Many people mistakenly believe that having a Will allows you to avoid probate. On the contrary, choosing a Will, or choosing to not have any estate planning document, generally means you will have to go through the probate process.
This means that your Personal Representative or Executor, often your spouse or child, will be responsible for hiring an attorney to conduct the probate process. Right after the death of a loved one is a terrible time to have to go to court. And getting probate started is often urgent, because the authority of a family member to act in your place under a Power of Attorney or other document providing for your care does not survive you — it expires when you do — so the authority to engage in legal or financial acts on behalf of your estate must be granted by a probate judge after the initial probate court filing.
Probate in Oklahoma is not as expensive as some states, where probate fees are based on a minimum percentage of an estate. But if probate can be avoided, that’s often a better plan.
One way to avoid probate is to consider a Revocable Living Trust instead.
If you want to simplify estate administration and pass title to you property in the easiest way possible, consider a simple type of trust called a Revocable Living Trust. It holds title to your property during your life, and upon your death, passes that title to the people you select. The “revocable” part means you retain complete control over the Trust and your property as long as you are alive. A Revocable Living Trust can be an important part of comprehensive estate planning.
Speed the Transfer of Title
One of the biggest advantages of a Revocable Living Trust is how fast title to property can be transferred. There are still important steps that should be followed in administering a Trust, but it avoids the delay of probate before the heirs can receive their inheritance.
With property held in a Revocable Living Trust, transfer of title does not require court supervision, so the process is much easier, with less paperwork.
Avoiding probate means avoiding court filing fees, costs of publishing mandatory notices in the newspaper, and costs of hiring an attorney. While there are some added costs involved in setting up the trust, these costs are generally lower than the costs to complete probate.
Trusts provide significant flexibility in controlling how assets pass. Unlike a Will, a trust can “live on,” meaning that control over the assets can extend beyond the life of the trust creator. For instance, if you want children to be a certain age before receiving their inheritance, a trust can be written to accomplish this.
Many people dislike the fact that probate is an open court proceeding where their family’s legal and financial affairs are made public for anyone to see. Unlike probate where much of your family and financial information will become public record, a trust maintains your privacy.
Most people don’t have to worry about the estate tax these days, since a married couple can pass on over $10 million without incurring estate tax liability. However, everyone should be concerned with minimizing income tax and capital gains tax. Proper estate planning and the use of carefully designed trusts can help protect your assets against taxes.
Retirement Plan Trusts
Since 2004, the IRS has permitted the creation of stand-alone Retirement Plan Trusts. It is a special trust used only for qualified retirement plans, such as 401(k) and IRA accounts. Using a Retirement Plan Trust permits the owner to maximize income tax deferral and long-term wealth accumulation while also maximizing asset protection against creditors or lawsuits (a recent Supreme Court case decided that beneficiaries do not enjoy the same asset protection as the account owner) to ensure nobody can take away the gift you leave to loved ones.
By creating a Retirement Plan Trust, you can provide your heirs with a lifetime of tax-deferred asset growth — a powerful legacy. Retirement Plan Trusts are relatively new, so many people have never heard of them and many financial planners and CPA’s are not familiar enough to recommend this powerful tool to their clients. To work, a Retirement Plan Trust must be set-up during the life of the original retirement account owner and it must meet certain strict IRS rules.
Planning With Trusts for Medicaid and VA Eligibility
Some specialized trusts are intended to maintain your ownership of your home and assets while still helping you qualify for Medicaid or VA benefits. These trusts are carefully drafted to comply with Oklahoma Medicaid rules and VA pension rules.
It is important to understand that most trusts, including Revocable Living Trusts, will not qualify you for Medicaid or VA benefits. Only trusts specifically drafted for this purpose can help protect you from spending down your assets to pay for long-term care. Planning with trusts for long-term care is most effective when done in advance of needing care, so do not delay this important planning.
Please contact us or call (405) 435-9700 to schedule a consultation.