Issues in Unplanned and Poorly Planned Estates

by Cody Jones and Ashley Ray for the Oklahoma Bar Journal February 2019

The term “estate planning” implies that a plan for the administration of an estate exists, which, of course, most estate planning attorneys would prefer. However, those same estate planning attorneys likely spend much of their time administering estates of decedents who did not have a plan in place at their death or who had a plan in place that was poorly prepared or never updated. This article addresses some common issues attorneys might encounter in unplanned or poorly planned estates.


Disposition of Remains

When a loved one dies, addressing the immediate needs of the individual’s estate can be chaotic for the family. One of the first decisions the family must make is determining the manner of the disposition of the decedent’s remains. If family members all get along, this may not be a contentious decision. When emotions run high and family members do not see Eye to Eye, this decision may become volatile. If the decedent had exercised thoughtful foresight while alive, he or she could have executed an assignment of right regarding disposition of remains pursuant to 21 Okla. Stat. §1151 (2011), which would have delegated to someone the right to control the decisions regarding the decedent’s remains. If no such assignment exists, the individual with priority to control the decisions is determined pursuant to 21 Okla. Stat. §1158 (2011), which is similar to the statute determining those individuals who will have priority to serve as administrator of an intestate estate.[1] The Oklahoma Court of Civil Appeals has previously found it is “highly impractical” to obligate a funeral home to determine all persons who are in the same degree of kinship to the decedent and obtain consent from all of them.[2] Thus, in poorly planned estates, the decisions regarding disposition may be decided on a first-come-first serve basis. In order to avoid such disputes among children, for instance, an assignment of right regarding disposition of remains is advisable.


The welfare of pets is also an immediate concern upon someone’s death. If it is not desired for pets to be surrendered to the local shelter, an individual should have a discussion with friends and family to identify who would be willing to care for the pets – perhaps even including provisions within the individual’s estate planning documents to provide accordingly. A pet owner might consider creating a “pet trust” for the benefit of his or her domestic animals.[3] Without such planning in place, what happens when the care for pets has not been considered in advance? By statute, dogs are considered the personal property of the owner, and by analogy other domesticated pets may also be considered personal property.[4] Thus, the provisions for personal property under a will and the provisions for exempt property allowed the family likely control pursuant to 58 Okla. Stat. §12 (2011). The greater concern, however, is the immediate welfare of the animals. If law enforcement has reason to believe an animal has been abandoned or neglected by the owner and no one is coming forward to care for the animal, the officer may obtain a warrant and the animal will be impounded.[5] The owner (or the deceased owner’s representative) will receive notice of a hearing to determine if the animal was in fact abandoned, and if the court determines a violation has occurred, the animal will be surrendered to a shelter or euthanized, depending on the circumstances, and costs will be allocated to the owner or the owner’s estate.[6] Thus, it is in the best interests of the estate for the personal representative or immediate family members to care for the pets of the decedent or locate someone who can until further disposition can be made.

Social Media Accounts

Another issue that may be an immediate concern after death is an issue that has arisen with the growth of social media. What should the family do with the decedent’s social media accounts, especially when the unfortunate news about the decedent’s death is spreading? Being aware of the options for management of a deceased person’s account for each networking website can prevent additional, unnecessary anxiety for the family. Although thoughts, prayers and fond memories may be publicly expressed and appreciated on social media sites, awkward or inappropriate messages may also be posted to the decedent’s page, in which case they may linger indefinitely if no one is appointed personal representative. Upon appointment as executor or administrator of the estate, the personal representative is given the power by statute to control the decedent’s social networking, blogging and emailing service websites.[7] However, each website has its own policy and procedures. For example, Facebook allows users to appoint a “legacy contact” to manage the decedent’s page, which can be memorialized or deleted following the decedent’s death.[8] Most other social networking websites require an immediate family member or personal representative to contact the company to either memorialize, deactivate or delete the user’s account.[9] Memorializing an account, which prevents others from making changes to the account, is an Immediate Action on most networking websites. Deleting the account, however, may take several months. Thus, it is in an individual’s best interests to explore relevant social media website policies in advance in order to control the account management soon after death.

Original Documents

Lastly, another immediate concern upon death is locating the decedent’s original estate planning documents, if any, and safely securing them for as long as necessary because documents can and do go missing if not properly secured. If an individual has a planned estate, yet the plan cannot easily be located, then even the best laid plan can go awry quickly. The original documents may identify the nominated personal representative, which will give the personal representative assumed authority to make decisions regarding the safety of the decedent’s pets, the security of the decedent’s home and the security of the decedent’s accounts. The original will should be delivered to the named executor in the will or otherwise filed with the district court, if possible, pursuant to 58 Okla. Stat. §21 (2011). While determining if a probate of the will is necessary, the named executor should secure the document in order to avoid proceedings to prove a lost will under 58 Okla. Stat. §81 (2011), if a probate is ultimately deemed warranted. Practitioners should make a habit of noting in their clients’ files where their client intends to store their original documents, hopefully ensuring someone other than the client will have access to them when needed. Although the practice cannot prevent the loss of all documents, this file note may be invaluable when the family contacts the decedent’s attorney upon the decedent’s death.


The Effect of Divorce on Beneficiary Designations

After the obvious concerns are addressed in the first few days after a death, issues in the decedent’s estate tend to surface. Discovering the decedent failed to update beneficiary designations before death is one of the most common issues estate attorneys must face. Although property division is a significant issue dealt with during a divorce, updating the beneficiary designations on such property postdivorce can often be overlooked. By statute, all provisions in a will in favor of a decedent’s ex-spouse are revoked.[10] Likewise, all provisions in a trust created by a decedent in favor of the decedent’s ex-spouse, which are to take effect upon the death of the decedent, are also revoked.[11] What happens to assets naming the ex-spouse as primary beneficiary if a property owner fails to update the beneficiary designations on assets passing by contract outside of the decedent’s probate or trust estate? For instance, are the provisions of a payable-on-death designation on a financial account enforceable upon the decedent’s death? Under 15 Okla. Stat. §178 (2011), “all provisions in the contract in favor of the decedent’s former spouse are thereby revoked” upon divorce, subject to a few exceptions. This statute applies to life insurance, annuities, compensation agreements, retirement arrangements and other contracts executed on or after Nov. 1, 1987, and to depository agreements and security registrations executed on or after Sept. 1, 1994. This begs the question, is a transfer-on-death deed naming an ex-spouse still enforceable at death if it was never revoked by the grantor-owner? Although similar to a will, a transfer-on-death deed is expressly not a testamentary disposition, so 84 Okla. Stat. §114 (2011) is seemingly inapplicable to a transfer-on-death deed.[12] The transfer-on-death deed is also not a bargained for contract in which consideration is exchanged, so 15 Okla. Stat. §178 (2011) is also seemingly inapplicable. Thus, arguably, a transfer-on-death deed designation may survive a divorce, which is something family law practitioners should be mindful of in addressing a property division.

One other exception to the revocation of a beneficiary designation upon divorce involves the ex-spouse’s interest in ERISA benefit plans.[13] In Egelhoff v. Egelhoff ex rel. Breiner, the United States Supreme Court held that a Washington statute revoking the beneficiary designation of an ex-spouse was pre-empted as it applied to ERISA benefit plans.[14] Given this decision, Oklahoma’s version of the Washington statute, 15 Okla. Stat. §178 (2011), would be ineffective in terminating an ex-spouse’s interest in a decedent’s ERISA plan. Therefore, a divorced decedent must have updated the ERISA plan’s beneficiary designation to someone other than the ex-spouse, or the ex-spouse must subsequently waive such interest, otherwise the plan will be administered with benefits being paid to the named ex-spouse, which may or may not be part of the divorce settlement.

The Effect of the Beneficiary Predeceasing the Decedent

Perhaps more commonly than after divorce, owners fail to update beneficiary designations after a named beneficiary dies. This may be due to the owner’s neglect or due to the owner’s incapacity and inability to change beneficiary designations. Upon the owner’s death in such situations, the language of the document will typically control if the asset passes 1) to the estate of the deceased beneficiary, 2) to a contingent beneficiary or 3) to the decedent’s estate. If a contingent beneficiary is not named, most assets will default to the estate of the decedent.

However, if a contingent beneficiary is not named on a bank account, the share of the deceased primary beneficiary shall be paid to the deceased beneficiary’s estate rather than the decedent’s estate.[15] This runs contrary to most expectations that a gift to a deceased beneficiary will lapse.[16] In the case of real property under the Nontestamentary Transfer of Property Act, a gift of real property pursuant to a transfer-on-death deed will lapse if the grantee beneficiary does not survive the owner.[17] If no contingent beneficiary is named, the real property will be trapped in the name of the deceased owner and default to the deceased owner’s estate.

Failure to update beneficiary designations on individual retirement accounts can trigger unwanted estate administration as well as unwanted tax consequences. When there is no living beneficiary designated for an IRA, upon the accountholder’s death, the IRA passes according to the terms of the associated financial institution’s plan. If an account holder fails to name a designated beneficiary, then oftentimes the IRA benefits are distributed based on who the financial institution states is the default beneficiary. The institution may have a few layers of default beneficiary designations for the account – such as passing to the decedent’s spouse, then children and then to the estate.[18] These default designations may result in negative tax consequences that could have been avoided if the account holder had updated the beneficiary designations.

When an IRA is made payable to a decedent’s estate there is a unique scheme for distributions because the IRS does not consider an estate to be an individual.[19] Logically, a nonindividual, such as an estate, does not have a life expectancy over which to stretch out required minimum distributions. Whether there ends up being a More or Less favorable outcome for the eventual takers of the estate depends on if the original account holder survived to the age of taking mandatory distributions.[20] If the account holder did not reach such age, then the eventual takers of the IRA must distribute the balance of the account by the end of five years.[21] If the original account holder did survive past the age of taking mandatory distributions, then the eventual takers may stretch the IRA distributions over a period calculated by “[u]sing the life expectancy listed next to the owner’s age as of his or her birthday in the year of death” and “[r]educ[ing] the life expectancy by one for each year after the year of death.”[22] While the second option does not allow the individuals to stretch the IRA over their own lifetimes, it will allow some benefit from delaying distribution, and the resulting tax, of the entire amount.

To qualify for inherited IRA treatment, 26 U.S.C. §408(3)(C)(ii) (2018) requires that the “individual for whose benefit the account or annuity is maintained acquired such account by reason of the death of another” and that they were not the “surviving spouse.” Although not binding authority, in a private letter ruling (PLR) the IRS discussed the issue of whether the ultimate beneficiaries of an estate can qualify for inherited IRA treatment.[23] In that PLR, an estate was the designated IRA beneficiary, received the IRA and conveyed it to a trust. The trust was to terminate and distribute all assets to the deceased’s four children. The IRS allowed the four children to each establish an inherited IRA for each respective share. Thus, failed designations may not have negative tax consequences, but this is by no means guaranteed.

The Backfiring of Joint Tenancy Ownership

Oftentimes, the death of a named beneficiary triggers issues when individuals exercised self-help to avoid probate. One of the more common options for avoiding probate is titling assets in joint tenancy with rights of survivorship. This can be dangerous planning for individuals, particularly the original owner, because it exposes the asset to the creditors of all the joint tenants. Additionally, if the joint tenants do not die in the expected order, the use of joint tenancy may backfire. For example, if the oldest
owner, typically the one who was trying to avoid probate, is the sole surviving owner, the owner may no longer be able to make alternative arrangements due to incapacity. Joint tenancy may also create confusion if utilized only for convenience prior to the decedent’s death, in which case the use of joint tenancy on a bank account may result in a constructive trust argument.[24] Self-help through joint ownership might also create inequitable results. Many times, joint tenancy is utilized by the decedent subject to the mutual understanding between the owners that the survivor will manage and distribute the assets according to the decedent’s wishes. However, the surviving joint owner may decide not to fulfill the decedent’s wishes, in which case the surviving owner may reap a windfall. Additionally, the surviving joint owner may lack capacity or have new creditor issues, in which case even if the surviving joint owner was well-intentioned, the decedent’s wishes for the property will remain unfulfilled.

Tasking the surviving joint owner to fulfill the decedent’s wishes may also trigger gift tax consequences for the surviving owner’s estate. For a surviving owner to fulfill a decedent’s wishes for others to benefit from the asset now wholly owned by the survivor, the survivor must give the assets to other individuals. In doing this, the survivor must keep in mind that these transactions may have gift tax consequences. Each individual has a lifetime gift tax exclusion representing the total amount they can give away over their entire lifetime without gift tax consequences. With the passage of the Tax Cuts and Jobs Act (TCJA) in 2017, the basic exclusion amount increased significantly. After being indexed for inflation, the thresholds for 2019 are now $11,400,000 for an individual and $22,800,000 for a couple.[25] Additionally, each year an individual may gift a certain amount without cutting into their lifetime basic exclusion amount.[26] The individual may give up to $15,000 annually to any person as of 2019 without utilizing his or her lifetime exclusion amount. In order to avoid any gift tax consequences while honoring the decedent’s wishes, a surviving joint owner must avoid giving more than $15,000, or potentially $30,000 for a donor couple, in a taxable year.[27] If the surviving owner decides to gift more than this in the taxable year, the sum over the annual gift tax exclusion will reduce the survivor’s lifetime gift tax exclusion amount, creating potential problems if the surviving owner already has a substantial estate.

As is evident, the road to avoid conflicts and cost after death is often paved with good intentions. Practitioners clearly cannot follow their clients throughout their lifetimes making sure fiduciary powers are adequately assigned, assets are appropriately titled and beneficiary designations are frequently reviewed. Perhaps it would be useful to give an estate information handbook to clients to review and complete independently on an annual basis, providing them a convenient resource for all their beneficiary designations, funeral wishes, fiduciary appointments, online information and any other relevant asset information. Such handbook would not prevent the consequences of an unplanned estate, but it might prevent what was once a well-planned estate from turning into a poorly planned estate due to circumstances beyond the estate attorney’s control.

1. See 58 O.S. §122 (2011).
2. Brady v. Criswell Funeral Home, Inc., 1996 OK CIV APP 1, ¶9, 916 P.2d 269, 271.
3. 60 O.S. §199 (2011) (stating trusts for the “care of domestic or pet animals is valid” and such instrument shall be liberally construed).
4. See 21 O.S. §1717 (2011).
5. 4 O.S. §512(A) (2011).
6. Id. §512(C).
7. 58 O.S. §269 (2011) (stating the personal representative has power “to take control of, conduct, continue, or terminate any accounts of a deceased person”).
8. See “Managing a Deceased Person’s Account,” Facebook (last visited Oct. 3, 2018) (select “Facebook Help Center”; then follow “Polices and Reporting”; then follow “Managing a Deceased Person’s Account”).
9. Practitioners and clients should explore policies for addressing decedent’s accounts on Twitter, Instagram, LinkedIn, Facebook and Pinterest and discuss such matters with their clients.
10. 84 O.S. §114 (2011).
11. 60 O.S. §175 (2011). Note §175(B)(6) permits the trustor to name the ex-spouse as a beneficiary in an amendment executed after the divorce or annulment.
12. 58 O.S. §1258 (2008), stating a transfer-on-death deed “shall not be considered a testamentary disposition.”
13. See Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001).
14. Id. at 147-51 (“The [state] statute binds ERISA plan administrators to a particular choice of rules for determining beneficiary status . . . [I]t runs counter to ERISA’s commands that a plan shall ‘specify the basis on which payments are made to and from the plan,’ §1102(b)(4), and that the fiduciary shall administer the plan ‘in accordance with the documents and instruments governing the plan,’ §1104(a)(1)(D), making payments to a ‘beneficiary’ who is ‘designated by a participants, or by the terms of [the] plan.’ §1002(8).”).
15. 6 O.S. §2025(A)(2) (2011).
16. 84 O.S. §142 (2011).
17. 58 O.S. §1255(B) (2011).
18. See, e.g., Morgan Stanley Funds Designation of Beneficiary Form, Morgan Stanley Investment Group (March 2017)
19. I.R.S., Dep’t of the Treasury, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) 9, 10 (Feb. 6, 2018).
20. See I.R.S., Dep’t of the Treasury, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) 10 (Feb. 6, 2018).
21. Id.
22. Id.
23. See I.R.S. Priv. Ltr. Rul. 2012-08-039 (Nov. 17, 2011).
24. See Isenhower v. Duncan, 1981 OK CIV APP 31, 635 P.2d 33 (“The proper basis for impressing a constructive trust is to prevent unjust enrichment.”). See also 60 O.S. §74 (2011) (discussing joint tenancy); 60 O.S. §137 (2011) (explaining when a trust is presumed).
25. See Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, §11061, 131 Stat. 2054, 2091 (2017).
26. See 26 U.S.C. §2503 (2017).
27. See 26 U.S.C. §2513 (2017).

Originally published in the Oklahoma Bar Journal -- OBJ 90 pg. 7 (February 2019)

The Impact of Oklahoma's Medical Marijuana Law on the Workplace

by Cara Nicklas

Oklahoma voters recently passed a state question that legalizes medical marijuana. Oklahoma’s medical marijuana laws are codified in Title 63, Chapter 15, § 420A through § 426A, of the Oklahoma statutes. So, what is the impact of the medical marijuana law on the workplace? The short, precise and lawyerly answer is . . .  it depends.  It depends on many factors, known and unknown. Without settled case law in Oklahoma on many of the issues related to medical marijuana use by employees, employers are left to make judgment calls based on the particular facts in a given situation.

A reasonable interpretation of the Oklahoma statute suggests the impact on employers should be minimal. The law restricts an employer from discriminating based on an employee’s “status” as a medical marijuana license holder or solely on the “results” of a positive drug test by a medical marijuana license holder. The law does not restrict an employer from maintaining a safe and drug-free workplace just as employers have done since before the law passed. Employers may restrict any drug use, legal or illegal, during or before work hours, that would impair the employee’s ability to perform work or would cause a safety risk. A situation analogous to medical marijuana would be the use of pain medication. An employer may prohibit its employees from driving or operating dangerous equipment while under the influence of traditional prescription drugs or medical marijuana. An employer may also take action against a poorly performing employee who may be under the influence of legal or illegal drugs.

Marijuana is still illegal under federal law. Therefore, an employee may not bring marijuana-related discrimination claims under federal statutes, such as the Americans With Disabilities Act. It is uncertain whether claims for disability discrimination can be brought under state law.  Assuming a claim may be brought under the Oklahoma Anti-Discrimination Act, any request by an employee for a reasonable accommodation involving use of medical marijuana is fact-specific and would require the employer engage in the interactive process similar to the dialogue and deliberation an employer goes through when an employee depends on prescription drugs that violate an employer’s policies. Whatever reasonable accommodation an employer determines is necessary, it is not required that the employer accommodate an employee’s use of marijuana on the work-premises or during working hours. Additionally, an employer can legally take action against an employee if “failure to do so would cause an employer to imminently lose a monetary or licensing related benefit under Federal law or regulations.”  (See 63 O.S. § 425A)

Oklahoma employers already realize how vulnerable they are to discrimination claims.  The new medical marijuana law certainly does not minimize the risk of discrimination lawsuits. Nevertheless, the new law should not significantly increase that risk if employers continue to take action against employees that is focused on the employee’s work performance as opposed to the employee’s status. 

Generational Trends in Estate Planning

by Lloyd McAlister with the assistance of Ashley Ray

Estate planning is not a single, one-size-fits-all document or decision made at the end of life; it is a long-term strategy shaped by an individual’s life. As lives change, plans adapt to fit new needs and desires. There are many influences that impact an individual’s life, but one critical factor is family. When guiding clients in planning the future of their assets, our estate planning lawyers consider the developments occurring inside the family unit. For instance, changes in generational characteristics, family demographics, and family structure have led to transformations in estate planning and trust management.

Each generation’s characteristics have been shaped by the unique circumstances and trends of the world they’ve grown up in. The Boomer Generation, individuals born from 1946 to 1964, have had different experiences than the Millennial Generation, individuals born from 1982-2002. For example, a defining question for a Boomer may be, “where were you when President Kennedy was shot?” but a defining question for a Millennial may be “where were you on 9/11?”  Technology has also been an impactful force on generations. For instance, a Boomer could probably describe when their family got its first television, but a Millennial would be more apt to remember how old they were when they got their first iPhone. One influence that has influenced all generations is the increase in life expectancy. From 1970 to 2010, the US life expectancy increased gradually from age 68 to 75 for men and from age 75 to 80 for women. Between the years of 1990 and 2010, the percentage of the global population over 65 steadily increased, while the population under 5 steadily decreased. It is projected that from 2015 to 2050 the global population over 65 will increase from 8% to over 16%, while the population under five will remain fairly constant at 7%.

These and other trends have shaped how the individual generations make decisions, balance work and life, and raise their children. The Boomer generation’s parental model usually includes a breadwinner and a breadserver. Instead of children being taught to strictly obey adults, like the children of past generations, children accommodate adults. This generation is generally optimistic, competitive, and lives to work. Decision making shifted from being command and control to consensus based. For the Boomer generation, competence and expertise come before self-esteem. In contrast to the previous generations, Gen X, which includes individuals born between 1965 and 1981, has a parental model of two breadwinners. Additionally, children frequently teach adults. Gen X is skeptical, suspicious of authority, and focuses on achieving a work/life balance. Decision making is pragmatic, independent, and impatient. Self-reliance and validation lead to self-esteem. Like Gen X, the Millennial generation features two breadwinners. Adults generally accommodate and consult children. This generation is optimistic, has a delayed adulthood, and is collaborative. Decision making is net-educated and networked. This generation works to live. Self-esteem generally precedes competence. All of these generalized traits have developed from each generation’s unique circumstances.

Changes in generational characteristics have corresponded with changes in family demographics. According to data from the U.S. Census Bureau, over the last 75 years there has been a steady decrease in the percentage of married households and a steady increase in the percentage of non-family households. Notably, from 1995 to 2015, married households decreased from around 58% to 50%. Additionally, from 1996 to 2016, the number of unmarried couples without children increased from around 3 million to over 8 million. Couples are also waiting longer to get married. From 1985 to 2015, the median age for a first marriage increased from 26 to 29 for men and from 22 to 28 for women. Instead of marriage taking place right after courtship, the increasing social norm is for marriage to occur after cohabitation, attainment of financial security, and the birth of children.

Generational differences and shifting demographics have impacted the structure of the archetypal family unit. It has been said that “[t]he demographic changes of the past century make it difficult to speak of an average American family. The composition of families varies greatly from household to household.” Troxel v. Troxel, 530 U.S. 57, 63 (2000). Families come in all shapes, sizes, and configurations. For example, according to the Pew Research Center, one-out-of-six American children live in a blended family. Additionally, 40% of American adults have at least one step-relative in their family. The Census Bureau reported that in 2013 the composition of American families was: 35% traditional, 34% modern (blended, multigenerational, etc.), and 31% households without children.

The above developments of the family unit have led to a recasting of the traditional estate planning paradigm. Planning has evolved from being hierarchical and oriented towards the nuclear family to being more humanistic and sensitive to family structure. Additionally, instead of individuals being predominantly focused on financial wealth, a holistic understanding of family wealth has developed. A further change is that grantor intent is becoming more flexible, aspirational, and better conducive to beneficiary engagement. The transformations to the family have led to a reconsideration of how families do their planning. For prior generations, estate planning was a decision made before mortality, and the decision would be disclosed to family afterwards. However, contemporary families usually begin the planning process with family dialogue between the spouses and their children. The plan is then designed, implemented, and then concludes with family disclosure.

While estate planning decisions are being formulated, strategic issues must be addressed that involve considering the context of the American family. According to Hugh McGill from Northern Trust Company, the major questions that must be addressed are:

·        “How and to Whom will Financial Wealth be Allocated,

·        How will Trusts Evolve for Modern Families,

·        Are There Limits to Longevity, and

·        How will Modern Families Collaborate and Make Decisions.”

It has been estimated that, as of 2009, 68% of adults had no will, 11% had a self-drafted will, and 20% had a will drafted by an attorney. To ensure you have an effective plan tailored to your family’s unique needs, please contact our office. We will be happy to guide you through the dynamic world of estate planning with special attention to the people and purposes important to you. 

Does Anyone Need A Trust?

by Karla McAlister

Historically, tax planning was one of the suggested reasons for using trusts in estate planning.  In 2000 the federal estate tax exemption was $675,00.00.  So, after considering the value of a home, vehicles, life insurance and retirement benefits (all of which are typically subject to estate tax), many Oklahomans were surprised to learn they had an estate tax problem. There have been many adjustments to the estate tax exemption in the last 18 years and now we are at an historic high. In the past when the exemption was lower, it was critical to try to avoid the estate tax because of the very high tax rates; the federal estate tax topped out at 55% and the Oklahoma estate tax at 15% for collateral heirs.

With the federal estate exemption at $11,180,000.00 per person in 2018,  thanks to the Tax Cuts and Jobs Act passed in late 2017, and scheduled to increase to $11,400,000.00 in 2019, does anyone need a trust in their estate planning? 99% of Americans have estates less than this exemption.

This law is scheduled to sunset in 2026, such that the exemption (basic exclusion amount for federal estate tax) will revert to its pre-2018 level ($5,490,000 adjusted for inflation) in 2026. So, we are not guaranteed the higher exemption is permanent.  However, at present, given the large federal estate tax exemption and the repeal of the Oklahoma estate tax for persons dying after January 1, 2010,  the vast majority of Oklahomans no longer have an estate tax problem.

However, before one assumes they do not have any concern about estate taxes, present or future, it is important to take into account everything considered as part of your gross estate for estate tax purposes. Very generally, anything of economic value which you own or control is taxable at your death. And, this might also include economic value you have transferred to others during your lifetime. Your estate tax is then calculated on the value of your  taxable estate - what is left after mortgages, other debts, and the administrative costs of settling your estate are paid. You can also deduct money or property given to charities (charitable deduction) and the value of the property that goes to your spouse (marital deduction) because  those gifts are not subject to estate tax.  Assets that pass directly to a named beneficiary such as life insurance or payable on death bank accounts and retirement funds are part of your estate for estate tax purposes even though they are not a part of a probate estate for purposes of court administration.

Without estate tax incentives to use trusts in their estate planning, should people still consider the utility of trusts in their planning for their surviving spouses, children and grandchildren, other dependent family or friends, and charities?

Advantages of trusts for beneficiaries

a.    Control and benefit. One of the main advantages of retaining assets in a trust after a client dies is that the trust provisions can  establish dispositive arrangements lasting indefinitely  which can carry out the client’s very specific desires for their beneficiaries. They can name the initial and successor trustees and   grant creative powers to the trustees to carry out their wishes in the management of the trust assets for the benefit of the trust’s beneficiaries. The beneficiaries can also be given rights or powers such as the power to withdraw trust assets at specific ages.

b.     Probate Avoidance. Another advantage of holding assets in trust is to avoid court supervised estate administration (guardianship and/or probate) both for the original property owner and   for his or her beneficiaries if the beneficiaries are incapacitated or die while the trust is in place. 

c.     Protection from Creditors’ Claims.   A trust can be designed to protect a beneficiary’s inheritance from the claims of his or her creditors.

d.    Protection from claims of spouses and ex-spouses. Assets managed in trust for a beneficiary  can provide better protection from the claims of a beneficiary’s spouse than an outright distribution to the beneficiary. Furthermore, assets held in a trust created by a parent or grandparents for their descendants can be managed and used for their descendants’ benefit, avoiding the involvement in the management and enjoyment of the assets by persons who are only related to the parent or grandparent by marriage, such as the ex-spouse of a child with regard to the inheritance left for the child’s children.

Advantages of trusts for persons creating trusts

a.    Incapacity Planning. If the creator of the trust (often referred to as the Settlor) is ever incapacitated by an illness or injury, the successor trustee(s) chosen by the Settlor can manage the trust for  the Settlor’s benefit without the expense and complication of a court supervised guardianship. The Trustee can pay expenses and manage the assets without any court approval or accountings.

b.    Complicated Family. Family can get complicated, even dysfunctional. If you have more than one marriage and children from each marriage, or a blended family where you and your spouse both have children from prior marriages, or your children have step-children, you may need special provisions  to address the special needs and your particular wishes in these situations. Additionally, if there is a disabled beneficiary or a beneficiary who has drug or alcohol issues or who simply cannot manage money well, then a trust  can be an effective mechanism to specifically plan for these ongoing circumstances and complications.

c.     Probate Avoidance. The Trustee can administer the trust at the death of the Settlor without any court intervention. It is usually much quicker, more private and less expensive than probate. There is not a filing of a list of assets or the provisions for distribution of a trust in public records as there is in probate.

d.    Trustee. If you have unique assets, you can appoint a trustee who is skilled in the management of those unique assets.  Examples would be collectibles such as artwork, patents, intellectual property, farming and ranching interests, or oil and gas.

Disadvantages of trusts

a.    Costs. There are ongoing costs for maintaining a trust, if the beneficiaries do not receive the assets outright. There may be trustee fees and accounting fees for tax returns and accountings. The Trust income and principal can be used to pay for these additional expenses as related to trust administration.

b.    Complexity. The trustee must be involved in the management of the trust assets and the administration of the provisions of the trust for the beneficiaries until it is completely distributed, which adds a layer of extra administration.

Even without the incentive of saving estate tax, the majority of our clients choose to use trusts in their planning in order to avoid probate, plan for incapacity and make specific provisions to ensure their wishes for the best interest of their beneficiaries will be achieved. It is our goal to help each client understand the pros and cons in order to make the best decision for their situation.

Preparing Your Estate: 10 Loose Ends To Tie Up Before You Die

by Cody Jones

Creating an estate plan can provide peace of mind for our clients because if all goes according to plan, their beneficiaries will be equipped and prepared to settle their estate according to their written wishes.  However, when our clients walk out the door of our office armed with their detailed plan, change doesn’t come overnight.  It takes some effort from our clients to make sure the plan is fully implemented and properly maintained.  These are a few of the unresolved or incomplete matters we often see, which can cause the plan to go awry. 

1.      Safe Deposit Boxes.  Your safe deposit box is subject to a box rental agreement and access to the box is limited upon your incapacity or death.  Review the box rental agreement.  If you have a revocable trust, make your trust a party to the box rental agreement.  Otherwise, you should coordinate with your financial institution to make sure someone you trust has authorization to access your safe deposit box upon your death or incapacity, which may require adding them as a joint or successor owner on the account.

2.      That “Small” Bank Account.  Many of our clients dismiss their assets of limited value, assuming they will not cause their survivors or caretakers any trouble, but many times it’s these small assets that require the most work after an owner’s death.  If you have a revocable trust, transfer the account ownership to your trust, ensuring the successor trustees will have easy access to these funds.  If you do not have a trust, consider adding a payable-on-death designation to the account to ensure the funds in the account are accessible by your survivors.  Otherwise, your survivors may need to pay an attorney to gain access to the account.  Such expense often exceeds the value of the account.  This issue is easily avoidable if you take the small step during your lifetime instead of leaving unfinished business which requires big steps after your death. If you opt to add a payable-on-death beneficiary designation, please make sure you update your beneficiary designation if a named beneficiary predeceases you. Otherwise, the funds in the account may not be allocated to the beneficiaries you prefer.

3.      Those Minimal Minerals.  Even if your mineral interests are not worth much now, they may be worth much more after your death. One of the most common triggers for probates and estate administrations are mineral interests that clients failed to either transfer to their revocable trust or otherwise provide for succession of ownership  by deed during their lifetimes.  A simple quitclaim deed during your lifetime can avoid significant cost after your death, a cost most of our clients intend to avoid with their estate plans.

4.      Boats, Trailers, Motorcycles, and Other Motorized Objects.  They have titles too.  If your name is the only name on the title at your death, the ownership is trapped in your name.  Barring a few exceptions, no one will have authority to sell this asset without being appointed by the court.  Once again, if you have a revocable trust, take the easy step to transfer the title to your trust now.  Otherwise, you might consider adding a co-owner to the asset to make sure the person you wish to receive each asset can easily assume ownership upon your death. 

5.      Bonds, Paper Bonds.  United States Savings Bonds are no longer issued as paper bonds, but many of our clients have old Series E Bonds or something similar.  More likely than not, these bonds do not have a beneficiary. If you have bonds in your name upon your death, these bonds will undoubtedly trigger an estate administration.  Please contact us so we can advise you on how to convert your paper bonds and update ownership during your lifetime. 

6.      The Future of Your Pets.  If you have pets, do you know what will happen to them upon your incapacity or death?  Have a conversation with your loved ones to make sure they know your wishes.  Make sure they have the knowledge and ability to assume caretaking responsibilities for your pets as you desire, and if not, direct them as needed.  The more they know, the more likely your wishes are fulfilled.

7.      Old Beneficiary Designations.  If your spouse or child predeceased you, please review your beneficiary designations on your retirement accounts and life insurance policies.  Oftentimes, the surviving spouse forgets to update these designations.  If your named beneficiary is not living upon your death, the proceeds of these assets will likely be payable to your estate, triggering a costly estate administration or probate.  Updating your beneficiary designations is an easy loose end to address. 

8.      Pesky Passwords, Codes and Keys.  Make sure your loved ones have access to your passwords, keys and access codes for your cell phone, email, social media, online billing, financial institutions, security systems, internet streaming services, and other similar accounts.  If you have a code for your safe, ensure someone other than yourself has access.  If you have multiple keys, make sure they are labeled as necessary.  If you do not want to give individuals access to this information during your lifetime, we will gladly keep this information in your client file for your heirs and successors, as needed.

9.      Trusted Advisors.  You know yourself and your assets better than anyone, and you know who you trust for advice for various purposes.  Consider making a list of these trusted advisors for your survivors so they do not need to reinvent the wheel.  Let them know who your CPA, financial advisors, attorneys, doctors, realtors, and other professional advisors are.  This information can be extremely helpful and cost-effective, particularly when your survivors live out of state.

10.  Blended Families.  Blended families often have different desires than what is provided for under state law. Please call us to make sure your estate plan fits your family situation.

Preparing for Incapacity

Imagine driving home from a holiday party this season and the unexpected occurs – Santa’s sleigh crashes into your vehicle! Leftover pumpkin pie and dressing splatter all over the reindeer. Jingle bells, toys, and cookies are strewn across the street in a 30-yard radius. Santa and his crew speed away without a scratch to finish deliveries to all the good boys and girls across the world. You, however, are incapacitated and require an emergency trip to the hospital, where you experience loss of consciousness (with visions of sugar plums) until Valentine’s Day.

Even without reckless reindeer on the road, about 750 car wreck-related injuries occur over the holiday season in Oklahoma, according to the most recent Fact Sheet published by the Highway Safety Office of the Oklahoma Department of Public Safety. Because car accidents occur so commonly, they provide a perfect illustration for imagining how easily any of us could become incapacitated. Any one of us could experience an accident or an illness and become unable to manage our day-to-day affairs, like paying our bills or driving to our doctor’s appointments.

What can we do to prepare for a season of life where we simply cannot take care of ourselves? Such a season could affect our physical abilities, mental abilities, or both. It could involve temporary impairment for only a season or permanent incapacity for the rest of life. Incapacity could occur slowly and over a long period of time, or it could occur suddenly and unexpectedly. The legal definition of “incapacity” incorporates a broad spectrum of circumstances, including the following:

  • impairment due to mental illness or disability;

  • impairment due to physical illness or disability;

  • impairment due to drug or alcohol dependency;

  • the inability to meet essential requirements for health and safety; and/or

  • the inability to manage financial resources

Preparing for a season of your own incapacity could provide a huge blessing to your family and others who depend on you. Here are some ways you can prepare for the possibility of incapacity:

  1. Appoint a person who can act for you in legal and financial matters. This person, your “agent,” is appointed in your Durable Power of Attorney. In case you ever need a court-appointed guardian, you can utilize your Durable Power of Attorney to nominate the person you would want to serve as your guardian.

  2. Appoint a person who can act for you in making health care decisions. This person, your “Health Care Agent,” is appointed in your Health Care Power of Attorney. He or she can be authorized to communicate with your doctors and medical caregivers about your care and make decisions on your behalf if you are unable to do so. In case you ever need a court-appointed guardian, you can utilize your Health Care Power of Attorney to nominate the person you would want to serve as your guardian.

  3. Appoint a person who can make decisions about end-of-life matters. You should have an Advance Directive in place, to document your decisions about the type of care you would want to receive if you become incapacitated and experience an end-of-life condition, such as becoming persistently unconscious or terminally ill. An Advance Directive also allows you to appoint a person, your “Health Care Proxy” to make sure your wishes, as expressed in your Advance Directive, are carried out by your health care providers.

  4. If you already have these important documents in place, make sure your family members know where these documents are located and how to use them. Make sure these documents are accessible to those who might need them. Also, if you have appointed one of your children before another to serve an important role in your care, please consider explaining your decision to your children while you have the capacity to do so in order to avoid potential family strife after you are no longer able to communicate your wishes.

  5. Talk to your family members and/or close friends about what information they will need to know if you become unable to take care of yourself and/or unable to continue taking care of them. This information includes the name and contact information for advisors you trust to assist you and your family during a period of incapacity.


Inheritance of Digital Assets

by Karla McAlister

We live in a changing world, a seminar I attended this summer alerted me to an area I had not really encountered in estate planning because it is such a new issue. It was a wakeup call for me personally and I believe our clients will also benefit from considering these issues regarding the management and disposition of digital assets. A practical example is when I was contacted by the children of a client because they were unable to access bank accounts for their parent. The parent is now incapacitated and only used online banking, but she could not remember her password and the children could not locate a written list of passwords. They wanted to know if I had a list. Unfortunately, I did not have any information in my file.

Although there is no official definition of “digital asset” yet, you can think of it as any information stored electronically, either online or on an electronic device. This includes text, images, multimedia, travel rewards and points, domain names, games, music, digital books, home security, online storage accounts personal property stored in digital format and also includes words, passwords, characters, codes or contractual rights to access that digital content which is stored online or offline. There are online corporations such as Google, Apple, Microsoft and Facebook and blogs, personal websites, online banking and other online accounts.  With the average person having twenty-five online accounts, digital inheritance has become a complex issue. They may be sensitive such as banking and medical information or shared such as social media or contacts in forums.

Two thirds of all digital content is created by individuals, not businesses or organizations. Your “digital assets” increase each time you open a new account, send an email, snap a picture, book a flight, make a purchase or post a comment. Fifty one percent of adults use their bank’s website for banking transactions and seventy-six percent of adults in the United States have a social network site. It has become normal to store data electronically in smartphones, computers and the “cloud” and to conduct transactions electronically. These assets may have monetary value and sentimental value to you and your family.

There are several ways to plan for management of digital assets upon incapacity or death. First, keep a complete list of passwords, online user accounts and other digital assets and update the list often. You should include security questions and answers to ensure fiduciary access as well. A printed copy should be kept in a safe location. You should consider including specific instructions in your estate planning documents regarding management of the digital assets at your death or incapacity. The third-party providers will want explicit provisions to allow your fiduciary to have access to your digital account.

There is a push for a Revised Uniform Fiduciary Access to Digital Assets Act (RUFADA) which has been adopted in thirty-five states, but it has not been adopted in Oklahoma. The goal of RUFADA is to respect a user’s intent reflected in online account options and dispositive documents.  One of the biggest hurdles for fiduciaries is that most digital accounts are bound by terms-of-service agreements and these terms of agreement (which most people do not read) determine what happens to an account upon the death of its owner.  Some terms of agreement prohibit a user from allowing anyone else  to access his or her account. Facebook’s terms-of-service agreement prohibits sharing passwords with anyone. Yahoo! terms-of-service provide that accounts are non-transferable, and the account terminates upon the user’s death and the receipt of a copy of the death certificate and the content is permanently deleted, which may not be what the family or owner intends. RUFADA states that users may consent to the disclosure of their digital assets and it will override any terms-of-agreement.

However, there may be electronically stored information a client does not want to share with family members or beneficiaries and those wishes should likewise be included and addressed in your planning. Specific directions may be made to delete private data.

With new technologies and innovation comes new complexities and considerations in your estate planning.  Hopefully, this article will help jump start your effort to help your loved ones by addressing these issues in your planning

Commercial Real Estate Leases

by Jon Austin

A commercial real estate lease is intended to capture the long-term relationship between a landlord and tenant, so it is important for both parties to ensure the lease rightly captures their intent. It is beyond the scope of this article to discuss every key provision within a lease. However, we want to point out a few terms both parties will often give extra attention to in the negotiation process.


  1. Rent. Tenants need to ensure they understand whether the quoted rent amount is the total amount of rent due or merely the "base" rent amount. Many leases require the tenant to pay a base rent plus the tenant’s pro rata share of the landlord’s insurance, taxes and maintenance costs. It is important for both landlords and tenants to know how rent is calculated, whether it is subject to increases over the life of the lease, and then budget accordingly.
  2. Commencement Date. This date is generally a trigger for the first payment of rent, but it also can lead to a possible default if either the landlord is unable to deliver the leased space or if the tenant does not take possession by this date. Therefore, both parties need to have a firm understanding of when this date occurs (especially if the date can occur within a certain range as opposed to a date certain) and the impact if someone is not ready by this time.
  3. Use. The parties will often want to clarify on the front end what the tenant’s expected business will be. This is often an important term in a retail setting due to the competing nature of businesses in a shopping center, but it is still important in an office building as a landlord may want to manage its overall mix of tenants.   
  4. Scope of Common Area Maintenance. The "common area" is that area within a building or complex that is generally not leasable, but rather is shared (or common) among all tenants and their customers (e.g., parking lots, hallways, restrooms, elevators, etc.). While the landlord is responsible for operating and maintaining the common area, it will also look to pass these costs through to the tenants. Both parties want to make sure the lease clearly defines what is included within this definition and how these costs are calculated on an annual basis.
  5. Indemnification & Insurance. Unfortunately, people make mistakes and injuries happen. Therefore, it is important both parties have fairly allocated responsibility and risk, and have required sufficient insurance to be in place if needed.


As noted above, this list is not exhaustive and other factors (such as, breach/remedies, shopping center restrictions, and the ability of a party to assign the lease) may be more important than others depending on the circumstances, location, and parties involved.  


Whether one is landlord or tenant and regardless of the type of lease, both parties need to be mindful of the variety of issues at play in negotiating and drafting their lease and the impact these terms can have on the success of their business operations for years to come.

Business Guidelines - Actions Speak Louder than Words

by Brandon Baker

We are privileged with the opportunity to serve many privately-held businesses.  Often, the company’s organizational documents (such as an operating agreement for an LLC or bylaws for a corporation) provide good governance practices for the company. However, the actions of the owners and officers unintentionally stray from the terms of those documents.  In certain circumstances, such failures could result in a loss of the liability protection afforded by the company.  As the old saying goes, “actions speak louder than words.”  


We suggest the following guidelines for operating a privately-held business in a conscientious manner:

  • The company’s officers should review the company’s organizational documents on a regular basis (at least annually), to ensure the company’s current operating practices, books, and records are consistent with the organizational documents.
  • The company should have a separate bank account, titled in the name of the company and used solely for company business.
  • Company funds should not be used for personal expenses, unless properly documented for repayment as one would do with a third party.  
  • The company should maintain sufficient operating capital to conduct the company’s ordinary business activities.
  • All agreements should be made in the company’s name, with the signature block noting the title of the individual signing on the company’s behalf.
  • Any assets used for company purposes should be owned, leased, or otherwise properly titled in the company’s name.  
  • The company should maintain sufficient insurance coverage for liability, casualty, workers' compensation, and other matters as appropriate for its business.
  • The company’s officers should act in accordance with their fiduciary duty to the company’s owners.
  • The company must stay current on taxes and required fees to government agencies.  Anyone conducting business in Oklahoma, whether it is a limited liability company, corporation, partnership, individual or otherwise, is now required to file an annual Business Activity Tax Return with the Oklahoma Tax Commission.  Generally, the tax is $25.00.  The Business Activity Tax, once paid, may be applied as a credit against certain taxes and fees, such as the annual fee paid to the Oklahoma Secretary of State by limited liability companies.


Each company is different and these recommendations may not apply to every company in every circumstance.  However, these suggestions will hopefully provide some helpful guidelines for the privately-held business operation.

Annual Maintenance for the Oklahoma LLC

by Brandon Baker

Limited liability companies, or “LLCs,” have become very common in the business marketplace.  One of the primary benefits of the LLC business entity, as opposed to the corporation or the limited partnership, is the LLC’s ease of operation.  However, “low maintenance” does not equal “no maintenance.”  Thus, Oklahoma LLC owners need to be attentive to certain annual maintenance requirements for their company.


Oklahoma LLCs, unlike corporations, are not required to pay annual franchise tax to the Oklahoma Tax Commission.  Instead, LLCs must file an Annual Certificate with the Oklahoma Secretary of State each year and pay a $25 annual fee.  The Annual Certificate is a simple form which recites the LLC’s name, states the street address of its principal place of business, and confirms that the LLC is an active business entity.  The Annual Certificate is due each year on the anniversary of the LLC’s creation (the date the Articles of Organization were originally filed with the Secretary of State).  


The process of filing the Annual Certificate is now conducted almost entirely through email and online filing.  The Secretary of State sends an annual reminder to the LLC’s email address of record prior to the anniversary date (usually two months in advance).  The annual reminder email contains a link, which the LLC’s owner or officer can use to file the Annual Certificate online.  


However, a surprisingly high number of LLCs fail to file an Annual Certificate each year.  If just one Annual Certificate is not filed in a timely manner, the LLC ceases to be in good standing under state law.  The loss of good standing prevents the LLC from filing lawsuits, filing documents with the Secretary of State (other than an Annual Certificate), and may hinder contractual business dealings, though it does not totally prevent them.  The good news is that the Secretary of State has streamlined the process for reinstating an inactive LLC.  An LLC can simply file an application for reinstatement, along with all past-due Annual Certificates, and payment of accrued annual fees.  


The Oklahoma LLC is an excellent choice for those looking to form a new business entity.  Though they are extremely user-friendly, Oklahoma LLCs do involve some ongoing annual maintenance.  Please feel free to contact our office if you have any questions or concerns about your current company, or if you are considering the formation of a new business entity.  

A Few “Best Practice” Resolutions for Businesses at Year-End

by Jon Austin



Just as we often spend time at the end of the year contemplating both the year behind us and the one before us, setting goals, reviewing accomplishments and so forth, the end of the year is also a good time to review similar items for any business. With that in mind, we offer the following non-exhaustive list of some items you may want to consider in your end-of-the-year business review.  


Limit Your Litigation Exposure. One of the effects of a bad economy is increased litigation. Studies have shown a majority of companies report being involved in ongoing litigation during the economic downturn, with contract obligations and employment issues topping the list. Although avoiding litigation may be impossible, you can control certain aspects. 

  • Keep company assets separate. Business and personal assets and records should be kept separate and distinct. A company’s limited liability protection is easily lost by commingling personal and business assets.  
  • Make sure contracts are in the company name. It is important that the proper person or entity (business vs. individual) be identified as the party to the contract. And, when you sign documents, be sure to identify your representative capacity when signing in behalf of a business (e.g., president, manager, etc.).  Otherwise, others can seek to impose personal liability upon you for obligations of the business.
  • Implement and update a document retention policy. A policy governing the retention and destruction of old company documents is a good business practice. The policy needs to be prospective, objective, and rigorously followed to ensure documents are destroyed according to an established schedule and, otherwise, documents are retained according to the retention policy. If you become involved in litigation and your practice of destroying documents appears to be arbitrary and not according to a prescribed policy, courts will often presume the worst and may allow the other side to use it against you. Also remember, a company’s internal documents are not privileged – whatever you say, even in an e-mail or text message, could become public in a lawsuit. 


Know Your Contracts. Do you know when your lease expires?  Or when your biggest customer might start shopping for a lower price?  Entering into a contract is only the first step to ensuring the intended benefits are realized. A good practice is to keep a summary of the significant obligations and liabilities in every major contract. It’s also good to keep a contract calendar with all key dates on one calendar to ensure you do not inadvertently breach a contract or lose a time-limited contractual right. The end of the year is a great time to review and update your contract calendar.


Keep Things Current. Current organizational records can mean the difference between business-level liability and personal liability. We recommend updating organizational records on an annual basis, so the end of the year is a perfect reminder to review the organization’s records for the year. 


  • In Oklahoma, limited liabilities companies must file an annual report with the Secretary of State and pay a $25 annual fee.  Corporations must file an annual franchise tax return with the Oklahoma Tax Commission.  
  • Corporations, both for profit and non-profit, must also hold annual meetings in accordance with their bylaws, and minutes of the shareholder’s meeting and board of director’s meeting should be kept with the corporate record books. Although limited liability companies do not have the same requirement, we believe it is best practice for the owners to have similar documentation.


Non-profit corporations must generally follow the same requirements of any other corporation under Oklahoma law, including keeping board of director minutes with the corporate records. Most Oklahoma non-profits are also required to file and renew annually the Registration Statement of Charitable Organization with the Secretary of State. 


Public charities must also file an annual information return (Form 990) with the IRS.  The last several years have seen substantial changes to the Form 990, both in terms of which version is required (often depending on revenue and assets) and in terms of what information the organization must provide. The most significant change has been the transition of the Form 990 from a reporting form with mostly “fill in the box” type responses to an organizational governance form that relies on extensive narrative responses and seeks to move away from a one-size-fits-all approach. Certain governance practices and policies are now encouraged through their inclusion on the Form 990. Implementing new governance practices now should result in less scrutiny later by the IRS. Private foundations are still required to file Form 990-PF with the IRS, which is a modified version of Form 990 tailored for the distinctive characteristics associated with private foundations.


One best practice is for the organization to require officers and board members to annually review and agree to a conflict of interest policy. A good conflict of interest policy will consider, among other things, actual and perceived conflicts between the organization and its directors and employees, especially with respect to financial considerations such as salaries, contracts or purchases that benefit directors or employees, leases between the organization and a director or employee, and benefits provided to directors or employees who are related through family, marriage, or business interests. 


We have had the privilege of helping establish and counsel many businesses and non-profit organizations. If you have questions about anything discussed here or if you would like our assistance with an annual review of your business practices, we would be pleased to help. 

A Closer Look at the Private Foundation

by Jon Austin

In 1936 Henry Ford’s son Edsel started and funded the Ford Foundation, now one of the most famous private foundations in the world, to promote philanthropic goals shared by the family. The Ford Foundation has been actively funding the family’s charitable goals for seventy-five years and at the end of 2009 had over $10 billion in assets. In the world of private foundations, the Ford Foundation is the exception; there are over 120,000 private foundations in the United States and approximately 75% of them have less than $10 million in assets. But the purposes and benefits of private foundations are uniform to all, from the smallest to the largest.

Private foundations have a number of useful purposes and you don’t have to be worth billions for it to be a valuable planning tool. One of the most common reasons people create private foundations is tax reduction.  There are other significant benefits, including:

  • Promoting and directing long-term charitable giving for certain specified purposes; and
  • Creating a family purpose that will provide common ground and common goals to guide future giving efforts.


Private foundations are only one of many methods commonly used to fund charitable purposes and reduce taxes. However, private foundations generally have three distinctive characteristics:

  • Most or all of the funding comes from a single source, usually a family or business, rather than from the general public;
  • Distributions from the foundation are typically in the form of grants to public charities or government entities, rather than the foundation directly operating charitable programs; and
  • Grants and administrative expenses come out of the foundation’s endowment or investment income of the endowment, rather than through a fundraising program.


Private foundations are not without their trade-offs. Like most other planning techniques with significant tax benefits, private foundations are subject to a number of complex and sometimes burdensome rules.  These rules are intended to prevent “abuse” of the benefits and ensure a private foundation is managed consistently with the charitable purpose of its creation. There are rules associated with funding the foundation, including restrictions on how much stock or other ownership interest a foundation can hold in a business, and percentage caps on the amount deductible as a charitable contribution. There are also rules regarding the ongoing operation of a private foundation, such as the requirements the foundation generally distribute at least five percent of the foundation’s net investment assets each year, make annual filings with the IRS and pay a small tax on certain investment income.  There are also substantial due diligence and conflict of interest requirements the board must adhere to. Particularly relevant to many business owners are the self-dealing rules that impose severe limitations on business transactions (e.g., selling, leasing, etc.) between a foundation and related parties.


The private foundation is not, however, the only way to reach many common charitable goals. Another option, the donor advised fund, operates in much the same manner but is generally easier and less expensive to set-up. The trade-off is less control over the assets and the long-term direction of the giving. And for many people, other more common gifting and estate planning techniques will accomplish their goals without the complexity often associated with a private foundation. But for people with a real philanthropic passion, or people with a potential estate tax concern, the private foundation is a worthwhile option to consider.


Our firm is routinely approached by persons with charitable intentions to assist them in evaluating the alternative means by which their charitable intentions might best be fulfilled, including the possibility of setting-up private foundations.  We are honored to contribute in this important aspect of planning and gifting. Whether you are taking the first step of exploring the options or you are working to implement a complex charitable gifting plan, we would consider it a privilege to help. 

Do You Need an Advance Directive

by Karla McAlister

An Associated poll found that sixty –four percent of boomers - born between 1946 and 1964 – say they don’t have a health care proxy or living will. Many people stated they feel healthy and that death and dying is not on their minds. However, the reality of death is inevitable for all of us and none of us have a crystal ball to tell us when or how we will die. Thinking about aging and possible end of life situations allows you to decide what types of care should be provided to you or withheld if you are unable to make and communicate your own decisions at that future point in time.  Documenting your wishes concerning end of life care is a comforting gift for your family as they may need to make those decisions in the future for you and, if so, they will be a able to do so with the assurance they are carrying out your wishes. It lessens the anxiety, possible guilt and potential conflict between family members if you have told your family your wishes and your decisions are stated clearly in an Advance Directive for Healthcare. 

Oklahoma's Advance Directive for Healthcare allows you, if you are 18 years of age or older, to inform physicians and others of your wishes concerning life-sustaining treatment. This document evidences the patient’s exercise of their constitutional right of self-determination, allowing them to state when they believe enough medical intervention has occurred and they want to be allowed to die. If a patient authorizes or directs the withholding or withdrawal of life sustaining treatment such as resuscitation and use of respirators, it does not prevent healthcare professionals from providing the patient pain relief and other forms of comfort care (palliative care).  And, if the patient is no longer taking nutrition and hydration (eating and drinking), the Oklahoma law requires separate, explicit decisions concerning withholding or withdrawing artificial administration of food and water (nutrition and/or hydration provided intravenously). Each person can decide if they would want those treatments provided or withdrawn.  The Directive does not become operative unless you are diagnosed by two physicians to be in a terminal condition, a persistently unconscious condition, or an end-stage condition and, then, only if you are unable to make and communicate these decisions for yourself. The Advance Directive can also be used to donate one’s body or specified organs for transplantation, research or education.

The Advance Directive also allows you to appoint a Health Care Proxy to make decisions in your behalf. With the advances in healthcare it is possible to keep a dying person alive for days, weeks, months or even years with medical intervention. After you complete an Advance Directive, you may revoke it in whole or in part at any time and in any manner. A revocation is effective upon your communication to your attending physician or other care provider or a witness to the revocation. We advise clients to give copies of the Advance Directive to the persons they appoint as proxies and also to their doctors. The signed, original Advance Directive needs to be kept with your important documents but a copy should be handy to provide to a healthcare provider if you have a sudden health crisis. Your family should know where to quickly locate the document.  In order to assist our clients and their families in times of health emergencies, we recommend our clients inform us of the location of all their important legal documents, including their Advance Directive, so that we are prepared to assist their family and surrogate decision makers at those times. 

If you signed a Directive to Physicians or other Advance Directive for Healthcare under Oklahoma law prior to 2006, we recommend you consider executing the new Advance Directive because of additional options under the existing law. When we assist people with their estate planning we often prepare an Advance Directive for Healthcare and we also recommend a Healthcare Power of Attorney; the former deals with the end of life decisions as explained above and the latter is used to deal more generally with health and personal care decisions which might arise at any point in one’s life due to injury or illness and, in those situations, to delegate authority to an appointed agent to make those decisions for you if you do not have the capacity to do so for yourself.

Trust Funding

by Karla McAlister

If you have a revocable trust as part of your personal estate planning, with an objective of avoiding court-supervised estate administration at your death (probate), this is your annual reminder that if you have not attended to the funding of your revocable trust your estate may have to go through court-supervised probate following your death.  

When we meet with our estate planning clients to sign their estate planning documents, we discuss the plan which their documents will carry out at the time of their future death.  We discuss trust funding with our clients who have chosen to use a revocable trust, informing them of the mechanics for changing ownership of appropriate assets to trust ownership (as well as alternative methods for succession of ownership) and reminding them we will help if they want our assistance with asset ownership changes, beneficiary designations, ownership succession documents for business interests, etc. Even so, each year we have clients who die and, as their family begins to take care of the necessary legal and tax matters following their death, the family is dismayed to find there is an asset which is not in the trust and for which no alternative arrangements have been made for the transfer of ownership without court-supervised administration.  

We can be as involved as you want us to be. Many choose to complete their own transfers and transfer on death arrangements in order to avoid the cost associated with the attorney being involved. That is terrific if you follow through and actually complete the transfers.  Sometimes clients transfer what they own currently but forget to implement similar ownership and transfer on death arrangements as the composition of their assets change over time, including the acquisition of new assets by purchase, gift or inheritance. We recommend you examine your financial statement annually and confirm the ownership of each asset. We have found it very effective to work with our clients’ tax accountants to use the process of preparing their annual income tax returns as a convenient time to prepare or update a personal balance sheet and confirm ownership of all assets. 

You may recall that probate is the court-supervised administration for the estate of a deceased person. Most of the probates we are currently handling are for people who were not our estate planning clients. Some of them did have a trust yet simply failed to transfer an asset to the trust.  A number of them are for people with Oklahoma mineral interests (what many in Oklahoma refer to as “royalty”) that were still titled in the name of the now deceased owner.  To be properly transferred in trust, title to minerals must be transferred by mineral deeds.  Whether or not minerals are producing now, it is worth the effort to find the original deed or probate decree whereby ownership of the minerals was first acquired and use that information to prepare appropriate legal documents (deed, assignment, etc. depending upon the nature of the interest owned) to transfer title to the trust. The other option is to let your family deal with them after you die, which may entail a time consuming and costly probate.  Another common issue is a bank or brokerage account which was never put into the trust. It is perfectly acceptable to leave one account out of the trust, either checking or savings, and at times it may actually be helpful. However, you must make sure appropriate alternative arrangements are made for transfer of ownership at your death (alternative arrangements such as payable on death designations, joint and survivor ownership, etc.). Otherwise the bank may appropriately require your family to initiate a “probate” in the district court in order for the bank to be able to work with a court-appointed legal representative. It is a shame to have to file a probate for a small account with a bank or other financial institution.  Another common mistake is overlooking beneficiary designations and/or successor owner arrangements for IRA’s, pensions and profit-sharing plans, annuities, life insurance and other death benefits. If a beneficiary is not named, it is generally assumed such financial interests are payable to the “the estate of” the deceased owner, which requires a probate and may also have unintended adverse tax consequences.

Regarding the issue of banking, it has come to our attention that many banks are extremely uncooperative about receiving checks written as payable to an individual for deposit into the trust account of the payee after the payee’s death.  For example, Mom dies and she has everything in her Trust, including all bank accounts. Son is successor trustee and he is closing down Mom’s home. He gets rebates and refund checks from various utilities and other vendors for account deposits and the unearned portion of other payments made by Mom prior to her death. The rebate and refund checks are all made out to Mom. The bank refuses to deposit them or cash them because they are not made out to the Trust of Mom, which is the owner of the account with the bank. The vendors that wrote the checks refuse to reissue to the Trust because the Trust did not make the initial deposit or other payment; Mom was the customer. Sometimes we have been able to convince the vendor to issue their check to the trustee or convince the bank to go ahead and deposit the check made payable to Mom.  However, to avoid this unintended problem you might leave one small account in your name to take care of such issues after death. However, if you do, make sure such an account is payable on your death (POD) asdiscussed above and do not close it out until all such “stray” deposits have been received and deposited.

If you own property in another State it is very important to have a post-mortem ownership succession strategy in place, whether the strategy is to transfer title to the out of state property into your trust or implementation of an alternative ownership succession strategy. If you do not integrate out of state property in the current implementation of your estate plan, upon your death it may be necessary to have a probate in another jurisdiction to clear the title to the out of state property for the control and benefit of your intended beneficiaries.

If a probate is needed, it is not the end of the world. After over twenty-five years serving clients out of our Edmond law firm and with a staff of professionals having over one-hundred years of cumulative experience, we are both prepared and pleased to help clients complete whatever post-mortem procedures are necessary, as efficiently as possible. We do give this annual warning to those who have thought ahead and have completed estate planning documents with the goal of avoiding probate. Do not fail to attend to the proper funding of your trust, otherwise your loved ones may be surprised when a probate is required.  

Estate Planning FAQs

What is the difference among a Personal Representative, Trustee, Agent, Guardian and Proxy?

The Personal Representative, also known as an Executor, settles your estate if a court-supervised probate is required. You can appoint your Personal Representative in your Will. 


The Trustee is the person or entity who manages assets owned by your trust and distributes the trust fund to the named beneficiaries according to the dispositive provisions of the trust. A husband and wife who create a trust often appoint themselves as the initial trustees and their children as their successor trustees. Instead of appointing their children as successor trustees, some clients opt to appoint an entity as their successor trustee, such as a trust company.  


An Agent is the person you appoint in your Power of Attorney document to make decisions on your behalf if you are incapacitated or otherwise cannot conduct your business. Through the Health Care Power of Attorney, our clients appoint an Agent to make decisions regarding medical and other personal care matters. Through the Durable Power of Attorney, our clients appoint an Agent to make decisions regarding legal, property, and financial matters.  If a third party requires court authorization, the Guardian is the person you nominate, or suggest, the court to appoint.  Most often, a client selects the same individual to be his or her Agent and Guardian. 


A Proxy is the individual you nominate under your Advance Directive to ensure your end-of-life decisions are fulfilled.  

What do I need to do if my spouse becomes incapacitated? 


If your spouse’s mental or physical condition is rapidly declining such that he or she is unable to make financial and medical decisions for himself or herself, you need to take steps to protect your spouse.  You may need to obtain letters from your spouse’s physicians to document the incapacity.  These letters accompanied by an affidavit will allow you to notify third parties that your spouse is no longer able to serve in a fiduciary role as agent or trustee.  Also, if your spouse has a power of attorney triggered upon his or her incapacity, you will need to present the physicians’ letters and the power of attorney to third parties in order to act as your spouse’s agent. If your spouse does not have a power of attorney document, it may be necessary for you to seek a court-appointed guardianship to care for your spouse. 


Our married clients commonly have estate plans in which each spouse is authorized to act for the other (as agent, trustee, and health care proxy) without having to document their spouse's incapacity.  Many single clients have similar delegations of fiduciary authority to other adults (children, parents, siblings, or trusted friends).  Planning for your incapacity, or for your assistance to loved ones who become incapacitated, is important and can be done in many creative ways to ensure a person's needs are met in the best way possible. 


What do I need to do when my spouse dies?

Every person's affairs are different as their life comes to an end.  Although a long list of detailed tasks could be compiled in advance, much of it would be unnecessarily confusing or inapplicable when the time comes for its use.  The best advice is two-fold.  First, consult with your attorney, accountant, doctor, and financial advisor to have good estate planning in place and keep it up to date with annual plan reviews.  Then, when a death occurs or seems imminent, convene a meeting of those advisors to confirm the planning in place and the appropriate actions to take after considering the circumstances at the time.  Each person has their own unique circumstances with a need for a unique plan, unique in both implementation and in execution.  Plan your work, then work your plan. 


Can I transfer real property to my trust if it is subject to a mortgage?  What if I need to refinance my home?

Federal law permits individuals to transfer their homestead property to a revocable trust for estate planning purposes without triggering the due-on-sale clause in a mortgage agreement.  This law only applies to your homestead property – it does not apply to rental properties or vacation homes. If you need to refinance your home, most likely the mortgage company will require you transfer the home out of your trust to yourself individually.  After you have refinanced, it is imperative for you to deed your home back into your trust to avoid probate and ensure your home passes according to the terms of your trust. You can transfer other real property subject to a mortgage to your revocable trust, but you will need to coordinate with the mortgage company to avoid triggering the due-on-sale clause.


What do I need to transfer to my trust?

In general, all assets requiring interaction with a third party in order to transfer the asset should be owned by your trust if you want the terms of the trust to govern the disposition of the asset upon your death or incapacity. You should consider transferring the following assets to your trust: real estate, automobiles, savings accounts, checking accounts, certificates of deposit, money market accounts, stocks, bonds, interests in general or limited partnerships, interests in limited liability companies, accounts receivable, notes receivable, mineral interests, royalty interests, boats, and other recreational vehicles.  Some of these assets may pass by beneficiary designation or joint ownership if they are not transferred to your trust. You should review your beneficiary designations to determine if your trust should be listed as the primary or contingent beneficiary. 


What should not or might not be transferred to my trust?

Retirement accounts, such as IRAs and 401(k)s, must be owned by individuals. A trust cannot own these types of assets. However, trusts can be the designated beneficiaries of such assets. Take caution though, because your trust should not be the designated beneficiary of your retirement accounts unless your trust contains certain "qualifying" provisions. 


Retirement accounts are unique assets because they receive special tax deferral treatment. To take advantage of this special tax treatment, contact your financial institution and make sure you have primary and contingent beneficiary designations in place for all of your retirement accounts. 


Some clients are uncomfortable with the thought of relying on beneficiary designations to transfer their retirement accounts to their beneficiaries. This discomfort is understandable because retirement accounts often comprise the bulk of many clients’ estates. If you prefer your retirement accounts pass to your beneficiaries according to the distribution provisions of your trust instead of providing complete control to your named beneficiaries, please contact us before designating your trust as the primary or contingent beneficiary of your retirement account. We will review your trust to make sure it includes the provisions required to “qualify” the trust for tax deferral. 


I’m concerned about my child’s marriage, substance abuse, financial management, etc.  How can I protect my child’s inheritance?

This is a concern shared by many clients. If your estate plan provides your children their inheritance outright, there is not much you can do to protect them from themselves or their creditors once their inheritance is distributed. At your death, if your trust distributes outright, your trustee must distribute your assets to your beneficiaries as your trust directs. Unless your trust specifically provides otherwise, your trustee will not have discretion to withhold assets from your beneficiaries, even if a beneficiary is a drug addict, in prison, filing for bankruptcy, or going through a divorce.


If this possibility concerns you, the best way to protect your child's inheritance is to set up a trust for their share. Your child's trust can authorize the trustee to use his or her discretion in deciding whether or not to distribute trust funds to your child. Because the trust fund can only be used at the discretion of the trustee and because the child, as beneficiary, cannot force a distribution, creditors cannot reach the child’s trust fund and the child's spouse cannot claim an interest in the trust fund as marital property. 


Our address changed.  Do we need to update our documents?

Your estate planning documents are not invalid because your address and phone number have changed. However, accurate contact information may become important when you provide these documents to third parties. For example, your Health Care Power of Attorney provides the name, address, and telephone number of your Agent, the person you have selected to make health care decisions on your behalf if you are incapacitated and unable to do so. In an emergency situation, your medical care providers should have accurate contact information on file so they will be able to contact your Health Care Agent as quickly and easily as possible. 


What is my trust’s tax ID number?

For individual revocable trusts, the tax ID number for the trust is the social security number of the settlor, or creator, of the trust.  For joint revocable trusts, the trust's tax ID number is usually the social security number of the primary reporting spouse. However, if the initial trustees of your revocable trust are no longer trustees, new identification numbers should be used to report trust income. You can file an SS-4 with the IRS to request a trust identification number. 

Food for Thought

by Lloyd and Karla McAlister

In this holiday season, much thought is given to food.  Here is some food for thought, for the good health of your personal estate planning ... and with no calories!


1.    Proper funding of a revocable trust.  Primarily the tool of the wealthy in the past, revocable trusts have become a common document in many personal estate plans today.  Revocable trusts can be crafted to accomplish many planning objectives.  However, avoiding the need for a court to appoint and oversee a guardian to manage ones financial affairs in the event of incapacity and avoiding the court supervised administration of ones estate after death, called probate, are by far the most frequent reasons for having a revocable trust in ones estate plan.  If you have a revocable trust for the purpose of avoiding the need for guardianship and/or probate, you should review every asset in which you have any interest to confirm each and every asset is properly integrated in your overall plan through ownership and/or pay on death provisions.  Although most assets can and should properly be owned by your revocable trust, there are very important exceptions.  So you should review your estate plan at least annually in order to confirm every asset is properly integrated in your plan to accomplish all your planning objectives, both non-tax objectives, such as probate avoidance, and tax objectives.  An annual review might be done at years end, with each newyear serving as a reminder for that review, or in conjunction with the preparation of ones annual income tax returns when you are handling your financial information for tax purposes anyway.


2.    Beneficiary designations, payable on death (POD) and transfer on death (TOD) accounts.  It is common for certain types of assets to pass from the owner to the person(s) of their choice at the owners death by a contractual designation, rather than by the owners Will or trust.  For example, life insurance and certain types of retirement benefits often pass to beneficiaries designated by the owner.  It is, therefore, critical for you to review any such arrangements in light of your overall estate plan to be certain those assets and benefits will pass in the event of your death to the person(s) or charities you intend.  Since a well drafted Will or trust can consider and provide for many contingent events, such as the unexpected death of the person(s) you intend to be the beneficiaries of your estate, it may be preferable to have such assets arranged so that the provisions of your Will or trust will control the disposition rather than relying upon beneficiary designations and payable/transfer on death arrangements.


3.    Deaths, including the unexpected death of a beneficiary.  In planning ones estate, thoughtful consideration is given to formulating a plan which is to be carried out in the event of your death.  However, all too often estate plans fail to consider the death of another person which can be critical to the success of your plan, your beneficiary.  What if the person(s) and/or charities you intend to benefit are deceased or incapacitated (or no longer in existence, as to charity) at the time of your death?  Or, what if they are alive at your death, but suffer death or incapacity (or legally dissolve, as to a charity) shortly after your death?  All too often a person will designate their spouse or adult child(ren) to receive some or all of their property, only to have one or more of those persons die or become incapacitated at points in time which were unexpected and cause unintended results such as a probate where probate was intended to be avoided, or estate taxes which could have been avoided, or property passing to persons who were not intended to benefit (such as unintended benefit or control passing to the spouse or even the ex-spouse of a child).  You should give careful thought to the possibility of your intended beneficiaries not being in existence, as you anticipate, at your death and, if that were the case, how you would prefer for your estate plan to operate in those alternative events.


4.    Family harmony and the family fiduciary.  Each of the five legal documents in a basic estate plan include the appointment of a fiduciary (Will - personal representative; trust - trustee; power of attorney - agent; advance directive - proxy).  The appointed fiduciary is delegated the legal authority to carry out the duties assigned to them, such as a trustee managing trust assets or a healthcare agent giving instructions to medical personnel.  Although family members, such as a spouse, parent or adult children, are logical candidates due to the intimacy of the relationship and their personal interest in the responsibilities to be undertaken, you should be mindful of the potential for family disharmony which can result from appointing family members.  It might make sense to involve a corporate fiduciary (a corporation whose business it is to handle such fiduciary matters, for a fee) or trusted friends who have the professional skills to handle such responsibilities with objectivity, either along with family members or alone.  In instances where family members are clearly the preference, which will undoubtedly continue to be the majority, careful consideration should be given to making those decisions and structuring such arrangements in the way which is believed will foster family harmony and not fuel the flames of conflict and disharmony.  Since there is no one way which is best, and people and circumstances change over time, you should review the fiduciaries named in your documents at least annually in order to determine whether any changes need to be made, either with the persons named or the guidelines for their performance of the delegated duties.

Estate Planning Toolkit

by Karla McAlister

Only about half of Americans have a Will according to a recent Forbes magazine article. Most people procrastinate because they do not want to actually think about what will happen when they die. It is important to plan and to make decisions or the state will make the decisions for you. State law directs how your assets are distributed if you die without a Will.  The distribution depends on whether you are married or single and whether you have children. The distribution, according to state law may not be anything you would have chosen but it is what your family must deal with if you have not planned.  It is especially important if you have minor children to make plans for the preservation of your assets to care for them. Provisions for a contingent trust for your children can be included in a Will or in a separate revocable trust document. 

 There are many different planning options and the proper option depends on your family situation, your assets and the complexity of your particular wishes.  Taking the time to work through and complete a planning questionnaire helps ensure accurate advice about the options for your situation. Sometimes the right answer is a revocable trust which avoids probateand provides detailed instruction for the trustee to manage your assets for your family. Other times the proper planning may be a transfer on death deed and placing payable on death beneficiaries on your bank accounts.  

Planning gives peace of mind:

  • By specifying who gets what—especially items with emotional significance—you head off disputes.
  • By choosing an executor and trustee if you use a trust to administer your estate, you put someone you trust in charge.
  • By naming a guardian for your young children (under 18), you make it possible for the person you choose to raise your children if for some reason you and the other parent couldn’t. If you don’t make your preference known in your will (or in other legally effective document) a judge would have to choose a guardian without any knowledge of your wishes.


Your life insurance and retirement accounts, traditional IRA, Roth IRA, and 401K are distributed upon your death according to the beneficiary designation, not by the provisions of your Will or Trust. The law is complicated and it is important to discuss those beneficiary designations with an experienced advisor.

In addition to the basic estate planning tools of a Will and Trust, a Durable Power of Attorney, which names a person who can act in your behalf regarding your property, is a valuable document. This tool gives the agent the power to act on your behalf if you are incapacitated and need assistance or if you are unavailable to act.  If you have a Durable Power of Attorney you will probably avoid the need to have a Guardian appointed if you unable to handle your own affairs. This avoids the cost and time associated with guardianship proceedings. 

A Healthcare Power of Attorney allows the agent named to make healthcare decisions for you, if you cannot make them. It is useful if you are injured or incapacitated and unable to make healthcare decisions. An additional healthcare document is the Advance Directive for Healthcare that gives instructions to your physicians on end of life matters. It also names a proxy who can make decisions if you are not able to make them.  It is essential in all of these documents to name people you trust as the agents, proxies, trustees, and personal representatives. They have great power but it also gives you great flexibility and avoids court supervisions of your affairs. 

Dispelling the Myth that Estate Planning is for Old People

by Cody Jones

  • “I/we don’t have enough assets to have a trust.”
  • “I won’t need an estate plan until I’m older.”
  • “I/we have too much debt for an estate plan.”
  • “I just want to know who will take care of my kids if I die.”


I often hear these responses when the twenty- and thirty-somethings I meet discover I’m an estate planning attorney. Although we’re told to plan for the worst and hope for the best, that advice rarely translates into preparing for our incapacity or death.  Instead, our time is spent focusing on careers, finances, homes, families, and other adventures. As a thirty-something, I too am often guilty of forgetting my days are numbered, hoping I’ll have plenty of time to plan for the not-so-fun “adult” decisions of life.  In doing so, we disadvantage our loved ones by leaving them to pick up the pieces without any foresight from us. Plus, we sacrifice the advantages of planning ahead. 


  1. Death is guaranteed, and incapacity is likely for all of us - no matter our age.  If you have experienced the loss or incapacity of someone you love, you know it is difficult.  We seldom think clearly in times of great tragedy. Planning ahead for such events can prevent additional stress in already stressful times. Such plans may include nominating someone you trust to care for you if you are incapacitated and documenting end-of-life decisions you would make if you were able.  Nominating an agent or proxy for your health care may also prevent the need for a costly court-supervised guardianship. 

  2. Not planning ahead can create confusion.  Upon your death or incapacity, your loved ones will have heightened emotions, and each will react to grief in a different and personal way.  One of the most sensitive questions that may be asked is who will take care of your minor children or other dependents. This may be a difficult question for you to answer, but it is even more difficult for others to answer when you cannot.  Discussing the nomination of a guardian for your minor children or other dependents with your spouse and loved ones while you have the ability to express your reasoning and consider their input can help avoid controversy over an already difficult decision.  Nominating a guardian helps provide a smooth transition for your children or other dependents and their caregivers. 

  3. Planning ahead can make planning later easier. Just as a football team is better prepared for the big game if the coach has a game plan, you can be more prepared for managing your estate as it increases in value if you create the framework from the beginning. Part of this framework may include a revocable trust that outlines how your assets may be used upon your incapacity and controls the distribution of your assets upon your death.  You don’t need an abundance of assets to justify having a trust.  If you have assets without beneficiary designations, such as a vehicle and a house, preparing a trust may be prudent.  Even if you have debt associated with an asset, such as a mortgage, the equity you own is an asset of your estate.  If you die and the legal ownership of the asset is trapped in your name, your loved ones will likely need to go through a court-supervised probate to access the value of the asset. A probate is avoidable if you properly utilize a revocable trust. Creating a trust to own your assets as you acquire them throughout your life can be less time-consuming and less expensive than implementing the same planning with a lifetime’s accumulation of assets later in life.  With a trust already prepared, you can simply buy an asset in the name of your trust at the time of purchase and rest in the assurance the asset will be controlled by the trust upon your death or incapacity. 

  4. A plan eases the impact of unexpected circumstances.  A revocable trust also provides a plan for unanticipated situations that joint ownership with rights of survivorship cannot address. Joint ownership only works well if at least one of the owners survives and has capacity.  If both you and your spouse die or become incapacitated simultaneously, a revocable trust contains provisions to address such circumstances.  Similarly, after your death if a beneficiary of your trust unexpectedly suffers from substance abuse or develops a disability, the trust can provide protections to avoid misuse or exhaustion of the trust funds which outright ownership cannot avoid.

Unexpected circumstances do not have an age limit.  Take time today to look at your family situation and personal assets. Who will care for your children if you pass away?  Who will care for you if you are incapacitated? What will happen to your assets upon your death or incapacity?  If you don’t have answers to these questions, or if you have adult children who cannot answer these questions for themselves, make an appointment so we can help you plan ahead and provide everyone certainty and peace of mind.

A Year-End Check-Up!

by Lloyd McAlister

Year’s end or the beginning of a new year, whichever you prefer, is an excellent time to get in the habit of checking your important personal paperwork – documents that are legally and financially important for you and your family.  So, consider taking an hour or so to do the following paper check-up:

  1. Locate your documents!  Isn’t it amazing how many times we need some piece of paperwork and aren’t sure where to look for it? If you can’t relate to that problem, move on to #2!   If you’ve experienced that problem, though, you know it is a good idea to gather all your important records.  
  2. Confirm the documentation you have! Your important records might include: military service and discharge papers; retirement plan papers; insurance policies; documents evidencing your ownership of all your assets, including vehicle titles, financial account statements, deeds for land and minerals, ownership records for assets received by gift or inheritance, trust papers for any interests you have in existing trusts, and so on.  And, last but by no means unimportant, your estate planning documents, including your last will and testament, your revocable trust, your durable power of attorney, your healthcare power of attorney (for general health and personal care decisions), your advance directive for healthcare (for end of life health decisions) and your consent for your attorney to communicate with your fiduciaries.  
  3. Confirm you have the necessary signed, original documents!  In most of our business and personal matters it is acceptable to simply have a copy of documentation, rather than a signed and dated original document.  This is so either because we aren’t the party responsible for possession of an original or the original document is not necessary.  However, as you well know, it can be very important to have the original paperwork proving ownership of certain types of assets, either in order to transfer ownership to a new owner or in order to establish our own ownership.  Likewise, original estate planning documents, properly executed with your signature and, if required, the signatures of witnesses and/or a notary public, can be critical in carrying out plans and instructions in the event of your incapacity or death.  
  4. Confirm your documents are current!  Have you ever felt time was passing quickly?  The speed of time passing seems especially real when we notice how “old” something has gotten without our notice.  For example, do you remember the date you did your estate planning documents (Will, trust, powers of attorney, advance directive for healthcare, etc.)?  Have things changed since then?  Do your documents still work the way you originally intended and, if so, is that still how you want things to happen?  Our clients regularly call upon us to meet with them and review their documents in order to assess whether any updating is needed or desirable.  Although this may seem inconvenient and does involve time and expense, the cost at present can be very small in comparison to the problems and costs which can be caused by having outdated documents which are no longer adequate or appropriate for the person’s situation.

My planning check-up:

  • What documents do I have?  
  • And which are signed originals?
  • Will    
  • Trust    
  • Durable Power of Attorney    
  • Healthcare Power of Attorney    
  • Advance Directive for Healthcare
  • Where are my documents located?
  • Are my documents current?

A Word About Words

by Lloyd McAlister

Mrs. Jones’ attorney: “Mrs. Jones, your father’s life insurance is taxable and at an estate tax rate of forty percent.”

Mrs. Jones: “But I didn’t think my father’s insurance was in his estate!”

Mrs. Jones’ attorney: “The life insurance your father owned is not part of his ‘probate estate’ but it is a part of his ‘gross estate’ for estate tax purposes.”

Legal terminology can be confusing, causing people to misunderstand important legal and financial consequences.  Few legal terms create more confusion than the word “estate” and the variety of uses for the word which have different legal and tax implications.


When a person dies, we often speak of their “estate,” usually referring to the property and legal rights the deceased person owned at the time of their death.  However, sometimes we mean something narrower in meaning, with a more specific application.  For example, we might be talking about the “estate tax” due as a result of the person’s death, in which case we might use the word estate to refer to their “taxable estate.”  However, technically, to arrive at one’s “taxable estate” we must start with their “gross estate” and deduct allowable deductions.  Now, what at first might have seemed somewhat simple becomes more confusing.  


When referring to one’s estate, we might also be talking about their “probate estate.”  Again, what might seem simple can become quite confusing because we referred to “taxable estate” and “gross estate” above, yet what comprises one’s “probate estate” might be quite different than those other terms used to refer to tax matters.  If a person dies owning property titled in their name without valid transfer on death successor owner arrangements, the disposition of that property after the owner’s death is technically subject to the administration of such property by the “probate court.”  The probate court determines:  what property fits in that category (and, consequently, is subject to the jurisdiction of the probate court), whether there was a valid last will and testament of the deceased person which disposes of such property and, if no valid will exists which completely disposes of the property, the disposition of the deceased person’s property according to state law (called the laws of “descent and distribution”).


Although all the property in a deceased person’s probate estate might also be in their gross estate, it will not necessarily all be in their taxable estate due to the “allowable deductions” which are subtracted from the gross estate to arrive at the taxable estate, deductions such as the marital deduction for property passing to a surviving spouse or the charitable deduction for property passing to a charity.  Similarly, it is entirely possible some or even all the deceased person’s property is in that person’s “gross estate” (again, using the term in its technical sense to refer to the gross estate for federal estate tax purposes) yet little or none of it is in their “probate estate” because the ownership of the property was such that there was no need for a probate court to determine the lawful, successor owners.  The very common use of revocable trusts (also referred to alternatively as living trusts, inter vivos trusts, loving trusts, etc.) is an excellent example; a person might establish the ownership of some or even all their property in the name of the trustee of their revocable trust in order to avoid the court-supervised administration of their estate, a legal process called “probate.” By virtue of the legal fact that the client, now deceased, did not hold the title in their individual name but rather held title in their name (or someone else’s name) as a trustee of their trust, there is nothing to probate (nothing for the probate court to administer); the successor trustee named in the deceased person’s trust merely needs to accept or confirm their appointment as trustee.  Since the property in one’s revocable trust is subject to the “estate tax” it is included in their “gross estate” and, possibly, their “taxable estate” even though such property is not in their “probate estate.”  In fact, the deceased person may have planned their “estate” so that there will not be a “probate estate” and, consequently, no need for a court-supervised probate proceeding.


So, if you speak of someone’s “estate,” be careful to be clear about the type of “estate” to which you are referring.  Otherwise, you may believe others understand what you said, yet you may not realize that what they think you said is not what you meant!