Archives For Oklahoma Estate Planning

This category contains posts on trusts, wills, durable powers of attorney, living wills and other issues related to estate planning.

Tax and money picture

Do you know who pays the tax on gift that is subject to federal estate tax?

In a previous post, I described what the IRS considers to be a gift.
If a gift has been made and there is no exclusion connected to it, gift tax may be due.  However, while a federal gift tax return may be required based on only one gift of $15,000.00, the chances of owing tax on a gift are much more remote.  The gift or gifts would have to exceed the unified credit amount, which currently stands at approximately 5.4 Million Dollars.

Nonetheless, if tax is due to the IRS on a gift, usually the person making the gift pays the tax.

It is important to know when gifts you make trigger your obligation to file a federal gift tax return (IRS Form 709, United States Gift [and Generation-Skipping Transfer] Tax Return).  I have heard the IRS doesn’t take kindly to individual who fail to file required tax returns 🙂
If a person makes an annual gift or a total annual gifts to one person over the annual exclusion, a gift tax return must be filed with the IRS. However, unless the total of the gifts go beyond the unified credit, 5.4 million, the person will not owe any gift tax.
Every US citizen has what is known as the annual exclusion which allows the person to gift away up to whatever the current year amount is without either having to file an IRS Gift Tax Return or being subject to any tax.
The annual exclusion amount for 2015 is $14,000.00. That means an individual could make as many $14,000 gifts as he desires to different people and not be subject to any tax or have to file a gift tax return.
One of the key points with the annual exclusion is any property gifted under the exclusion does not count against the unified credit. Let me provide an example that may be helpful:
  • A parent gifts the full annual exclusion amount in 2015 to each of their five children. That means the parent gifted $70,000 when all five gifts are added together. Since all of the gifts were within the annual exclusion amount the parent is not required to file a gift tax return.
  • Additionally, the $70,000 does not count against the unified credit, which in 2015 is approximately $5.4 million.

Connected Hands

Do you know why the federal estate tax and the federal gift tax are often addressed in the same discussion?

Although the federal estate tax and federal gift tax are separate statutes, they are connected by what is known as the unified credit.
The unified credit is automatically provided by the IRS Code to every US citizen at their birth. This credit is the amount of property that a person can gift away before they owe any tax to the IRS.
That means that all the gifts you make during your life are added to all the gifts you make at your death (through an Oklahoma Trust, Oklahoma Will or otherwise) and that is the basic amount that the IRS considers for taxation.
However, before any tax is assessed, you get to subtract (use your “coupon” so to speak) to reduce the amount.  The coupon can be applied to all gifts during life and at death.
So, while a person could use their whole coupon during their life, there is no requirement that they do so.  If there is an amount left on the coupon at death, the amount can be applied.
According to the IRS, the estate tax is a “tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death.”  The top federal estate tax rate for property transfers that are not otherwise credited or excluded is 40% for 2015.
Tender Leaf Tea Coupon from Flickr User AVI

Tender Leaf Tea Coupon from Flickr User AVI

Do you know what the Internal Revenue Service and your local grocery store have in common?

They both provide you with coupons you can apply to reduce the amount you required to pay!

Well, the IRS’s “coupon” is not exactly like scoring big with a $2.00 off coupon for Tide Detergent.  The IRS administers the unified credit.

The unified credit is automatically provided by the IRS Code to every US citizen at their birth. This credit is the amount of property that a person can gift away, either during life or at death, before they owe any tax to the IRS.

The coupon analogy is helpful because when a person passes, the person’s heirs can apply the IRS Unified Credit against against tax that might be owed by the deceased person.

For more specifics about the IRS unified credit, check this post, How does the IRS Unified Credit work?

In a previous post, I talked about the IRS unified credit, the IRS version of a coupon.  Here are some of the specifics on the unified credit.

  • The unified credit for people passing away in 2015 is approximately $5.4 million. That number is indexed to inflation and will rise a small amount each year and less changed by Congress.
  • This means that a person can give away up to the unified credit amount either during their life or at the time of their death without knowing any tax to the IRS.
  • For example, a person could gift $1 million to one of their children at age 25 and not owe any tax to the IRS.  
    Nonetheless, a gift tax return would have to be filed with the IRS year the gift was made. That is because of another tax exclusion vehicle.

One more point to remember is that federal tax law allows you give an unlimited amount of property to your spouse (assuming the spouse is a US Citizen) without incurring any tax.  If you die with a 20 million dollar estate, you can pass all of it to your pass without any tax being due.

  • This sounds really good, right?  Leave everything to your spouse and have no tax issues, right?  Not so fast my friend, as Lee Corso from ESPN’s College GameDay would say.

It is true that there would no tax assessed on the transfer to your spouse.  Presumably, however, at some point that same spouse is going to transfer the spouse’s estate to people other than a spouse.  If that transfer happens and the estate is valued over the unified credit amount, taxes will be an issues.

Since the word “gift” is at the heart of federal estate taxation, it makes sense to understand how the IRS views the term IRS Gift.  The IRS states that a gift is:

The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.
The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

You need to know when you have made a gift because that act could trigger obligations.
Image provided by Flickr user Keith Ellwood

Image provided by Flickr user Keith Ellwood

Would you like to know two ways you can change title to a car owned by a person who died, without going through an Oklahoma probate?

If your answer is “yes”, you have found the right post. 🙂

I have written volumes on this blog about Oklahoma estate planning and a lesser amount about addressing the situation where someone died without doing estate planning.  I would like to provide a few cleanup tools that can used to avoid probate even after someone didn’t do Oklahoma estate planning.

There are two options that may apply for changing title to a car owned by someone who died with going through Oklahoma probate.

  1. Oklahoma No Administrator Affidavit.

My experience has been that most tag agents will transfer title to vehicle following a person’s death when the No Administrator Affidavit is provided.  I wrote about this Affidavit on this blog post.  This document will generally allow title to a car to be transferred if:

  • A properly completed No Administrator Affidavit is provided;
  • A certified copy of the death certificate is provided; and
  • The facts are such where the person asking for the change in title (ostensibly to themselves) has a clear right to receive the vehicle.
  1. Oklahoma Small Estate Affidavit.

The other option is the Oklahoma Tax Commission’s Small Estate Affidavit.  This document is used to transfer the ownership of a vehicle when:

  • The car is given to someone in a last will and testament,
  • The total value of the estate is not greater than $20,000.00, and
  • The person who is given the car in the last will and testament must sign the Oklahoma Small Estate Affidavit.

 

There are no guaranties of course; even when you think you have done everything correctly, the transfer of title still doesn’t happen.  If you run into this type of issue, give me a call or an email.

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A dicey situation by Wonderlane from Flickr.

Everyone knows that for a well-balanced and fruitful life, one needs to maintain proper boundaries in relationships, work, play, etc. . .
The other major boundary you may need to consider is between and your neighbor; that is the line that divides your property from your neighbors.  That line is often marked by a fence.  Sounds fairly simple, right?  
Sound is deceptive here because Oklahoma land boundary issues are often complex and vexing.  Imagine being in a boundary dispute or a battle over who will maintain the shared fence that separates the two properties.
 
Consider some of the questions I answer below about Oklahoma land boundaries and fences.
 
 
What is a boundary fence?
A boundary fence is one that sets out the legally-described line, set out either in a deed or survey, separating to two tracts of land.  Normally, a boundary fence runs on the true boundary line between property owners where the boundary line is known and not disputed.  Obviously, it important when considering any fence on a shared boundary to know what the actual boundary is.  If it isn’t clear, then it makes sense to have a survey done.
 
What is a partition fence?
A partition fence is generally one that memorializes the division of a parcel of real property into small parts.
 
What is the difference between a boundary fence and a partition fence?
The Oklahoma Supreme Court considers the “term ‘boundary’ to mean the legally-described line, set out either in a deed or by survey, separating two parcels of real property. While the term “partition” describes the subdivision of a parcel o3896922807_36aa591b91_qf real property into smaller parts. Fences are often erected to memorialize a boundary line or partition line. In some instances, but not all, the fence may serve a dual role. It may mark both a partition and a boundary. In short, every boundary fence is also a partition fence, but not every partition fence is a boundary fence.”  
 
What does Oklahoma statutory law say about the obligation to maintain a boundary fence?  
Adjoining landowners are mutually bound equally to maintain [t]he fences between them unless one of the landowners chooses to let his land lie open as a public common. 
 
What does Oklahoma statutory law say about the obligation to maintain a partition fence?
Adjoining landowners are required to keep partition fences in good repair throughout the year, unless the owners agree otherwise in writing.  However, the caveat here is when one landowner is only using his land as commons.  In this case, the landowner cannot be compelled to pay for the erection or maintenance of the fence.
 
What are circumstances in which owners are mutually bound to maintain a boundary fence?
Generally, a property owner cannot be forced to erect or maintain a fence on a shared boundary.  When one owner chooses to let his land lie open as a public common, in which case, if he afterwards encloses it, he must refund to the other a just proportion of the value, at that time, of any division fence made by the latter.
 
When can a real property owner not be forced to maintain a boundary fence?
A landowner generally cannot be forced to pay to maintain a boundary fence unless the fence is necessary to keep his livestock from leaving his property. One Oklahoma statute that addresses fencing where animals are involved provides:
 
Any person not wishing his land enclosed, and not occupying or using it otherwise than as commons shall not be compelled to contribute to erect or maintain any fence between him and an adjacent owner; but when he encloses or uses his land otherwise than as a commons, he shall contribute to the partition fences as in this article provided.
Okla. Stat. Ann. tit. 4, § 143.
 
All partition fences shall be kept in good repair throughout the year, unless the owners on both sides otherwise agree in writing.
Okla. Stat. Ann. tit. 4, § 142.
 
What are the limitations on the removal or replacement of boundary fence when owner will not agree?
It appears that Oklahoma law allows one owner of a boundary fence to erect a fence without the permission of the other owner and with fence on both properties:
 
A person building a fence may erect the same upon the line between him and the adjacent owners, so that the fence may be partly on one side and partly on the other, and the owner of such fence shall have the same right to remove it as if it were wholly on his land: Provided, that such fence is not more than five (5) feet from such line.
 
Okla. Stat. Ann. tit. 4, § 152.
 
However, if removal of a boundary fence is done for malicious reasons or in a way that causes unnecessary harm to the other owner, the owner removing the fence run into legal issues.
 
What is the process for resolving disputes between owners over whether a boundary fence needs to be put or maintained?
In Oklahoma, when a controversy arises between boundary owners,  either party may apply to the fence viewers, who, after due notice to each party, may inquire into the matter and assign to each his share thereof, and direct the time in which each shall erect or repair his share in the manner provided above.  The purpose of this process is the recognition by the Oklahoma Legislature that many boundary fence disputes might resolved while young through full disclosure and open communication between the adjoining landowners.
 
whitewashing fences, and building communities online from Flickr

whitewashing fences, and building communities online from Flickr