Wills & Trusts
Although many people view a Will as the end result of "getting their affairs in order", it is really just one piece of a comprehensive plan for ensuring that your assets pass to whom you want and in the manner in which you want. One limitation of a Will is that it is effective only on your death. If you are incapacitated during your lifetime, your Will cannot be used to determine guardians for you or for your children or define who can act on your behalf to pay your bills, get your mail, or manage many other aspects of your life that need to be addressed. Another limitation of a Will is that it requires the intervention of a Court through the Probate process.
There are two types of Wills which we use in support of your comprehensive plan.
A Will (or a 'Last Will and Testament') is a legal document that tells the Probate Court how you want your property distributed after you die, and who has the power and responsibility to wrap up your affairs. Through the Probate process the Court will give the 'Executor' of your will (called the Personal Representative in Oregon) the authority to gather all of your property, pay any remaining creditor bills, and distribute your remaining property as you specify in your Will. Because the Will takes effect only after a court determines that it is a valid document, a judge must act before your executor can step in and manage your estate.
A Pour-Over Will is a legal document used in conjunction with a Living Trust and is an integral part of any comprehensive plan designed to avoid the Probate process. In the event that you die with assets outside of your Living Trust, a Pour-Over Will acts to complete your estate plan, and avoid Probate, by providing that assets not transferred to your Living Trust during your lifetime are to transferred to your Living Trust after death.
A Trust created in the Will which does not become effective until the moment of death when the Will becomes effective. Most often used for controlling money to children or to a surviving spouse.
A Living Trust, or a Revocable Living Trust, is treated by Oregon law as the functional equivalent of a Will. It is created by the Trustor (or Settlor or Grantor) who designates a beneficiary or beneficiaries of the Trust, appoints a Trustee to manage the assets of the Trust and transfers title of the Trustor's assets to the Trust. As a general rule, the Trustor assumes all three roles. Unlike a Will, which is only effective at the death of Testator, a Revocable Living Trust is effective when created and funded. A fully funded Revocable Living Trust is part of a comprehensive plan which provides instructions to the successor Trustee and others allowing you to control your property while you are alive, take care of you and your loved ones in the event of disability, pass your property to your heirs when and how you want while maintaining privacy regarding the details of your assets, and avoid the intervention of the Court in the Probate process.
A Revocable Trust is so named because during the Trustor's lifetime, and while the Trustor is not incapacitated, the Trustor can revoke the Trust and take title in the Trustor's name. Because the Trustor has not relinquished control of the assets, the Internal Revenue Service treats the assets as belonging to the Trustor.
There are many different Irrevocable Trusts. In general terms, an Irrevocable Trust is a Trust that, once executed, cannot be revoked.
An Irrevocable Life Insurance Trust (ILIT) is an example of an Irrevocable Trust. Life insurance is a unique asset in that it serves numerous diverse functions in a tax-favored environment. Life insurance proceeds are received income tax free and, if properly owned by an Irrevocable Life Insurance Trust, life insurance proceeds can also be received free of estate tax. An ILIT is one of the most popular wealth planning devices. It is a trust designed to own a life insurance policy, usually on the lives of you and your spouse. You gift funds to the trust periodically and the trustee uses the funds to pay premiums on the life insurance policy. The ILIT is designed to produce many benefits for you and your family, some of which are that it allows you to accumulate assets outside of your taxable estate, it protects the assets from the claims of creditors, and avoid estate tax upon the distribution of funds to your family.