CONNIE
SWENSON
ATTORNEY at LAW
 |
Office:
7300 NE Glisan Portland, OR Telephone: (503) 997-9477 Email: Swenson997@mail.com Fax: (503) 669-2131 |
| Serving Clients in the
State of Oregon |
|
| Mailing Address:
465 NE 181st Avenue #149 Portland, OR 97230 |
|
Connie Swenson, a graduate of Northwestern
School of Law of Lewis and Besides her practice, Connie volunteers for Better Business Bureau arbitrations and as a Hearings Officer for Multnomah County Animal Control. |
ESTATE PLANNING
FOR CLIENTS IN THE STATE OF
PET TRUSTS
Household pets
often outlive their owners. Do you know
what will happen to your pets when you die?
The recent
FEDERAL TAX LEGISLATION
The
federal government recently passed The Economic Growth and Tax Relief
Reconciliation Act of 2001. This law
allows an increasing amount of assets to pass estate tax free (for example
$1,000,000 in 2002) until the law repeals the estate tax in 2010. However, unless Congress enacts new
legislation the estate tax will return January 1, 2011. One should also note
that the gift tax is not abolished. With
the changes in tax law, it will become important to maintain records concerning
your basis in assets. There will be a
return to a modified carryover basis for estates after 2009. Consult your
attorney for details on this important legislation.
WILLS
DO YOU FREQUENTLY TRAVEL ABROAD?
WHO CAN MAKE A WILL?
According
to
IS AN ORAL WILL VALID?
What if the decedent told his
relatives his wishes before he died? Is
that enough?
No, in the
State of
Furthermore, if the will is done in an attorney’s office, an Affidavit of Attesting Witnesses will most likely be executed. This is a sworn statement of the two witnesses that the testator was of legal age, of sound mind, and not acting under any restraint, undue influence, duress, or fraudulent misrepresentation at the time they saw him sign the will. With this document, when the will is probated or admitted to court, one does not need to find witnesses.
WHAT IS THE EFFECT OF DIVORCE OR
MARRIAGE ON A WILL?
The will of a testator (the person writing a will) is revoked by a subsequent marriage unless the testator stated an intent in the will that the provisions will not be revoked by a subsequent marriage, or the testator and spouse entered into a written contract before the marriage which states specific provisions for or against the spouse. ORS 112.305
Upon divorce or annulment of the marriage, unless the will evidences a different intent, such provisions dealing with the ex-spouse will be revoked, including the ability to serve as personal representative or in some other function under the will. ORS 112.315 However, it is advisable to redo your will after a divorce.
WHAT IF I DELIBERATELY LEAVE NOTHING TO MY CURRENT SPOUSE?
Unless you have executed a valid, enforceable prenuptial agreement with your spouse prior to marriage or an agreement after your marriage in which your spouse has agreed not to elect against your will, your spouse may elect against the will and receive one-fourth of the value of the net estate of the decedent reduced by the property given under the will as stated in Oregon Revised Statutes 114.105.
Note however, you may disinherit or leave nothing to your children.
DO I REALLY NEED A WILL? WHAT
HAPPENS IF I DO NOT HAVE A WILL?
The State of
a) Your spouse receives the entire net intestate estate if your children are your surviving spouse’s children.
b) Your spouse receives only one-half the net intestate estate if your children are not children of your surviving spouse. If such children and descendants are no longer living, your parents would receive the other half of the net intestate estate.
This could upset the estate of your
parents who are, perhaps, trying to decrease their estate and avoid taxes by
gifting so much per year to their children.
If your parents are no longer living, the state continues to find
recipients, who are relatives, but may not be your preferred recipients. However, the law finally stops if certain
relatives are no longer living, and your property escheats or goes to the
State of
BUT
ALL MY BANK ACCOUNTS AND MY HOUSE ARE IN JOINT OWNERSHIP WITH MY DAUGHTER; I DO
NOT HAVE TO WORRY ABOUT PROBATE. RIGHT?
Not
necessarily. What if your daughter and
you die at the same time in the same automobile or plane crash. Then once again the State of
ONCE I HAVE A WILL, WHEN AND HOW
DO I MAKE CHANGES?
Once you have established a relationship with an attorney and keep the office informed of any address changes, such attorney should update you concerning changes in the law. In fact, ask your attorney to do so. However, you need to take responsibility for making an appointment to change your will after the birth of children, a marriage, a divorce, significant changes in property which could move you into a taxable estate, when your chosen beneficiaries die before you and when you just want changes.
Simple changes to a will, such as the name
of the personal representative can be accomplished through an amendment known
as a ‘codicil.’ However, such an
amendment needs to be executed with the same formalities of a will (two
witnesses). If you have several changes to make, it may be prudent to redo the
entire will to clarify the changes and avoid having numerous amendments which could be
confusing. If your original attorney
still has the will on a disk, he or she may easily be able to change it.
ARE THERE OTHER
ADVANTAGES TO A WILL? YES
1. In a will you can decide who will be the personal representative (the person who inventories your property and makes certain it goes to your chosen recipients).
2. In a will you can require that the personal representative obtain a bond (to protect against fraud or negligence) or you can waive the bond. Without a will, a bond will ordinarily be required.
3. If you and your spouse die at the same time, a will allows you to state who shall be presumed to have died first. The order of deaths may be very important for tax planning.
4. In a will you can decide how long a beneficiary must live beyond your death in order to receive property under your will. This can prevent the estate of the decedent passing to a beneficiary and being taxed another time, if the beneficiary does not live long after the death of the decedent.
5. If the testator fears some of the beneficiaries may contest the will, a provision known as an “in terrorem clause” can be included. Such clause states that if one contests the will, he or she will not receive anything under the will.
6. If you have minor children, a will provides an opportunity to nominate the guardian of your children.
7. Your will can provide for a testamentary trust for your children. This would allow you to appoint a responsible
person to take care of your children. Furthermore, you can choose for what purposes and at what age your children
receive distributions.
ARE THERE OTHER DOCUMENTS I SHOULD EXECUTE AT THE SAME TIME?
While a will takes care of your affairs at death, you may wish to take care of your financial affairs during life through a detailed durable power of attorney. Since such an instrument gives significant power, you should think about who to appoint and guard against the misuse of this document. With specific description of real property, an agent appointed under a power of attorney can execute papers to sell or transfer your real property. Powers of attorney can provide for the appointed agent to take care of bank accounts, stock accounts and numerous other activities. A power of attorney stays in effect until it is revoked. However, sometimes banks have refused to honor old power of attorneys.
Most likely
you will also want to execute an Advance Directive, in which you nominate a
health care representative to make medical decisions for you should it be
impossible for you to communicate your desires (you are in a coma or otherwise
incapacitated). However, as long as you are conscious and can communicate in
some manner, you can later change your mind and revoke your advance directive
or certain provisions of it.
SHOULDN’T I TRY TO AVOID PROBATE?
Maybe. However,
1. Spouses often avoid probate for real estate
property by owning such property as tenants by the entirety. If you own the
house with your spouse as tenants by the entirety, at the death of the first
spouse the house automatically passes to the surviving spouse by right of
survivorship. That is, it will not pass
under a will; such property will avoid probate. However, you still need a will
as a backup if you should both die at the same time. You need another beneficiary for your house;
this can be accomplished by a will or a revocable living trust. Similarly, joint bank accounts avoid
probate. You may have named a second
beneficiary on your account, but a will would provide a backup if all the named
beneficiaries die before you.
Furthermore, with life insurance policies you name a primary
beneficiary, such as your spouse, and perhaps a second beneficiary. Nevertheless, if these beneficiaries die
before you, your funds will go into your estate. If you have no will, there is
an intestate estate.
The disposition of the intestate property will
be determined by the ‘State of
2. Probate does serve one very important purpose. A notice is published in the newspaper concerning your death, and creditors have a limited time to submit any claims they have against your property or estate. When a will is probated, creditors have an opportunity to present their claims and have the personal representative, or a court determine the validity of their claims. This becomes more important when the decedent has been involved in an auto accident, etc., or has been a doctor or other professional who could, even after death, be subject to malpractice claims. Before the probate assets are distributed to beneficiaries, the court determines if there is any debt owed to a creditor. After proper probate notice, the debts of creditors are cut off and the beneficiary receives his or her gift free of creditor claims. With living trusts, unless the new notice statute is utilized, creditor claims are not cut off as they are through the probate process.
3.
Attorney fees in probate are under the supervision of the court. In order to close a probate in
4. You can execute a probate avoidance instrument, such as a revocable living trust. This has some advantages, such as privacy, greater control of assets by the trustees, and probate avoidance if all assets are transferred into the trust. You still, however, often need the services of an attorney and/or CPA to complete title transfers and do taxes. People often pay upfront—they do a “living probate” by the time they complete the trust and transfer their property. Trusts are useful in certain situations which will be discussed under revocable living trusts, but they are often costly and promoted in situations in which a person may be better off with a will.
REVOCABLE LIVING TRUSTS
PROBATE AVOIDANCE IN THE STATE OF OREGON
Probate
avoidance and Revocable Living Trusts have become a popular terms during
the last decade. Although probate in the
State of
1. Does executing
a revocable living trust always avoid probate?
Just because you executed a revocable living trust, does not mean that you will avoid probate. All your property, which would otherwise be subject to probate, must be transferred into your revocable living trust. As a safety or backup device you execute a pourover will along with your revocable living trust. Through this pourover will any property that never was transferred into your revocable living trust can be probated and pour into this trust. However, since your goal is to avoid probate transfer all your property before you die.
2. What is this ‘probate’
I am avoiding?
Probate is
a court process by which a decedent’s property passes to beneficiaries. If the
decedent executed a will (dies testate), such property will pass to designated
relatives, friends or organizations. If
the decedent dies without a will (dies intestate) the
State of
3. Should you execute a revocable living trust? While anyone has a right to execute a revocable living trust, some people are the better candidates for such a trust?
a. Are you retired or close to retirement? Are you unlikely to sell or buy real estate or other significant assets in the near future?
Generally, when you are retired, a decision has been made as to what property you intend to keep and where you intend to live. A revocable living trust is a “living probate.” You draft a revocable living trust or a document explaining what is to be done with your property during your life and when you die. You take an inventory of your property and transfer everything into the trust (there may be some exceptions, often retirement funds). Thereafter each time you buy, sell, or transfer your property you need to update your trust. When you anticipate few changes to your property, often around retirement age, a living trust may be a wise decision. However, if you execute a living trust early in life, you are likely to spend money transferring property in and out of your trust: For example, each time you acquire real estate costs include deed preparation and recording fees. There are often fees for transfer of other types of property as well. Furthermore, it takes time and discipline to maintain trust documents. Remember any property left out of your revocable living trust, which must then be probated, will defeat your purpose for having the trust.
b. Do you own real property in
more than one state?
If you own real property in more
than one state, a revocable living trust is the means to avoid several
probates. For example, if you own
property in
c. Do you like privacy?
A will is filed with the court after you die and becomes a public record. Anyone can request your file, copy the information and take it home. A revocable living trust is a private document. While a mortgage company or other organizations may request a copy of your trust, they can be given only the pertinent sections that are needed for their records. There is no public file from which anyone can request copies.
d. Do you wish to control your assets both while you are alive and “after you die?”
You usually become the first trustee of your revocable living trust, and chose the person or professional trustee to succeed you when physical or mental infirmities necessitate a change. Moreover, with a successor trustee appointed a petition to the court for a conservator to manage your property when you become incapacitated should not be necessary. Thus, you save the time and cost of a conservatorship. Of course, if the successor trustee is a professional trustee, such as the trust department of a bank, there will be fees for services. If a son or daughter takes over as successor trustee, he or she may or may not be paid. Furthermore, you may even wish to use your successor trustee if you hate financial matters, or if you travel a lot and want someone in charge at home.
In the trust document you can decide how the property will be divided at your death. If married, you can set up a credit shelter trust to avoid estate taxes. Perhaps you want a trust to assure that your children will have an opportunity for a college education. You can determine when your children will receive all your property. You may wish them to receive a partial distribution at age 25, and the remainder at age 30. You may not be alive when your child is 30 years of age, but through your choice of successor trustees, your intent can be carried out by a trustee. While a child is legally able to receive your estate at age 18 years, many parents, etc. worry that such child will squander their inheritance within a short time if he/she receives an inheritance at that age. While you can draft testamentary trusts in a will, the trust document avoids the court supervision.
e. Are your heirs likely to contest your estate plan?
While your heirs can contest or litigate the validity of your trust, it is usually more costly and more difficult than contesting a will. A will is already before the court, but the person contesting your revocable living trust will have to start the case. The predictability, concerning the outcome of a contested will case, is more certain than that of a trust case. Case law concerning wills has developed over many years, whereas revocable living trusts are newer instruments and the case law concerning them is sparse and less predictable.
f. Have you been or are you in a professional practice, such as a doctor, lawyer, etc.?
If so, the probate of a will may be
desirable. During the process of probating
a will, a notice is published so that any creditors or persons with possible
malpractice claims can come forward and have their claims decided. If such adverse parties do not present their
claims during probate, they will, absent fraud, lose their opportunity to lay
hold to your assets. Note, however, that
new
4. The beneficiaries may get distributions earlier than if the property passed through probate.
How quickly beneficiaries of a
revocable living trust receive assets may depend on the type of property (for
example, time to settle real estate subject to a mortgage), whether there are
claims against the decedent due to his/her past profession or involvement in
litigation such as an automobile accident, and whether there will be estate tax
or income taxes owed. Unless the assets
are extremely small and uncomplicated, the successor trustee will need the
advice of an attorney and/or CPA as to when he/she should distribute the
assets. Theoretically, the assets can be
distributed earlier than probate, but if taxes or other debts are owed, the
trustee needs to delay distribution in order to avoid liability for improper
distribution of assets. In contrast to
probate, where creditor claims can be cut off after proper notice and a waiting
period, the assets of a revocable living trust could be subject to creditor
claims for several years. Recent
5. Do you anticipate needing Medicaid in the future?
While generally, executing a revocable living trust simplifies life for the elderly (one does not have to seek a conservatorship when incapacity begins), some revocable living trusts, especially a joint revocable living trust, may cause problems when seeking Medicaid support. Seek advice from your attorney or an elder law attorney.
If you
are going to do a revocable living trust, do it one-on-one with an attorney
from