Author Archives: Tyler Barrett

By some estimates, the incidence of Alzheimer’s disease will triple by 2050. As a result, an increasing number of American families will have to deal with the issue of long-term care. With costs approaching $60,000 per year, nursing homes and assisted living facilities can be a financial burden even for people in the upper middle class.

Medicaid, a joint federal and state government program, provides assistance for long-term care. However, Medicaid has strict eligibility requirements. These requirements often force applicants to divest all of their assets. For many, this is untenable. But can you do anything to avoid it? The answer is yes, with a couple of caveats.

First, Medicaid penalizes uncompensated transfers. This means you cannot give away property to qualify. The good news is that Medicaid looks back only five years from the date of your application. Thus, gifts before that time are not a factor. Second, you must relinquish at least some control over your estate.

So, what steps can you take to protect your assets from Medicaid? One option is creating a special type of irrevocable trust.  Such trust must be managed by an independent trustee, and cannot be amended or revoked. Another possibility is to sell property in exchange for a promissory note, which is structured so that it does not count against your Medicaid eligibility.

Both of the above options should be carried out only with the supervision and counsel of a knowledgeable estate planning and Medicaid attorney. Also keep in mind that because these are highly advanced estate planning techniques, the cost is higher than a basic last will and testament or a revocable living trust. That said, it may be worth it to leave a legacy by having money to pay for the grandchildrens’ college education or passing down the family farm to the next generation.

A deceased person’s largest asset is frequently a house. Whenever loved ones list the home, they’re sometimes surprised to learn that probate is necessary. In such cases, the family and their realtor should have a general understanding of probate sales.

Selling a house through probate involves court supervision. Generally, the personal representative of the estate must first obtain the court’s permission. This requires notice (both by mail and publication) and a hearing. However, if the family is all in agreement, the court can waive these requirements.

Another important difference between a regular sale and one in probate is the representations and warranties the seller makes. In probate, the seller is the personal representative. Because the personal representative is acting on the estate’s behalf, he/she should not make any individual warranties or representations. Further, rather than a normal warranty deed, the buyer should receive a personal representative’s deed. A personal representative’s deed is a special type of deed that protects the personal representative and the estate from liability.

Lastly, due to the legal requirements, a 30-day close is not always possible in probate. Therefore, the realtor should condition the buyer to expect delays.

Selling a house through probate is not the ideal circumstance. Yet, with knowledgeable counsel and a little transparency, it need not get in the way of a successful sale.

We have sprung forward! Despite the loss of sleep, I always look forward to the return of daylight savings time. It means warming temperatures, more sunshine and the pursuit of outdoor hobbies. For many, there is also spring cleaning. In between the yard work and garage sales, consider spring cleaning for your estate plan. Here’s why:

1. You don’t have an estate plan – By some estimates, over half of adults in America do not have even a basic last will and testament, let alone a living trust. Lack of an estate plan causes many problems, from unwanted inheritances to court-ordered guardianships for minor children.
2. Changing Tax Laws – Congress overhauled the federal estate and gift tax laws in 2012, and last fall’s election results may lead to additional changes in the near future. If your estate plan is more than a few years old, there’s a good chance it’s obsolete.
3. New Family Dynamics – Perhaps you have a new grandchild. Or maybe you are now in a position to benefit a favored charity. Whatever the case may be, new family dynamics warrant a review of your estate plan.

Estate planning attorneys often preach this to clients: estate planning is not a one-time event. To avoid probate and achieve one’s goals and wishes, they must update their estate plan throughout the years as circumstances change. Keep that in mind this spring!

Losing a loved one is painful. Wrapping up the deceased’s financial affairs only adds to the stress. I often receive phone calls stating, “The bank asked me for Letters Testamentary. What’s that, and how do I get them?” Unfortunately, it involves probate.

If the deceased owned money or property in their name only, generally a probate court must supervise distribution to the heirs and beneficiaries. Letters Testamentary is a legal document appointing a Personal Representative to manage the deceased’s estate. Obtaining Letters Testamentary requires filing a probate petition with the district court and having a hearing before the probate judge. Only then will the bank release funds from the deceased’s account.

Probate is both costly and time-consuming. Thus, it’s best to avoid probate. The primary ways to avoid probate are beneficiary designations along with a Transfer-on-Death Deed for real property or a revocable living trust. Which option is best for you depends on a variety of factors, something an estate planning attorney can help determine.

Happy New Year! As the calendar turns to January, many of us reassess things. From earning a work promotion to finally using that gym membership, resolutions abound. Consider adding this resolution for 2017: sit down with a knowledgeable Norman, Oklahoma estate planning attorney and discuss a revocable living trust. Here are a few reasons why a trust makes sense for your estate planning:

1. Probate Avoidance – Do you want private details about your finances to become public knowledge? Are you okay with your loved ones waiting months or years for their inheritances? I assume your answer to those questions is no. A revocable living trust is the best way to avoid probate and make certain that your estate is administered in a timely, efficient manner.
2. Incapacity Planning – With the incidence of Alzheimer’s expected to triple by 2050, incapacity planning has taken on much greater importance. If you lose the ability to handle your affairs, who will manage your bank accounts, IRAs, life insurance policies and other assets? By appointing a successor trustee, you can ensure that the right person makes these key decisions in the event you cannot do so. An added bonus: third parties (i.e. banks and financial institutions) are generally more amenable to dealing with a successor trustee than they are an agent under a durable power of attorney.
3. Tax Planning – The American Taxpayer Relief Act of 2012 (ATRA) significantly changed our nation’s tax laws, raising the exemption from federal estate taxes to over $5 million for individuals and in excess of $10 million for married couples. As a result, revocable living trusts created before ATRA may be overly cumbersome or even obsolete. Moreover, with Republicans now controlling both the White House and Congress, a full repeal of the estate tax is likely. Given this new reality, updating your revocable living trust is a smart move.
4. Controlling Distributions – Let’s face it: we love our families, but nobody is perfect. Most of the time my clients want to leave their estates outright to the beneficiaries. That is, until I explain the possible consequences of doing so. Take, for example, a disabled person. This person may depend on Social Security Disability Insurance, Medicaid or other government programs to help provide for their care. Unbeknownst to many, receiving an inheritance (even a small one) can disqualify the disabled person from getting benefits under these programs. In other cases, the intended beneficiaries may simply not be in a position to deal with the money because they are a minor, are financially irresponsible or have tax or creditor problems. One can structure a revocable living trust so that the assets for such beneficiaries continue to be held in trust and do not negatively impact the beneficiary.

Probate avoidance, disability planning, tax planning and controlling distributions are great reasons to create a revocable living trust. I am a client-centered, affordable Norman, Oklahoma estate planning attorney who will review all of your options and devise an overall estate plan that meets your specific needs. I wish everyone a happy and prosperous 2017!

Regardless of our political affiliations, I think we are all glad that the 2016 election is over. In any new administration, there are apt to be policy changes. This is particularly true whenever one party controls both the executive and legislative branches. In addition to other priorities, President-elect Trump and the Republican Congress almost certainly will take aim at the federal estate tax, with the goal of abolishing it entirely. What would that mean for estate planning? To answer that question, we first must review the present law and how existing estate plans are shaped around it.

Currently, the federal estate tax exemption is $5.45 million, meaning heirs and beneficiaries can inherit up to that amount tax-free. Given the high exemption, only roughly 3 out of every 1,000 Americans are subject to the federal estate tax. But many estate plans are nonetheless constructed to avoid estate taxes, especially those created in the early to mid-2000s when the exemption was much lower. In order to minimize or eliminate federal estate taxes, many of these plans utilized revocable living trusts with so-called A-B provisions. While such a design accounts for estate taxes, it can significantly restrict when and how beneficiaries receive their inheritances, potentially tying up your estate for years.

In the event President Trump and Congress get rid of the federal estate tax, clients with older plans may want to free up assets for their heirs and beneficiaries. Additionally, the focus of estate planning for wealthy clients will shift from estate tax avoidance to minimizing income and capital gains taxes and providing for incapacity.

If nothing else, the 2016 election puts an exclamation point on something I tell all of my clients: estate planning is not a single occurrence, but rather an ongoing process that must take into consideration one’s goals, wishes and personal circumstances as well as changing economic and political conditions. So, enjoy the holidays with family and friends. But make it a New Years’ resolution to review your estate plan with a knowledgeable attorney in 2017.

We are nearing my favorite holiday: Thanksgiving. From family to turkey, from pumpkin pie to football…the list of things for which to be thankful is long. Something that may not immediately come to mind, however, is estate planning. I know you are probably thinking, “Estate planning is how Tyler makes a living. Of course he is thankful for it!” Fair enough. But here are a few reasons why you should join the party:

1. Revocable Living Trusts – A wonderful tool, revocable living trusts avoid probate and maintain privacy. In addition, revocable living trusts give you the opportunity to control how your beneficiaries spend their inheritance. Finally, revocable living trusts can protect your assets from creditors and lawsuits
2. Durable Powers of Attorney – Sadly, many of us will someday lose the ability to make decisions for ourselves. That means another person will need to step in and help, potentially requiring a guardianship proceeding. Fortunately, by executing a durable power of attorney, you can empower someone you trust to manage your financial affairs and health care without going to court, saving both time and money.
3. Peace of Mind – Although none of us relish confronting our own mortality, we must consider what happens after we are gone. You have worked hard in life to provide for your family. Plan for the future and ensure that your loved ones are taken care of after your death, too. In doing so, you will gain something truly invaluable, that is, peace of mind.

There you have it. Revocable living trusts, durable powers of attorney and peace of mind: these are among the many reasons to be thankful for estate planning this holiday season. Until next time, Happy Thanksgiving!

Estate planning is the process of managing your property while you are living and providing for its distribution after your death. A good estate plan has three key components:

1. Last Will and Testament or Living Trust – If you do not specify who receives your property, then the State of Oklahoma decides for you. In some cases, this is an acceptable outcome. More often, however, it leads to undesirable results. The two options for stating your wishes are a Last Will and Testament and Living Trust. The former merely gives the probate court instructions about how to distribute your property. The latter provides you with significant flexibility in controlling the manner of your beneficiaries’ inheritances, and it also maintains the privacy of your estate. The choice between a Last Will and Testament and Living Trust turns on many factors, and it is something you should discuss in detail with your estate planning attorney.
2. Durable Power of Attorney – Unfortunately, as we age, accidents and illness occur more frequently. Whether due to stroke, a car wreck or Alzheimer’s disease, incapacity is always a possibility. If you are incapacitated, then you cannot legally make important decisions about your finances, such as withdrawing money from bank accounts, filing tax returns or selling your house. With a Durable Power of Attorney, you appoint someone to execute these tasks for you in the event you are unable to do so.
3. Advance Directive for Health Care – Many people remember the case of Terry Schiavo, the young woman at the center of a national controversy over end-of-life medical treatment. Ms. Schiavo suffered a stroke and, as a result, was in a persistent vegetative state that her doctors said was permanent. Ms. Schiavo’s fiance wanted to withdraw life support, while her parents sought to keep her alive. The ensuing legal battle dragged on for years. You can avoid such a tragic situation by utilizing the Advance Directive for Health Care, a legally binding document that tells doctors your wishes concerning life support if you are incapacitated and have a terminal condition, are in a persistent vegetative state or if you have an end-stage condition.

A Last Will and Testament or Living Trust, Durable Power of Attorney and Advance Directive for Health Care form the foundation of a comprehensive estate plan. Additional documents may be necessary, but this is where you should start.

Revocable living trusts enable one to avoid probate, resulting in greater privacy as well as decreased legal fees and costs. If structured properly, revocable living trusts also provide other benefits. To achieve these benefits, the client should execute an “A-B trust”.

What is an A-B trust? Let us use a married couple to illustrate. In basic trust planning, one of two things happens when the first spouse dies: either the assets remain in trust for the surviving spouse or the assets are distributed outright to the surviving spouse. By contrast, with an A-B trust, we split the assets into two separate and distinct trusts upon the death of the first spouse to die. The “A” trust is a marital trust; it benefits only the surviving spouse, and the surviving spouse has full control over the assets. The “B” trust, sometimes called the bypass trust or the family trust, likewise benefits the surviving spouse; however, it can also have other beneficiaries such as children or grandchildren. Distributions from the bypass trust are limited, and it is irrevocable. For most of my clients, an A-B trust is at least worth considering. Here are three reasons why:

1. Estate tax reduction – In 2016, the federal state exemption is $5.45 million. Thus, only a small percentage of estates will be subject to federal tax. However, it is difficult to predict how and whether the law will change in the future. A-B trusts allow married couples to fully utilize the federal estate tax exemption of both spouses, no matter what that exemption may be.
2. Remarriage protection – Many clients worry that their spouse will remarry after they pass away and that an inheritance will end up in the hands of their spouse’s new husband or wife or stepchildren. A-B trusts can mitigate this concern. Because distributions from the bypass trust (or “B” trust) are restricted and the bypass trust is irrevocable, clients can rest assured that the assets in the bypass trust will ultimately pass to their children.
3. Creditor protection – Assets placed into a bypass trust are protected from creditors and the holders of lawsuit judgments.

Estate tax reduction, remarriage protection and creditor protection: these are a few reasons to consider A-B trust planning. If you are setting up your estate plan, ask your attorney if an A-B trust is right for you.

If you have an estate plan, congratulations: you are way ahead of most people in terms of protecting your legacy and giving your loved ones peace of mind. By some estimates, nearly half of all American adults lack even have a basic will. Consequently, millions of families every year will incur unnecessary taxes as well as attorney fees from probate. All that said, just because you already have an estate plan does not mean you can rest on your laurels. Estate planning is an ongoing process. Your will, living trust, durable power of attorney and other documents must be refined and amended over time so that your wishes are carried out after you are gone. Here are the top five reasons to update your estate plan:

1. You got married – The tax code treats married couples differently than single individuals. Did you know that you can leave your entire estate, regardless of size, to your spouse free of any federal estate taxes? In addition, getting married will likely change how you plan for the possibility of incapacity, such as Alzheimer’s or stroke.
2. You had a child – Minors cannot legally own property. Therefore, it is vital that your will and/or living trust contains adequate provisions to ensure an inheritance does not pass outright to the minor child. Otherwise, an expensive and intrusive guardianship proceeding could be required.
3. You got a raise – As you progress in your career, hopefully you are making more money. Obviously, everyone wants a raise. However, with increased income and wealth often comes the need for more extensive estate planning.
4. Congress changes the tax laws – A few years ago, Congress drastically altered our nation’s tax laws with the American Taxpayer Relief Act (ATRA, for short). ATRA increased the exemption for federal estate taxes to $5.25 million, indexed for inflation (in 2016, the exemption is $5.45 million). While that brought some certainty to estate planning attorneys and their clients, things can always change. If you follow the news, it may be difficult to believe that anything gets done in Washington. Yet, the fact is Congress actually does pass new laws on occasion. In the event Congress tinkers with the federal estate tax again in the future, it could render estate plans crafted around ATRA obsolete. A good rule of thumb: if your will or living trust is more than three years old, you should at least review it with an estate planning attorney.
5. You recently retired – If you recently retired, or are thinking about it, now is a good time to reevaluate your finances, including estate planning. As we age, the possibility of long-term care becomes more acute, and certain estate planning tools can preserve assets for your family from Medicaid and nursing home costs.

An estate plan is like a car: if you do not perform regular maintenance, it breaks down. You made an investment in your future by planning your estate. Do not let that investment go to waste by neglecting necessary changes.