A LOOK AT ESTATE PLANNING

Majority of American Adults Are Going Through Life Without A Properly Executed Estate Plan. Many People Don't Even Know Exactly What Estate Planning Is, Or Why It Is Important.

By Larry Parman OKLAHOMA ESTATE PLANNING ATTORNEY

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According to surveys, the majority of American adults are going through life

without a properly executed estate plan. Many people don't even know exactly

what estate planning is, or why it is important.

Everyone is going to pass away someday. This may not be the most pleasant

subject to contemplate, but it is simply a fact of life. You must prepare for this

inevitability in advance, and it requires the execution of certain legally binding

documents.

VEHICLES OF ASSET TRANSFER

Estate planning involves arranging for the transfer of your financial assets after

you pass away. There are numerous different ways to get assets into the hands of

your loved ones. The best course of action is going to vary on a case-by-case

basis depending on your unique personal situation.

LAST WILLS

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The most commonly used asset transfer vehicle is the last will or last will and

testament. In this estate planning document you record your wishes regarding

the transfer of your property. You also name an executor or executrix who will be

in charge of handling the business of the estate.

If you are a parent of a dependent child you would want to nominate a potential

guardian when you create a last will. This individual would care for the child if

both parents were to pass away.

REVOCABLE LIVING TRUSTS

An alternative to a last will as a vehicle of asset transfer is a revocable living

trust. With these trusts you name a trustee to administer the trust after you die.

You can name an individual, but many

people prefer to use a bank or a trust

company.

The trustee that you select distributes

assets to the beneficiary or beneficiaries

that you name in the trust agreement. You

decide on the nature of these distributions

when you are drawing up the trust.

Many people think that trusts are only for wealthy individuals. In fact, revocable

living trusts do not address many of the concerns that wealthy people have. This

type of trust is utilized to enable the transfer of assets outside of the probate

process.

Probate is the legal process of the estate administration. It takes place under the

supervision of the probate court. Probate avoidance is appealing because

probate is time-consuming, it can be costly, as it is a public proceeding.

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ESTATE TAX EFFICIENCY

We have a federal estate tax in the United States, and it can reduce the value of

your wealth considerably as it is being passed on to your heirs. At the present

time the maximum rate of the federal estate tax is 40 percent.

The amount of the estate tax exclusion in 2014 is $5.34 million. The portion of

your wealth that exceeds $5.34 million in value would potentially be subject to

the federal estate tax.

Estate planning can involve positioning your assets in a tax efficient manner so

that your estate tax exposure is mitigated.

ASSET PROTECTION

Estate planning can include efforts to protect assets from creditors and

claimants. There are various different ways of accomplishing this goal. The

creation of a family limited partnership can be a way to protect assets. Limited

liability companies are also used for asset protection.

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SPECIAL CIRCUMSTANCES

Your family dynamic will play a role when you are planning your estate. For

example, if you have a person with a disability who is receiving government

benefits on your inheritance list you must tread lightly. A direct inheritance

could lead to the forfeiture of these benefits.

This type of situation is addressed through the creation of a supplemental or

special needs trust.

There is also the matter of a spendthrift heir. You may have someone in the

family who is prone to burning through money quickly. He or she may squander

a direct inheritance in short order.

You can protect a poor money manager from his or her own bad decisions by

making this individual the beneficiary of a spendthrift trust. The trustee would

handle the assets, and the beneficiary would have no control over them.

Measured distributions would be made to the beneficiary in accordance with

your wishes.

These are a couple of

examples of special

circumstances, but there are

others.

INCAPACITY PLANNING

Arranging for the transfer of

your financial assets is at the

root of estate planning. However, it also involves preparing for the twilight years

that will precede your death.

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Incapacity is possible. You can prepare for this eventuality by empowering

decision-makers to handle your affairs in the event of your incapacitation. This

is done through the execution of documents called durable powers of attorney.

You should also execute a living will stating your preferences regarding the use

of life sustaining measures.

CONCLUSION

All responsible adults should work with a licensed estate planning attorney to

create a comprehensive estate plan. If you do nothing your family would be left

behind to deal with the aftermath. Negative consequences could arise, and they

can be easily avoided if you plan ahead appropriately with the benefit of legal

counsel.

REFERENCES

Forbes http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-estate-planning/ American Bar Association http://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning.html

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About the Author Larry Parman

After helping his own family deal with a lengthy probate and a battle with the IRS following his father’s death in a farm accident, Larry made a decision to help families create effective estate plans designed to reduce taxes, and minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors. Following a dozen years in the investment banking and financial services business, in the mid-1980s Mr. Parman formed a law firm that gives families the peace of mind that comes from having created a premier estate and financial plan. After forming his law firm in 1984, he offered a series of public and private seminars to inform the public about using a Living Trust as the

foundation of a family’s estate plan. Today, Parman & Easterday is one of the leading business and estate planning law firms in the Midwest. The firm’s primary focus is on business and estate planning, elder law, asset protection, and providing effective estate planning solutions for clients. Today, the firm’s premier estate plan design is referred to as a Legacy Wealth Plan. Mr. Parman is a frequent guest on the radio and can be seen on television talk shows explaining the importance of proper estate planning. Prosperity Productions selected Mr. Parman as a featured speaker in a nationally-recognized educational video on Living Trusts. He is the author of numerous published articles on financial and estate planning matters and the co-author of two books, Estate Planning Basics: A Crash Course in Safeguarding Your Legacy and Guiding Those Left Behind in Oklahoma: Settling the Affairs of Your Loved Ones. Mr. Parman is a member and Fellow of the American Academy of Estate Planning Attorneys. He is also a member of the Oklahoma and Missouri Bar Associations, the American Bar Association, and the Oklahoma City Estate Planning Council.

www.ParmanLaw.com

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OKLAHOMA CITY, OK 13913-B Quail Pointe Drive Oklahoma City, OK 73134 Phone: (405) 843-6100 Fax: (405) 917-7018