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Chapter 13, another type of Bankruptcy

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Chapter 13 is a special part of the bankruptcy law. It lets you file a payment plan and gives you a way to repay all or part of your debts while protecting you or your co-signer from claims by creditors. The plan essentially sets out your debts and says how you intend to pay them. If your financial problems or debts cannot be helped by consumer credit counseling or a Chapter 7 straight liquidation, Chapter 13 may be an alternative for you. The filing fee is $310.

The law does not require you to have a lawyer. However, Chapter 13 bankruptcy can be complicated and the bankruptcy law changes from time to time. You may want to talk with a lawyer before filing a Chapter 13 case. Note that hiring an attorney for a Chapter 13 case generally costs more than a Chapter 7 case.

To qualify for Chapter 13, you must meet several requirements. You must be an individual, or husband and wife, or a sole proprietor of a business. You must have a regular income, even if from government benefits, pension or child or spousal support. A partnership or a corporation does not qualify for this type of bankruptcy. At the time of this writing, your unsecured debts must be less than $394,725 and your secured debts less than $1,184,200. A secured debt is one for which the creditor has retained an interest in some of your property, such as when you obtain a mortgage on your house or finance the purchase of a car.

The maximum length of a Chapter 13 plan is five years. You cannot receive a discharge in a Chapter 13 case if you have received a discharge in a Chapter 7 case filed within the last four years, or received a Chapter 13 discharge in a case filed within the last two years.

There are specific procedures involved in filing a Chapter 13 plan. First, you or your lawyer will need to prepare a financial summary of how much you owe and to whom, what your assets are, and what are your monthly income and living expenses. You must also prepare a proposed plan for repayment of your debts. Your plan will provide for monthly payments to the trustee for distribution to your creditors. The amount of your monthly payments depends on a number of factors, including your income and expenses. All of these items must be prepared on court-approved forms.

Before you can file for bankruptcy, you must complete a credit counseling course. Once you complete the course, you will receive a certificate of completion, which will be valid for 180 days. After you file bankruptcy, and before you can receive a final discharge of your debts, you must complete a debtor-education course. Both of these courses can be completed on the Internet or on the telephone. Depending on your financial situation, you may have to pay a course fee.

Once you file your Chapter 13 case, the court will appoint a trustee. The trustee has a number of duties, one of which is to make the payments to your creditors from the money you pay to the trustee pursuant to your plan. Shortly after you file the bankruptcy you must submit a copy of your most recently filed federal tax return, or a transcript of it, to the trustee. You must also file all required state, federal and local tax returns, and continue to file them during the period of the plan. You must give to the trustee any net state and federal refunds that you receive. Before you can receive a discharge, you must certify that all domestic support obligations have been paid in full or that your plan provides for the payment of the obligations. If you fail to pay domestic support obligations during the plan, the court may dismiss your case. A domestic support obligation is essentially spousal support (alimony) or child support.

You will be required to make your first payment to the trustee within 30 days of the date you filed your plan even if your plan is not yet confirmed by the court. It is important to understand that you have to timely make the payments required by the plan; if you miss a payment the trustee will start the procedure to dismiss your case. Only the Bankruptcy Court can authorize you to miss a payment. Similarly, without permission from the trustee, you cannot enter into any credit obligations during the course of the plan.

After you file, the Bankruptcy Court will set a date for a hearing. This hearing is called the meeting of creditors or the “341(a) hearing.” You and all of your creditors will be notified of the time, date and place of this meeting, and you will be required to attend and answer questions under oath about your financial matters.

The appointed trustee for your case will conduct the meeting. It is the trustee’s job to verify the financial information you give. The trustee will then determine whether he or she can recommend to the judge that your plan can be confirmed. At the meeting, the trustee and your creditors may question you about your income, expenses, property, past earnings and your proposed repayment schedule.

About six weeks after the 341(a) hearing, the court will schedule a hearing to determine if your plan is acceptable and meets all of the requirements. This is called the confirmation hearing. The court will notify you of the date of the confirmation hearing. At the confirmation hearing, the judge will determine whether your plan should be confirmed and allowed to proceed. The creditors may attend this hearing and offer any objections they may have. Your presence at the confirmation hearing is not always required, particularly if you have an attorney. If your plan is confirmed, and you are employed, your employer may be ordered to make monthly payments to the trustee by taking them out of your wages.

Benefits Available With Confirmed Chapter 13 Plans
The following benefits would be available to you if your Chapter 13 plan is filed in good faith, the filing fees are paid, the plan is confirmed by the court, you can make your proposed payments, and you otherwise comply with all of the requirements:

• If you complete the plan, which means that you make all of the required payments and comply with all other requirements, you can be excused from paying the remaining balance of most debts. Examples of debts that cannot be excused are: those for willful or malicious injuries that cause personal injury or death; most domestic support obligations, such as child or spousal support; personal injury damages that are the result of willful or malicious conduct; damages for death or personal injury caused by driving under the influence; certain student loans; restitution and certain criminal fines included in a criminal conviction; most debts incurred as the result of fraudulent conduct; and certain tax debts.

• Although you cannot discharge many student loans and some tax obligations, you can gain additional time to become current.

• You might be able to stop or delay a foreclosure against your home by making the back payments over a period of time. Such an extension is also available on delinquent taxes. You may also be able to remove a lien created by a second mortgage on your house.

• If your monthly payments on contracts are too large, you may be able to lower the monthly payment and possibly the interest rate. House payments are the exception; they cannot be changed.

• If necessary, you can pay the unsecured creditors less than 100 percent of their claims. Some taxes must be paid in full.

• You can stop or modify interest from continuing to accrue on unsecured debts in most instances.

• You can take up to three years to repay the claims, and under some circumstances, you may take up to five years.

• You may be able to keep your property that would otherwise be sold and distributed to your creditors in a Chapter 7 bankruptcy.

• You may be able to stop some or all collection activities against a person who co-signed or is otherwise obligated for one of your debts.

• For most debts you incurred before you filed your bankruptcy petition, no one can demand payment from you, sue you, garnish your wages or repossess property without court approval.

• You can sometimes pay extra into the plan to pay it off sooner.

• You can propose to sell some of your property as part of the monies to be paid through the plan.

• If there is a major change of circumstances, you can propose changes to your plan that would help you complete it. However, you cannot stop making the required payments without permission from the Bankruptcy Court. If the change of circumstances is beyond your control and makes it impossible to continue even a modified plan, you can request a “hardship discharge, and discharge some, if not all, of your debts.

• You have the option to dismiss your case at anytime, or convert it to a Chapter 7 bankruptcy.

It is important to realize that changes may occur in this area of law. This information is not intended to be legal advice regarding your particular problem, and it is not intended to replace the work of an attorney.

We are attorneys in Hermiston and Pendleton, Oregon.

Can bankruptcy help me?

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If you cannot pay your debts, are receiving telephone calls from collectors demanding payment or are dealing with a lawsuit, bankruptcy may help you. One of the major aims of bankruptcy law is to give a financially distressed person an opportunity to make a new financial start. Filing bankruptcy generally results in the “discharge,” or release from obligation, of your debts — or at least of many of them — so that no further legal action can ever be taken against you on those debts. In short, bankruptcy gives you a fresh start. However, careful consideration should be given before filing for bankruptcy, because doing so may affect your credit and have other adverse consequences.

Chapter 7 is the most common type of bankruptcy. It is called a “liquidation bankruptcy,” because the debtor is relieved of personal liability for all debts (with certain exceptions). In return, a debtor must give up possession of the debtor’s assets (again, with certain exceptions). While a liquidation bankruptcy is a valuable tool for the debtor, a debtor only will be granted a discharge once every eight years. Once such a Chapter 7 bankruptcy is filed, it generally takes about 3 months to complete.

Some debts are not discharged by a Chapter 7 bankruptcy. The most common of these debts are child support, spousal support, criminal restitution and criminal fines. Other debts may or may not be discharged, depending on the particular circumstances. For instance, debts arising out of giving a false financial statement, fraudulent use of a credit card, or for willful and malicious injury may not be discharged. Personal income tax liabilities may be discharged depending on whether a tax return has been filed and sufficient time has passed. Educational loans can be discharged in whole or in part only after proving the existence of undue hardship, something which requires a separate proceeding from the bankruptcy case. Difficult legal questions come up when looking at these kinds of debts. To avoid serious problems, you should discuss these issues with an attorney before filing for bankruptcy.

Many people ask, “Will I have to give up all of my property if I file for bankruptcy?” The answer is usually that you will not. The law recognizes that some basic property is necessary and allows certain exemptions. “Exempt” means that you will be allowed to keep the property as long as the value of the property does not exceed certain amounts and you take the proper steps to claim the exemption in bankruptcy. You typically will have the option of choosing one of two alternative sets of exemptions: the state exemptions or what are typically called the federal exemptions. Depending on which set of exemptions you use, for many debtors certain property will likely be exempt. For instance, at the time of this writing, under the Oregon exemptions, may exempt an interest in one or more automobiles up to a total of $3,000. Household goods are exempt up to $3,000. Clothes and jewelry are exempt up to $1,800. A single debtor may exempt up to $40,000 of the debtor’s equity interest in a home. Two or more debtors who are members of the same household may exempt up to $50,000 of their home.

If you have lived in Oregon for at least the last two years, you may choose to use the federal exemptions. Under the federal exemptions at the time of this writing, you may exempt an interest in an automobile up to $3,775. Household goods, clothes, jewelry and musical instruments are exempt up to $12,250. A single debtor may exempt up to $23,675 of the debtor’s equity interest in a home. Two or more debtors who are members of the same household may exempt up to $47,350 of their home. If a debtor does not have a home, or is not using the exemption for a home, the debtor has an additional $11,850 to apply to any property, even if the property is already subject to an exemption. In addition to the foregoing, you have an additional exemption of $1,250 that can be used for any personal property.

Only property which you have, and income to which you are entitled, on the date you file bankruptcy is subject to the bankruptcy. Property which is acquired at a later date generally cannot be taken, regardless of the value. Some property, such as the right to an inheritance or proceeds from a divorce decree or divorce settlement acquired within 180 days after the date you file, may nevertheless be included in your bankruptcy. Under certain circumstances other property, such as your right to tax refunds for prior years or the current year, may also be included in your bankruptcy, even though you have not yet received the refunds.

If your property is subject to a security interest, or if your house is secured by a trust deed or mortgage, the property will not be exempt from the creditor holding the security agreement or trust deed or mortgage. If you want to keep the property, you will have to continue to make payments to prevent the creditor from repossessing your automobile or foreclosing on the house, despite the exemption from general creditors and from the bankruptcy trustee. For some personal property that is subject to a security interest, such as in purchasing (and financing) of an automobile, you may have to sign a formal agreement called a reaffirmation agreement, where you agree with the seller to continue making payments. This agreement has to be approved by either the court or your attorney as in your best interests. If the agreement is approved, you will not lose the automobile. However, you will have to keep making the payments in order to keep the automobile, and this debt would not be discharged in the bankruptcy.

As of this writing, the filing fee for a Chapter 7 bankruptcy is $335. This fee can be paid in three installments. No money is due on the date of filing and the first installment is due 30 days later. If your income is low enough, you may be entitled to a waiver of the filing fee.

Chapter 7 Bankruptcy does not Make Sense for Everyone

Other types of bankruptcies are available. You may file a Chapter 13 petition if you have debts within a certain range and have a regular income (whether from wages, unemployment or otherwise) and you wish to pay some or all of your debts when you can. Chapter 13 will permit you to propose to the bankruptcy court a plan for paying off your debts gradually, generally within three to five years, but the judge must approve the plan you propose. You will have to agree to give a portion of your income to a trustee who will distribute that money among your creditors on a pro-rata basis. You will not be able to pay only when you can, but will have to make the payments each month for a specified time period. You generally will not lose any of your property in a Chapter 13 case, and the court will restrain your creditors from garnishing your wages or taking other action against you and your property and sometimes even against a co-signer. You may not file a Chapter 13 if you are a corporation or partnership.

A somewhat similar bankruptcy, if you have a large amount of debts and are involved in a partnership or business, is a Chapter 11 bankruptcy. Chapter 11 primarily is used to reorganize business entities, such as corporations. There is also a somewhat similar bankruptcy for certain family farmers under Chapter 12. Finally, there is a Chapter 9 bankruptcy that applies to municipalities, and a Chapter 15 bankruptcy which applies to certain cross-border international situations.

Note that if you are “judgment proof,” bankruptcy may not be helpful. If you have only a few assets of minimal value, no income or your income is from unemployment, TANF or some other type of government benefits, or your wages are low enough, you may be judgment proof. This means that even if your creditors file suit against you and obtain judgments, they cannot take any of your property or garnish your income.

A creditor that does not have a security interest in particular property may not take any of your property or garnish your wages unless it files a lawsuit against you, serves you with a summons and complaint, gives you an opportunity to respond, and ultimately obtains a judgment. A judgment is not a court order that you have to pay any money. Rather, in most circumstances, a judgment is a court determination that you owe a certain amount of money. The judgment creditor has to determine how to collect the money specified in the judgment from your property or income.

Oregon law provides that certain property and income of a debtor is exempt from the claims of creditors, even if the creditors have obtained judgments. As described earlier, your automobile cannot be taken if it is worth less than $3,000. TANF, Social Security, unemployment and certain other government benefits cannot be garnished, and are generally protected even when deposited in a bank account. If you earn net wages of $218 per week or less, your wages cannot be garnished. A creditor can only garnish 25 percent of your net wages or the amount that your net wages exceed $218 per week, whichever is less.

Often factors to consider in deciding whether to file bankruptcy include: Am I likely to incur debts in the future that I cannot pay? Do I have medical insurance, automobile liability insurance, or am I otherwise at risk of incurring unexpected expenses? Do I have any property or income that a judgment creditor could take if I do not file bankruptcy? Even though I have a lot of debts that I cannot pay, will filing bankruptcy result in any more money for me after I pay my basic living expenses? Is my financial situation going to improve in the future and, if so, should I wait to file bankruptcy until that improvement happens? Should I delay filing bankruptcy so that I do not lose any property, such as the right to tax refunds?

There are a number of factors to consider in deciding whether bankruptcy is an appropriate option. You may wish to consult an attorney before proceeding to file for bankruptcy.

Note, exemptions on property amounts change over time, talk with an attorney to confirm that the amounts referenced are the current valuations. We are lawyers in Hermiston and Pendleton Oregon, serving Umatilla County.

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Understanding bankruptcy

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What is Bankruptcy?
When you owe money, you are a debtor, and the people or companies you owe money to are your creditors. “Bankruptcy” is a federal law that establishes an orderly process to provide protection to debtors and fair treatment to creditors. Bankruptcy proceedings, though not for everyone, can be very helpful in solving a financial crisis.

There are five different types of bankruptcy proceedings. The two most common types are referred to as Chapter 7 and Chapter 13 bankruptcies. Usually when people talk about filing for bankruptcy, they are talking about Chapter 7. A Chapter 7 bankruptcy gives you the opportunity to avoid (or “discharge”) all or almost all of your debts owed as of the date you file for bankruptcy without having to make any future payments. “Discharge” means you no longer have a legal obligation to repay a debt. This process takes approximately 90 days after your bankruptcy petition is filed. In a Chapter 7 bankruptcy, you may be at risk of losing some of your property, and some debts may not be discharged. In addition, some transfers of property that happened before you filed bankruptcy can be undone.

A Chapter 13 bankruptcy is a three- to five-year repayment proceeding. In Chapter 13 bankruptcy you gain protection for your property, and you are able to repay certain debts such as child support arrearages, taxes, car payments and home mortgage arrearages over a three- to five-year time period rather than having your wages garnished or losing property to foreclosure. In exchange for this added benefit, you must agree to make a monthly payment of your disposable income to repay a portion (or sometimes all) of your debts. When consumer credit counseling or Chapter 7 are not available options, Chapter 13 is often an alternative.

Will Bankruptcy Help My Situation?
Bankruptcy can give you a fresh financial start and can seem very attractive to people with debts they cannot afford to pay. However, the process is not for everyone. Because you can discharge only those debts that you owe as of the date you file your bankruptcy, and cannot discharge any debts you become responsible for after the day you file your bankruptcy, timing of the bankruptcy filing is very important. Filing for bankruptcy may affect your credit for a number of years or have other serious consequences that you will need to consider.

You may wish to consult a lawyer to assess the advantages and disadvantages of filing in your particular situation. Perhaps you will be able to work out a debt repayment plan on your own. Possibly you will do best to get help from consumer credit counseling services. Or perhaps bankruptcy will be your best solution later, but not necessarily at this time. Whatever route you take, you will need to gather some basic information before proceeding further. Many attorneys will give a free consultation to discuss the benefits and risks of a bankruptcy and what alternatives to bankruptcy are available.

Some Factors to Consider
What are your total living expenses? Calculate the total monthly expenses for you and your dependents, such as food, housing, utilities, transportation, insurance, clothing, medical care and some reasonable reserve for the unexpected. You will need an accurate list of these monthly expenses as well as a list of your total monthly income.

Do you have medical and automobile liability insurance? While you may think that you are not going to incur any new debts after you file bankruptcy, medical bills and liability for damages for an automobile accident are often unexpected and outside of your control. If you do not have the applicable insurance, these new debts could eliminate the benefits of the bankruptcy you are considering filing.

Whom do you owe money to? Make a list of all of the names and addresses of your creditors and how much you owe each of them. Identify those creditors to whom you have pledged property (e.g., car loan; mortgage or home equity line of credit; installment loan on furniture, appliances or other property), and the value of the property your creditors have an interest in. You can find information about many of your creditors on a credit report. You can get a free copy of your credit report once every 12 months from Equifax, Experian and TransUnion. You can get your credit reports at www.annualcreditreport.com. Print and save each report for future use. Note that you do not need to obtain all three credit reports at the same time.

Unless a creditor has a security interest in a particular item of property such as your car, a creditor cannot take any of your property or income with obtaining a court judgment against you.

Are you “judgment proof”? When a creditor sues you, the creditor is seeking a judgment. A judgment is generally not a court order that you have to pay a debt, but rather a court determination that you owe a certain amount of money. The creditor has to figure out how to collect the debt reflected by the judgment. A creditor with a judgment can garnish bank accounts or wages, or file a lien against your real property (such as your house), or ask the court to take possession of and sell your personal property. However, under Oregon law, you can protect certain property and income from your judgment creditors. This is called exempt property. Exactly what property and income are exempt depends on the type of property and income, and their value. If all of your property and income is exempt, your judgment creditors cannot take anything. In this situation, you are often called judgment proof. Creditors cannot take any property or garnish the income of a person who is truly judgment proof, so creditors may not bother to sue if they won’t be able to collect any money. However, even judgment-proof people can and do file for bankruptcy relief — often to stop harassing telephone calls.

If Your Current Debts were Erased, Would Your Financial Problems be Over? Bankruptcy is intended to give a fresh financial start and will work best if you will have enough income after the bankruptcy to support you and your family. On the other hand, bankruptcy will only be a temporary fix if you go right back into debt again with no way of paying off any new debts. Chapter 7 is only available once every eight years. It is often best to wait until you have resolved your financial problems before filing bankruptcy. Even if you have filed a previous bankruptcy, the court may allow you to file a Chapter 13 bankruptcy to deal with any new debts you may have incurred; however, this depends on the particular circumstances of your case.

Bankruptcy does not Discharge all Debts
It is important to realize that bankruptcy does not necessarily allow you to avoid paying back every kind of debt. For public policy reasons, several types of debts are specifically excluded from discharge in bankruptcy. The most common debts which cannot be discharged are child support obligations, spousal support, criminal restitution and criminal fines. Some other types of debts are dischargeable in some circumstances. For example, delinquent personal income taxes may be discharged depending on whether a return has been filed and certain time periods have passed. Depending on the circumstances, liability for bad checks or the alleged fraudulent use of a credit card may not be discharged. Student loans are difficult to discharge. As noted above, any debts incurred after the date you file your bankruptcy cannot be discharged. The details of your own particular situation should be discussed with a lawyer or other knowledgeable person before you begin bankruptcy proceedings.

Will I Have to Give Up All My Property?
When you file your bankruptcy, all of your property as of the date you file and your right to income that you have earned but not yet received become part of your “bankruptcy estate.” A trustee is appointed to liquidate the property in the estate and distribute the proceeds to your creditors. Some property that you do not have on the date you file your petition, such as the right to an inheritance or proceeds from a divorce decree or divorce settlement acquired within 180 days after the date you file, may also be included in your bankruptcy estate. Under certain circumstances, your right to tax refunds for prior years or the current year, may also be included in the estate, even though you have not yet received the refunds.

Although Chapter 7 is a “liquidation proceeding,” the goal of bankruptcy is to give you a fresh financial start. Consequently, you will be allowed to “exempt” — or keep — certain property and protect it from the trustee and your creditors. The property you can exempt is determined by the type of property and its fair market value. For many types of personal property, the fair market value is often described as “garage sale value,” or how much actual cash you would receive by selling the item to an unrelated party.

Certain property such as your working tools, household furnishings, radio, television, musical instruments, some savings and checking accounts, your car and the equity in your home may be entirely protected or exempt through bankruptcy.

Unlike a Chapter 7 bankruptcy, a Chapter 13 case usually allows you to retain all of your “nonexempt” assets, and over a three- to five-year period of time you pay to the court the value of those nonexempt assets for distribution to your creditors.

Some of your transactions prior to filing bankruptcy may also create an issue. For instance, if you have sold, transferred, given away or otherwise disposed of any property (including money) within two years (and sometimes four years) prior to filing bankruptcy and did not receive reasonably equivalent value in return, the trustee may have the option to take back the property or money from the recipient. Under some circumstances, if you have paid $600 or more on a debt to a creditor within 90 days prior to filing bankruptcy, the trustee may have the option to take back the money from the creditor. If you have paid $600 or more on a debt to a relative (and in some circumstances to a person who is not a relative) within one year prior to filing bankruptcy, the trustee may have the option to take back the money from the relative or other person.

Do I have to go to Court?
In almost all situations the answer is no. However, in both Chapter 7 and Chapter 13 you must attend a meeting of creditors, typically called the section 341(a) hearing. this hearing is usually held about 30 days after you file the case. This hearing is held by the bankruptcy trustee who is administering the bankruptcy process. You will be sworn in under oath, and the hearing will be recorded. Most of the questions will pertain to information in the bankruptcy papers you file with the court. The hearing typically only takes five to 10 minutes, and most creditors do not attend and ask questions.

How Long does the Bankruptcy Process Take?
Prior to filing bankruptcy you need to complete a credit counseling course. You also need to gather all of the relevant information to complete your bankruptcy petition, which takes time, of course. Once a Chapter 7 bankruptcy is filed, it generally takes about three months to complete. However, you are protected from your creditors beginning the day the bankruptcy is filed — they may not repossess your car, foreclose on your house, garnish your accounts, continue sending you letters or making collection telephone calls, or generally take any other collection activity. If all of your assets are exempt, and provided you have completed a second financial counseling course and paid in full any filing fees, you will receive your order discharging the debts about 60 days after the meeting of creditors hearing. This order will reflect that all of your dischargeable debts have been discharged, and the closing of your case.

Timelines for Chapter 13 are different. Chapter 13 cases run between three to five years, depending on the circumstances.

What is the Fee to File Bankruptcy?
The fee to file a Chapter 7 bankruptcy is currently $335. However, you have the option to pay this fee in three installments over a 90-day period, and you do not need to pay any fee at the time you file the bankruptcy. Under some circumstances, you may be able to extend the payment deadline to 180 days. If your income is low enough, you may be eligible for a full waiver of the filing fee.

What will Happen to My Credit Rating?
A Chapter 7 bankruptcy case will be reported by credit reporting agencies for 10 years from the date of filing. A Chapter 13 bankruptcy case will be reported by credit reporting agencies for seven years. Creditors are sometimes willing to approve credit after bankruptcy, because they know that a financial burden has been lifted and that you may now be able to make regular payments on any new debt. Also, they know that if you filed a Chapter 7 proceeding, you will not be able to declare Chapter 7 bankruptcy again for eight more years, so in some ways you are a better credit risk after filing bankruptcy. If you have completed a Chapter 13 plan, then you have demonstrated that you can handle regular payments on your debt obligations. Some creditors will require an extended period of time after bankruptcy before extending further credit.

Do I need a lawyer to file a bankruptcy case?
The law does not require individuals and sole proprietors to hire a lawyer. However, you may want to consult a lawyer to make sure that bankruptcy is the best option for you at this time, and if so, that you are taking the correct steps to file. Completing all the required documents can be difficult. If you wish to pursue a bankruptcy on your own, you can obtain a packet of information by contacting the bankruptcy court.

Are there Alternatives to Bankruptcy?
Yes. There are many credit counseling agencies that exist to help people who have money problems. Most are nonprofit services offering free advice on how to get out of debt and how to use credit wisely. There is no charge to have a counselor review your financial situation and help analyze your problem. If the service handles your payments to creditors under a debt-management plan, a small monthly contribution may be requested. This fee would be waived if the counselor finds it is not possible because of a very tight program. If you do not have enough money to make even partial payments to your creditors, then most counseling services will be unable to help you and may suggest filing bankruptcy.

Divorce document on a table

Revocable Living Trusts – Oregon

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Revocable living trusts are often promoted as an effective alternative to probate. Even though Oregon’s probate system is relatively simple and inexpensive, many people seek an even quicker and easier mechanism for transferring the assets of a deceased person to the beneficiaries of that person. Revocable living trusts often serve this purpose, but they often create problems, too. To help you decide if a revocable living trust is right for you, here are answers to some of the most frequently asked questions about these trusts.

What is a revocable living trust?
A revocable living trust is a legal device that can be used to manage your property during your lifetime and to distribute your property after your death.

A revocable living trust is established by a written agreement or declaration, which appoints a “trustee” to administer the property transferred to the trust, and which gives detailed instructions on how the property is to be managed and eventually distributed. If you want your trust to substitute for a probate proceeding (court administration of property after death), you should legally transfer substantially all of your property to the trustee, and you should provide instructions to the trustee regarding how to distribute trust assets after your death. A revocable living trust agreement or declaration is usually longer and more complicated than a will, and transfer of assets to the trustee can be time-consuming and expensive. Any competent adult can establish a revocable living trust.

Who can be the trustee?
In Oregon any competent adult can be the trustee, including the person setting up the trust. An Oregon bank or trust company can also act as trustee. A professional fiduciary that is not an Oregon bank or trust company can act as trustee, if a court appoints it and it posts a bond. You can appoint more than one trustee, delegating different duties to each trustee if you wish, and you can retain the power to remove the trustee and appoint a new one. Appointing a successor trustee is essential if you are the first trustee and the trust will carry on after you die or become incapacitated.
How is a revocable living trust established?
IIf a revocable living trust is appropriate for you, you will need a written agreement or declaration of trust, which sets out your plan for management and distribution of your assets. Then you must legally transfer most trust assets to the trustee. Deeds, stock transfers, new bank accounts and other legal documents may be necessary. Some assets, such as IRAs and annuities, should not be transferred to the trustee. An attorney and accountant should be consulted regarding the specific assets that should be transferred to the trustee. Assets not formally transferred to the trustee may not be considered part of the trust and might still be subject to probate.

A will also plays a role in most estate plans that include a revocable living trust. In these estate plans, the will ensures that any property not properly placed in your trust before death can be transferred to it after death.

At your death your will can transfer up to $75,000 of personal property and $200,000 in real property to your trust through an affidavit filed with the court. Your will can transfer assets of greater value to your trust through the probate process. You can also have life insurance and certain pension accounts paid directly to the trust.

Here is an example of how trust assets should be registered: “John Doe, Trustee Under the Marty Smith Trust Agreement Dated January 1, 1990.” The trustee should not hold trust assets individually as “John Doe” without the additional information. The trustee must keep separate records for trust assets and might have to file separate income tax returns for the trust. If the trustee does not obey these rules, the trust may not avoid probate.

Probate and Revocable Living Trusts
Probate is a legal process for transferring your property when you die. It is supervised by a court.
Probate usually involves validation of your will, appointment of a personal representative, collection of your assets, notification of and payment to your creditors, and transfer of your property to the beneficiaries under your will. Probate creates a public record for the administration of your estate. This public record includes all of your assets that are subject to probate and their value at the time of your death.

A revocable living trust avoids the public process of probate, because you collect your assets and transfer them to the trustee before you die. The trustee then transfers your assets to your beneficiaries after your death. If you establish a trust but fail to transfer your assets to your trustee, it is unlikely that you will avoid probate.

If you die owning real estate outside Oregon, a court proceeding might be required in each state where real estate is located. A revocable living trust can avoid these extra court proceedings only if that property is transferred to your trust.

Sometimes it is not a good idea to avoid probate.

For instance, in a probate proceeding, your personal representative has special powers to deal with your creditors and can force them to file claims with the court or lose their claims. The trustee of a revocable living trust now has similar, optional powers to deal with creditors; however, using these powers may require some additional expense and delay, as in probate.

Even if you want to avoid probate, there may be better ways to do it. With regard to real property, you can execute a transfer-on-death deed which allows the death beneficiary named on the deed to automatically assume ownership of the property upon your death, with no need for probate. Joint tenancy ownership of specific assets, with the right of survivorship, can be a cost-effective way to avoid probate on the death of the first joint owner. There are several ways to pass bank accounts at death without probate, including joint accounts with right of survivorship, trust bank accounts, and so-called “payable on death” accounts. Most pension plans and life insurance policy proceeds pass under beneficiary designations that avoid probate without use of a revocable living trust. Depending on the nature and amount of property, one or more of these non-probate devices could be a less expensive way for you to avoid probate. Be aware though, that some of these non-probate devices can result in consequences relating to creditors, taxes, eligibility for publicly provided long-term care, and loss of independent control over an asset.

What is a conservatorship?
Conservatorship is the legal process for management of your property and providing for your financial needs when you become incapacitated. If a court determines you can no longer handle your financial affairs, a conservator is appointed. The conservator must list your assets in the court file, manage your property under court supervision and file periodic accountings with the court.

If you transfer all of your assets to a revocable living trust and give your trustee detailed instructions on how to handle your assets if you become disabled, there should be no need for a conservatorship. Your written agreement or declaration can specifically define a process for establishing that you are incapacitated. In some revocable living trusts, your trustee is authorized to make this determination. In others, your trustee is authorized to rely on a letter from your physician as proof of your incapacity.

A conservator can establish, or fund, a revocable living trust if: 1) the trust would be a more efficient way to administer the property of the incapacitated person; and 2) use of the trust would be consistent with the person’s overall estate plan. A special court order is needed to do this, however.
Durable Power of Attorney
A durable power of attorney may serve as a relatively inexpensive way to avoid conservatorship.

This document appoints another person as your “attorney in fact” to handle your assets. A durable power of attorney may briefly and generally describe the authority of your attorney-in- fact, or it may specifically itemize, in great detail, the actions that you authorize your attorney-in-fact to take on your behalf. A durable power of attorney is less expensive than a revocable living trust, because it involves no transfers of assets and no estate distribution plan upon your death.

However, durable powers of attorney frequently give no direction to your attorney-in-fact regarding your plans for investments, money management or distribution. They generally contain no written restrictions on their use.

With a revocable living trust, it is possible to not transfer all assets to the trustee immediately, but specifically to authorize the attorney-in-fact to finish funding the trust if you become incapacitated. This approach will not avoid probate, however, if the trust funding is not completed before you die, because the power of attorney dies with you.

Does a revocable living trust avoid taxes?
By itself, a revocable living trust does not avoid income, estate or gift taxes. Provisions for saving estate and gift taxes can be included in a revocable living trust or in a will. Whether your assets are held in a trust or not, a state estate tax return must be filed after you die if your property exceeds $1 million in value, and a federal estate tax return must be filed after you die if your property exceeds $5 million in value. You should not set up a revocable living trust just to save taxes.
What does a revocable living trust cost?
The exact cost of a revocable living trust depends on how complicated your assets and your estate planning goals are, how many assets must be transferred to the trustee, and whether tax planning is needed. Before you direct an attorney to set up a trust for you, ask for estimates of how much it will cost, how much writing a will would cost and how much probating your estate would cost.

If you do not plan to serve as your own trustee, you should consider any fees you might want to pay the trustee and whether those fees would replace fees that you are already paying to manage your assets.

A revocable living trust plan should include the trust document, the transfer of assets to the trust, a “pour over” will to add any other assets to the trust, and a durable power of attorney. It also might include related legal documents, such as an advance directive regarding medical decisions and a certification of trust, which summarizes important trust terms and information.

Advantages of a Revocable Living Trust
Avoidance of probate. In particular, a revocable living trust can avoid expensive multiple probate proceedings when you own real estate in several different states, as well as the publication of the otherwise private financial details of your estate.

Avoidance of conservatorship. A revocable trust can avoid the additional cost of a conservatorship in the event of your incapacityy.

Efficient distribution. A revocable trust can reduce delays in distributing your property after you die, although delays caused by filing an estate tax return cannot be avoided.

Confidentiality. Generally the terms of your living trust are confidential, with only your named beneficiaries and trustee having access to that information.

Continuity. A trust can provide continuity of management of your property after your death or incapacity.

Disadvantages of a Revocable Living Trust
Expenses of planning. A revocable living trust is more complicated than a will to draft, and asset transfers can take time and can result in additional costs.

Expenses of administration. If you appoint a bank or trust company as trustee, you will have fees to pay (though these may take the place of investment advisory fees and other fees you are already paying). Setting up a revocable living trust will not eliminate the need for professional services of attorneys and accountants in the future.

Inconvenience. Once the trust is established, you must be sure that trust books are maintained and that all assets continue to be registered to the trustee. Persons dealing with the trustee (such as banks and title insurance companies) may want to review the trust instrument to check on the trustee’s powers and duties.

Unforeseen problems. Revocable living trusts can raise a variety of new problems regarding the ability to borrow against property, title insurance coverage, real estate in other countries, Subchapter-S stock, certain pension distributions, and many other issues. Only a skilled attorney familiar with estate planning can tell you whether, on the whole, a revocable living trust is right for you, your family and your assets.

Complexity. Revocable living trusts often are more complicated than wills and can leave you confused about an estate plan that will require your attention and management for an indefinite period of time.

Attorneys at desk with client

Power of Attorney – Other powers – Oregon

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Who will manage your financial matters if you become seriously ill, disabled, or injured and cannot handle them for yourself? Many people expect that a spouse or other family member automatically has the power to help with financial matters; but this is not true. Under Oregon law, someone must have special authority to act for another person. You accomplish this through a written document authorizing another person to act on your behalf. You must sign the document before you are incapacitated. Once you have lost the ability to understand and manage your own affairs, you can no longer authorize someone else to handle them for you.
Powers of Attorney
A power of attorney is the most commonly used document granting financial authority to another person. A power of attorney gives someone else, called an agent, the right to make financial decisions about the matters you specify in the document. If you limit the power to certain decisions, the document is a specific power of attorney. If you do not limit the power you give to your agent, the document is known as a general power of attorney. You may sign a specific power of attorney at the bank to give an adult child the authority to make deposits and write checks on a specific bank account. You can use general power of attorney to authorize another person to handle a wide range of matters including banking, buying and selling property, and making investments on your behalf. The document itself states whether the powers it authorizes are specific or general. You can make the power of attorney temporary if, for example, you are going to be out of the country and want an agent to handle your affairs when you are gone.

If the power of attorney does not contain an ending date, the law assumes it is “durable.” That means the authority does not end, even if you are incapacitated. A durable power of attorney is useful when the person who authorized it later becomes unable to handle his or her own business affairs; the agent simply takes over the decision-making.

By giving your agent power of attorney, you are not giving up the power to continue conducting the transactions yourself while you are able to do so. You can end the agent’s authority by revoking the authority in writing. All powers of attorney end upon your death.

A power of attorney generally become effective when you sign the document. Oregon law also specifically allows powers of attorney that take effect at the time other than when signed. You can give a specific date when it will go into effect, list a particular event that would cause the power to be effective, or describe a situation when the power could be used. This type of power of attorney is called a “springing” power, because it springs to life only if the event outlined in the document comes to pass. If you prefer to give an agent power in the future if you become unable to handle your affairs due to incapacity, you can also say who will determine if you have become incapacited, such as one or more doctors or the court.

Forms for powers of attorney are available from many sources. This is both good and bad. It is easy to buy an inexpensive form from a stationery store or find one on the internet. Without a lawyer’s advice, it can be risky to sign a document you do not understand and that might not meet your needs. It is important to understand that the agent named in the power of attorney can make decisions with serious financial consequences in all the areas listed in the document. Also, that person will have no authority to act in any areas not listed. A printed form may include too much power or too little power, depending on your individual circumstances. In addition, a power of attorney can be abused. Dishonest people may use this type of document to get control of your money or property. For this reason, it is advisable to speak to a lawyer if you plan to sign a power of attorney. The lawyer can help you decide what is needed. The lawyer may suggest the use of a printed form, perhaps adding language to limit or expand the powers in the form; or the lawyer may suggest a custo m document. In more complicated situations, the lawyer may offer additional option such as a trust.

Representative Payees, Guardians, Conservators
For the person who is no longer able to understand enough to sign documents, other legal tools are available. For example, the Social Security Administration and the Veterans Administration can appoint a representative payee to receive and handle the benefit checks on behalf of a person who is mentally or physically unable to handle the money. The government agencies will consider handling the person’s benefits this way only after being notified that the person is having a problem handling the money himself or herself; the agencies are required to investigate any report about the person’s inability to handle the funds before they arrange for a representative payee.

The power of a representative payee is limited to managing a person’s benefits at the government agency that grants it. If the person has other money or property that he or she cannot manage, it may be necessary for a state court to appoint a conservator or a guardian. A conservator handles only finances; one is appointed by the court if the person owns a house or other property that needs management or protection. A guardian generally makes decisions about health care and other personal matters, but not about significant financial matters. A guardian must honor a person’s advance directive for health care. A person for whom a conservator or guardian has been appointed loses control over his or her own finances. For that reason, the court will generally not grant them if there is a less restrictive option available to handle the person’s needs.

After a petition for conservatorship and/or guardianship is filed with the court, notices and copies are given to the person for whom the conservatorship and/or guardianship is requested, and mailed to close relatives. The court also appoints a court visitor who will interview the person along with other people who have information that may be useful, including healthcare providers. If there is an objection within 15 days, the court will hold a hearing to determine whether a guardianship and/or conservatorship is needed. If there are no objections, the judge generally signs the order appointing as conservator and/or guardian the person who asked for those powers. There are annual reporting requirements for both a guardianship and conservatorship. The guardian and conservator can be the same person or different people; and there can be one without the other.

A conservator and/or guardian usually has broad authority. A conservator is required to give a financial bond to guarantee that money or property will not be misused. Both a conservator and a guardian must make a written report to the court once a year.

Other Uses for These Tools
Powers of attorney can be useful for students or military members or others who expect to be out of the area or even out of the country, and for parents away from their children temporarily. Conservatorships and guardianships can be created over minor children and their property, too. In those cases, different rules and procedures apply than the ones for adults described in this topic. You will want to talk with a lawyer about these situations.

Gavel

Advanced directive (Living Will) Oregon

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Managing your final illness and appointing a health care representative to speak on your behalf is important, and can be done through a properly drafted and signed legal document. In Oregon, these documents are known as the Advance Directive and Appointment of Health Care Representative.

The Health Care Representative
Under both the advance directive and appointment of health care representative forms, you can appoint someone called a health care representative to make your health care decisions if you are unable to make them yourself. This health care representative can only make your healthcare decisions if you become incapable of making them yourself. Your health care representative must accept the nomination before the nomination is active. You must sign the advance directive and have it notarized or witnessed by two qualified witnesses. To be “qualified” a witness must be an adult who is not your attending physician, your attending health care provider, your health care representative or your alternate health care representative.

The Advance Directive
In addition to appointing a health care representative, the advance directive allows you to state your preferences regarding life support and tube feeding under certain circumstances. These circumstances are listed in the advance directive form and include: you are close to death and life support would only postpone, not prevent, death; you are permanently unconscious; you are in the end stages of an advanced progressive illness; or life support would not help your medical condition and would subject you to extraordinary suffering. You may use the checklist on the form and may also include a written narrative of your preferences for end-of-life care.

Who can serve as a health care representative?
Your health care representative can be any person you want, so long as they are an adult and are willing to serve as your representative and follow your stated preferences. People who cannot serve as your health care representative include your attending physician and their employees, the employees of a care facility (unless that person agreed to act on your behalf before he or she became employed at the facility). The form must include the health care representative’s contact information including their address, phone number(s), and email.

What are the duties of the health care representative?
The health care representative must attempt in good faith to follow your wishes as expressed in your advance directive. Once your representative agrees to serve, he or she cannot ignore the duty to do so. The only way the representative can avoid this duty is to resign altogether from serving as your representative. You should list one or two alternate representatives in case your first choice is unable to serve or resigns.

The health care representative cannot overrule your decision to a change of care even if it conflicts with your advance directive — regardless of whether you remain legally capable of making that decision. The representative does, however, have the power to allow you to be admitted to a hospital for up to 18 days in order to get treatment for dangerous behavior that is caused by dementia, even if you object.

Who can witness an advance directive?
One witness can be related to you by blood, marriage or adoption. The other cannot, and that person also should not expect to inherit anything under the terms of your will or have any claim against your estate. That witness cannot be an owner, operator or employee of a health care facility where you are a patient or resident. And neither the health care representative, nor an alternate health care representative, can serve. You may not use your attending physician as a witness.

How long is an advance directive or health care appointment valid?
The document is effective from the date you sign it before a notary or two valid witnesses, and stays in effect until you die or revoke the document.

How can it be revoked?
You can revoke your end-of-life decisions at any time, regardless of your mental state or competency. Other matters may be revoked at any time so long as you are capable of making medical decisions. If you revoke the document, you can start it again or make a new one only by doing so in writing. You must be mentally competent to execute a new document.

Who can make an advance directive?
Any capable person over the age of 18 may make an advance directive at any time. Someone under18 can make an advance directive if the person is either legally emancipated or married.

May I draft my own forms?
Oregon law states that an advance directive and appointment of health care representative must be in a certain form. If you want your document to be valid, you must use the correct form. All health care organizations, including home health agencies, hospice programs, hospitals, long-term care facilities and health maintenance organizations have the forms and will provide them to you. You may find the form online but make sure it is the current form as outlined in the Oregon Revised Statutes and not an older version. A lawyer can prepare the form and help answer questions or concerns as you complete the form.

Some people make mistakes on their forms that may prevent the document from being legally binding. Even though forms with mistakes cannot necessarily be enforced, courts look at them as having expressed a person’s wishes and desires, and should allow them to be honored if they are sufficiently clear and there is no reason to doubt the person’s capacity to express those wishes at the time the form was signed.

Isn’t an advance directive the same as mercy killing?
No. Nothing in the statute condones, authorizes, or approves mercy killing or permits a deliberate act to end life. Instead, the advance directive permits the natural process of dying as provided by the laws if your preference is for no life support or no tube feeding. You express your choices; your health care representative must follow your wishes when you are incapable. Someone who actively ends your life may be guilty of a crime.

Won’t physicians be afraid to get involved with advance directives?
Designated health care representatives, health care providers and health care facilities who act in good faith and in accordance with the law are immune from criminal and civil liability.

Can insurance companies require policy holders to sign advance directives in order to get or retain medical insurance?
No. The advance directive does not affect the terms of any life or health insurance policies.

If there is no advance directive or appointment of health care representative, who will make end-of-life care decisions?
If an incapable person has no advance directive or health care representative, the attending physician can withdraw life support at the request of the following people: a guardian who is authorized to make health care decisions; a spouse; a majority of the adult children who can be located; either parent; a majority of the adult siblings of the principal who can be located with reasonable effort; or any adult relative or adult friend, or person nominated by any of the above named people. If none of these people are available, life-support may be withdrawn by the attending physician or attending health care provider. A duly authorized health care representative may make the decision to withdraw life-support only after consulting with family and close friends.

Pen and paper

What is Probate? Oregon

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What is probate?
Probate is a legal process whereby a court oversees the distribution of assets left by a deceased person. Assets are anything a person owns with value, such as real and personal property and cash, for instance.

When is probate needed?
Probate is not always necessary. If the deceased person owned bank accounts or property with another person, the surviving co-owner often will then own that property automatically. If a person dies leaving very few assets, such as personal belongings or household goods, these items can be distributed among the rightful beneficiaries without the supervision of the court.

Sometimes probate is needed to:
Clear title to land, stocks and bonds, or large bank or savings and loan accounts that were held in the name of the deceased person only, and put the title to these assets in the names of the rightful beneficiaries.

-Collect debts owed to the deceased person.

-Settle a dispute between people who claim they are entitled to assets of the deceased person.

-Resolve any disputes about the validity of the deceased person’s will.

What happens during the probate process?
If the deceased person had a will, the will is “proved” and delivered to the court. The deceased person’s will can be proved by an affidavit made under oath by the witnesses to the will. If such an affidavit is unavailable, the personal presence of the witnesses may be required in court to testify that at the time the will was signed, the deceased person was of sound mind and knew what he or she was doing.

A personal representative is selected. A personal representative is someone who handles the deceased person’s affairs. A will generally names a personal representative who, if willing to serve and otherwise qualified, will be approved by the court. If a person dies without a will, the court will select the personal representative, usually the spouse, an adult child or another close relative. If none of those people are available or willing to be the personal representative, the court may choose a bank, trust company or a lawyer.

A notice to creditors is published in a local newspaper. This public notice to creditors tells the creditors that they have four months to bring any claim against the estate for debts the deceased person owes them. The personal representative also gives written notice to all known creditors.

The heirs and people named in the will are notified of the probate proceeding.

Assets are identified and an inventory is prepared and filed with the court. The personal representative works to identify and value the deceased person’s assets. Depending upon the type of assets and the kind of records left by the deceased person, this step can be quite straightforward — or more difficult and time consuming.

Debts are paid. The personal representative ensures that creditors are paid. Creditors must be repaid from the estate before the remaining estate assets can be distributed to the rightful beneficiaries.

The personal representative prepares state and/or federal tax returns and any inheritance, gift and estate tax returns and pays any taxes due.

The personal representative prepares and submits an account to the people named in the will, the heirs of the deceased person and the court. Or if the heirs and people named in the will choose to waive that accounting, a “verified statement” in lieu of that account can be filed with the court for approval.

The account shows all money paid out from the estate and all money collected by the estate. It also contains a narrative explaining the important actions taken in connection with the probate of the estate.

After court approval of the account and payment of all unpaid probate expenses, the deceased person’s assets are distributed to the people and entities (such as charities or trusts) named in the will or, if the person died without a will, to the heirs of the deceased person.

What is a “small estate” proceeding?
Oregon allows an abbreviated procedure for handling small estates that would otherwise require a full probate. If an estate fits in this category, the cost and time for distributing the estate assets may be greatly reduced. The procedure involves filing a document called an “affidavit of claiming successor.” This abbreviated procedure can be used if the estate’s personal property is valued at no more than $75,000 and real property is valued at no more than $200,000, for a total aggregate estate value of no more than $275,000. (These rates are accurate as of April 2018, but can be changed by the state legislature. Please see an attorney or advisor to ensure that they are still accurate.) Real property includes land and buildings or structures placed on land, such as houses, commercial buildings and agricultural buildings. Personal property includes all other property, such as cars, boats, clothing, stocks, bonds and personal items.

How long does probate take?
Probate can be started immediately after death and takes a minimum of four months. If the estate includes property that takes a while to sell, or if there are complicated tax or other matters, probate can last much longer. A small estate proceeding cannot be filed until 30 days after death and is complete upon filing.

What are the costs involved?
Under Oregon law, a personal representative is entitled to a fixed percentage of the value of the total estate. Extra costs may be approved by the court for the personal representative and a lawyer, if the estate is complicated. Other costs include court filing fees, legal notices published in the local newspaper and any other necessary expenses. Lawyers generally charge an hourly rate for their services.

Does probate mean more taxes?
No. Probate does not affect taxes that must be paid. These amounts are based on the total assets that you own at the time of your death. There are federal estate taxes as well as taxes due to Oregon. These amounts change frequently as Congress and our state legislature determine the amounts. Check with your attorney or advisor for details.

Do I need a lawyer?
Probate in Oregon involves a good deal of paperwork that must be filed in a timely manner. To achieve the results you want, probate should be handled with an understanding of the legal principles involved. A probate lawyer can help you avoid the many possible tax traps and other problems that could arise. Also, a lawyer can help you prepare and file the legal documents and prepare you for hearings in court.

Jar of money on table

What is a Trust? Oregon

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People create trusts for different reasons. A person who creates a revocable living trust may do so because it allows her to avoid probate, which is the court process of settling the estate of someone who has died. Parents of young children may include a “just in case” trust in their wills, so that if the parents die when their children are still young, the children’s inheritance will be placed in trust until the children are old enough to manage the assets themselves. Spouses with children and large estates may create trusts for each other in order to minimize the estate tax paid to the government before their children receive their inheritance. These are just some of the many reasons for creating a trust.

No matter the reason for or type of trust, certain terms remain the same for all of them. A “settlor” is the person who creates the trust. A “trustee” is the person who manages trust assets. A “beneficiary” is the person for whom the benefit of the trust is intended. In addition, a trust will either be revocable or irrevocable. The settlor and/or trustee of a revocable trust may modify or revoke the trust fairly easily, according to the terms of the trust, while an irrevocable trust may not be modified or revoked at all, or except under limited circumstances outlined in the trust and/or in state law.

When a settlor creates a trust, the settlor creates a separate legal entity. After creating the trust by signing a legal document, the settlor transfers ownership of assets from the settlor’s name to the trust’s name. If the asset is real property, the settlor signs a deed conveying the real property to the trust. If the asset is a bank account, the settlor changes the owner of the account to the trust. If the asset is personal property, the settlor signs an assignment of the personal property to the trust. The duty of the trustee, who is named in the trust document, is to administer trust assets in accordance with the terms of the trust, for the benefit of the trust beneficiary.

The operation of a trust depends upon the trust purpose. A trust for the benefit of minor or disabled children often takes effect when both parents have died. The parents may have included language in their wills indicating that if they die before their children reach a certain age, the inheritance of the children will be kept in trust and managed by a trustee to provide for the support, care and education of the children until they reach a specific age. If the child is disabled, the trust may direct that the disabled child’s inheritance will remain in trust for the child’s lifetime.

When parents die without creating a trust for their children, it may be necessary for a probate court to appoint a conservator to manage the children’s inheritance. Although conservatorship is appropriate in some cases, it includes costs, complexity and ongoing court oversight that trusts do not.

Another common type of trust is known as a “revocable living trust.” A revocable living trust is an estate plan that addresses three distinct phases of a settlor’s life and death: First, the trust makes clear that while the settlor is alive and well, he or she will serve as trustee and manage trust assets for his or her own benefit. Second, if the settlor becomes ill or injured to the extent that he cannot manage his finances, the trust identifies who will take over as trustee, and directs the successor trustee how to manage trust assets. Third, the trust directs the successor trustee how to distribute remaining trust assets after the settlor dies. As long as the settlor understands the nature and consequences of his or her actions, he or she can cancel or change the revocable living trust.

In the right set of circumstances, a revocable living trust may be an appropriate estate plan. A revocable living trust can sometimes allow the estate of a deceased person to avoid the court probate process for settling estates. The probate process generates costs, delay and complexity, which some families prefer to avoid. In addition, if a deceased person owns real property in more than one state, a probate process may be necessary in each state before the real property may be distributed to beneficiaries.

However, a revocable living trust is not the appropriate estate plan for all people. A revocable living trust is a complex estate plan that will cost more in legal fees than a more basic estate plan. A revocable living trust must be properly funded in order to avoid the probate process, and trust administration generates its own costs and delays. In addition, creation of a revocable living trust is not a tax strategy. The assets of a revocable living trust are subject to federal and state death taxes in exactly the same way as the assets passing under the terms of a more simple estate plan.

Many people hear horror stories about the court probate process and are urged by friends and relatives to execute a trust. A trust is a complex legal document that can serve various purposes for various people. It is important to determine – on an individual basis – whether a trust is an appropriate estate plan. To learn more about trusts and probate and estate planning, contact an attorney who is knowledgeable about trust and estate planning matters.

Oregon Divorce

Your Will – Oregon

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What is a will?
A will is a set of instructions that explains how you want your property distributed after your death. In Oregon, you must be at least 18 years old and of sound mind to make a will. If you are married, you can make a will before you turn 18. Your will must be in writing and must be signed by you and two witnesses. Some people cannot serve as witnesses to your will. It is important to make sure that all of Oregon’s legal formalities are carefully observed.

What are the benefits of a will?
A will allows you to decide who will manage your money and other property after you die, and how it will be distributed. It lets your wishes be heard regarding the care of minor and disabled children. It often prevents disputes among your relatives. In a large estate, a will can also reduce the amount of taxes that may be due at your death.

Who should draft a will?
A will is an important legal document that can have a significant impact on your family. A lawyer can give you good advice on how the will should be prepared and executed. Having a lawyer draft your will gives you the assurance that your voice will be heard regarding how you want your children to be cared for and how you want your property to be distributed.

Does a will avoid probate?
No, but having a will can reduce the cost of probate and the burden to your friends and family. Whether your property needs to go through probate is determined by the value of the property and how that property is titled, not whether you have a will.

Can joint accounts substitute for a will?
Joint accounts, life insurance and retirement accounts usually do not have to go through the probate process, but they are not a complete will substitute, because they only control the distribution of those accounts. Many spouses own real estate, bank accounts, stocks and bonds, and other types of property as husband and wife with the right of survivorship. This means that if you die, any jointly owned property passes automatically to your surviving spouse, regardless of what your will says. Life insurance and retirement accounts are contractual documents. You should fill out the beneficiary designation form for each company you contract with to tell that company who is to receive your death benefit. Your beneficiary designation will determine who gets the benefit regardless of what your will says. Beneficiary designations and jointly owned accounts can be good probate avoidance techniques but should only be considered as part of a complete plan that includes a will.

What happens if I do not have a will?
If you do not have a will, and if you have probate property, your property will be distributed according to instructions made by the Oregon legislature. For example, if you are married and do not have children, all property that is in your name alone will go to your spouse. This is also true if you are married and have children that are born of your current marriage. If you are married and have children from a prior marriage, half of your property will go to your spouse and the other half will go to all of your children. If you have a child under the age of 18, the court may choose someone to take care of the property for that child. If you do not have a will or any family that would be entitled to your property, your property (that is in your name only) may go to the state of Oregon. Your family (heirs) includes a large category of relatives: spouse, children, grandchildren, parents, siblings, grandparents, nieces, nephews and cousins.

Whom may I choose to inherit my property if I write a will?
The only rule is that if you are married, your spouse has a right to claim part of your estate. Generally, unless you entered into an agreement in which you validly waived your right to claim a share of your spouse’s estate, spouses cannot disinherit each other. You are not required, however, to leave anything to your children or other family members. You may instead choose a friend or charity to inherit your property. If you plan to disinherit a family member it is very important that you consult with an attorney experienced in estate planning to make sure that your plan will be followed.

What is a personal representative?
If your estate needs management, a personal representative (“executor”) will be appointed by the court. Having a will lets you decide who that person will be. You may choose someone familiar with your property and affairs or a professional who can serve as a personal representative. If you think there may be hard feelings in your family or your estate has complications such as children from a previous marriage, you may want to name a professional. Many banks and trust companies have experienced people to handle the difficult task of being a personal representative and — since the fee paid to a personal representative is determined by the size of the estate, not by who serves as personal representative — banks and trust companies are generally paid the same fee to serve as personal representative as an individual is paid.

What is a trust?
A trust is another tool used in estate planning that can be created as part of a will or as a separate document. A trust is a legal document that appoints someone (a “trustee”) to manage your property and gives detailed instructions on how the property will be managed and distributed. A trust is one way to take care of a minor child, an elderly person or someone who needs help handling money. A trust may be established during your lifetime, and you may act as your own trustee, or it may be established by your will after your death. Trusts are generally more complicated to create than a will, and you may want to consider having an estate planning lawyer assist you.

Can a revocable living trust substitute for a will?
A properly drafted revocable living trust can work well as a substitute for a will and sometimes may reduce the costs of handling your estate. However, even if you have a trust, most advisors would recommend you also have a will to cover the possibility that some of your assets may not be covered by the trust at the time of your death. Whether a trust is proper for your estate is a decision to be made after receiving competent legal advice.

Is a will expensive?
No, a simple will is not expensive. However, the cost of any will depends on how much work your lawyer does for you. As a will becomes more complicated, the cost rises. Ask your lawyer for an estimate of the cost. In general, the trouble and expense of not having a will far outweigh the cost of the will.

Do I need a will if I don’t have much money?
The amount of property you own does not determine whether you need a will. Your personal and financial circumstances determine when and how a will should be drafted. For example, it is important for new parents to have a will to provide for their children even if they own little personal or real property.

What are estate and inheritance taxes?
Estate taxes are the taxes that need to be paid out of your estate after you die. These are based on the total amount of assets that you own at the time of your death. There are federal estate taxes as well as taxes due to Oregon. These amounts change frequently as Congress and our state legislature determine the amounts. An estate planning lawyer may be able to draft a will, trust or other document, as well as give you advice, to help reduce the amount of taxes your estate may owe upon your death.

Is a will from another state valid?
Yes. Generally, if you made a will in another state according to the laws of that state, it is also valid in Oregon. This is also true if you created a trust in another state.

Can a will be changed?
You can change your will at any time as long as you are of sound mind. Major life events such as marriage, divorce, death of a family member, or a new baby are good reasons to consider changing your will. In fact, in Oregon, marriage may revoke any will you made before your marriage. You may revoke your old will by destroying it or by writing a new will. If you only want to make minor changes, you may create a “codicil,” a document that is attached to your will. The same legal formalities are required for creating a codicil as a will, and therefore it is wise to consult an attorney about the changes you would like to make. In the meantime, do not write on your old will, because you may end up invalidating the entire document.

Should I consider having a medical advance directive and a financial power of attorney?
Yes. A will only takes effect after you die. An advance directive and power of attorney are documents that may be used to manage your health care and finances while you are still living. A power of attorney may be created for any purpose, but most commonly an elderly person will nominate a close friend or family member to be their agent to help manage their money. Because this power can be abused, it is wise to seek the advice of a lawyer before signing a power of attorney. An advance directive is a document in which a person appoints a “health care representative” to make medical decisions such as living arrangements and treatment options when they become incapacitated and unable to make their own decisions. An advance directive can be used to indicate whether you wish to have life support, tube feeding or other heroic measures when you are close to death. A power of attorney and advance directive can be excellent end-of-life planning tools. Both documents expire at death, or can be revoked at any time.

Divorce Code Oregon

Bankruptcy Means Testing

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From the United States Department of Justice:

“Most individual debtors filing for bankruptcy relief are required to complete a version of Bankruptcy Form 122. Official Form 122A-1 (Chapter 7 Statement of Your Current Monthly Income), Official Form 122A-1Supp (Statement of Exemption from Presumption of Abuse Under § 707(b)(2)), and Official Form 122A-2 (Chapter 7 Means Test Calculation) (collectively the “122A Forms”) are designed for use in chapter 7 cases. Official Form 122C-1 (Statement of Your Current Monthly Income and Calculation of Commitment Period) and Official Form 122C-2 (Chapter 13 Calculation of Your Disposable Income) (collectively the “122C Forms”) are designed for use in chapter 13 cases. [The Official Bankruptcy Forms can be found on the Administrative Office of the U.S. Courts Web site.]

A debtor must enter income and expense information onto the appropriate form (i.e., the 122A Forms or the 122C Forms) and then make calculations using the information entered. Some of the information needed to complete these forms, such as a debtor’s current monthly income, comes from the debtor’s own personal records. However, other information needed to complete the forms comes from the Census Bureau and the Internal Revenue Service (IRS). This Web site reproduces the Census Bureau and IRS Data necessary to complete the 122A Forms and the 122C Forms. The source data reproduced here is also available directly from the IRS and Census Bureau using the links at the bottom of this page.”

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