Estate Planning 101

Hello, my name is Spencer Pittman, and I am an attorney at the law firm of Winters & King, a full-service law firm based in Tulsa, Oklahoma.  One legal service our firm provides is estate planning, which includes wills, trusts, guardianships, probate, and the legal formalities that come along with those processes. The topic of today’s Podcast episode is on the details of estate planning, why its important for you and your family, the process, and how Winters & King can help you in your particular situation.

Estate planning is the process of anticipating and arranging for the management and disposal of your estate during your life, as well as at and after death, while minimizing gift, estate, generation skipping, and income tax. A will is part of the estate plan. Depending on the complexity of the situation, an estate planner might use other tools such as trusts, pass-through entities or life insurance to accomplish your estate planning goals. 

So, what would happen if I passed away without a will?  If you pass away without a will, the laws of the state where you reside at the time of your death will determine how your assets are distributed. This is known as dying “intestate.” Typically, your assets will be distributed to your closest relatives, such as your spouse and children, and this varies by state law. If you have no living relatives, your assets will go to the state. This is important because if you die without a will, you will not be able to control how your assets are distributed and who will inherit them. This is why I highly recommended to have a will in place, so you can determine how your assets will be distributed after you pass away.

Estate planning benefits more than just the person with the estate.  It is a very emotional time when a loved one passes away. Administering an estate during this emotional time without clear instructions can be very difficult.  Estate planning provides the surviving family members with your clear final wishes on how the estate is to be handled and divided.  Estate planning can benefit others for other reasons too.  Proper estate planning can avoid probate, which can be time-consuming and expensive, or the need for court-supervised guardianship proceedings for family members who are unable to manage their own affairs.  Estate planning can help protect your assets from creditors, lawsuits, and other potential liabilities, and can help minimize the impact of taxes on your assets and provide a tax-efficient transfer of your assets to your beneficiaries.

Two of the most common estate planning tools are the will and the revocable living trust.  Wills and trusts can work together to create the most complete plan for an estate. These tools are very different in application in the estate planning process, though.  A will is a legal document that describes how you would like your assets to be distributed after you pass away. A will goes into effect only upon your death and it is used to name an executor who will be in charge of carrying out your final wishes and distributing your assets according to the will.

A trust on the other hand is a legal arrangement where a trustee holds and manages assets for the benefit of one or more beneficiaries. Trusts can be used for a variety of purposes, such as avoiding probate, protecting assets, providing for family members, and reducing taxes. Trusts can also be revocable or irrevocable depending on the terms of the trust.  

A revocable trust, also known as a living trust, is a trust that can be modified, amended, or revoked by the grantor during their lifetime. With a revocable trust, the grantor retains control over the assets placed in the trust and can change the terms of the trust as their circumstances or wishes change. The trust assets are still considered part of the trustor’s estate for tax purposes, and the grantor can still receive income or other benefits from the trust. 

An irrevocable trust, on the other hand, is a trust that cannot be modified or revoked by the grantor once it is established. With an irrevocable trust, the grantor gives up control over the assets placed in the trust, and the trustee has full control over the assets and their distribution. Because the grantor gives up control over the assets, the assets are not considered part of the trustor’s estate for tax purposes, and the grantor cannot receive income or other benefits from the trust. 

The primary differences between revocable and irrevocable trusts are the level of control the grantor retains over the assets and the tax treatment of the assets. Revocable trusts are often used for estate planning purposes, allowing the grantor to have control over their assets during their lifetime while still providing for the distribution of those assets after their death. Irrevocable trusts are often used for asset protection, estate tax planning, or to provide for long-term care needs, as they remove the assets from the grantor’s estate and protect them from potential creditors or other legal claims.

There are advantages and disadvantages to both wills and trusts, so you should speak with one of the experienced attorneys at Winters & King about your circumstances to determine which of these options, or what combination of the two, is best for you and your financial and family situation and goals.

Once you create your estate plan, you should periodically do a check up on the estate plan to see if it needs updating.  There are several circumstances that may warrant the need to update your estate plan, such as certain significant life events.  These may include marriage, divorce, the birth or adoption of a child, or the death of a beneficiary or executor.  Another may be a significant change in your assets, the acquisition or sale of a large asset such as real property or a new home, or a change in tax laws or the laws of your state.

It is a common misconception that estate planning is only for the wealthy or people with a vast amount of resources or assets. The estate planning serves to protect you and your loved ones, regardless of wealth.  Since estate planning is merely the process of creating a formal plan for how your assets and personal belongings will be distributed after you pass away, and making arrangements for your healthcare and financial management if you become incapacitated.  There are no set minimum amounts of assets that are needed to create this kind of estate plan. Further, the initial cost to create an estate plan pales in comparison to the legal fees, costs, and expenses required to administer an estate without a trust, or a probate when someone dies intestate, or without a will. Again, an estate plan is important for anyone who wants to ensure that their assets are distributed according to their wishes and that their loved ones are taken care of after they pass away. Even if you do not have many assets, estate planning is important to make sure that your wishes are followed and to minimize the stress and confusion that your loved ones may experience during an already difficult time.

The estate planning attorneys at Winters & King have decades of experience in advising clients on all aspects of estate planning, including wills, trusts, powers of attorney, advanced directives, probate administration, and serving as counsel for personal representatives to ensure our clients’ wishes, needs, and estate plans are drafted or administered appropriately and in accordance with the law.  Call the attorneys at Winters & King at 918-494-6868 to discuss your legal issues in more detail.