Sarah Stewart Legal Group, PLLC

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5 Tips for New Parents to Prepare for Baby

By Sarah Stewart Legal Group

A new baby brings parents so much joy. There are so many things you have to do to prepare- get baby clothes, diapers, bedding, design a nursery, just to name a few. The list seems never-ending.

Usually one of the last, but most important, items on a new parents’ to-do list is to get their financial and legal plans in order.   We’ll cover the 5 most important ways to prepare for new baby legally and financially today.

(1) Get Life Insurance

Life Insurance serves a very specific purpose. Life Insurance allows you to protect your family financially and prepare if something happens to you.  Life insurance helps your children pay for college and/or your spouse take care of the day-to-day necessities, like daycare, food, and shelter, if you are not there to contribute.

(2) Set Up A Monthly Automatic Draft Deposit for Savings

Many banking institutions allow you to schedule a monthly draft from your checking account to your savings account. Set up a high yield savings account with a monthly draft you can afford so you can guarantee you are building your emergency fund.  Experts recommend having 3 to 6 months of bills in savings in case an emergency arises. Even a small monthly amount will add up over time.

(3) Make an Estate Plan

Now that you have a bouncing bundle of joy on the way, you need to think about who will take care of him or her if you and your spouse die.  It is not a pleasant thought, but it is much better to decide now than to not have made the decision at all if that day comes sooner than you expected.

You will also want to be sure you have a plan in place for how your money will be spent for your children’s care.  Without a trust, the money will go to the children’s Guardian, or the children if they are 18, as soon as you die.  If you want to make sure the money is protected, or have specific wishes for when the children can access the money, you will need a Trust to enforce those wishes.

(4) Reduce Debt

One of the greatest scams of all time is credit card debt.  Anyone who has suffered from stifling credit card debt knows the downfalls of using credit cards for purchases.  Having a baby will only accelerate those problems.  Make a plan and budget now to help you be free from debt.

(5) Put Money Aside for Baby

Whether you choose a simple free savings account with your local bank, or a 529 education savings plan for advanced education, it is important to have some money stashed away for your child’s future-whether that future be education, entrepreneurship, or traveling the world.  Over 18 years (or more), even a small monthly savings can add up.  So, start saving today.

A new baby brings so much joy, excitement, and responsibility.  Be sure to use this guide to prepare for your baby and your financial future.

5 Financial Mistakes of Millennial Parents

By: Sarah Stewart Legal Group

Parents are busy.  They cart their children around to endless activities while trying to manage a household, and oftentimes, work.  In the midst of all the craziness, it’s easy to forget how important your finances are and how to plan for the future, when the kids have left the nest.  Here are the 5 most important financial mistakes for young parents to fix:

(1) Neglecting your retirement account.

Many parents try to fund their children’s college educations, but don’t save for their own retirements.  Really, parents should focus on saving for retirement over funding college.  First, there are scholarships and loans available for college while there aren’t for retirement.  Second, who’s to say college 20 years from now will be of the same importance or that your child will even decide to go to college?  Maybe they’ll be the next teenage genius, business-building sensation!

If you are employed, focus on your 401k accounts first.  Many times, employers will match a portion of their employees’ contributions.  If that is not an option, choose a ROTH IRA or traditional IRA.  Talk to a professional about the best option for you.

(2) Forgetting to save.

What would happen today if you and/or your spouse lost your job?  Would you have enough money to pay bills, buy groceries, and pay for gas to get you to interviews?  If you’re like most young parents, the answer is no.  Most financial experts suggest having 3 to 6 months of total living expenses saved as an emergency fund.  Start today!  Open an online account with a bank.  Don’t order checks, and set up a direct payment from your account in whatever amount you can reasonably afford each month.  Resist the urge to dip into the account, unless it’s an emergency, until it passes your 3 to 6 month emergency fund requirement. This will allow you to weather the storm of unemployment, or pay unexpected medical or home repair expenses when they come up.

(3) Failing to take tax breaks.

Most parents are aware of the tax breaks available per child.  However, they sometimes miss less obvious tax savings.  Be sure to speak to your accountant, or look into tax savings on daycare, child tax credits, tax credits for adoption, and tuition credits for special needs students.  You can find information on these credits at

(4) Starting savings accounts owned by your child.

Opening a custodial savings account when your child receives money for education from a family member seems like a good idea.  But, there are drawbacks. You can’t reach the money if you need it, savings are taxable, the account will count against eligibility for financial aid, and the return on investment is usually not very high.  Your family should consider a 529 college-savings plan instead.  If you use the account toward eligible education expenses, the money will grow tax-free.  Also, the accounts usually have a higher interest yield than CDs and other savings accounts.

(5) Overlooking health-care flexible spending accounts.

Many companies allow employees to save pretax dollars for medical expenses.  Only about 20% of employees take advantage of the plan, likely because of the nature of the savings that if you do not use the account, you will lose that money.  To take full advantage of this opportunity, look at your medical records.  Determine how much prescriptions, dental, vision, and doctor’s appointments were for the past year, then use that total for your FSA at enrollment.  Keep in mind, there may be a cap.

Estate Planning for Business Owners

By: Sarah Stewart Legal Group

Many people don’t want to think about what will happen after they die. Business owners are no exception. But, estate planning, though important for everyone, may be even more important for business owners.

Have you thought about what happens to your business when you die? Who will take over? Will your family receive a portion of your business, or step in and run it? Do you want the power to make those decisions, or do you want to leave it up to a Court to decide? Most business owners are not comfortable with the prospect of giving a Court control to decide who will run their business, or whether the business will continue.

It is even more important for businesses that have more than one owner to consider estate planning, succession, and even life insurance for their owners. As a partner in a business, how would you feel if your partner’s long lost cousin, and only heir, were given control of his portion of the business when he died unexpectedly? I imagine you would not be too happy.

Also, as businesses grow, so do their assets. At some point, tax planning considerations may come into play. Though these considerations are part of a larger estate plan, they are likely to affect a business owner more than an employee.

At the very least, business owners should have a Will that states who their assets, including their businesses, will go to when they die.  Owners should also consider having a trust put in place to avoid probate and continue the business as seamlessly as possible on death or disability. For businesses with more than one owner, business agreements between the owners are absolutely critical. These documents will lay out actions for buying out other members, dissolving the business, and handling death or disability.

Life insurance policies are a crucial element to any estate plan, but they are especially vital for owners. They provide funds for family members to pay business and personal debts, or, in the case of multiple owner businesses, they allow the business members to buy out heirs on the death of another member. They provide large liquid assets the business may not otherwise have.

Business owners and entrepreneurs are in a class all their own. They are progressive, hearty, strong individuals. They are more likely to take risks, but leaving succession to chance is too great a risk to take. Entrepreneurs owe their families the safety and security of healthy estate plans.

Joint Tenancy Pitfalls

By Sarah Stewart Legal Group

I have had several people tell me they do not need an Estate Plan because they own everything jointly with their children, or they want to.  Though it is true owning property in joint tenancy with right of survivorship means the other owner receives everything on the death of the joint owner, there are some pitfalls to joint tenancy that you must be aware of before making that change:

(1) Loss of Control.

The original owner loses control of the asset when the asset is listed with a joint owner.  The new owner has the same ownership as the original owner and big decisions can no longer be made without the approval of both owners.  For instance, if Mom has Son on the Deed to her home as a joint owner and she wants to sell her home, Son has to agree and sign off on the sell.

(2) Access.

The new owner will have the same access to the property as the original owner. Take a bank account, for example.  If the account is owned jointly, the new owner can write checks off of the account to pay his or her own bills, without the consent of the original owner.

(3) Creditors.

Once property is owned jointly, the new owner has equal right and access to it.  That means their creditors do as well.  Son has a large amount of debt he owes.  If Son is named as a joint owner on Mom’s home, Son’s creditors can file a lien on Mom’s home for Son’s debt.

(4) Tax Issues.

Joint property is taxed differently than an inheritance.  When a new owner is named as a joint owner, there can be tax implications.  Let’s say Son agreed to the sell of Mom’s home in our earlier example.  Since Son does not live in the home, his portion of the sell is taxed to him very differently than Mom’s and he may be liable for a large tax payment.

Though joint tenancy works very well in some situations, it must be used carefully.  If you are considering joint ownership, please be sure to do your research first so that you do not encounter unintended consequences.

Adoption Options

By Sarah Stewart Legal Group

I am often asked by couples looking to adopt what options are available to them within the State of Oklahoma.  Generally speaking, there are 3 ways couples can adopt.  I will speak briefly about these options, and the pros and cons of each, today.

(1) Adoption through the Department of Human Services

In Oklahoma, families can adopt through the Department of Human Services.  Though the Department will usually help pay for the adoption and offers post adoption services, the process can be a little challenging for families.  Families will have to go through classes, home studies, and other processes in order to adopt.  Additionally, depending on the family’s preference, there could be long waiting periods for a child to be placed.  There may also be emotional and physical disabilities with children adopted through DHS. However, the costs of DHS adoption are generally lowest for the family.

(2) Private Adoption (via an agency or personal acquaintance)

Private adoptions are more likely to take place among family members or private adoption agencies.  In these situations, families are generally more aware of the history of the children and the situations they come from.  However, there is a greater likelihood of the birth family changing their minds and the adoption falling through than with DHS adoptions.  Also, the costs are generally higher with adoption agencies, as there are placement fees.  Waiting periods can also be long, depending on the availability of birth families and their preferences of adoptive families.

(3) International Adoption

International adoption is the most complex and costly of all adoptions.  The adopting family generally works through and pays an agency for placement of an adoptive child.  These fees are usually higher than local adoption agencies.  The family must then complete adoption procedures overseas and readopt within the State of Oklahoma.  Adopting families will also need to look into citizenship procedures for their adoptive babies.

If you have more questions about adoption, please contact an attorney or adoption agency.

Who Needs a Durable Power of Attorney

By: Sarah C. Stewart

A durable power of attorney is a document that allows someone to choose another person to stand in his or her place for specified reasons.  Those reasons can include everything- medical and financial, just medical or financial, or even get extremely specific. A power of attorney does not allow the agent to overrule the person who signed the power of attorney.  As long as the signer has the ability to make decisions for himself or herself, the signer will always overrule the agent.  The signer can also terminate the power of attorney at any time.

Most people think that powers of attorney are only for the elderly.  That simply is not the case.  A durable power of attorney can go into effect immediately, or only when the signing party becomes incapacitated.  That means, if John, who’s 35, gets in a motorcycle accident tomorrow and goes into a coma, if he has a durable power of attorney in place, a loved one can make decisions for him tomorrow.  Or, if Mary, who’s 20, goes out of the country to study abroad with school, her attorney-in-fact can pay her bills for her while she is gone.

So, really, a durable power of attorney is a tool every adult needs.  It is a tool that can help any adult plan for the unexpected circumstances that happen in our day to day lives.

Guardianship vs. Durable Power of Attorney

By: Sarah Stewart

I often get frantic phone calls.  Something horrible has happened to Grandma.  She has been deteriorating for a while, but recently, she has taken a turn for the worse. Usually, she has been diagnosed with Alzheimer’s or dementia, and she has gotten to the point where she can no longer take care of herself and has been put into a nursing facility.

The nursing facility has told the family that they have to get Guardianship over mom so they can make medical decisions and help pay her medical bills.  But, nursing homes are not legal advisors, and like many other service providers, don’t always fully understand the law and options available to families.

One option families may have is what’s called a Durable Power of Attorney.  This document has to be signed when Grandma can fully understand what she is signing, choose an individual or individuals to help her with her matters, and sign the document.  Many people suffering from memory disorders have moments of lucidity where they can accomplish these tasks.  Some do not.

Durable Powers of Attorney give another individual or individuals the ability to help the signer with Medical and Financial matters.  Those matters can be as extensive, or restrictive, as the signer wants.  Those powers can start right away, or only on incapacity (when the signer cannot make decisions for is or herself).  The signer can always override the appointed attorney-in-fact (as long as he or she is capable) and can always revoke the Durable Power of Attorney.

If your loved one does not have a Durable Power of Attorney, or does not understand what a Durable Power of Attorney is, Guardianship is likely the only option.   Guardianship is a legal process by which families prove to the Court a loved one is unable to care for his or herself and the Court decides who is responsible for helping to care for Grandma.

There are options for families to file Guardianships on their own, get help with documents, or have attorneys take care of the process for you.  For Durable Powers of Attorney, it is best to meet with a professional who can draft the documents to fit your situation.  Both are options to help care for elderly loved ones, or those with Special Needs.

Why Do I Need a Business Entity?

I get questions, almost daily, from many people who want to be their own boss. They want to become entrepreneurs and run their own businesses.  And, most of them know that they need to do something to protect themselves, but they’re not sure what, exactly, that is.

One of the best ways to protect yourself is to establish a business entity.  A business entity can allow you to limit your personal liability. An entity essentially separates your personal assets and your business assets so that, in most cases, people cannot go after both if you were to be sued.

So, how do we do this?  How do we establish a business entity?  First, we need to decide what we want our business to be.  You have many options.  The ones who afford you  the greatest protection and limited liability are limited liability companies, corporations, and S-Corporations.

In my experience, limited liability companies are the most popular.  This is because they do not require Boards to run them and can have as many, or as few, owners as you want.  They are flexible.  Of course, you need to speak with a professional, or do your research, to determine what is best for your situation.

Once you decide what you want to be, you have to pick a name and register with the Secretary of State for the state(s) you are operating in.  In Oklahoma, all you have to do is go to the Secretary of State web site, choose Business forms, your type of entity, input your info, and pay- all online.

If you have more than one owner, you will want to seriously consider an agreement that outlines who owns what, who contributed what, and what happens if someone leaves or dies.  These documents are very important in helping you to minimize future risks to your business.  Of course, you’ll also want to consider any licenses and permits you’ll need to do business, and get yourself insured and possibly bonded.

You will also need to file for an Employer Identification Number (EIN) with the federal government for tax purposes.  This can be done entirely online at

Business ownership is an exciting, and stressful, time.  Be sure you have what you need to be successful and get yourself a business entity today!

Alphabet Soup

Have you spoken to a financial advisor or attorney lately regarding your estate and heard a lot of letters flying around?  Have you heard the terms GRAT and IDGT?  If you have, I imagine your head must be spinning!  What in the world do all those letters mean?  What is a Grantor Retained Annuity Trust?  What is an Intentionally Defective Grantor Trust?  Why do I care?

The truth is, most of us won’t really care.  These types of planning tools are better-suited for high-wealth clients.  What is a high-wealth client?  Currently, that is an individual who will very likely have assets of more than $5.4 million when they die ($10.8m for couples). Why that exact amount?  Mostly because the Federal Estate tax comes into play when someone passes that amount.

There are other considerations, of course, that may make your personal plan a good candidate for this type of planning.  For instance, does your state have estate tax? In Oklahoma, we currently do not.

Grantor Retained Annuity Trust

A GRAT is a way for you to leave large gifts without being subject to the annual gift tax.  Why is that important?  Well, mostly because the estate tax is reduced by annual gifts that you give annually.  The estate tax is tied to the gift tax.  If you give your allotted $14,000 each to your chosen people each year, your limit is $5.4 million.  Then, you have no estate exemption left.  So, we want to minimize those taxes as much as we possibly can.

A GRAT is a way to minimize those taxes without taking the benefits of the asset away from the Grantor (person establishing the trust). The Grantor is able to receive distributions (in the form of an “annuity”) at least annually. Then, the remainder passes to the heirs without estate taxes.  These trusts work best for income-producing and high appreciation assets.

Intentionally Defective Grantor Trust

An IDGT is purposefully drafted to invoke the Grantor trust rules of the Internal Revenue Code.  In this trust, the Grantor retains the power to recover the assets and benefit from the trust’s income.  The trust can be structured in a way where the asset is sold to the trust, or gifted to the trust.  If gifted, the estate tax exemption applies.  This trust works well for a family business.  The Grantor can retain business making decisions in regard to the business by keeping voting stock, but sell non-voting stock of the business to a trust with a promissory note.  Then, the asset is no longer owned by the Grantor for estate tax purposes, but the Grantor can still receive income from the promissory note.

The distributions must be pre-determined, and not related to the income of the business. The note can transfer to the spouse at death, or be self-canceling.

These tools are advanced considerations for an estate.  However, if you own your own, successful business, or assets that will exceed the Estate Tax exclusion, you should consider them for your estate.  Find a trusted advisor to help you in the planning.

Do You Need an Irrevocable Life Insurance Trust?



By: Sarah Stewart

For 2016, the estate tax exemption is $5.45 million.  That means an individual can leave assets valued at about $5.45 million to their heirs without their heirs having to pay an estate tax, which is a rather large amount. In the state of Oklahoma, there is currently not an estate tax amount, so for Oklahoma residents, at least you currently do not have to worry about paying additional estate taxes to the state. In other states, that may not be the case.

Under Federal and some state laws, life insurance proceeds can be taxed to the decedent’s estate when the decedent has an ownership interest in the policy.  That means, if the Decedent pays the premiums, changes beneficiaries, or has the ability to withdraw cash from his/her life insurance accounts, the value of the policy may be included for estate tax purposes. So, if we have an individual with an ownership interest in $2 million of life insurance and $3.5 million dollars in other assets, including real estate, business interests, and personal accounts, without proper planning, the estate would be subject to the high federal estate tax, and depending on the state, additional state estate taxes.

If you are in the fortunate situation where that may be a concern for your family, you can avoid having life insurance included in the estate value if you execute an Irrevocable Life Insurance Trust (“ILIT”). Though this type of trust is complex, the general idea is that you are turning over your control and ownership of the policy to a third-party trustee.  Because of the complicated issues included in this type of trust, it is best to have a corporate, or extremely tax-savvy, trustee.  The insured will make gifts each year to the trustee to pay the life insurance policy premiums.

In order to keep your gift tax exemption (currently $14,000 in 2016) intact, there are certain notices and precautions that must be taken.  This includes sending notices to beneficiaries and allowing beneficiaries the, often unexercised, option to withdraw their annual gifts from the trust.

If you do have a large estate that will be subject to estate taxes, the ILIT may also be an option for helping to pay some of those taxes and estate costs.  However, if the payment is made outright, there is a chance the payment may be counted as estate income.  There are ways to use the trust to make loans and provide liquidity to the estate, such as purchasing estate assets, without having tax ramifications.

If you are in a position to have assets that are over $5.45 million when you die, you may want to consider an ILIT.  Also, you may want to keep an eye on the federal and state estate tax laws to make sure this amount does not change with time.

Legislators are continuously updating the tax code.  So, though you may feel comfortable where you are now, there may be a change to lower the amount of the estate tax exemption at any given time and you will need to be aware of those changes to protect your estate from high federal, and possibly state, taxes. In those times, remember the ILIT as an estate planning option.

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