What is a Payable on Death bank account?

A payable-on-death (POD) bank account is a type of bank account that allows the account owner to designate one or more beneficiaries who will inherit the account balance upon the owner's death. POD accounts are sometimes also referred to as a "transfer-on-death" (TOD) accounts.

To set up a POD account, the account owner must provide the bank with a payable-on-death designation form that names one or more beneficiaries and specifies the ownership interests of each beneficiary. The owner can name any person or entity as a beneficiary, including family members, friends, charities, or trusts. The owner can also change or revoke the POD designation at any time as long as they are competent and capable of doing so.

POD accounts can be a useful tool for estate planning, as they allow the account owner to transfer ownership of the account to the designated beneficiary(ies) upon their death without the need for probate. This can save time and money, and it can also provide greater privacy and control over the transfer of the account. It's important to note, however, that POD accounts are not available for all types of financial accounts.

Does Oregon have a Transfer on Death deed?

Yes, Oregon does have a transfer-on-death deed (also known as a TOD deed or a beneficiary deed) option that allows property owners to transfer ownership of their real property to one or more designated beneficiaries upon their death. A transfer-on-death deed is a legal document that is recorded with the county where the property is located, and it becomes effective upon the owner's death.

 To create a transfer-on-death deed in Oregon, the property owner must execute and record a TOD deed that names one or more beneficiaries who will inherit the property upon the owner's death. The TOD deed must also describe the property and specify the ownership interest that is being transferred. The property owner can revoke or modify the TOD deed at any time as long as they are competent and capable of doing so.

 A transfer-on-death deed can be a useful tool for estate planning, as it allows property owners to transfer ownership of their property outside of the probate process. This can save time and money, and it can also provide greater privacy and control over the transfer of the property. It's important to note, however, that a TOD deed does not take effect until the owner's death, so the property owner will need to continue to manage and maintain the property during their lifetime.

 If you are considering using a transfer-on-death deed in Oregon, it's a good idea to consult with an attorney to ensure that the deed is properly executed and recorded, and to discuss any other estate planning options that may be available to you.

Please contact us if you have any questions.

Can a Will Avoid Probate?

No. A will only provides instructions to your loved ones about how to distribute your property after your death. Without a will, your property will transfer subject to the intestate laws of Oregon. This means, the state decides how your property will pass to your heirs.

We wrote an article in 2016 about What happens when you die without a Will. The charts in that article will show you what happens to your property in most situations.

While a will is not a tool to avoid probate, a will can ensure that your assets are distributed as you choose. Without a will, Oregon intestate laws determine how your assets are passed. If you wish to avoid probate, please refer to the previous article How to Avoid Probate in Oregon.

How Do You Avoid Probate in Oregon?

Many people wish to avoid probate because it is a tedious and lengthy process. Benefits of avoiding probate include loved ones receiving inheritances sooner and no court oversight. Different methods for avoiding probate are illustrated below.

Revocable Trusts (Living Trusts)

Many people set up an inter vivos trust, also known as a Living Revocable Trust. To set up a trust, the grantor, the creator of the trust, must first name a trustee. The trustee is the person who will carry out the specific terms of the trust. Generally, the grantor appoints themselves as the trustee during their lifetime and will appoint a successor trustee to take over once they pass away or become incapacitated. Next, the grantor names the beneficiaries. These are the people, or entities, that will inherit the trust property after the grantor dies. Lastly, and importantly, the grantor must transfer ownership of their property to the trust, through the trustee. For example, if you wish to place your home into the trust, you must convey title to the trust through the trustee via a deed.

  It is important to keep your trust documents in a safe location so that your loved ones can find the trust document after you pass away. Without the trust document, it can be difficult to determine the beneficiaries of the trust property and will likely cause complications.

  Even with a trust, it is still recommended to draft a "pour-over" will. A pour-over will is a simple will that transfers any overlooked property into your trust.

Joint Ownership

 Joint tenancy creates a "right of survivorship" with the surviving owner and is a popular method individuals use to avoid probate. Each owner must hold an equal share of the property to create a joint tenancy. When one owner dies, their share is transferred to the surviving owner(s) immediately at their death. Individuals can hold most assets in joint tenancy, such as bank accounts, real estate property, vehicles, etc. Often, specific language is needed to create a joint tenancy, such as joint ownership in real estate between non-married individuals.

 Joint ownership of real estate property between married individuals is termed a tenancy by the entirety and also hold right of survivorship as described above.

 Joint ownership between parents and adult children, may not be advantageous in many situations. In the instance of bank accounts, the adult child will have full access to all the assets in the account, as may their potential creditors and soon-to-be ex-spouses. Additionally, it is not advisable to add your children to your deed. This can prevent your children from receiving a favorable step-up in basis tax treatment when they inherit the real estate property.

Payable on Death or Transfer of Death Designations

Payable on Death (POD) and Transfer on Death (TOD) accounts are designed to avoid probate. These accounts transfer ownership directly to the named beneficiaries upon the account holder's death. POD accounts are associated with bank accounts, such as checking accounts and savings accounts, as well as certificates of deposits (CDs), and life insurance policies.  TOD accounts are generally brokerage accounts, stocks, bonds, and other investments. Lastly, individuals can create a Transfer on Death Deed, to transfer real estate property upon their death.

To create a TOD or POD, the account holder must designate beneficiaries to the account, which will transfer ownership of the account immediately upon the account holder's death. Beneficiaries can be an individual, an organization, or a trust. The account holder retains sole control and ownership of the account throughout their lifetime. The beneficiary has no right or access to the account until the account holder dies.

Some pitfalls can occur, when people designate one of their children as the designated beneficiary of the account, but later drafts a will or trust that states that their children shall receive equal shares. The TOD/POD beneficiary designation will generally override the will or trust's provisions, which can lead to unintentionally creating unequal shares between their children.

Additionally, people must consider payment of any estate taxes. If a person's estate consists entirely of TOD or POD accounts, there will be little to no money reserved to pay the estate's taxes. In this scenario, it can cause confusion regarding who should pay the estate’s taxes, and how much.

Summary

Avoiding probate allows assets to be transferred to beneficiaries in a more private and efficient manner. People who wish to avoid probate have many options. Speaking with an attorney can help you determine your best choices.

2018 Oregon Estate Tax Rates

The State of Oregon levies a tax on taxable estates that have a value of more than $1 Million.  Estates of less than $1 Million are exempt from the Oregon Estate Tax.  This is a separate from the Federal Estate Tax.  In 2018, individuals with less $11.2 Million and couples with less than $22.4 Million are exempt from the Federal Estate tax.  The top Federal Estate tax rate is 40%.  More information on determining the Federal Estate Tax rates can be found at IRS.gov.

Taxable Estate Equal to or more than:	Taxable Estate less than:	Tax rate on Taxable Estate amount more than column 1
$1,000,000	$1,500,000	$0 + 10%
1,500,000	2,500,000	50,000 + 10.25%
2,500,000	3,500,000	152,500 + 10.5%
3,500,000	4,500,000	267,500 + 11%
4,500,000	5,500,000	367,500 + 11.5%
5,500,000	6,500,000	482,500 + 12%
6,500,000	7,500,000	602,500 + 13%
7,500,000	8,500,000	732,500 + 14%
8,500,000	9,500,000	872,500 + 15%
9,500,000		1,022,500 + 16%

Is a Handwritten Will Valid in Oregon?

Is a Handwritten Will Valid in Oregon?

The short answer is no.  Wills that are handwritten and not witnessed are not recognized as valid in Oregon.  A handwritten will that is witnessed by two individuals will be considered valid.  

I have written more about about the basics of estate planning in the following articles:

1. Basics of an Oregon Estate Plan (Part 1)

2. Basics of an Oregon Estate Plan (Part 2)

3. Basics of an Oregon Estate Plan (Part 3)

Oregon Probate Inventory

What is required on an estate inventory.

One of the first tasks must be completed during the administration of an estate is the inventory.  The inventory must be completed within 60 (the timeline has been changed to 90 days) days of the appointment of a personal representative and provide estimates of the value of the property as of the date of death.

ORS 113.165 Filing inventory and evaluation

Within 60 days after the date of appointment, unless a longer time is granted by the court, a personal representative shall file in the estate proceeding an inventory of all the property of the estate that has come into the possession or knowledge of the personal representative. The inventory shall show the estimates by the personal representative of the respective true cash values as of the date of the death of the decedent of the properties described in the inventory.

Determining the values of assets is generally straightforward.  You can look at the balance of a bank account or investment account at the date of death.  

Hiring Appraisers

Sometimes the estate will have unusual or unique property that must be appraised.  Oregon law allows the personal representative to hire an appraiser that will be paid by the estate as a necessary expense.

ORS 113.185 Appraisement

(1) The personal representative may employ a qualified and disinterested appraiser to assist the personal representative in the appraisal of any property of the estate the value of which may be subject to reasonable doubt. Different persons may be employed to appraise different kinds of property.
(2) The court in its discretion may direct that all or any part of the property of the estate be appraised by one or more appraisers appointed by the court.
(3) Property for which appraisement is required shall be appraised at its true cash value as of the date of the death of the decedent. Each appraisement shall be in writing and shall be signed by the appraiser making it.
(4) Each appraiser is entitled to be paid a reasonable fee from the estate for services and to be reimbursed from the estate for necessary expenses.

Personal Items and Household Goods.

Generally speaking, it is fine to lump the household goods and personal items together on the inventory.  If the items have a substantial value, they should be listed individually on the inventory.  

When determining a "substantial value", most attorneys rely on 26 CFR 20.2031-6 - Valuation of household and Personal effects.

(b) Special rule in cases involving a substantial amount of valuable articles. Notwithstanding the provisions of paragraph (a) of this section, if there are included among the household and personal effects articles having marked artistic or intrinsic value of a total value in excess of $3,000 (e.g., jewelry, furs, silverware, paintings, etchings, engravings, antiques, books, statuary, vases, oriental rugs, coin or stamp collections), the appraisal of an expert or experts, under oath, shall be filed with the return. The appraisal shall be accompanied by a written statement of the executor containing a declaration that it is made under the penalties of perjury as to the completeness of the itemized list of such property and as to the disinterested character and the qualifications of the appraiser or appraisers.

Amended and Supplemental Inventories

Occasionally the personal representative will have to correct or add information to the inventory that was filed with the court.  

When the information filed with the court was incorrect, the personal representative must file an amended inventory to correct that mistake.  

A supplemental inventory is required when the personal representative finds property of the estate after the original inventory has been filed.

Other types of assets

Real estate located outside of Oregon should not placed on the inventory.  Certain beneficial interests may or may not be listed on the inventory.  You should talk to your attorney if you have any questions regarding beneficial interests.

Basics of an Oregon Estate Plan (Part 3)

Part 3.  Advance Care Planning

This is the Third Article in our Basics of Estate Planning series.  In this article, we will explain options for health care decision making.  We will talk about two documents that allow you to express your wishes when you are not able to.  The first are legal documents call advance directives.  The second are medical orders call Physicians Orders for Life Sustaining Treatment (POLST.)

Advance Directives

The Oregon Health Care Decisions Act (ORS Chapter 127) allows Oregonians to create Advance Directives for Health Care, Powers of Attorney, Declarations for Mental Health Treatment and other documents.  Advance Directives are legal documents.

Healthcare Representatives

Advanced directives allow a person to decide their treatment wishes while they are still able.  They also allow you to appoint a healthcare representative to direct your health care when you are unable to do so.  You can also place limits on the decisions that your Healthcare Representative can make for you. For example, you may have certain religious or ethical beliefs that you want taken into account when life-sustaining decisions are being made and that your Healthcare Representative should honor your wishes.

Healthcare instructions

Advanced directives also allow you to make decisions about specific medical conditions and treatments.  Below is an excerpt from an Advanced Directive:

In this example, you have an Advanced Progressive illness and are very unlikely to substantially improve.  Importantly, you are unable to communicate and someone else will have to make medical decisions for you.  With the Advance Directive you can choose the care you desire in this situation by initialing the form. 

The State of Oregon has information regarding Advance Directives and an Advance Directive form available online (http://www.oregon.gov/DCBS/insurance/shiba/topics/Pages/advancedirectives.aspx)

Physician Order for Life Sustaining Treatment (POLST)

A POLST is an optional form that you create with your health care provider.  A POLST is a medical order that must be signed by a health care professional in order to be valid.  A POLST is typically used by those that are seriously ill or are near the end of life.  

A POLST will tell medical professionals whether you want CPR, tube feeding or any other medical interventions that may sustain life.  

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Basics of estate planning series

You can review the other articles in this series.

• Part 1. What is a Will.
• Part 2. What is a Trust.

Basics of an Oregon Estate Plan (Part 2)

Part 2. What is a Trust.

This is the second article in our basics of estate planning series.  In this article, we will explain what a Revocable Trust is, what it can be used for and what it can’t do.

The first article in the series is Part 1. What is a Will.

What is a Living Trust?

A living trust is simply a contract with yourself.   You establish a trust by written agreement and by “funding” the trust by transferring your property into it.  The trust will appoint a “trustee” to administer the assets of the trust.  The trust agreement will also provide instructions for how the trust is to be administered.  A living trust can be a used to avoid Probate or Conservatorship.  

How does a Living Trust Work?

By retitling all of your property from yourself to the living trust while you are living and providing instructions for the “successor trustee” to distribute your property after your pass, very little of your property will pass through probate.

A diagram explaining the mechanics of a living trust.

A “Pour Over Will” is often used alongside a living trust to move property into the trust that was missed or was acquired after the trust was formed.  A downside of this method is that “Pour Over Will” may have to be settled through a probate proceeding before the assets of the living trust can be distributed.  Another option is to transfer the property not included in the living trust directly to the heirs by a small estate proceeding.  

How does a Living Trust avoid Conservatorship?

Conservatorship is when the court determines that you are unable to manage your financial affairs and appoints a conservator to do so.  By transferring your property to a revocable living trust and providing detailed instructions for the successor trustee in the event you become incapacitated, you can avoid the court oversight and costs involved in a conservatorship.

Drawbacks of a Living Trust.

The main drawbacks of a Revocable Living Trust are:

1.    Complexity.  Trusts are often left unfunded and property acquired after the formation of the trust is not moved into the trust.  Living Trusts require more maintenance and ongoing administration than a will.
2.    Costs.  Living Trusts are more expensive than creating a will.  For young and healthy individuals, the costs of probate and conservatorship are likely many years down the road.  For these individuals, they are often times better off investing the money they would have spent setting up a Living Trust.  Older individuals will more quickly see the benefits of probate and conservatorship avoidance and may want to consider a living trust.
3.    Unforeseen Consequences.  Family’s change and the law changes.   Companies may want to review the trust documents if you purchase or insure property.  Stock in certain corporations may not be held in some trusts without serious tax implications.  You may also have difficulty acquiring assets in other Countries.

If would like to learn more about how to plan your estate, visit our practice page or search the blog on the right.  You can also sign up for our newsletter and have estate planning tips delivered to your email.