Avoiding probate should not be your primary goal when estate planning in Oregon. For most people, probate is a quick process that allows you an appropriate vehicle for distributing assets, protecting loved ones, and honoring your charitable wishes. Trust companies convince you otherwise so you will buy their product–not because it necessarily works to your advantage.
But there are exceptions. Our law office encounters a few clients who may benefit from avoiding probate and should create a trust as their main estate planning vehicle. Here are four possible reasons why clients may need to establish a trust in order to avoid probate.
Need for Continuous Asset Management
During the probate process, your assets are essentially placed on hold until the court approves their distribution. This can be troublesome if your assets generate income that may be vital to supporting your family.
If you own a business, rental properties or even investment accounts, these assets continue to generate income but that cannot be distributed unless a special motion is filed with the court or probate concludes with assets being liquidated or passed on to their new owners. In cases of incapacity, a power of attorney allows an agent to pay bills or distribute income. But once you die, that agent no longer has the authority to accomplish those tasks.
When you own multiple income-producing assets, a living trust may be your best option. It continues distributing income until it is dissolved which reduces interruption of support and hardship.
Probate is a public process. Technically, anyone can access your court files and see your asset inventory and the value of your estate.
This creates anxiety for some people. A contentious divorce or family estrangement leads some clients to want to keep the assets of their estate private. Sometimes, the motivation is less conflict-driven. Clients may not wish to compromise their family members’ safety by making the ownership of high-value property public. There is always a risk that if it is known a family member owns an expensive car or rare work of art, they may become a target for crime.
In most cases, you do not need to keep the distribution of your assets after death private. If you are worried about social security or credit card account numbers, those are kept private anyway. However, if you believe a public probate will compromise safety or heighten tensions within your family, a trust could be a better option for you.
When assets are placed in a trust, they technically no longer belong to you. They belong to the trust which is why they are not subject to probate proceedings.
This works well for clients whose estate is valued over $1 million. You can move assets into a trust and reduce the estate’s overall taxable value. Income and property are then distributed to your loved ones rather than used to pay a tax burden.
The cost of probate in Oregon is modest compared to some other states. Unless your estate exceeds $1 million, you are unlikely to lose a significant amount of it in administration fees or taxes.
However, if you live in Oregon and own property in other states, it is likely that you will need an ancillary probate in each of those states, as well. An Oregon probate proceeding cannot address property outside the state. If you own a hunting cabin in Alaska, for example, you must file a separate probate proceeding there.
People who own a number of out-of-state property and investments will see their costs rise with each separate probate proceeding. Placing out-of-state assets in trust or owning them jointly with a spouse or other family members may prevent this dilemma.
Before you choose a trust company and decide to transfer all your assets into a trust, see if that is necessary for you. Diane L. Gruber advises clients on all their Oregon estate planning options including those for avoiding probate. Contact us today to schedule a consultation and see what is necessary for you.