Will vs. Living Trust in Oregon, What is Best for You?

Living trusts, also called revocable trusts or family trusts, are not for everyone.   There are lawyers who will bombard you with a litany of scare stories, insisting that having a trust is the only way to go.  Here are some of the scare stories:   Probate is a disaster and takes years; the Government will get your property; you will lose the estate to taxes; and the probate fees will eat up the entire estate unless you have a trust.  There may be some truth to all of these, but the answer for you is certainly not a one-size-fits-all estate plan.

What is a Living Trust?

A living trust is a legal entity you set up to hold your assets to avoid probate and in some cases where  people have a substantial estate, a trust can be used to minimize estate taxes.

Let’s take a realistic look at some of the issues surrounding living trusts.

 

Should you avoid probate at all costs?

Not always.  If the value of the estate is low, then a small estate probate can be less expensive than a trust.

How expensive is probate?

If an estate goes through probate, the probate fees, including the personal representative’s fee and the attorney fee can be expensive.  However, if you are under 60 and healthy, the probate expenses will occur in the distant future, paid by your children, but the cost of paying a lawyer for the trust is paid now by you.    A will costs less now, and allows you to invest the saved money for later.

Won’t attorney fees in probate eat up the entire estate?

Valid creditor’s claims, medical bills and unpaid back taxes are much more likely to eat up the assets of the estate than attorney fees and the statutory personal representative’s fee.  Attorney fees are paid at the end of the probate, and must be approved by the judge.

Doesn’t a living trust save on taxes?

A living trust will not save your family money on income or estate taxes.  A trust is tax neutral.

How do I choose a lawyer?

Not every lawyer gets along with every client and the opposite is equally true as well.  It is a personal professional relationship.  Choose someone that you think you can get along with, by asking them hard questions up front.  Choose someone who has experience, will promise to answer your calls, and someone who will explain their fee structure.  Call several lawyers and compare services and prices.  If someone will not talk to you on the phone, thank them for their time, hang up and call another.

At what age should  you consider creating a living trust?

If you are in your late 60’s, 70’s or 80’s and have substantial assets, sometimes a trust makes sense.  Just as often, it does not make sense.  Each situation is different.   A living trust is more expensive to create, and the savings to your family, if any, will only be realized after death.  Therefore, if you create a trust at too young an age, any savings are far down the road, and you are spending money that would be better invested.   Money spent on a trust is money out of your pocket now, whereas probate fees are paid out of your children’s inheritances.   If you are in your 80’s, the savings to your family from a trust will be realized much sooner, and buying a trust might make a whole lot more sense.

Isn’t a trust easy to administer?

Not really.  A Living Trust is not so simple to set up or administer over your lifetime.  If you set up a trust, you have to pay attention to it for the rest of your life.  All your assets must be legally transferred into the trust for it to be effective.  If you leave out an asset, or buy a new asset and fail to put it into the trust, your family could end up with an unnecessary double administration after you die:   A probate administration for the assets outside of the trust, followed by a trust administration for the assets inside the trust.  A double administration will not save your family money.

Will my family be able to administer my trust after my death without a lawyer?

A successor trustee should get professional advice after the death of the person who created the trust.  Sometimes not much needs to be done, but sometimes a lot needs to be done.  Let an expert help you.  The trustee should make sure he or she does not miss any important legal issues.  The trustee is personally liable for mistakes, so hiring a lawyer is useful to make sure the trustee does not get sued later by disgruntled heirs or creditors.  Administering a trust in some simple cases can be pretty easy and cost effective, but in other cases a trust administration can be just as costly as a probate.  If the plan in the trust calls for the creation of a credit shelter trust after one spouse dies, the successor trustee should definitely hire an attorney to help set up the credit shelter trust after one spouse dies.

What about joint ownership with right of survivorship?

With a spouse, yes.  Joint ownership of assets with a spouse avoids probate.  Beneficiary provisions on life insurance and annuities also avoid probate.   Beneficiary provisions are safe to use.  However, please never put your children’s names on your real estate, or financial accounts as joint owners.  If your children get sued, divorced, bankrupted or get in trouble with the IRS, your assets might be garnished by your children’s creditors!

Isn’t a trust private after death?

A living trust administration after the death of the creator of the trust is private and is performed informally, outside of the court’s review.   This can be very desirable, and is an advantage for high net worth people.   However, I have seen situations where unscrupulous trustees take advantage of the informal and private procedures of trust administration to hide assets, and even to steal assets from beneficiaries.  In a probate, it is unlikely that a personal representative will be able to steal assets, since the court record shows all of the critical information, and each beneficiary is given a formal right to contest the probate.  If you create a trust, only choose the most trustworthy person you know to be a successor trustee.

©Richard Huhtanen, Oregon Probate Wills Trusts Lawyer

Oregon Revocable Living Trusts

Frequently Asked Questions About Revocable Trusts

 

Should I have a revocable trust to avoid probate?

You should have a trust only if you are older and only if you have substantial assets.  Revocable trusts (also called living trusts or family trusts) have been oversold to the public by many lawyers.  A revocable trust only controls assets transferred carefully into the trust.  If this transfer process is not complete, the trust can be worthless.  Call me to discuss if a trust is a good option for you.  I have put together the following information on revocable trusts:

Revocable Living Trusts (also known as living trusts or family trusts) are often promoted as an effective alternative to probate for transferring property when you die.  Even though Oregon’s probate system is among the simplest and least expensive in the nation, many citizens are attracted by the possibility of even quicker and easier asset transfers.  But revocable living trusts have some drawbacks.  Revocable trusts cost more than wills.

I have heard terrible things about probate.

Many people hear horror stories about the Probate Court process and are urged by friends and relatives to execute a trust.  A trust is a complex legal document that can serve various purposes for various people.  It is important to determine–on an individaul basis–whether a trust is an appropriate estate plan.  To help you decide if a revocable living trust is right for you, here are answers to some of the most frequently asked questions about these trusts.

What is a revocable living trust?

A revocable living trust is a legal device that can be used to manage your property during your lifetime and to distribute your property after your death.

A revocable living trust is established by a written agreement or declaration, which appoints a “trustee” to administer the property transferred to the trust, and which gives detailed instructions on how the property is to be managed and eventually distributed.  You should legally transfer substantially all of your property to the trustee.  A revocable living trust agreement or declaration is longer and more complicated than a will, and the transfer of assets to the trustee can be time-consuming and expensive.  Deeds, stock transfers, new bank accounts, and other legal documents will be necessary.  Assets not transferred to the trustee will not be considered part of the trust and might still be subject to probate.  You must also have a “pourover will” to ensure that any property not properly placed in your trust before death can be transferred to it after death.

Who can be the trustee?

In Oregon any competent adult can be the trustee, including the person setting up the trust.  An Oregon bank or trust company can also act as trustee.  Appointing a successor trustee is essential.

A revocable trust avoids probate.

Revocable trusts avoid probate because you transfer ownership of assets to the trustee before you die.  The trustee then transfers your assets to your beneficiaries after your death without a probate.  If you establish a trust but fail to transfer your assets to your trustee, you will not avoid probate.

If you die owning real estate outside of Oregon, a court proceeding might be required in each state where real estate is located.  A revocable living trust can avoid these extra court proceedings only if that property is transferred to your trust.

Sometimes it is not a good idea to avoid probate.

For instance, in a probate your personal representative can limit the claims of creditors to a certain time period, and if they do not file their claims on time, their claims are invalid.  However, if a trust is administered, creditor claims may not be time limited, unless a special court proceeding is started, which requires additional time and expense.

Be aware though that some of these non-probate devices can result in consequences relating to taxes, eligibility for public provided long-term care, and loss of independent control over an asset.

I have a large estate.  Should I have a trust?

Spouses with large estates may create trusts for each other in order to minimize the estate tax paid to the government before their children receive their inheritance.

One size does not fit all.

Each family requires a customized estate plan.  Revocable trusts are not for everyone.  One size does not fit all.  Call for a free phone consultation about your estate planning.

©Richard Huhtanen, Oregon Living Trusts Lawyer

Oregon Will Information

Frequently Asked Questions About Wills in Oregon

 

Should I have a will?

Yes.  Everyone should have a will.  If you have a will, you get to decide who receives your estate, who acts as a personal representative, and you can waive the bond fee.  If you have minor children, you can name a trustee to manage their money until they reach a responsible age (most people choose 25 or 30), and you can name a guardian who will raise your children if you are not alive.

What if I do not have a will?

Oregon has a will for everyone who does not have a will, called “intestacy”.  Your estate will go to your “intestate heirs”.  The State of Oregon will not receive your estate.  If you do not have a will, you do not get to choose the personal representative, or the distribution plan, and the court will require a bond for the probate.

Is my Oregon will valid in other states?

Yes.  Oregon wills are valid in other states.  Wills properly prepared in other states are also valid in Oregon.

Can the personal representative live in another state?

Yes, no problem.  Choose the most trustworthy person as a personal representative, regardless of where they live.

Do wills go through probate?

Yes.  All wills go through probate to be valid.  A will is not valid until after death, and it is not valid until the Probate Court officially appoints the personal representative.  All assets owned by the deceased person in their name alone are distributed by the will.

I have minor children.  What type of Oregon will should I have?

If you have young children, you should have an Oregon will with a trust provision built in.  You get to choose the trustee, who will manage the money, and you get to choose the guardian, who will raise your children.  You can name the same person as trustee and guardian, or you can name different people to these jobs.

How can I avoid probate?

Probate is avoided by means of joint ownership, beneficiary provisions on life insurance and annuities, and revocable trusts.  However, each of these methods of avoiding probate can have serious negative side effects, depending on your family situation.  Call me to discuss your family estate plan.  I will not steer you in the wrong direction.

Should I put my children’s names on my real estate and bank accounts to avoid probate?

No.  Never do this.  If you put your children’s names as joint owners on your assets, and if your children then get sued, divorced, in an auto accident, in trouble with the IRS, or bankrupt, your children’s creditors will take your assets!

Should I give away my assets to my children to avoid losing them to a nursing home or probate?

This is a bad idea.  If you give away your assets, and if you then require nursing home care within 5 years, you could be disqualified for Medicaid coverage.  Also, if you give away your assets, and your children get sued, divorced, or bankrupted, their creditors will take your assets.

Do probate costs eat up the entire estate?

No.  Probate in Oregon is not the expensive disaster it is in other states.  It is a reasonable system that is designed to be fair to creditors and beneficiaries alike.  Choose an attorney carefully.

What about life insurance and annuities?

Use the beneficiary provisions provided by pension plans, life insurance, and annuities.  Most pension plans and life insurance policy proceeds pass under beneficiary designations that avoid probate without use of revocable living trust.  Using beneficiary designations could be a less expensive way for you to avoid probate.  Be aware though, that all probate avoiding devices can result in negative consequences relating to taxes, eligibility for publicly provided long-term care, and loss of independent control over an asset.

My wife and I have children from prior marriages, what should we do?

Be careful.  A blended family presents a more complex situation.  One of the heartbreaks of my estate planning career is watching survivor spouses coldly disinherit their stepchildren.  This happens all the time.  If you have a blended family, you should have a pre-nuptial agreement or post-nuptial agreement to protect your children from being disinherited.  If you do not want to see your children disinherited, do not mix your assets with your spouse’s assets, and each of you should have a separate will or trust.  You may wish to use different attorneys.  Call me to discuss this.

Should I have a power of attorney and an advance directive?

Yes.  A power of attorney allows the most trustworthy person you know to sign your name for financial purposes while you are alive, to conduct business on your behalf.  Do not appoint a person as “attorney in fact” under a power of attorney unless you trust them absolutely.  An advance directive for health care allows you to appoint a person to make health care decisions for you if you are terminally ill.

Who should I appoint as personal representative?

Appoint your spouse as first choice, and your must trustworthy child or relative as second choice.

©Richard Huhtanen, Oregon Wills Lawyer

Oregon Probate Information

What is probate?  When is it necessary?  What does it cost?  Read the following Frequently Asked Questions to get answers to some basic probate questions.  Call me at no cost to learn more.

What is probate?

Probate is a very old legal process designed to make sure a deceased person’s creditors and taxes are paid before the family members or will beneficiaries receive their inheritances.

What assets need to be probated?

All assets owned by the deceased person in their name alone, without a surviving joint owner, must be probated.  Assets that have a surviving joint owner, or assets that have a beneficiary provision such as life insurance or annuities do not need to be probated usually.  If a person dies leaving very few assets, such as personal belongings or household goods, these items can often be distributed among the rightful beneficiaries without the supervision of the court.

The cost of probate.

Probate costs include the personal representative’s fee (a fixed percentage of the value of the estate), the filing fee, the publication fee, and the attorney fee.  Call me to discuss what these fees are.  I invite you to compare my attorney fee rates with those of other attorneys.  Attorneys are paid by the hour for their work, at the end of the probate process, at the same time the beneficiaries receive their inheritance.  However, I sometimes charge a flat rate for small estate probates.

There are two types of probate–regular probates and small estate probates

If the value of all real estate owned by the decedent is worth more than $200,000 then a regular probate is needed.  If the value of all other assets combined is worth more than $75,000, then a regular probate is needed.  However, if the value of real estate is worth less than $200,000 and all other assets (personal property) are worth less than $75,000, then a small estate probate, called an “Affidavit of Claiming Successor” may be used in some situations.  Real property includes land and buildings or structures placed on land, such as houses, commercial buildings, and agricultural buildings.  Personal property includes all other property, such as bank accounts, vehicles, stocks, bonds, and personal items.

The problem with small estate “Affidavit of Claiming Successor” probates

If the value of the decedent’s estate qualifies for a small estate probate, it still might not be a good choice.  Small estate probates only work in the most simple situations: Few heirs, few creditors, and no fighting between anyone.  Selling real estate after filing a small estate probate is often a huge problem.  All heirs and will beneficiaries must sign a deed transferring the real estate to any new buyer.  If even one heir or will beneficiary refuses to sign a deed, the title to the property will not be cleared, and any sale will not qualify for title insurance or financing.

How long does probate take?

Probate can be started immediately after death and takes a minimum of six to nine months.  If the estate includes property that takes a while to sell, or if there are complicated taxes or other matters, probate can last much longer.  A small estate proceeding can’t be filed until 30 days after death and generally takes four to six months.

What about bank accounts?

Bank accounts owned by the decedent in their name alone usually need to be probated, but if the only asset the decedent owned is a single bank account, and the decedent did not have any creditors, and there are no fighting relatives, please call me to discuss this situation.

What about vehicles?

Vehicles owned by the decedent in their name alone usually need to be probated, but if the only asset the decedent owned is a vehicle, and there are no creditors or fighting relatives, it is possible for the DMV to release the vehicle to an heir, who is responsible for making sure that creditor claims and family members get treated fairly.  Please call me to discuss this situation.

What about real estate?

Real estate owned by the decedent in their name alone, with no surviving spouse listed on the deed, must be probated.  If a decedent owned real estate with another person who was not a spouse, the decedent’s share of the property needs to be probated unless the last recorded deed shows the words “right of survivorship”.

Do I need to live in Oregon to be the personal representative?

No.  The personal representative can live anywhere, including out of the USA.  We can handle all probate matters by phone, fax, and email.  You will not have to appear in court unless there is a contested issue of some sort.

Sometimes probate is needed to:

  • Collect debts owed to the deceased person.
  • Settle a dispute among people who claim they are entitled to assets of the deceased person.
  • Resolve any disputes about the validity of the deceased person’s will.

What happens during the probate process?

The will is “proved” and delivered to the court.  The deceased person’s will can be proved by an affidavit made under oath by the witnesses to the will.

A personal representative is selected.  A personal representative is someone who handles the deceased person’s affairs.  A will generally names a personal representative who, if willing to serve and otherwise qualified, will be approved by the court.  If a person dies without a will, the court will select the personal representative, usually the spouse, an adult child or another close relative.  If none of those people are available or willing to be the personal representative, the court may choose a bank, trust company, or lawyer.  If there is no will, a bond will usually be required, and the personal representative will have to submit to a rigorous credit check.

A notice to creditors is published in a local newspaper.  This public notice to creditors tells the creditors that they have four months to bring any claim against the estate for debts the deceased person owes them.  The personal representative also gives written notice to all known and possible creditors.

The heirs and people named in the will are notified of the probate proceeding.

Assets are identified and an inventory is prepared and filed with the court.  The personal representative works to identify and value the deceased person’s assets.  Depending upon the type of assets and the kind of records left by the deceased person, this step can be quite straightforward–or more difficult and time-consuming.

Debts are paid.  The personal representative ensures that creditors are paid.  Creditors must be prepaid from the estate before the remaining estate assets can be distributed to the rightful beneficiaries.

Tax returns are filed.  The personal representative prepares state and federal income and estate tax returns.

A final accounting is prepared.  The personal representative prepares and submits a final account to the people named in the will, the heirs of the deceased person, and the court.  After the court approves the final account, the will beneficiaries or heirs receive their inheritances, the attorney fees are paid, and the estate may be closed.

Do I need a lawyer?

Probate in Oregon involves a good deal of paperwork that must be filed in a timely manner.  To achieve the results you want, probate should be handled with an understanding of the legal principles involved.  A probate lawyer can help you avoid the many possible traps and other problems that could arise.

©Richard Huhtanen, Oregon Probate Lawyer

 

Oregon Probate, Wills, Trusts

I am an Oregon attorney specializing in probate, wills, family estate planning, and living trusts. I handle probates in all Oregon counties. My goal is to complete your probate as fast as possible while keeping your costs low.

Serving Every County in Oregon

Baker, Bend Metro, Benton, Clackamas, Clatsop, Columbia, Coos, Crook, Curry, Deschutes, Douglas, Eugene Metro, Gilliam, Grant, Harney, Hood River, Jackson, Jefferson, Josephine, Klamath, Lake, Lane, Lincoln, Linn, Malheur, Marion, Medford Metro, Morrow, Multnomah, Polk, Portland Metro, Salem Metro, Sherman, Tillamook, Umatilla, Union, Wallowa, Wasco, Washington, Wheeler, and Yamhill.