Oregon Estate + Business Planning Blog

FAQ: What will happen to our house if we are married, but I am not on title?

A very common scenario that married people face is when they own a house, but one spouse is not on title. What will happen with the property when the owner-spouse dies? The answer to this question assumes that there is not an estate plan in place yet.

Generally, in Oregon, without an estate plan in place, the surviving spouse inherits all of the deceased spouse's property, but not necessarily without the probate court's approval. This is not always the case, but is the general rule. (If you have a blended family, things are different.)

However, the house and any other assets owned solely by the deceased spouse would have to go through the probate process in order for the surviving spouse to become the owner. Probate is a court process that happens after a person dies. The personal representative (called "executor" in other states), with the supervision of the court, takes inventory of assets, valuates the estate, pays off creditors, and distributes what is left to whomever the heirs are. If that sounds complicated, it's because it is. The probate process can cost a lot of money and take a lot of time, and probate is all a matter of public record. The way this usually plays out is that the surviving spouse continues to pay the mortgage for several years and doesn't find out that the house needs to be probated until he or she tries to sell it. At that point, they discover that the house can't be sold until it goes through probate, so a sale is held up for several months and in some cases, years.

How Do I Fix This!?

Well, you can always just create a new deed that names both spouses. The mortgage can stay in one spouse's name. That's the easiest way to do it. When a spouse dies, the surviving spouse simply records the death certificate with the county and becomes the sole owner. But many people don't want to do that because they wish to keep their separate property separate. The only other easy way to avoid probate in this scenario would be through trust planning. Plus, the joint property scenario won't help your kids to avoid probate if both spouses die. A will is not enough. A will basically tells a probate judge what to do with your property. A trust tells the trustee what to do with the property, and the trustee can handle transferring the assets without ever opening a probate. You can even make your surviving spouse the trustee. 

But guess what. You should consult with an attorney before making any of these decisions. I just want to make you aware that these issues exist, and that there are various ways to solve them. Oh, and by the way, this scenario creates other problems if you and your spouse are not legally married. Consult with a lawyer.

To your family's health & prosperity,

 

P.S.  Want to get started on the most important planning you'll ever do for your family?  Give our office a call at (503) 235-5150 to get started.  You'll be glad you did.

___

Want to use this article in your newsletter or on your blog or website?

 

You can! Just please be sure to use this complete blurb with it:

 

Candice N. Aiston is an Estate Planning Attorney for families in the Portland, Oregon area. She helps loving parents to prepare their families for a lifetime of security, prosperity, and guidance. If you would like to receive her free report, "The 9 Common Planning Mistakes Parents Make," please visit http://candiceaistonlaw.com/.

*Image courtesy of fantasista at FreeDigitalPhotos.net

How Should Your Clients Take Title To Their Home in Oregon? A Guide for Real Estate Professionals

Have you ever wondered if you are doing right by your clients in how you have them take title to their new home or rental property?  It’s a situation I encounter all the time as an estate planning attorney.  You have the opportunity to make sure that your clients have all the benefits of correctly titled property and they will definitely thank you for it.

Why is titling property correctly so important to  property owners?

First, if titled incorrectly, the property owner cannot control what happens to the property after he dies; second, if titled incorrectly, the owners and their heirs can lose the property to creditors, the government, or even an ex-spouse. 

Three Common Ways to Hold Title:

Tenancy by the Entirety:  Tenancy by the Entirety is the most common way for married couples in Oregon to hold property, but it ensures that there will be a probate upon the death of the second spouse. 

Joint Tenancy with Rights of Survivorship:  Joint Tenancy with Rights of Survivorship is a common way for UNmarried couples in Oregon to hold property, but it ensures that there will be a probate upon the death of the second joint tenant.

Tenants in Common:  Tenants in Common is where each owner wants to maintain their interest in the property even upon death, but this can cause a lot of problems for the surviving owner.

The Best Way to Own Your Home – A Revocable Living Trust: 

The best way for homeowners to own their property is in a revocable living trust. 

• A properly drafted and funded trust will avoid time consuming, expensive and public probate upon the first death and the second death.
• A revocable living trust will make sure that the right people receive the property after the death of both owners and that it doesn’t go to creditors, predators, or future spouses.

The Best Way to Own Your Rental Property – An Asset Protection Trust or LLC: 

The best way for your homeowners to own their property is in an asset protection trust or LLC. 

• A properly drafted and funded trust or LLC will avoid time consuming, expensive and public probate upon the first death and the second death.
• A properly drafted and funded trust or LLC will make sure that the right people receive the property after the death of both owners and that it doesn’t go to creditors, predators, or future spouses.
• A properly drafted and funded trust or LLC will ensure that if renters or guests have a cause of action against the owner, the owner’s other assets are not vulnerable to being collected against.
• A properly drafted and funded trust or LLC will protect the assets inside of that entity from being vulnerable to lawsuits arising from other causes of action.

BOTTOM LINE: Your clients are going to need to talk to an estate planning attorney to determine the best way to title their property. Stand out from the competition by bringing these concerns to your clients' attention.

To your family's health & prosperity,

Candice N. Aiston

P.S.  Want to get started on the most important planning you'll ever do for your family?  Give our office a call at (503) 235-5150 to get started.  You'll be glad you did.

___

Want to use this article in your newsletter or on your blog or website?

 

You can!  Just please be sure to use this complete blurb with it:

 

Candice N. Aiston is an Estate Planning Attorney for families in the Portland, Oregon area.  She helps loving parents to prepare their families for a lifetime of security, prosperity, and guidance.  If you would like to receive her free report, "The 9 Common Planning Mistakes Parents Make," please visit http://candiceaistonlaw.com/.

What Estate Planning Documents Do I Need?

I recently returned from a trip to Hawaii, where I visited my family and attended my brother's wedding.  My two kids left a week before me with my parents, and that gave me some time to think about whether my estate plan was up to date.  No, it was not.  My guardian designations were outdated, my trustee designations were no longer going to work for my situation, and the new revisions to the Oregon Inheritance Tax created a big problem for my estate.  Honestly, I am embarrassed to say that I thought, "My plane is not going to crash.  I don't plan on dying.  This can wait."  But after the couple of weeks I just had with a friend dying and with two friends winding up in the hospital, I quickly shook off that nonsense.  I needed to update my plan.  A lot had changed in my life since I last updated it.  

I decided to show you what things look like now. Here is a list of everything in my binder and what you need to include in your plan:

• KidsCare Plan:  Long-term guardian designations; short-term guardian designations; instructions to caregivers about emergency plan; instructions to guardian about long-term care of kids; wallet ID cards (TO RECEIVE YOUR FREE KIDS CARE PLAN, CLICK HERE);
• Overview: The "Cliff's Notes" of the trust;
• Trust Agreement: Outlines terms of trust during lifetime and how assets are to be distributed after death; names Trustees;
• Pour-Over Will: Names Personal Representative and "catches" and assets that may have been left out of the trust;
• Nominations: A quick reference to see who is involved in the plan;
• Personal Information: Your most recent personal and financial information sheet;
• Funding Instructions: Shows you how to title assets and is handy to refer to when you acquire assets in the future;
• Power of Attorney: Names an agent to act for you financially if you are incapacitated;
• Privacy Affidavit: The short and sweet version of what banks and other institutions need to know about your trust;
• Trust Assets: Includes your asset spreadsheet, confirmation of asset transfers, and any information about your assets that your trustee will need to know;
• HIPAA Release: Allows your trustees and representatives to gain access to your medical records without a court order, saving your family money if you are incapacitated;
• Advance Directive: Names a Healthcare Representative to make healthcare decisions for you and outlines your healthcare wishes;
• Memorial Instructions: Everything your family needs to know to prepare an obituary, notify friends and groups of your passing, and plan a memorial service;
• Property Agreements: Any agreements you have with people you co-own property with;
• Personal Property Memorandum: Gives away specific items to specific people;
• Other Documents: This can include a Letter of Instruction to your trustee and letters you or your lawyer writes to your fiduciaries;
• Trust ID Card: This is handy to carry in your wallet to remind you how your trust should be titled;
• CD of Documents: For ease in sending any documents to fiduciaries, banks or other institutions, or doctors;
• Family Treasures Conversation: A recorded message to your family so that you can say all the things you want to make sure you've said.

 Of course, you may need more than this if your estate will be subject to estate taxes, or if you need to incorporate asset protection or business succession into your plan.  The most important part of your plan is professional counsel.  An estate planning attorney will be able to guide you in the direction that is right for your family.

To your family's health & prosperity,

 

P.S.  Want to get started on the most important planning you'll ever do for your family?  Give our office a call at (503) 235-5150 to get started.  You'll be glad you did.

___

Want to use this article in your newsletter or on your blog or website?

 

You can!  Just please be sure to use this complete blurb with it:

 

Candice N. Aiston is an Estate Planning Attorney for families in the Portland, Oregon area.  She helps loving parents to prepare their families for a lifetime of security, prosperity, and guidance.  If you would like to receive her free report, "The 9 Common Planning Mistakes Parents Make," please visit http://candiceaistonlaw.com/.

 

Wednesday Web Wrap-Up

Welcome to Wednesday Web Wrap-Up! Lots of great information put out over the past two weeks! Thank you to the attorneys and organizations that provided such great information.

Massachusetts Attorney Danielle G. Van Ess linked to this article, which illustrates the importance of business succession planning. Business owners need to think long and hard about how they want their business handled after their death. Not planning can leave a mess for your family. The law may require that some heirs have a stake in the business that you would never have wanted, and it may leave out heirs that you had wanted to include.

Los Angeles Attorney Angelica Simmons linked to this article about the feud between the grown children of Artist Frank Frazetta. Frazetta is still kickin' at age 82, but his children are already fighting over their future inheritance. I think the article speaks to the importance of family communication and planning.

Attorney Mike Lichterman posted this article, called, "What's So Bad About Probate?" on his blog. It explains why many people and their attorneys plan to avoid probate - it can be expensive, time consuming, and the records are public.

I cam across this article, "Celebrity estate fights can offer lessons for us," linked to on Twitter by various Estate Planning Attorneys. From the article: "[Michael] Jackson, for example, died at 50 but had made a will and set up a trust for his children. But like so many everyday fathers or mothers, he didn't take the next key step -- funding the trust or re-titling his assets into it. Now, it's a family mess." It's amazing to think that even Michael Jackson didn't properly set up his trust. It's scary to think that so many regular folks think they can do it properly online! 

WealthCounsel linked to two articles from fool.com: "Make Your Heirs Rich, Not Your Lawyer," and, "The Truth About Living Trusts." The first article talks about how much of your estate can be eaten up in probate fees and costs if you fail to plan (or use a will-based plan), and the second article talks about the use of trust planning. I personally believe that most families should use trust planning. The transfer of assets after death is much smoother, less costly, less time consuming, and totally private.

Attorney Jackie Bedard, of Carolina Family Estate Planning, linked to this Forbes photo article: "In Pictures: Nine Facts You Need to Know about Estate Tax." There are many misconceptions that people have about estate taxes. Most people don't realize that life insurance is included in your estate if you own the policy. Many people don't realize how steep the tax is and that it's not just the uber-wealthy that will be taxed. Look at the article to find out other facts.

To your family's health & prosperity,

Wednesday Web Wrap-Up

I often read other attorneys' estate planning blogs, and I often have other attorneys forward news articles about estate planning. I thought it would be cool to do a weekly series of compilations of the most interesting or noteworthy items in the estate planning world. I'll call it, "Wednesday Web Wrap-Up." I'm feeling super nerdy about this, but I suppose an estate planning blog is inherently nerdy, so what can I say?

The first article, "Assemble a Paper Trail, and Make Sure Your Heirs Can Follow It," from the New York Times, is a few weeks old, but the WealthCounsel attorneys have been discussing it this week. The general idea of the article is really great. One of the most important things about estate planning is creating a plan and communicating about that plan to the people who need to know about it. Many people create a plan and stick on a shelf or in a safety deposit box (or even in the freezer!), and when the documents are needed, no one knows they exist, or they know there's a plan but don't know where to look for the important documents. So I appreciated that aspect of the article.

What I didn't like were some of the errors I found. There were some errors in terminology, but the most important error I saw was the idea that a "simple will" that you can create on Legal Zoom will solve the problems raised in the article. Sure, in a simple will, you get to designate who gets what, but your estate will still have to go through the probate process and you're still looking at all those fees and costs discussed in the article. I can't tell you how many clients and even financial advisors have told me that they believe a will avoids probate. It doesn't. If probate avoidance is a goal, a revocable living trust plan is the way to go.

A good blog post that touches on the issue of the "simple will" is, "I don't do simple wills. In fact, I don't sell wills. I sell advice." from South Florida Estate Planning blog, by David Shulman. I related so much with this post, because I get about 2 or 3 phone calls every week from people asking me, "How much do you charge for a simple will?" I, like David, don't do simple wills. I do create will-based plans, but they're never simple. I like to tell people, "The documents are free! What you pay for is my advice and counsel. The documents are necessary, but they're included as a by-product of our relationship." And while we do create plans according to our clients' wishes, we start from a place of education. Before we talk about what kind of plan we're going to create, we show our clients exactly what their unique situation looks like, and what the options are to avoid different scenarios. Then our clients make an informed decision from there. Just like a doctor checks things out and gives you different options based on your situation, we check things out and talk about the different options before you make a decision.

The next article, "How Much Should You Leave the Kids?" from Money Sense, is actually a few weeks old, but Laura Lee Sparks, of Legal Marketing Maven, recently posted it on her Facebook page. I'm posting it because I really love the approach that the parents in the article took. They hashed things out with their adult children, and everyone knows what the plan is. This is the best way to prevent sibling battles and disappointments. I have seen estate planning gone wrong in my own family, and a lot of the problems could have been solved with a little communication between parents and their adult children.

Last, Rania Combs, a Texas estate planning attorney, posted, "Estate Planning for Special Needs Children," on her blog. I thought I'd post this for some of my readers and friends who have special needs children. These issues are very important to think about. When the child is a minor, you want to have special provisions in your estate plan that create a Special Needs Trust in the event of your death. This is the best way to preserve what you have for the child, while still preserving the child's ability to receive government benefits. Once your child is 18, there are other legal steps that must be taken. You should consult with an estate planning attorney to find out what steps you need to take.

I hope that you find some of these articles and posts helpful!

To your family's health & prosperity,

What are the disadvantages of setting up a trust?

Next in the "Let's Talk" series, a reader asks, "What are the disadvantages of setting up a trust?"

I assume that we are talking about setting up a Revocable Living Trust plan, as opposed to any Irrevocable Trust planning options. We'll talk about Irrevocable Trusts another day.

A Revocable Living Trust plan is an alternative to a Will-Based Plan. Most families with assets should opt for a Revocable Living Trust plan because it is the easiest and most affordable way to pass your assets on after your death. The most common reason that people go with this type of plan is so that they can avoid probate, which is a court process that happens after a person's death that essentially transfers title of assets to the person's heirs. Probate can be very expensive; it can be very lengthy; and it is a matter of public record.

In my opinion, any drawbacks to setting up a Revocable Living Trust plan are outweighed by the benefits, but I suspect that my readers (like my clients) are independent thinkers who want to get the whole story before they make a decision, so here are some disadvantages for you to consider:

1. A Trust-Based plan is more expensive to set up than a Will-Based plan.

The initial costs of setting up a Trust-Based are more expensive than a Will-Based plan. A Trust-Based plan can be two or three times more expensive. This is because setting up a Trust is more complicated, and because a Trust must be accompanied by several ancillary documents that a Will doesn't require. It takes a lot of your attorney's time to get the plan right. (This is also a reason why Trust kits are so dangerous.) However, where you may spend $4-6,000 for a properly crafted Trust plan, your estate's savings later on could be 10 to 20 times that amount. One of my colleagues compares a Trust plan with buying a car. A new car loses several thousand dollars in value as soon as you drive it off the lot, and several thousand dollars in value each year until it is ultimately worthless and you have to buy a new one. A Trust plan actually gains in value over the years. The larger your estate is, the more valuable your Trust plan becomes. You may need to do some tune-ups over the years, but it does not depreciate in value. 

2. Properly setting up a Trust can take up a lot of your time.

In order for your Trust to work properly, all of your assets must be retitled, or for some types of assets, your beneficiaries must be redesignated. This is called "funding" a Trust. This usually means a lot of paperwork on your part. Many attorneys offer the service of handling all of your funding for you (usually at an additional charge), so that would be an advantage if you don't have the time to do it yourself. Most people will find the time to do something that saves them thousands of dollars and headaches in the long run. 

3. Many Trusts fail to accomplish their purpose.

Many people spend several thousand dollars to set up a Trust, only to have it fail when it's needed. There are a number of reasons for this. The most common reason is usually a failure in the funding process. Any asset that is not retitled properly could be subjected to the probate process. It's essential for people who want to set up a Trust plan to work with an attorney who will guide them through the funding process, and who will offer ongoing assistance to help keep the plan updated. (Stay tuned for an upcoming post about what to look for in an estate planning attorney!)

As you might be able to tell, I stretched myself to be able to bring up disadvantages to setting up a Trust plan. If your family needs a Trust plan, the benefits will outweigh the disadvantages every time. Please see an estate planning attorney to find out which type of plan your family needs. If you are in the Portland, Oregon area, my office offers a free Family Wealth Planing Session for all blog readers (normally $750). It's an educational meeting where we analyze your financial and asset situation and show you exactly what your estate would look like if something happened to you. That way, you can go into estate planning with your eyes wide open!

To your family's health & prosperity,

P.S. Do you want to learn more about Estate Planning for parents? Visit my website to download my FREE report, "The 9 Planning Mistakes Parents Make." http://candiceaistonlaw.com/

P.P.S. Do you have a question I can answer on this blog? Email it to me at [email protected].

Wall Street Journal: If you have assets, use a trust

Stacey L. Bradford has put out "The Wall Street Journal Financial Guide for Parents." In it, she talks about how many parents should be setting up trusts. The only thing I would add is that when you seek out an attorney to do this, you should make sure that you are working with one who is going to keep up with you throughout your lifetime, so that you can be sure that your trust is always going to work for you. Ask the attorney whether they offer a free plan review (at least every 3 years) and whether they have a membership program for ongoing legal needs. We see many trusts fail because of little issues that could have been prevented with better client service and communication. (Actually, here is a good article about choosing an estate planning attorney.)

You can read the WSJ article here.

And here is the video interview of the author:

My spouse and I own everything jointly, so it's no prob...

I can't tell you how many people tell me that they are not worried about estate planning because they own everything jointly with their spouse, so it doesn't really matter.

WRONG!

Here are a few reasons why that kind of thinking costs thousands of dollars (at least):

1. What if you both die at the same time?

If you and your spouse die in the same accident and you have no planning in place, you're looking at spending a heck of a lot in probate fees. We estimate right now that probate costs approximately five (5) percent of your gross estate value. So (to give a little perspective) if all you own is a house worth $500,000, you're paying $25,000 to the court and your personal representative, possibly more when you take attorney's fees into account.

And that's not all. If you have minor children when you die without any planning in place, your kids are each going to get their share of inheritance when they turn 18. Yes, the law requires this! The law also does not discriminate with age when it comes to inheritance. So, your 20-year-old son and your 2-year-old son will inherit the same amount of money! Not what most parents would have wanted.

2. You could miss out on certain tax advantages only afforded married couples.

When you plan for death with joint ownership, what you effectively do is delay tax payment. What you lose when you plan this way is the tax benefit that married couples are afforded. Each person has a certain tax exemption when it comes to paying estate taxes ($3.5M for 2009, No tax in 2010, then $1M in 2011 and beyond). But with joint ownership planning, you lose one of those exemptions all for the sake of delaying payment. Each married couple should be planning for two tax exemptions. It might not be worth it in your case to lose that all for the sake of delaying any payment.

3.  Your assets are not protected after your death.

If you die before your spouse and own everything jointly, you're leaving an unprotected estate to your spouse and kids. If your spouse has creditors, they can reach all of the estate. If your spouse remarries then divorces, he or she may lose some of your estate to the ex. Or, if your spouse remarries and dies, there's no guarantee your kids will see any of that inheritance. Even if your spouse doesn't remarry, if he or she doesn't do any further estate planning, after his or her death, your children will receive their inheritance outright and unprotected. So, your child's creditors or ex-spouse may have a claim to it.

Planning with a Revocable Living Trust is a far better way to go. You retain lifetime control over your assets, but leave a much cleaner situation for those you leave behind.

Securing Your Dream with Estate Planning

This is a video that has Alexis Martin Neely speaking on CNBC about the importance of estate planning, even during tough economic times.

Are you inexcusably foolish?

The New York Times recently published an article about estate planning that was pretty straightforward and accurate, for the most part.  The author pointed out that estate planning is often ignored, "[b]ut not discussing something that is going to happen will not stop it from happening. And at some point, someone is going to have to sort out your estate — regardless of how big or small it is."

The author discussed wills for parents: "Everybody should have a will, and people who are married and/or have dependent children are inexcusably foolish if they do not."  Ouch, that's harsh, but may I gently suggest that it's not far from the truth?  This is something that can potentially have a huge impact on your family, and something that you can easily have an attorney take care of for you!

Of course, no article can have everything you need.  The focus of this article was on wills and healthcare documents, which are important, but it just gave this small nod to trusts: "As a side note, trusts are no longer the province of the very rich. They have morphed over the years into useful and straightforward vehicles to protect assets in life from creditors and lawsuits and to pass them to heirs on your own terms." 

I would have added that Revocable Living Trusts are the basis of most estate plans for parents.  I am now recommending RLTs for all parents who own any property.  This is because RLTs save your survivors time, money, and privacy.

To your family's health & prosperity,

Candice