Ghostbusters: Preventing Identity Theft After Death

Each year, approximately 2.5 million Americans have their identity stolen... after their deaths. These stolen identities are used to borrow money, purchase cell phones, fraudulently open credit cards, etc., all of which can dramatically impact the liability exposure of the decedent's estate. Criminals may even file tax returns under the name of the decedent and collect refunds (totaling $5.2 billion in 2011) that rightly belong to someone you.

Welcome to the world of "ghosting": the theft of a deceased individual's identity.

How does "ghosting" happen?

Your identity as a deceased individual is perhaps more vulnerable to theft than your identity as a living individual. Suppose you pass away today. It can take six months or more for credit-reporting agencies, financial institutions, and the Social Security Administration to register your death records and share information that lets other governmental agencies and financial institutions know you are deceased. During that time, you aren't regularly checking your credit score or other financial information because, you know, you're dead.

Your identity may be stolen deliberately. A thief could get your personal information from an obituary, a funeral home, or hospital records. With your name, address, and birthday, they can illicitly purchase your Social Security Number for as little as $10. Alternatively, your identity may be stolen by sheer luck: A thief makes up a Social Security Number that just happens to match yours (think of it like picking lottery numbers).

You may not care whether your identity is stolen after your death (after all, you're no longer using it). However, identity theft is a very real problem that could affect the estate of a loved one and, in turn, affect you.

Is there any way to prevent "ghosting"?

So what can be done to protect your loved one's estate after their death? The short answer is this: "be vigilant." If you notice any suspicious activity on a deceased loved one's accounts, contact the institution and/or law enforcement to investigate. There are some other ways you can help prevent identity theft in the first place:

  1. Don't disclose too much personal information. This is key to preventing identity theft in general. For example, in obituaries, list the age of your loved one but don't include their birthday or their mother's maiden name or their home address.
  2. Send death certificates to credit bureaus. Send copies of the death certificate to credit-reporting bureaus — Equifax, Experian, and TransUnion — and ask them to place a "deceased alert" on your love one's credit report. Be sure to use certified mail with a "return receipt requested" when mailing this information (so you will know the bureau received the certificate).
  3. Send death certificates to financial institutions. Similarly, mail death certificates to banks, investment companies, credit card companies, brokerages, insurers, mortgage companies, and other institutions where the decedent owned accounts. For any joint accounts, simply remove the deceased individual's name.
  4. Report to Social Security. Report the death to the Social Security Administration by calling 1-800-772-1213.
  5. Cancel driver's license. Contact the DMV to cancel the decedent's driver's license. This helps prevent duplicate licenses from being issued to criminals.
  6. Check credit reports. Check the credit report of the decedent a few weeks after their death to see if there is any suspicious activity. A few months later, get another report from a different bureau.

It is often difficult to think straight after the death of a loved one, and focusing on financial matters and identity theft may be the last thing you want to do. But we highly recommend that you take the time to perform these preventative measures and lessen the possibility of an even bigger headache later on.

Protect yourself with a solid estate plan.

Identity theft is a problem whether you are living or dead. But during your lifetime, you can take steps that make it less likely your information and assets will be vulnerable to identity theft: namely, you can ensure that your personal information will be handled by people you trust — something you control through estate planning. To discuss creating or reviewing your estate plan, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

5 Ways to Avoid Probate

Probate is a dirty word to most people. It's time-consuming, expensive, public, and brings with it the possibility of infighting and costly litigation. So how can you avoid it? The short answer: estate planning. But as we have written before, estate planning is a very broad topic. So here are five ways you can use estate planning to avoid probate:

1. Give away your entire estate.

This might seem like the most logical solution and, sadly, many people do it without thinking of the consequences. If you give away your assets, you also give away control over them. If, for example, you give your home to your child, you cannot control who lives there or if it is sold or mortgaged or seized by your child's creditors — even if you're living there. Giving away your estate may also trigger a federal gift tax. What's more, if you give your child your home as a gift during your lifetime, they cannot take advantage of a concept known as stepped-up basis and could instead be forced to pay large capital gains taxes in the future.

(Read more about stepped-up basis and avoiding capital gains taxes.)

2. Create a joint tenancy.

Joint tenancy has been called "the poor man’s will" because it can effectively avoid probate on the death of the first joint tenant. However, if you and your spouse own property as joint tenants and both of you die together, the property is still subject to probate. Joint tenancy property is also subject to estate taxes and may actually cause an increase in overall estate taxes, since the property may be fully taxable in the estates of both joint tenants. Some people decide to make their children joint tenants on a house or a bank account. But beware: property held in joint tenancy can be reached by the creditors of all joint tenants. To sell or encumber joint tenancy property, ALL joint tenants (and their spouses, in some cases) must agree and sign the necessary documents.

There are also potential tax consequences of naming a joint tenant. For some assets, such as bank accounts or most brokerage accounts, merely adding someone as a joint tenant does not trigger a gift tax; they could incur gift tax liability if the joint tenant starts drawing funds or income from the joint tenancy asset for personal use. For other assets, however, such as a personal residence, creating a joint tenancy could result in gift tax liability immediately. And like giving away your property during your lifetime, naming a joint tenant means that person cannot take advantage of stepped-up basis after your death.

3. Designate Pay-on-Death beneficiaries.

This is possibly the easiest method of probate avoidance, although not the most thorough. Banks and other financial institutions allow you to designate a particular account or investment to pay out to a named beneficiary after your death. Regardless of what you have provided in your last will and testament or your living trust or other estate planning document, this pay-on-death designation will control the disposition of that property after your death. Similarly, if your state allows it, you can sign a transfer-on-death deed to pass real estate after your death.

(Learn about transfer-on-death deeds in our recent blog post.)

Unfortunately, you cannot put restrictions on the use of your account or real estate after your death; it simply becomes the property of your named beneficiary. If the beneficiary dies before you, and you have not named any other living beneficiaries, the pay-on-death designation may not be effective to convey that asset after your death, which means the asset may be subject to probate in your estate.

4. Designate contractual beneficiaries.

This concept is most commonly used with life insurance. Your life insurance policy names a beneficiary to whom the policy proceeds are paid at your death. As with the pay-on-death designation, you usually cannot put restrictions on the distribution. Also, as with the pay-on-death designation, the death of the beneficiary still leaves the insurance proceeds subject to probate. Life insurance policies are a good part of many estate plans, but it is important to understand their limitations.

5. Create a Living Trust.

Finally, you can avoid probate by creating a living trust. A living trust involves transferring all your titled assets (real estate, bank accounts, motor vehicles, etc.) into the name of the trust. You can be the trustee of your trust and, in order to allow the trust to function after your death or incapacity, you can also list successor trustees to manage the trust for you and distribute your estate at your death. When you die, the trust lives on and can transfer those titled assets without the necessity of probate. You can also put restrictions on the use and/or distribution of the trust assets, which can be particularly important if you have any young, irresponsible, or special-needs beneficiaries.

(What is the difference between a will and a trust?)

Most of these methods of avoiding probate are more complex and nuanced that they appear. Therefore, we highly recommend consulting an attorney before taking any of these actions. To visit with an qualified attorney about whether your estate will be subject to probate at your death, contact the Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation. And for more information about probate avoidance and estate planning, download our FREE Estate Planning Guide by clicking below.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

Legal Briefs: What is a transfer-on-death deed?

Most people are familiar with deeds. Though they come in many different varieties, deeds convey (transfer) interests in real estate. Generally speaking, a conveyance is effective as soon as a deed is signed. With a transfer-on-death deed, however, the conveyance is effective only after the grantor (the person conveying the real estate) dies.

What are the benefits of a transfer-on-death deed?

The main benefit of a transfer-on-death deed is that the conveyance can avoid probate. Let's say Joe wants to leave his house to his son, Dan. If Joe provides in his Will that the house should go to Dan, the Will must still go through probate before Dan can get the house. But if Joe signs a transfer-on-death deed, all Dan will need to do is file an affidavit (and a death certificate) with the county clerk to obtain title to the house.

(A living trust can also avoid probate. Read about the differences between a will and a trust.)

You are not limited to just one beneficiary, either. If Joe had two children, Dan and Mary, he could list both of them as grantees (the people receiving the property) on the transfer-on-death deed. He could also leave them the house as joint tenants or as tenants in common. So there is some degree of flexibility with a transfer-on-death deed.

What are the problems with a transfer-on-death deed?

Transfer-on-death deeds can lead to several potential problems. First, if the beneficiary (grantee) named on the transfer-on-death deed dies before you, then the real estate could be subject to probate. Second, a transfer-on-death deed doesn't provide a plan in the event of your incapacity. Without someone to manage your property, a guardianship may ultimately be necessary in the event you lacked capacity to transfer or encumber the real estate during your lifetime. Third, it does not allow you to limit the flow of property to beneficiaries who may be too immature or irresponsible to manage their assets.

(Read more about how a transfer-on-death deed can avoid probate.)

In short, a transfer-on-death deed does not offer the same scope and flexibility as other estate planning documents such as a Last Will and Testament or a Living Trust. That said, it is still a great tool to effect a deathtime transfer outside the probate process. To discuss whether a transfer-on-death deed may be right for you, contact the estate planning attorneys at Postic & Bates for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

One Weird Estate Planning Concept You Need to Know

This post is Part Four in a four-part series discussing a variety of ways an estate plan can be challenged. You can find links to the other posts in the series here.

So your parents have a Last will and Testament or a Living Trust. Great. It was signed by all the proper parties, contains the proper language, and appoints the proper people. Wonderful. And to top it all off, the attorney's gave you an unbelievable deal. Excellent (unlikely, but excellent). The problem? Those documents can still be thrown out by the court if your parents lacked one key thing: testamentary capacity.

What is Testamentary Capacity?

We lawyers sure do like our big words. Fortunately for everyone, testamentary capacity boils down to a pretty simple idea: Does the person signing a Will or Trust understand what they're signing? To have testamentary capacity in Oklahoma, the testator (the person signing the Will or Trust) must understand, in a general way, (1) the quality and quantity of his or her property (sometimes called their "bounty"), (2) the natural objects of his or her bounty (i.e., who should logically inherit their property), and (3) the legal effect of signing the document.

Seems simple enough, right?

It is important to understand that testamentary capacity is different than what people usually think of as legal capacity or capacity as it relates to a guardianship or other legal proceeding. The fact that a person was found incompetent to handle his affairs two years ago does not mean he lacks testamentary capacity today. Likewise, a person's ability to manage his affairs two years ago does not mean he has testamentary capacity today. What matters is the individual's capacity at the moment he or she signs an estate planning document.

How is testamentary capacity determined?

Lawyers also like "tests." Not actual tests, of course, but rules that guide our interpretation of the law. To determine testamentary capacity, we use a category of test called a "totality of the circumstances test" (so named because it asks us to look at the totality of the circumstances). Oklahoma courts have held that the following factors or circumstances may be considered (but do not have to be considered and need not be the only factors considered) when determining the existence of testamentary capacity: (1) evidence of the testator's mental state both before and after execution of the Will; (2) the testator's appearance; (3) the testator's conduct and actions; (4) the testator's habits; and (5) the testator's conversation.

So, practically speaking, how can we know whether an individual has testamentary capacity at the time they sign their documents? That is the operative question, as it is definitely better (and, likely, less expensive) to find out the answer now rather than years later in probate.

There are a number of ways a qualified estate planning attorney can make his or her own determination regarding the testator's capacity, although there is no strict "test" a client must pass before he or she can sign a document. Some common questions come from an evaluation called the Mini-Mental State Evaluation (MMSE). Often used to decide whether an individual has capacity to testify at trial (which is different than testamentary capacity), this evaluation asks the individual to identify the date and their location, to repeat a certain phrase, to count backwards, etc. Attorneys often work these and other similar questions into their conversation with a client if there is a possibility he or she may lack testamentary capacity.

Can you change your estate plan if you lack capacity?

The short answer is "no." Testamentary capacity is necessary for any testamentary document to be valid. However, there are other ways to make changes to the testator's estate. For instance, if the testator has a Durable Power of Attorney appointing someone as their attorney-in-fact (and if that document gives the attorney-in-fact the ability to do so), that individual can transfer property, enter into contracts, and even establish a trust for the testator's benefit. Still, these transactions are scrutinized very closely by courts, and if the testator does not have a Durable Power of Attorney, they may be out of luck.

Could a loved one's estate plan be challenged?

Testamentary capacity is a crucial estate planning concept to understand. If you are concerned that a loved one may lack (or may have lacked) testamentary capacity to execute an estate planning document -- or to determine whether you should challenge an estate planning document in probate -- contact the experienced Oklahoma City estate planning and probate attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

How to Recognize Fraud in Estate Planning

This post is Part Three in a four-part series discussing a variety of ways an estate plan can be challenged. You can find links to the other posts in the series here.

Suppose your mother has dementia. Her nurse convinces her that he is her only child and has her sign estate planning documents leaving all of her assets to him and expressly disinheriting you and any of her other children. Are those documents valid? Likely not, as your mother has been the victim of fraud.

What is fraud?

There are several ways fraud can be committed in the estate planning process, but the type of fraud we will discuss in this article is referred to as fraudulent inducement. Let's say your mother executed a Last Will and Testament. You could challenge that Will if your mother was fraudulently induced into leaving her property to a person she would not normally have left it (in the example above, the nurse).

You could also challenge the Will if your mother was fraudulently led to believe she was signing a different document, when in reality it was a Will. For instance, the nurse may have tried to convince your mother that the estate planning documents were really medical forms or birthday cards. If she did not realize she was signing a Will, then her estate plan can be challenged on the basis of fraud.

How do you challenge a Will on the basis of fraud?

Even if a loved one has been the victim of fraud in the estate planning process, how do you prove it? How can you get the Will overturned on the basis of fraud? There are three main elements of any claim of fraud:

1. Misrepresentation

To prove fraud, you must show that there was a false representation with the intent that the testator rely on that statement to make or change his or her Will or other estate planning document. The element of "fraud" is often referred to as a "misrepresentation." In the example above, the misrepresentation was the nurse's statement that he was your mother's only child or that the papers she was signing were really something other than a Will.

A false representation does not have to come from someone outside the family. Fraud may occur if one child of the testator lies about a sibling to get more money under their estate plan or to disinherit the sibling entirely. Claims of fraud (and, for that matter, undue influence) are fairly common among family members.

(It is important to note here that fraud is different than undue influence.) 

However, showing a misrepresentation is not as cut and dried as it sounds. Generally speaking, you must be able to prove that the speaker knew the statement was false when he made it. Of course, anyone can pretend they "didn't know" the statement was false, but sometimes it can be enough to show that they should have known it was false. What evidence do you have that a statement was made? What evidence do you have that the statement is false? And what evidence do you have that the speaker knew or should have known the statement was false at the time it was made? These are all questions you should think about when discussing the matter with an attorney.

2. Intent

In most areas of the law, intent is a crucial element. Simply showing that the nurse lied to your mother is not enough to have her Will set aside for fraud. You must also show that the nurse intended for your mother to change her estate plan based on his misrepresentation.

For example, suppose the nurse had told your mother something like, "Don't worry about your cats after your passing. I will take care of them for you." If the nurse had no intention of taking care of your mother's cats, his statement was a misrepresentation. But it does not rise to the level of fraudulent inducement because there is no indication that the nurse intended for your mother to rely on his statement to change her estate plan.

On the other hand, if the nurse made that statement because he hoped your mother would leave him thousands of dollars to take care of her cats, then that may be enough to show fraudulent inducement. Yet providing intent is difficult. How can you show what someone was thinking at a certain point in time? That is why it is important to work with an experienced probate attorney who knows how to gather admissible evidence and convince the court of the speaker's fraudulent intentions.

3. Injury

To have success with any claim, you must be able to show that some injury occurred because of the complained-of conduct. For fraudulent inducement, the injury is not necessarily that the testator was tricked into making or changing his or her estate plan. A claim of a fraudulent inducement in this context usually arises only after the testator has died. Instead, the injured party/parties are the representative of the love one's estate or the heirs of that estate. While even attempts at fraudulent inducement are a cause for concern within your family, from a legal perspective, the injury must actually occur. That means the person who attempted to trick your loved one did, in fact, trick your loved one into making the estate plan change.

To explore this concept further, let's change the scenario a bit: Suppose that your father has passed away and you are your mother's only child. In other words, you are her sole heir at law, meaning that even if she had no Last Will and Testament, you would receive her entire estate after her death. If you fraudulently induce your mother into signing a Will, could that Will later be set aside on the basis of fraud? Maybe not. Because you would receive your mother's entire estate anyway, a court may not find that anyone else was injured as a result of your fraud. A friend or other relative could come forward and claim that your mother intended to leave them a part of her estate, but they would likely face an uphill battle. 

This is not to suggest that only children would face no consequences from defrauding their parents. But it is important to understand the concept of injury when determining whether you may have a valid claim for fraudulent inducement.

Do you have a case for fraud?

Few things are more upsetting than realizing a loved one was tricked or taken advantage of. Falling for a lie is not the fault of your loved one; someone manipulated him or her for their own personal gain. If you believe a loved one has been the victim of fraud in his or her estate planning, contact the experienced Oklahoma City estate planning and probate attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

4 Tips to Identify Undue Influence

This post is Part Two in a four-part series discussing a variety of ways an estate plan can be challenged. You can find links to the other posts in the series here.

Imagine your father is elderly, handicapped, and requires in-home care. He develops a close relationship with his caretaker, who is much younger than he is. When your father passes away, you assume that all his assets will be left to you and your siblings. However, the caretaker comes forward with a Will signed by your dad a week before his death — and it leaves everything to her! Seems fishy, right? This is a classic case of undue influence.

What is Undue Influence?

In Oklahoma, undue influence consists of taking an unfair advantage of another's weakness of mind or body or the use of authority to procure an unfair advantage over someone. Put another way, undue influence occurs when someone exerts pressure on an individual, causing him or her to act contrary to his or her wishes and to the benefit of the influencer.

In the example above, the "influencer" is a person outside the family; however, undue influence can occur from inside the family as well. Sometimes, a child may convince his or her parent to leave another child out of the Will or to leave that other child less of the estate. The child assisting his or her parents with their estate plan may not have any malicious motives: perhaps he or she simply thinks that their sibling would not manage the assets well. Nevertheless, such a scenario could give rise to a claim of undue influence from the child left out of the Will.

How Can I Identify Undue Influence?

In assessing a claim of undue influence, courts consider a number of factors. But for our purposes, we have narrowed them down to four main indicators you can use to determine whether undue influence might exist: 

1. Look for unexpected gifts.

Courts often look at whether the testator disposed of his or her property in an unexpected way. The question is sometimes phrased like this: Did the testator leave his estate to anyone who was not the natural object of his or her bounty? For instance, if a woman was close with her three children, the fact that her Will leaves her entire estate to a caretaker looks suspicious. After all, one would expect the woman to leave most (if not all) of her estate to her children.

2. Examine the testator's mental/physical state.

Courts often consider the age and health of the testator in analyzing undue influence claims. Frailty, deteriorating mental state, and other mental or physical factors could make a loved one susceptible to undue influence. Although undue influence is different than a claim of "lack of capacity," the same evidence is often relevant for both claims.

3. Consider whether the testator was isolated.

Third, determine whether the testator was isolated from other family or friends. An influencer often tries to separate the testator from his or her loved ones so he or she will become dependent on the influencer. The testator may see the influencer as the only person that cares about him or her and thus believes it would be proper to leave the influencer their estate. Elderly people, disabled individuals, and individuals with mental ailments may be especially susceptible to undue influence on account of their isolation or separation from other relations.

4. Scrutinize special relationships.

Lastly, look at whether there is a "special relationship" in the testator's life. A caretaker is simply one example. Perhaps a neighbor spends a lot of time with your father and helps him with chores and other tasks. Or perhaps one child spends much more time with parents than another. A "special relationship," by itself, does not indicate undue influence. There must be some action on the part of the influencer to show that he or she unduly influenced the testator. Did she drive your father to his appointment with the estate planning attorney? Was she present when your father signed his Will? All these facts could indicate that the influencer utilized the "special relationship" to his or her unfair advantage.

How Can I Avoid a Claim of Undue Influence?

As mentioned above, perfectly reasonably intentions can still lead someone to challenge an estate plan on the grounds of undue influence. At various times, you may be the one bringing a claim or the one defending a claim. Therefore, we recommend a few best practices to avoid having a loved one's (or your) estate plan challenged because of undue influence"

1. Always keep undue influence in mind.

If you are helping a loved one prepare an estate plan, keep in mind the factors explained above. Examine your actions from the perspective of a disgruntled heir and consider whether you have done anything that could be considered undue influence. Remember: successfully defending a claim of undue influence is great, but the goal is to avoid the claim in the first place. Any legal battle will result in thousands of dollars of attorney's fees and court costs.

2. Resist involvement in a love one's estate planning.

If a parent plans to leave everything to you, and you are your parent's primary caretaker, resist involving yourself in their estate planning process. You might simply wish to help your parent through the legal process, but look at it from the perspective of a plaintiff's attorney (who would argue there was undue influence): you suggested that your parents review their estate plan; you called the attorney's office to schedule an appointment for them; you drove them to that appointment; you sat in the appointment with them; and you were present for the signing of their estate planning documents. The attorney wants to show the judge and jury that that you exerted complete control over your parent in amending his or her estate plan, and that such control amounted to undue influence. If you involve yourself in the estate planning process, the case becomes even more difficult to defend.

3. Make your wishes clear.

For your own estate plan, be sure that your attorney has a clear record of your wishes. Your estate plan may say exactly what you want -- right now. But if you become incapacitated, frail, or mentally infirm, you could be the victim of undue influence. By making your attorney aware of your wishes (and the reason for them), you can better ensure that your estate is distributed the way you want.

The Best Place to Start: Have a Rock-Solid Estate Plan

The issue of undue influence is much more complicated than explained above. Nevertheless, we hope that this article has given you an idea of what undue influence is and how you can identify it. Estate plans are meant to provide peace of mind and the knowledge that your assets will go to the people you want to receive them. But if your documents are challenged on the basis of undue influence, all your planning could be for naught. That's why it is critical that you consult with an experienced attorney to create a rock-solid estate plan.

If you believe a loved one has been the victim of undue influence, want to challenge an estate plan on the basis of undue influence, or want to avoid the appearance of undue influence in your or a love one's estate plan, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

The #1 Argument Against DIY Estate Planning

This post is Part One in a four-part series discussing a variety of ways an estate plan can be challenged. You can find links to the other posts in the series here.

Can I make a "Do It Yourself" estate plan?

The phrase "Do It Yourself" calls to mind weekend trips to Home Depot and saving money. And while some aspects of home improvement may be proper to do yourself (e.g., painting walls or building a patio), things get trickier when you try to act as a plumber, excavator, or electrician. Performing those tasks incorrectly — resulting in broken gas mains or electrical shocks — could have disastrous consequences.

(Forbes has published several famous do-it-yourself estate planning horror stories)

The same is true of "Do It Yourself" (or "DIY") estate planning. Although do-it-yourself estate planning services may seem like a bargain, just remember: you get what you pay for. In many cases, these services merely provide generic forms that do not take into account your financial situation, family relationships, tax consequences, and other important factors. More than all of those things, however, the number one argument against using a do-it-yourself estate planning service is this: the documents may not comply with the legal requirements in your state.

Formalities can make or break your estate plan.

Every type of estate planning document — a last will and testament, living trust, power of attorney, etc. — has certain statutory requirements or "formalities" that must be adhered to in order for the document to be valid. Consider Oklahoma: Title 84 of the Oklahoma Statutes prescribes requirements for wills; Title 60 covers trusts; Title 58 covers powers of attorney; and laws governing the disposition of certain property interests are covered in Titles 15, 16, 54, and elsewhere. And that's just starters: you will also need to comply with a host of complex federal laws for special needs trusts, healthcare planning, and other documents.

One way someone can challenge your estate plan is by claiming that it failed to comply with statutory formalities. Were the witnesses or notary related to you? Does the document omit certain required language or "magic words"? Is your signature not in the proper place on the document? Without these formalities, your estate plan may not be recognized by the court and your beneficiaries may not get what you want to leave them. Worse yet: the mistakes or problems associated with these documents are often not realized until it's too late (e.g., when you are admitting a will to probate, using a power of attorney, or filing estate taxes). At that point, your family could end up spending many times what you "saved" in legal fees by drafting your own estate planning documents.

(AARP lists DIY estate planning as the #1 "Costly Estate Planning Blunder")

Do-it-yourself estate planning services will not help you answer the questions mentioned above and will not ensure all the formalities have been satisfied. In fact, these services provide repeated disclaimers that they cannot and do not offer legal advice and that you are accepting the risk of failure by using their service. With something as important as your estate plan — and the financial well-being of your loved ones — is that really a risk you want to take?

Don't Be an Estate Planning Horror Story

An attorney is pivotal in the estate planning process, as he or she can develop effective, valid documents that accomplish your goals. Don't leave things to chance with a "Do It Yourself" estate plan. To ensure your estate plan is prepared and executed properly, contact the qualified Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

4 Ways to Challenge an Estate Plan

Estate planning is meant to provide certainty and security to your loved ones. So how would you feel if, after your death, your estate plan were ignored? How would you feel if a probate court tossed it out and decided to do things differently? (Trick question: You're dead, so you can't feel at all.) Unfortunately, these are very real possibilities if your estate plan is successfully contested.

How Can My Estate Plan Be Challenged?

Understanding how your estate plan can be contested is the first step to making sure it won't be contested. That is why we are dedicating our next few blog posts to discussing the different ways an estate plan can be challenged in Oklahoma. Links to each new article in this series will be posted below as they are published:

  1. Part One – The #1 Argument Against DIY Estate Planning (formal requirements)
  2. Part Two – 4 Tips to Identify Undue Influence (undue influence)
  3. Part Three – How to Identify Fraud in Estate Planning (fraud)
  4. Part Four – One Weird Estate Planning Concept You Need to Know (testamentary capacity)

Get a Free Consultation

To help ensure your estate plan won't be challenged, or to determine whether you should contest an estate plan in probate, contact the experienced Oklahoma City estate planning and probate attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

Legal Briefs: What is the difference between a Will and a Trust?

We are often asked about the differences between a Last Will and Testament and a Living Trust. Let's start by describing how Wills and Trusts are similar: Both allow you to designate who gets your "stuff" after your death. Both allow you to name representatives to manage your estate after your death. Both allow you to designate a guardian for any minor children. Both are revocable, meaning you can change or revoke them while you are alive. In these respects, the documents serve similar purposes.

Will vs. Trust

Now for the main differences: A Will takes effect only after your death; a Trust takes effect right now. A Trust allows your successor trustees (i.e. representatives who manage your estate after your death) to manage assets for beneficiaries who are unable to responsibly manage their own assets; a Will gives you no such option. A Trust is a private document; because a Will is subject to probate, it will be filed in court (meaning it is freely accessible to the public) along with lists and descriptions of all your assets and beneficiaries. Perhaps most importantly, a Will must still go through probate to transfer title of your assets to your beneficiaries; but assets in a Trust are not subject to probate.

(Confused about probate? We explain the probate process in a nutshell.)

Mostly, people who ask us about the differences between Wills and Trusts want to know whether one document is better than another, to which we give the classic lawyer answer: It depends. Sometimes, a Will may be more advisable than a Trust; other times, a Trust more advisable than a Will. As a result, we highly recommend consulting with a qualified estate planning attorney before creating your estate plan.

Get a Free Consultation

To discuss which estate planning documents might be best for you, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

What is Estate Planning?

Most people have been told that they need an estate plan, but what exactly IS estate planning? What does it mean to have an estate plan, and why is it important to have one? Although estate planning is a very broad subject, it can be boiled down to this: An estate plan helps ensure that the proper people can take care of your SELF in the event of your incapacity and that the proper people get your STUFF in the event of your death. An estate plan includes several key aspects:

1. Formal documents

You have most likely heard of two very common estate-planning documents: a Last Will and Testament and a Living Trust. These documents say what happens to your STUFF after you die. Importantly, a Will is still subject to probate after your death; however, a properly funded Trust can avoid probate.

(Read our blog post explaining Probate In a Nutshell.)

Other estate-planning documents deal with taking care of your SELF. For instance, a Durable Power of Attorney allows you to appoint someone to make financial and/or medical decisions for you in the event you are unable to do so. An Advance Directive for Health Care (also known as a Living Will) allows you to state your wishes regarding end-of-life care, e.g., whether you want a feeding tube or other life-sustaining treatment.

There are myriad other estate-planning documents that may be appropriate in your particular situation. Estate planning is not a one-size-fits-all proposition, and you should consult with a qualified estate-planning attorney to determine what documents are best for you.

2. Beneficiary designations

Bank accounts, insurance policies, 401(k) plans, IRAs, pension plans, and many other financial assets allow you name someone to receive the asset after you die. This person is called a beneficiary because they benefit from the asset after your death. You may not think about it, but these designations are part of your estate plan.

(There are a number of advantages to using insurance in your estate plan.)

One of the great things about beneficiary designations is that, in most circumstances, they allow assets to transfer outside the probate process. As a result, we recommend reviewing your beneficiary designations regularly to make sure (1) you have a beneficiary named and (2) you still want the named individual to receive that particular asset after your death.

3. Informal planning

The most overlooked aspect of estate planning is possibly also the most important: informal planning. When you die, do your kids know where your assets are located? Do they know how to contact your financial or business advisors? Do they know your Internet passwords? Do they know where your safe deposit box key is located? Do they know which subscriptions and services need to be canceled? Do they even know what estate-planning documents you have?

(Has your family had an estate-planning "Fire Drill"?)

In addition to the formal documents prepared by an attorney, we recommend preparing a "Letter of Instruction" to your family and/or representatives detailing the more nuanced aspects of managing your estate. Approach the letter as though you could stand over your representative's shoulder and tell them everything that needs to be done in order to close your estate. Creating this document can greatly reduce the stress placed on your loved ones by having to manage your estate after your death.

How should I start my estate plan?

Although this post has merely covered the highlights, you can surely tell that there are many sides to estate planning. It is not all formal documents filled with legalese. Whatever your estate plan includes, remember: A properly designed estate plan should take care of your STUFF and your SELF.

Whether you want to create an estate plan for the first time, or you already have an estate plan and want to have it reviewed, contact the Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation appointment. As a bonus, click below to download our FREE Estate Planning Guide.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

Use RMDs to Fund a 529 Account

Earlier this month, we wrote about using required minimum distributions (RMDs) to make charitable gifts. But in what other ways can you use your RMDs? One option: fund a 529 account for a child or grandchild.

A 529 account (or 529 plan) is a tax-advantaged savings plan designed to encourage saving for future college costs. The different types and mechanics of 529 plans are best saved for another blog post. For now, the important thing to know is that there are three main benefits to using your RMDs to fund a 529 plan:

1. Earnings grow tax-free.

Usually, you have to pay income taxes on RMDs. If you then invest the RMD, you will likely pay a second round of taxes on those earnings down the road. On the other hand, if you contribute your RMD to a grandchild's 529 account, you will still pay income tax on the RMD, but the money you invest in the 529 account will grow tax-deferred. And if the money is later used for qualified education expenses, the entire amount is available tax-free.

(Three 529 Withdrawal Penalties to Avoid)

Additionally, the amount you contribute to a 529 account is not included in your estate for estate tax purposes — even though you retain control over the funds.

2. Helps financial aid qualification.

Federal financial aid (FAFSA) calculations consider the total resources of a prospective student when determining need. The Expected Family Contribution (EFC) to a child's college education takes into account 20% of a student's assets, but just 5.64% of a parent's assets and 0% of a grandparent's assets.

(How Assets Hurt College Aid Eligibility on FAFSA)

Giving your RMD to a grandchild as a check or other type of gift will likely increase the amount he or she is expected to pay for college. But by setting up a 529 account in your own name with a grandchild as a beneficiary, you keep your contributions classified as your assets and help your grandchild qualify for federal aid.

3. Offers flexibility.

529 accounts offer flexibility in the event circumstances change after you open the account. Say, for instance, one of your grandchildren gets a full scholarship to college. You can change the beneficiary of the account to another family member and still retain the tax-advantaged status of the plan. And if you decide to go back to school during retirement, you can even name yourself as the beneficiary of your 529 account.

Put RMDs to work for loved ones.

If you are fortunate enough to not need all of your RMDs, consider funding a 529 account to help your children or grandchildren on the way to a brighter future. For more information on 529 accounts and their role in your estate plan, talk to a qualified financial advisor and contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

Asset Protection in a Nutshell

With increases in the federal estate tax exemption ($5,600,000 for single individuals or $11,200,000 for married couples in 2018) and repeal of the Oklahoma estate tax, estate-tax planning is becoming a non-issue for all but the largest estates in Oklahoma. Instead, a greater concern for most people is protecting their assets from lawsuit judgments.

Why is Asset Protection necessary?

One car wreck, for example, can have a devastating effect on your estate. What if someone is injured in the wreck and sues you? Will your insurance cover it? Your car insurance may include $300,000 in liability insurance; however, if the accident seriously injures or kills someone, a lawsuit judgment could be $1 million dollars or more. In that case, you could be personally responsible for damages above the $300,000 in liability insurance.

In Oklahoma, certain assets are typically protected from creditors: your personal residence, your retirement plans, life insurance, your car (up to a certain value), etc. But general savings, investments, real estate, and other assets are fair game for creditors. One lawsuit can eliminate your life savings. Asset protection is the process of minimizing your liability exposure to avoid losing everything you have worked so hard to gain.

What does Asset Protection look like?

Asset protection comes in many forms, but the most popular is the creation of a Limited Liability Company (LLC) or a Limited Partnership (LP). Once created, this entity would hold some of your assets and "manage" them for you. That way, if a judgment is rendered against you personally, the assets owned by the LLC or LP would not be subject to execution; similarly, if a judgment is rendered against the business entity, your personal assets outside the entity would not be subject to execution. In addition to liability protection, these business entities can offer income tax benefits -- benefits that may be even greater if the GOP tax bill goes into effect.

How can I protect my assets?

For more information about asset protection and the tax benefits of an LLC or LP, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

5 Items to Put on Your Year-End Estate Planning Checklist

As 2017 comes to a close, now is a good time to review your estate plan. Although there are many aspects of your plan to consider, we recommend performing at least the following tasks:

1. Review Beneficiaries

Are the beneficiaries listed in your Living Trust or your Will still the individuals you want to inherit your assets? Have you divorced? Have you remarried? Have any beneficiaries proven themselves financially irresponsible? If one of your children is newly married, do you want to ensure the spouse does not get your assets? Have you had additional children or grandchildren?

Additionally, take time to review beneficiary designations on insurance policies, your 401(k), your IRA, or your bank accounts and other financial assets. These simple actions can go a long way to ensure that your assets go to the right people and, potentially, keep your heirs from fighting over your estate.

2. Inventory Assets

If you have purchased or inherited new assets in 2017—a house, a car, mineral rights, artwork—or sold others, your estate plan should reflect those changes. If not accounted for in your estate planning documents, those assets may be subject to probate (or cause other unintended consequences) after your death.

3. Review Your Power of Attorney

Your power of attorney grants someone (your "attorney-in-fact") the ability to act for you in financial and/or medical situations. If you no longer trust the person you have named as your attorney-in-fact, or if the person you named has moved away, you should consider updating your documents.

Additionally, some financial institutions and medical providers are wary of powers of attorney that are more than a few years old—even though the documents are still legally valid. To avoid any problems with using your documents, we recommend updating your powers of attorney at least every few years.

4. Create a Digital Estate Plan

Most people focus on the tangible side of estate planning, but have you set up an estate plan for your digital assets? What happens to your email accounts, social media accounts, and online bank and investment accounts after you die? What happens to photos or other important documents you have stored online?

To make things easier on you, we put together a five-step guide for creating your digital estate plan. So take a few minutes over the holidays to set your digital assets in order.

5. Have a "Fire Drill"

We recommend scheduling a family meeting to hold a "fire drill": Explain your estate planning documents to your family; show them where your important information is located; and walk them through exactly what needs to be done after your death. It's not always easy or happy to discuss your estate plan, but having a "fire drill" like this gives your family members a chance to raise any questions they have about your estate. And if they know exactly what to do, it can also dramatically reduce their stress after your passing.

Get a Free Consultation

There are many factors that can influence your estate plan, but reviewing the five items listed above can help ensure that your estate plan does what it is supposed to do. To discuss your estate plan with qualified estate-planning attorneys, contact the Oklahoma City law firm of Postic & Bates for a free, no-obligation consultation.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

Reduce Taxes by Making a Charitable Distribution

Is a Charitable Distribution Right for Me?

If you have not already taken your required minimum distribution (RMD) for 2017, you may want to consider making a qualified charitable distribution (QCD) through your IRA. Of course, before doing so, you want to know the answer to one important question: Would you benefit from making a QCD? If you fall into one of the following categories, the answer may be "yes":

1. You have a high adjusted gross income.

Some expenses are deductible only to the extent they exceed a certain percentage of adjusted gross income (AGI). For instance, miscellaneous itemized deductions must exceed 2% of AGI to be deductible; medical expenses and casualty losses must exceed 10%. QCDs can reduce AGI by taking the place of otherwise taxable RMDs, meaning it may be possible to lower your threshold for deducting certain expenses.

2. You pay income tax on Social Security.

As explained above, QCDs can reduce AGI. For retirees, a lower AGI can possibly result in lower taxes on any Social Security benefits you received in 2017.

3. You want to reduce your estate tax burden.

Your IRA is included in your estate after you die, meaning it could be subject to the estate tax. If you are looking to reduce the value of your estate to fall under the estate tax threshold, QCDs are one method to achieve that reduction. Because you can give up to $100,000 per year through QCDs, you can reduce the balance of an IRA (and thus the value of your estate) with charitable gifts over several years.

4. You can't deduct all your charitable contributions.

In any given year, the most you can claim for a charitable-gift deduction is 50% of AGI (although deductions in excess of that amount can be carried over for up to five years). However, gifts made directly from IRAs (e.g., a QCD) are not included as part of this 50% limitation. This means QCDs can reduce your 2017 tax burden over and above ordinary charitable contributions.

Get a Free Consultation

There are many factors that go into determining whether you should make a QCD from your IRA. With all tax issues, we recommend consulting with a qualified attorney and/or tax professional. To discuss your estate plan or charitable giving options, contact the Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

Will You Lose Your Long-Term Care Deduction?

We recently wrote about several ways the House GOP tax package could impact your estate plan. However, one area we did not cover is an important proposal that could impact millions of Americans: eliminating the medical expense deduction.

What Is the Long-Term Care Deduction?

The House plan proposes eliminating the deduction (codified in Title 26, Section 213 of the U.S. Code), which generally allows taxpayers to deduct medical expenses (including long-term care insurance premiums) for income tax purposes if the expenses are greater than 10% of adjusted gross income (AGI). But there is a cap on the amount you can deduct for long-term care premiums. The IRS recently announced that, for 2018, taxpayers age 40 and under can deduct a maximum of $420; taxpayers 70 and over can deduct a maximum of $5,200.

(You can see full tax rate tables and other IRS inflation-related adjustments for 2018 here.)

Of course, this deduction only applies to qualified long-term care insurance policies, so be sure to discuss the matter with your accountant or tax professional before claiming the deduction.

Who Uses the Deduction?

According to the IRS, approximately 8.8 million households -- or about 6% of tax filers -- claimed a medical expense deduction in 2015. The AARP estimates that 74% of those filers are 50 or older, and roughly half have annual incomes of $50,000 or less.

(Click here for the full AARP report on Medicare beneficiaries who spend at least 10% of their income on out-of-pocket medical expenses.)

Spouses, adult children, and some other individuals serving as caregivers can also claim the deduction under certain circumstances. By and large, though, the deduction is used by middle-aged or elderly taxpayers with limited assets and high medical expenses.

How Does this Change Affect Me?

Eliminating the medical expense deduction means more people will likely have to spend down their assets more quickly, forcing them to apply for Medicaid. Additionally, if you pay for your parents' care and qualify to claim the deduction, your tax bill may be affected, as you may no longer be able to claim the deduction for certain expenses. Click here for more information on how eliminating the medical deduction might affect you.

Get a Free Consultation

The tax plan proposes many changes that may affect your financial future. To discuss your estate plan or long-term care planning, contact the Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

Legal Briefs: What is "stepped-up basis"?

"Stepped-up basis" refers to a tax rule that minimizes or eliminates capital gains tax liability. Say, for example, your Uncle Buck owns Apple stock. He purchased 100 shares of the stock when it was worth $1/share. In tax lingo, his cost to buy the stock is known as his "basis." Apple stock is now worth about $170/share. If Uncle Buck sold his shares today, he would have to pay a capital gains tax on the $169/share appreciation in the value of his stock. Similarly, if Uncle Buck gifted you the stocks today, you would "inherit" his basis, meaning you would have to pay capital gains tax on the $169/share appreciation if you sold the stock tomorrow.

But let's say Uncle Buck decided to hold onto his shares. He placed them in a trust that names you as the sole beneficiary. If Uncle Buck died today, leaving you the stocks, the Internal Revenue Code provides that the value of the stock today (Uncle Buck's date of death) is your new basis in the stock. In other words, your basis is "stepped-up" from $1/share to $170/share. So if you turned around and sold the Apple stock for $170/share, you would pay no capital gains tax. 

The principle of "stepped-up basis" applies to other capital assets, most commonly real estate. Even though the law is more nuanced than the above example illustrates, the idea of "stepped-up basis" is an important one to consider when discussing potential estate planning options. To learn more about "stepped-up basis" or other estate planning terms, contact the Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]


3 Ways Tax Reform Could Impact Your Estate Plan

Yesterday, House Republicans unveiled their tax reform legislation, called the Tax Cuts and Jobs Act. (You can read the full text of the bill here.) Although the tax plan proposes numerous changes to our current system, we wanted to review a few that could impact your estate plan.

1. Repealing the Estate Tax

We have written previously about the history of the estate tax, but pretty soon the estate tax itself could be history. Under the GOP proposal, the individual estate tax exemption would nearly double (to about $11 million) immediately -- and the federal tax would be repealed entirely in 2024. What does this mean for you? Very likely, nothing. Only 0.2% of estates owe an estate tax. However, for those who do (or may) owe an estate tax, elimination of this 40% tax could mean a difference of thousands or even millions of dollars.

2. Maintaining "Stepped-Up" Basis

Republicans have long wanted to do away with the estate tax. However, some commentators believed that, as a compromise, the House bill would also propose eliminating (or limiting) a tax rule known as "stepped-up basis," which can allow you to avoid paying capital gains on certain inherited assets. Although the Republican tax plan maintains the stepped-up basis rule, it is an important item to watch in the coming months, as the rule can always be excluded in the Senate version of the bill. If the final tax package does eliminate the stepped-up basis, you should revisit your estate plan to determine how best to handle appreciated capital assets.

3. Extending "Pass-Through" Taxation

Some businesses -- sole proprietorships, partnerships, or limited liability companies -- pay taxes differently than others. For these "pass-through" entities, the owners pay taxes on all business profits on their individual tax returns (i.e., business income "passes-through" the business to the owner's tax returns). This is in contrast to a corporation (or a business that elects corporate-style taxation), which is taxed directly on all business profits.

Under the GOP tax plan, pass-through companies would pay a tax rate of only 25% on a large chunk of their business income (significantly lower than the 39.6% some pay now). The bill does include provisions to prevent service firms (e.g., law firms, accounting firms) from being able to pay the lower 25% rate; however, unless stronger (and likely more complicated) rules are proposed, many of those firms will likely still be able to qualify for the lower tax rate. Still, if you own a business, the tax plan's treatment of pass-through entities will be a major item of debate that you will want to watch.

The Bottom Line

With all the uncertainty surrounding tax reform, now is a good time to review your estate plan to see whether any of the potential changes to the tax system could affect you or your family. As always, we recommend discussing these matters with a qualified estate planning attorney or tax professional. To discuss creating or reviewing your estate plan, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

IRS Announces Estate and Gift Tax Limits

The IRS recently (officially) announced increases in the estate and gift tax exemption for 2018. The combined exemption will be $5.6 million per individual, up from $5.49 million in 2017. In other words, if you die in 2018, you can leave $5.6 million (or $11.2 million for married couples*) to heirs without paying a federal estate or gift tax.**

The annual gift exclusion amount also has increased to $15,000 in 2018—up from $14,000 in 2017. This means you can now give away $15,000 (and a husband and wife can each gift $15,000) to as many individuals as you want each year without paying any gift tax. For example, starting in 2018, a couple could make $15,000 gifts to each of their four grandchildren, for a total of $120,000. Gifts beyond the annual exclusion amount count towards (i.e., reduce) the $5.6 million combined estate/gift tax exemption.

Of course, tax reform being discussed at the Capitol could change all of this. President Trump’s tax reform framework, announced last month, calls for the elimination of the federal estate tax. However, the estate tax repeal may end up being sacrificed as the Republican-controlled Congress focuses on lowering corporate and individual income taxes.

To learn how to minimize or avoid estate taxes or to take other actions to protect your hard-earned assets, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]


*The $11.2 million exemption per couple is not automatic. An unlimited marital deduction allows you to leave all or part of your assets to your surviving spouse without paying federal estate tax. However, to use your spouse’s unused exemption — a.k.a. "portability" — you have to elect to do so on the estate tax return of the first spouse to die, even when no tax is due. Otherwise, you could be hit with a surprise federal estate tax bill.

**Although Oklahoma has eliminated its separate estate tax, 18 states and the District of Columbia still have a separate inheritance tax or inheritance tax. This number will drop to 17 in 2018, as Delaware and New Jersey each repealed their estate taxes effective January 1, 2018 (though New Jersey still has an inheritance tax).

How Do I Keep My Kids From Fighting Over My Estate?

As a parent, you undoubtedly want your children to have successful and happy lives. And while money is not the only measure of success or happiness, you may want to give your kids some assistance when it comes to finances. Many people utilize their estate plans to leave inheritances to their children to help them with financial and sentimental aspects of their lives.

How Can I Keep My Kids from Fighting?

If you have multiple children, you likely want to leave each child his or her fair share of your estate. But this task is not always as easy as it sounds. Each child may be attached to different assets, and their lives may present different hardships and successes that make certain assets more desirable for them. If you don't take these factors into account, your kids could end up fighting over your estate even if you have a well-designed estate plan - especially if probate becomes necessary. Luckily, there are certain steps you can take to help mitigate these disputes or avoid them entirely:

1. Address specific property

Though you may already address larger assets such as homes and vehicles in your will or living trust, have you taken time to specify where your smaller personal items should go? Rather than leaving those items up for grabs (for example, "half to my son and half to my daughter"), you can create a separate list to designate who should receive each item of personal property. Which child should have your grand piano? Who should get your paintings? Your set of china? Specifying who you want to receive these items can help you ensure that your estate is distributed fairly and, hopefully, avoid arguments.

2. Update your plan

Once you create your plan and feel that it distributes your property fairly, you may believe that is the end of it. However, life happens and things change. What you may have deemed fair and equitable at one point may not seem fair later. If you have additional children or grandchildren, if a beneficiary passes away, or if certain relatives are more or less financially successful, your current distribution plan could require significant adjustments. We recommend reviewing your estate planning regularly to determine if you should make any changes. At the very least, update your list designating who will receive your personal property.

3. Speak with your family

For some personal items, you may wish to get input from your family. Perhaps your daughter is very connected to your dining table but does not want your jewelry. Or maybe your son would love your book collection but not your vintage car. By having an open discussion on how you should distribute your estate, you can better understand who has an interest in your assets and decide what designations would be the most fair. It can also help avoid later disputes by making all your beneficiaries aware of what you have planned, so no one will be surprised in the future.

Get a Free Consultation

When it comes to estate planning, there are many ways to ensure that your estate is distributed in a way that makes you and your family happy. And while you cannot always control how your children will react after you are gone, you can do your best to avoid arguments by executing a well-crafted estate plan.

To discuss your estate plan, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]

Legal Briefs: Will my IRA affect my estate plan?

Most of the time, the answer is simple: it won't. Even if you set up a trust, you will continue to individually own your IRA and list individual beneficiaries for it. You cannot make your trust the owner of your IRA, and naming your trust the beneficiary of your IRA accounts can be very complicated. However, your IRA can be an important part of your estate plan, so it is important to understand what options are available and what you can do to provide the maximum benefit to you and your loved ones and other heirs.

If you do want your trust to be the beneficiary of an IRA, it is important that the trust qualify for the “look-through” rule. This rule says that the IRS must be able to determine whether there is a designated beneficiary and who that beneficiary is. The four requirements that the trust must satisfy are as follows:

  1. Validity. The trust must be valid under state law — or it would be but for the fact that there is no corpus (principal);
  2. Irrevocability. The trust must be irrevocable or will, by its terms, become irrevocable upon the death of the account owner;
  3. Identification. The beneficiaries of the trust who are beneficiaries with respect to the trust’s interest in the account owner’s benefit must be “identifiable from the trust instrument”; and
  4. Documentation. The plan administrator must be provided with certain documentation: (i) a copy of the trust and amendments (if any), or (ii) a list of all trust beneficiaries, including other details about contingent and remaindermen beneficiaries, as well as giving the plan administrator a copy of the trust instrument upon demand.

If the trust satisfies these requirements, the trust qualifies, and Required Minimum Distributions (“RMDs”) will be determined based on the life expectancy of the trust beneficiary. If there are multiple beneficiaries, RMDs are determined by the life expectancy of the oldest beneficiary. If the trust doesn’t qualify, then the “no designated beneficiary” rule will apply, and RMDs will not be computed according to any beneficiary’s life expectancy — thus, RMDs will be accelerated over a short time period.

There are some good reasons to leave IRA money to a trust after your death. Typically, it is to benefit someone who can’t be trusted to manage their money: a minor child, a spendthrift, or the spouse of a second or later marriage. In the last instance, a trust can be set up for those who want to leave enough money to care for their spouse and then direct any remaining funds to go to their children after the spouse passes.

Rules for inherited IRAs are different for spouses and non-spouse beneficiaries. As a spouse who inherits an IRA, you can either "rollover" the funds to your own IRA or wait to take RMDs until your deceased spouse would have been 70½. If you have other income, you may want to wait to take RMDs so your tax bill is lower.

The IRS has stricter rules for non-spouse beneficiaries of an IRA. These beneficiaries have three options:

  1. Cash in the IRA. This means emptying the entire inherited IRA and paying taxes on that sum at one time. If you really need the money that may be your best bet. However, be prepared for a huge tax bill!
  2. Take only RMDs. The IRS requires non-spouse beneficiaries of IRAs owned by people over age 70½ to start taking RMDs within a year of inheriting the IRA. Those RMDs are based on the beneficiaries’ life expectancy, not the life expectancy of the now-deceased owner of the account. Therefore, the younger you are the lower your RMDs.
  3. Cash in and empty the account over five years. You don’t have to stick to the RMDs or take all the money from the IRA at once. You can wait and take any sum you want, but once you start taking distributions beyond your RMDs you have to finish emptying the account within five years.

Option 2, often called a “stretch IRA,” takes advantage of the fact that younger beneficiaries have smaller RMD requirements. Individuals who know that their spouses have enough money to live on can extend the benefits from their IRAs by naming children, grandchildren, and even great-grandchildren as IRA beneficiaries. Those younger relatives then take RMDs that are small enough to trigger minimal taxes. The rest of the inherited account (the part remaining in the IRA) can continue to grow tax-deferred and increase in value. However, not all IRAs can be stretched, so consult your IRA provider and/or financial advisor if you are considering this strategy.

If you are not comfortable bypassing your spouse as your IRA beneficiary, you can instruct him or her to stretch it for you. With this strategy, you name your spouse as your IRA beneficiary. He or she then rolls your IRA into an inherited IRA in his or her name and starts taking RMDs at age 70½. Your spouse then names a younger relative as the beneficiary of that IRA. When your spouse dies, the young beneficiary starts taking the small RMDs described above. However, due to pending legislation, this last option may soon no longer be available.

To determine how IRAs fit into your estate plan, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation.

[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]