Funding Your Oregon Living Trust – Intel UBS Accounts

Many of my estate planning clients work at Intel, and receive Intel Restricted Stock Units (“RSUs”) as part of their compensation.  These RSUs may be issued several times per year, and often take several years to vest.  Intel employees have accounts at UBS containing both vested and unvested RSUs.  These UBS RSU accounts pose special challenges in terms of avoiding probate by setting up a living trust.

I recently contacted UBS directly to confirm that my law firm had accurate information on how a UBS RSU account can be coordinated with an Intel employee’s living trust (we did).  Key points are as follows:

  1. Ownership of a UBS RSU account cannot be re-titled to the living trust during the Intel employee’s lifetime.
  2. To be able to add a Transfer on Death (“TOD”) provision naming the living trust as a beneficiary of the UBS RSU account, the Intel employee must have upgraded to a “full-service account” with UBS, which triggers an annual fee.
  3. Another option is to transfer all vested RSUs to another investment account in the Intel employee’s living trust or that TODs to the living trust.

A worst case scenario in regard to the UBS RSU account is that, upon the death of the Intel employee, the RSUs can be transferred to the living trust by probating the pour over will.  However, given that most Intel employees will have retired and closed  out their UBS accounts during their lifetimes, relatively few Intel employees should ultimately need to have their UBS RSU accounts go through probate.

Probate in Washington County, Oregon

Over the last five years or so, my estates and trust practice has grown to encompass the administration of estates throughout Oregon, including probate cases in Washington, Multnomah, Clackamas, Lane, Marion, Clatsop, and Douglas Counties. Nonetheless, given that my office is in Hillsboro and I work at Hillsboro Law Group PC, the majority of my probate cases are in Washington County. Unfortunately, to be frank, I have consistently found the Washington County probate court to be the most difficult jurisdiction in which to handle probate cases. From what I have heard this appears to be widely shared perception among the Oregon Bar.

Attorneys handling Oregon probate cases often may choose from two or more counties in deciding where to file a probate case. For example, if a decedent resided in Multnomah County, had property in Clackamas County, and died in Washington County, venue would be proper in any of those three counties. Even though my office is in Hillsboro, I would likely elect to file such a case in Multnomah County, at least for the time being.

A major concern regarding Washington County probate practice is the absence of “Supplementary Local Rules” for probate procedures. Multnomah and Clackamas Counties have such rules, but Washington County does not. Nonetheless, Washington County probate courts will frequently (but inconsistently) impose requirements that have no statutory or regulatory basis, meaning that pleadings are often returned, usually with a cryptic explanation at best. In my opinion, it is crucial that adequate Supplemental Local Rules for probate cases in Washington County be adopted and promulgated in the very near future.

My comments above notwithstanding, I do think the situation has improved somewhat over the last six months or so. The huge backlog of accountings seems to have eased somewhat, and judges recently assigned to handling probate cases may be becoming more comfortable in this rather arcane area of law. Nonetheless, attorneys handling probate cases in Washington County should proceed with extra caution.

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.