Understanding Trusts and Estates Law in Oregon: A Comprehensive Guide for Executors and Beneficiaries

Introduction

Trust and estate law governs how an individual's assets are managed, distributed, and protected either during their lifetime or after their death. This law is complex and can vary from state to state. This article aims to provide a comprehensive guide for executors and beneficiaries in Oregon.

Part One: Understanding Trusts

A trust is a legal entity created by a person (trustor) to specify how their assets will be managed, distributed, and protected during their lifetime or after death. There are two types of trusts – revocable and irrevocable trusts.

1. Revocable Trusts

Revocable trusts are created during the trustor's lifetime and can be modified, revoked, or terminated by the trustor at any time. Revocable trusts are also known as living trusts. The trustor retains control over the assets in the trust, and income generated by the assets is taxable to the trustor. Revocable trusts are often used to avoid probate, reduce estate taxes, and provide for incapacity planning.

2. Irrevocable Trusts

Irrevocable trusts are created during the trustor's lifetime but cannot be modified, revoked, or terminated by the trustor once created. The trustor gives up control over the assets in the trust, and the income generated by the assets is taxable to the trust or beneficiaries. Irrevocable trusts are often used for asset protection, estate tax planning, and Medicaid planning.

Part Two: Understanding Estates

An estate is the legal entity created by a person's assets after their death. The estate is responsible for paying the decedent's debts, funeral expenses, and taxes. The estate's assets are distributed according to the decedent's will, trust, or Oregon intestacy laws if there is no will or trust.

1. Intestate Succession Laws

If a person dies without a will or trust, their assets will be distributed according to Oregon intestate succession laws. These laws determine who will inherit the decedent's assets based on their familial relationships.

2. Probate

Probate is the court-supervised process of validating a will, identifying and appraising the decedent's assets, and distributing the assets to the beneficiaries. Probate can be a lengthy and costly process, and assets subject to probate are typically subject to creditors' claims.

3. Non-Probate Assets

Not all assets are subject to probate. Assets held in a revocable trust, payable on death, or transfer on death registrations are considered non-probate assets and pass directly to the beneficiaries.

Part Three: Understanding Estate Planning Documents

Estate planning documents are essential components of an individual's estate plan. These documents specify how the individual's assets will be managed, distributed, and protected during their lifetime or after their death.

1. Wills

A will is a legal document that specifies how the individual's assets will be distributed after their death. A will also appoints an executor to administer the decedent's estate.

2. Trusts

A trust is a legal entity that specifies how the individual's assets will be managed, distributed, and protected during their lifetime or after their death. A trust can also be used to avoid probate and reduce estate taxes.

3. Power of Attorney

A power of attorney is a legal document that authorizes someone else (attorney-in-fact) to act on behalf of the individual regarding financial and legal matters.

4. Advance Directive

An advance directive is a legal document that specifies the individual's wishes regarding medical treatment and end-of-life decisions.

Part Four: Understanding Estate and Gift Taxes

An estate tax is a tax levied on the transfer of an individual's assets after their death. A gift tax is a tax levied on the transfer of an individual's assets during their lifetime.

1. Federal Estate and Gift Taxes

In 2021, the federal estate tax exemption is $11.7 million per individual, and the top tax rate is 40%. The federal gift tax exemption is also $11.7 million per individual, and the top tax rate is 40%.

2. Oregon Estate Tax

Oregon has its own estate tax, with an exemption of $1 million per individual and a top tax rate of 16%. The tax is levied on the value of the taxable estate, which includes both probate and non-probate assets.

Part Five: Understanding Trust and Estate Administration

Trust and estate administration involve managing, distributing, and protecting the assets within a trust or estate. Executors and trustees are responsible for administering the trust or estate.

1. Executors

An executor is responsible for administering the estate of the decedent. The executor manages the decedent's assets, pays the decedent's debts and taxes, and distributes the assets to the beneficiaries.

2. Trustees

A trustee is responsible for administering the trust according to the trust document's terms. The trustee manages the trust's assets, distributes income and principal to the beneficiaries, and ensures the trust's objectives are met.

Conclusion

Trust and estate law is complex and can vary from state to state. Beneficiaries and executors should understand the types of trusts, estates, estate planning documents, taxes, and administration involved to ensure their loved one's assets are managed, distributed, and protected according to their wishes. Consultation from an estate planning attorney may be beneficial to navigate the complexities of trusts and estates.