Do you know what the difference is between a Revocable Trust and a Last Will and Testament?

Could you explain the differences to someone else who knew nothing about it?

This is one of the most basic of questions in Oklahoma estate planning and also one of the toughest to explain.

Lets start with the definitions:

A Last Will and Testament is a “legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his property at death.”

A Trust is a “relationship whereby property (real or personal, tangible or intangible) is held by one party for the benefit of another.”

To be a bit more practical, lets look at what each document does:

A Will comes into effect when a person dies. A Trust is in effect from the moment it is signed.

A Will passes property to heirs upon a person’s death. A Trust owns property from the time it is transferred to the trust and may pass that property on at anytime in the future, before or after death.

A Will covers all property that is only in your name when you die but not property held in joint tenancy or in a trust. In contrast, a Trust, covers only property that has been transferred to the trust.

A Will usually goes through probate court. A Trust usually avoids the need to go through probate court.

A Will becomes a public document in probate court. A Trust is usually private never being exposed to public view or court.

A Will generally allows you to name a guardian for your minor children and specify funeral arrangements while a Trust does not allow these activities.

To find a bit more about the differences between the Revocable Trust and Will, check my post on when a Trust is better than a Will.

Note: Even if you choose a revocable trust for your estate planning, you are going to end up with a Will, sort of. In most instances a “pour-over” Will accompanies a Trust to send any property to the Trust which did not make it into the Trust during life.

Most people I come in contact with expect that in Oklahoma estate planning having an Oklahoma living trust will help their heirs avoid probate.  

What most people don’t know is how the living trust accomplishes the avoidance of probate.  The answer is below. Continue Reading…

There are so many ways people get into our business.  One of the areas where people least want other people to invade their privacy is in their estate planning.  This post discusses how the living trust offers a high level of privacy over ways to plan your estate.
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Have you ever tried to figure out: Do I need a Last Will and Testament?

If you have asked yourself that question or are wondering right now . . . read on. ➞
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In Part I of this series, I started by talking about the basics of Federal Estate taxation, including the estate, market value of property and moving target that is the exemption amount. Today, we are going to answer more specific questions about how much you could owe and how you might be able to minimize what you owe.
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The goal of this series is to help you understand when you might want to plan to minimize Federal estate taxes. You need to understand what the IRS considers your “gross estate”, “fair market value”, when you could owe federal estate taxes and what you can do to minimize the amount of taxes you would pay if any are owed.

What is your “Estate”?
The “Estate” consists of everything you own or have an interest in at the time you die. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your “Gross Estate.” It is the value of your “gross estate” on which you will be taxed.

The property may include a lot of different things like cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. You may have heard about the distinction between “probate” (property that the Court has control over) and “non-probate” property (property that passes outside of the court process). Forget that distinction for federal estate tax purposes, the IRS looks at everything and this usually means non-probate as well as probate property.

What is “Fair Market Value?”
Fair Market Value is generally the price at which the property would sell if two normal people were doing a transaction that didn’t involve any really unusual circumstances. For example, the IRS says that fair market value can’t be a “forced sale price”, something like the price for property at a foreclosure sale. Essentially, fair market value comes down to what someone would sell an item for on Craigslist to a buyer that understood what he was buying and was willing to pay for it.

Who is going to owe Federal Estate Taxes?
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From time to time on here, I talk about the basics of Oklahoma estate planning, such as in this podcast or this series on Oklahoma Estate Planning Myths as well as a few others. Today, my idea is to provide a visual representation of many of the documents you can expect to see when you working with a living trust. To do this, I created a diagram (it also functions as a checklist and guide in my office) of the key documents, with a brief description of each document. If you would like a larger and potentially higher quality image, you can click on the image and go to Flickr where it is hosted.