Vaughn, Winton & Clark, PLLC, Oklahoma Wills, Trusts, and Estate Planning Blog

Powers of Attorney

I was recently very fortunate to be interviewed on Channel 9's Saturday morning show.  It was a follow up to a previous interview they had requested.  The original story detailed how an elderly woman from Pauls Valley was taken advantage of by her caregiver, potentially using a power of attorney.  The caregiver wrote check for almost $10,000 from the elderly woman's account to bail the caregiver's boyfriend out of jail!  The police got involved and the caregiver was arrested.  Both interviews centered on questions about the creation and use of powers of attorney.  I thought I would summarize my general advice on powers of attorney as follows:

1.  Have a competent attorney help you create the document.  I have reviewed many power of attorney that have been downloaded off the internet or copied from a friend or co-worker.  Most of the time, the client  had no idea what power they were granting or when they were effective.  If you don't understand what the document says, don't sign it.  Typically, you get what you pay for.  Remember, if your power of attorney ceases to be effective at the wrong time,  your loved ones may have to take a guardianship overy you in order to take care of your needs. 

2.  Choose someone you trust implicitly.  Many problems with powers of attorney stem from choosing someone out of obligation, like a son or niece.  If you don't have someone you trust, you need to limit the powers you grant them.

3.  Don't choose someone financially connected to you.  You should not choose someone who owes you money, who you owe money or who you provide anything to financially.  For example, if you pay your son's rent, he is not a good choice for your power of attorney. 

4.  Limit the powers you grant to your power of attorney.  I would not grant the power to change beneficiaries on your life insurance or retirement.  Limiting the maximum amount of money that can be withdrawn at one time or forbidding the sale or mortgage of real property are a couple of good limitations.

5.  Know when the power of attorney becomes effective and when it ceases to be effective.  Most power of attorney documents are effective at the time of execution and do not cease until death.  Some do not become effective until incapacity and others cease to be effective upon incapacity. 

This is a very powerful document and should be carefully considered prior to putting it in place.  If you have other questions about a power of attorney or need to have your power of attorney reviewed, please contact this office.

-Michael Clark, Oklahoma Estate Planning Attorney. 

Some Estate Tax Relief

After making us hold our breath all year, Congress finally took action on the Bush Tax Cuts.  Amongst other changes, the estate tax exemption level was increased to five million dollars ($5,000,000).  This means that your estate will not pay any federal estate tax on the first $5,000,000 of your net assets.  They also made it easier to utilize the estate tax exemption of both members of a marriage.  The downside of the legislation was the estate exemption increase is only effective for 2 years, 2011 and 2012.  Hopefully, Congress will avoid another last-minute fix and establish the estate tax exemption levels (or repeal!) well in advance of the next deadline.  If you are a client, you will be receiving your annual review letter with more explanation of the legislative changes.  If you are a client or other interested party, please contact our office for the details of upcoming presentations on the legislative changes, among other estate planning issues. 

-Michael N. Clark, Oklahoma Estate Planning Attorney

Estate Tax Relief?

There may be light at the end of the tunnel after all.  According to this article on foxnews.com, http://www.foxnews.com/politics/2010/12/06/obama-proposes-payroll-tax-reduction-deal-taking-shape-bush-tax-cuts/, President Obama's tax proposal on the expiration of the Bush-era tax cuts appears to increase the estate tax exemption to 5 million dollars and decrease the estate tax top rate to 35 percent.  This would be a dramatic improvement when compared to the 1 million dollar exemption and 55 percent top tax rate we are facing if the expiration happens.  We are still a long way from this proposal passing; it faced oppposition from both parties.  Stay tuned for more updates as they develop. 

-Michael-

Oklahoma Estate Planning Attorney

How did you spend your inheritance?

A recent news article contained a story I found very sad and disturbing.  The story stated that a mother convinced her teenage son to use part of his inheritance to buy drugs, specifically methamphetamine.  After the purchase, the drugs ended up in the system of the boy's 15 year old sister.  Sadly, she died of a drug overdose, allegedly from the drugs her teenage brother bought with his inheritance.  The link to the article is below, if you would like to read the full story.  As an estate planning attorney, I could not help but wonder what type of inheritance the boy had.  The article uses the phrase 'trust fund.'  Typically, they are not accessible by teenagers without court permission or from the adult who controls the account.  My guess is that someone will be held liable for giving the boy access to the money.  This is a terrible story and my prayers go out to the victims of this situation.  It should remind everyone to consider not only who your beneficiaries are, but their decision-making ability and who might negatively influence their decisions.  These choices should be a carefully considered part of any estate plan and estate plan review. 

- Michael N. Clark

Oklahoma Estate Planning Attorney

www.newsok.com/article/3497667?searched=money%20from%20inheritance&custom_click=search

What will happen to the Estate Tax?

The Wall Street Journal recently dedicated their 'Wealth Advisor' section to the issue of the estate tax.  Here is the link to the article: http://online.wsj.com/article/SB10001424052748704358904575477592541210592.html.

As many of you know, the 'Bush Tax Cuts' included changes to the federal estate tax.  As of January 1, 2010, the federal estate tax was repealed.  If Congress takes no action before December 31, 2010, the estate tax will be resurrected with an exemption of maximum rate of 55%.  The estate tax exemption will be set at $1,000,000 per individual.  Remember, if your estate plan is not set up to utilize the exemption of both a husband and a wife, a married couple will only use the surviving spouse's exemption, as opposed to both individuals.  If you do not have a will and/or trust, this is a great time to put one in place.  If you already have a will and/or trust, it is vital that you have your estate plan reviewed as soon as possible.  If you are in need of an Oklahoma Estate Planning Attorney, please contact this office. 

- Michael N. Clark, Oklahoma Wills and Trusts Attorney

Adding your kids to your bank account equals risky business

Many times, especially late in life, people will choose to add a family member to their bank account.  The main benefit of this addition is to allow the family member to pay your bills using your account.  The purpose of this post is to alert you to two major risks flowing from that decision.  Risk #1: Putting someone on your account makes your money their money.  If the individual on your account has creditors, your money is an easily accessed resource the creditor can garnish or levy against.  The individual may not have creditors now, but they are only one accident or lawsuit away.  Risk #2: In the event of your untimely death, all funds remaining in your account are the legal property of the other individual added on the account.  Those funds do not pass into your estate, via your will or trust.  That individual has no legal duty or obligation to distribute those funds to anyone else.  Plus, if that individual dies prior to making the distribution you are confident they would have made (to your children, grandchildren...), those funds pass via that individual's will or trust.  This means you have no control over where your assets go. 

There is an alternative: Complete a power of attorney and appoint the individual your attorney in fact.  The document will allow the individual to access your accounts, including actions like writing checks or making deposits.  The power of attorney also prevents the assets from being considered the individual's assets, meaning they won't be attachable by lawsuits or pass to that person upon your death.  This allows you to retain control of those assets throughout your life and how they are distributed upon your death.  If you are interested in learning more about a power of attorney or other estate planning documents, please contact my office.

--Michael N. Clark

----Oklahoma Estate Planning Attorney

Ray of Hope

Organ donation is a difficult subject for a lot of people, which is very understandable.  Nobody likes to think about dying or what happens after death.  But, if you are unsure as to how you feel about organ donation, you need to hear the story of Jason Kendall Ray.  Here is a link to a recent ESPN.com story that will give all of the details: http://sports.espn.go.com/espn/eticket/story?page=rayofhope.  In summary, Jason Ray was a college student, who happened to be the mascot (Rameses) for the North Carolina Tar Heel basketball team.  The Tar Heels were getting ready to play USC in the Sweet 16 and Jason was walking to a gas station for a burrito and soda before the game.  On his way back to the arena, he was hit by a passing vehicle.  He was severely injured, and after running some tests, the doctors concluded he had no brain activity.  He was pronounced dead on March 26, 2007.  Prior to the accident, Jason had chosen to be an organ donor, as indicated by a red heart on his driver's license.  His heart, liver, both kidneys and pancreas were transplanted into four other individuals.  Each of those people would not have lived much longer without Jason's organs.  He saved their life.  Although I recognize organ donation is not for everybody, if you are a willing donor, I encourage you to complete an Advance Directive.  This document allows you to state your willingness to be an organ donor and to appoint an individual to help carry out that decision after you are gone.  According to statistics quoted in the ESPN article, 18 people die every day waiting on organ transplantation.  So, if you are a willing donor, there is a definite need.  If you are interested in completing an Advance Directive (or a will, trust, probate or other estate planning documents), please contact my office and we can begin the process today. 

Michael N. Clark

---Oklahoma Estate Planning Attorney

What's better, a will or a trust?

As estate planning attorneys, one of the most common questions we hear is "should I get a will or a trust?" The tough part is that there is not a right answer, it all depends on what fits your personal situation. The following illustrates the basic characteristics of each document and gives a practical example. After that, it is up to you, after all, we work for you!

A will directs the distribution of your assets and appoints your personal representative to oversee the distribution process. Upon one's death, the will must be probated, which includes notifying heirs and creditors, publishing notice in a local newspaper and having a judge supervise the entire process. Your will also becomes public record, so anyone can read it. The entire probate process typically takes six (6) months and, as shown below, probate is also an expensive process.

A trust is a document that directs the distribution of all assets held in the trust. A trustee, who is the person in charge of the carrying out the terms of the trust, is appointed in the document and takes control of the assets upon your death or incapacity, whichever comes first. If all of your assets are titled in the name of a trust, then probate is avoided. This means the time for distribution should be shorter, less expensive and your trust will not be public record. A trust is more expensive than a will to begin with, but the savings at death far outweigh the initial costs.

EXAMPLE:

Adam dies with a $250,000 estate. Prior to his death, Adam had VW prepare his revocable trust. His Trustee (the person in charge of his Trust after he dies), with help from VW, spends approximately $2,500 on expenses incurred while administering his Trust. The process of administering Adam's Trust did not involve a trip to court and took approximately 3 months. Adam's two children received approximately $122,500 each.

Eve dies with a $250,000 estate. Prior to her death, Eve had VW prepare her will. Her executor, with help from VW, probates Eve's Will and spends approximately $12,500. The executor, after getting permission from the Judge and making all of Eve's estate public record, sends a check for approximately $118,750 to each of Eve's children. The checks to Eve's children arrive in their mail approximately 9 months after her death.

---Michael N. Clark

Oklahoma Estate Planning Attorney

Chris Benoit's Estate: Fight Beyond Death

The late Chris Benoit was a professional wrestler, he fought for a living.  Taking a page out of his book, his family is now fighting over his estate.  Chris's mother-in-law recently petitioned a Georgia Court to determine who died first, her daughter or grandchild.  During the weekend of June 22, 2007, Chris Benoit took the life of both his wife and son, before committing suicide.  Neither Chris or his wife died with a will, trust or any other type of estate planning, which opened the door for this fight. 

When a person dies without a will (or intestate), the laws of their home state decide who inherits the estate.  Unfortunately, the crucial issue in determining who inherits the estate depends on the timing of the death of Benoit's wife and child. If the child died first, then Chris's mother-in-law would inherit the estate.  If his wife died first, then Chris's children from a previous marriage would inherit the estate.  Per 84 O.S. 213, the result, had Chris Benoit died in Oklahoma, would have been the same.  The Benoit estate is, based on the two known pieces of property owned at his death, to be worth at least 3 million dollars.  Based upon that number, I would say this fight is just getting started. 

This story is just one more recent example of how important it is to have an estate plan.  When money is involved, whether the amount is large or small, the fight can get out of hand quickly.  If you plan properly, you can leave little, if any, issues to be resolved after your death. If you need help setting up your will, trust or estate plan in Oklahoma, please contact my office, I will be happy to help you. 

---Michael N. Clark

Oklahoma Estate Planning Attorney

Avoiding Probate with a POD: It is more than just a band.

If you are a member of generation X, the acronym 'POD' probably brings a reference to a popular Christian rock band of the same name to mind.  If you are thinking in terms of probate avoidance or trust funding in Oklahoma, you need to realize a POD can be a very good estate planning tool.  A bank account that has a living POD beneficiary after the account owner's death will pass to the POD beneficiary without going through probate in Oklahoma. 

POD is a common acronym for 'payable on death.'  Generally, you can designate a POD beneficiary on your bank account.  A POD beneficiary can be a individual, trust or a nonprofit organization.  This means that upon the death of the account owner, the bank is contractually bound to pay the account proceeds to the POD beneficiary.  Prior to making this payment, the bank would be required to pay any party holding a security interest and must generally receive approval from the Oklahoma Tax Commission.  If the POD beneficiary is living, the bank will pay the proceeds directly that said beneficiary.  If the POD beneficiary is not living (and a second primary beneficiary or contingent beneficiary has not been named) the bank will pay the proceeds of the account to the estate of the deceased beneficiary, as opposed to the estate of the account owner.  If one individual is named the primary POD beneficiary, then contingent beneficiaries may be named.  But, if more than one individual is named as primary POD beneficiaries, then contingent beneficiaries may not be named.  It is also important to note that all designated primary POD beneficiaries will have an equal share of the account proceeds. 

There are slightly different rules for savings and loan accounts and credit union accounts, so be sure of what type of institution and/or account you own before utilizing a POD.  If you are interested in learning more about a POD, probate avoidance or properly funding your trust, please set up an appointment.

---Michael N. Clark

Oklahoma Estate Planning Attorney