Oklahoma Estate Planning

This category contains posts on trusts, wills, durable powers of attorney, living wills and other issues related to estate planning.

The Oklahoma transfer-on-death deed: Smart Probate Avoidance

What happens to a person’s property when they die in Oklahoma?

There is a detailed answer in this post, What happens to a person’s property when they die?

The shorter answer is that it goes to your relatives, the people you chose in your last will and testament or Oklahoma revocable trust. If you own real property outright and pass away you will need a court order in an Oklahoma probate case to change the title from the person who passed away to his heirs.  There are several ways to avoid this results.  One way is the Oklahoma transfer-on-death deed.

Oklahoma Transfer-on-Death Deed

The Oklahoma TOD allows you to set up your real property to pass to another person after you die.  You sign and record the Deed with the Oklahoma county clerk in the county where the property is located. The person you giving the property to does not become the owner until you pass.  But, when you pass away, . . .

Transfer of the Property after death

The property passes almost automatically, with the person inheriting the property only need to file an affidavit stating that person died, whether the person was married and a legal description of the property.

 

If this is something that interests you or you like to talk about Oklahoma estate planning, please contact me.

 

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

Who pays the IRS tax on a “gift”?

Tax and money picture

Do you know who pays the tax on gift that is subject to federal estate tax?

In a previous post, I described what the IRS considers to be a gift.
If a gift has been made and there is no exclusion connected to it, gift tax may be due.  However, while a federal gift tax return may be required based on only one gift of $15,000.00, the chances of owing tax on a gift are much more remote.  The gift or gifts would have to exceed the unified credit amount, which currently stands at approximately 5.4 Million Dollars.

Nonetheless, if tax is due to the IRS on a gift, usually the person making the gift pays the tax.

Posted by Shawn Roberts in Estate and Gift Tax, Oklahoma Estate Planning

When is an IRS gift tax return required?

It is important to know when gifts you make trigger your obligation to file a federal gift tax return (IRS Form 709, United States Gift [and Generation-Skipping Transfer] Tax Return).  I have heard the IRS doesn’t take kindly to an individual who fails to file required tax returns 🙂
If a person makes an annual gift or a total annual gift to one person over the annual exclusion, a gift tax return must be filed with the IRS. However, unless the total of the gifts goes beyond the unified credit, 5.4 million, the person will not owe any gift tax.
Posted by Shawn Roberts in Blogposts, Estate and Gift Tax, Oklahoma Estate Planning

What is the IRS annual exclusion?

Every US citizen has what is known as the annual exclusion which allows the person to gift away up to whatever the current year amount is without either having to file an IRS Gift Tax Return or being subject to any tax.
The annual exclusion amount for 2015 is $14,000.00. That means an individual could make as many $14,000 gifts as he desires to different people and not be subject to any tax or have to file a gift tax return.
One of the key points with the annual exclusion is any property gifted under the exclusion does not count against the unified credit. Let me provide an example that may be helpful:
  • A parent gifts the full annual exclusion amount in 2015 to each of their five children. That means the parent gifted $70,000 when all five gifts are added together. Since all of the gifts were within the annual exclusion amount the parent is not required to file a gift tax return.
  • Additionally, the $70,000 does not count against the unified credit, which in 2015 is approximately $5.4 million.
Posted by Shawn Roberts in Estate and Gift Tax, Oklahoma Estate Planning

How are the federal estate tax and gift tax connected?

Connected Hands

Do you know why the federal estate tax and the federal gift tax are often addressed in the same discussion?

Although the federal estate tax and federal gift tax are separate statutes, they are connected by what is known as the unified credit.
The unified credit is automatically provided by the IRS Code to every US citizen at their birth. This credit is the amount of property that a person can gift away before they owe any tax to the IRS.
That means that all the gifts you make during your life are added to all the gifts you make at your death (through an Oklahoma Trust, Oklahoma Will or otherwise) and that is the basic amount that the IRS considers for taxation.
However, before any tax is assessed, you get to subtract (use your “coupon” so to speak) to reduce the amount.  The coupon can be applied to all gifts during life and at death.
So, while a person could use their whole coupon during their life, there is no requirement that they do so.  If there is an amount left on the coupon at death, the amount can be applied.
Posted by Shawn Roberts in Estate and Gift Tax, Oklahoma Estate Planning

What is the federal estate tax?

According to the IRS, the 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.”  The top federal estate tax rate for property transfers that are not otherwise credited or excluded is 40% for 2015.
Posted by Shawn Roberts in Estate and Gift Tax, Oklahoma Estate Planning

What is that coupon (unified credit) the IRS provides?

Tender Leaf Tea Coupon from Flickr User AVI

Tender Leaf Tea Coupon from Flickr User AVI

Do you know what the Internal Revenue Service and your local grocery store have in common?

They both provide you with coupons you can apply to reduce the amount you required to pay!

Well, the IRS’s “coupon” is not exactly like scoring big with a $2.00 off coupon for Tide Detergent.  The IRS administers the unified credit.

The unified credit is automatically provided by the IRS Code to every US citizen at their birth. This credit is the amount of property that a person can gift away, either during life or at death, before they owe any tax to the IRS.

The coupon analogy is helpful because when a person passes, the person’s heirs can apply the IRS Unified Credit against against tax that might be owed by the deceased person.

For more specifics about the IRS unified credit, check this post, How does the IRS Unified Credit work?

Posted by Shawn Roberts in Estate and Gift Tax, Oklahoma Estate Planning

How does the IRS unified credit work?

In a previous post, I talked about the IRS unified credit, the IRS version of a coupon.  Here are some of the specifics on the unified credit.

  • The unified credit for people passing away in 2015 is approximately $5.4 million. That number is indexed to inflation and will rise a small amount each year and less changed by Congress.
  • This means that a person can give away up to the unified credit amount either during their life or at the time of their death without knowing any tax to the IRS.
  • For example, a person could gift $1 million to one of their children at age 25 and not owe any tax to the IRS.  
    Nonetheless, a gift tax return would have to be filed with the IRS year the gift was made. That is because of another tax exclusion vehicle.

One more point to remember is that federal tax law allows you give an unlimited amount of property to your spouse (assuming the spouse is a US Citizen) without incurring any tax.  If you die with a 20 million dollar estate, you can pass all of it to your pass without any tax being due.

  • This sounds really good, right?  Leave everything to your spouse and have no tax issues, right?  Not so fast my friend, as Lee Corso from ESPN’s College GameDay would say.

It is true that there would no tax assessed on the transfer to your spouse.  Presumably, however, at some point that same spouse is going to transfer the spouse’s estate to people other than a spouse.  If that transfer happens and the estate is valued over the unified credit amount, taxes will be an issues.

Posted by Shawn Roberts in Estate and Gift Tax, Oklahoma Estate Planning

You need to know . . . when the IRS thinks you have made a gift

Since the word “gift” is at the heart of federal estate taxation, it makes sense to understand how the IRS views the term IRS Gift.  The IRS states that a gift is:

The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.
The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

You need to know when you have made a gift because that act could trigger obligations.
Posted by Shawn Roberts in Blogposts, Estate and Gift Tax, Oklahoma Estate Planning

Two ways to change title to a car without Oklahoma probate

Image provided by Flickr user Keith Ellwood

Image provided by Flickr user Keith Ellwood

Would you like to know two ways you can change the title to a car owned by a person who died, without going through an Oklahoma probate?

If your answer is “yes”, you have found the right post. 🙂

I have written volumes on this blog about Oklahoma estate planning and a lesser amount about addressing the situation where someone died without doing estate planning.  I would like to provide a few cleanup tools that can be used to avoid probate even after someone didn’t do Oklahoma estate planning.

There are two options that may apply for changing the title to a car owned by someone who died with going through Oklahoma probate.

  1. Oklahoma No Administrator Affidavit.

My experience has been that most tag agents will transfer title to the vehicle following a person’s death when the No Administrator Affidavit is provided.  I wrote about this Affidavit on this blog post.  This document will generally allow the title to a car to be transferred if:

  • A properly completed No Administrator Affidavit is provided;
  • A certified copy of the death certificate is provided; and
  • The facts are such where the person asking for the change in title (ostensibly to themselves) has a clear right to receive the vehicle.
  1. Oklahoma Small Estate Affidavit.

The other option is the Oklahoma Tax Commission’s Small Estate Affidavit.  This document is used to transfer the ownership of a vehicle when:

  • The car is given to someone in a last will and testament,
  • The total value of the estate is not greater than $50,000.00, and
  • The person who is given the car in the last will and testament must sign the Oklahoma Small Estate Affidavit.

 

There are no guarantees of course; even when you think you have done everything correctly, the transfer of title still doesn’t happen.  If you run into this type of issue, give me a call or an email.

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