I. How Your Property is Transferred Without an Estate Plan
If you die owning property in your name alone, the Oklahoma Legislature has passed a law in Title 84, Sec 213, which deals with distributing the assets if you have failed to prepare your estate plan with a Last Will and Testament or a Trust. This does not affect property of the deceased where title is held in "Joint Tenancy with the right of survivorship." (see #IV)
II. Last Will and Testament Probate Proceedings
A person's Last Will and Testament is the document that expresses the person's instructions as to how they want their property disposed of after their death. It also names the Executor (or Personal Representative) who the deceased wants the probate court to appoint to administer the estate through the probate proceedings.
The legal process by which a will is presented to the court and "proved" and includes all the procedures to transfer title of the deceased's property, payment and resolution of all debts and claims and any other estate related issues. The Executor (or Personal Representative) must prepare and file a General Inventory and Appraisal of all the assets the deceased owned at death. Once the estate tax returns have been filed, taxes and creditors paid, and the tax releases have been received, then the court can approve the final accounting, distribute the assets according to the will and release the Executor from his or her responsibilities.
Executor (or Personal Representative)
A person, bank, or company nominated by the deceased in his will to carry out his directions. This person is responsible for making sure the assets are properly appraised, an inventory filed with the court, tax returns filed, debts paid, and distributions made to the correct persons as listed in the Will. It is important for the Executor to know how to handle business matters, tax returns and not be improperly influenced by family members or other heirs.
III. Revocable Living Trust
A trust is a financial contract whereby title to property is transferred by the Creator with the intention that it be administered by a Trustee for someone else's benefit. It is a "living" trust because it is created during the Creator's lifetime, not after his death. By "revocable," it means the terms of the trust can be amended or changed at any time or completely revoked by the Creator, as long as they are living and still competent. Property owned by the trust will not be subject to any probate proceedings with the court at the Creator's death. The Trustee, in charge of managing the trust assets, will transfer the assets to the beneficiaries as the Creator specified in the trust document once the Creator's estate and income tax returns are completed and the trust is closed. This type of trust can, however, continue for another beneficiary after the Creator's death. If there is a disabled beneficiary, surviving spouse, injured child, etc., the continuation of the trust, so that the Trustee can manage the investments and pay the disabled beneficiary's bills, may be desirable. Attorneys often call the Creator by the name of Grantor or Settlor.
IV. Property Held in "Joint Tenancy with the Right of Survivorship"
Most husbands and wives hold title to their homes, CDs, checking and savings accounts or investment accounts this way. At the first one's death, the asset passes to "the survivor" automatically. These types of assets are not involved in a probate proceeding of your estate, so this effectively avoids the need to probate assets registered this way on the first death. The survivor then needs an estate plan to handle the inheritance of assets at his or hear death. Many people think they can avoid the cost of having a will prepared and a probate proceeding in the District Court by keeping their assets registered in "Joint Tenancy with the Right of Survivorship" with the person or family members they want to receive the asset at their death. There are problems with this arrangement when the relationship of the two owners is father-child, mother-sister, aunt-nephew. For example, a younger person could die first, or the other owner could be sued or involved in a divorce and these jointly-owned assets be subject to claims. The other owner might be forced to file bankruptcy, and the elderly owner's assets become part of the younger joint owner's bankruptcy due to the way the assets are titled. Therefore, it is not wise to title assets "Joint Tenancy with the Right of Survivorship" as an alternative to a good will or trust for co-owners who are not husband and wife.
V. Giving Your Property to Heirs During Your Lifetime
Many parents and grandparents make annual gifts of cash or property every year. The IRS permits an annual gift exclusion of cash or property per year, per person. Therefore, two grandparents could give each grandchild double the amount per year. This is often used to help set aside money for their grandchildren's education. Sometimes these gifts are made directly to the child's guardians or parents. If these gifts start at a very early age and the grandparents want to place controls and limits on how the money will be spent, an Educational Trust may be a better alternative to receive the gifts. Ask for a separate brochure on Educational Trusts at our Trust Department office, local bank location or website.
VI. Transfer-On-Death Deed
Title 58, Oklahoma Statutes Chapter 21, Section 1253 et. Seq. established the Nontestamentary Transfer of Property Act effective November 1, 2008. A person under this law can execute a Transfer on Death Deed which names the person to receive real property upon the death of the donor. The deed must be recorded during the lifetime of the donor to be effective. This "Transfer" may also be revoked during the lifetime of the donor. The donor can still mortgage or sell the property.
Our bank encourages everyone to consult with an attorney knowledgeable about estate planning. If you would like, you can arrange an appointment with our Trust Officer for a free one-hour conference to review your estate planning options. We do not draft legal documents. Call 580-436-8323 or 580-436-8322 for more estate planning information.