Estate Planning Guide

Putting It All Together

All right, you have read all the materials in this book. Now, what do you do? How do you decide what is right for you? Is estate planning simply a "one-size-fits-all" approach? Absolutely not! However, there are certain elements that should be a part of every basic estate plan:

A Durable Power of Attorney. This document is possibly the most important document can have. It allows you to appoint someone, such as a spouse, child, or trusted loved one, to sign things for you, make health care decisions for you, and generally handle your personal business in the event of your incapacity. Why is it so important? Well, without a durable power of attorney, there may be the need for a guardianship over you and your property. A guardianship - sometimes referred to as a "living probate" - is a court proceeding in which a judge appoints someone, such as your spouse or a child, to manage your person and your property. A guardianship costs thousands of dollars - money that could have been used to take care of you, instead of to pay a lawyer! Therefore, whether you have a will, a trust, or simply have all of your property in joint tenancy with your intended beneficiaries, you need a durable power of attorney. We recommend separate durable powers of attorney -- one for business and one for health care purposes.

An Advance Directive for Health Care (Living Will). Many people state, "My family already knows my thoughts about artificial life support." That may be so. However, what written proof do you or they have of those thoughts? Additionally, who has the authority to communicate those thoughts to your doctors? Under what circumstances DO you want artificial life support? These are the issues that can be addressed with an Advance Directive for Health Care. Such a document is commonly called a living will. It is not to be confused with a living trust or a last will and testament. Although you can prepare your own advance directive, Oklahoma has a specific statutory form for such a directive. In order to avoid problems or confusion when the use of such a document is required, it is recommended that you use the statutory form and have it properly signed, witnessed and notarized. Furthermore, in order to communicate your desires to your doctors, we recommend you meet with your doctors who may be called upon to make life and death decisions for you and discuss with them your intentions, concerns, and desires for artificial life support. By doing so, you can save your family and loved ones a lot of anxiety and concern if it becomes necessary to make decisions regarding artificial life support.

A Last Will and Testament or Living Trust. The choice is yours! The purpose of both of these documents is to set forth instructions for the distribution of your estate after your death. A will is usually cheaper to prepare. However, it will be subject to a probate proceeding after your death, usually costing thousands of dollars in legal fees and expenses, before your will is effective. A living trust, on the other hand, will not be subject to probate, as long as it is properly prepared and maintained. A will must be made public when it is submitted for probate after your death. A trust is kept private. You do not have to retitle any of your assets with a will. However, with a trust, you must retitle everything into the name of your trust. A probate judge will monitor the distribution of your estate through the probate process. Your successor trustee usually has complete control over the distribution of your trust estate without judicial monitoring. Regardless of which document you choose, you want to express your wishes, concerns, and desires for the distribution of your estate. Although we all hope to live many more years, express your desires as if you are dying TODAY. Why? You may not live to tomorrow! Both a will and a trust are revocable. That means they can be changed at any time. Therefore, if your estate or family situation changes over time, so can your will or trust. If you do not have a will or trust, you will be leaving decisions regarding the distribution and use of your estate to family members who may or may not follow your stated desires, or a probate judge who has no knowledge of your family situation and your personal wishes.

A Letter of Instruction. This is not the same thing as your will or trust! The purpose of this letter is to set forth instructions and procedures for handling your estate after your death and implementing your will or trust. This letter should include:

  1. Names, addresses, and telephone numbers of advisors such as lawyers, accountants, financial planners, insurance agents, and others;
  2. Information on the location of important papers, such as wills, trusts, insurance policies, safe deposit box keys, and other valuable papers;
  3. Information on your burial arrangements;
  4. Names, addresses, and telephone numbers of family members to call;
  5. Information on credit cards and other debts to be handled at your death;
  6. Your wishes for the continued investment of your estate for the benefit of income beneficiaries.

Such a letter will be a valuable tool for your successor trustees, personal representatives and family members in knowing what to do with your property. The letter should be reviewed regularly and updated to reflect your then-current estate.

Long-Term Health Care Plans. In this day and time when there is much concern about the cost of nursing care, start making plans NOW for your long-term health care. As stated earlier in these materials, you should investigate the purchase of long-term health care insurance. With sufficient insurance, you will not need to worry about losing your estate to pay for your nursing care. You will not need to worry about qualifying for Medicaid. You will not need to worry about being a burden on your loved ones. The longer you wait, the more expensive long-term health care insurance becomes. Therefore, obtain it now, before the premiums increase and the need arises. If you cannot afford or do not want long-term health care insurance and do not have sufficient assets to generate the money necessary for nursing home care, please discuss this subject with us well in advance of the need to go to a nursing home. If you wait until the eve of moving to the nursing home, there is little that can be done to protect your estate from dwindling away paying your way through a nursing home.

One Trust or Two?

A common dilemma for a married couple is deciding whether to use one living trust or two. In other words, should the spouses have separate trusts or a joint trust? It is our recommendation that, if your entire estate is under $1 million, a joint trust is more efficient and useful. It does not require that you and your spouse separate assets or lose control over any portion of your joint estate. However, if you and your spouse cannot agree on the final distribution of your entire estate, or if the total value of your estate exceeds $1 million, you may want to consider using separate trusts. Although a joint trust - if properly prepared - can work to avoid federal estate taxes, many couples choose to create separate trusts which they individually control, using children or others as successor trustees. By doing so, there is little danger of the IRS or other taxing authority attempting to include the trust of one spouse in the estate of the other at death. In most instances, a joint trust must be "dismantled" into two trusts upon the death of the first spouse. However, the ease of management of the joint trust during the joint lifetimes of both spouses makes such a trust desirable.

What Do I Do About Estate Taxes?

First, determine if you will have an estate tax. If your estate exceeds the allowable exemptions, there is only one way to avoid the estate tax: give your estate away! You can start by making lifetime gifts now to children, grandchildren, or other intended beneficiaries. However, the gift must be a complete gift. In other words, you cannot sign a deed and put it in your desk and consider it a gift to your child. Likewise, you cannot write a check to an heir and not allow the recipient to cash it. The gift is not completed until the deed is filed or the check cashed. Consider the use of a family limited liability company or family limited partnership as a vehicle to funnel gifts to children which can still allow you to keep total control of the assets within the company or partnership. However, if you do not choose to make lifetime gifts, the choice at death is simple: Keep what you have for your heirs and pay a portion of your estate to the government in the form of a tax, or give a portion of your estate to charities of your choice. It is clear that the money your estate will pay in estate taxes will not go to your family members or other heirs. Therefore, why not give it to a charitable beneficiary of your choice? There are many ways in which you can make gifts to charities that benefit you as well as the charities. Charitable trusts can avoid capital gains on highly appreciated assets and charitable gift annuities can provide excellent income, especially to older individuals.

Do not simply eliminate charitable gift planning because you consider your estate too small or you do not consider yourself charitably inclined. Remember, each year you give about a third or more of your income to charity -- the IRS -- which uses that money for the charities supported by the federal and state government. Do you feel the federal government can manage your "gifts" as efficiently as your church or college? Wouldn't you rather make a gift that allows you to give instructions for its use, instead of paying taxes for which you have no control over its use? Charitable planning can benefit you as well as charities. Charitable gift annuity rates are substantially higher than bank CDs rates and can provide you with lifetime income!But you must start the planning now. Ask for a copy of our brochure Asset Protection and Charitable Giving available through our office.