Estate Planning is not as simple as "1,2,3", but it doesn't have to be too complicated to understand. Therefore, we hope the following comments will enable you to formulate your thoughts, and enable you to take affinitive steps to implement your estate plan.

I. BASIC QUESTIONS

WHAT IS ESTATE PLANNING?:

Estate Planning is making decisions as to what you want done with your property; specifically, who is to enjoy it and how they are to receive the property.  Estate Planning also involves other decisions, such as providing income at disability or retirement, providing guardians for minor children, and making certain that there is enough money to pay any estate taxes.

WHAT IS INVOLVED IN ESTATE PLANNING?:

After answering the first question, you shou1d visit with a knowledgeable professional advisor in order to make certain that your decisions can be carried out in a way that complies with the legal requirements which apply to Wills or Trusts. Generally this involves a visit to an attorney . You and the attorney will discuss what you want to do, and the attorney will determine whether or not it can be legally accomplished. After this consultation process, the attorney will prepare the legal documents which will be used in your estate plan.

WHAT ARE THE TYPES OF ESTATE PLANS?:

Estate Plans generally will be one of the fo1lowing:

1.         A Will; or

2.         A Revocable Living Trust Package; or,

3.         No Estate Plan -- relying instead on the intestate

succession laws of Oklahoma.

WHAT IS A WILL?

A Will is a set of written instruction to another person, the Personal Representative of your estate, outlining to that person how to distribute your property, both real and personal, upon your death.

·       A Will generally has no effect upon the distribution of your property, until your death.

·       A Will is a relatively inexpensive document that can be easily modified.

·       A Will must be admitted to probate in order for the Personal Representative named in the Will to make the outlined distributions.

WHAT IS PROBATE?:

The term “probate” is derived from a Latin term which means “to prove”.  Therefore, the probate process is the process of proving to a Court of Law that the deceased has in fact passed away, and the instrument purporting to be the Last Will and Testament of the deceased, is in fact the deceased's Last Wi1l and Testament.

WHAT IS A REVOCABLE LIVING TRUST?:

A Living Trust is a written document, or a “contract” in which a person owning assets turns them over to a Trustee (usually the same person) with instructions as to how the assets are to be managed and ultimately distributed.

• A Living Trust operates during your lifetime. It can provide benefits while you are alive and also dispose of your assets or estate upon your death.
• A Living Trust may be easily modified at any time.  Since a Revocable Living Trust can be modified, you keep complete control of the assets you place in the Trust.
• A Revocable Living Trust lessens the burden on your survivors in distributing your estate at your death, in that a Trust may avoid probate.
• A Revocable Living Trust is personal and private. There is generally no need to file a Living Trust at the Courthouse and the provision of the Trust need only be known to those involved.
• A Revocable Living Trust is a separate “entity” for legal and tax purposes. Under IRS Regulations your Social Security Number (husband's or wife's in a joint trust) is the Trust LD. Number. As long as the Trustor is taxed on the income, a separate tax return for the Trust need not be filed. However, a Revocable Living Trust will not reduce your income taxes.

WHAT IS INHERITANCE TAX?:

There are two types that may impact your estate upon your death.  The two separate taxes are:

1. Federal Estate Tax; and,

2. Oklahoma Estate Tax.

There are several important things to remember about these two taxes:

1.         There is no Federal Estate Tax or Oklahoma Estate Tax on transfers between husband and wife. Either spouse can leave the other any size of an estate and there will be no Federal or Oklahoma Taxes due.

2.         Each person may leave any person or group of persons up to the Federal Estate Tax exemption in effect for the year of death.

3.         Each person may leave parents or issue up to the Oklahoma Estate Tax exemption in effect for the year of death. Estates left to persons other than a surviving spouse, parent, or issue, will be subject to Oklahoma Estate Tax, on the very first dollar--there is no exemption.

4.         Both taxes are based upon the fair market value of the estate at the date of death, not what was actually paid for the property.  Also, any life insurance owned by you is included in the Estate at its face value.

5.         There is no Federal Estate Tax or Oklahoma Estate Tax on transfers made to charities, such as a church or recognized 501(c)(3) charitable organization.

WHAT IS “NO ESTATE PLAN”?:

            No estate plan is where you pass away without a Will or Trust.  If this should arise the State of Oklahoma has written a plan for you and your estate will be distributed under the intestate succession of laws of Oklahoma. 

WHAT IS JOINT TENANCY WITH RIGHT OF SURVIVORSHIP, AND IS IT AN EFFECTIVE “ESTATE PLAN”?:

            Joint Tenancy with right of survivorship is a common way to title property is a common way to title property so that if one owner of the property dies, the survivor becomes the sole owner.  This is a useful way to title property when the owners of the property are husband and wife.

            However, Joint Tenancy is not recommended as an “Estate Plan”, and generally should not be utilized if the owners of the property are not spouses. 

            Common pitfalls of placing your property in Joint Tenancy with someone other than your spouse, if you intend to keep using the property:

            1.            The other joint tenant may get a divorce and the property may get involved in the joint tenants divorce.

            2.            The other joint tenant may get sued, and a judgment lien may cause the property to be sold to satisfy the judgment.

            3.            You may need to sell the property, and the other joint tenant may not agree to sign the deed. 

4.             The other joint tenant may file bankruptcy and the property may be sold to satisfy that joint tenant's creditors.

5.            The other joint tenant may become incapacitated and be unable to sign the deed if the property needs to be sold.

6.            If the property involved is a bank account, the other joint tenant has the right to withdraw the entire amount at any time.

ARE THERE ANY OTHER DOCUMENTS I SHOULD BE AWARE OF WHEN

THINKING ABOUT “ESTATE PLANNING”?:

There are two other documents that go hand in hand with a Will or a Trust.  These two

documents are:

1. Uniform Durable Power of Attorney; and,

2. Advance Directive for Heath Care.

There is a third instrument that goes hand in hand with a Trust.  This instrument is call a "Pour-over Will".

• A Uniform Durable Power of Attorney is an instrument that allows you to give another person your power of attorney to handle your business affairs. This instrument is durable in that it is effective even if you should become incapacitated. It will terminate upon your death, unless previously revoked.

• An Advance Directive for Heath Care is an instrument that allows you to decide whether or not your death will be prolonged through life sustaining methods, and by the artificial administration of food and water when you have been diagnosed with a terminal illness or are in a persistently unconscious state.

• A "Pour-over Will" is an instrument that has special provisions relating to the Trust. If any assets of the Trustor were overlooked and not placed into the Trust, there is the "Pour-over Will" which would distribute those assets to the Trust.

II.  USEFUL DEFINITIONS

1.  TRUSTOR:

The person who established the Trust.

2.  GRANTOR:

Any person or entity who puts property into the Trust.  This person is generally also the Trustor.

3.  TRUSTEE:

The person who manages the Trust.  Generally,  the Trustor is the original Trustee, and certain named individuals or entities are Successor Trustees. Because the Trust is revocable, the Trustee may be changed at any time.

4.  BENEFICIARY:

The person whom the Trust benefits. Generally, this person is the Trustor, with the Trustor's family, friends, or favorite church as the FINAL beneficiary.

5.  TRUST INCOME:

The income, interest, dividend, or rents, which the Trust earns.

6.  TRUST CORPUS:

The "body" of the Trust.  It is the property such as cash, bank accounts, stocks, bonds, and real estate that is placed into the Trust.

7.  ISSUE:

Any lineal descendant, either natural or by adoption. (children, grandchildren, etc...)

8.  LINEAL HEIR:

Blood relatives in the direct line of descent. (grandparents, parents, children, grandchildren, etc...)

9.  COLLATERAL HEIR:

All people you are related to, other than lineal heirs, either by blood or adoption. (brothers, sisters, aunts, uncles, cousins, etc...)

III GETTING STARTED:

            To get started on your "estate plan" there are several things you should do:

1.  Prepare a list of your assets, how the assets are owned or "titled" and their fair market value.  It is a good idea to get copies of all deeds, car titles, CDs, etc...

2.  Prepare a list of all your liabilities.

3.  Decide who you would want to appoint as Personal Representative of your estate, if you choose a Will; and, who you would want to be Successor Trustee if you choose a Trust.

4.  Decide how you want your property to be distributed upon your death.

IV. CONCLUSION

We hope the foregoing discussion is helpful in getting you started on your estate plan. We strongly stress, do not be like Scarlett and "think about it tomorrow," for tomorrow may be too late. GET STARTED AS QUICKLY AS POSSIBLE. Almost all of the estate planning problems that we encounter in our practice could have been avoided by timely, efficient planning.