Writing Your Tulsa Estate Planning Blog

Do not be confused about what estate planning is and whether or not you need to do it.

Most Americans do not have estate plans. One of the reasons that they don’t is confusion about what getting an estate plan means and who should have them. The term “estate” often conjures up images of the palatial estates of the ultra-wealthy. However, the term applies to the property of anyone who passes away.

We will all have estates someday. For that reason, it is important to know what estate planning actually does.

Recently, the Vail Daily discussed some basics in “Estate Planning.”

If an estate is the property you have when you pass away, then estate planning is deciding what should happen to that property. It is you deciding beforehand who you want to have your property and the legal means by which they will receive it.

The two most common methods to have your property distributed are wills and trusts.

A will is a legal document that is submitted to a court. The will sets out who should receive what. If the will is valid, the court will oversee the process of making sure that the property goes where you want it to.

A trust creates a new legal entity to hold and distribute property. It is not normally submitted to a court, unless it is a “testamentary” trust created under a will to manage the estate distribution. Another person known as a trustee, is charged with making sure that your directions are followed.

There are other aspects of estate planning you should address, including planning for your own end-of-life care. Visit an estate planning attorney if you have questions about wills, trusts, or any other aspects of estate planning.

Reference: Vail Daily (Dec. 8, 2016) “Estate Planning.”

Although wills and trusts have been standard legal documents for a long time, many people still have misconceptions about them.

Estate planning can be complicated by the fact that many people have misconceptions about the basics of wills and trusts and what having either one of them means. This problem is compounded by the Internet as people who are wrong, often share their misconceptions with other people online. The result is more confusion.

Recently, TCPalm discussed common misconceptions in “Common misconceptions about wills and trusts,” including:

•Having a will means that your estate does not have to go through probate. This is completely false. In most cases, wills have to be submitted to a probate court for administration.
•If your estate is not large enough to pay the estate tax, then you do not need to have a will or trust. This is another falsehood since there are many other reasons to have a will or trust. The most important is that if you do not, then all of your property will be distributed according to statutory rules instead of how you might have preferred it to be distributed.
•By putting your assets in a revocable trust, you lose the ability to have any control over the assets. This is not true. If you are the trustee of your trust and the trust is drafted properly, then you will still be able to do whatever you want with your assets during your lifetime.
•You have to file a separate tax return for your revocable trust. This is also not true. As long as your trust is properly drafted, a revocable trust will not be considered a separate legal entity during your lifetime and you will not need to file a separate tax return for it.

Talk to a qualified estate planning attorney who will be more than happy to educate you on the realities of estate planning.

Reference: TCPalm (Dec. 2, 2016) “Common misconceptions about wills and trusts.”

If you have a trust and would like to make it the beneficiary of your IRA instead of an individual, you can do so. However, there are some important things to consider before doing so.

When people get trusts, one of the first things they are told is that they should put all of their important assets into the trust. They are often told that they can designate their trusts as beneficiaries of their life insurance policies and retirement accounts, and that they should consider doing so.

However, for tax purposes, it is not always a good idea to designate a trust as the beneficiary of your IRA, as Financial Advisor explains in “Is Naming A Trust As Beneficiary Of A Client’s IRA A Good Idea?”

The biggest and most important issue is that IRA beneficiaries must take required minimum distributions or face tax consequences. This requirement does not go away when the beneficiary is a trust and not an individual.

Satisfying the requirement with a trust can get technical.

Every beneficiary of the trust must be identifiable and must be an individual. While that might seem easy to accomplish, it is not always the case. Every successive beneficiary must be an identifiable individual. Therefore, the beneficiaries who would automatically receive the trust assets when a previous beneficiary passes away, must be an identifiable individual.

This can be an issue if a residual clause in the trust includes giving assets to a charity, for example.

That is not the only complication with designating a trust as the beneficiary of an IRA. There are other potential problems, which is why you should consult with an estate planning attorney before doing so.

Reference: Financial Advisor (Dec. 2, 2016) “Is Naming A Trust As Beneficiary Of A Client’s IRA A Good Idea?”

Many family dynasty trusts created during the Great Depression to avoid rising taxation, will automatically terminate soon. Trustees and beneficiaries need to be prepared.

One of the lasting legacies of the Great Depression will soon come to an end. In response to that crisis, the government greatly increased the gift and estate tax rates. Wealthy families responded, in turn, by creating dynastic trusts to hold their wealth and preserve it for future generations.

Most of the trusts created at that time have mandatory termination dates at which time the trust assets must be distributed to the residual beneficiaries.
Successfully carrying out that process will require some planning as the Wills, Trusts & Estates Prof Blog explained in “Preparing for Trust Termination.”

The first challenge for many trusts and trustees will be determining the residual beneficiaries. In many cases, they could be distant relations of the original trust settlors and not the same people who currently receive regular distributions from the trusts.

Once the beneficiaries are determined, they will need to plan for how receiving the trust assets, will impact their lives and financial futures. Depending on the amount of money received, the beneficiaries’ tax and estate plans could change dramatically.

Those who do not plan appropriately, could face negative consequences that could have been avoided.

If you are a residual beneficiary of a depression era trust, you should seek independent legal advice. It might not be a good idea to rely on the advice offered by the trustees and their legal advisors.

You need an attorney who will be acting only in your interests.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 5, 2016) “Preparing for Trust Termination.”

If you want to be remembered for charitable giving, then you should get started with an estate plan.

At this time of year, it can seem like giving to charity is something done with little forethought. It can require no more than dropping loose change in a bell ringer’s bowl at the grocery store or putting a new toy in a designated box at the mall.

While anonymous giving like that is helpful, having a true charitable legacy requires more work and considerable forethought.

People who want to be remembered for being charitable benefactors, need to get comprehensive estate plans as the Port Huron Times Herald explains in “Plan today to make a difference tomorrow.”

With an estate plan, you can set up your charitable giving to be ongoing after you pass away. If you want, you can leave one time gifts in your plan but also create new legal entities that will continue to give to charity indefinitely. You can even dictate what charities these entities will give to and for what purposes.
The entities can be relatively simple trusts or they can be complex family foundations.

Without proper planning, however, creating a charitable legacy is nearly impossible. Attempts to do so can easily fall afoul of the law and IRS regulations. Thus, if you would like to leave a charitable legacy, visit with an estate planning attorney to review your options.

Reference: Port Huron Times Herald (Nov. 25, 2016) “Plan today to make a difference tomorrow.”