Writing Your Tulsa Estate Planning Blog

Disputes over wills have been around for centuries, and perhaps longer. One can imagine pre-civilization men coming to blows over the sticks, stones, and other tools of one of their deceased contemporaries. Take this quote from Voltaire, French author (1694 – 1778):

“Animals have these advantages over man: they never hear the clock strike, they die without any idea of death, they have no theologians to instruct them, their last moments are not disturbed by unwelcome and unpleasant ceremonies, their funerals cost them nothing, and no one starts lawsuits over their wills.”

via Wills, Trusts & Estates Prof Blog

I’ve been working hard on this blog for my clients, prospects, and anyone else interested in estate planning in Oklahoma. That is why it is great when good people like Michael D. Bonasera at The Ohio Trust & Estate Blog agree to link up with me. For my clients with family in Ohio, especially near Columbus, Michael appears to be doing terrific estate planning work there.

Ok, there is a lot to write about here. A huge bill just passed Congress and was signed by the Prez. There is a lot of stuff to cover in the bill. I’m going to start with the most pressing issue in this post.

The following only applies to the lucky readers who have assets in excess of 5 million, or the luckier readers who have grandparents with assets over 5 million who intend to give some to their grandkids. For those clients there is a once-in-a-lifetime planning opportunity. The problem is, this opportunity ends at midnight, December 31, 2010.

The Skinny

Transfers above the gift tax exemption (currently $13,000) to grandkids and great grandkids are subject to what is known as the generation-skipping transfer tax. The thing is, if you give money to your children it is subject to tax when you pass, and when your children pass and leave it to your grandchildren. The IRS doesn’t want you to skip that first taxation by passing straight to your grandkids, so we have the GST tax.

The Opportunity

The 2010 Tax Relief Act creates a unique opportunity to make gifts through December 31, 2010 that are not subject to the generation-skipping transfer tax. This is because, under the new law, the tax rate is zero for any generation-skipping transfer made in 2010.  Beginning January 1, 2011, the tax rate for these transfers will be 35%. In two short years the rate goes back to 55%.

The Payoff

If you intend to leave assets to your grandkids do it now, and I mean now, now. Talk to an estate planning attorney today. Even if you aren’t ready for your grandkids to get the money, create a trust and gift the money today. It will save you at least 35% in taxes.

For more info see this.

I am a Tulsa lawyer who focuses on estate planning. I’m an expert in that area of the law. What a lot of people don’t realize is estate planning is comprised of various different disciplines.

Most people understand that estate planning attorneys work with will and trusts. What people don’t understand is estate planning attorneys often handle property law matters and business law matters.

It makes perfect sense if you think about the what most estates consist of. The largest asset in most people’s estate is their home, which is real estate. When my clients have a question about buying or selling property, they talk to me, their estate planning attorney.

If a person is a business owner, chances are the largest asset in their estate is their business. If they have been in business for a number of years, their business has most likely exceeded the value of their home. It makes sense that my clients who own their own business turn to me with their business law questions.

Yes, I’m a tulsa attorney who focuses on estate planning, and that includes property and business law.

I’ll be honest, this post is an excuse for me to show you a picture of my dog, Paper. Yes, his name is Paper. That is another story all together.

Isn't he so stinking cute?

Now that I’ve verified my love for animals with this picture …

Yesterday I talked to a potential client who is interested in setting up a trust for her pets. Believe it or not, this will be the second pet trust I’ve worked on this year! Obviously, I’m not the only one who is in love with animals.

I can totally understand why some of my clients want to make sure their pets are provided for. If you exit without planning for your pet, your pet may end up in a bad home with unloving care-givers, or worse on the street.

The thing is, the court isn’t equipped to place your pet. Hopefully, you have loving family who is willing to step in, but you never know.

Even if you do have family to step in, nobody knows your pet like you do, and you should make sure and carry that information over. Make sure you let your loved ones know the food and activities your pet likes. A good tulsa lawyer focused on estate planning can help you with that.

Lastly, if you do have family to care for your pet, and especially if you don’t, make sure you provide financially in a trust. This tulsa attorney have drafted two recently. It doesn’t have to be much, even a little can guarantee that your pet continues to live a warm and healthy life.

Frequently one parent will pass away leaving a remaining spouse. When this happens the remaining widow or widower will statistically be remarried within four years. It is no fun to think about your spouse remarrying, but it is incredibly common.

It is even less fun to think about your remaining spouse and his/her new partner spending through the inheritance you intended for your children. Even good people make this mistake. Often it is done with the best intentions. Perhaps, the new partner has student loans that need to be paid, and the intent is to put the money back over time.

You can protect against this with a properly drafted estate plan. An attorney who focuses on estate planning can help you create a trust for your children. The terms of the trust frequently give the remaining spouse a portion of the funds outright, and allow him/her to access other funds for the children’s health, maintenance, education and welfare. When the children reach the age that you decide (probably 20 to 25), they will receive the remaining funds.

This is great way to pass on values to your children and to protect your children’s inheritance. That is why it is the 2nd important reason young families need estate planning.

One main reason young families need an estate plan is to name the guardian of their children.

Although it is terrible to think about, unfortunate events like car accidents happen everyday, leaving minor children without parents. When parents do pass at the same time, it is important that they have a plan in place to name who they want to be appointed as guardian of their children.

Too often parents fail to do this planning. Maybe they think it could never happen to them, or maybe they just never get around to it. Regardless, when parents are no longer in the picture, and they didn’t leave a plan, the Court is left to decide who should be the guardian of their young.

This is bad for many reasons. First, you should be the one to decide who cares for your kids, if you are no longer able to do so. You know about them and their needs the best, you should decide.

Second, when you don’t have a plan, you put you children and your remaining family at risk of unnecessary stress at an already stressful time. If you pass without a plan, your family will be left not knowing your wishes. Frequently families will fight over who should be the guardian. I have seen this far too often – otherwise well mannered loving families almost coming to blows.

Last, even if your extended family does consent to the appointed guardian without costly and time consuming litigation, there is ofter bitterness over the appointment. The side of the family that didn’t get appointed guardian is left wondering if that is really what you would have wanted and if that is best for your children.

Naming who you want to be the legal guardian of you minor children isn’t difficult. It can be accomplished with a well-drafted Last Will and Testament as part of a comprehensive estate plan. You will want to consult an attorney to accomplish this. Make sure you talk to an attorney who focuses on estate planning, like this Tulsa estate planning lawyer.

Check back soon for the 2nd reason young families need an estate plan.

I have had several Tulsa, Oklahoma clients ask if they really need an estate plan. They mistakingly believe that estate planning is only for the wealthy. They think since they don’t have a huge estate, they don’t need to plan. That is not true.

In Oklahoma you have an estate plan whether you know it or not! If you die without a plan, the state effectively creates one for you. If you have a house, a car, maybe some cash in the bank, and even furniture and appliances, you have an estate. And, if you die without a plan, Oklahoma decides what to do with it.

People with small estates frequently avoid planning. The sad thing is that people with small or modest estates often are those who need planning the most, because their loved ones need proper care for survival.

There are rare cases when you want to distribute your property exactly as the State would and your estate is small enough to avoid probate. You need to talk to an attorney to determine if you fall into this category. Mention this post and your estate planning attorney will give you a free initial consultation.

Estate planning has been interesting this year. 2010 has been a year without estate tax. That’s right, the estate tax, which has been around since 1916, doesn’t exist today. If you or a family member pass away in 2010, the respective estates won’t have to pay estate tax.

How could this be? A little know congressional rule that requires any law that affects revenue for more than ten years to be passed by 3/5 of the Senate, influenced legislation called the EGTRRA. The EGTRRA, or Economic Growth Tax Reconciliation Relief Act, sought to repeal the estate tax, but to get around the rule it was written to repeal itself, or “sunset”, on the final year. This is the final year of the EGTRRA and next year it will sunset. That means next year the estate tax will come back at 2001 levels. All assets over 1 million will be taxed at 55%, unless Congress acts.

So what will Congress two? Probably one of the following:

• Nothing. This is what I think will happen. The Democrats are most likely still going to control the Senate after the election and with the election over, they have little reason to pass new legislation to lower taxes.  I think they will let the estate tax come back at 55% on all assets over 1 million.
• Seek to apply tax on estates for this year. This is unlikely. The first estate tax returns filed under the current environment without estate taxes have been filed. It is unlikely that retroactively applying tax on these estates would be found to be constitutional, and any law that sought to do so would definitely be challenged. I don’t think Congress will attempt to apply estate taxes to estates filing this year.
• Pass a new law raising the exemption. This is perhaps the most reasonable thing for Congress to do. Even if balancing the budget requires estate tax, the exemption should be higher than the unadjusted 2001 amount. It should at least be adjusted for inflation. The problem is raising the exemption would require Congress to act and there isn’t a lot of time for them to do so.

I had lunch today with a professional from a capital management firm I trust. He asked what the threshold is for recommending a trust. By threshold, he meant what level of assets justified using a trust as an estate planning tool. He mentioned that in the past he and considered the threshold to be the estate tax exemption, combined for a married couple. Using that threshold a single person would need 1 million in assets, and a couple, 2 million in assets next year, if Congress fails to act.

His threshold is correct, but incomplete. It is correct in that a trust works wonderfully to minimize estate taxes when a married couple has assets (real property, IRAs, 401(k)s, insurance benefits, equities, bonds, cash, etc.) in excess of the estate tax exemption. Many people incorrectly assume that because of the unlimited deduction for spouses, estate planning doesn’t need to occur until one spouse meets the man (or woman) in the sky. My friend is wiser that. He knows that by using an AB trust families can keep more money out of the hands of Uncle Sam.

My friend didn’t understand the non-tax related benefits of trusts, so I’ll outline the three biggest reasons to use a trust below.

1. Avoid Probate. As I’ve written before, Oklahoma probate procedure is expensive, time-consuming, and public. A well drafted estate plan can help you avoid probate.
2. Distribute Property Your Way. Using a will you can control who receives property, and what property they receive, but you have little control over when or how they get the property. This is particularly a problem for couples with young children and/or grandparents who want to give directly to grandchildren. Do you want you beneficiaries to inherit a large portion of money when they are 18? Many people, myself included, think that is too young. A trust allows you to make distributions based on milestones, like graduation, marriage, or having children, or you can make distributions why your beneficiaries are 25 or 30. The point is, you get to decide.
3. Avoid a Contest. A will is far more likely to be contested than a trust. A will only goes into effect when you die. Your beneficiaries don’t know your wishes entirely until they are in an already stressful situation. Further, all they have to do to prove your will invalid is prove that your were incapacitated or under undue influence when you signed the will. With a trust they have to prove that you were incapacitated or under undue influence when you signed the trust, filed the trust documents, transfered any property into the trust, when investment decisions where made regarding the property in the trust, or when any distribution was made to any beneficiary or the owner. For a trust existing for any length of time, that is almost impossible to prove.