It is important to understand the fact that estate planning is an unfolding process rather than a one-time event. The first estate plan that you put in place will be based on your financial situation, your intentions, and your family dynamic at the time that it is created.
Over the years, things will probably change, and estate plan revisions will be necessary.
When you are first setting out as a self-supporting adult, you should have a basic estate plan in place. Your employer may be providing life insurance and a 401(k) plan, and you should take some steps on your own to cover all your bases.
A will or trust can be used as an asset transfer vehicle, and you should address possible incapacity. Advance directives for health care are necessary, and one of them is a living will. This type of will is used to record your preferences regarding the use of life-support.
To account for situations that are not related to life-support, you should add a durable power of attorney for health care. A HIPAA release should also be signed to give the health care representative the legal right to access your medical records.
If and when you get married, your responsibilities will increase, and you and your spouse should discuss your estate planning objectives. A joint living trust can be a good choice for many young couples, and it can be adjusted when necessary.
One of the good things about a living trust for a young married couple is the fact that it will be useful if you have children. You want to make sure that your young ones are provided for under any circumstances, but minors cannot handle their own finances.
The trustee that is named in your trust declaration would be empowered to manage assets on behalf of the minor child or children. Even if you have a trust to address the financial part of the equation, you should name a guardian for your children in a simple will.
Marital Status Changes
Unfortunately, a significant percentage of marriages end in divorce, and this is a life event that will necessitate an estate plan update. If you get remarried, there will be a fresh set of circumstances, and yet another revision will be needed.
An estate plan for a parent that is getting remarried can potentially revolve around a legal device called a qualified terminable interest property (QTIP) trust.
To execute this strategy, your spouse would be the first beneficiary, and your children would be the final beneficiaries of the trust.
If you predecease your spouse, they would receive distributions of the trust’s earnings for the rest of their life, and they could potentially receive discretionary distributions of portions of the principal. The surviving spouse would also be able to use property that is held by the trust.
They would be in a comfortable position, but they would not be able to alter the terms of the trust. After their death, your children would inherit the assets that remain in the qualified terminable interest property trust.
As you get older, you may enjoy increasing financial success, and your original estate plan may become obsolete in some ways. The federal estate tax can be a factor for very high net worth individuals, and it carries a 40 percent rate, so it can have a significant impact.
There are also state-level estate taxes in 12 states, but Oklahoma is not one of them. If you own property in a state with an estate tax, it would apply to your estate if its value exceeds the exclusion in that state.
Changes to Relevant Laws
In addition to the twists and turns of your own life, pieces of legislation that impact the estate planning process can be enacted along the way. A revision may be necessary to react to relevant change in the laws.
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We are here to help if you are ready to work with an Oklahoma City estate planning lawyer to put a plan in place. Each situation is different, so we will gain an understanding of your position and provide recommendations so you can make fully informed decisions.
If you are ready to get started, you can send us a message to request a consultation appointment, and we can be reached by phone at 405-843-6100.
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