Are you thinking about how best to pass your assets onto your family, friends or chosen charity? If so, an Oregon Living Trust might be worth a closer look.
Unlike a traditional will, a living trust (also called a “revocable trust” or “revocable living trust”) makes passing our assets to the next generation smoother, faster and cheaper. How? Because it avoids the court process known as probate.
In this article, we’ll discuss the advantages and disadvantages of this tool, as well as alternatives, costs and whether it’s the right choice for the estate planning piece of your wealth protection strategy.
What is an Oregon Living Trust?
An Oregon Living Trust is a legal document created during your lifetime to hold assets. It avoids probate and provides other benefits.
The trustee is the person who’s responsible for managing the settlor’s assets on behalf of the beneficiaries— the person, charity or organization that will receive the assets when the settlor dies.
In a living trust, the settlor transfers some or most of their assets to the trust and then serves as the trustee. When the settlor dies or becomes disabled, a successor trustee named in the trust will take over and administer the trust and its assets.
Living trusts only control assets formally put into them. They make it very easy to pass assets on to heirs and can be drafted to provide protection for dependents with special needs after you’re gone.
However, living trusts in Oregon do not provide asset protection or tax savings.
The Legal Basis
In Oregon, the legal basis for a living trust is found in the Uniform Trust Code.
Who needs a living trust?
Not everyone needs a living trust in Oregon, but for those who have at least $75,000* in non-land assets or real estate exceeding a fair market value of over $200,000* (or both) subject to probate, it makes sense to give it some serious thought.
If you do have an estate smaller than $75,000* or real estate with a fair market value of less than $200,000*, it can pass to your beneficiaries without a probate process. Certain assets, such as life insurance benefits and your interest in a retirement plan, aren’t generally subject to probate.
*Under Oregon law, your estate is considered small if the assets to be transferred adds up to less than $275,000 (with no more than $75,000 in personal property and no more than $200,000 in fair market value real estate).
Generally, though, our clients often fall into one or more of the following groups:
- High-net-worth individuals with substantial assets. They use a living trust to be able to transfer their assets to the next generation in a private way.
- Business owners. Shares or interest in a company can be moved into a living trust to easily pass them onto the next generation.
- Parents of minor children. The trust can be drafted to ensure the children are properly supported until they reach adulthood. (And, in some cases, even longer depending on your wishes.)
Pros and Cons of an Oregon Living Trust
Advantages
- Avoid probate. Many people use wills to set out their last wishes. However, not only is this process public, it can take years to complete, and cost the beneficiaries a fair bit of money. It also opens the door to fights between heirs. A living trust avoids all that. It’s fast, private, and often cheaper than a will after all costs are considered.
- Control. During your lifetime, you keep control over all your assets in the trust.
- Benefits for the beneficiaries. A living trust can be drafted so that after you pass, the trust changes form in a way that offers strong asset protection for your beneficiaries.
Disadvantages
- Upfront costs and fees. Setting up the trust involves more legal fees than preparing a will. Attorney fees and administrative expenses may be greater.
- Transfer process can take time. Formally changing title to move assets into the trust can take time and effort. Assets left outside the trust may still need to go through probate.
- Doing business with those assets can be harder. Dealing with trust assets can be more complicated and require extra paperwork. This is especially true if you need to borrow money for assets held within the trust.
- It can’t cover everything. Certain assets like retirement accounts, health savings accounts, and life insurance cannot be transferred into the trust. Fortunately, these assets still generally pass to your beneficiaries outside of probate.
Alternatives to a Living Trust in Oregon
- A Will: This is the standard. However, probate will be involved, which takes time and is very public.
- Joint Ownership / Joint Tenancy: Certain accounts and assets owned jointly with rights of survivorship automatically pass to the surviving owner(s) if you die. This avoids probate.
- Gift Transfers: You can give assets away during your lifetime. This will reduce the size of your estate over time. However, there are some important tax considerations with this strategy, so be sure to check with your tax advisor before setting up such a program.
Each alternative has its own pros and cons, and the best choice depends on your individual circumstances and goals.
Oregon Living Trust vs Oregon LLC
An Oregon Living Trust and an Oregon Limited Liability Company (LLC) are both legal tools. They can both be used to manage assets. However, they do different things.
An Oregon Living Trust is a legal entity mainly used for estate planning.
The settlor — the person creating the trust — transfers assets to the trust. These assets can be distributed to beneficiaries without going through probate. This can save time and costs.
Trusts themselves are private and do not become part of the public record. They can hold many types of assets.
However, an Oregon Living Trust does not offer any asset protection.
On the other hand, an Oregon LLC is a legal business structure. It offers limited liability to its owners (called “members” under the law) and managers. In most cases, this protects them from personal responsibility for the company’s debts or liabilities.
At the same time, an LLC can also make it difficult for personal creditors to grab assets held within the LLC.
However, an Oregon LLC is not as private as a trust. In some states, the name of every member must be filed with the state. Unfortunately, though, Oregon is one those states.
In Oregon, not only the registered agent and the manager(s) must be listed. The names of the members are listed only if they serve as managers.
If you live in Oregon, you can serve as your own registered agent, but you can also pay a registered agent to serve in this capacity.
In that way then, an Oregon LLC can offer some degree of privacy, but not as much as in some other states.
But, that all said, at the end of the day, a living trust is mainly used for estate planning. An LLC is used to protect assets — either from claims from an active business the LLC owns, or from personal claims against assets protected by an LLC.
Living Trust vs a Will
Living trusts and wills are both estate planning tools. However, they offer different benefits and drawbacks. Here’s a quick summary:
| Feature | Living Trust | Will |
| Purpose | A flexible, tool to quickly and easily pass assets onto the next generation. | A basic document that outlines your wishes after death. |
| Probate | There is no probate. | Probate is often triggered, meaning a public (and sometimes expensive) court process |
| Privacy | Private, not part of public record | After death, becomes a public record, accessible to anyone |
| Control | You maintain control during life and can make changes. Very difficult to contest if created properly. | You can change any time. But can be contested after you pass. |
| Tax benefits | No tax benefits to you but potentially can be to your beneficiaries. | No tax benefits to you but potentially can be to your beneficiaries. |
| Cost | Typically more expensive to set up than a will | Typically less expensive to set up than a living trust |
How to Create a Living Trust in Oregon
Step One: Determine how this fits into your overall planning.
For most people, a living trust is a great foundational estate planning tool. But not always.
This is especially true if you have what’s called a “small” or “simple” estate. In this case, if an estate is smaller than a certain minimum under state law, you can apply to skip the probate process entirely.
In 2023, an estate is considered small if the assets to be transferred are valued at less than $275,000 (with no more than $75,000 in personal property and no more than $200,000 in fair market value real estate).
Step Two: Figure out what should be moved into the trust and what should stay outside.
Once you’re sure you need a living trust, you need to figure out which assets need to be moved over and which ones stay outside… a process called conveyance.
Common Assets to be conveyed:
- Stocks
- Bonds
- Real estate
- Antiques and other collectibles
- Vehicles (cars, boats, planes, etc.)
Assets that don’t need to be conveyed:
- Assets held jointly: If you own an asset with another person and you pass, the ownership will generally pass to the other person automatically and not be included as part of your probatable estate. But there are exceptions such as “tenants in common” property.
- “Pay on death” accounts held in your own name: As the name suggests, these accounts will also automatically be given to a named beneficiary automatically without probate needed.
- Insurance policies: They already include named beneficiaries.
- Retirement accounts: Upon death, the assets inside will automatically be given the named beneficiary on the account.
Where things get complicated…
Your home: Most states have something called homestead protection (or homestead exemption), which protects a certain amount of home equity in case of a judgment or bankruptcy. In some states, if you move your home into a trust, you can lose this protection.
In Oregon, moving your home into a living trust does not necessarily disqualify it from this protection.
The standard homestead credit protection exemption in Oregon, is just $40,000 for individuals or $50,000 for joint owners.
Real estate held out of state or country: Estate planning becomes more complicated if you hold real estate in another state or country. That’s because the holding of that property will be subject to the laws of that other jurisdiction.
Business interests held in a different state or country: If you own shares or a membership interest in a company that is organized in another state or country, you will need to understand the interplay between planning done in your own state and the fact that the business is subject to the laws of the other place.
In all of these cases, it’s very important to consult with a qualified advisor to get the best answer for your situation.
Step Three: Implement the trust.
Once you’ve accounted for your assets and are clear on what needs to be done, you’ll want to go to a lawyer to draft up the trust deed. You’ll set the terms of the trust, choose your beneficiaries and, in most cases, make yourself the trustee. This lets you keep control over the assets.
You can also purchase an online kit to draft an Oregon living trust for you. This can save money up front, but we generally don’t recommend it. It’s safer to have a lawyer create a living trust to better fit your particular needs, especially if your estate planning is complex.
Then it’s just a matter of conveying the assets into the trust. The process for that will vary depending on the type of asset, whether there’s debt on it, and sometimes other factors too.
How much does a living trust cost in Oregon?
The fees can vary widely depending on factors such as:
- The type of assets to be moved into the trust.
- How complicated the “trust instrument” (i.e. the trust agreement) has to be.
- Who will serve as the trustee.
- The number of beneficiaries and planning around that group.
- The lawyer you work with.
In general, though, a simple trust can start at anywhere from $1,000 – $1,500. A more complex trust involving higher value estates can cost anywhere from $3,000 – $5,000+.
Frequently Asked Questions
Does a living trust need to be recorded in Oregon?
In Oregon, a living trust does not need to be recorded or made part of the public record. The terms of the trust, beneficiaries, and assets are private and do not become public record. This privacy is one of the benefits of having a living trust in Oregon.
How do I transfer property into a living trust in Oregon?
To transfer property into a living trust in Oregon, you can follow these steps:
- Create the Trust Instrument: This document will be the foundation of the trust and will contain all the legal language necessary. It should include the names of the settlor (the person creating the trust), the trustee (usually you) and the beneficiaries. It should also include the trust’s terms.
- Transfer the Assets: Once the trust document is created, you can transfer the assets into the trust. Your best source will be who set it up for you.
- Notify any relevant parties: Be sure you update anyone that needs to be updated about ownership changes of assets moved into the trust. That especially includes creditors of the transferred assets.
In practice, you will want to let parties know about your intention to “retitle” (i.e. change legal ownership over) the assets BEFORE you make the change. This is especially important when it comes to financial accounts or assets with debt on them.
What happens in a divorce?
Oregon follows the equitable distribution model when it comes to dividing property in a divorce. This model does not operate on a strict 50/50 split of marital property but rather evaluates each case based on its specific and unique circumstances.
Oregon’s equitable distribution laws place an “umbrella of equity” over all assets amidst a dissolution, and each party has the opportunity to make arguments for the fair distribution of their separate and marital property. The court considers various factors, such as the length of the marriage, the earning capacity of each spouse, and the marital standard of living, to determine a fair and equitable division of assets.
That said, here are some key points to consider:
Marital vs. Separate Property: Assets acquired during the marriage are typically considered community property. Assets acquired before the marriage or through inheritance are considered the separate property of that spouse. If a Living Trust holds community property, it will be subject to division during the divorce.
Impact on Divorce Settlement: The property in a Living Trust may or may not be considered community property depending on what assets were transferred to it and when they were transferred. Assets that are considered community property can affect child support and alimony calculations in a divorce settlement.
Negotiation and Modification: In a divorce involving a Living Trust that holds community property, those assets are subject to division between the spouses. The trust may need to be revoked or redrafted to ensure it reflects their changed circumstances.
Your lawyer is best placed to evaluate your circumstances. This is especially important if you or your spouse is a beneficiary or settlor of a living trust.
Does a living trust avoid probate in Oregon?
Yes, assets within a living trust avoid probate in Oregon.
This saves time, maintains privacy, and can avoid thousands (even tens of thousands) of dollars in probate costs.
However, many (but not all) types of assets outside your trust will still have to go through probate.
Does it need to be notarized?
Yes, a living trust should be notarized in Oregon. Notarization is not always required, but it’s recommended to ensure the trust isn’t contested and that the successor trustee (the one after you can’t do it anymore) can manage the trust assets more easily. If the trust is going to transfer real estate, then it needs to be notarized.
Should you do it yourself?
Creating a living trust by yourself is possible, but we do not recommend it.
Especially if you have a lot of assets, it’s a good idea to seek professional help.
Does it provide asset protection?
An Oregon Living Trust does not provide any asset protection. The settlor, who creates the trust, can change or revoke it at any time.
In the event you lose a lawsuit or declare bankruptcy, you can be forced to pull the assets out of the trust and give them to your creditors.
If I put my house into a living trust, do I still benefit from homestead protections?
A homestead exemption protects a certain amount of equity in your home from creditors. In Oregon, the homestead exemption applies to real or personal property used as a residence up to $40,000 for individuals, or $50,000 for joint owners.
It is available to both homes built on a foundation, mobile homes as well as houseboats, and it applies to homes held in living trusts.
Is a living trust “revocable” or “irrevocable”?
A revocable trust is a flexible estate planning tool that lets you to keep control over your assets while you’re alive. You generally serve as trustee. You can change it at any time.
An irrevocable trust, on the other hand, is an inflexible planning tool designed for estate planning and asset protection. Once you set it up, it’s very difficult (sometimes impossible) to change. In essence, you give up those assets for the benefit of the beneficiaries, although you can continue to manage the assets on their behalf.
When we talk about a living trust, we refer to a revocable trust under the control of the person (the settlor) who first put assets into it.
Where do I find an Oregon Living Trust Lawyer / Attorney in my Area?
Our firm, The Nestmann Group, helps build complete plans for clients interested in wealth protection. A big part of that is helping with estate planning.
However, a proper wealth protection plan is more than that. A good one will look at other factors like asset protection, tax strategies, insurance, and available government protections.
If you’re interested in seeing what’s right for you, please schedule a free no-obligation consultation with one of our Wealth Protection Associates.
