You don’t have to be wealthy or elderly to think seriously about estate plans. In Oklahoma, a person’s assets like home, bank accounts, personal belongings, life insurance, pensions, etc. are all part of their estate. Even someone with a small estate needs a plan to properly transfer their property after death. A will or a trust allows you to decide what will happen to your assets after your death without any intervention from the state laws. A trust allows you to easily transfer assets to your beneficiaries or heirs. And if set-up properly, the assets in a trust can avoid probate and immediately pass from the owner to the heirs. And sometimes you can also create a special needs trust like the life insurance trust or Medicaid asset protection trust in Oklahoma.
What is a Trust?
A trust is a legal document that manages the distribution of a person’s property by transferring the benefits and obligations to the beneficiaries. A property owner (grantor) creates a trust by naming one or more persons or institution (called trustee or trustees) to manage their property subject to the terms and conditions set forth in the trust agreement. Unlike a will, a trust allows a person to control the distribution of their property and the income derived from their property, during life as well as after their deaths.
Types of Trusts
There are many different types of trusts and their details may vary from state to state. In fact, there are numerous types of trust agreements to choose from in Oklahoma alone. However, each type of trust has certain advantages and disadvantages that are intrinsic to that specific trust agreement. The four basic types of trusts are:
- Living Trust
A living trust is a trust that is created by the owner of the property and becomes effective immediately after it is created. These trusts do not wait to come into effect but can be designed to continue after the death of the owner. In these types of trusts, the owner often retains ownership for making any changes which can be transferred at the time of their death.
- Testamentary Trust
A testamentary trust becomes effective only after the death of the grantor. These trusts often specify the conditions of distributing the property or benefits among the heirs. They also specify whether to spread the payment of benefits over a period of time or to make a single payment. Testamentary trusts are commonly specified in a will as a provision leading to probate before commencement of the trust.
- Revocable Trust
These trusts are made during the lifetime of the grantor and can be changed, modified, or revoked entirely if the owner wishes. Revocable trusts are extremely helpful to avoid probates as the ownership of assets stays with the trust during life and at the time of death of the grantor. However, they cannot be used for asset protection as the assets remain available to the grantor’s creditors.
- Irrevocable Trust
Irrevocable trusts cannot be altered, modified, changed, or revoked after their creation. Once a property is transferred into an irrevocable trust, even the grantor cannot modify or take it out of the trust. These trusts can be helpful in avoiding excessive estate taxes. Although holding a survivorship life insurance in these trusts can have negative consequences.
Trusts in Oklahoma
A trust is much more flexible than a will and can be tailored to meet your specific needs. An individual can utilize a trust to resolve complex issues and avoid probate. You should discuss whether you need a trust and all your legal options for trust agreements that meet your expectations with an experienced local attorney before making any decisions.