Serving the Washington, Multnomah, Clackamas Counties

503-650-9662

Wills vs Trusts I: What Wills Do & Don’t Do

There is no doubt that a will is a helpful estate planning tool. When it meets the requirements for a last will and testament in Oregon, it reduces family stress and streamlines the distribution of assets after death. However, there are limits to a will and that is why it is best that you discuss your circumstances with an estate planning attorney rather than attempting to draft one on your own.

To get an idea of what you need to consider while estate planning in Washington, Multnomah, Marion, and Clackamas counties, here is what wills do and don’t do. 

The Do’s

A well-drafted will leaves no doubt to your intentions and makes probate an easy process–rather than one to avoid. This is how it works to meet those goals.

Determines the Distribution of your Assets

A will is a legal document that formalizes your wishes after death. This includes the distribution of your personal and real property.

When you die without a will (intestate), state statutes, not your desires, determine who owns your property after death. Sometimes, this seems to work in your favor. For example, if you are married with no children, your spouse will receive your entire estate. If you are single and have children, each child receives an equal share. Many people consider this ideal and take the risk of dying intestate.

But the statutes have their limitations. First, they are cut-and-dry with little room for subjective feelings. For example, if you have a spendthrift child who needs a trust more than a direct payout, the only way that will happen is with a will. Otherwise, that child receives a large share of property that can be squandered quickly. The same is true if you are single and estranged from your family. It will not matter if you suffered horrific abuse and cut off contact 15 years ago–the intestate statutes still require distribution of your assets to relatives.

Second, the intestate statutes only address property distribution to family. If you wish to pass property to charity and you die without a will, there is no space for that to occur. Even if you talked about giving your assets to charity for decades, none of that matters unless it is documented in a will. Property will pass to your relatives, even if that was never your preference.

The only way to assure your final wishes are respected is to draft a will. Otherwise, you take a chance on the intestate statutes.

Provide For Care of Minor Children

A will also lists guardians and alternate guardians should you pass away before your children become adults. Many clients choose siblings or parents for this role, but sometimes, they choose a close family friend.

The intestate statutes are already brutal when it comes to property distribution, but in this area, they are even more unforgiving. Many clients assume custody of children will pass to their spouse but they do not consider that an accident could kill both spouses at once. Also, single parents must designate guardians, especially if they prefer a friend or live-in partner assume custody rather than an estranged family member.

Drafting a will that addresses this issue also spares your children from court hearings involving who becomes responsible for their care. That traumatic process can be avoided with careful estate planning in Oregon rather than taking a chance you will survive until you children reach adulthood.

Reduce Family Tension

Despite impressions to the contrary, a will reduces rather than enhances family tension. It makes your wishes clear so there is little to fight over, even if you intentionally exclude a family member from inheriting.

Disputes in probate arise more frequently with intestate proceedings. While there is always a likelihood of “mom loved me best” in any probate, that is less likely to carry weight if there is a will that documents your desires. Without a will, family members are more likely to challenge distribution plans and bring grudges dating back to 1979 into the process.

There are ways to phrase a will so challenges are discouraged. That is another reason to talk to an estate planning attorney.

Make Charitable Gifts

If it has been your lifetime dream to give your house to the Cat Adoption Team so they can create an additional shelter, the only way that will happen is through a will. The same is true with other charitable intentions, even if it is a smaller scale one, like $200.00 going to cancer research.

Intestate statutes will not honor these wishes without a long court battle initiated by a sympathetic relative. Even then, it is not guaranteed to work out in line with your wishes. If you have charitable leanings, document them in a will.

Create a Testamentary Trust

A testamentary trust is a trust created by will. Circumstances like spendthrift relatives and family members who require long-term care often demand a trust. But it may not be necessary until after you die, because as long as you are alive to manage assets, there are no issues.

Since the intestate statutes focus on equality, there is no consideration of unique situations. For example, if you have three children and one is essentially unemployable with special needs, you likely want to assure a lifetime income for that child. A money or property payout may cancel out any benefits and also create financial management issues. The special needs trust is a type of testamentary trust that provides resources to your child but not at cost of sacrificing other benefits like Social Security Disability or state welfare plans.

Trusts also control spendthrift relatives who may squander a large inheritance. Other trusts manage property to make life easier for a surviving spouse or support charitable causes.

However, no one can benefit from these trusts unless you create them with a will. This makes wills vital when your family situation or legacy plans are not typical.

The Don’t’s

A complete will solves many problems but there are also functions it cannot perform. These issues require additional effort if you want them to match your desires.

Change “Transfer on Death” Beneficiaries

Life insurance, retirement assets, and some types of investment accounts contain “transfer on death” beneficiaries.  Basically, when you die, the assets in those accounts transfer to a named beneficiary, usually a spouse or children.

You designate beneficiaries on these accounts not in your will but by completing the required paperwork. Companies that deal in these products offer beneficiary forms so you can add or change beneficiaries.

When you are estate planning, it is a good idea to check your beneficiary designations on accounts. If you remarried and your former spouse is still a beneficiary on transfer on death accounts, that will not change if you have a new will or if you are married to someone else. You must change the designation with the account manager for it to be effective.

Affect Joint Ownership

Real estate, automobiles, and bank accounts often have more than one owner. This is especially true for married couples. The convenience of this situation is if you die, the property automatically transfers to the other owner and it does not need to go through probate.

However, if you want the proceeds of a bank account to transfer to a child or charity upon your death, that cannot happen unless you remove the joint owner first. Even if it is stated in your will, it is not enforceable. Like payable on death accounts, you must deal with the title company, bank or DMV directly to change joint ownership.

Plan for Incapacity

One reason to hire an estate planning attorney is to address all contingencies. Individuals often become so absorbed in how their property distributes after death that they never consider another possibility–incapacity.

This development can be more disruptive than death. If you die, there is at least a personal representative appointed in your will to handle financial matters and manage your estate. However, if your assets are not held jointly and you are mentally or physically unable to manage your affairs, there can literally be no options for paying your bills, signing contracts or finishing business transactions in process.

A will only goes into effect if you die. It has no bearing if you become incapacitated. To appoint an agent to act for you in the event of incapacity, you require a Power of Attorney–another document that can be drafted by your lawyer.

Meet the requirements for a last will and testament in Oregon by hiring an estate planning attorney today. Gruber & Associates, P.C. is located in West Linn, OR and serves Washington, Multnomah, Marion, and Clackamas counties. Contact us to schedule a consultation.

Want more information about estate planning options? Visit Part II of the Wills vs. Trusts series. 

Tags: ,

Leave a comment