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Estate Planning for Your New Expanded Family
The attorney of Skillern Law Firm, PLLC, Penni Skillern, recently had a baby girl in January of 2015. Yes, that is why there was a lack of blog posts and updates on our website. The first thing she did when she was able to go back to work was update her estate plan to reflect her new expanded family. Not only is it important to set up guardianship in your will, but its important to look at structuring your estate plan distribution for your new infant.
We have previously written about how to handle a minor infant in your estate plan before. Please read the blog post here.
For this blog post, we are going to discuss what to get done for your estate plan once you have the new baby. Having a child or children complicates life in many ways, and your estate plan is no exception. If you had an estate plan written when you were childless, it is important to reflect the monumental change in your situation in life in your estate planning. Most likely, you would want to leave part or all of your estate to your new child(ren). You do not have to have anything fancy like a revocable trust, however, it does need to be done. Here are four simple steps to take.
1. Write or Amend a Will or Trust
Even without children, having an estate plan in place is important. Generally, most young people do not think about getting an estate plan done until they have children. That is understandable, as most single young adults do not own a lot of assets to be distributed at their demise. However, once you have a child, it becomes not only important to write a will to discuss distribution, but also to name a guardian for your child(ren). Make sure to read a previous post about how to chose the right guardian for your child.
Once you have a will with a guardian appointed in place, if your children ever needed a guardian, the court would appoint the person you nominated in your will, absent a serious problem with that person. You can even name a separate guardian for different children if you wish. If you have not made plain in your will or estate plan who you wish to be the guardian of your children, and you pass away unexpectedly, the probate court will have no idea what your wishes were. That can cause fighting among the families of the two parents, each wanting the child. This can be stressful for the families, and especially the children left behind. The court would have no way of knowing which family member of friend who you wished to watch over your children if you were to pass.
The other main reason to write or update your will is that if you do not, and then you pass away, a portion of your estate may not go to your spouse, but may go to your children. If you pass away and have a young child, most people prefer that the money go to their spouse, who will use it to support their children.
Getting a will written and signed is easy, quick, and inexpensive. You can easily set up an appointment with an attorney and have one done and signed within a couple of weeks or a month. This important step can help your new family in unexpected ways and can alleviate an amazing amount of stress in the future if something unforeseen were to happen.
2. Buy Life Insurance
While our attorney was pregnant with her new daughter, she and her husband added new life insurance to their financial portfolio. The reason is simple: their lives were about to get more expensive. It’s not surprising to know that life with a child is more expensive than one without one. If you or your spouse were to pass away unexpectedly, are you prepared to take care of your child(ren) without the other person’s income? Life insurance is there as a safety net, to help take care of expenses that your deceased spouse would have helped with if they remained alive.
Obviously, this is more of a financial planning than legal planning. However, it is good to get both done when you are preparing or soon after you have a child. It’s best to have both your financial and legal plans in place, working together, when you have a child.
3. Write Durable Powers of Attorney and a Living Will
Even without children, Powers of Attorney and Living Wills are extremely important documents to have for every adult. If an accident or sudden illness strikes, these documents will make things much easier for your family.The Powers of Attorney (both financial and health), are documents that designate an individual to take care of matters if you are unable to. We have previously written about these documents, and you can read about Powers of Attorneys here.
Living Wills, or Advanced Directives, are also very important to have in your estate plan. If you have been to the hospital recently, you have probably been asked if you have one when you checked in. An Advanced Directive is a document that sets out your wishes for end-of-life choices and care. Oklahoma allows you to set our your end-of-life health care choices for three scenarios. Read about those here.
Even if you are young, childless, and healthy, these documents are important to have done. If you were seriously injured, these documents would let your family know what you wanted, sparing them very difficult decisions, court costs, and disagreements. There have been many famous young people whose families have gone through courts and disagreements because these documents were not in place. (Terri Schiavo was 26 when her illness began and she fell into a permanent vegetative state.)
4. Designate Beneficiaries on Accounts
One last simple (and completely free!) action to take is to name beneficiaries on your accounts, whether retirement, banks, life insurance, etc. All you need to do is fill out the beneficiary form provided by the account holding institution. By naming a beneficiary, you make it possible for the funds in the account to go directly to the person (or persons) you name, without probate. It is important to know the repercussions of naming minors as beneficiaries, however, so make sure you keep that in mind when you are planning for your new child.
If you do all of the above after you have a child, you are ready. Having a new child is a huge change in your life, and your estate plan needs to reflect that change. You are doing a disservice to your child if you do not plan ahead in case you are not there to take care of him/her. Your family would want to know your wishes for your child(ren) if you pass unexpectedly. Make an appointment with your local estate planning attorney today!
(Minor) Children in Your Estate Planning
When handling people’s estate plans, I am often asked how life insurance, retirement accounts, and other “beneficiary” property should be handled with regards to the young children. More often than not, people with children want some or all of the proceeds of these accounts to go to their minor children.
For example, if a client has a $100,000 life insurance policy and has a minor child of 5 years old, she would most likely tell me or the insurance agent that she wants her child to be the beneficiary of the life insurance. The questions presented in this situation are:
- What happens to the money and any other property when her minor child inherits or receives it?
- Is there a better way to handle life insurance proceeds or other property that you want to leave to a child?
To answer the first question presented, let’s look at Oklahoma’s law on minors. Children or minors are legally incapable of holding and managing that property until the reach the age of majority, which, in Oklahoma, is the age 18. While they are still considered minors in Oklahoma, any property or money a minor owns must be managed by another person, such as a guardian or custodian. IMPORTANTLY, for the most part, the financial institutions will require the guardian to go to court and receive Letters of Guardianship before the institution will release the funds into the guardian’s control. This applies to parents. Therefore, if a grandparent left a minor as a beneficiary of an account, the minor’s parent would have to go through the court process of Guardianship (which can be expensive), before the parent will gain control of the minor’s assets. This is an expensive complication to leaving an asset to a minor child, because court processes comes with attorney fees, accounting fees, filing fees, just to name a few.
In the above scenario, when the child turns 18, he or she can take over the management and control of the property or money. Oklahoma law generally does not require a specific level of financial literacy, planning, or common sense to manage or control your own property. Thus, the young teenager may squander the monies that was given to them very quickly, since they have full control of it once they turn 18. And how many 18 year old teenagers do you know that would know how to handle a lump sum of $100,000 responsibly?
THE GOOD NEWS is that there are other, more responsible approaches to leaving minors an inheritance. Rather than naming your child directly to receive the proceeds of a life insurance policy, or any other beneficiary account, you can set up a revocable or irrevocable trust that has your minor child as a beneficiary. This allows you to provide for appropriate use and management of the property with certain guidelines and control that will not let the minor child to squander their inheritance, and it won’t include any court process or fees. Unlike custodial arrangements discussed above, a trust does not necessarily terminate at age 18 and can continue to provide supervised management of the property into adulthood, including planning for education and other life-events. To read more about trusts, read a previous article by our attorney here.
The Trustee, or the person who manages the trust’s money and property, can also be empowered to use the Trust’s money for the benefit of the child, without the need and cost of court supervision. This can be helpful because it allows you to have more control over the types of expenses you want to provide for your child, including health, education, and general expenses one might occur as a young adult.
Remember, selecting a beneficiary for any type of monetary account is an important decision with potentially far-reaching consequences. There are important legal implications depending on your choice. Selecting a beneficiary is part of your overall estate plan, and the attorney at the Skillern Law Firm, PLLC can help plan for your minor children or grandchildren. Call our office at to speak to our attorney today!
Stepchildren, adopted children, and half-blood relatives: No Child Left Behind.
Oklahoma has some unusual laws when it comes to step-children and half-blood relatives, especially in the intestate inheritance laws. Just as a reminder, intestate merely means that the person who passed away died without a will, and so the state’s inheritance laws are in effect. Oklahoma’s statute, Okla. Stat. tit. 84, § 213 (1994), is the state’s Intestacy law/code, if you are interested in reading the statute yourself.
Stepchildren are not able to inherit through the intestate system in Oklahoma. Only blood children are able to take from the estate. It’s as simple as that. If you want your stepchildren to inherit part of your estate, you need to get estate planning in place (a will is a good place to start), so that they are able to. Otherwise, your blood children, spouse, and other blood relatives will take from the estate.
In Oklahoma, half-blood children have their own special rules, which can be viewed as harsh. Half-blood children/relatives are not be able to inherit “ancestral property,” but are able to inherit all other property and assets. “Ancestral property” is property that the decedent (half relative who passed away) acquired by gift, devise, or inheritance. In other words, half-blood children or relations will not be able to receive any intestate property that was given to the decedent by an ancestor who is not also an ancestor of the half-blood relation. Okla. Stat. tit. 84, §222. However, half-blood relatives are able to inherit ancestral property when full-blood relatives are more remotely decended. See In Re Estate of Robbs. Therefore, a half-blood would not be able to inherit ancestral property if there is whole-blood kindred of the same or closer degree of relative. For example, if A & B were full blood relatives, and B & C were half-blood relatives, A would receive the B’s entire ancestral estate, leaving C to receive 1/2 or whatever portion he was entitled to without ancestral property included. Half-blood intestate inheritance can be a little confusing, and is a major source of probate litigation in Oklahoma. If you have any questions, feel free to call us today for any explanation of the law and to see how you can avoid this problem with a will.
Adopted children in Oklahoma have an advantage not available in many states to them: double inheritance. In Oklahoma, an adopted child can inherit from and through his/her natural parents as well as their adopted parents. The converse is not available, however. The adopted parents cannot inherit through the child they gave up for adoption. Adopted children, therefore, will be able to inherit through intestacy just as if the child was a maternal or paternal child.
Skillern Law Firm can help craft all different types of wills, trusts, and other estate planning documents that allow your children (of all sorts) inherit your property without worrying about Oklahoma Intestate Law. Please call us today for more information.
