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Planning with Trusts, Wills & Special Needs Trusts

   A Will is a document, executed with certain statutory formalites, by which a person specifies who is to be the beneficiaries of his property (either outright or in trust) and who is to carry out his instructions for distribution of that property. While certain states, such as California, recognize holographic wills, Oregon does not.  A Will takes effect only when a person dies. Up until that time a Will is revocable provided that the maker retains legal capacity. To manage the affairs of a person who lacks capacity, a Power of Attorney is utilized.

   For married couples or individuals with estates exceeding $1 milion dollars, Oregon and federal inheritance tax planning warrants discussion.

   A properly drafted, executed and funded Revocable Living Trust  can perform the same function as a Will by specifying who is to receive the person's property and who is to carry out the distribution of that property. In addition, a Revocable Living Trust may provide instructions for management of a person's property and instructions for care of that person while the person is alive but lacks capacity.    

   Properly utilized and maintained, a Revocable Living Trust is a probate avoidance device. Revocable Living Trusts are recommended if there is real property owned in multiple state (e.g. home in Oregon, vacation property in Washington). Revocable Living Trusts, however, do not avoid income tax. Just as with a Will, Revocable Living Trusts do allow planning for estate or inheritance tax issues.

   Besides wills and trusts, other methods of passing property upon death include by contract (e.g. beneficiary designation on IRA, life insurance, etc.) or by operation of law such as a survivorship tenancy in real property.

   A Special Needs Trust is a trust which allows property to be gifted for the benefit of a person receiving needs based public benefits without affecting the recipient's qualifications for those benefits. Such trusts are also called Supplemental Needs Trusts. Such "third party" SNT trusts may be established by parents, grandparents, aunts and uncles, to hold inheritances for children with disablities.

   Special Needs Trusts may also be established in certain circumstances with the recipient's own money received from lawsuits or inheritances from relatives where prior planning was not done. These are often called "pay back" or "first party" SNT's because while preserving the recipient's benefits, the remaining funds in the trust at termination must be available to reimburse the government for benefits paid. Third party SNT's are not subject to these payback requirements.

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