As featured in the March 11th Issue of the Portland Business Journal in their special section, titled "Estate Planning & Charitable Bequests"

Five Reasons Why You Need An Estate Plan Even if There is No Estate Tax

By Douglas P. Cushing

With the support of the President, efforts continue in Congress to eliminate the estate tax permanently. Proponents call it a "death tax" and claim its elimination is necessary to protect small business interests, even at a cost of billions of dollars over the next decade. Although planning should allow most estates to avoid any tax even under the current laws, if the tax is eliminated will the need for estate planning also disappear? Not likely. In Oregon, there is a statutory scheme for distribution of an estate after death if there is no plan. However, that typically leaves everything to a spouse or divides it between a spouse and children as well as provides the priority for appointment of an administrator and payment of debts before disposition of an estate in its entirety. A well-thought out estate plan can assure assets are allocated as the decedent intended they be — and provides a legally binding guide amidst the often complicated family and business scenarios of today.

1. Minor Children

The statutory framework provides that minor children will be provided for in the absence of a will, although the nature and timing of that allocation may be very different from most parents' wishes. If there is no binding estate plan, the statutory scheme is more complicated and assets can be distributed over a much shorter timeframe than was the original intent. Under a will or trust, a trustee can exercise his full discretion outside court supervision, and distributions may be deferred over time, as specified by the decedent. In the absence of properly drawn plans, the statutory rules require a court-supervised conservatorship to administer funds, meaning a judge will review expenses as opposed to a trustee whom the decedent has chosen. And in Oregon, when the beneficiary reaches 18 years of age, the conservatorship will terminate, and all remaining funds will be distributed to the beneficiaries. Remaining funds may be relatively small and the children relatively responsible and sophisticated at 18, but few parents wish to leave a substantial estate outright to an 18 year old.

2. Business Succession

Many business enterprises also require a plan to assure transition upon the death of an owner. A contractual arrangement among co-owners is often binding on the personal representative, but if there is no agreement, the deceased business owner's spouse or children could take control of the company. Preparing a plan should assure that the designated person administers the estate. Perhaps that is the spouse or next of kin — but legislative options can make a huge logical leap in many cases that factually may be in error.

3. The Modern Family

The make up of the modern family demonstrates another reason why estate planning will continue to be critically important in the years to come. Today's family can take many forms — from a more traditional married union with children to a blended family with children from two or more marriages, to long-term unmarried partners of either same-sex or heterosexual orientation — all requiring careful attention when it comes to arranging the transfer of an estate. Fully providing for all interested parties to receive the assets and provisions the decedent wants to pass on demands a written estate plan. For example, in Oregon, legislative choices (though potentially somewhat in flux) will not provide for distribution to step-children or an unmarried spouse. There must be a will or trust in place.

4. Family Members with Unique Circumstances

Children or family members with unique needs present another compelling reason to plan ahead. If a child has a disability that qualifies for Social Security disability benefits, an estate plan may be essential to see they do not lose those benefits, even if only for a period of time. The administrative process of obtaining the benefits and reinstating them if lost may be significantly complicated if the parents of such a child are no longer living and have not provided for a special-needs trust to benefit the child without terminating benefits from the estate or federal government. Similarly, for many people in the "sandwich" generation with elderly parents who may not have the benefits of significant pension plans, a will or trust is often the only way to provide for them, as opposed to assuming the legislature will somehow extend them benefits. Some beneficiaries may require a supervised trust, as is often the case when there is a known problem with drugs or alcohol, to assure that funds are not provided for an ill-advised use.

5. "DINKS" — Designating a Beneficiary

Another consideration applies to "DINKs"(double-income-no-kids), as designating a beneficiary other than one's children also requires an estate plan. Perhaps a couple wishes their assets to be given to nieces and nephews, a neighbor or a charity; all of these options require careful planning. Individuals might wish to provide for long-term care for pets as well. Oregon has a framework that allows for such a benefit in the short run, but it requires a will or trust for long-term care.

As it stands, Oregon has now reinstituted its own form of an estate plan tax, and under current federal laws, a married couple can pass onto heirs up to three million dollars without any estate tax. Those numbers will rise over the next five years, and most industry watchers predict there will ultimately be a three to five million dollars per person allowance that can pass without any federal estate tax. However, one should not rely on the legislature to provide for the disbursement and administration of his or her estate, but consult with professionals and put it in writing. Don't hope for coincidence — plan for the future.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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