A lot of people do not have estate plans because they do not understand why it is important. In reality, there are some very good reasons to plan your estate. We will look at four of them here.
Avoid Intestacy
If you pass away without any estate planning documents at all, your family would be placed in a very difficult situation. The emotional part of the equation is indescribable. This makes it is tough to handle procedural challenges during such a difficult time.
Ultimately, the probate court would oversee the estate administration process. They would name a personal representative to act as the administrator, and the process would slowly unfold.
After final debts are paid and all the other details are sorted out, the court would order the distribution of the assets under the intestate succession laws of the state of Oklahoma.
Under these circumstances, your true wishes may not be carried out. People you would have never slighted may be disinherited or shortchanged. On the other side of the coin, a relative you are not especially close to that does need the money may receive an inheritance.
When you make advance preparations, you can be sure that everyone that you care about will be provided for in the appropriate manner. You will also short-circuit possible disagreements among family members that can arise when there are competing interests.
Protect Vulnerable Beneficiaries
A very small percentage of adults that are between the ages of 20 and 40 have estate plans in place. This may be due to extended life expectancies. At the same time, the parents of dependent children are usually in this age group.
When you have a family that depends on your income, a lack of planning is irresponsible. To protect minor children, you can create a custodial account or a trust. If you do not have a significant store of resources, you can use life insurance as an income replacement vehicle.
Adults can also be vulnerable in a different way. A person who is simply not very good with money could potentially burn through a direct inheritance far too quickly.
As a response, you can include spendthrift protections when you plan your estate. A living trust with a spendthrift provision would protect the principal from the beneficiary’s creditors. You can also dictate limited incremental distributions to prevent reckless spending.
Mitigate Estate Tax Exposure
The federal estate tax packs a powerful punch with a 40 percent maximum rate. That’s the bad news. The good news is that there is a $13.61 million exclusion. This is the amount that can be transferred before the tax would become applicable on the remainder.
There are strategies that can be implemented to ease the burden. It should also be noted that there are 12 states have state-level estate taxes. Oklahoma is not one of them, but if you own valuable property in one of these states, the tax in that state could be a factor.
Protect Assets
Legacy preservation is another piece of the puzzle. They say that we live in a litigious society. Business owners and individuals that are in certain high-risk professions are especially vulnerable to legal actions.
You can implement an asset protection strategy when you are planning your estate if you have concerns. Plus, there is another type of asset protection that some people do not consider.
Medicare does not pay for long-term care, and most seniors will need some type of living assistance. Medicaid will cover the costs if you can gain eligibility, but you have to divest yourself of assets, because it is only available to people with limited financial resources.
This can be done through the creation of an irrevocable, income only Medicaid trust. The key here is you much fund the trust at least five years before you apply for Medicaid.
Schedule a Consultation Today!
Today is the day for action if you have been going through life without an estate plan. You can schedule a consultation at our Oklahoma City estate planning office if you call us at 405-843-6100.
Our Tulsa office can be reached at 918-615-2700, and you can fill out our contact form if you would rather send us a message.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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