Our last few articles discussed the probate process in Oklahoma, the reasons why most families seek to avoid probate, and how to create an estate plan that avoids probate. In that last article, we explained that an integral part of avoiding probate is the creation of a living family trust.
In this article, we will explain different reasons for setting up a trust for your family in Oklahoma. We will provide information related to the following topics:
- The importance of understanding why you want trust.
- What exactly is a trust?
- Reasons for creating a living trust.
- How a trust helps you avoid probate.
- The process for setting up a trust in Oklahoma.
OKC Trust Attorney can help you understand the reasons for setting up a trust.
Do you have a clear reason for why you want to create a trust? You first must know why you want to create a trust. Ask yourself the following questions:
- What is the problem you are trying to solve?
- And will a trust actually solve that problem?
When choosing a legal strategy, you must know exactly what problem you are trying to solve.
These are not questions that we can answer over the phone. Often, it takes an extended discussion to discover all of the complexities and issues you are facing. Therefore, we prefer to have a more intimate consultation, called a Family Wealth Planning Session. In these sessions, the goal is for you to discover what would happen with your current estate plan (or without a plan) and how those outcomes can be controlled by you with a plan, that may or may not involve a trust or other documents.
A benefit of attending one of these planning sessions is that you not only gain a full understanding of all of your assets, but you also become more financially organized than you’ve ever been before.
What is a trust?
A trust is simply an agreement. The agreement is between the Grantor (person creating the trust) and the Trustee. The Trustee agrees to hold title to the Grantor’s assets. The Trustee also agrees to distribute the assets to the Beneficiaries according to the terms of the Grantor’s Trust.
That is all it is. A trustee will allow all of the assets to be titled in the trustee’s name, while distributing the principal and the income to the beneficiaries according the instructions inside the trust.
But this legal arrangement can create massive benefits to the family.
By dividing up the ownership, control, and benefits of an asset, you can accomplish a wide range of goals, from minimizing taxes to providing protection from creditors. Assets held in certain types of trusts can be protected from divorce, bankruptcy, and even the government. We discuss these reasons in the next section.
Reasons to create a living trust.
There are many reasons for creating a living trust. But I first want to share with you the most important, and most basic, of them all: a trust allows for you to have a successor, ready to take over control and operation, of all of your assets the minute you are unable to be there to steer the ship. You don’t need a court order. Your lawyer doesn’t need to file anything. It’s just automatic.
If something were to happen to you – you become incapacitated, in a coma, or you die – somebody of your choosing will be in control of your house, your bank account, your rental properties, your business. Somebody that you have chosen be able and ready to step up and take over, so that those assets are protected and maintained, and don’t fall into the wrong hands.
Now, there are many other benefits to having a trust. But just this one, basic reason is important enough that everyone should have one. Knowing that your assets are immediately controlled by someone you chose, without them having to file anything at all or do anything with a court, is reason enough.
Now, let’s look at some of the many other reasons.
A living trust will avoiding probate and keep your family out of court
The number 1 most popular reason that clients choose to create a trust is to pass on title ownership of their assets after death without their family having to go to court. This is also our first priority when creating trusts for our clients. We want to prevent our clients’ families from getting stuck in probate court. There are many reasons to avoid probate, including the potential for family conflict, as well as the total lack of privacy to the estate.
But avoiding probate is not the only reason we create trusts.
A living trust prevents your estate from losing your assets to the state
The state of Oklahoma has over $1 billion in its unclaimed property fund. These are assets that the state is in possession of, but no one has stepped forward to claim.
How do assets end up in state custody? A common reason is simply that the owner dies, and his surviving family never knew about the asset. Years go by. And no one comes forward to claim the bank account, or to claim ownership of a piece of real estate. The bank doesn’t know who to call. The county tax assessor doesn’t either. There are so many examples of this happening, it would seem like fiction. Yet, instead it’s so very true.
We design estate plans not only to keep our clients’ families out of court (and out of conflict, and to maintain privacy) but also to maintain inventories of assets, so that when the next successor trustee takes over, he or she knows exactly what assets are part of the estate, where they are located, and how to access them. This is the truly understated value of having us prepare your estate plan. Among many other reasons, at a minimum, we will ensure that your assets aren’t lost and forgotten about, eventually escheating to the State.
All of our estate plans include an inventory of assets. We also review all of our clients plans every three years, at no additional cost. If together we discover that the inventory needs to be updated, then we do so. This ensures that our client’s maintain a living trust over their lifetime that stays accurate and up to date, and won’t fail their family when they need it.
A trust can protect assets for your children for the rest of their lives.
With a trust, you can leave your spouse with an estate that is sheltered from creditors, and even subsequent re-marriages and divorces. You can also provide this type of asset-protection for your children or for whoever you wish to leave gifts of your estate.
Imagine leaving your children with equal shares of your estate, but locked up in separate trusts for each child. They can have access to the money, but in the even they are sued, or experience a divorce, that money can remain locked up in the trust. It will be safe from these stressful events of life that can wreak havoc on one’s finances.
You can protect assets for generations to come
With trusts, we can create protection for generational wealth, preserving your assets for many generations to come. We sometimes refer to these instruments as dynasty trusts. These are the tools of the most powerful and wealthy families in America.
The good news is that when you hire the right lawyer, you, too, can have access to these tools.
But what tools are right for you? You will not know until you book your Life & Legacy Planning Session with my office. Call us at 405-607-7799 to schedule a 15-minute phone call to learn more about our Life & Legacy Planning Sessions.
In our next article, we will explain the process for setting up a trust in Oklahoma.
Contact Oklahoma City Trust & Estates Lawyer Travis Charles Smith
Travis Charles Smith can be your personal family attorney, someone to help you design the right estate plan, as well as help your children administer it. If you are the beneficiary of a trust that you recently inherited, but you don’t know how the trust works, contact our office to schedule an appointment with Travis regarding trust administration.