So You Need a Will, Now What?

It's easy to assume writing a will is something you can leave for later in life, but you're never too young to make a plan. We asked Pacific University Trustee and attorney, Matthew Lowe to speak to alumni and friends about how to demystify the process of crafting a will. Use the tips and resources below to gain confidence to start your planning or craft a will of your own. 

1. If you die without a will and are married, what happens to your estate?

“Intestate” means one who dies without leaving a valid will, or the circumstance of dying without leaving a valid will, effectively disposing of all the estate. “Estate” means the real and personal property of the decedent.

• If your spouse survives you, and if you have kids together, then your entire estate passes to your surviving spouse.
• If your spouse survives you, and if you have kids from a prior relationship, one-half of your estate passes to your surviving spouse. The other half goes to your surviving children by “right of representation.” 
• If you have no children, the entire estate passes to your surviving spouse.
• If your spouse dies before you and you have children, your entire estate passes to your children.

2. If you die “intestate” (without a will) and are not married, or your spouse dies before you, and if you have no children, what happens to your estate?

• Your estate passes to your surviving parents.
• If your parents die before you, your estate passes to your surviving siblings by “right of representation.”
• If you have no surviving siblings, but have nieces and/or nephews, then your estate passes to the surviving nieces and nephews.
• If none of the above apply, then to grandparents, then to uncles or aunts, and so on to ensure that it goes to relatives.
• Eventually, if no relatives, then it all goes to the state.

3. What other issues arise if you don’t have a will?

• In a probate proceeding, the court will appoint a personal representative which may or may not be someone you would have selected.
• If your spouse does not survive you, custody/guardianship of minor children may be up in the air.
• Charitable gifts that you may have wanted to make likely will not happen. Even if your survivors want to make a gift, they will not be able to do so in a way that could reduce estate tax liability.
• Any specific gifts that you may want to make (e.g., grandma’s ring, family photos, etc.) may not go to the person(s) to whom you’d like them to go, not to mention any family chaos that might ensue.

4. Where there is a will there is peace of mind.

A validly executed will is a means of expressing your wishes for the distribution of your estate and is binding on your heirs and a court. To be “validly executed:”

• You must be over 18.
• The will must be in writing and signed.
• The will must be executed in the presence of two witnesses.
• The witnesses must “attest” the will by signing in the presence of the testator (person making the will).
• Form doesn’t matter, whether on toilet paper or parchment, as long as in writing, signed before two witnesses, and attested to by the witnesses.

5. What is “Probate?”

Probate is the process of transferring title to assets. Probate is a court process and includes:

• Filing a Petition
• Appointment of a Personal Representative (aka “Executor”)
• Issuance of Letters Testamentary
• Marshaling estate assets and filing an estate inventory
• Filing an estate accounting
• Filing state and federal income and estate tax returns
• Notifying creditors and processing claims against the estate
• Requesting permission to distribute probate assets
• Closing the estate

Probate is not always required to transfer title to assets and certain assets are considered “non-probate” assets, including:

• Bank accounts
• Brokerage accounts
• IRAs
• Transfer on Death Deeds

Other assets without titles often are not probated if there are no other estate assets that need to be probated. You should plan for solvency when considering non-probate assets.

Other probate issues to consider:

• Time
• Court supervision
  • Good when there is disagreement or hostility among heirs
  • Good to sort out claims of creditors
  • Bad when you are ready to take action but need court permission
  • Bad if you don’t like paperwork…
• Costs
  • Legal Fees
  • Filing Fees
  • Accounting Fees
  • Publication of notices
• Public Process

6. Is a Revocable Living Trust a good alternative to probate? 

Like a will, a trust allows you to declare your intentions regarding distribution of your estate assets. Unlike a will, a trust need not be probated because your estate assets are owned by the trust and trusts do not die. The person making the trust is knows as the “trustor” or “settlor.” The person designated to administer the trust is known as the “trustee.” The trustee does not need court approval prior to taking actions when administering the trust. Trust administration process while the trustor is alive includes:

• Conveying assets to the trust and taking title to newly acquired assets in the name of the trust
• Distributing income, principal or other trust assets to beneficiaries under the terms of the trust
• Often the trustor and trustee of a revocable living trust are the same person 
• The lifetime beneficiary is often the trustor
• Heirs and devisees (those taking after your death) have no present interest in trust assets

The IRS disregards the trust for tax purposes.

After the trustor dies, the trust administration process includes:

• Appointment of a successor trustee
• Marshaling estate assets
• Notice to creditors
• Payment of creditors and claims
• Distribution of assets to designated beneficiaries
• Filing state and federal income and estate tax returns
• Terminating the trust

7. What other issues can you have with a trust?

• Revocable versus non-revocable trusts
• A revocable trust does not avoid estate taxes
• A trust may not be desirable if there is family dissension
  • A judge can be useful to resolve disputes among beneficiaries
  • Court appointment of a personal representative may carry more weight than appointment of a trustee in a trust
• Assets that are not owned by the trust may require probate so you should always have a “pour-over will” in addition to a trust
• Can avoid “ancillary probate” for property owned in other states
• The cost to prepare trust documents is higher than the cost to prepare a will

8. Don't forget about taxes on your estate.

There is a primer on tax liabilities upon death.

• Decedent’s final income tax returns
• Fiduciary tax returns
  • The income tax return for the estate
  • Income in respect of a decedent
• Federal estate tax returns
  • Due within 9 months of death (6 month extension available)
  • $5.49M individual exemption in 2017
  • Individual exemption is “portable” so you can transfer unused portion to your spouse.

Oregon Estate Tax Returns:

• Same deadlines for filing as federal returns
• Use federal estate tax forms to file state returns
• $1M individual exemption
  • Creates confusion and difficulty in tax planning
• Unlike federal law, lifetime gifts do not apply against the lifetime individual exemption
  • This can be a useful tax planning tool for estates below $5.49M but more than $1M
  • Annual gift exclusion is $14,000 per person

9. What is durable power of attorney?

• Durable power of attorney is a document where you grant legal authority to another person to act on your behalf.
• This is only effective during life and it ends upon death.
• “Durable” powers of attorney are expressly intended to be effective upon incapacity.
• The person appointed is referred to as your “attorney in fact” - Choose wisely!
• Banks, brokerages, title companies, hospitals, etc. are required to honor valid powers of attorney.

10. What is an Advance Directive for Health Care Decisions?

• Form of Advance Directive is statutory.
• Allows you to direct end of life decisions, either through expressing your wishes specifically or through designating a health care representative.
• Applies in instances where you are in a terminal condition, permanently unconscious, life support would cause you permanent and severe pain; or you are in an advanced stage of a progressive, fatal illness.
• Immediately effective upon signing in front of two witnesses.
• Can be changed or revoked at any time.
• Does not end until you die or revoke it.

Any questions?
Contact Matthew Lowe 
matthew.lowe@jordanramis.com
503-598-7070

Additional Resources

• Everybody Needs a Will | Pacific Magazine, Winter 2017
• Estate Information Form
• Estate and Succession Planning 
• General Explanation of Advance Directive for Health Care Decisions
• Living Trusts
• Disability Planning with a Durable Power of Attorney
• Matthew Lowe, Jordan Ramis Attorneys at Law
  • matthew.lowe@jordanramis.com
  • 503-598-7070