Q: Should I have a will or a trust?

A: Here are some facts you should know before you decide “No.”

A person does not have to be wealthy or elderly to do some serious thinking regarding an estate plan. If you own a home or a car or have a checking or savings account, you have an estate. Often a person with a small or modest estate is most in need of a plan to provide for the proper transfer of that property at death.

There are several reasons for having a will or a trust. Most importantly, having a will or a trust allows you to decide who will receive your property rather than leaving that choice to state law.

Having a will allows you to choose your personal representative and to eliminate the cost of a personal representative’s bond the probate court would require if a probate of your estate is necessary. Without a will, the court will appoint someone as personal representation who may not be the person you would have chosen.

Having a trust allows you to avoid the probate court system altogether if your trust is created and funded properly.

Equally important, if you have minor children you can name their guardian in your will or trust. Without a will or a trust, the court may appoint a guardian who may not be the person you would have chosen.

Q: What if I die without a will or a trust?

A: If you die without a will or a trust, Oklahoma law effectively writes a will for you. These laws set a rigid formula and make no exceptions for those in unusual need. Your estate must be administered in court, and often the cost will be greater than if you had planned your estate with a will or a trust.

Here are the rules for how your estate will be distributed if you die without a will or a trust. Assuming your estate is not controlled by a prenuptial marriage contract, if you die leaving a surviving spouse and children, generally your spouse takes one-half of your estate and your children share equally the remaining one-half. Special rules apply if you have children from a prior marriage and you have property acquired during your last marriage as well as separate property.

If your children are minors, your surviving spouse, in order to use their portion of your estate for their support or education, would either have to be appointed guardian of the children by the court or have someone else appointed, give a bond, make annual accountings to the court and obtain the court’s permission for many routine transactions. This will result in considerable expenses as well as legal difficulty.

Q: What is a will?

A: A will is a written instrument by which you provide for the disposition of your property after your death. In Oklahoma, if you are of sound mind and age 18 years or over, you may dispose of your property by will.

Q: May I dispose of my property as I wish with a will or a trust?

A: Almost, but not quite. Under Oklahoma law, a married person may not completely exclude the surviving spouse because Oklahoma law allows the spouse to elect to take a certain portion of the estate despite the will or trust. If your will does not name a child or in some cases a grandchild, or indicate that the child or grandchild has been considered, then the child or grandchild may have certain rights to take a portion of your estate. Your lawyer can explain these restrictions and show you how to accomplish your desires.

Q: May I change my will or trust?

A: You may modify or revoke your will or revocable trust at any time. You should take steps to revise your will or trust whenever changes in the size or circumstances of your family or estate mean that your old will or trust no longer disposes of your property as you want. All changes, to be effective, must be made in strict conformity with the law. Any change made in a will or trust by erasure or in your handwriting or typed as an insertion is likely to be invalid.

Q: Does it cost more to administer an estate with or without a will?

A: Obviously there is the cost of having an attorney prepare your will. But the cost of administering the estate of a person who dies with a will is normally less than the cost of administering the estate of a person who dies without a will. That is because you can include cost-saving provisions in a will such as waiving the bond requirement for your personal representative as well as authorizing your personal representative to sell property and perform other functions without first obtaining permission from the court.

Q: Is joint tenancy a substitute for a will or a trust?

A: No. Joint tenancy may be a good way to title your property for a married couple, but to rely on joint tenancy ownership for estate planning is generally a poor idea. Usually a home is owned by a married couple as joint tenants. Upon the death of the first joint tenant, the property passes to the survivor by law. However, if real property is held in joint tenancy, an affidavit must be filed at the courthouse in order to terminate the joint tenancy. Your attorney can advise you on this procedure. Then there is the issue of how the property will pass when the surviving joint tenant dies. It is rarely if ever advisable to create a joint tenancy with someone other than your spouse.

There are creditor hazards and tax hazards in such joint tenancies as well as other possible complications and expenses.

Your attorney can advise you as to whether the use of joint tenancy outside of marriage is appropriate. Joint tenancy is simply not an adequate substitute for a will or a trust in most cases. Furthermore, if both joint tenants die simultaneously, both of their estates will require probate.

Q: How do I make a will or a trust?

A: Trusting your estate planning to a will or trust form or computer program is not recommended. A will or trust must be prepared within the legal technicalities prescribed by the law. These technicalities are for the protection of you and your heirs, but they must be observed. The drafting of a will or a trust requires the professional learning, skill and experience obtained only by study, training and practice. Only a practicing lawyer can perform this service properly. Some attorneys charge on the basis of time spent in preparation of a will or a trust while others have a flat fee. A few hours of an attorney’s time now will save your beneficiaries the costs of litigation over a poorly drawn will or trust and avoid the additional expense of a guardianship of your minor children. Your attorney will be glad to discuss the charge for services with you.

Q: Is a handwritten will valid?

A: Under Oklahoma law a will that is entirely written, dated and signed in your own handwriting, and which contains no typed or printed portion, is valid. The problems resulting from this type of will are not so much in what the person writing the will says as in what the person fails to say. Without the advice of an attorney, most people who prepare handwritten wills fail to include provisions that address the issue of a beneficiary who dies before the will maker, the naming of a personal representative and waiver of his bond, the source for payment of estate taxes and the specific powers the personal representative will have, as well as the problem of the simultaneous death of the will maker and a will beneficiary.

Your lawyer can explain these matters and show you how to simplify the administration of your estate as well as accomplish your desires with the best tax consequences.

Q: What is a living will?

A: A living will is part of a document called an Advance Directive for Health Care. In the living will portion of such document, if you (1) have a terminal condition, or (2) become persistently unconscious, or (3) have an end-stage condition, you may direct that your life not be extended by life-sustaining treatment. Your directions go into effect if your attending physician and another physician determine that you are no longer able to make decisions regarding your medical treatment. As part of this living will, you may also make an election whether you desire the artificial administration of food and water under these circumstances if you are unable to take food and water by mouth.

Q: What is a revocable or living trust and what are its advantages instead of a will?

A: A revocable or living trust is a written document providing for the management of your property which becomes effective while you are living, unlike a will which takes effect after your death. A trust is set up for a trustee to manage your property for your benefit during your lifetime or in the event of your incapacity. Ordinarily you serve as the sole trustee until you die or become incapacitated. After your death, the trust document will provide for your successor trustee to distribute any remaining property to those persons or entities you have chosen (just as in a will) or provide for the continued management of your property by that successor trustee for many years, with the ultimate distribution as you direct. The primary advantage of a revocable trust over a will is that upon your death, the administration of your estate in probate court is avoided and the distribution of your property is governed by your trust outside of the probate court system.

This normally results in a quicker and less costly distribution of your property to the people you have selected. In addition, a revocable trust is a private document which is not recorded at the courthouse or anywhere else. In this regard a trust is unlike a will which, if probated, normally requires a list of your property and its value to be public record at the courthouse. When a revocable trust is fully funded, by conveying all of your property into your trust during your lifetime, no probate of your estate is required.

Q: What are the advantages of having a will instead of a trust?

A: Generally the cost to prepare a will is less than the cost of preparing a revocable or living trust. That is because a will requires no action on your part after it is signed and thus is simpler to create than a trust. On the other hand, a revocable trust is more complicated than a will because it involves the management of your property during your lifetime as well as its distribution after your death. In addition, a trust must be funded during your lifetime and this can require significant paperwork and legwork. Your attorney will assist you by explaining the steps necessary to put your property into the trust. Basically, wills and trust are two separate approaches to estate planning. You should consult with an attorney who works extensively in estate planning for an explanation of the advantages and disadvantages of wills, trusts and joint tenancies. Keep in mind, you can include in a will provisions to establish a trust. However such a will is usually no longer a simple will and the costs could approach what a revocable trust would have cost. Either a will or a trust can be used to transfer your property following your death.

Note: This pamphlet is based on the laws of the state of Oklahoma. It is issued to inform the public and not to advise. Only a lawyer can advise you on your particular problems.

Revised March 2008