By Dan Barney

Estate Planning & the Law

Previously, we discussed various purposes that are fulfilled by various estate planning techniques. Most individuals would seek to fulfill only one or two of those specific objectives, however, knowing the range of benefits available may assist you in your planning.

The following objectives may be fulfilled in your planning: (a) control disposition; (b) avoid probate; (c) avoid/minimize taxes; (d) protect assets; (e) preserve a family ranch or business; (f) deal with Medicaid issues, protect against divorce issues.

More specific planning tools to control disposition of your assets may include the following:

A. Disposition of Your Assets: Intestate–No Will – If you do nothing, state law will determine how your assets are distributed at your death. The laws of intestate succession will apply. These laws may or may not be what you want.

For example, if a couple has children by their marriage, the surviving spouse will receive only one-half (1/2) of the estate. Many couples would prefer to pass all property to the surviving spouse.

B. Ways to Control Disposition.

1. Will – a properly drawn will permits you to control the disposition of your property between your spouse, your children, unrelated individuals, charities, etc. Within reason you can completely control this distribution although a surviving spouse has a right to demand a predetermined share and special provisions are required to omit a child from your will.

Even with a will, the distribution of “titled property” such as real estate, mineral interests or bank investment accounts will require a court decree from probate to enable transfer to your selected beneficiaries.

2. Trust – A trust can be established which will essentially own your assets. Consequently, at your death, the trust continues and assets in the trust are administered exactly as you have prescribed in the terms of that trust.

The trust is administered by persons you have named as trustees. The trust can be structured to distribute assets at your death, at the death of your spouse, or many years later.

Later distributions can be reserved for your children’s or grandchildren’s education or for distribution to them when they reach a certain age milestone.

No probate is required for assets placed into a trust, although the administration of the trust may create additional effort for you since all titles, investment accounts, checking accounts, etc., must be transferred and maintained in the name of the trust.

3. Payable on Death Accounts – Oklahoma law provides for designation of primary and contingent “payable on death” or “P.O.D.” beneficiaries.

This method, which is applicable to bank accounts and some investment accounts, permits you to authorize transfer of your account directly to one or more beneficiaries (such as your children) upon your death. You may also provide for contingent beneficiaries should your primary beneficiary be deceased.

4. Insurance Products/Annuities – If properly structured, life insurance and annuities can pass separately from your probate estate directly to persons you select.

It is also appropriate to transfer assets on death directly to your selected beneficiaries under an IRA or other qualified pension plan.

It is usually better to provide for direct transfer rather than allowing the assets to be paid to your own estate since they would then be subject to your will and possible taxes.

C. Conclusions. One purpose of planning is to control the distribution of your assets at your death. Rather than permitting the state to control this matter, you can take control using your will, a trust, or your specific instructions to a bank or investment company.

Next week, an in-depth discussion of another of the purposes behind planning your estate.

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