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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!
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!
A lot of clients seem to be under the misconception that, if your will is valid, self-explanatory, and clear as to your intent, then it does not need to be probated. However, your Last Will and Testament is not effective until it goes through probate. It does not matter if it is clear and unambiguous! The deceased persons’ assets and liabilities cannot legally pass to the beneficiaries named in the will until after the Probate Court enters an Order that shows that the assets pass to the beneficiaries.
For example,many people that own a home in their name and may leave it to their children in a will. During the life of the owner, in order to be able to sell the home, they would need to sign a deed over to the new buyer in the closing process. After they pass away, a buyer will not accept a signed deed from the deceased children since there has been no legal determination or court order granting them the legal right to sign over the deed, since it is still in the deceased person’s name. It will not work to simply provide the buyer with a copy of the will, since it does not solve ownership problem and they cannot be assured that the will is valid until the probate court has reviewed it. Therefore, only until an Oklahoma Probate Court has reviewed and decreed the will to be a valid Last Will and Testament of the deceased, and that the will legally passes the home onto the children, the children have no legal authority to sign a deed, sell the house, or have any ownership to the house. As a result, there is no will that is effective until it has been probated and through the probate process.
Many people are flustered and upset that their estate has to go through probate when they have a valid will, but they can solve this problem by establishing and funding a Revocable Living Trust. Let Skillern Law Firm help you in this process by calling the law office today.
Today on the Tulsa Estate Planning Blog, we’re going to explain the difference between a living trust, a revocable trust, and an irrevocable trust. Specifically, what are the advantages and disadvantages of the types of trusts. So let’s get started.
A living trust and a revocable trust are usually, if not always, the same thing. Both are trusts that are set up to hold assets during the life of the settlor or grantor (the person who created the trust) for the benefit of that person. It is called a “living” trust because it is established during the lifetime of the settlor. It is also called “revocable” because the settlor can revoke the trust at any time during his/her lifetime. The purpose of the revocable, living trust is to avoid probate of the settlor’s assets after he or she passes away. The estate will avoid probate if the trust is written well and the settlor does not do anything irresponsible after the trust is created (like forgetting to transfer deeds into the trust name). After the settlor passes away, however, the trust will become irrevocable in that it cannot change. The “successor trustee,” or the person who was named to take over the trust’s management, shall distribute the property as described in the trust. Sometimes a trustee is a bank or individual who is paid for their services, but often it can be family and friends who will do it without a fee. This is one reason why trusts are less expensive than probate. The major advantage is that a revocable trust will avoid probate, and it is flexible in that the trust can be amended and changed.
An irrevocable trust is a trust that cannot be amended, changed, or revoked once it is established. Irrevocable trusts are normally formed by a person or family who wants to give away assets to another person, subject to certain terms that they do not want to be changed. Once the settlor puts the assets into the trust corpus, the settlor no longer owns or has access to those assets. There are many practical advantages to an irrevocable trust. There are tax advantages as well as creditor advantages. Creditors cannot gain access to the funds in the irrevocable trust since it is no longer in the settlor’s estate. However, the disadvantages may outweigh the advantages for many people. The trust cannot be amended or changed without going to court, and the settlor cannot get the gift back, ever.
Skillern Law Firm, PLLC can create both types of trust for your estate planning needs. Please contact us today! If you are interested in creating a will instead of a trust, please read our last post – The Difference Between a Will and a Trust.
Lions, tigers and bears! Oh my! Sometimes thinking about estate planning is as scary as a pack of wild animals. Understanding wills and trusts might make one feel as if they aren’t, perhaps, in Kansas anymore, but the differences and similarities are easy to learn.
Let start small. Wills and trusts both dispose of property after death. Both are documents that dictate your wishes in written form. Wills and trusts do differ in the following ways:
- Privacy. Wills are private documents until they are entered in a probate proceeding. Probate proceedings are open to the public, and anyone can see how your estate was distributed after your death. Trusts are private documents. The public will be able to see that you have created a trust, but the public will not know the contents of the trust. Further, trusts are not entered into probate, and the distribution of assets will never be open to the public.
- Disability. A will makes no provisions for disability. A trust allows for a successor trustee to manage assets without the need for a court proceeding.
- Cost. Wills are less expansive in the short term, but heirs might incur more costs after death in probate attorney fees.
- Effort. Wills require only the effort to write one. Trusts require a little more time investment, in the transferring of assets into the trust. However, this process can (and should) be done by your trust attorney.
- Creditor protection. Neither wills nor trusts can shield their makers from creditors. Trusts can include provisions that shield its assets from heir’s creditors.