Legal Questions and Answers
Wills and Trusts
Q: Should I have a will or a trust?
A: Here are some facts to help you decide:
A person does not have to be wealthy or elderly to do some serious thinking regarding an estate plan. If you own a home or a car or have a checking or savings account, you have an estate. Often a person with a small or modest estate is most in need of a plan to provide for the proper transfer of that property at death.
There are several reasons to have a will or a trust. Most importantly, having a will or a trust allows you to decide who will receive your property rather than leaving that choice to state law.
Having a will allows you to choose your personal representative. Without a will, the court could appoint someone as personal representation other than a person you would choose.
Having a trust allows you to avoid the probate court system altogether if your trust is created and funded properly.
Equally important, if you have minor children you can name their guardian in your will or trust. Your selection of a guardian is not binding on the court, but the court will give strong consideration to your selection. Without a will or a trust, the court may appoint a guardian other than the person you would have chosen.
Q: What if I die without a will or a trust?
A: Assuming your estate is not controlled by a prenuptial marriage contract, here are the general rules for how your estate will be distributed if you die without a will or a trust:
If you die leaving a surviving spouse and children, your spouse takes one-half of your estate, and your children split the remaining one-half in equal shares. If you die leaving a surviving spouse and no children, your spouse takes one-half of your estate, and your parents share the remaining one-half.
If you die single but have children, your children take your entire estate in equal shares. If you die single with no children, your parents take your entire estate. Oklahoma law provides for distribution of your estate in additional situations, all depending on the identity of your legal heirs. Special rules apply if you have children from a prior marriage and you have property acquired during your last marriage as well as separate property.
If your children are minors, your surviving spouse, in order to use their portion of your estate for their support or education, would either have to be appointed guardian of the children by the court or have someone else appointed, give a bond, make annual accountings to the court and obtain the court’s permission for many routine transactions. This will result in considerable expenses as well as legal difficulty.
Q: What is a will?
A: A will is a written instrument by which you provide for the disposition of your property after your death. In Oklahoma, if you are of sound mind and 18 years or older, you may dispose of your property by will.
Q: May I dispose of my property as I wish with a will or a trust?
A: Under Oklahoma law, a married person may not completely exclude the surviving spouse. Oklahoma law allows the spouse to elect to take a certain portion of the estate despite the will. If your will does not name a child or in some cases a grandchild, or indicate that the child or grandchild has been considered, then the child or grandchild may have certain rights to take a portion of your estate. Your lawyer can explain these restrictions and show you how to accomplish your desires.
Q: May I change my will or trust?
A: You may modify or revoke your will or revocable trust at any time. You should take steps to revise your will or trust whenever changes in the size or circumstances of your family or estate mean that your old will or trust no longer disposes of your property as you want. All changes, to be effective, must be made in strict conformity with the law. Any change made in a will or trust by erasure, in your handwriting or typed as an insertion is likely to be invalid.
Q: Does it cost more to administer an estate with or without a will?
A: Unfortunately, “it depends” is the appropriate answer. You could have the cost of having an attorney prepare your will, but you may also have costs for talking to an attorney for help with estate planning, even if you do not prepare a will. With a will, you can include cost-saving provisions such as waiving the bond requirement for your personal representative as well as authorizing your personal representative to sell property and perform other functions without first obtaining permission from the court. However, other procedures exist which may allow the same results or more favorable results, whether or not you have a will.
If you have a will, your estate will be “probated” in court. If you do not have a will, your estate will be “administered” in court. Both procedures are governed by the Oklahoma Probate Code (Okla. Stat. title 58) and many of the procedures apply equally to probate and estate administration. The Probate Code provides several methods to probate or administer an estate, some of which can reduce costs if used appropriately.
An attorney with a working knowledge of wills, inheritance, probate and estate administration can provide guidance on minimizing probate or estate administration costs and achieving the desired results for distribution of your estate.
Q: Is joint tenancy a substitute for a will or a trust?
A: No. Joint tenancy is a useful estate planning tool, but to rely solely on joint tenancy ownership for estate planning is generally a poor idea. Usually home and bank accounts are owned by married couples as joint tenants. Upon the death of the first joint tenant, the property passes to the survivor by law. The survivor becomes the sole owner of the property and should make additional provisions for distribution upon his or her death. If real property is held in joint tenancy, an affidavit must be filed at the courthouse in order to terminate the joint tenancy. Your attorney can advise you on this procedure.
There are creditor hazards and tax hazards in holding property in joint tenancy as well as other possible complications and expenses.
Your attorney can advise you as to whether the use of joint tenancy is appropriate. Joint tenancy is simply not an adequate substitute for a will or a trust in many cases. Furthermore, if both joint tenants die simultaneously, both of their estates will require probate; although, in some instances, both estates can be probated or administered through one court action.
Q: How do I make a will or a trust?
A: Using a will or trust form or computer program for estate planning is not recommended. A will or trust must be prepared within the legal technicalities prescribed by the law. These technicalities are for the protection of you and your heirs, and they must be observed. The proper drafting of a will or a trust requires the professional knowledge, skill and experience of a practicing lawyer. Some attorneys charge on the basis of time spent in preparation of a will or a trust while others have a flat fee. A few hours of an attorney’s time now will save your beneficiaries not only the costs of litigation over a poorly drawn will or trust but also the additional expense of a guardianship of your minor children. Your attorney will be glad to discuss the charge for services with you.
Q: Is a handwritten will valid?
A: Under Oklahoma law a will that is entirely written, dated and signed in your own handwriting, and which contains no typed or printed portion, is valid. The problems resulting from this type of will are not so much in what the person writing the will says as in what the person fails to say. Without the advice of an attorney, most people who prepare handwritten wills fail to include provisions that address the issue of a beneficiary who dies before the will maker, the naming of a personal representative and waiver of his bond, the source for payment of estate taxes and the specific powers the personal representative will have, as well as the problem of the simultaneous death of the will maker and a will beneficiary.
Your lawyer can explain these matters and show you how to simplify the administration of your estate as well as accomplish your desires with the best tax consequences.
Q: What is a living will?
A: A living will is part of a document called an Advance Directive for Health Care. In the living will portion of such document, if you 1) have a terminal condition, 2) become persistently unconscious, or 3) have an end-stage condition, you may direct that your life not be extended by life-sustaining treatment. Your directions go into effect if your attending physician and another physician determine that you are no longer able to make decisions regarding your medical treatment. As part of this living will, you may also make an election whether you desire the artificial administration of food and water under these circumstances if you are unable to take food and water by mouth.
Q: What is a revocable or living trust and what are its advantages over a will?
A: A revocable or living trust is a written document providing for the management of your property which becomes effective while you are living, unlike a will which takes effect after your death. A trust is set up for a trustee to manage your property for your benefit during your lifetime or in the event of your incapacity. Ordinarily you serve as the sole trustee until you die or become incapacitated. After your death, the trust document will provide for your successor trustee to distribute any remaining property to those persons or entities you have chosen (just as in a will) or provide for the continued management of your property by that successor trustee for many years, with the ultimate distribution as you direct. The primary advantage of a revocable trust over a will is that upon your death, the administration of your estate in probate court is avoided, and the distribution of your property is governed by your trust outside of the probate court system.
This normally results in a quicker and less costly distribution of your property to the people you have selected. In addition, a revocable trust is a private document which is not recorded at the courthouse or anywhere else. In this regard a trust is unlike a will which, if probated, normally requires a list of your property and its value to be public record at the courthouse. When a revocable trust is fully funded by conveying all of your property into your trust during your lifetime, no probate of your estate is required.
Another advantage is that a trust can continue after your death, holding property for the benefit of a spouse, a child or another named beneficiary. This is especially useful in the event the spouse, child or other beneficiary is disabled or is receiving assistance from other sources. The trust cannot be continued indefinitely, but can be continued long enough to achieve many desired purposes. The same results can also be achieved by adding trust provisions to a will, but normally results in a delay in providing for the beneficiary since the will must first be probated.
Q: What are the advantages of having a will instead of a trust?
A: Generally the cost to prepare a will is less than the cost of preparing a revocable or living trust. That is because a will requires no action on your part after it is signed and is simpler to create than a trust. On the other hand, a revocable trust is more complicated than a will because it involves the management of your property during your lifetime as well as its distribution after your death. In addition, a trust must be funded during your lifetime and this can require significant effort and paperwork. If you fail to transfer all property into your trust or you subsequently acquire property in your own name instead of the trust name, your estate will still have to be probated. Your attorney will assist you by explaining the steps necessary to put your property into the trust. Basically, wills and trust are two separate approaches to estate planning. You should consult with an attorney who works extensively in estate planning for an explanation of the advantages and disadvantages of wills, trusts and joint tenancies. Keep in mind, you can include in a will provisions to establish a trust. However such a will is usually no longer a simple will and the costs could approach what a revocable trust would have cost. Either a will or a trust can be used to transfer your property following your death.
Q: Do other alternatives to a will or trust exist?
A: Oklahoma provides several methods of transferring property upon a your death. One of the recent additions is a “Transfer on Death deed” which provides for the transfer of real property to a named beneficiary upon the death of the owner, with the owner retaining full ownership during his or her lifetime. Oklahoma also provides for “Transfer on Death” or “Payable on Death” for other types of property, including bank accounts, corporate stock, and other types of personal property. Oklahoma recognizes the division of real property between a life estate and a remainder interest, with certain persons owning the real property during the lifetime of one or more named persons, with the property becoming fully owned by the designated remainder interest owner upon the death of the named persons. Trusts other than revocable trusts also exist which are useful in appropriate circumstances. All of these are useful planning methods and can be used separately or in conjunction with a will or a trust to achieve your desired estate plan.
Q: I own real property in another state. What do I need to do?
A: Each state has its own laws, but can also have laws in common with other states. As long as every state in which you hold property recognizes the validity of holding property in trust, a trust helps avoid having to probate your estate in every one of those states. Whether you use a will, trust, joint tenancy, or other planning device, you will need to comply with the laws of each state in which you hold property. Often, you or your local attorney will consult with an attorney licensed to practice law in the state where the property is located to make sure the method used is handled properly according to that state’s laws.
Is Probate Needed?
Q: What is meant by probating an estate?
A: Upon the death of a property owner, Oklahoma law provides for a legal process to determine the assets, assess their value, and distribute them to creditors and heirs. Such procedure takes place in the district court of the county where the deceased property owner lived. If there is property of the deceased located in another state, additional proceedings called “ancillary administration” will be necessary in that state. Oklahoma law provides for the probating of estates to protect all parties who have any interest in the estate.
Q: What is the necessity of probate?
A: An estate is probated for the following reasons:
Q: What does probate involve?
A: Probating an estate requires that a responsible party, called the personal representative, be appointed by the court to carry out the duties outlined above. The personal representative may be a bank or a trust company or it may be an individual such as the spouse or child of the deceased. If the deceased names a personal representative in a will, that party is usually appointed by the district court. If the deceased does not have a will, the district court will usually appoint the closest relative as the personal representative. The functions and duties of the personal representative are:
The District Judge
All of these proceedings are under the jurisdiction of the judge of the district court. Every action taken by the personal representative is subject to the scrutiny and approval of the judge. All determinations are made by the judge, without a jury, including the payments of debts, payment of attorney and personal representative fees, and the final distribution of the estate assets.
Q: How long does probate take?
A: It is difficult to predict how long it will take to settle any estate because each one is different. There is usually a minimum of 10 days required before a hearing can be held for the appointment of the personal representative. Creditors must be given two months in which to submit claims following publication of a notice to creditors in a newspaper. The personal representative must file an inventory of the assets of the estate within two months after appointment, unless the inventory is waived by the court. The personal representative must file an accounting of the handling of the estate funds at the conclusion of the probate and a minimum of 20 days notice must be given for a hearing on his accounting. The state and federal taxing authorities will usually take from two to 15 months to complete an audit of the estate tax report, depending on the size and complexity of the estate.
The minimum time required to complete a simple estate is six to 12 months. Large estates with property to be sold usually take longer. If an estate is taxable, tax releases from the taxing authorities must be filed with the court before the judge will issue a final decree distributing the estate property.
Special procedures are available for administering small estates, estates passing completely to a surviving spouse, and terminating a joint tenancy or a life estate. In these cases, the time required may be considerably shorter.
Fees, Costs And Taxes
Three sources of expenses that arise in connection with the administration of the estate, other than property management expenses, are court costs, estate and inheritance taxes, and attorney and personal representative fees.
District court costs are based on a schedule of charges made for each matter handled by the court.
Federal estate taxes are charged against estates over the exemption amount for persons who pass away in a given year.
Attorney fees are based upon reasonable charges necessary to provide appropriate compensation to the attorney, considering the scope and extent of services rendered and responsibilities assumed. The personal representative is allowed a fee, fixed by law, based on a percentage of the probated estate. Fees for attorneys and personal representatives are subject to the approval of the district court.
Some property may not be included in the probate estate, such as life insurance, pension and/or profit sharing benefits, trust property and property held in joint tenancy; but this property is still generally subject to estate taxes. However, proper transfer of these assets may require considerable effort on the part of your attorney.
Joint tenancy is a form of co-ownership of property whereby two or more persons own property together. On the death of one joint tenant, court proceedings are occasionally necessary to transfer title. Normally a joint tenancy may be terminated by the execution of an affidavit filed in the county clerk’s records. Joint tenancy can be a useful transfer device for a married couple; however, the unrestricted use of this device by a layman for every property acquisition can lead to disastrous tax consequences. The court proceedings are simple if all of the property of the deceased is in joint tenancy; however, many people do not have all of their property in joint tenancy and a full probate is required for the solely owned property. Usually, a great deal of time and expense can be saved by obtaining the advice of the family lawyer before title is taken in joint tenancy.
Whether or not you make a will is up to you. Experience has proven the wisdom of one who has carefully considered the provisions of a will. Having your will timely and properly drawn will assure you and your loved ones that upon your death disposition of your property will be as you intended.
After you have made your will, it is important that you periodically review it with your attorney to keep it up to date, taking into consideration current individual circumstances and tax laws.
Wills must be filed in the district court upon deaths, if a probate is required. If you do not make a will, your property may be distributed according to the Oklahoma laws of descent and distribution, depending on how you held title to each asset.
Laws Of Descent And Distribution
If a person dies without a will, the legislature has written a law determining how that person’s estate will be distributed at death, called the law of descent and distribution. The law of descent and distribution will be subject to any prenuptial marriage contract. Assuming there is no prenuptial contract, if the deceased leaves a spouse and children of their marriage, the surviving spouse receives one-half of all the property of the deceased, whether acquired by the joint industry of the husband and wife during marriage or otherwise. The remaining one-half of the estate passes in equal shares to the surviving children. When a person dies leaving a spouse and children, one or more of whom are children from a prior marriage, the surviving spouse receives one-half of the property acquired by the joint industry of the husband and wife during the marriage and the children share the other half equally.
All remaining property of the deceased person is shared equally by the surviving spouse and children of the deceased. Additionally, where a person’s child has predeceased them, if that deceased child is survived by children (the deceased person’s grandchildren), those grandchildren will receive equal shares the portion of the estate that their parent would have received if living.