by Freeman Green, Partner, Estate Planning Industry Group
Oregon is a great place to live. Most of our clients live in Oregon, and more and more of our clients have friends and family moving to Oregon. Here are answers to some of the most common estate planning questions we receive from new Oregonians.
Are My Out-Of-State Documents Still Valid?
Estate planning documents signed outside of Oregon are valid, as long as they were legally created under the laws of the state in which they were signed.
Example: A California resident signs a will and power of attorney validly created under California law. If that California resident later relocates to Oregon, her documents will continue to be valid under Oregon law.
Should I Make Any Changes or Updates To My Estate Planning Documents?
We recommend that new Oregonians have their existing estate plans reviewed by an attorney familiar with relevant Oregon law. Although out-of-state documents are generally valid, they often contain state-specific language that should be updated to avoid confusion or unintended results. Oregon also has a state-specific form for medical decisions (discussed below).
Example: A will signed in California contains a provision stating: “This will is governed, construed, and administered according to the laws of California.” If the will’s creator later moves to Oregon and dies without updating this provision, an Oregon court must apply California law to the will administration, which could lead to confusion and inefficiencies in the administration process.
Should I Worry About Avoiding an Oregon Probate?
Probate is a court proceeding that is generally required when a person dies owning assets in his or her sole name, and without naming a beneficiary of those assets on a valid beneficiary designation.
Probate is a state-specific proceeding and the process can vary greatly from state to state. Some states allow for a simplified probate proceeding that is so easy and unobtrusive that the state’s residents do not generally worry about planning to avoid probate. Other states (like Oregon) have a much more involved probate process that can cause administration delays and thousands of dollars of additional administration expenses.
In Oregon, it is generally worthwhile to avoid court probate. This requires structuring assets so that they are either: (1) owned by a living trust; or (2) at a minimum, have a valid beneficiary designation naming the intended beneficiaries.
Does Moving to Oregon Change My Estate Tax Situation?
It might! Oregon is one of the few Western states to impose a state estate tax. If an Oregon resident dies and the total value of his or her property (including the death benefit on any life insurance policies) exceeds $1 million, the estate will be required to file an Oregon Estate Transfer Tax Return, Form OR706. Under Oregon’s estate tax, property passing to non-spouse persons in excess of $1 million is taxed at a graduated rate of 10% to 16%. (The taxable estate would need to exceed $9.5 million before reaching the top marginal rate of 16%.)
Two common strategies to reduce the Oregon estate tax are the use of a credit-shelter or “bypass” trust and lifetime gifting:
- Credit-Shelter or “Bypass” Trust. A married couple moving to Oregon can update their estate planning to include the use of a credit-shelter or “bypass” trust at the first spouse’s death. The bypass trust can shelter $1 million, together with any future appreciation, from the Oregon estate tax when the surviving spouse dies. This technique allows a married couple to potentially pass up to $2 million free of the Oregon estate tax (or more, if the bypass trust property appreciates in value).
- Lifetime Gifting. Oregon does not have a gift tax. Oregon residents can reduce Oregon’s estate tax by gifting assets prior to death. Oregonians considering this strategy should consult with a tax professional to consider income and federal gift tax and income tax implications, which, in some cases, can outweigh the Oregon estate tax savings.
Is Oregon a Community Property State?
No, unlike our neighboring states, Oregon is not a community property state. However, Oregon does allow new residents to maintain the character of any community property they own, so long as that community property remains distinguishable from any non-community property. Because community property receives favorable income tax treatment under federal law, Oregon residents with community property should consider signing a Community Property Agreement or similar document to memorialize the ownership and segregation of their community property. Doing so can result in the community property receiving a full basis adjustment to date-of-death value, which can lessen or eliminate capital gains tax if those assets are later sold.
Does Oregon Have Any State-Specific Documents?
Unlike most states, Oregon has a statutory form known as an “Advance Directive” that is used to express end-of-life wishes. The Advance Directive is also used to name a health care representative to make medical decisions in the event of incapacity. Because the Oregon medical community is familiar with the Oregon Advance Directive, it is prudent to at least complete Oregon’s Advance Directive.
Oregon also has a lesser-known statutory Disposition of Remains form that is used to nominate a third party to make decisions regarding the handling and final placement of a decedent’s remains.
Many laws affecting estate planning are state-specific. After moving to Oregon (or any new state), consider reviewing your estate plan with an attorney to ensure that it still meets your wishes and addresses state-specific laws.
And don’t even think about pumping your own gas.
Freeman Green is a Partner in the Estate Planning practice group. The information in this article is not intended to provide legal advice. For professional consultation, please contact Erich or Daniel at Saalfeld Griggs PC. 503.399.1070. © 2020 Saalfeld Griggs PC