What does promissory estoppel mean under Oklahoma law?

The law is full of terms of art, legal ease, Latin and a variety of other terms that make it hard for anyone other than lawyers (and hard even for some lawyers) to comprehend.

One such term is promissory estoppel.  This is a term that comes up an Oklahoma lawsuit when a person is trying to enforce an agreement but the agreement doesn’t quite meet the legal definition of an enforceable “contract.”

Recently, in a court case in Okmulgee County, Oklahoma, the attorneys representing one of the parties provided an excellent definition and explanation of the term promissory estoppel:

Jedson's MPSJ Against CP Kelco 3.11

 

Here is a link that will take you to the full document (it is a large document, give it some time to load) and to the court case from which the document came.

Posted by Shawn Roberts in Blogposts, Oklahoma Contract Law

The two primary uses of an Oklahoma Revocable Trust Trust

The Oklahoma revocable living trust is a fairly common estate planning tool.

I have written about using a trust to protect and plan for your family several times such as here, here and over there. The more I have worked with Oklahoma trusts and seen how my clients use them, I have come to see primarily used to accomplish two things:

The Probate avoidance Trust

The goal of the probate avoidance trust is to get all your property into it, then when you pass away, the trust passes all of your property to your heirs with no strings attached, without your heirs being required to file a probate case in court. Instead, the trust distributes your property to the people you choose.  When all the property has been distributed by the trust, the trust reaches the end of its life and is terminated. The Oklahoma probate-avoidance trust functions similar to an Oklahoma last will and testament, except with the trust, your heirs avoid the court-supervised probate case.

The Legacy Trust

The goal of what I call the legacy trust is to get all your property into your trust and when you pass away distribute all of your property to your heirs, over an extended period of time and possibly with some qualifying instructions (Note:  If this type of trust is properly created and managed, it to should help your heirs avoid probate). The legacy trust typically continues on for a lengthy period of time after you pass away doing things such as:

  • Providing for your children’s education
  • Protecting your children’s inheritance from their creditors
  • Gradually providing financial assistance on terms you design

 

The right trust for you and indeed even IF a trust is right for you is something I am happy to talk with you about.

Posted by Shawn Roberts in Blogposts, Oklahoma Estate Planning

What tax returns are you required to file when someone dies in Oklahoma?

This is a question that comes up from time to time when I am talking with someone who has had a parent or loved one pass away. While the specifics of this question are better answered by a CPA or tax advisor, I can provide some general direction on this question in this post.

The automatic estate

When a person passes away, a new taxpaying entity – the person’s estate – is automatically created to ensure all taxable income is accounted for. Income is taxed either on the taxpayer’s final return, on the return of the beneficiary who acquires the right to receive the income, or if the estate receives $600 or more of income, on the estate’s income tax return.

The chore of filing the taxpayer’s final return usually falls to the executor or administrator of the estate, but if neither is named, a survivor must do it. The return is filed on the same form that would have been used if the taxpayer were still alive, but “deceased” is written after the taxpayer’s name. The filing deadline is April 15 of the year following the taxpayer’s death.

Death tax vs. Income tax

There are three taxes to consider:  Estate (death) taxes and estate income taxes are two different types of tax.  It is very important to understand the distinction between the two types of taxes. Often, there may be no estate tax due while there very well could be some income tax due.  The third type of tax to be considered is the standard income tax that everyone is subject to.

1.  Estate death tax is a tax paid on the transfer of property from the deceased person to the people who receive the deceased person’s property.  As the IRS puts it “[t]he Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death.”  To be liable for the federal estate tax, a person passing away in 2014 must have left an estate valued at 5.3 Million or more (and the person had not used up any of this amount during their lifetime). Oklahoma abolished its estate death tax in 2010.  A person passing away in Oklahoma in 2014 would not owe any estate tax under Oklahoma law.

2.  Estate income tax is a tax on the income received by the estate after a person has died (the “estate” is what I referred to above as the “automatic estate” that is created when the person passes away.) Note that this is different than the final individual income tax return which is described below.  Some examples of estate income would be interest, dividends, gains from sales of stock or real estate.  This tax might be paid by the estate or beneficiaries.  Most estates have to pay or file an estate income tax return(s) with the federal and state government.  For the federal government, the executor of the estate (sometimes also referred to as the “fiduciary”) uses the IRS form 1041 to file what is known as a fiduciary income tax return.

3.  Individual Income Tax.  The executor of the estate is required to file a final income tax return for the person who is passed away.   Income earned or received by the deceased person between January 1 and the date of the person’s death is reportable under the person’s Social Security Number.

Are tax returns required?

1.  Final Individual Income Tax Return.     The executor of the estate is required to file a final income tax return for the person who is passed away. Income earned or received by the deceased person between January 1 and the date of the person’s death is reportable under the person’s Social Security Number. If that amount is sufficient to meet the minimum filing requirements (which change each year), you will need to file a return for the person. Also, if the person had any taxes withheld (e.g. from a pension, or from estimated payments), you will certainly want to file to claim a refund. However, if the person’s income was low and she had not been filing returns, you won’t have to unless she had some special circumstance such as selling stock or a house, cashing in an IRA, or winning the lottery.  This is the same return that the person would’ve filed had they not passed away. The final individual income tax return is due on the same day as if the taxpayer had that died. For example, if someone passes away on January 1, 2015, then the final IRS form 1040 will be due on April 15, 2016.

What to do: You can go this page on the IRS website to determine if the person had enough income to require a tax return.

2.  Estate Income Tax.     An estate income tax return is typically required to be filed if the decedent had an income of $600.00 a year or more or had a beneficiary who is a nonresident alien.  In addition to income received while the decedent was living during the tax year, the estate may end up with income through rents on real property received, interest on bank accounts, unpaid salary or dividends.

However, there are some circumstances where if the property is distributed relatively quickly to the people who are to inherit it the estate may not have income and there may not be a need to file an income tax return for the estate. For example, if the person who passed away owned a house in joint tenancy, had transfer on death designations for bank accounts, those assets pass immediately at the time that the person passed away. With the property no longer being owned by the estate, there is no chance for the estate to end up with and come in the form of things like rent received, interest received and things like that. For that reason, those assets very well may not generate income for the estate.

What to do: Determine if the deceased taxpayer’s estate value exceeds the minimum threshold for filing by the IRS and the state taxing authority.

3.  Estate Death Tax.  If you live in Oklahoma and the person passed away in 2014 or later then no Oklahoma state tax return is required because the estate tax was abolished.  For federal tax purposes, if the person passed away in 2014 and the value of their gross estate was less than $5.3 million, no federal estate tax return is required. However, you will want to consult your CPA or tax advisor about this type of issue because there are circumstances where a federal estate and the gift tax return is filed even when no taxes due following a person’s death. Those circumstances are typically when a person is close to the federal exemption number of 5.3 million.

Posted by Shawn Roberts in Oklahoma Estate Planning

What is the difference between an Oklahoma revocable trust and an irrevocable trust?

Below is a list of qualities that explain and distinguish an Oklahoma revocable trust (also known as a “revocable living trust”) and an Oklahoma irrevocable trust.

  • A revocable trust can be changed or modified by the people who make it.
  • An irrevocable trust cannot be changed or modified except in very limited circumstances
  • Property placed in a revocable trust remains under the control of the people who made the trust.
  • Property placed in an irrevocable trust is no longer considered belonging to the people who made the trust.
  • Property placed in a revocable trust remains part of the estate for tax purposes
  • Property placed in an irrevocable trust usually is no longer part of your estate.
  • Assets placed in a revocable trust are still subject to creditor’s claims
  • Assets placed in an irrevocable trust are no longer part of the estate of the person who made the trust so they are usually out of the reach of creditors.
Posted by Shawn Roberts in Blogposts

How an Oklahoma Limited Liability Company is taxed

One of the factors to consider when choosing whether to do business as an Oklahoma corporation or Oklahoma limited liability company is how the new entity will be taxed.  There are several options for both corporations and limited liability companies.  Below is a diagram explaining how an Oklahoma limited liability company is taxed.

 

The source for this information is the Internal Revenue Service website, specifically this page.

Posted by Shawn Roberts in Blogposts, Oklahoma limited liability company

Consider the cost/benefit analysis in determining whether to do an Oklahoma probate

To probate or not probate:  A cost/benefit analysis.

One of the primary questions that needs to be answered is whether a probate case is necessary? As we discussed, my goal is always to try to find a way to avoid doing a probate case if possible and still allow my client to access the assets.
Whether you do an Oklahoma probate is a cost/benefit analysis:  The cost of doing the probate (attorney fees, court costs, etc.. .) versus the benefit you hope to receive from the process (control over property, inheritance of property you would not otherwise get).  To be able to perform a reliable cost/benefit analysis, you need to understand why probate happens.  The answer is that while probate happens for many reasons, the primary reason is when there is property to inherit, but it can’t be inherited unless you do probate.
Although a lot of effort is put into avoiding Oklahoma probate, there are times when it is simply the only option to change the title to a piece of property or free up funds held in a bank account. The result of a probate proceeding is usually a Judge signing an order that transfers title to the property.

Why probate happens

Below are some scenarios in which you might need Oklahoma probate:
  • Real Property.

An unmarried person dies owning a house and title to the house is solely in the deceased person’s name; although other states provide a process where title to real property can be transferred by affidavit, I am not aware of any similar process in the state of Oklahoma. I believe that the only way to transfer title to real property, where the person who died is the sole owner of the real property, is to get an order from a judge transferring title, out of a probate case.
  • Life insurance.

A person dies leaving a life insurance policy with beneficiaries who are no longer living;
  • Not transferred to Trust.

A person who has a living trust dies, but has property that was never transferred to the trust such as real property or investment accounts;
  • Accounts with no beneficiary.

Typically, with retirement accounts, investment accounts and many times on bank accounts, there is the opportunity to name a beneficiary.  The beneficiary is the person or people who automatically receive the proceeds of the account (with proof of death of the owner and proof of beneficiary identify of course).  If a person does not name at least one beneficiary on an account such as this, that usually means the account is going to probate.  Without probate, the company holding the account will not release it (there are two small exceptions to the general rule: Oklahoma small estate affidavit and Oklahoma affidavit of delivery of personal property); and
  • Mineral Interests.

A person dies owning an Oklahoma mineral interest, but the interest is not held in a trust, and the title is solely in the name of the person who dies.  Many times, the operator of the Well will not continue to pay royalties without an order from the Oklahoma probate court specifying who the heirs are.
As you might expect, this means that sometimes the question of whether to do probate or not is difficult when the value of the assets in the estate are small because that value must be weighed against the cost of doing the probate.

Who would end up with the property in probate?

The other question is assuming the person who passed away did not have a last will and testament, who would end up owning the property?  His property would pass under Oklahoma law of intestate succession, which is found at Title 84 O.S. sec. 213.  Section 213 is a difficult statute to interpret, but generally, the order of inheritance would go as follows:  spouse, children, grandchildren, the parents of the decedent, children of parents in equal shares (your uncle’s siblings), grandparents of the decedent; children of the decedent’s grandparents.

Summary Probate

Sometimes the question of whether to do a probate or not is difficult when the value of the assets in the estate are small because that value must be weighed against the cost of doing the probate.
The Estate may qualify for the summary probate process. This is an abbreviated version of a full probate, with the emphasis being on speed and reducing some of the cost of the normal probate process. That being said, there are still cost. In my experience, this type of probate cost 3,000.00-$3500.00, plus out-of-pocket cost.  You can read more about the summary probate process here.
Posted by Shawn Roberts in Blogposts, Oklahoma Probate

Should your Oklahoma series LLC have one bank account or multiple bank accounts?

One goal in using an Oklahoma series limited liability company is to separate the liabilities of different assets within one limited liability company.  For example, the series LLC creates cells within it, and we call the cells “series.”

The magic of the series model

Each series has a name and is intended to be legally separate for all other series.  Series “A” for example, may own a rental home and Series “B” may also own a rental home.  The magic of the series model is if a water heater explodes on the Series “A” property, causing property damage and physical injury, only Series “A” is responsible for the damage, not any other Series.  Liabilities from one series don’t leak into any other series (pun intended).

The need to maintain series separately

One key to securing series LLC protection is to maintain and operate each Series separately.  That means you need to account for each series separately.  As to bank accounts, ideally, each series would have its own bank account, into which all revenue would be deposited and out of which account all expenses would be paid. However, for people with many properties (meaning many series), it is cumbersome and difficult to maintain a separate bank account for each series.  I have clients who own as many as 30 rental properties, and such clients have no interest in using 30 bank accounts.

Using one bank account

When not using separate bank accounts, you must still maintain the ability to track all revenue and expenses for each series separately.  That means the accounting software (e.g., like Quickbooks) can sort and then generate reports for each series’ revenue and expenses.  While not ideal (separate bank accounts would be ideal), depositing funds into one bank account with the ability to track and report funds for each series separately is an alternative.

Posted by Shawn Roberts in Blogposts

Should your automobiles be transferred to your Oklahoma revocable living trust?

It is a good question.

The short answer is “yes,“ automobiles should be transferred to a person’s Oklahoma revocable trust, to receive the full benefits of Oklahoma estate planning. Below is a bit longer explanation:

Purpose of Estate Planning with a Revocable Trust

One of the purposes of doing estate planning with a revocable living trust is allowing a person’s family to avoid Oklahoma probate when the person passes away. The trust helps a person avoid probate because assets that typically force a probate case are owned by the trust when a person passes away (more on that here).

 
For example, if an individual owns real property at the time of his death, titled solely in his name, with no mechanism to pass the title to the property (such as a transfer-on-death deed), the real property is going to have to be probated to change the title to the heirs.
Contrasting that scenario with the revocable trust scenario, upon a person’s death where his revocable trust owns real property, the trust can continue as the owner and eventually transfer title to the property to the beneficiaries. Since a change in title is accomplished by the trust, there is no need to do a probate case based on the real property.

Automobiles and Revocable Trust

Automobiles come up a little bit short in terms of forcing an estate to be probated. There are scenarios where one can change the title to an automobile following a person’s death, by taking the original title to a tag agent and demonstrating that they are the beneficiaries entitled to receive the automobile. This showing of beneficiary status is usually accomplished with a last will and testament. This method is inconsistent and sometimes varies from tag agent to tag agent, so I do not recommend this method to my clients.

Instead, I recommend that my clients transfer title to their automobiles to their revocable living trust by signing the back of the original title at the tag agent. It’s a relatively simple process and allows people to get the full benefit of the revocable living trust.

Posted by Shawn Roberts in Blogposts, Oklahoma Estate Planning, Oklahoma Probate

How does Oklahoma law protect an employee’s social media accounts?

Social media has existed long enough to become common in our lives. 

Although it not the only way to use social media, public broadcasting and interaction is the norm for many people (as opposed to say protecting your Twitter account from public consumption).  It is quick and simple for one to broadcast any thought, feeling, question, rant or tangent into publicly-occupied cyberspace.  With the ubiquity of social media, Oklahoma employer and employees are likely to encounter “issues” from the use of social media.    Recognizing this reality, in 2014 the Oklahoma legislature enacted a law to address employer actions regarding personal social media accounts.  The statute is titled § 173.2. Prohibited actions regarding personal social media accounts–Exemptions–

Below are some of the actions that an Oklahoma employer is prohibited from taking related to employees’ social media accounts:

1. Require an employee or prospective employee to disclose a user name and password or other means of authentication for accessing a personal online social media account through an electronic communications device;
2. Require an employee or prospective employee to access the employee’s or prospective employee’s personal online social media account in the presence of the employer in a manner that enables the employer to observe the contents of such accounts if the account’s contents are not available to the general public, except pursuant to an investigation as provided in subsection D of this act;
3. Take retaliatory personnel action that materially and negatively affects the terms and conditions of employment against an employee solely for refusal to give the employer the user name or password to the employee’s personal online social media account; or
4. Refuse to hire a prospective employee solely as a result of the prospective employee’s refusal to give the employer the user name and password to the prospective employee’s personal online social media account.

You can find the Oklahoma Statute here. As always there are exceptions and qualifications, so if questions arise for you, please feel free to reach out to me.

 

Posted by Shawn Roberts in Blogposts, Oklahoma Employment Law