ESTATE PLANNING, PROBATE & TRUST ADMINISTRATION

Frequently Asked Questions…

Why do I have to have a will? Can I do it myself? Can I change it?

A will is important to ensure that your money and other property go to the persons you want them to go to. If you don’t say to whom the assets go, the state of Oregon will decide. These rules, called the rules of “intestacy,” generally provide that your assets go to your next of kin, but uncertainty and unintended results abound. Only a written will provides peace of mind.

Have a living trust?
You still need a will. This type of will is called a “pourover” will because it ensures any assets left outside of the trust will be properly placed in (i.e., poured into) the trust. Though a probate is necessary for a pourover will, it still ensures that the asset left out of the trust will follow the same distribution pattern as the trust.

Young kids?
A will is the optimal way to transfer guardianship to a trusted individual after the parents’ death – even if there are no assets. If there are assets, the will is even more important because it can establish a family trust for the benefit of the child or children. This ensures that the children will receive the trust money at an age that they can manage the money. It also allows the parent(s) to specify who the trustee of the trust is, to include distribution provisions that minimize “trust baby” syndrome, and any other relevant provisions.

Have a child, young or not, with an uncertain future?
A child with special needs? Your will is especially important for establishing appropriate trust provisions to benefit the child in a way that maximizes the child’s standard of living while, in some cases, ensuring government benefits continue uninterrupted.

Can I change my will?
You can change your will at any time. In fact, it’s a good idea to update your will to reflect changes in your family, assets, and desires.

How does property pass at death?

Disclaimer: Not everyone needs a trust, and which one is right for you, if any, depends on your specific assets and family. The information provided below is for general information only. We need to meet with you to give you specific advice for you.

To understand why you need a will or how a revocable living trust works, we want you to understand how property passes at death in Oregon:

Individual name – passes by your will and probate.
Generally speaking, any asset owned in your own name alone will pass under your will and through a probate proceeding.

Joint Tenants – passes outside probate to the survivor.
Property owned as joint tenants with the right of survivorship will pass automatically to the surviving joint tenant, outside of the will, and without any probate.

POD/TOD – passes outside probate to the beneficiary.
Bank accounts owned with a payable on death (POD) designation pass to the designated payee without the need for any probate. The same is true for assets with a transferable on death (TOD) designation, such as stock certificates or LLC membership interests.

Retirement and Life Insurance – passes outside probate by beneficiary designation to the beneficiary.
Retirement plan assets, annuity proceeds and life insurance proceeds pass to the beneficiary who is designated by the retirement plan participant, or the life insurance policy or annuity owner. These proceeds pass outside of the will and are not subject to probate.

Revocable Living Trust – passes outside probate to the beneficiaries.
Any assets that have been transferred to a living trust during your lifetime pass to the persons named in the trust outside of your wills and without any probate.

What is a trust?

Disclaimer: Not everyone needs a trust, and which one is right for you, if any, depends on your specific assets and family. The information provided below is for general information only. We need to meet with you to give you specific advice for you.

The basic idea of a trust is that a person is appointed to manage money or assets for the benefit of the named beneficiary. Trusts are like ice cream… they come in all shapes and sizes.

Testamentary Trusts.
Some trusts are established at death by a person’s will, which formally is called a “Last Will and Testament.” As a result, these trusts are “testamentary trusts.” For example, a parent may establish a family trust for the benefit of his or her children in case the parent dies while the children are young. Another example is a grandparent who establishes an education trust for the grandchildren after his or her death.

Living Trust.
In contrast, trusts set up during a person’s lifetime can be revocable or irrevocable. A revocable living trust is a very common type of trust and is used to avoid probate to manage assets during any financial incapacity, and for maximum privacy.

Irrevocable Trusts.
An irrevocable trust is just as it sounds: irrevocable. Irrevocable trusts can be testamentary or living. Some common irrevocable living trusts include: irrevocable life insurance trust (ILIT), charitable remainder trusts, charitable unitrusts, generation-skipping transfer trusts, and asset protection trusts.

Charitable Trusts.
There are many types of charitable trusts, which can be an effective way for donors to leverage gifts while providing for their families as well.

Will or revocable living trust? Which one is right for me?

Disclaimer: We specialize in guiding clients through choosing a will or trust in their estate plans. Which is right for you depends on your specific assets and family. The information provided below is for general information only. We need to meet with you to give you specific advice for you.

Often clients wonder whether a revocable living trust is right for them. Most clients choose to incorporate a revocable living trust around retirement age, relying on a will prior to that time. The basic differences include:

• A will requires probate to transfer your property after death. In a revocable living trust, the client appoints a person or institution – called the “trustee” – who has authority to transfer the assets in the trust after death. This allows the client to avoid probate, which often minimizes cost and delay.

• A revocable living trust has the additional benefit of giving the trustee the authority to manage the trust assets during any period that the client is financially incapacity and unable to do so. This avoids needing a conservator appointed by the court to do the same, which is an expensive process with annual costs and ongoing requirements.

• The administration of a living trust is private, while the administration of a will is part of the public record of the court.

• A revocable living trust requires more documents and the physical transfer of assets into the trust. This means it is more expensive than the cost to write just a will. Typically, this extra cost is outweighed by the expected cost of probate.

• A revocable living trust requires additional maintenance because it only works to the extent of the assets that are owned by the trust; any asset left outside the trust (with few exceptions) requires a probate. Of course, both wills and trusts require updates for changes in your family, assets, and other circumstances, not unlike your car, which needs a 60,000 (or more) mile tune-up.

Keep in mind that some clients execute revocable living trusts well before retirement age, and some clients prefer to continue relying on a will well past retirement age.

What is probate and how do I avoid it?

Disclaimer: We specialize in guiding clients through knowing what to expect with regard to probate, including whether to plan to avoid probate or to plan for it, as well as which method of probate avoidance is best. Whether before or after a death in the family, we focus our efforts in minimizing the costs and delays of probate in the manner that best suits each client’s family. The information provided below is for general information only. We need to meet with you to give you specific advice for you.

Probate described.
Probate is the court process by which a person is appointed “personal representative” to gather together a deceased individual’s “probate” assets, pay off any debts, and distribute the remaining assets to the appropriate persons. The probate process in Oregon involves, among other tasks, filing an inventory of assets with the court, publishing a newspaper notice, and sending notices to heirs, beneficiaries, and creditors. All creditors must submit a claim for payment to the estate within four months or their claims are barred. At the end of the process, the personal representative files an accounting and the court orders distributions of the assets.

Benefits of probate.
Peace of mind, claims cut off, resolves disputes. We never assume that avoiding probate is best. In some cases, probate is best. The court oversees the actions of the personal representative, providing assurance that the decedent’s wishes will be honored and that debts will be paid. This also provides peace of mind to the beneficiaries that the assets they receive from the estate will be free from any future claims of creditors. When family disputes are anticipated, probate is ideal to “police” the matter and resolve any disputes that arise.

Downsides of probate.
Cost, delay, public disclosure. When the benefits of probate don’t matter to clients, however, we try to help them avoid the cost and delay of probate, which can be unnecessary when the family gets along well and there are no creditors. Sometimes the estimated financial savings can be in the thousands of dollars and the time savings six months to a year. Also, many clients like to avoid probate because it is part of the public record. In some cases, public disclosure is more than just a preference – for some clients, one significant goal of the estate is keeping the matter (including what they owned and who gets it) private from wayward family members.

Avoiding probate.
Probate only is necessary for assets that are owned in a person’s individual name and that do not have a beneficiary designation (“probate assets”) Probate avoidance involves changing title to each client’s assets to alternative forms of ownership, for example, joint ownership, payable on death designations, and/or living trusts. Types of “non-probate assets” include a home owned by a person’s living trust or the individual’s life insurance policy, which passes according to the person’s beneficiary designation.

Is joint ownership a good way to avoid probate?
(Caution! Unintended consequences.)
Joint ownership (e.g., joint bank account, real estate held “joint with right of survivorship” or “tenants by the entirety”) is a way of avoiding probate – but not for many clients. For most of our clients, we only recommend joint ownership for married couples who do not have taxable estates. Joint ownership between a parent and child often only causes trouble – liability to the child’s creditors and transfer tax implications are just a couple reasons joint ownership can cause unintended consequences.