Sarah Stewart Legal Group, PLLC

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Month: December 2016

3 Ways to Fund a Trust

By: Sarah Stewart Legal Group

A trust is a powerful estate planning document.  People who choose a trust as an estate planning vehicle can avoid probate, increase privacy, decrease government intervention in their matters, have more control over the use of their assets when they die, and determine if the trust will be changeable.  If any of these concepts are important to you, a trust is the right plan of action.

A trust is a plan that can be funded in a few different ways. I often receive questions on how a trust is funded.  We will discuss those options today.

(1) Immediate

Immediate funding happens when you transfer all of your assets to the trust quickly after creating it.  You do this by preparing and filing Deeds and Memorandums of Trust on real estate and transferring checking, savings, retirement, and other accounts to the trust.  With immediate funding you ensure that you have the protection of a Trustee to help you when you are incapacitated (can’t make decisions for yourself) and you ensure the trust is properly funded if something were to happen to you unexpectedly.

However, sometimes immediate funding is not an option or it doesn’t meet the goals of the creator of the trust.  So, there are other options available.

(2) At Death

For some assets, this will be your only option.  For instance, if you want your life insurance policies to pass through the trust, you will most likely have to name your trust as the beneficiary and the assets will transfer to the trust on your death. You have the option of doing the same with checking and savings accounts.  However, if you do not title your accounts in the name of the trust, and they are not currently owned jointly, you do lose some of the protection of having a Trustee be able to step in and manage those accounts if you are incapacitated.

With real estate, it can be trickier.  Though Oklahoma law allows you to file a Transfer on Death Deed that transfers the property only on death, that law has been evolving over the years.  So, it may not be the best option for your family.  And, you want to consider tax consequences of your choices as well.

(3) A Little of Both

The reality is, most trusts will be funded this way.  There will be some property you will want to immediately transfer to your trust, and some you likely won’t or won’t be able to.  So, most trust funding requires a joint approach of titling assets into the trust now, and naming the trust as beneficiary after your death.  The beauty of a trust is that it is really all up to you!

Just remember, a trust is only as good as what you have in it.  So, regardless of how your trust is funded, you have to be diligent to ensure it is funded, or it won’t do you any good. If a trust is not funded properly, the assets may still have to go through probate.

Be sure to contact a professional to start your trust and reach out to him or her with any funding questions.

4 Factors That May Make Business Owners Personally Liable for Company Liabilities

By: Sarah Stewart Legal Group

Business owners create businesses in order to separate their personal assets and liabilities from business assets and liabilities.  But, if the owner doesn’t properly separate the business assets from his or her personal assets, the business owner can be found personally liable for debts of the business by a Court of law.  In legal terms, this is called “piercing the corporate veil.”

What do you need to do to keep yourself and your business safe?

In determining if a business is actually separate from it’s owner, the court will usually look at and weigh 4 factors.  If you ensure your business meets these factors of separation, you are well on your way to protecting your personal assets from your business liabilities and vice versa.

(1) Lack of Separation

In order to protect your personal assets from business debts and liabilities, your business assets must be separate.  You will need to establish your business by registering it with the state in some way.  You will also need to establish separate bank accounts.  You need to be sure to pay business expenses with business funds and personal expenses with personal funds.  You can, of course, pay yourself from the business, but it is best to do this by issuing yourself checks from the business.  The main goal here is to make it clear, to everyone, that you are not your business.

(2) Lack of Capital to Cover Costs

If you do not keep enough money in your business account to cover typical business costs, you are at risk for piercing the corporate veil.  Companies that did not have enough money to cover business expenses have been found, in some cases, to be shell corporations and the owners have been found personally liable for debts associated with those businesses.

(3) Used for Fraud

If your business is used to commit fraud, you may be personally liable for business debts and lawsuits.  Please be sure to run your companies with integrity and abide by applicable laws.

(4) Failure to Observe Formalities

Some company structures require very little formalities, others require more.  For instance, limited liability companies do not require you to have a Board of Directors or to hold board meetings and keep minutes, while C Corporations do.  If you own a C Corporation and have not appointed a Board of Directors, and do not hold board meetings, you are at risk for personal liability for business debts and lawsuits.  When picking your business structure, be sure to take into account all the formalities and tax implications that may come with choosing that business structure.

Business owners should be aware of the benefits of having a separate business entity to protect themselves from personal liability for business debts and lawsuits.  They should also be aware of the practices they need to implement to preserve that separation, and follow the rules.

If you are looking to start a business, it is always a good idea to speak with professionals to help you decide how to structure your business for taxes and other business related issues.

3 Questions You Should Answer Before Getting a Special Needs Trust

By: Sarah Stewart Legal Group

Families with loved ones with Special Needs face all of the problems every family faces, and some others.  With every family, it is important to plan for your children in case something happens to you or the other parent.  But, in families where loved ones have Special Needs, it can be even more important.

Many families dealing with the day to day challenges of finding proper care for their loved ones and applying for and receiving government benefits can forget that inheritances can cause government benefits to be taken away from those who need it most.  Income-based benefits are calculated based on the assets a person owns and the income received.  So, if a recipient suddenly gets a windfall through an inheritance, he or she will lose those benefits.  Though the recipient can get the benefits back again once he or she qualifies, the question is will he or she be able to?

Since trusts are so important to maintain proper care and assets for loved ones with Special Needs, we will discuss the 3 most important questions to ask before getting a trust for your loved one below.

(1) What will my loved one with Special Needs need if I’m no longer here to care for him or her?

When preparing your trust and wishes for your loved one, you will need to sit down and think about the needs he or she has and the costs you can anticipate for those needs throughout the years.  You will also want to think about whether you are wanting your loved one to live in a home or a different setting and what additional problems may arise.  Then, you will want to allot an excess amount for surprise costs.  Most importantly, you will want to think about who you trust to care for your loved one if something were to happen to you.  All of this information will be important in deciding how to fund your trust and who to name as a manager of the trust’s assets.

(2) Where are the funds coming from?

Before you start a trust for a loved one with Special Needs, you will need to decide where the money to fund the trust will come from.  You have options for different kinds of trusts, but those options depend on who owns the assets before they go into the trust.  There are trusts that can only be established with assets of the loved one with Special Needs.  These are called First-Party trusts. And trusts established with funds from a parent, grandparent, or other person.  These are Third-Party trusts.  How the trust is funded decides the rules the trust must follow if you want your loved one with Special Needs to keep receiving government benefits. Your options are limited based on how you plan to fund the trust.

(3) How will the trust fit in with my other estate plans?

Just as loved ones with Special Needs have specific needs others may not, families with Special Needs will have estate planning issues other families do not.  Most families will need to establish a separate plan for their loved ones with Special Needs and the rest of their family.  If the family does not seek professional input in creating estate and financial plans, the family member with Special Needs and the caretaker may find themselves in a dismal situation.

What if the loved one with Special Needs loses supplemental funding and the caretaker cannot provide the necessary care for his or her loved one?  Would he or she be able to figure out how to access those benefits again?  What if you didn’t choose a caretaker for your loved one with Special Needs and when you die there is only a sibling, who is a child, left to care for him or her?

These are difficult questions for every family to answer.  But, given the unique circumstances of each family, we all must consider them to properly prepare.


Frequently Asked Questions About Oklahoma Guardianships

By Sarah Stewart Legal Group

Many of our clients are Guardians or attorneys in fact for members of their family.  Whether those family members are minors, or adults, we get a lot of questions about what Guardianship is and how it works.  We have compiled some of those questions, and answers, below:

(1) What is the difference between a Power of Attorney and a Guardianship?

A Power of Attorney is a document that an adult signs to allow someone to act in certain situations on his or her behalf.  There are Durable Powers of Attorney that allow the attorney in fact to continue to act even after the person signing the document is unable to make decisions for his or herself.  There are also Powers of Attorney that will not continue if the person is incapable of making his or her own decisions.  There are also Powers of Attorney that parents can sign allowing someone else to provide certain care to their children.  This can include getting medical treatment for the child or enrolling him or her in school. A Power of Attorney is a private contract between individuals.

Guardians are court appointed.  The person seeking Guardianship has to go to Court to become a Guardian.  Usually, for minors, guardianships are sought when Mom or Dad are gone and the person seeking Guardianship can’t find them, the Guardian needs to be able to enroll the child in school and Mom and Dad won’t give them a power of attorney, or there is a fear that Mom or Dad may come take the child out of a stable environment at any time.

For adults, Guardianship is given when the Guardian can show that the person he or she is seeking guardianship over is unable to take care of his or herself, either physically or due to a mental health issue or disability. Guardians are under the supervision of the Court.

(2) What are a Guardian’s duties?

A Guardian will care for the Ward (the person over whom he or she has Guardianship) like they would their own child.  That means making sure the physical and psychological needs of the Ward are met.  This can include paying bills on the Ward’s behalf, finding proper housing, or making sure the Ward attends school.  The Guardian has a duty to try to acknowledge and consider the opinions of the Adult Ward in his or her care.

The Guardian will also be required to report to the Court annually with updates on the Ward’s condition and property.  The Guardian will have to ask permission of the Court to make big changes, like selling a Ward’s home, or for reimbursements of Guardian expenses from the Ward’s property.

(3) What is incapacity?

For adult Guardianships, the Guardian must prove to the Court that the person he or she is seeking Guardianship over is incapacitated.  Incapacity means that the Ward is unable to make decisions for his or herself.  Generally, incapacity is proven by providing medical records showing the Ward’s current medical situation.

(4) Will the Ward receive notice of the proceedings?

For adult guardianships, the closest living relatives of the Ward will receive notice of the proceedings and the Ward must be personally served.  For minor Guardianships, the Mom and Dad of the child must receive notice of the proceedings.

If you have any other questions about guardianship, or want to start guardianship proceedings in Oklahoma, you should consult with a professional.


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