Source: https://www.mcalisterlaw.com/articles-all
Timestamp: 2019-04-19 15:11:14+00:00

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The term “estate planning” implies that a plan for the administration of an estate exists, which, of course, most estate planning attorneys would prefer. However, those same estate planning attorneys likely spend much of their time administering estates of decedents who did not have a plan in place at their death or who had a plan in place that was poorly prepared or never updated. This article addresses some common issues attorneys might encounter in unplanned or poorly planned estates.
When a loved one dies, addressing the immediate needs of the individual’s estate can be chaotic for the family. One of the first decisions the family must make is determining the manner of the disposition of the decedent’s remains. If family members all get along, this may not be a contentious decision. When emotions run high and family members do not see Eye to Eye, this decision may become volatile. If the decedent had exercised thoughtful foresight while alive, he or she could have executed an assignment of right regarding disposition of remains pursuant to 21 Okla. Stat. §1151 (2011), which would have delegated to someone the right to control the decisions regarding the decedent’s remains. If no such assignment exists, the individual with priority to control the decisions is determined pursuant to 21 Okla. Stat. §1158 (2011), which is similar to the statute determining those individuals who will have priority to serve as administrator of an intestate estate. The Oklahoma Court of Civil Appeals has previously found it is “highly impractical” to obligate a funeral home to determine all persons who are in the same degree of kinship to the decedent and obtain consent from all of them. Thus, in poorly planned estates, the decisions regarding disposition may be decided on a first-come-first serve basis. In order to avoid such disputes among children, for instance, an assignment of right regarding disposition of remains is advisable.
The welfare of pets is also an immediate concern upon someone’s death. If it is not desired for pets to be surrendered to the local shelter, an individual should have a discussion with friends and family to identify who would be willing to care for the pets – perhaps even including provisions within the individual’s estate planning documents to provide accordingly. A pet owner might consider creating a “pet trust” for the benefit of his or her domestic animals. Without such planning in place, what happens when the care for pets has not been considered in advance? By statute, dogs are considered the personal property of the owner, and by analogy other domesticated pets may also be considered personal property. Thus, the provisions for personal property under a will and the provisions for exempt property allowed the family likely control pursuant to 58 Okla. Stat. §12 (2011). The greater concern, however, is the immediate welfare of the animals. If law enforcement has reason to believe an animal has been abandoned or neglected by the owner and no one is coming forward to care for the animal, the officer may obtain a warrant and the animal will be impounded. The owner (or the deceased owner’s representative) will receive notice of a hearing to determine if the animal was in fact abandoned, and if the court determines a violation has occurred, the animal will be surrendered to a shelter or euthanized, depending on the circumstances, and costs will be allocated to the owner or the owner’s estate. Thus, it is in the best interests of the estate for the personal representative or immediate family members to care for the pets of the decedent or locate someone who can until further disposition can be made.
Another issue that may be an immediate concern after death is an issue that has arisen with the growth of social media. What should the family do with the decedent’s social media accounts, especially when the unfortunate news about the decedent’s death is spreading? Being aware of the options for management of a deceased person’s account for each networking website can prevent additional, unnecessary anxiety for the family. Although thoughts, prayers and fond memories may be publicly expressed and appreciated on social media sites, awkward or inappropriate messages may also be posted to the decedent’s page, in which case they may linger indefinitely if no one is appointed personal representative. Upon appointment as executor or administrator of the estate, the personal representative is given the power by statute to control the decedent’s social networking, blogging and emailing service websites. However, each website has its own policy and procedures. For example, Facebook allows users to appoint a “legacy contact” to manage the decedent’s page, which can be memorialized or deleted following the decedent’s death. Most other social networking websites require an immediate family member or personal representative to contact the company to either memorialize, deactivate or delete the user’s account. Memorializing an account, which prevents others from making changes to the account, is an Immediate Action on most networking websites. Deleting the account, however, may take several months. Thus, it is in an individual’s best interests to explore relevant social media website policies in advance in order to control the account management soon after death.
Lastly, another immediate concern upon death is locating the decedent’s original estate planning documents, if any, and safely securing them for as long as necessary because documents can and do go missing if not properly secured. If an individual has a planned estate, yet the plan cannot easily be located, then even the best laid plan can go awry quickly. The original documents may identify the nominated personal representative, which will give the personal representative assumed authority to make decisions regarding the safety of the decedent’s pets, the security of the decedent’s home and the security of the decedent’s accounts. The original will should be delivered to the named executor in the will or otherwise filed with the district court, if possible, pursuant to 58 Okla. Stat. §21 (2011). While determining if a probate of the will is necessary, the named executor should secure the document in order to avoid proceedings to prove a lost will under 58 Okla. Stat. §81 (2011), if a probate is ultimately deemed warranted. Practitioners should make a habit of noting in their clients’ files where their client intends to store their original documents, hopefully ensuring someone other than the client will have access to them when needed. Although the practice cannot prevent the loss of all documents, this file note may be invaluable when the family contacts the decedent’s attorney upon the decedent’s death.
After the obvious concerns are addressed in the first few days after a death, issues in the decedent’s estate tend to surface. Discovering the decedent failed to update beneficiary designations before death is one of the most common issues estate attorneys must face. Although property division is a significant issue dealt with during a divorce, updating the beneficiary designations on such property postdivorce can often be overlooked. By statute, all provisions in a will in favor of a decedent’s ex-spouse are revoked. Likewise, all provisions in a trust created by a decedent in favor of the decedent’s ex-spouse, which are to take effect upon the death of the decedent, are also revoked. What happens to assets naming the ex-spouse as primary beneficiary if a property owner fails to update the beneficiary designations on assets passing by contract outside of the decedent’s probate or trust estate? For instance, are the provisions of a payable-on-death designation on a financial account enforceable upon the decedent’s death? Under 15 Okla. Stat. §178 (2011), “all provisions in the contract in favor of the decedent’s former spouse are thereby revoked” upon divorce, subject to a few exceptions. This statute applies to life insurance, annuities, compensation agreements, retirement arrangements and other contracts executed on or after Nov. 1, 1987, and to depository agreements and security registrations executed on or after Sept. 1, 1994. This begs the question, is a transfer-on-death deed naming an ex-spouse still enforceable at death if it was never revoked by the grantor-owner? Although similar to a will, a transfer-on-death deed is expressly not a testamentary disposition, so 84 Okla. Stat. §114 (2011) is seemingly inapplicable to a transfer-on-death deed. The transfer-on-death deed is also not a bargained for contract in which consideration is exchanged, so 15 Okla. Stat. §178 (2011) is also seemingly inapplicable. Thus, arguably, a transfer-on-death deed designation may survive a divorce, which is something family law practitioners should be mindful of in addressing a property division.
One other exception to the revocation of a beneficiary designation upon divorce involves the ex-spouse’s interest in ERISA benefit plans. In Egelhoff v. Egelhoff ex rel. Breiner, the United States Supreme Court held that a Washington statute revoking the beneficiary designation of an ex-spouse was pre-empted as it applied to ERISA benefit plans. Given this decision, Oklahoma’s version of the Washington statute, 15 Okla. Stat. §178 (2011), would be ineffective in terminating an ex-spouse’s interest in a decedent’s ERISA plan. Therefore, a divorced decedent must have updated the ERISA plan’s beneficiary designation to someone other than the ex-spouse, or the ex-spouse must subsequently waive such interest, otherwise the plan will be administered with benefits being paid to the named ex-spouse, which may or may not be part of the divorce settlement.
Perhaps more commonly than after divorce, owners fail to update beneficiary designations after a named beneficiary dies. This may be due to the owner’s neglect or due to the owner’s incapacity and inability to change beneficiary designations. Upon the owner’s death in such situations, the language of the document will typically control if the asset passes 1) to the estate of the deceased beneficiary, 2) to a contingent beneficiary or 3) to the decedent’s estate. If a contingent beneficiary is not named, most assets will default to the estate of the decedent.
However, if a contingent beneficiary is not named on a bank account, the share of the deceased primary beneficiary shall be paid to the deceased beneficiary’s estate rather than the decedent’s estate. This runs contrary to most expectations that a gift to a deceased beneficiary will lapse. In the case of real property under the Nontestamentary Transfer of Property Act, a gift of real property pursuant to a transfer-on-death deed will lapse if the grantee beneficiary does not survive the owner. If no contingent beneficiary is named, the real property will be trapped in the name of the deceased owner and default to the deceased owner’s estate.
Failure to update beneficiary designations on individual retirement accounts can trigger unwanted estate administration as well as unwanted tax consequences. When there is no living beneficiary designated for an IRA, upon the accountholder’s death, the IRA passes according to the terms of the associated financial institution’s plan. If an account holder fails to name a designated beneficiary, then oftentimes the IRA benefits are distributed based on who the financial institution states is the default beneficiary. The institution may have a few layers of default beneficiary designations for the account – such as passing to the decedent’s spouse, then children and then to the estate. These default designations may result in negative tax consequences that could have been avoided if the account holder had updated the beneficiary designations.
When an IRA is made payable to a decedent’s estate there is a unique scheme for distributions because the IRS does not consider an estate to be an individual. Logically, a nonindividual, such as an estate, does not have a life expectancy over which to stretch out required minimum distributions. Whether there ends up being a More or Less favorable outcome for the eventual takers of the estate depends on if the original account holder survived to the age of taking mandatory distributions. If the account holder did not reach such age, then the eventual takers of the IRA must distribute the balance of the account by the end of five years. If the original account holder did survive past the age of taking mandatory distributions, then the eventual takers may stretch the IRA distributions over a period calculated by “[u]sing the life expectancy listed next to the owner’s age as of his or her birthday in the year of death” and “[r]educ[ing] the life expectancy by one for each year after the year of death.” While the second option does not allow the individuals to stretch the IRA over their own lifetimes, it will allow some benefit from delaying distribution, and the resulting tax, of the entire amount.
To qualify for inherited IRA treatment, 26 U.S.C. §408(3)(C)(ii) (2018) requires that the “individual for whose benefit the account or annuity is maintained acquired such account by reason of the death of another” and that they were not the “surviving spouse.” Although not binding authority, in a private letter ruling (PLR) the IRS discussed the issue of whether the ultimate beneficiaries of an estate can qualify for inherited IRA treatment. In that PLR, an estate was the designated IRA beneficiary, received the IRA and conveyed it to a trust. The trust was to terminate and distribute all assets to the deceased’s four children. The IRS allowed the four children to each establish an inherited IRA for each respective share. Thus, failed designations may not have negative tax consequences, but this is by no means guaranteed.
owner, typically the one who was trying to avoid probate, is the sole surviving owner, the owner may no longer be able to make alternative arrangements due to incapacity. Joint tenancy may also create confusion if utilized only for convenience prior to the decedent’s death, in which case the use of joint tenancy on a bank account may result in a constructive trust argument. Self-help through joint ownership might also create inequitable results. Many times, joint tenancy is utilized by the decedent subject to the mutual understanding between the owners that the survivor will manage and distribute the assets according to the decedent’s wishes. However, the surviving joint owner may decide not to fulfill the decedent’s wishes, in which case the surviving owner may reap a windfall. Additionally, the surviving joint owner may lack capacity or have new creditor issues, in which case even if the surviving joint owner was well-intentioned, the decedent’s wishes for the property will remain unfulfilled.
Tasking the surviving joint owner to fulfill the decedent’s wishes may also trigger gift tax consequences for the surviving owner’s estate. For a surviving owner to fulfill a decedent’s wishes for others to benefit from the asset now wholly owned by the survivor, the survivor must give the assets to other individuals. In doing this, the survivor must keep in mind that these transactions may have gift tax consequences. Each individual has a lifetime gift tax exclusion representing the total amount they can give away over their entire lifetime without gift tax consequences. With the passage of the Tax Cuts and Jobs Act (TCJA) in 2017, the basic exclusion amount increased significantly. After being indexed for inflation, the thresholds for 2019 are now $11,400,000 for an individual and $22,800,000 for a couple. Additionally, each year an individual may gift a certain amount without cutting into their lifetime basic exclusion amount. The individual may give up to $15,000 annually to any person as of 2019 without utilizing his or her lifetime exclusion amount. In order to avoid any gift tax consequences while honoring the decedent’s wishes, a surviving joint owner must avoid giving more than $15,000, or potentially $30,000 for a donor couple, in a taxable year. If the surviving owner decides to gift more than this in the taxable year, the sum over the annual gift tax exclusion will reduce the survivor’s lifetime gift tax exclusion amount, creating potential problems if the surviving owner already has a substantial estate.
As is evident, the road to avoid conflicts and cost after death is often paved with good intentions. Practitioners clearly cannot follow their clients throughout their lifetimes making sure fiduciary powers are adequately assigned, assets are appropriately titled and beneficiary designations are frequently reviewed. Perhaps it would be useful to give an estate information handbook to clients to review and complete independently on an annual basis, providing them a convenient resource for all their beneficiary designations, funeral wishes, fiduciary appointments, online information and any other relevant asset information. Such handbook would not prevent the consequences of an unplanned estate, but it might prevent what was once a well-planned estate from turning into a poorly planned estate due to circumstances beyond the estate attorney’s control.
1. See 58 O.S. §122 (2011).
2. Brady v. Criswell Funeral Home, Inc., 1996 OK CIV APP 1, ¶9, 916 P.2d 269, 271.
3. 60 O.S. §199 (2011) (stating trusts for the “care of domestic or pet animals is valid” and such instrument shall be liberally construed).
4. See 21 O.S. §1717 (2011).
5. 4 O.S. §512(A) (2011).
7. 58 O.S. §269 (2011) (stating the personal representative has power “to take control of, conduct, continue, or terminate any accounts of a deceased person”).
8. See “Managing a Deceased Person’s Account,” Facebook www.facebook.com/help/275013292838654 (last visited Oct. 3, 2018) (select “Facebook Help Center”; then follow “Polices and Reporting”; then follow “Managing a Deceased Person’s Account”).
9. Practitioners and clients should explore policies for addressing decedent’s accounts on Twitter, Instagram, LinkedIn, Facebook and Pinterest and discuss such matters with their clients.
10. 84 O.S. §114 (2011).
11. 60 O.S. §175 (2011). Note §175(B)(6) permits the trustor to name the ex-spouse as a beneficiary in an amendment executed after the divorce or annulment.
13. See Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001).
14. Id. at 147-51 (“The [state] statute binds ERISA plan administrators to a particular choice of rules for determining beneficiary status . . . [I]t runs counter to ERISA’s commands that a plan shall ‘specify the basis on which payments are made to and from the plan,’ §1102(b)(4), and that the fiduciary shall administer the plan ‘in accordance with the documents and instruments governing the plan,’ §1104(a)(1)(D), making payments to a ‘beneficiary’ who is ‘designated by a participants, or by the terms of [the] plan.’ §1002(8).”).
15. 6 O.S. §2025(A)(2) (2011).
16. 84 O.S. §142 (2011).
17. 58 O.S. §1255(B) (2011).
18. See, e.g., Morgan Stanley Funds Designation of Beneficiary Form, Morgan Stanley Investment Group (March 2017)www.morganstanley.com/im/publication/forms/msf/designationofbeneficiaryform_msf.pdf.
19. I.R.S., Dep’t of the Treasury, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) 9, 10 (Feb. 6, 2018).
20. See I.R.S., Dep’t of the Treasury, Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) 10 (Feb. 6, 2018).
23. See I.R.S. Priv. Ltr. Rul. 2012-08-039 (Nov. 17, 2011).
24. See Isenhower v. Duncan, 1981 OK CIV APP 31, 635 P.2d 33 (“The proper basis for impressing a constructive trust is to prevent unjust enrichment.”). See also 60 O.S. §74 (2011) (discussing joint tenancy); 60 O.S. §137 (2011) (explaining when a trust is presumed).
25. See Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, §11061, 131 Stat. 2054, 2091 (2017).
26. See 26 U.S.C. §2503 (2017).
27. See 26 U.S.C. §2513 (2017).
Oklahoma voters recently passed a state question that legalizes medical marijuana. Oklahoma’s medical marijuana laws are codified in Title 63, Chapter 15, § 420A through § 426A, of the Oklahoma statutes. So, what is the impact of the medical marijuana law on the workplace? The short, precise and lawyerly answer is . . . it depends. It depends on many factors, known and unknown. Without settled case law in Oklahoma on many of the issues related to medical marijuana use by employees, employers are left to make judgment calls based on the particular facts in a given situation.
A reasonable interpretation of the Oklahoma statute suggests the impact on employers should be minimal. The law restricts an employer from discriminating based on an employee’s “status” as a medical marijuana license holder or solely on the “results” of a positive drug test by a medical marijuana license holder. The law does not restrict an employer from maintaining a safe and drug-free workplace just as employers have done since before the law passed. Employers may restrict any drug use, legal or illegal, during or before work hours, that would impair the employee’s ability to perform work or would cause a safety risk. A situation analogous to medical marijuana would be the use of pain medication. An employer may prohibit its employees from driving or operating dangerous equipment while under the influence of traditional prescription drugs or medical marijuana. An employer may also take action against a poorly performing employee who may be under the influence of legal or illegal drugs.
Oklahoma employers already realize how vulnerable they are to discrimination claims. The new medical marijuana law certainly does not minimize the risk of discrimination lawsuits. Nevertheless, the new law should not significantly increase that risk if employers continue to take action against employees that is focused on the employee’s work performance as opposed to the employee’s status.
Estate planning is not a single, one-size-fits-all document or decision made at the end of life; it is a long-term strategy shaped by an individual’s life. As lives change, plans adapt to fit new needs and desires. There are many influences that impact an individual’s life, but one critical factor is family. When guiding clients in planning the future of their assets, our estate planning lawyers consider the developments occurring inside the family unit. For instance, changes in generational characteristics, family demographics, and family structure have led to transformations in estate planning and trust management.
Each generation’s characteristics have been shaped by the unique circumstances and trends of the world they’ve grown up in. The Boomer Generation, individuals born from 1946 to 1964, have had different experiences than the Millennial Generation, individuals born from 1982-2002. For example, a defining question for a Boomer may be, “where were you when President Kennedy was shot?” but a defining question for a Millennial may be “where were you on 9/11?” Technology has also been an impactful force on generations. For instance, a Boomer could probably describe when their family got its first television, but a Millennial would be more apt to remember how old they were when they got their first iPhone. One influence that has influenced all generations is the increase in life expectancy. From 1970 to 2010, the US life expectancy increased gradually from age 68 to 75 for men and from age 75 to 80 for women. Between the years of 1990 and 2010, the percentage of the global population over 65 steadily increased, while the population under 5 steadily decreased. It is projected that from 2015 to 2050 the global population over 65 will increase from 8% to over 16%, while the population under five will remain fairly constant at 7%.
These and other trends have shaped how the individual generations make decisions, balance work and life, and raise their children. The Boomer generation’s parental model usually includes a breadwinner and a breadserver. Instead of children being taught to strictly obey adults, like the children of past generations, children accommodate adults. This generation is generally optimistic, competitive, and lives to work. Decision making shifted from being command and control to consensus based. For the Boomer generation, competence and expertise come before self-esteem. In contrast to the previous generations, Gen X, which includes individuals born between 1965 and 1981, has a parental model of two breadwinners. Additionally, children frequently teach adults. Gen X is skeptical, suspicious of authority, and focuses on achieving a work/life balance. Decision making is pragmatic, independent, and impatient. Self-reliance and validation lead to self-esteem. Like Gen X, the Millennial generation features two breadwinners. Adults generally accommodate and consult children. This generation is optimistic, has a delayed adulthood, and is collaborative. Decision making is net-educated and networked. This generation works to live. Self-esteem generally precedes competence. All of these generalized traits have developed from each generation’s unique circumstances.
Changes in generational characteristics have corresponded with changes in family demographics. According to data from the U.S. Census Bureau, over the last 75 years there has been a steady decrease in the percentage of married households and a steady increase in the percentage of non-family households. Notably, from 1995 to 2015, married households decreased from around 58% to 50%. Additionally, from 1996 to 2016, the number of unmarried couples without children increased from around 3 million to over 8 million. Couples are also waiting longer to get married. From 1985 to 2015, the median age for a first marriage increased from 26 to 29 for men and from 22 to 28 for women. Instead of marriage taking place right after courtship, the increasing social norm is for marriage to occur after cohabitation, attainment of financial security, and the birth of children.
Generational differences and shifting demographics have impacted the structure of the archetypal family unit. It has been said that “[t]he demographic changes of the past century make it difficult to speak of an average American family. The composition of families varies greatly from household to household.” Troxel v. Troxel, 530 U.S. 57, 63 (2000). Families come in all shapes, sizes, and configurations. For example, according to the Pew Research Center, one-out-of-six American children live in a blended family. Additionally, 40% of American adults have at least one step-relative in their family. The Census Bureau reported that in 2013 the composition of American families was: 35% traditional, 34% modern (blended, multigenerational, etc.), and 31% households without children.
The above developments of the family unit have led to a recasting of the traditional estate planning paradigm. Planning has evolved from being hierarchical and oriented towards the nuclear family to being more humanistic and sensitive to family structure. Additionally, instead of individuals being predominantly focused on financial wealth, a holistic understanding of family wealth has developed. A further change is that grantor intent is becoming more flexible, aspirational, and better conducive to beneficiary engagement. The transformations to the family have led to a reconsideration of how families do their planning. For prior generations, estate planning was a decision made before mortality, and the decision would be disclosed to family afterwards. However, contemporary families usually begin the planning process with family dialogue between the spouses and their children. The plan is then designed, implemented, and then concludes with family disclosure.
It has been estimated that, as of 2009, 68% of adults had no will, 11% had a self-drafted will, and 20% had a will drafted by an attorney. To ensure you have an effective plan tailored to your family’s unique needs, please contact our office. We will be happy to guide you through the dynamic world of estate planning with special attention to the people and purposes important to you.
Limited liability companies, or “LLCs,” have become very common in the business marketplace. One of the primary benefits of the LLC business entity, as opposed to the corporation or the limited partnership, is the LLC’s ease of operation. However, “low maintenance” does not equal “no maintenance.” Thus, Oklahoma LLC owners need to be attentive to certain annual maintenance requirements for their company.
Oklahoma LLCs, unlike corporations, are not required to pay annual franchise tax to the Oklahoma Tax Commission. Instead, LLCs must file an Annual Certificate with the Oklahoma Secretary of State each year and pay a $25 annual fee. The Annual Certificate is a simple form which recites the LLC’s name, states the street address of its principal place of business, and confirms that the LLC is an active business entity. The Annual Certificate is due each year on the anniversary of the LLC’s creation (the date the Articles of Organization were originally filed with the Secretary of State).
The process of filing the Annual Certificate is now conducted almost entirely through email and online filing. The Secretary of State sends an annual reminder to the LLC’s email address of record prior to the anniversary date (usually two months in advance). The annual reminder email contains a link, which the LLC’s owner or officer can use to file the Annual Certificate online.
However, a surprisingly high number of LLCs fail to file an Annual Certificate each year. If just one Annual Certificate is not filed in a timely manner, the LLC ceases to be in good standing under state law. The loss of good standing prevents the LLC from filing lawsuits, filing documents with the Secretary of State (other than an Annual Certificate), and may hinder contractual business dealings, though it does not totally prevent them. The good news is that the Secretary of State has streamlined the process for reinstating an inactive LLC. An LLC can simply file an application for reinstatement, along with all past-due Annual Certificates, and payment of accrued annual fees.
The Oklahoma LLC is an excellent choice for those looking to form a new business entity. Though they are extremely user-friendly, Oklahoma LLCs do involve some ongoing annual maintenance. Please feel free to contact our office if you have any questions or concerns about your current company, or if you are considering the formation of a new business entity.
Just as we often spend time at the end of the year contemplating both the year behind us and the one before us, setting goals, reviewing accomplishments and so forth, the end of the year is also a good time to review similar items for any business. With that in mind, we offer the following non-exhaustive list of some items you may want to consider in your end-of-the-year business review.
Limit Your Litigation Exposure. One of the effects of a bad economy is increased litigation. Studies have shown a majority of companies report being involved in ongoing litigation during the economic downturn, with contract obligations and employment issues topping the list. Although avoiding litigation may be impossible, you can control certain aspects.
Keep company assets separate. Business and personal assets and records should be kept separate and distinct. A company’s limited liability protection is easily lost by commingling personal and business assets.
Make sure contracts are in the company name. It is important that the proper person or entity (business vs. individual) be identified as the party to the contract. And, when you sign documents, be sure to identify your representative capacity when signing in behalf of a business (e.g., president, manager, etc.). Otherwise, others can seek to impose personal liability upon you for obligations of the business.
Implement and update a document retention policy. A policy governing the retention and destruction of old company documents is a good business practice. The policy needs to be prospective, objective, and rigorously followed to ensure documents are destroyed according to an established schedule and, otherwise, documents are retained according to the retention policy. If you become involved in litigation and your practice of destroying documents appears to be arbitrary and not according to a prescribed policy, courts will often presume the worst and may allow the other side to use it against you. Also remember, a company’s internal documents are not privileged – whatever you say, even in an e-mail or text message, could become public in a lawsuit.
Know Your Contracts. Do you know when your lease expires? Or when your biggest customer might start shopping for a lower price? Entering into a contract is only the first step to ensuring the intended benefits are realized. A good practice is to keep a summary of the significant obligations and liabilities in every major contract. It’s also good to keep a contract calendar with all key dates on one calendar to ensure you do not inadvertently breach a contract or lose a time-limited contractual right. The end of the year is a great time to review and update your contract calendar.
Keep Things Current. Current organizational records can mean the difference between business-level liability and personal liability. We recommend updating organizational records on an annual basis, so the end of the year is a perfect reminder to review the organization’s records for the year.
In Oklahoma, limited liabilities companies must file an annual report with the Secretary of State and pay a $25 annual fee. Corporations must file an annual franchise tax return with the Oklahoma Tax Commission.
Corporations, both for profit and non-profit, must also hold annual meetings in accordance with their bylaws, and minutes of the shareholder’s meeting and board of director’s meeting should be kept with the corporate record books. Although limited liability companies do not have the same requirement, we believe it is best practice for the owners to have similar documentation.
Non-profit corporations must generally follow the same requirements of any other corporation under Oklahoma law, including keeping board of director minutes with the corporate records. Most Oklahoma non-profits are also required to file and renew annually the Registration Statement of Charitable Organization with the Secretary of State.
Public charities must also file an annual information return (Form 990) with the IRS. The last several years have seen substantial changes to the Form 990, both in terms of which version is required (often depending on revenue and assets) and in terms of what information the organization must provide. The most significant change has been the transition of the Form 990 from a reporting form with mostly “fill in the box” type responses to an organizational governance form that relies on extensive narrative responses and seeks to move away from a one-size-fits-all approach. Certain governance practices and policies are now encouraged through their inclusion on the Form 990. Implementing new governance practices now should result in less scrutiny later by the IRS. Private foundations are still required to file Form 990-PF with the IRS, which is a modified version of Form 990 tailored for the distinctive characteristics associated with private foundations.
One best practice is for the organization to require officers and board members to annually review and agree to a conflict of interest policy. A good conflict of interest policy will consider, among other things, actual and perceived conflicts between the organization and its directors and employees, especially with respect to financial considerations such as salaries, contracts or purchases that benefit directors or employees, leases between the organization and a director or employee, and benefits provided to directors or employees who are related through family, marriage, or business interests.
We have had the privilege of helping establish and counsel many businesses and non-profit organizations. If you have questions about anything discussed here or if you would like our assistance with an annual review of your business practices, we would be pleased to help.
An Associated Press-LifeGoesStrong.com poll found that sixty –four percent of boomers - born between 1946 and 1964 – say they don’t have a health care proxy or living will. Many people stated they feel healthy and that death and dying is not on their minds. However, the reality of death is inevitable for all of us and none of us have a crystal ball to tell us when or how we will die. Thinking about aging and possible end of life situations allows you to decide what types of care should be provided to you or withheld if you are unable to make and communicate your own decisions at that future point in time. Documenting your wishes concerning end of life care is a comforting gift for your family as they may need to make those decisions in the future for you and, if so, they will be a able to do so with the assurance they are carrying out your wishes. It lessens the anxiety, possible guilt and potential conflict between family members if you have told your family your wishes and your decisions are stated clearly in an Advance Directive for Healthcare.
Oklahoma's Advance Directive for Healthcare allows you, if you are 18 years of age or older, to inform physicians and others of your wishes concerning life-sustaining treatment. This document evidences the patient’s exercise of their constitutional right of self-determination, allowing them to state when they believe enough medical intervention has occurred and they want to be allowed to die. If a patient authorizes or directs the withholding or withdrawal of life sustaining treatment such as resuscitation and use of respirators, it does not prevent healthcare professionals from providing the patient pain relief and other forms of comfort care (palliative care). And, if the patient is no longer taking nutrition and hydration (eating and drinking), the Oklahoma law requires separate, explicit decisions concerning withholding or withdrawing artificial administration of food and water (nutrition and/or hydration provided intravenously). Each person can decide if they would want those treatments provided or withdrawn. The Directive does not become operative unless you are diagnosed by two physicians to be in a terminal condition, a persistently unconscious condition, or an end-stage condition and, then, only if you are unable to make and communicate these decisions for yourself. The Advance Directive can also be used to donate one’s body or specified organs for transplantation, research or education.
The Advance Directive also allows you to appoint a Health Care Proxy to make decisions in your behalf. With the advances in healthcare it is possible to keep a dying person alive for days, weeks, months or even years with medical intervention. After you complete an Advance Directive, you may revoke it in whole or in part at any time and in any manner. A revocation is effective upon your communication to your attending physician or other care provider or a witness to the revocation. We advise clients to give copies of the Advance Directive to the persons they appoint as proxies and also to their doctors. The signed, original Advance Directive needs to be kept with your important documents but a copy should be handy to provide to a healthcare provider if you have a sudden health crisis. Your family should know where to quickly locate the document. In order to assist our clients and their families in times of health emergencies, we recommend our clients inform us of the location of all their important legal documents, including their Advance Directive, so that we are prepared to assist their family and surrogate decision makers at those times.
If you signed a Directive to Physicians or other Advance Directive for Healthcare under Oklahoma law prior to 2006, we recommend you consider executing the new Advance Directive because of additional options under the existing law. When we assist people with their estate planning we often prepare an Advance Directive for Healthcare and we also recommend a Healthcare Power of Attorney; the former deals with the end of life decisions as explained above and the latter is used to deal more generally with health and personal care decisions which might arise at any point in one’s life due to injury or illness and, in those situations, to delegate authority to an appointed agent to make those decisions for you if you do not have the capacity to do so for yourself.
What is the difference among a Personal Representative, Trustee, Agent, Guardian and Proxy?
The Personal Representative, also known as an Executor, settles your estate if a court-supervised probate is required. You can appoint your Personal Representative in your Will.
The Trustee is the person or entity who manages assets owned by your trust and distributes the trust fund to the named beneficiaries according to the dispositive provisions of the trust. A husband and wife who create a trust often appoint themselves as the initial trustees and their children as their successor trustees. Instead of appointing their children as successor trustees, some clients opt to appoint an entity as their successor trustee, such as a trust company.
An Agent is the person you appoint in your Power of Attorney document to make decisions on your behalf if you are incapacitated or otherwise cannot conduct your business. Through the Health Care Power of Attorney, our clients appoint an Agent to make decisions regarding medical and other personal care matters. Through the Durable Power of Attorney, our clients appoint an Agent to make decisions regarding legal, property, and financial matters. If a third party requires court authorization, the Guardian is the person you nominate, or suggest, the court to appoint. Most often, a client selects the same individual to be his or her Agent and Guardian.
A Proxy is the individual you nominate under your Advance Directive to ensure your end-of-life decisions are fulfilled.
What do I need to do if my spouse becomes incapacitated?
If your spouse’s mental or physical condition is rapidly declining such that he or she is unable to make financial and medical decisions for himself or herself, you need to take steps to protect your spouse. You may need to obtain letters from your spouse’s physicians to document the incapacity. These letters accompanied by an affidavit will allow you to notify third parties that your spouse is no longer able to serve in a fiduciary role as agent or trustee. Also, if your spouse has a power of attorney triggered upon his or her incapacity, you will need to present the physicians’ letters and the power of attorney to third parties in order to act as your spouse’s agent. If your spouse does not have a power of attorney document, it may be necessary for you to seek a court-appointed guardianship to care for your spouse.
Our married clients commonly have estate plans in which each spouse is authorized to act for the other (as agent, trustee, and health care proxy) without having to document their spouse's incapacity. Many single clients have similar delegations of fiduciary authority to other adults (children, parents, siblings, or trusted friends). Planning for your incapacity, or for your assistance to loved ones who become incapacitated, is important and can be done in many creative ways to ensure a person's needs are met in the best way possible.
What do I need to do when my spouse dies?
Every person's affairs are different as their life comes to an end. Although a long list of detailed tasks could be compiled in advance, much of it would be unnecessarily confusing or inapplicable when the time comes for its use. The best advice is two-fold. First, consult with your attorney, accountant, doctor, and financial advisor to have good estate planning in place and keep it up to date with annual plan reviews. Then, when a death occurs or seems imminent, convene a meeting of those advisors to confirm the planning in place and the appropriate actions to take after considering the circumstances at the time. Each person has their own unique circumstances with a need for a unique plan, unique in both implementation and in execution. Plan your work, then work your plan.
Can I transfer real property to my trust if it is subject to a mortgage? What if I need to refinance my home?
Federal law permits individuals to transfer their homestead property to a revocable trust for estate planning purposes without triggering the due-on-sale clause in a mortgage agreement. This law only applies to your homestead property – it does not apply to rental properties or vacation homes. If you need to refinance your home, most likely the mortgage company will require you transfer the home out of your trust to yourself individually. After you have refinanced, it is imperative for you to deed your home back into your trust to avoid probate and ensure your home passes according to the terms of your trust. You can transfer other real property subject to a mortgage to your revocable trust, but you will need to coordinate with the mortgage company to avoid triggering the due-on-sale clause.
What do I need to transfer to my trust?
In general, all assets requiring interaction with a third party in order to transfer the asset should be owned by your trust if you want the terms of the trust to govern the disposition of the asset upon your death or incapacity. You should consider transferring the following assets to your trust: real estate, automobiles, savings accounts, checking accounts, certificates of deposit, money market accounts, stocks, bonds, interests in general or limited partnerships, interests in limited liability companies, accounts receivable, notes receivable, mineral interests, royalty interests, boats, and other recreational vehicles. Some of these assets may pass by beneficiary designation or joint ownership if they are not transferred to your trust. You should review your beneficiary designations to determine if your trust should be listed as the primary or contingent beneficiary.
What should not or might not be transferred to my trust?
Retirement accounts, such as IRAs and 401(k)s, must be owned by individuals. A trust cannot own these types of assets. However, trusts can be the designated beneficiaries of such assets. Take caution though, because your trust should not be the designated beneficiary of your retirement accounts unless your trust contains certain "qualifying" provisions.
Retirement accounts are unique assets because they receive special tax deferral treatment. To take advantage of this special tax treatment, contact your financial institution and make sure you have primary and contingent beneficiary designations in place for all of your retirement accounts.
Some clients are uncomfortable with the thought of relying on beneficiary designations to transfer their retirement accounts to their beneficiaries. This discomfort is understandable because retirement accounts often comprise the bulk of many clients’ estates. If you prefer your retirement accounts pass to your beneficiaries according to the distribution provisions of your trust instead of providing complete control to your named beneficiaries, please contact us before designating your trust as the primary or contingent beneficiary of your retirement account. We will review your trust to make sure it includes the provisions required to “qualify” the trust for tax deferral.
I’m concerned about my child’s marriage, substance abuse, financial management, etc. How can I protect my child’s inheritance?
This is a concern shared by many clients. If your estate plan provides your children their inheritance outright, there is not much you can do to protect them from themselves or their creditors once their inheritance is distributed. At your death, if your trust distributes outright, your trustee must distribute your assets to your beneficiaries as your trust directs. Unless your trust specifically provides otherwise, your trustee will not have discretion to withhold assets from your beneficiaries, even if a beneficiary is a drug addict, in prison, filing for bankruptcy, or going through a divorce.
If this possibility concerns you, the best way to protect your child's inheritance is to set up a trust for their share. Your child's trust can authorize the trustee to use his or her discretion in deciding whether or not to distribute trust funds to your child. Because the trust fund can only be used at the discretion of the trustee and because the child, as beneficiary, cannot force a distribution, creditors cannot reach the child’s trust fund and the child's spouse cannot claim an interest in the trust fund as marital property.
Our address changed. Do we need to update our documents?
Your estate planning documents are not invalid because your address and phone number have changed. However, accurate contact information may become important when you provide these documents to third parties. For example, your Health Care Power of Attorney provides the name, address, and telephone number of your Agent, the person you have selected to make health care decisions on your behalf if you are incapacitated and unable to do so. In an emergency situation, your medical care providers should have accurate contact information on file so they will be able to contact your Health Care Agent as quickly and easily as possible.
What is my trust’s tax ID number?
For individual revocable trusts, the tax ID number for the trust is the social security number of the settlor, or creator, of the trust. For joint revocable trusts, the trust's tax ID number is usually the social security number of the primary reporting spouse. However, if the initial trustees of your revocable trust are no longer trustees, new identification numbers should be used to report trust income. You can file an SS-4 with the IRS to request a trust identification number.
Only about half of Americans have a Will according to a recent Forbes magazine article. Most people procrastinate because they do not want to actually think about what will happen when they die. It is important to plan and to make decisions or the state will make the decisions for you. State law directs how your assets are distributed if you die without a Will. The distribution depends on whether you are married or single and whether you have children. The distribution, according to state law may not be anything you would have chosen but it is what your family must deal with if you have not planned. It is especially important if you have minor children to make plans for the preservation of your assets to care for them. Provisions for a contingent trust for your children can be included in a Will or in a separate revocable trust document.
There are many different planning options and the proper option depends on your family situation, your assets and the complexity of your particular wishes. Taking the time to work through and complete a planning questionnaire helps ensure accurate advice about the options for your situation. Sometimes the right answer is a revocable trust which avoids probateand provides detailed instruction for the trustee to manage your assets for your family. Other times the proper planning may be a transfer on death deed and placing payable on death beneficiaries on your bank accounts.
By specifying who gets what—especially items with emotional significance—you head off disputes.
By choosing an executor and trustee if you use a trust to administer your estate, you put someone you trust in charge.
By naming a guardian for your young children (under 18), you make it possible for the person you choose to raise your children if for some reason you and the other parent couldn’t. If you don’t make your preference known in your will (or in other legally effective document) a judge would have to choose a guardian without any knowledge of your wishes.
Your life insurance and retirement accounts, traditional IRA, Roth IRA, and 401K are distributed upon your death according to the beneficiary designation, not by the provisions of your Will or Trust. The law is complicated and it is important to discuss those beneficiary designations with an experienced advisor.
In addition to the basic estate planning tools of a Will and Trust, a Durable Power of Attorney, which names a person who can act in your behalf regarding your property, is a valuable document. This tool gives the agent the power to act on your behalf if you are incapacitated and need assistance or if you are unavailable to act. If you have a Durable Power of Attorney you will probably avoid the need to have a Guardian appointed if you unable to handle your own affairs. This avoids the cost and time associated with guardianship proceedings.
A Healthcare Power of Attorney allows the agent named to make healthcare decisions for you, if you cannot make them. It is useful if you are injured or incapacitated and unable to make healthcare decisions. An additional healthcare document is the Advance Directive for Healthcare that gives instructions to your physicians on end of life matters. It also names a proxy who can make decisions if you are not able to make them. It is essential in all of these documents to name people you trust as the agents, proxies, trustees, and personal representatives. They have great power but it also gives you great flexibility and avoids court supervisions of your affairs.
I often hear these responses when the twenty- and thirty-somethings I meet discover I’m an estate planning attorney. Although we’re told to plan for the worst and hope for the best, that advice rarely translates into preparing for our incapacity or death. Instead, our time is spent focusing on careers, finances, homes, families, and other adventures. As a thirty-something, I too am often guilty of forgetting my days are numbered, hoping I’ll have plenty of time to plan for the not-so-fun “adult” decisions of life. In doing so, we disadvantage our loved ones by leaving them to pick up the pieces without any foresight from us. Plus, we sacrifice the advantages of planning ahead.
Death is guaranteed, and incapacity is likely for all of us - no matter our age. If you have experienced the loss or incapacity of someone you love, you know it is difficult. We seldom think clearly in times of great tragedy. Planning ahead for such events can prevent additional stress in already stressful times. Such plans may include nominating someone you trust to care for you if you are incapacitated and documenting end-of-life decisions you would make if you were able. Nominating an agent or proxy for your health care may also prevent the need for a costly court-supervised guardianship.
Not planning ahead can create confusion. Upon your death or incapacity, your loved ones will have heightened emotions, and each will react to grief in a different and personal way. One of the most sensitive questions that may be asked is who will take care of your minor children or other dependents. This may be a difficult question for you to answer, but it is even more difficult for others to answer when you cannot. Discussing the nomination of a guardian for your minor children or other dependents with your spouse and loved ones while you have the ability to express your reasoning and consider their input can help avoid controversy over an already difficult decision. Nominating a guardian helps provide a smooth transition for your children or other dependents and their caregivers.
Planning ahead can make planning later easier. Just as a football team is better prepared for the big game if the coach has a game plan, you can be more prepared for managing your estate as it increases in value if you create the framework from the beginning. Part of this framework may include a revocable trust that outlines how your assets may be used upon your incapacity and controls the distribution of your assets upon your death. You don’t need an abundance of assets to justify having a trust. If you have assets without beneficiary designations, such as a vehicle and a house, preparing a trust may be prudent. Even if you have debt associated with an asset, such as a mortgage, the equity you own is an asset of your estate. If you die and the legal ownership of the asset is trapped in your name, your loved ones will likely need to go through a court-supervised probate to access the value of the asset. A probate is avoidable if you properly utilize a revocable trust. Creating a trust to own your assets as you acquire them throughout your life can be less time-consuming and less expensive than implementing the same planning with a lifetime’s accumulation of assets later in life. With a trust already prepared, you can simply buy an asset in the name of your trust at the time of purchase and rest in the assurance the asset will be controlled by the trust upon your death or incapacity.
A plan eases the impact of unexpected circumstances. A revocable trust also provides a plan for unanticipated situations that joint ownership with rights of survivorship cannot address. Joint ownership only works well if at least one of the owners survives and has capacity. If both you and your spouse die or become incapacitated simultaneously, a revocable trust contains provisions to address such circumstances. Similarly, after your death if a beneficiary of your trust unexpectedly suffers from substance abuse or develops a disability, the trust can provide protections to avoid misuse or exhaustion of the trust funds which outright ownership cannot avoid.
Unexpected circumstances do not have an age limit. Take time today to look at your family situation and personal assets. Who will care for your children if you pass away? Who will care for you if you are incapacitated? What will happen to your assets upon your death or incapacity? If you don’t have answers to these questions, or if you have adult children who cannot answer these questions for themselves, make an appointment so we can help you plan ahead and provide everyone certainty and peace of mind.
Locate your documents! Isn’t it amazing how many times we need some piece of paperwork and aren’t sure where to look for it? If you can’t relate to that problem, move on to #2! If you’ve experienced that problem, though, you know it is a good idea to gather all your important records.
Confirm the documentation you have! Your important records might include: military service and discharge papers; retirement plan papers; insurance policies; documents evidencing your ownership of all your assets, including vehicle titles, financial account statements, deeds for land and minerals, ownership records for assets received by gift or inheritance, trust papers for any interests you have in existing trusts, and so on. And, last but by no means unimportant, your estate planning documents, including your last will and testament, your revocable trust, your durable power of attorney, your healthcare power of attorney (for general health and personal care decisions), your advance directive for healthcare (for end of life health decisions) and your consent for your attorney to communicate with your fiduciaries.
Confirm you have the necessary signed, original documents! In most of our business and personal matters it is acceptable to simply have a copy of documentation, rather than a signed and dated original document. This is so either because we aren’t the party responsible for possession of an original or the original document is not necessary. However, as you well know, it can be very important to have the original paperwork proving ownership of certain types of assets, either in order to transfer ownership to a new owner or in order to establish our own ownership. Likewise, original estate planning documents, properly executed with your signature and, if required, the signatures of witnesses and/or a notary public, can be critical in carrying out plans and instructions in the event of your incapacity or death.
Confirm your documents are current! Have you ever felt time was passing quickly? The speed of time passing seems especially real when we notice how “old” something has gotten without our notice. For example, do you remember the date you did your estate planning documents (Will, trust, powers of attorney, advance directive for healthcare, etc.)? Have things changed since then? Do your documents still work the way you originally intended and, if so, is that still how you want things to happen? Our clients regularly call upon us to meet with them and review their documents in order to assess whether any updating is needed or desirable. Although this may seem inconvenient and does involve time and expense, the cost at present can be very small in comparison to the problems and costs which can be caused by having outdated documents which are no longer adequate or appropriate for the person’s situation.
What documents do I have?
And which are signed originals?
Where are my documents located?

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