Do You Need a Living Trust in Oregon?

The primary advantage of having a living trust is to avoid probate. Probate takes time, and costs money. In my experience handling probate cases, the negative aspects of the probate process almost always outweigh any hypothetical benefits to the decedent’s beneficiaries.

When a person dies, the person’s assets can be divided into two categories:

  1. Probate property: Legal ownership of such assets cannot be changed without court assistance (‘probate”).
  2. Non-probate property: Assets may be transferred to intended beneficiaries through a variety of methods, without requiring court assistance:
    • Asset that was jointly titled with a surviving person, with right of survivorship.
    • Asset that had a surviving named beneficiary.
    • Asset that a transfer-on-death or pay-on-death provision attached to its proof of ownership.
    • Asset that does not have a legal proof of ownership that must be changed (usually personal property items, such as jewelry, home furnishings, etc.)
    • Asset that has been transferred into a revocable living trust (“RLT”) during the deceased person’s lifetime.

In my opinion, the simplest, most cost-effective approach to avoiding the headache of probate is, for most individuals, to assign probate assets into a revocable living trust prior to death.

A survey of articles addressing this issue on the internet reveals many arguments for and against the widespread use of living trusts. Perhaps the best known proponent of living trusts is the television financial guru Suze Orman, who has asserted that “everyone needs a living trust”: http://www.cnbc.com/id/101069222. While I think this is too extreme, I think Orman’s basic points are valid for most Oregon families, especially those that own real property.

On the opposite extreme, some financial publications, such as Kiplinger’s, take an opposite, and in my opinion ill-advised, position that living trusts are usually unnecessary: http://www.kiplinger.com/article/saving/T021-C000-S002-why-you-do-not-need-a-living-trust.html. Disagreements I have with this article include the following:

  1. An estate plan that includes a trust costs $1,000 to $3,000, versus $300 or less for a simple will.” Response: A basic estate plan in Oregon includes, in addition to a will or a living trust & will, a power of attorney and an advance directive for health care. My firm publishes its estate planning fee schedule online at http://hillsborolawgroup.com/law-firm/client-forms/fee-schedule-estate-planning.pdf, so that clients know they are not getting gouged based on the size of their estates. The fee schedule shows that adding a living trust to an estate plan may add $400-$700 to the total cost, which is far less than the cost of probate. Also, for our many clients with Hyatt legal insurance plans, the additional cost of a living trust is often less than $50, which represents the county recording fee to ensure their marital home avoids probate.
  2. “You can arrange for most of your valuable assets to go to your heirs outside of probate.” Response: While you can avoid probate by adding joint parties or rights of survivorship to all of your accounts, that doesn’t mean that this is an easy process, or a good idea. For example, adding a “transfer on death” provision to your real property may render your heirs unable to sell the real property for two years after they inherit it. Or they may be sued by your creditors after you die. Or they may be unable to agree on how to jointly own the property after your death, sue each other, and never talk to each other again.

Considering the competing views, my overall analysis is as follows:

  1. Probate is an expensive headache that should, in most cases, be avoided.
  2. For most Oregonians, a living trust is the most cost-effective and simplest tool to avoid probate.
  3. Unfortunately, some attorneys charge excessive fees for preparing living trusts, or make the process more complicated than necessary.
  4. If you can purchase Hyatt legal insurance, the cost of setting up a living trust should be negligible.
  5. If you do not have Hyatt legal insurance, unless your estate is unusually complex or high in value ($5 million plus) , you should not pay more than $1,750 for your estate plan including a living trust.

 

FAPA Restraining Orders in Oregon

Family Abuse Prevention Act (“FAPA”) restraining orders are frequently at issue in Oregon divorce cases. Persons eligible for FAPA orders include spouses, former spouses, roommates, former roommates, and persons who have been sexually intimate within the last two years. ORS 107.705.

To obtain a FAPA order, a petitioner must allege that (1) he/she has been the victim of an incident of abuse within the preceding 180 days, (2) he or she is in imminent danger of further abuse, and (3) the respondent presents a credible threat to the physical safety of the petitioner or the petitioner’s minor child. ORS 107.710(1), ORS 107.718(1).

Unfortunately, FAPA orders are often misused in Oregon divorce cases to gain an unfair strategic advantage. For example, with almost no judicial inquiry, a party in a divorce proceeding may obtain a court order immediately barring the estranged spouse from entering the marital home, and prohibiting any contact with the parties’ children. The respondent against whom the FAPA order is targeted then must request a hearing on the restraining order, which may take several weeks to complete depending on how overloaded the court system is. Given that many FAPA orders are eventually dismissed after a court hearing, it is clear that the process is being abused by attorneys and their clients.

In my opinion, to curb the abuse of the FAPA order process, judges should be very aggressive in ordering attorney fees against parties that have their FAPA orders dismissed in a contested hearing, especially when the dismissed FAPA order resulted in the prevailing party losing out on parenting time. 

Beware of ORS 20.080, 20.082, and 20.083

For many types of civil actions in Oregon, a prevailing party cannot obtain an attorney fees award against the losing party, despite having won the case. In such cases, all parties should have a strong incentive to avoid litigation, because even a victory may result in high legal fees that dilute or outweigh the victory obtained in litigation.

An exception to the general Oregon rule that each party pays its own attorney fees can be found in ORS 20.080, 20.082, and 20.083. These statutes allow a prevailing party in a lawsuit for $10,000 or less to obtain an attorney fees award against the losing party, so long as certain statutory requirements are followed. In some such cases, the risk of an adverse attorney fees award may pose a much greater economic threat to the defendant than the actual damages sought by the plaintiff.

ORS 20.080 applies to most types of civil claims, including various torts. ORS 20.082 applies to claims for breach of contract. ORS 20.083 applies to claims arising from failed contracts. For sake of brevity, I will use “ORS 20.080″ as a placeholder for all three statutes, as the requirements of each statute are very similar.

In my experience, many small business owners, and even some insurance claims adjusters, initially fail to recognize the danger inherent in ORS 20.080 claims. When a prospective defendant rejects a claim made under ORS 20.080,the defendant’s potential liability for the claimant’s attorney fees immediately begins to grow, and will continue to grow until the claim is settled or tried to an arbitrator or court.

Absent a basis for an attorney fees award, it may sometimes be a good negotiating strategy for a defendant to either flatly reject an initial claim for damages, or make a very low ball offer, and then perhaps negotiate upwards. Applying this strategy in an ORS 20.080 situation, however, can lead to catastrophe. Instead, upon receipt of an ORS 20.080 demand, it often makes sense for a prospective defendant to immediately offer the probably actual damages the plaintiff would be entitled to in litigation. Then, if the plaintiff fails to beat the settlement offer in litigation, the defendant could seek an attorney fees award against the plaintiff. Thus, by making a generous initial settlement offer, the defendant can shift the huge potential liability for attorney fees back on to the plaintiff in part.

Rest assured that most Oregon civil attorneys are well aware of ORS 20.080, and will aggressively utilize the statute to maximize the value of their clients’ claims. For this reason, if a small business owner receives an ORS 20.080 demand letter, that person should, in my opinion, immediately consult with an attorney before responding. Otherwise, the economic cost of resolving the claim may quickly balloon out of control.

Warning – Time Matters 12 SP2 is broken

Law firms using Time Matters practice management software should not install the recent Service Pack 2 update, which appears to be extremely buggy. While the update purports to support Office 2013 and Acrobat XI, it instead renders the Time Matters Outlook integration virtually unusable. Users can no longer save multiple emails from Outlook to Time Matters, and Outlook routinely crashes when saving a single email. Tech support has been unable to solve the problems, and has no idea when a Hotfix will be released.

Having used Time Matters for the last twelve years, the technical problems that have accompanied recent program updates have been very disappointing.

Short Sale & Foreclosure in Oregon

In recent months I have begun meeting with Oregon clients dealing with mortgage problems. Common mortgage problems include the following:

  1. Property is “under water,” in that debt exceeds equity, especially factoring in the cost of sale (usually about 6%).
  2. Client is locked in to one or two mortgages with very high interest (6 to 9%), compared to rates available over the last two years (3 to 5%). Further, Client’s lack of equity in the property prevents a refinance to a lower interest rate.
  3. Client purchased a property with their significant other (not spouse), and then broke up. The party staying in the home cannot refinance to get the other party’s name off the mortgage(s), because the property is under water.
  4. Client has been unable to consistently to make mortgage payments because of a loss of employment or decline in income. Foreclosure proceedings have been, or will soon be, filed.

While every client’s situation is unique, my general approach is as follows:

  1. The question of whether a bank can obtain a deficiency judgment against Client is often decisive. If the bank(s) cannot get a deficiency judgment, then foreclosure may be Client’s best option.
  2. The real estate industry has disseminated a lot of propaganda to consumers about the danger of foreclosure, and the supposed benefits of a short sale instead of foreclosure. In many cases, a short sale may offer no benefits to Client compared to a foreclosure, but is much more time consuming, aggravating, and possibly more expensive.
  3. I believe that banks (i.e., corporations) approach mortgages from a narrow financial self-interest perspective. The bank will take whatever action it believes will increase its bottom line, hopefully within the confines of state and federal laws. In my opinion, consumers should also use this approach, and be prepared to walk away from a mortgage that is a financial liability for their family.

Overall, dealing with troubled mortgage issues is very stressful, and I am happy to be able to assist clients in moving forward with their lives.

 

Oregon Estate Planning for Assets in India

Many of my estate planning clients are relatively recent immigrants to the U.S., and continue to own property in their countries of origin.  In particular, I am frequently asked questions about how an Oregon legal will or trust may affect property in India.  Here are some general observations regarding this rather complicated subject:

  1. Clients residing in Oregon with assets in India should ideally consult with an estate planning attorney in India to ensure that those assets are distributed correctly at death.
  2. India is a common law jurisdiction, meaning that there are numerous similarities between U.S. and Indian estate laws.  In particular, the probate process in India for a testate estate is very similar to Oregon probate.  On the other hand, for an intestate estate, India law may be very different, as the distribution of assets may depend on the decedent’s religion (Hindu, Muslim, Christian, etc.).
  3. India does allow a revocable living trust (“RLT”), which could be used for probate avoidance, as in the U.S. However, a living trust created in the U.S. would be considered an “offshore trust,” meaning that complicated rules will apply for transferring assets into the RLT.  For example, India may prohibit the transfer of immovable property, i.e., land, into such a trust, as the trust is not a resident of India.
  4. The transfer of financial assets from India into an offshore trust may require the approval of the Financial Bank of India under the Foreign Exchange and Management Act (“FEMA”).
  5. An Oregon legal will could be probated in Oregon, and then registered in an appropriate court in India to ensure the proper distribution of assets in India.

 

Calculating Spousal Support in Oregon

It is often difficult to predict spousal support amount and duration in an Oregon divorce case.  While child support tends to closely follow the Oregon Child Support Guidelines, there is no set formula for spousal support in Oregon.  Recently, however, I discussed the spousal support issue with a local judge, who referred to spousal support calculators used in other jurisdictions to give opposing counsel and I some parameters on how he might rule in our case.  Here are some links to online spousal support calculators used in jurisdictions outside of Oregon:

  1. Massachusetts alimony calculator
  2. Maricopa County, Arizona alimony calculator
  3. Fairfax County, Virginia spousal support formula

While Oregon judges are of course free to not follow the formulas set forth above, the formulas may nonetheless be a good starting point for determining a range of appropriate values in an Oregon divorce case.