Why do I need an Estate Plan?
Estate plans can help you to prosper while you are alive and pass your assets at death with minimal inconvenience and expense. They can also protect you and your assets and minimize estate and inheritance taxes owed upon your death. For example: (1) Advance Directives for Health Care and Durable Powers of Attorney allow you to appoint someone to act on your behalf if you are unable to do so; (2) Wills for married couples may include provisions that make use of both marital and individual estate tax exemptions; or (3) Parents of minor children may include guardian and conservator provisions to protect their children until adulthood. For larger estates, limiting the amount of estate tax owed upon death is a good reason to make sure a comprehensive estate plan is in place. Depending upon the size of the estate, the plan may include trusts, charitable planning or gifting strategies to decrease the size of the taxable estate. In sum, estate planning provides a means to deal with uncertainties, plan for the next generation and protect yourself and your assets.
What is the difference between a Will and a Trust?
A will does not become enforceable until the creator dies. At that point, the personal representative is responsible for distributing the property according to the terms of the will. Before the assets can be distributed to the beneficiaries, the will is subject to probate or administration by the court. This requires filing the will and other paperwork in court where it becomes part of the public record. If a decedent owns real property in two states, the will may be subject to probate in both states.
In contrast, a trust can take effect during the creator’s or “grantor’s” lifetime or at the grantor’s death. For example, a revocable trust takes effect as soon as it is signed. The grantor transfers property from his or her individual name to the trustee of the trust. The grantor will still be considered the owner of the property for tax purposes, but the trustee will be responsible for managing and distributing the property according to the terms of the trust agreement. Unless a dispute arises among trust beneficiaries, court approval and involvement is usually not required for a trustee to manage and distribute trust property.
What is Trust Administration?
Trust Administration is similar to probate, in that it involves the management and distribution of a decedent’s trust property. The difference is it does not usually require court involvement. Instead, the trustee is responsible for gathering the trust property, determining its value and distributing it to the beneficiaries of the trust. In administering a trust, the trustee follows specific rules contained in the trust agreement and in the Oregon Uniform Trust Code. For example, the trustee is often required to provide notice and reports of trust activity to the beneficiaries of the trust.
What is Probate?
Probate is a court process to transfer title of property after a person’s death. A Personal Representative is appointed to gather the estate assets, determine their value and distribute them to the estate’s beneficiaries as they are named in a will or under state law.
Some assets do not require probate in order to transfer title. For example: (1) Joint with right of survivorship property; (2) Insurance or retirement plans that have a designated beneficiary, or (3) Assets held by an individual as trustee of a trust. It is important to determine how all of a decedent’s property is titled before you can determine whether probate is required.
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Butcher & Smith Law, LLC | 520 SW Yamhill St., Suite 1000 Portland, Oregon 97204 | Tel: (503) 972-7380
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