Skillern Law Firm, PLLC

Home » Posts tagged 'trusts'

Tag Archives: trusts

Estate Planning for Your New Expanded Family

child momThe 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!

Funding A Revocable Trust

funding trustWhenever an attorney creates a Revocable Living Trust for a client, the trust needs to be funded.  “What does it mean to fund a trust?” is a common question that our attorney at the Skillern Law Firm  gets from clients.  It is a very important step in the estate planning process. To see what a Revocable Living Trust can do for you, read our previous blog post about the types of trusts and their advantages. A trust, if funded correctly, will allow its creator(s) to avoid the probate process. An unfunded or partially funded trust does not allow your assets to avoid probate, because only the assets owned by the trust at your death or payable to the trust at your death avoid the probate process.

There are a few common misconceptions about the trust funding process.

Myth #1 – Since you formed a trust and have a Trust Agreement, the trust is complete and there is nothing else that needs to be done. 

When you sign or form a trust with an estate planning attorney, signing to document is only the first step in the trust-creating process.  The attorney, or the client, needs to make sure ALL of the assets held by the trust-creators (or “trustors”) are put in the trust’ss name, or has the trust as the listed beneficiary of the account. Otherwise, the Trust Agreement is an expensive pile of paper that will not help the creator’s avoid probate. The attorney at the Skillern Law Firm funds all of the trusts she helps create, taking this important step out of the client’s hands.

Myth # 2 – When the trust was created, there was a list of all the property on an Exhibit or Schedule that’s attached to my trust, so that transferred my assets to the trust… right?

Many trusts have an exhibit or schedule of property. This is a helpful document that helps a successor trustee in ascertaining what property they should be managing and accounting for. Updating this exhibit or schedule as the “big-ticket” items change is important so that the information on the exhibit is generally up to date. However, merely putting a description of the property on a schedule or property addendum does not legally transfer the ownership of the property into the trust. That needs to be done outside of these exhibits/schedules, most likely by property deeds and beneficiary designations.

How do you fund a trust?

To fund a trust, the attorney or client needs to file the property deeds with the county its located in, and put the trust as the beneficiary on all accounts.  To fund business interest, you will need to assign closely held business interests to your trust. Like all things in life, there can be tax consequences and benefits to each course of action. You should always seek tax advice prior to making a transfer of property, because once transfers are completed, there is often no undo button for tax purposes.  Whenever our attorney create a trust for a client, she makes sure she funds the trust at creation, but it is up to the client to keep the trust correctly funded after signing.

What are the benefits of a fully funded trust?

The biggest benefit of a correctly and fully funded trust is that it allows your beneficiaries to avoid probate. One more important benefit of a fully funded trust is that it allows for easier management of your property in the event of your incapacity. A truse can also can save on administration costs upon your death or incapacity, since your successor trustee and beneficiaries will not have to spend as much time and money locating your property.

Having a revocable trust in your estate planning portfolio is important for those who want to avoid probate and keep their estate administration as easy as possible. Funding your revocable trust is an absolute necessity if you want the benefits of avoiding probate and having management of your property in the event of your incapacity. Funding your revocable trust is a necessity that should be completed and worked on along with the creation of your trust. Call the Skillern Law Firm today to get your estate planning done today!

Oklahoma’s Simplified Probate

probateIf you do not have a Revocable Living Trust, your estate will  need to be probated or be small enough for a simple affidavit. Probate is the legal process required for estate administration and asset distribution.  To read more specifically about what probate is, read our previous post “what is probate.”

One important thing about about probate is that is is time-consuming and typically expensive. There are court costs, publishing fees, and of course attorney fees. For this reason many people are able to shrink their probate estate using simple ways to avoid probate like beneficiary designations or a revocable living trust. A trust allows you to put all your assets into a trust, you then name a successor trustee to take over when you are incapacitated or pass, and your named beneficiaries who would receive distributions without having to go through court. It’s usually very simple and clean.

Simplified Probate

Regular probate is most likely going to be necessary for most people with a normal sized estate. However,  those who have a smaller amount of assets may be able to pass along property outside of probate altogether or through the utilization of a simplified probate procedure. In Oklahoma,  if the estate is worth less than $20,000,  a simple affidavit can be used to claim the estate after a ten day waiting period.

For estates larger than $20,000 and smaller than $150,000, Oklahoma allows for a “Simplified  Probate.” The executor or executrix can contact the probate court to request simplified probate if the estate that he or she is administering is valued at less than $150,000 ($175,000 beginning November 1, 2013). This includes all personal property as well as other assets. The benefits are that it is quicker than normal probate and the attorney fees will be less.

Whether your estate is too large for simplified probate or small enough, the best way to make sure your affairs are in order is to contact a qualified estate planning attorney. The attorney of the Skillern Law Firm can help you plan out your estate so your heirs are taken care of in the best and efficient manner possible. Call our office today!

Should I Get A More Complex Estate Plan?

Most people that come into our office expect to need a “simple” estate plan. Usually, they mean a will, power of attorneys, and a living will. No trust, no tax planning, and no trust provisions for their children or other family members.  Perhaps the initial motivator for this is the lower cost, but also the understandable desire to avoid taking the time and energy to understand the workings of a more complex estate plan.

First of all, of course simple plans are less expensive and easier to understand. However simple estate plans are usually for small, straight forward estates. Small usually meaning an entire estate worth less than 100-150 thousand, and straightforward meaning married couple with adult, healthy children with no complications. Most couples estates are worth more than the smaller, especially when you consider that your estate consists of EVERYTHING you own (Life insurance, real property/homes, cars, personal property, retirement accounts, bank accounts, etc. Also, if you have children, grandchildren, or others that you care about and wish to see benefit from your estate, a simple plan offers absolutely no assurance that that will happen.

Here’s a couple of brief examples:

  1. John dies and leaves all of his assets to his wife Jessica. They have one child, Joe.  A few years later, Jessica marries Jack, and they buy a house together with Jessica’s money, and she names Jack as the beneficiary of the IRA that she rolled over from John.  Jessica then dies, with a Will that names Joe as the sole beneficiary.  However, despite what the Will says, her second husband Jack gets the house, the IRA, and under Oklahoma law, one-half of all other property.  John and Jane’s son, Joe, is left with little of her estate.
  2. Lisse has three adult children, Larry, Louise, and Lisa.  Louise and Lonnie each have two children of their own. Lisse’s Will provides that each shall receive one-third of the estate.  Lisse dies, and each child receives $250,000.  Larry uses the money to buy a home with his wife.  They then divorce, and the judge awards her the house in the divorce settlement.  He is left with nothing of Lisse’s original estate.  Louise uses the money to start a business, risky since she has little business sense or experience.  The business fails, and she and her children are left with nothing. Lisa puts the money in a savings account in his name, but his Will provides that her husband gets everything.  Lisa dies, and a couple of years later her husband remarries.  Sometime after that he dies, and the new wife gets everything, and leaves nothing for Lisa’s children. After all of these events, Lisse’s children and grandchildren are left with nothing of the original estate.

These types of circumstances occur everyday and impact many, many families. Second marriages are very common, and as a consequence, children and grandchildren are unintentionally disinherited, and in-laws, spouses or ex-spouses, and creditors end up with the family legacy.

How do you prevent these types of things from happening? Call our office today about using a trust or multiple trusts as part of your overall estate plan.  It will cost a bit more (at this time, but do not forget it skips probate costs), and take some more time to implement, but the savings and peace of mind can be priceless.

It’s Important to Update your Estate Planning After A Divorce

Most couples, especially married couples, get their estate planning done together and draft them accordingly. Most of the time, married couples will get a Family Trust, rather than two individual Trusts, and all the beneficiaries/executors/trustees are listed as each other. After the unfortunate event of a divorce, it is extremely important to get your estate planning updated to reflect your life change. Most people’s wishes and ideas about who should receive and manage your property after your death changes after a divorce. The only way to effectively express that intent is to have a new estate plan drafted.

When you get divorced, you absolutely need to update your estate plan. Oklahoma law provides some safeguards for Wills, Trusts, and certain beneficiary designations. Under Oklahoma law, your former spouse does not benefit under your will or Trust, only if your Will or Trust follow the requirements of Oklahoma law. However, these few safeguards are incomplete and will not change your estate plan to exclude your ex-spouse in some situations. The default rule will not revoke any gifts to relatives of your ex-spouse, for example.

It is important to update your Will and/or Trust after a divorce, because the default Oklahoma rules that may or may not apply, and an experienced estate planning attorney will know which ones need updating. One of the best ways to express your new wishes after the divorce is to create or amend your estate plan. This way, you are able to accurately express your new intent with your estate, since divorce usually changes your intent (i.e. leaving the ex-spouse out), and this will ensure that your wishes are clearly communicated.

One important thing to update after a divorce is beneficiary designations on accounts. When you select beneficiaries for life insurance, retirement plans, or bank accounts, you are making a legally significant decision. After you pass away, the institution holding the account will look at your account information, including the death beneficiary, and distribute accordingly. Ex-spouses, if not changed on the account, have a strong chance of benefiting from the account.  Divorce has an very limited effect, if any, on these beneficiary type arrangements.

For example, most people hold a lot of assets in their IRA, 401(k), or other retirement plan. Most people do not realize that these retirement plans are governed by Federal law, and no state (including Oklahoma) can use a divorce decree/order to overcome the beneficiary designation on your retirement plan. This means your ex-spouse will benefit if the beneficiary is not changed. You absolutely have to change the beneficiaries after a divorce decree is final to express your new intent.

Most people have many other things on their minds if they have just gone through a divorce, but it is very important to contact an estate planning attorney, or be active in keeping your estate plan up-to-date. Please contact the Skillern Law Firm, PLLC if you need your estate plan updated or created.

What Happens To My Trust After I Pass Away?

Many people who create a Revocable Living Trust fail to understand what happens to the trust after they are gone (for more information about types of trusts, see Let’s Talk Trusts). One of the most common misconceptions is what happens to a Revocable Living Trust after the trustmaker or “trustor,” or the person who created and funded the trust, dies. A lot of successor trustees believe, that as long as the trust is fully funded, all that they need to do is collect an inheritance check, pay some taxes, and that is it. However, it really does not take a lot of common sense to figure out that there needs to be more than that, since you are closing and cleaning up the financial affairs of a person’s entire life.  (For more on trustee’s duties, See Duties of A Trustee).

Even though probate is not required for a correctly and fully funded trust, the successor trustee of the trust will still have quite a few responsibilities and duties to accomplish before the trust’s beneficiaries can receive their inheritance. Usually, there are taxes to be filed and paid, bills to be paid,  paying ongoing expenses of maintaining the real estate of the trust, and selling or auctioning off any property that cannot be liquidated any other way. However much work this seems, this is much better than having a court process where a judge is looking over every bill to be paid, every expense, and holding things up due to court dates needing to be scheduled. Usually the only professionals needed in this process is a good accountant, and sometimes an attorney. Cleaning up and closing a trust is still much faster and cheaper than probate.

If you are interested in getting a trust, or finding out more about how one can help you and your heirs, please call our office today.

Edith Windsor’s Fight for Same-Sex Marriage Recognition

There is currently a legal battle in the federal courts regarding a Federal law mandating that marriage is between a man and a woman. EdiTh Windsor  challenged the federal law in DOMA (Defense Of Marriage Act) as unconstitutional on equal protection grounds. The U.S. District Court for the Southern District of New York recently held that Section 3 of DOMA that created this mandate was unconstitutional. She is skipping the Circuit Court, and has petitioned for the United States Supreme Court to hear and review the case. Many legal experts expect the court to take up the case for their October term.

This legal case is important for Constitutional Law, in that it may finally rule on if gay marriage is a constitutional right or the U.S. Constitutional sees homosexuals as a protected class. However, it has further implications in the estate planning legal realm.

When Edith Windsor’s partner and wife died, she left her entire estate to Windsor. But since the Federal government does not recognize under DOMA, Windsor owed $363,000 in Federal estate tax. If Edith’s wife had been a man, and they were a heterosexual couple, there would have been no Federal estate tax. Usually a married heterosexual couple does not incur any taxes because they can use the Federal estate tax exemption. In 2012, this was up to $5,000,000. The Federal estate tax exemption, however, does not apply to same-sex couples. To many people’s surprise, Edith has managed to win the first battle at the New York Federal district court. Now, the Supreme Court is more than likely going to hear the case this fall. President Obama and his administration has stated that they will not defend the law, and so the Bipartisan Legal Advisory Group  took the position to defend the law. The legal argument for DOMA and the case against Edith is that the representatives in Congress  have Congressional decided that children should be raised by both a mother and a father. The legal argument against DOMA is that it is a violation of the Equal Protection Clause and Due Process.

As this legal case develops, Skillern Law Firm will continue to write about this important legal case. If you are a same-sex couple in Oklahoma, and you need your estate planning done, please feel free to call for a free consultation. We would love to help you. For more information on why estate planning is especially important for same-sex couples living in Oklahoma, please see our post Estate Planning for Everyone.

See Manuel Roig-Franzia, Edith Windsor’s Fight For Same-Sex Marriage Rights Continues, Even After Partner’s Death, Washington Post, July 19, 2012.

%d bloggers like this: