FAQ: Estate Planning
Estate planning seems overwhelming and confusing at times to many people. The following is a list answers to the most frequently asked questions we receive. Please reach out, if you have additional questions.
What is Estate Planning?
Estate planning is simply planning the future of your “estate” after you pass. Estate planning covers the transfer of property upon death and other personal issues and decisions related to your death. The core documents most often associated with estate planning, include: last will and testament, living will or advanced healthcare directive, power of attorney, and trust documents.
The process of estate planning may involve legal and financial advisors, familiar with your goals and concerns, that will assist you in establishing a plan, legal documents, and accounts to address your desired disbursement of assets and your family needs. Estate planning may involve an estate attorney, probate attorney, accountant, financial planner, life insurance provider, and bankers.
Estate Planning Overview
Intestate means dying without a will. In the case of a person that dies without a will, the laws of Oklahoma will dictate who will inherit what from your assets. Nearly 75% of Americans do not have a will and the division of their estate will be determined by a Probate Judge, without their desires being considered.
If you die without a will, Oklahoma laws of descent and distribution will determine who receives what aspects of your estate and property by operation of law. Oklahoma law generally distributes property to your spouse, then children, and finally to next of kin, if you are not married or survived by children.
Oklahoma estate law attempts to “guess” what a party would desire to happen to their estate, if they had drafted a will. Additionally, Oklahoma law operates to protect minor children. The law likely does not reflect your actual wishes that is why drafting a will is so important to make statements and decisions concerning your personal preference. Additionally, a will allows you to make decisions and exercise control over a wide area of choices related to your death and estate, which Oklahoma descent and distribution laws cannot address.
A will is a document that allows a person to speak after passing concerning a number of important issues, including: property, children, and specific requests. Wills allow for the disposition of property and the appointment of new parents after death. Wills have no legal authority until a person dies and the original will is presented to the Probate Court. Wills do not allow a person to avoid Probate Court. Every person with minor dependents, including children, needs a will. A will is the only way to appoint new parents for children after death.
Special testamentary trust provisions are often included in a will to manage the distribution of assets to children and other heirs. These trusts can also help to avoid some or all death taxes. Wills provide the opportunity to make your last wishes, including funeral and burial decision, known to family and loved ones.
A will provides for distribution of your assets and property upon your death. However, some laws provide for forced heirship that prevent you from disinheriting your spouse completely and minor children. Your will does not control the disposition of property controlled by a beneficiary designation or titling to avoid probate estate.
Beneficiary designation is a means to avoid probate for some assets. Oklahoma non-probate transfer law allows for the transfer of some assets without probate. Life insurance death benefits and bank accounts are exemptible assets, which can avoid probate with beneficiary designations.
Assets under beneficiary designation will pass outside of probate estate if they are in joint title with right of survivorship, payable on death accounts, life insurance accounts, retirement plans and accounts, and employee death benefits. These types of assets pass automatically upon death to another party and are not governed by your will, unless specifically payable to your estate.
No, wills come in a variety of shapes, sizes, and complexity. Wills can assist you and your family in achieving a wide range of family objectives. Wills that only detail distribution of assets are commonly referenced as simple wills. Wills that create one or more trust upon death are called testamentary trust wills. Alternatively, the most complex wills include inter vivos trusts, which leave probate assets to a pre-existing trust, created during your lifetime, which results in a “pour over will.”
Pre-existing inter vivos trusts are also called revocable living trusts and are used to ensure property management, despite divorce, creditors, and protection of heirs from their own poor choices. Additionally these trusts often provide charitable provisions and help to minimize taxation of the estate.
Wills first and foremost provide for the division of your estate upon death; however, wills can provide a wide variety of other benefits.
- Children: your will may designate a guardian for minor children or the surviving parent, which helps to avoid court involvement in the care of your children. You can avoid bonds (money to secure trustee property), by use of a trust and appointment of a trustee to manage property and funds for the support of your children.
- Designate an Executor: you may designate a personal representative executor, which can eliminate the need for a bond.
- Designate other beneficiaries: a will allows you to designate beneficiaries outside of Oklahoma intestacy laws, i.e. stepchildren, godchildren, friends, charities, and business partners.
Non-probate property cannot be governed by a will. These assets are governed by operation of law or contract, i.e. beneficiary designations, which pass to someone other than your estate upon your death. Any property held in joint tenancy with a right of survivorship cannot be divested in a will. Insurance policies or an IRA that are payable to a specific beneficiary pass to that individual, regardless of statements contrary in your will.
In order to be legally enforceable, wills must be signed in the presence of at least two witnesses and other formalities must be followed or the will may be deemed invalid. In Oklahoma, a will that is signed by two or more witnesses and notarized is “self-proving” and may be admitted to probate without the live testimony of witnesses or other forms of proof of the will’s validity. The best way to ensure a will is valid and upheld in probate court, is by ensuring the will is valid at formation. An amendment to a will is called a codicil and must be signed and notarized with the same formalities as the original will. It is crucial to retain an experienced estate planning attorney prior to creating a codicil as the laws governing the enforceability of codicils is complex. Separate documents referenced in a will to divide specific items of property are red flags as well. It is best to include all specific bequests or division of specific items of personal property in the will itself.
Types of Non-Probate Property
Property owned jointly with another party that holds rights of survivorship, not as tenant in common, will pass directly to the joint owner upon your death. This type of property will not be part of the estate governed by your will. This analysis is separate from the tax issue related to estate tax.
A trust is simply means the holding of property by a trustee, which may be one or more persons, a bank, a company, or other party in accordance with Oklahoma law. Trusts are established for the benefit of trust beneficiaries in accordance with the terms of the trust. Significant financial and other goals may be achieved through a trust that are not possible otherwise. Trusts create a legal arrangement with great flexibility for the ownership and passage of ownership over assets, which enables individuals to achieve a wide variety of goals that are otherwise unachievable. The trustee is the legal owner of the trust and the beneficiaries are equitable owners.
The creator of the trust is the trust’s grantor. Trusts created by a will are testamentary trusts and the provisions for such are contained in the will.
Revocable living trusts are created during your lifetime and may be dissolved or revoked. Irrevocable trusts cannot be changed by the settlor or grantor. Both types of trusts are created to manage property, provide division of assets upon the physical or mental incapacity of the grantor, and dispose of property after the death of the grantor of the trust with minimal involvement of probate court.
Many people, regardless of the value of their estate elect to form living trusts. Revocable living trusts allow parents to make nominations of how their children will inherit the estate, if they are not old enough to be responsible for the assets. When both parents die with minor children, this type of trust can hold the assets of the estate, until the children have reached a sufficient maturity to be responsible for property. Trusts allow for a single undivided fund to support minor children, provide for education and other financial needs, with the eventual division of the trust balance upon the youngest child reaching a predetermined age. This arrangement allows for a simple and easily understood division of assets, which is better in many instances than a complex division of assets and varying years and times due to the different ages of children.
Power of Attorney
Power of Attorney is a legal tool to grant legal authority for a person to act on your behalf. The power given under a power of attorney may be limited in scope to one singular authority, such as a deployed parent granted a power of attorney for a family member to enroll their child in extracurricular activities during the deployment. Alternatively, a power of attorney can grant someone the ability to do everything that the party granting the authority could do.
A power of attorney may take effect immediately or it can be springing or conditioned upon the occurrence of a particular event, such as mental or physical disability. The later “springing” power of attorney is named based on a condition bringing the power of attorney into action. In Oklahoma, a power of attorney may be revoked; however, written notice to the party granted the power of attorney is typically required.
The person named in your power of attorney that acts on your behalf or in your place is typically called your “agent” or “attorney-in-fact.” A valid power of attorney gives the agent the ability to perform any act authorized in the power of attorney. In most cases, your agent must present the actual power of attorney document in order to act on your behalf.
For example, if your agent were to sell real property or a vehicle on your behalf, the purchasing party or title company will require a copy of the executed power of attorney prior to authorizing your attorney-in-fact to act on your behalf and sell your property. In less significant events, such as signing a check on your behalf, the agent will likely not need a copy of the power of attorney; however, it is important he or she keep a copy.
Convenience is a major cause for the creation of a power of attorney. You can avoid appearing at the closing of the purchase or sale of an asset by granting your agent power of attorney to sign on your behalf, which is especially useful, if you are purchasing or selling property in another state or country. The most common cause of the granting of a power of attorney is in preparation for the risk of being unable to act on your own behalf due to incapacity or absence. Again, military service members will usually create one or more general and limited power of attorneys to allow a trusted person to act on their behalf during deployment or a period of absence.
A Durable Power Attorney allows you to appoint a person to make legally binding decisions on your behalf without your presence or participation in the specific decision. It is crucial to only grant a Durable Power of Attorney to someone you trust with your life and assets. Having a Durable Power of Attorney in place will allow that person to act on your behalf without a probate proceeding. You will go through a guardianship and conservatorship process, if you do not have a Durable Power of Attorney and you become incapacitated. In this legal proceeding, the Court will determine who should make these important decisions for you and will be supervised by the Court.
A limited power of attorney is the opposite of a durable power of attorney. The limited power of attorney is “limited’ either in scope, duration, or both. By executing a limited power of attorney that terminates on a specific date, you do not need to worry about revoking the power of attorney at a later date; rather, it will simply expire or become ineffective.
Many individuals choose a family member or trusted friend to be their agent or attorney-in-fact. Some people will appoint more than one party to act as attorney-in-fact or agent, in case one party is unavailable or to ensure no bad action is taken against the person by requiring both parties to agree prior to taking action on your behalf. The designation of co-agent should include successor agents to address your agent’s unavailability to act or their own incapacitation.
No qualifications exist to act as an agent for another party, other than the person must be an adult and not personally incapacitated. The key to electing an agent is finding someone you trust. The integrity of the person you choose is often more important than their financial savvy.
Your agent should sign as follows, Your Name, by the Agent’s Name under Power of Attorney. Alternatively, your agent may sign as Agent’s Name, attorney-in-fact for Your Name. In the event that you are called to act as the agent, you should seek legal advice to ensure your actions will not be challenged. This is especially true, if your actions as agent will personally benefit you, either directly or indirectly.
The best answer is only the authority your agent needs to accomplish the task you have appointed the agent to perform. You may grant your agent the authority to do anything you personally can do; however, it is generally wise to only grant broad authority to an attorney-in-fact or agent, if needed. It is wise to speak to an Oklahoma estate planning attorney to determine what authority you need to provide to your agent and allow your Oklahoma estate planning attorney to help you draft a power of attorney to accomplish your goals.
It depends. Oklahoma allows for durable power of attorney, which remains effective once signed until the power of attorney authority is removed or you die. You should periodically meet with your Oklahoma estate planning attorney to revisit your power of attorney and decide whether or not you need to revise or revoke the power of attorney. Additionally, you can substitute your agent by revoking their authority and substituting another agent in his or her place. Some powers of attorney expressly provide termination dates to minimize abuse and protect you and your interests.
What is a Living Will?
Often referred to as an “Advance Healthcare Directive”, a living will provides a person the ability to state your desires concerning medical treatment and life support measures should you become incapacitated or unable to announce your wishes. Life support measures or rejection of life support measures are detailed in living wills to notify loved ones and medical professionals of your desire should you become incapacitate. Living wills are often executed with a Durable Power of Attorney related to Healthcare to give another party the authority to make healthcare decisions when you are unable to do so.
A health care proxy or health care surrogate is a durable power of attorney specifically for medical care and medical treatment. Your health care proxy is granted the authority to make medical decisions on your behalf, if you are unable to express your preference about medical treatment. Health care proxies typically only act when you are incapacitated or mentally unable to make decision on your own. Medical professionals will always make recommendations on the best course of action and available treatment options; however, your health care proxy will make the final decision based on their best judgement and any documents you have in place, such as an advanced health care directive.
Contact – Cannon & Associates: Oklahoma Fierce Advocates for Estate Planning needs
At Cannon & Associates, our attorneys have the experience and expertise needed to navigate the complex world of estate planning. We look forward to the opportunity to meet you, answer your questions, and assist you in creating the necessary documents to accomplish your estate panning goals.