living trusts avoid probate – a huge benefit. Probate is expensive and time-consuming. Probate also results in the loss of privacy and makes legal challenges to your estate more likely.

In addition to probate avoidance, revocable living trusts are advantageous for asset protection. What is asset protection? This means ensuring that your beneficiaries’ inheritances do not inadvertently end up in the hands of other parties such as creditors, ex-spouses or the government. Click here for more on asset protection in revocable living trusts.

Lastly, revocable living trusts can minimize or eliminate estate taxes.

Conclusion

Revocable living trusts are an excellent estate planning tool. Some balk at the cost. While more expensive than a basic will, they offer several advantages. A knowledgeable Norman, Oklahoma estate planning attorney can assess your circumstances and help determine if a revocable living trust is right for you.

Oil and Gas Probate

Many Oklahoma families own oil and gas rights, which can be a significant source of income. Unfortunately, mineral owners frequently misplace records detailing their oil and gas rights. Further, title problems arise. As a result, the oil and gas companies delay royalty payments. Among the biggest reasons for this delay is probate.

What is Probate?

Probate is the court-supervised distribution of a deceased person’s property. It involves the filing of a petition with the district court. What’s more, the personal representative or executor must publish notices and attend hearings. Oklahoma law requires probate for all property owned by the deceased individually, even if there is a last will and testament. The process usually takes anywhere from 6 months to 1 year to complete.

Why is it Important for Oil and Gas Rights?

Oil and gas companies typically allow heirs to sign leases based on an affidavit. However, unless the mineral interest is very small, they withhold royalties until probate is finished. That said, one can easily avoid it. First, the mineral owner can transfer the oil and gas rights to a revocable living trust. Second, the mineral owner can execute a Transfer-on-Death Deed. Lastly, the mineral may consider a lifetime transfer of the oil and gas rights to reduce or eliminate estate taxes.  The author recommends these techniques only with the guidance of a knowledgeable estate planning attorney.

Conclusion

Oil and gas affects all Oklahomans. If you own oil and gas rights, probate should be top of mind. Although one is best to avoid it. To learn more about revocable living trusts and probate avoidance, click here.

Last Will and Testament vs. Revocable Living Trust

For estate planning, one must choose either a last will and testament or revocable living trust. These documents differ in important ways. But for several reasons, a revocable living trust is probably the better estate planning tool.

A last will and testament requires probate. This is expensive and time-consuming. Probate also reduces privacy. Everything is filed in court. Thus, it’s public knowledge. By contrast, the court system has no involvement in administering a revocable living trust. Consequently, just the trustee, attorney and family members learn the details of your estate.

The second key distinction between a last will and testament and revocable living trust is incapacity. Whether due to a stroke, accident or Alzheimer’s disease, you may someday be unable to manage your financial affairs. A will only governs the distribution of estates after death, meaning it cannot deal with incapacity during lifetime. However, a revocable living trust takes effect immediately. If a trust’s creator later becomes incompetent, the successor trustee named in the document assumes legal responsibility for dealing with the trust property. This ensures payment of taxes, expenses and providing for your care.

Lastly, a revocable living trust offers more flexibility in estate planning than does a basic will. One can use a trust to protect assets from the creditors and divorcing spouses of beneficiaries. Furthermore, a knowledgeable estate planning attorney can structure a revocable living trust to reduce or eliminate estate taxes.

Estate planning is not something to be taken lightly. It requires careful consideration of one’s goals as well as personal and financial circumstances. Contact a Norman, Oklahoma estate planning attorney today to get started.

Estate Planning: 3 Things You Should Know

Estate planning is a nebulous term. It’s also a morbid one. Thus, many procrastinate on getting their affairs in order. But estate planning is among the best things you can do for your family. Here are three things you should know:

  1. Estate planning isn’t just for the rich. In fact, anyone with property and/or money can benefit from an estate plan. Most of my clients are just like you. A house, a car, maybe a retirement account or some life insurance. Do you want to make things easier for your loved ones? What about providing for a favorite charity or your alma mater? An estate plan is how you get there.
  2. One size does not fit all, and cheaper does not equal better. LegalZoom and other companies boast of a last will and testament or a revocable living trust for a price less than your cable bill. If it seems too good to be true, that’s because it is. No two people are alike. Therefore, no two estate plans should be alike. Each client of mine has unique goals and needs. Maybe you want to protect a beneficiary who has dependency issues or is in a bad marriage. Or perhaps shielding your assets from nursing home costs is a priority. Whatever the case may be, your best bet is to seek a knowledgeable estate planning attorney who can evaluate your circumstances, counsel you on the options and create a customized plan.
  3. Estate planning involves what happens while you are still alive, too. Estate planning isn’t just about the distribution of your assets after death. It also covers certain matters during your lifetime, such as who will make medical and financial decisions for you if you become incapacitated.

Estate planning is not something to be feared. Rather, it’s an investment in your family’s future. So, protect your legacy by planning your estate.

Can I Protect My Assets From Medicaid?

By some estimates, the incidence of Alzheimer’s disease will triple by 2050. As a result, an increasing number of American families will have to deal with the issue of long-term care. With costs approaching $60,000 per year, nursing homes and assisted living facilities can be a financial burden even for people in the upper middle class.

Medicaid, a joint federal and state government program, provides assistance for long-term care. However, Medicaid has strict eligibility requirements. These requirements often force applicants to divest all of their assets. For many, this is untenable. But can you do anything to avoid it? The answer is yes, with a couple of caveats.

First, Medicaid penalizes uncompensated transfers. This means you cannot give away property to qualify. The good news is that Medicaid looks back only five years from the date of your application. Thus, gifts before that time are not a factor. Second, you must relinquish at least some control over your estate.

So, what steps can you take to protect your assets from Medicaid? One option is creating a special type of irrevocable trust.  Such trust must be managed by an independent trustee, and cannot be amended or revoked. Another possibility is to sell property in exchange for a promissory note, which is structured so that it does not count against your Medicaid eligibility.

Both of the above options should be carried out only with the supervision and counsel of a knowledgeable estate planning and Medicaid attorney. Also keep in mind that because these are highly advanced estate planning techniques, the cost is higher than a basic last will and testament or a revocable living trust. That said, it may be worth it to leave a legacy by having money to pay for the grandchildrens’ college education or passing down the family farm to the next generation.

Selling Property in Probate

A deceased person’s largest asset is frequently a house. Whenever loved ones list the home, they’re sometimes surprised to learn that probate is necessary. In such cases, the family and their realtor should have a general understanding of probate sales.

Selling a house through probate involves court supervision. Generally, the personal representative of the estate must first obtain the court’s permission. This requires notice (both by mail and publication) and a hearing. However, if the family is all in agreement, the court can waive these requirements.

Another important difference between a regular sale and one in probate is the representations and warranties the seller makes. In probate, the seller is the personal representative. Because the personal representative is acting on the estate’s behalf, he/she should not make any individual warranties or representations. Further, rather than a normal warranty deed, the buyer should receive a personal representative’s deed. A personal representative’s deed is a special type of deed that protects the personal representative and the estate from liability.

Lastly, due to the legal requirements, a 30-day close is not always possible in probate. Therefore, the realtor should condition the buyer to expect delays.

Selling a house through probate is not the ideal circumstance. Yet, with knowledgeable counsel and a little transparency, it need not get in the way of a successful sale.

 

Spring Cleaning For Your Estate Plan

We have sprung forward! Despite the loss of sleep, I always look forward to the return of daylight savings time. It means warming temperatures, more sunshine and the pursuit of outdoor hobbies. For many, there is also spring cleaning. In between the yard work and garage sales, consider spring cleaning for your estate plan. Here’s why:

  1. You don’t have an estate plan – By some estimates, over half of adults in America do not have even a basic last will and testament, let alone a living trust. Lack of an estate plan causes many problems, from unwanted inheritances to court-ordered guardianships for minor children.
  2. Changing Tax Laws – Congress overhauled the federal estate and gift tax laws in 2012, and last fall’s election results may lead to additional changes in the near future. If your estate plan is more than a few years old, there’s a good chance it’s obsolete.
  3. New Family Dynamics – Perhaps you have a new grandchild. Or maybe you are now in a position to benefit a favored charity. Whatever the case may be, new family dynamics warrant a review of your estate plan.

Estate planning attorneys often preach this to clients: estate planning is not a one-time event. To avoid probate and achieve one’s goals and wishes, they must update their estate plan throughout the years as circumstances change. Keep that in mind this spring!

The Bank Asked for Letters Testamentary: Now What?

Losing a loved one is painful. Wrapping up the deceased’s financial affairs only adds to the stress. I often receive phone calls stating, “The bank asked me for Letters Testamentary. What’s that, and how do I get them?” Unfortunately, it involves probate.

If the deceased owned money or property in their name only, generally a probate court must supervise distribution to the heirs and beneficiaries. Letters Testamentary is a legal document appointing a Personal Representative to manage the deceased’s estate. Obtaining Letters Testamentary requires filing a probate petition with the district court and having a hearing before the probate judge. Only then will the bank release funds from the deceased’s account.

Probate is both costly and time-consuming. Thus, it’s best to avoid probate. The primary ways to avoid probate are beneficiary designations along with a Transfer-on-Death Deed for real property or a revocable living trust. Which option is best for you depends on a variety of factors, something an estate planning attorney can help determine.

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