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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:
- 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.
- 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.
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.
One important thing that must be said is that beneficiary designations, including IRA’s, life insurance, annuities, bank accounts, etc., go outside probate and the trust. What is said in the Will does not effect what is said in a beneficiary designation.
For instance, if you want to leave your two children 50/50 of your estate, and you put that in your Will or Trust, but leave only one as a beneficiary or joint owner of an account, that one child will receive the entire amount of the account, and the other child has no legal right to the other half. Beneficiary designations trump whatever your Will says about the other assets.
This can also play a role in Guardianship designations in a Will or Trust. Some people believe that if they designate a guardian for their child in their Will or Trust, and then leave that Guardian as a beneficiary on an account, that the guardian will be obligated to use that money for the child’s use once they become legal guardian. This is not true. If the named beneficiary is left as a beneficiary on an account, then it is legally their money, not the child’s. You can leave the child as the beneficiary, and once the legal guardian is approved by the Court, they can access the account for the child’s use.
That being said, it is great to have beneficiaries on accounts, because it makes a lot of sense and allows the executor or trustee to focus on fewer assets to disburse. However, always keep in mind the distinction between beneficiary in a Will or Trust, and a beneficiary on an account.
If you do not have a Will or Trust set up, please contact our office today to set up an appointment!
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.
In September of 2010, a non-lawyer wrote an article about her experience trying out four different will-making computer programs. This article appeared in the New York Times. After she got all four different wills drafted, she took the wills to an established estate planning lawyer in New York City, and had them reviewed. The results were poor, to say the least. The lawyer found that one of the Wills was so defective that it did not even identify which heirs got which of the author’s assets. Each of the other three wills had different problems, including problems that could harm the probate process. The attorney stated, “The thing that most surprised me is how different your will comes out depending on what program you pick.” Some of the more common problems with the online-made wills include:
If one or more of the beneficiaries you name in your Will passes away before you, and you haven’t named an alternate beneficiary to take that person’s place, then your property passes to your heirs-at-law. If you’re not a lawyer, chances are you don’t know who your heirs-at-law are, and you probably do not want your property going to them. A Will that does not name contingent beneficiaries may have the result of taking your property away from your control, and giving that control to the state through the state’s intestacy statutes. Most online websites forget or do not have a contingent beneficiary estate plan as part of their package, and this can cause all sorts of problems for people with relatively simple life situations. If your family’s situation is more complex than normal, say you are a blended family or you have complex estate, than contingent beneficiaries and similar provisions can make your estate planning problems even worse. Qualified estate planning attorneys know these problems and can work with you to figure out what is the best plan for your estate planning needs. An experienced attorney can adapt, and should will know what the appropriate questions to ask for your situation, and no computer estate planning model can do that.
Oklahoma allows the probate courts to admit holographic (or handwritten) wills. There are certain considerations that are very important to consider if you think a holographic will is right for you. Today on Tulsa Estate Planning Blog, Skillern Law Firm, PLLC will help you figure out if its right for you.
First, there are important, strict formalities that Oklahoma requires for a holographic will to be valid. First, the will must be dated. Second, it must be signed by the testator. Third, it must be completely in the handwriting of the testator/testatrix. And lastly, it must be clear that the document is the intended last will and testament of the testator/testatrix.
These four requirements are very strict. Without all four, and with a variation on all four, Oklahoma courts have refused to admit certain holographic wills.
One such error is the belief that getting a holographic will notorized or witnessed is a great thing. This is not true. If you remember from above, the document must be entirely written by the testator/testatrix. A notory or a witness’s tesatament are not the same handwriting. There have been some Oklahoma courts that have held that in the event it is notarized or witnesses, that does not defeat the will since it is not required to be witnessed or notarized. If you do choose a holographic will, do not chance this, and avoid a notary or witness.
Many people insist they should save the money and create a holographic will. I remember in law school, someone asked the teacher in our estate planning course whether there were really any benefits to a formal, attorney-made will. Of course there is, she said, otherwise there would be no estate planning attorneys!
There are some very common problems with holographic wills. Here are some common mistakes:
- Proving the authenticity of the will. Getting a handwriting expert, proving it was the intent, and making sure the entire document was written by the testator/testatrix is expensive, time-consuming, and doesn’t always result in probating of the holographic will. A formal, notarized, witnessed will is much easier to prove the authenticity, and many times, that is not even an issue with formal wills.
- Testator/testatrix omits important features of a formally prepared will that can have a severe impact of your estate. For instance, not having a residuary clause, spend-thrift clause, or many other important clauses that attorneys know are necessary.
- Vague/Confusing/Unmanageable instructions. Attorneys are good at using legal language that the probate court will be familiar with, and understand what the testator/testatrix desired. Many individuals are not. Furthermore, most holographic wills are vague and confusing, with different instructions concerning the same property, and avoiding discussing other property. For instance, leaving everything to “mother” does not exactly tell the court who you meant. Using vague terms, without using full names, and also using vague descriptions of property is a common mistake.
- Failure to distribute the entire estate. A problem arises when the holographic will distributes less than all of the testator’s estate. If, for instance, the will gives away his house, car, and bank accounts, but neglects to mention furniture and other personal property, there is a partial intestacy as to the assets not covered by the will. These assets will then pass to surviving legal heirs as determined by the state intestacy statutes, the result of which may not be what the testator intended.
- Many, many, more!
Just remember, all of these problems above (and the ones not listed) involve the probate trying to figure out what the testator/testatrix intended with their holographic will. This will eventually include probate attorneys charging hourly rates on your estate and beneficiaries. The cost of holographic wills may be free when they are made, but when they are probated, the cost is often much higher to the estate than a traditional, attorney-made will due to the probate costs.
Formal, Attorney-made wills is the best idea to make sure your estate is distributed as you desire, without the added probate costs of holographic wills. Let Skillern Law Firm, PLLC help you distribute your assets effectively, clearly, and easily through a will today. Please contact us to set up a free appointment today.
When Skillern Law Firm P.L.L.C. discusses the benefits of a will or a trust, inevitably probate comes up. We advise clients to avoid probate, since it is costly and a complicated process that can easily be avoided by a trust. Still, many clients ask us: “What is probate”? Our answer is: it depends. Basically, probate is simply a court proceeding(s) in which a court administers and concludes the legal and financial matters of the deceased. Essentially, probate court is when a court distributes, decides, and delivers the deceased person’s goods to his heirs and beneficiaries.
The Probate Court is a neutral forum where beneficiaries, heirs, and creditors are able to settle disputes or other issues related to the deceased person’s estate. Probate is simple another legal court where things get settled. It is similar to a civil lawsuit or bankruptcy court in that it is the way the United States legal system has found to deal with a legal problem. In the case of probate court, it is a way to distributing estates.
One reason most of our clients try to avoid probate is the cost. Normally, the cost of probate ranges from two to ten percent of the total estate. There are many factors that go into how much probate costs, including the size and nature of the estate, how many beneficiaries or heirs the deceased had, how many creditors, etc. When there are more assets and debts, the probate process tends to cost more since it is longer to distribute. If you really think about it, it makes sense. The more creditors there are, the more time and expense it takes to sort out which creditor or beneficiary has priority and how they should be paid. Sometimes, estates simply cannot pay all of their debts and become insolvent.
Time is also an issue when it comes to probate. The probate process can take anywhere from six months to a year to distribute the estate. Complex estates can take even longer. Did you know that New York probated Marilyn Monroe’s estate from 1962 until 2001? That is 39 years! While that is an extreme, time is still an issue for most estates. In Oklahoma, there are certain deadlines that must be met. Beneficiaries and creditors are required to be notified of their rights and they have a certain amount of time in which they can respond. Sometimes, fighting between siblings, grandchildren, or other beneficiaries can cause the estate to be open for years.
Another reason many couples and families chose to get a trust done to avoid probate is that the proceedings in probate are public. Anyone can watch and read what happens to the estate. Trust distribution is private, and only a small memorandum of trust needs to be recorded with minimal information. Most people find that the privacy of a trust instead of probate is a big selling factor.
That, essentially, is what probate is and why most people tend to avoid it. A trust is a legal instrument that can avoid probate, and a qualified estate planning attorney, including those at Skillern Law Firm, can help you get one in place. A will does not avoid probate, but it can help make the process go quicker by letting the court know what your intention with your estate is. Please contact the office today for a free consultation.