Category Archives: Estate Planning

Beneficiary Designation Trumps Dissolution of Relationship

In a recent Court of Appeals case, Martin v. Gomes and Am. Century Inv. Servs., Inc., No. A146643 (Or. Ct. App. Feb. 26, 2014), the plaintiff-decedent’s estate brought an action to recover the proceeds of the decedent’s IRA where the decedent’s former domestic partner remained designated as the beneficiary of the IRA at the time of the decedent’s death. Afterall, the decedent and his domestic partner had ended their domestic partnership many years back and even had a judgment dividing their assets and stating that “[the decedent] shall maintain the retirement benefits in the retirement accounts that he has accrued. [The former domestic partner] has no right or interest in [the decedent’s] retirement funds.” The decedent, however, never submitted a change of beneficiary form removing his domestic partner as the beneficiary of the IRA account.

The court held that the terms of the IRA beneficiary designation controlled, and that this was not altered by the provisions of the earlier judgment on the basis that the judgment addressed the parties’ property interests at the time of the judgment and did not address any expectancy interest that the parties’ may have by virtue of a beneficiary designation.

It is important to note that the Court’s ruling was specific to the set of facts presented and that the result may have differed had the judgment been a dissolution judgment, made a specific reference to the beneficiary designation, or evidenced an intention by the parties to dispose of any expectancy interests.

The take-home point – upon dissolution of a marriage or domestic partnership, be sure to change the beneficiary designations on your retirement accounts (and to be safe, your life insurance policies as well)!

 

Estate Planning is for Everyone

Most Americans are generally aware that they need to have an estate plan, but – according to a recent nationwide survey – most still do not even have a Will. One common misconception is that there is no need for an estate plan unless the estate is large or complex. In reality, most of the reasons to plan apply to all estates, large or small. Some issues you should consider:

1. Incompetency. What if you become incompetent prior to your death? With a comprehensive estate plan, you can pick the successor manager of your affairs using a trust, power of attorney, or other tools. Without an estate plan, expensive court intervention may be required in order to appoint a fiduciary who will then be required to annually report to the court.

2. Blended Families. In any second or later marriage an estate plan is particularly important. Without a plan, children from different marriages may be treated very differently or even left out of inheritance entirely, depending on how assets are titled. With a plan, you can insure that your priorities will prevail. For example, by using a marital trust you can provide support for a surviving spouse and then, upon his or her death, direct the disposition of the assets to the children of a prior marriage.

3. Minor Children. If you have minor children, a properly drafted estate plan will allow you to nominate the guardian or guardians of your choice – the single most important estate planning step parents can take. Without an estate plan the courts will be forced to designate a guardian without the benefit of your insight or the knowledge of your preferences. In addition, your assets will be distributed to minor children at their 18th birthday unless your estate plan provides otherwise. With a plan, you can designate a trustee to manage the estate’s assets until your children reach an appropriate age that you determine.

4. Special Needs Children. If you have a child who qualifies for government benefits, those benefits may be lost if the child receives an inheritance outright. The inheritance itself may also be spent improvidently if the child does not have the capacity to manage the assets. However, a trust for such a child can hold assets so that the child will remain qualified for government benefits and have the benefit of appropriate management and distribution. Similarly, if you have a child who struggles with drug addiction, poor money management, or other negative behaviors, you can tailor a trust that meets the needs of that child – if you plan in advance.

5. Beneficiary Designations. If you have life insurance, IRAs, annuities or other assets which designate a beneficiary, your current beneficiary designation may not effectively reflect your current wishes – particularly if the beneficiary designation was made some time ago. The rules and options relating to beneficiary designations have undergone significant change in recent years and will continue to do so. Your estate plan should integrate your beneficiary designations with the overall plan for all of your assets and ensure that you and your beneficiaries can take maximum tax advantage under complex distribution rules.

6. Business Transition. If you own a business, your death may also spell the death of that business if you neglect a business transition plan. With a transition plan, you can help to ensure that the business will either be transitioned to the appropriate family members or be continued pending a sale so that its value can be preserved for your family.

7.Probate and Probate Avoidance. Without a plan, your estate will pass via intestacy, meaning, in effect, that the State of Oregon will have written your Will for you. If you plan your estate, you can decide who will manage the estate, who will inherit it, and whether various methods to avoid probate entirely are appropriate. For example, a common method of avoiding probate is the creation of a revocable trust that takes title to your assets prior to your death. During your life you serve as your own trustee. Upon your death, your successor trustee is able to manage and distribute the assets per your wishes without probate.

8.Taxes. For most estates, taxes are not a concern. However, there is an Oregon Estate Tax on estates above $1,000, 000 and a Federal Estate Tax on estates above $5,340,000 (2014 exemption, indexed annually for inflation). For both Oregon and Federal tax, a married couple can fairly easily double the amount they can leave to their heirs tax free – but only with the appropriate estate planning.

Most estates, large or small, would greatly benefit from intentional planning. At a minimum, every adult should have a Will, Power of Attorney and Advance Directive to Physicians (for medical decisions) – all of which you can obtain at a cost far lower than the cost you or your family will incur from failing to plan.

The Top 12 Reasons It May Be Time To Review Your Estate Plan

I am frequently asked, “when should I review my estate plan”? My answer (in true lawyer fashion) is “it depends.” Circumstances change. A birth. A death. A divorce. Your intentions for how you want your assets distributed will evolve over time. The following is a list of the Top 12 Reasons it may be time to review and update your existing documents with your estate planning attorney:

Size and Composition of Estate Assets
1. The value of your estate has changed since the time your estate plan was prepared. This may include receiving an inheritance, obtaining a significant amount of life insurance, etc.

Health & Family
2. There may be a significant change in your health or the health of your spouse.
3. A child or other beneficiary has suffered from a life altering illness or injury.
4. A new child or grandchild has been born.
5. There has been a divorce or separation in the family.

Business
6. You have bought a new business.
7. You have entered into a buy-sell agreement.
8. You would like to sell your existing business or transition your closely held business to the next generation.

Bequests & Fiduciaries
9. You would like to change who is serving as a fiduciary (personal representative, executor, trustee, agent, guardian) in your plan.
10. You would like to remove or add an individual or charitable beneficiary.
11. You would like to change the percentages or dollar amounts that a beneficiary receives.
12. You would like to change the beneficiaries on your retirement plans or life insurance policies.

The first step in the process of reviewing your plan it to meet with your attorney. If you do not have a current attorney, and would like to speak with someone about updating your estate plan in Oregon, please feel free to contact me at [email protected] or 541.382.3011.

Who We Are: Estate Planning and Probate

With abundant natural beauty and vibrant culture, Central Oregon continues to be an alluring destination for retirees. When you factor in the region’s active entrepreneur community, it’s clear Central Oregon has a growing demand for estate and business succession planning. As one of the largest and most well-respected estate planning and probate practice groups in the state, we will continue to offer extensive estate planning and administration services, including estate plan drafting, revocable living trust formation, estate and gift tax planning, charitable giving, estate administration and probate, trust administration, guardianships and conservatorships, closely-held business advice and succession planning, and contested estate and fiduciary litigation services.

Although we believe these changes will help Karnopp Petersen better serve Central Oregon, we are continuing to provide other traditional legal services to businesses and individuals throughout the region.