The next thing to consider is the impact of taxes on your estate, particularly estate taxes. There are two separate estate taxes to consider, namely: FEDERAL ESTATE TAX and OKLAHOMA ESTATE TAX.

1. There is no Federal Estate Tax on property passing to a surviving spouse. This means that you may leave the your spouse any size of an estate and there will be no Federal Estate Taxes due.
2. There also is no Federal Estate Tax on property passing to a qualified charity.
3. A decedent dying in 2009 may leave any person or group of persons, collectively, up to $3,500,000 [less previous taxable gifts] of the decedent's Gross Estate free of Federal Estate Tax. This $3,500,000 amount (the "Federal Exemption") is personal to each of us and may be used all on one person or on a group of persons. Once the Federal Exemption is used, the Federal Estate Tax rate starts at 45%.
4. The Federal Estate Tax is based on the fair market value of your Gross Estate at the time of death. Gross Estate includes all five (5) ways of owning property. Your Gross Estate also may include other property. What you actually paid for the property that makes up your Gross Estate is of little significance. Life insurance owned by you is included in the your Gross Estate at its face value.
5. Beginning January 1, 2010, the Federal Estate Tax is temporarily repealed for the year 2010.  This means that there is no Federal Estate Tax on the estate of any person dying in 2010.  However, the Federal Estate Tax law changes that were enacted in 2001 "sunset" (expire) on December 31, 2010.  This means that the Federal Estate Tax laws revert to the laws that were in existence immediately prior to the 2001 changes, which means that, on January 1, 2011, there will be a $1,000,000.00 Federal Exemption and a tax rate of 55%.

1. There is no Oklahoma Estate Tax on property passing to your surviving spouse or a qualified charity. This means that you may leave your spouse or a charity any size of an estate and there will be no Oklahoma Estate Taxes due.
2. For the year 2009, a decedent may leave any person or group of persons, collectively, up to $3,000,000.00 (the "Oklahoma Exemption") of the decedent's Gross Estate free of Oklahoma Estate Tax.
3. Like Federal Estate Tax law, Oklahoma Estate Tax Law is also based upon the fair market value of the property at the time of death.
4. Beginning January 1, 2010, the Oklahoma Estate Tax law is permanently repealed.  This means that a decedent may leave any amount of property to any person or group of persons free of Oklahoma Estate Taxes.

    As you can see from the foregoing, property passing to a surviving spouse will pass to that surviving spouse completely free of Federal and Oklahoma Estate Tax. Upon the death of the surviving spouse, however, the surviving spouse’s Taxable Estate will incur a Federal Estate Tax if it exceeds the Federal Exemption and there will also be an Oklahoma Estate Tax if the Gross Estate exceeds the Oklahoma Exemption.

    There is a very easy technique to make certain that both husband and wife fully utilize their Federal Exemption. Unfortunately, in order to take advantage of this, you must have a carefully drawn Will or Revocable Trust Agreement. Estate Tax minimization is not automatic. For example, if your Estate is held entirely in joint tenancy with right of survivorship with your spouse, or if you have a "simple" Will which leaves everything to your spouse, the surviving spouse’s estate (i.e. your children) may pay hundred of thousands of dollars in estate taxes which could have been legally avoided. Joint tenancy with right of survivorship will not work!

    The technique used to minimize Federal Estate Taxes involves the establishment of a special trust at the death of the first spouse. This special trust is called any one of the following:

    The Family Trust is designed (written) to: (1) use the Federal Exemption of the first spouse to die to shelter the corpus of the Family Trust from taxation at the first spouse’s death; and (2) not have the Family Trust corpus included in the surviving spouse’s estate at the surviving spouse’s death.

    Generally, the surviving spouse is given the right to all of the income from the Family Trust together with a right to use the corpus of the trust, if needed. The Family Trust is funded (i.e. given property) equal to the Federal Exemption for the year in which the first spouse died. Also, generally the balance of the first deceased spouse's estate (trust) passes tax free directly to the surviving spouse.