Wealth Law Blog : Oregon Asset Protection Lawyers & Attorneys : Samuels Yoelin Kantor Seymour & Spinrad Law Firm : OR Estate Planning, Fiduciary Litigation

ORS 708A.655 Procedures for opening safe deposit box after death of person who was sole lessee or last surviving lessee of box.

(1) This section applies to the safe deposit box of any person who is the sole lessee or last surviving lessee of the box and who has died.

(2) Upon being furnished with a certified copy of the decedent’s death certificate or other evidence of death satisfactory to the Oregon operating institution, the Oregon operating institution within which the box is located shall cause or permit the box to be opened and the contents of the box examined at the request of an individual who furnishes an affidavit stating:

  (a) That the individual believes the box may contain the will of the decedent, a trust instrument creating a trust of which the decedent was a trustor or a trustee at the time of the decedent’s death, documents pertaining to the disposition of the remains of the decedent, documents pertaining to property of the estate of the decedent or property of the estate of the decedent; and

  (b) That the individual is an interested person as defined in this section and wishes to open the box to conduct a will search or trust instrument search, obtain documents relating to the disposition of the decedent’s remains or inventory the contents of the box.

      (3) For the purpose of this section, “interested person” means any of the following:

      (a) A person named as personal representative of the decedent in a purported will of the decedent;

      (b) The surviving spouse or any heir of the decedent;

      (c) A person who was serving as the court-appointed guardian or conservator of the decedent or as trustee for the decedent immediately prior to the decedent’s death;

      (d) A person named as successor trustee in a purported trust instrument creating a trust of which the decedent was a trustor or a trustee at the time of the decedent’s death;

      (e) A person designated by the decedent in a writing that is acceptable to the Oregon operating institution and is filed with it prior to the decedent’s death;

      (f) A person who immediately prior to the death of the decedent had the right of access to the box as an agent of the decedent under a durable power of attorney; or

      (g) If there are no heirs of the decedent, an estate administrator of the Department of State Lands appointed under ORS 113.235.

      (4) If the box is opened for the purpose of conducting a will search, the Oregon operating institution shall remove any document that appears to be a will, make a true and correct copy of it and deliver the original will to a person designated in the will to serve as the decedent’s personal representative, or if no such person is designated or the Oregon operating institution cannot, despite reasonable efforts, determine the whereabouts of such person, the Oregon operating institution shall retain the will or deliver it to a court having jurisdiction of the estate of the decedent. A copy of the will shall be retained in the box. At the request of the interested person, a copy of the will, together with copies of any documents pertaining to the disposition of the remains of the decedent, may be given to the interested person.

      (5) If the box is opened for the purpose of conducting a trust instrument search, the Oregon operating institution shall remove any document that appears to be a trust instrument creating a trust of which the decedent was a trustor or trustee at the time of the decedent’s death, make a true and correct copy of it and deliver the original trust instrument to a person designated in the trust instrument to serve as the successor trustee on the death of the decedent. If no such person is designated or the Oregon operating institution cannot, despite reasonable efforts, determine the whereabouts of such person, the Oregon operating institution shall retain the trust instrument. A copy of the trust instrument shall be retained in the box. At the request of any interested person, a copy of the trust instrument may be given to the interested person.

      (6) If the box is opened for the purpose of obtaining documents pertaining to the disposition of the decedent’s remains, the Oregon operating institution shall comply with subsection (4) of this section with respect to any will of the decedent found in the box, and may in its discretion either:

      (a) Make and retain in the box a copy of any documents pertaining to the disposition of the remains of the decedent and tender the original documents to the interested person; or

      (b) Provide a copy of any documents pertaining to the disposition of the remains of the decedent to the interested person and retain the original documents in the box.

      (7) If the box is opened for the purpose of making an inventory of its contents, the Oregon operating institution shall comply with subsection (4) or (5) of this section with respect to any will or trust instrument of the decedent that is found in the box, and shall cause the inventory to be made. The inventory shall be attested to by a representative of the Oregon operating institution and may be attested to by the interested person, if the interested person is present when the inventory is made. The Oregon operating institution shall retain the original inventory in the box, and shall furnish a copy of the inventory to the interested person upon request.

      (8) The Oregon operating institution may presume the truth of any statement contained in the affidavit required to be furnished under this section, and when acting in reliance upon such an affidavit, the Oregon operating institution is discharged as if it had dealt with the personal representative of the decedent. The Oregon operating institution is not responsible for the adequacy of the description of any property included in an inventory of the contents of a box, or for the conversion of the property in connection with actions performed under this section, except for conversion by intentional acts of the Oregon operating institution or its employees, directors, officers or agents. If the Oregon operating institution is not satisfied that the requirements of this section have been satisfied, the Oregon operating institution may decline to open the box.

      (9) If the interested person does not furnish the key needed to open the box, and the Oregon operating institution must incur expense in gaining entry to the box, the Oregon operating institution may require that the interested person pay the expense of opening the box.

      (10) Any examination of the contents of a box under this section shall be conducted in the presence of at least one employee of the Oregon operating institution.

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In a recent "TED talk," Adam Ostrow, a journalist and editor in chief of Mashable, an online news site dedicated to covering digital culture, social media and technology, discusses a fascinating topic that relates to the "Virtual Assets" issues that we've previously written about on WealthLawBlog.com.

In his short lecture, Mr. Ostrow states that "today we're all creating this incredibly rich digital archive that's going to live in the cloud indefinitely, years after we're gone. And I think that's going to create some incredibly intriguing opportunities for technologists.” He then discusses how technology is forever changing the manner in which our virtual existence continues after we die.

As technology continues to change the manner in which we humans interact with our many forms of “virtual assets,” the law will continue to develop in potentially unpredictable ways. In the context of our estate planning, I believe the key component for effective planning will be careful organization of our virtual assets and arranging for that information to be placed in the right hands when we’re gone.
 

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We are pleased to announce a new seminar series that will keep our clients and colleagues informed on recent developments and industry best practices. The seminars take place in our beautiful, state-of-the-art conference room on the 38th floor of the US Bancorp Tower. Seminars are complimentary and include a boxed lunch.

To register, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon!

Federal and Oregon Estate Tax Changes: Meet the New Boss, Same as the Old Boss
THURSDAY SEPTEMBER 1, 2011, 12 NOON - 1:30 P.M.

Presented by Edward "Ted" L. Simpson and Glen Goland

The estate tax landscape has changed dramatically for Oregon residents over the last nine months. In December 2010, the U.S. Congress unified the gift and estate tax exemptions at $5 million and introduced portability of the exemption between spouses. This spring the Oregon legislature changed our state’s estate tax rates and the manner in which the tax is calculated. Our seminar will discuss these and other changes to the estate tax system. It will demonstrate the effect these new rules have had on our clients and discuss the planning issues raised by these changes.

To register for any of these seminars, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon! 

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The recent passing of 27 year-old entertainer Amy Winehouse is tragic on many levels. Her family and friends will never be able to replace their lost daughter and friend; her fans will forever miss Amy’s undeniable talent and unique voice. Her well documented substance abuse problems, shared with the world through 24-hour cable news and the internet, were a tragedy in themselves.
 

Ms. Winehouse is the most recent in a long line of musicians who have left us at 27, a line that includes Jim Morrison, Kurt Cobain, Brian Jones, Janis Joplin, and Jimi Hendrix, among others. Unlike many of the musicians on this list, however, it appears Amy Winehouse had sound legal counsel somewhere along the way.

First, a little background: Amy Winehouse married Blake Fielder-Civil in 2007. The couple divorced in 2009. During the time that they were married, Winehouse’s second LP, “Back to Black” took her from anonymity to superstardom. She won 5 Grammy Awards and the album shot to #1 on charts around the world. Mr. Fielder-Civil’s life was traveling in the opposite direction – six months into their marriage he was sentenced to 27 months in prison for assaulting a man and then offering the man $400,000 to not show up in court. He was recently arrested again and is currently serving a 32 month sentence for robbery.

Under British law, Ms. Winehouse’s ex-spouse would have been in line to inherit the bulk of her estate, which is estimate to be worth over $15 million. Fortunately, in this case, reports indicate that she executed a new will after the divorce. This new will, according to published reports, leaves her estate to her mother and family while excluding her ex-husband.

The estate planning lesson in this case is clear: Individuals should update their estate plans when they go through life-altering events like marriage, divorce, retirement, having children, or becoming international rock stars.

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My law partner Merritt Yoelin recently pointed out an article in the Wall Street Journal entitled The 25 Documents You Need Before You Die. In discussing the article, Merritt explained “many of our clients have asked us for this type of information so that they may organize their affairs. This is the best I have seen in my many years of practice.”

In the article, Saabira Chaudhuri discusses a number of documents that each of us should compile. The article provides an excellent framework to think about the estate planning process. The articles main points can be summarized as follows:

     1.         Know what your assets are and how you own them. We often discuss with our clients the importance of understanding what your assets are, what they’re worth, and how they are titled. For example, for planning purposes, the home you own with your spouse, your interests in a retirement plan or IRA, or investments you own with an unrelated business partner, will all be treated in very different ways at your death. It’s essential to understand these intricacies and possibly take appropriate actions in the estate planning process. For example, many clients with whom I meet are surprised to learn that their will or trust will generally not control what happens to their retirement accounts or IRA when they die. Rather, it’s the beneficiary designations that are typically signed when a person first opens such accounts.

     2.         Plan carefully, and prepare legal documents that reflect that plan. While that might sound like a platitude, many individuals simply have not prepared an estate plan that meets the specific needs of their family. Rather, they see the process as just “completing the right forms.” However, every family has a unique set of assets and family dynamics. It’s entirely common for children in a family to have very different personalities, needs, and challenges. By candidly discussing these issues with an experienced estate planning attorney, these issues can be addressed, while at the same time navigating the ever-changing tax issues that impact the estate planning process.

     3.         Communicate! Another key point set forth in Ms. Chaudhuri’s article is the importance of communicating information about your planning to your family, your executor, and/or your trustee. If these key people don’t have the appropriate information relating to your assets and the planning steps that you’ve taken, their job in taking care of your estate will be much more difficult. I made a similar point in my WLB article last year entitled “Estate Planning and ‘Virtual Assets’”. In that article, I discussed the “VAIL” or “Virtual Asset Instruction Letter,” which is similar a tool to list your electronic or digital assets (which we call “virtual assets). The VAIL is an instruction letter about these kinds of assets that is directed to your executor or trustee to ease the burden of administering these assets after your death.

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We are pleased to announce a new seminar series that will keep our clients and colleagues informed on recent developments and industry best practices. The seminars take place in our beautiful, state-of-the-art conference room on the 38th floor of the US Bancorp Tower. Seminars are complimentary and include a boxed lunch.

To register, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon!

 ESTATE PLANNING IN
THE BRAVE NEW WORLD OF ELECTRONIC ASSETS
THIS THURSDAY
JULY 21, 2011, 12 NOON - 1:30 P.M.

 
Presented by Victoria Blachly and Michael Walker

Do you access or store important financial or family information online in an electronic format? 

Most of us do. These “virtual assets” include emails, digital images, electronic financial statements, social media accounts, web sites, and e‐banking related accounts, among others. Many of these assets are generally transferred through a client’s will or trust.

As more of our population goes online, we've seen a rising number of cases surrounding the use (and abuse) of these assets. In this seminar we’ll discuss how the growing prevalence of electronic or internet based assets has changed the way we approach the estate planning process, and how estates and trusts are administered after someone dies. We will conclude by talking about the pros and cons of some of the different “online vaults” that are available to clients.

To register for this seminar, contact events@samuelslaw.com or call us at 503-226-2966.
 

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We are pleased to announce a new seminar series that will keep our clients and colleagues informed on recent developments and industry best practices. The seminars take place in our beautiful, state-of-the-art conference room on the 38th floor of the US Bancorp Tower. Seminars are complimentary and include a boxed lunch.

To register, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon!

INCLUDING PETS IN YOUR ESTATE PLAN
WEDNESDAY JUNE 29, 2011, 12 NOON - 1:30 P.M.

Presented by Glen Goland

This seminar will discuss Oregon’s long history on the forefront of animal rights and will cover the short and long‐term questions that pet owners should consider when preparing their estate plans.

To register for any of these seminars, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon! 

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There are several ways that attorneys can utilize estate-planning documents to provide for pets upon the death of their owner. One popular method is leaving a sum of money to a caretaker in the pet owner's will. There are two potential issues to consider with this method of planning: The pet owner has no way of ensuring that the assets will be used to cover pet-related expenses and there may be negative tax consequences to leaving the caretaker a sum of money outright. These same problems can exist when an owner makes a monetary bequest to a pet caregiver towards the end of his or her life.

These factors were overblown in many of the publications I read when preparing my own estate plan. Under today's $5 million federal estate tax exemption, there are virtually zero federal estate or gift tax implications when a person leaves $5-10,000 to a trusted caretaker. There may be state tax implications in some circumstances and your attorney should discuss potential state taxes with you when considering this option. As for guaranteeing the money is spent properly? Many of my clients have told me that they would not be naming the person to look after the pets if they did not trust them. This issue is a non-factor in these cases and in others it is the primary factor - it depends on the relationship the owner has with the potential caretaker(s).

A second way that pet owners can utilize wills to provide for their pets is by making a bequest to animal organizations that will work to place your pet in a home if you leave assets to the organization. The Oregon Humane Society's Friends Forever program is an example of one of these programs. The Portland-based shelter adopted out over 17,000 animal in 2010, including all of the animals that came in under 'Friends Forever'. 

If a pet owner makes no provisions for his or her animal, the pet will become part of the owner’s residuary estate and will usually pass to a new owner under the residuary clause of the will. In Oregon the estate may reimburse the caretaker who looks after the animal immediately after the owner’s death.

Attorneys regularly address these (and other) pet planning issues through the use of the pet trust. Pet trusts determine custody of the animal, provide instruction for the caretaker and pay for the animals’ expenses. Pet trusts can be stand-alone documents or they can be incorporated into the pet owner’s will or trust. Pet trusts should be considered very carefully, as they can be surprisingly expensive to administer. If your animal is one that will likely outlive a caretaker or two (a parrot or turtle for example) or is particularly expensive to care for (a horse or a pet with high medical expenses maybe) then a pet trust might be the perfect document for you. If it is just your cat or your dog, carefully consider your pets needs vs. the amount of administration required to maintain the pet trust.

The first question an owner must answer when preparing a pet trust is, “who will look after the animal on a day to day basis?” The caretaker(s) should be familiar with the pets and should receive a copy of the pet instruction letter discussed in my previous blog post. Pet owners should consider the tax implications involved when leaving assets to a caretaker. The owner may consider providing additional compensation to the caretaker to make up for any tax liability imposed due to the financial bequest under the pet trust.

The next individual an owner may name in a pet trust is the trustee. The trustee is in charge of tracking trust expenses, bank accounts and, in some states, preparing trust tax returns and distributing an annual accounting. A pet owner should consider these activities (and their associated cost) when selecting a trustee for their pet trust.

The last person an owner may name in the pet trust is the trust protector. This independent person has no role in the day-to-day operation of the trust. He or she is in charge of monitoring the overall performance of the trust to ensure the pet is being cared for properly. This trust protector checks in on the actions of the caretaker and the trustee. The trust protector holds the other parties accountable when there are questions about the administration of the trust. ORS 130.185 allows for an interested party to petition the court on the pet's behalf, so if even if the document does not name a trust protector, a friend of family member could petition the court to remove a trustee if the animal was not being cared for as outlined in the trust.

A word of warning: Not all pet trusts are created equal. There is a lot more to a well written pet trust than merely listing the people to serve in the roles outlined above. These documents should also allocate funds, account for expenses of trust administration and occasionally outline investment strategies, among other things. The trust should clearly outline which expenses may be paid from the trust property and tell the reader exactly how these fees are to be paid. A pet trust should also provide for back-ups in the event that the named individuals cannot serve.

The most famous pet trust of them all is the one that belonged to the late Leona Helmsley. This trust provided $12 million to care for her dog and the story garnered media attention around the world. The trust was established to pay for her dog Trouble’s expenses with any remaining assets passing to a charitable foundation at Trouble’s death. Helmsley’s executors petitioned the New York Court to reduce the amount of assets going to the trust, in an effort to minimize the taxes due on Helmsley’s estate. They were successful in their petition and the judge ordered the pet trust funded with “only” $2 million. The remaining assets flowed to the charitable foundation in a $10 million transfer that qualified for the charitable deduction.

The New York judge in the Helmsley case relied on the language of New York’s pet trust statute. In New York, and in states that have adopted the Uniform Trust Code’s pet trust language, courts may “determine the value of the trust property that exceeds the amount required for the intended use”. The courts may then reduce the funding of the pet trust accordingly and direct the excess assets into a resulting trust for the benefit of the settlor’s successor in interest.

The pet trust statutes in Oregon and Washington do not contain language allowing courts to reduce the amount of assets directed to these trusts. Had Leona Helmsley relocated to the Pacific Northwest, Trouble may still be living large off of $12 million. ORS 130.185 specifically states, “Property of a trust authorized by this section may be applied only to its intended use.” Similarly, RCW 11.118.030 provides, “no portion of the principal or income of the trust may be converted to the use of the trustee or to any use other than for the trust's purpose or for the benefit of the designated animal or animals.”

While most of us will never have to worry about leaving a pet $12 million, there is an important lesson to be learned from Leona Helmsley’s pet trust. The $10 million implications of the seemingly subtle differences in the statutory language highlights the importance of putting together your pet’s long-term plan with an advisor that understands the delicate issues involved.
 

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The first step in planning for pets is to address the question “who will take care of the animals in an emergency?” If there is a short-term disability or illness, do you have someone who will go to your home and feed the cat or walk the dog? Does that person have a key? Do they know where the dog food is? Are the animals familiar with this person?

The short-term caretaker may be identified by an informal agreement like the one we have with one of our family friends. He has a key to our place, knows the animals well and we have shown him where their food is kept, where the vet records are, etc. He has our family contact information and he is an emergency contact on file with our employers and the day care facilities we take our dog to.

Some of our clients have taken a more formalized approach by authorizing an agent to care for their animals in periods of disability and/or hospitalization. This is accomplished by adding language to the power of attorney that specifically grants an agent the power to care for the pet(s). The decision on whether to make a formal or an informal agreement with the caretaker depends on a number of owner-specific issues: the proximity of friends and family, the amount of time and/or work the pets require and the expenses involved in caring for the animals, to name a few.

Regardless of whether an owner takes a formal or an informal approach to short-term planning, it is most important that they have a plan and they write it down. ORS § 130.185 instructs Oregon courts by providing for, “the liberal construction of oral or written instruments as enforceable pet trusts and not unenforceable honorary trusts.” Make a plan. Write it down.

There is a second document that pet owners should be creating for both their short-term and long-term planning: instructions for the day-to-day care of the animals. This document should include all of the necessary contact information for vets, trainers, kennels, etc. It should note the exercise routines of the pets, their feeding habits and any other relevant information. It should tell the caretaker the location of the animals’ health records, vaccination history and licensing information. The U.S. Census Bureau estimates that 22 percent of the nation’s dogs and 25 percent of our cats live in single person households. Creating a detailed set of instructions is particularly important for these pet owners, as it is less likely there will be another individual who is familiar with the pets’ day-to-day routines. A detailed instruction letter is also crucial if your pet has special dietary needs, medical concerns or training issues.

A well drafted estate plan provides the family with adequate instructions on how matters are to be handled during a time of crisis. If your family includes household pets, you should think about what would happen to them in a short term emergency. Do you have a friend or family member that would look after your pets? If so, talk to that person about the arrangement and write it down. In my next blog post I will discuss planning for the long-term care of our furry friends.
 

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For those of you in the Chicago area on July 14-15, Samuels Yoelin Kantor attorney Victoria Blachly will be speaking at the ALI-ABA CLE Representing Estate and Trust Beneficiaries and Fiduciaries.

Her topic is incorporating virtual assets and online information into an estate plan:

1. What are virtual assets?
2. Integrating virtual assets into your estate plan.
3. Creating a VAIL (Virtual Asset Instruction Letter).
4. Consider who should receive your virtual assets.
5. Use caution when dealing with commercial services to hold your virtual assets.

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We are pleased to announce a new seminar series that will keep our clients and colleagues informed on recent developments and industry best practices. The seminars take place in our beautiful, state-of-the-art conference room on the 38th floor of the US Bancorp Tower. Seminars are complimentary and include a boxed lunch.

To register, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon!

ASSET PROTECTION
WEDNESDAY JUNE 8, 2011, 12 NOON - 1:30 P.M.

Presented by Edward "Ted" L. Simpson

The legal landscape across which creditors chase debtors is ever changing. What worked 10 years ago does not necessarily work today.

This has resulted in three categories of asset protection strategies: those that are readily identifiable and either do or do not work according to established law; those that are promoted as asset protection strategies, but about which the law is not settled; and those that are new and unique, have not been identified as asset protection strategies, and which have not been the subject of studied attempts to pierce. In this seminar we will take a thoughtful and practical look at how asset protection planning is approached and how strategies are developed, both broadly and in specific situations.

INCLUDING PETS IN YOUR ESTATE PLAN
WEDNESDAY JUNE 29, 2011, 12 NOON - 1:30 P.M.

Presented by Glen Goland

This seminar will discuss Oregon’s long history on the forefront of animal rights and will cover the short and long‐term questions that pet owners should consider when preparing their estate plans.

To register for any of these seminars, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon! 

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There are three ways that ownership of an asset is transferred at death – by law (a joint tenancy arrangement for example), by bequest (through a will or trust) and by contract (through the use of a beneficiary designation). The Appeals Court of Oregon’s recent decision in the case In re Marriage of Keller (232 Or.App. 341) reminds us that an individual that is planning on transferring assets through the use of beneficiary designations (primarily insurance proceeds and IRA/pension benefits) must make sure that the beneficiaries stated on the plan or the policy match up with his or her planning objectives.

In Keller, the court was presented with a complicated (but not uncommon) family situation. A man and his wife agreed to a divorce decree in which the husband retained ownership of a number of assets, including several insurance policies. The divorce agreement contained a provision which read, in part, “each party releases and relinquishes any and all claims or rights which he or she may now have, may have had, or may have in the future against the other as a result of the marriage of the parties, including but not limited to spousal support.”

After the husband’s death, the executor of his estate determined that the decedent’s ex-spouse was still listed as a beneficiary on one insurance policy. The executor asked the ex-spouse to disclaim the insurance proceeds, the ex-spouse refused, and the executor sued the ex-spouse for violating the clause spelled out above. Three-and-a-half years later, the parties have received two judgments and are still fighting. The trial court ruled in favor of the ex-spouse and the Appeals Court of Oregon recently remanded the trial court decision and sent the case back to the lower court for a more detailed analysis of the divorce agreement entered into by the parties.

The moral of the story? When developing (and revising) an estate plan, it is important to pay particular attention to the individuals that you have named as beneficiaries on insurance policies, IRA accounts and pension plans. Incorrectly naming the beneficiaries on these accounts can leave to prolonged court battles and unexpected (and expensive) results.

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We are pleased to announce a new seminar series that will keep our clients and colleagues informed on recent developments and industry best practices. The seminars take place in our beautiful, state-of-the-art conference room on the 38th floor of the US Bancorp Tower. Seminars are complimentary and include a boxed lunch.

To register, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon!
 

VIRTUAL ASSETS
WEDNESDAY JUNE 1, 2011, 12 NOON - 1:30 P.M.

Presented by Victoria D. Blachly and Michael D. Walker, P.C.

Virtual assets include emails, digital images, electronic financial statements, social media accounts, web sites, and e‐banking related accounts, among others. Many of these assets are assets that are generally transferred through a client’s will or trust.

As more of our population goes online, we have seen a rising number of cases surrounding the use (and abuse) of these assets.

This seminar will outline the policies employed by some common email and media providers, talk about where these assets fit in our clients’ estate plans and point out some specific areas of concern. We will conclude by talking about the pros and cons of some of the different “online vaults” that are available to clients.

ASSET PROTECTION
WEDNESDAY JUNE 8, 2011, 12 NOON - 1:30 P.M.

Presented by Edward "Ted" L. Simpson

The legal landscape across which creditors chase debtors is ever changing. What worked 10 years ago does not necessarily work today.

This has resulted in three categories of asset protection strategies: those that are readily identifiable and either do or do not work according to established law; those that are promoted as asset protection strategies, but about which the law is not settled; and those that are new and unique, have not been identified as asset protection strategies, and which have not been the subject of studied attempts to pierce. In this seminar we will take a thoughtful and practical look at how asset protection planning is approached and how strategies are developed, both broadly and in specific situations.

INCLUDING PETS IN YOUR ESTATE PLAN
WEDNESDAY JUNE 29, 2011, 12 NOON - 1:30 P.M.

Presented by Glen Goland

This seminar will discuss Oregon’s long history on the forefront of animal rights and will cover the short and long‐term questions that pet owners should consider when preparing their estate plans.

To register for any of these seminars, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon! 

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As an estate planning attorney, I often help people plan for the distribution of their assets when they are gone. I talk with my clients about what will happen to the house, the stamp collection, the bank accounts, etc. One question that usually provokes a strong response is, “What would you like to have happen to your pets?” Unfortunately, this is a question that goes unanswered far too often. In the United States, close to 500,000 pets end up in shelters every year when their owners die or become disabled. In these shelters, five out of ten dogs and seven out of ten cats are euthanized because there is no one to adopt them. If we plan ahead for these things, we can help our pets live the way that we want them to when we are gone. We can also make sure they never become statistics.

The American Society for the Prevention of Cruelty to Animals estimates that the average annual cost of basic food, supplies, medical care and training for a dog or cat is $700-875. The cost of our dog’s day care expenses, food, training, teeth cleaning and vet check-ups is considerably higher than this projection, while the cost of caring for our cat is significantly lower. The actual costs will depend on the pet. Who will pay this bill when we are gone? Will our pets live a life similar to the one they have now? Will our dog still get his raw diet or will he be fed generic kibble? Will our cat still go to the same vet? Will they be moved away from our current neighborhood and city? Will they go to a shelter? These are some of the questions we should be thinking about.

This article will be divided into three separate blog posts. This week I’ll talk about Oregon’s rich history on the forefront of animal rights and mention some of Oregon’s judicial and legislative decisions that affect the planning we do for our pets. In my next post I’ll talk about short-term planning for periods of emergency. In my final entry I will discuss the questions that pet owners should think about when preparing their estate plans.

Oregon’s courts recognized something over 100 years ago that is evident if you walk down any street in any town in Oregon today: We have a special attachment to our pets. They are friends, companions and family. In the 1914 case McCallister v. Sappingfield, an Oregon court ruled that when an animal was hurt or killed, its owner should receive more than just the market value of the animal. This “Special Value” law recognized that our dog is worth more to my family than the $80 adoption fee we paid at the shelter.

More recently, Oregon’s legislature made animal cruelty a felony in 1995 and ORS § 130.185 became law in 2005 – allowing Oregon residents to create legally binding pet trusts. Forty-three states now categorize animal cruelty as a felony and forty-four of them recognize pet trusts. Additionally, ORS § 114.215(3) provides for a unique procedure to care for an animal immediately following the death of its owner – even if the owner has left behind no will or other planning documents. This statute allows friends and/or family members to take immediate possession of the animal and be reimbursed for any reasonable expenses incurred in caring for the pet during the probate of the owner’s estate.

The Oregon State Bar is one of the few in the country that has an entire section devoted to animal law. Oregon’s Lewis & Clark Law School was the first college in the country to publish an animal law review and its students were the first to organize a chapter of the Animal Legal Defense Fund. Oregon's judges, legislative bodies, attorneys and law students recognize that our animals have certain rights and values that must be protected under the law. In part two of this article, I'll talk about how these protections affect the planning process. 

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Often free internet advice on Do It Yourself ("DIY") professional matters is worth exactly what you pay for it:  nothing.  The internet has changed the way we interact with each other, the way we shop, and the way we manage our lives. Search tools like Google and Bing now steer users to millions of web pages, some of which contain “professional” advice on everything from medicine to law.  

One of these sites that provides an online database of legal forms was recently investigated by the Attorney General in the State of Washington.  This investigation was settled and the parties signed an Assurance of Discontinuance (pdf) on September 1, 2010. The Assurance highlights some of the pitfalls people should look out for when preparing their own legal documents online.

Article II of the Assurance lists the acts which the Attorney General determined were “unfair or deceptive acts or practices and unfair methods of competition in violation of 19.86.020 RCW”. These acts include the following:

• Failing to offer estate planning legal forms in Washington that conform to Washington law.
• Failing to clearly disclose that communications between the provider and Washington consumers are not protected by the attorney-client or work product privilege.
• Comparing service costs with those of an attorney without disclosing to Washington consumers the fact that the provider was not a law firm.
• Misrepresenting the costs, complexity and time required to probate an estate in Washington.
• Misrepresenting the benefits or disadvantages in comparing estate distribution documents in Washington.
• Failing to comply with 19.295 RCW (the statute dealing with estate distribution documents).
• Engaging in the unauthorized practice of law by providing legal advice about self-help documents.

While the Assurance notes that it is not to be considered an admission by the provider and that it “shall not be considered a finding of wrongdoing,” the document does effectively spell out some of the questions individuals should be thinking about when preparing their own legal documents:

1. Do you have all of the correct forms?  Many online law providers are not allowed to direct readers to particular or necessary forms.
2. Do the documents comply with all of the laws for the relevant state(s)?  If you've got property or assets in more than one state, this is important. 
3. Is there sensitive information that the individual would rather keep confidential?
4. How complex will the implementation of the documents be.  For example, what will probate cost? 
5. What will the process ultimately cost?  If future litigation blows up because the forms are defective or insufficient, your estate and/or your beneficiaries will pay the price. 

You've heard these warnings before: "If it's too good to be true......" or "an attorney who represents himself has a fool for a client."   The same cautionary advice holds true for those who opt to prepare their own legal forms using an online service.  While some may be able to use these services to prepare inexpensive legal documents, the costs associated with enacting these documents and the opportunity for error can be significant.

Finally, if an attorney commits an error in preparing legal documents, the attorney is covered by malpractice insurance (or should be - some states demand mandatory insurance while others do not), but no such protection exists for those that prepare their own documents. 

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Kudos to Hugh Hefner. In case you haven’t heard, the 84 year old entrepreneur just announced his engagement to an attractive 24 year old. Now, I know you presume that this is the natural outcome when two people fall in love, but I suspect there may be ulterior motives.

We all know that Hugh is, from all appearances, a pretty wealthy guy. I can only conclude from this most recent nuptial announcement that he is also an incredibly gifted tax planner.

I am not sure the ink was even dry on the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 before the perennial purveyor of porn jumped into action. You see, included in Congress’s extension of the Bush tax cuts was a brand new provision in the estate tax law dealing with “portability” of the estate tax exemption. Beginning in the year 2011, the estate tax exemption increases to $5 million. In addition, the executor of a decedent’s estate can elect to transfer his or her remaining $5 million exemption to his or her surviving spouse.

Hugh gets his own $5 million exemption. We all know how young and spry he is, and based upon his lifestyle, we can only presume that Hugh thinks he is going to live to age 150. His naïve yet enchanting young wife, who has never been faced with the pressure of modern day life being married to a multi-millionaire, may well succumb to the physical stress of the relationship and meet an untimely demise during either 2011 or 2012. If this is the case, Hugh will be entitled not only to his own $5 million estate tax exemption, but to the exemption of his recently deceased spouse as well. Brilliant!

This creative tax reduction “technique” provides a unique new market for the acquisition of “portable estate tax exemptions.” Let’s presume, for a moment, that we have a wealthy unmarried client (call her “Ms. A”) with no foreseeable intent to marry in the future. We explain to Ms. A that if she agrees to marry someone, and if her new husband then predeceases Ms. A, she could receive the benefit of her deceased husband’s unused $5 million estate tax exemption. Ms. A decides that this is worth looking into, so we find a lost soul with no assets, no reasonable life expectancy, and the need for some quick cash. Ms. A and her intended “spouse” would enter into a premarital agreement providing that he waives all claims against Ms. A’s estate, agrees to accept no support from Ms. A and agrees never to communicate with Ms. A again (even though the marriage would last “until death do us part”). Ms. A could then create a trust providing for monthly nominal payments to the new husband during his lifetime (an inter-vivos QTIP). The husband would agree under the prenup to sign a will giving his $5 million estate tax exemption to Ms. A.. At the new husband’s death, the trust would revert back to Ms. A or her intended beneficiaries.

What a plan! This would give Ms. A an additional $5 million of exemption to use in connection with gifts to children or other intended beneficiaries, resulting in a $1,750,000 tax reduction at her death.

If you think this whole arrangement might be comical, let me tell you what’s really comical: Congress thought that portability meant simplification, but instead they created a new quagmire and more confusion among tax advisors. When will they learn?
 

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Retired National Football League coach Bill Parcells often assessed his teams’ performances by telling media members, “You are what your record says you are”. A recent decision from the Appeals Court of Oregon reminds us that the same premise holds true when assessing property transfers made pursuant to estate planning: most of the time, your property is what the record says it is. Recording your transactions properly is the best way to tell a court what your intentions are for the property being transferred.

In Connall v. Felton, the Appeals Court of Oregon was presented with a deed that was transferred from a mother to her step-son, while both were alive. The deed contained a phrase that the mother had copied directly from a friend’s deed, which read, “The true and actual consideration paid for this transfer is $-0-; estate planning”.  The step-son argued that the deed transferred the entire property interest to him (and him alone) at the moment the deed was signed. The other children asked the court to force the step-son to transfer the property to the mother's estate, so that it could be enjoyed by all of the transferee’s children equally in accordance with the terms of her will.

The court was asked whether to admit external evidence (conversations the transferee had with family members, the transferee’s Last Will) to show that the transfer was intended to merely as a tool to avoid probate, with the intent that the property be shared among all of the transferee’s children. The court ruled that this evidence was inadmissible because the will was signed years before the deed was recorded and the family conversations happened after the deed was recorded. Because none of the evidence presented was related to statements made at the time of the deed’s execution, the court held that the evidence could not be used in determining the mother’s intent at the time of the transfer.

The court pointed to the clear and unambiguous language of the deed and decided that the deed did transfer the asset and an estate planning benefit was derived from the transfer (the asset did avoid probate). Since there was no (admissible) evidence to show the mother intended anything other than to give the property to her step-son, the Appeals Court held in the step-son’s favor.

Remember, your property is what the record says it is. You should consult an attorney any time you are considering re-titling or transferring assets for estate planning purposes, as properly executed estate planning and transfer documents can properly spell out your intentions and help prevent expensive arguments about the transfer of your assets.

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(Click Image To Launch Video)

SYKS&S partners Victoria Blachly and Jeff Cheyne were recently interviewed by reporter Kerry Tomlinson for a KATU-TV (ABC affiliate) news story about “virtual assets” such as internet domain names, online content such as photos and videos, and personal accounts for email, banking, brokerage and social media sites such as Facebook. Increasingly, personal information and content is being stored online — and few people know what happens to these assets when a person becomes incapacitated or dies.

In other words, who can gain access to our “virtual existence” when we’re gone?

As previously discussed in a two-part “Estate Planning and Virtual Assets” blog post by SYKS&S partner Michael Walker, the answer can be quite complex. For more detailed information, read Part I and Part II of Michael’s post. You can also view the KATU-TV story on the station’s website. 

As part of the KATU-TV news segment, our estate planning team prepared avirtual assets checklist, which is posted on KATU.com. 
 

Also in the news… partner Steve Seymour was quoted in a recent Portland Business Journal article about the Oregon State Bar’s proposed mandatory mentoring program for new attorneys. The state bar’s mentoring committee is drafting a proposal that could be in place as soon as May 2011.

SYKS&S already has an organized mentoring program in place for new attorneys joining the firm.
 

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Heirs and personal representatives of estates frequently ask: “Why can’t we use the free market analysis report from the local real estate agent to determine the fair market value of the real property in the estate?” 

A free market analysis by a local real estate agent is a valuable service, if you are thinking of listing the property for sale. However, we do not recommend it for estate valuation purposes.

Generally, the income tax basis for any real property owned by a decedent receives a tax basis adjustment equal to the fair market value of the property as of the date the decedent died. This valuation rule is slightly different for 2010 estates, although Congress is expected to make some changes in the next few months. Those rules will be discussed in a later blog article. 

The date of death fair market value information is important for several reasons. 

• First, this is the value that generally must be reported if an estate tax or inheritance tax return is required to be filed. 
• Second, this is the information that determines the adjusted income tax basis for the real property of the decedent. 
• Third, if the estate has multiple beneficiaries, the value of the real property may play a role in determining how much distribution each beneficiary is to receive. 
• Last, if the asset is subject to probate, it is information that must be reported on the probate inventory. 

Even though a free market analysis may provide a market value very similar to an appraisal report, there are a number of reasons why the analysis will not be sufficient. 

• First, the market analysis is generally based on current market data and is not specifically focused on the fair market value as of the date of death. 
• Second, the agent providing the free market analysis is generally not licensed as an appraiser; and, therefore, is not in a position to defend the values provided in the market analysis in the event an auditor or a disgruntled heir questions the market analysis. 
• Third, because the free market value analysis is not a qualified appraisal, government auditors are likely to reject the report as not being qualified, and thus if the value is challenged in an audit, the personal representative will need to get an appraisal anyway.
• Last, disgruntled heirs could claim that the personal representative did not fulfill his or her fiduciary duty to the heirs of the estate by failing to obtain a qualified appraisal.

During the current economic downturn, the income tax savings will likely be reduced. As a result, disgruntled heirs could be further disgruntled. In this circumstance, a qualified appraisal is essential.

For these reasons, we generally recommend that the representative of the estate obtain appraisal reports from qualified appraisers for all estate real property. In the case of residential property, the cost is a few hundred dollars. In the case of commercial property, it is a few thousand dollars. Since most, but not all, properties have a higher value, the potential income tax savings is well worth the appraisal expense. 

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In Part 1 of my last article, Estate Planning and “Virtual Assets,” I discussed the complex issues relating to estate planning and “Virtual Assets,” which include financial accounts, email accounts, social media sites, and other personal or family information. All of these assets are typically accessed over the internet with a username and password. Here are two additional recommendations with respect to Virtual Assets:

1.   Consider Who Should Receive Your Virtual Assets. If a virtual asset is a bank or investment account, your will or trust should (presumably) control who will receive these assets at your death. However, what about access to family photos or genealogical information? One might want to specifically instruct your executor or trustee to replicate and distribute these items so that they pass to multiple intended beneficiaries.  

2. Use Caution in Using Commercial Services to Hold Your Virtual Assets. A new cottage industry has sprung up to provide a type of “online safe deposit box” to store your virtual assets and provide a means by which designated individuals can gain access to your virtual assets. A few words of caution are in order. First, be careful and make sure you’re dealing with a reputable company. Giving someone the keys to your digital existence would be a goldmine for someone bent on stealing your identity. Second, remember that giving someone access to information about an asset is not the same as giving that asset to that individual. Your will or trust should ultimately control who should inherit your assets, not an online service provider. There may be complex legal and tax issues that need to be taken into account in designating beneficiaries of virtual assets. For example, one online service provider refers to an “electronic will.” In most states, a will requires certain formalities (typically a written instrument signed before two witnesses), and the absence of these formalities can render one’s good intentions legally invalid.

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For many, our primary means of communication is email, often through multiple email accounts. We “tweet” about the latest happenings through our Twitter accounts. We keep in touch with friends and colleagues through social networking sites such as Facebook and Linkedin. We store family photos and other important information on a growing array of online sites. We access our financial assets, such as bank accounts and brokerage accounts, over the internet. We pay our bills electronically. We own internet domain names. In the aggregate, these “virtual assets” have tremendous aesthetic and financial value. 

Yet, when we die or become incapacitated, what happens to these assets? Who can gain access to this “virtual existence” when we’re gone?

The answer is a very complex. Most of these virtual assets are controlled by a license agreement with the provider of the online access. Such license agreements vary from provider to provider. Without careful planning, chaos may rein. Here are some key recommendations to consider:

1.      Integrate Virtual Assets into Your Estate Plan. Wills, trusts, and powers of attorney have been around for centuries. In appointing an executor, trustee, or agent under a power of attorney, you are appointing a representative that you trust to take control of your assets and follow your legal instructions. Whether dealing with virtual assets or an office building, you should appoint individuals in these roles that are both trustworthy and competent to carry out these instructions.

2.      Create a Virtual Asset Instruction Letter. A “Virtual Asset Instruction Letter” or “VAIL” will list all of your online accounts and assets, and will provide web addresses, user names, and passwords to give your designated representative the ability to identify and access these accounts. Place the VAIL in a safe location, such as a safe deposit box, that can only be accessed by your legal representative. In addition to a written list, you might consider saving the VAIL to a flash memory drive or CD which can make your representative’s access to these accounts more efficient. For assets such as email accounts, your VAIL may instruct your representative to delete the account after a period of time. Most such accounts will simply terminate after a certain period of inactivity.

Check back with WealthLawBlog.com in a few days to see additional recommendations relating to virtual assets.

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We recently received a report stating that Senator Jon Kyle of the Senate Finance Committee is working with fellow committee member Senator Blanche Lincoln, along with Finance Committee Chair Max Baucus and Ranking Minority Member Chuck Grassley, on an agreement to move forward on estate tax legislation. Senator Kyle stated that they have worked out the details, and are simply finding the last few offsets before bringing the bill out of committee. It appears that they will not make the law retroactive, giving us lawyers plenty of work for the next few years.

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Surprise, surprise! Congress still has not come up with an answer to the lingering estate and generation-skipping transfer (GST) tax question for individuals who die this year. And, with the lack of a step-up in basis, some heirs will face higher combined estate and income tax costs for deaths occurring this year rather than in 2009. What a topsy-turvy world we live in.

There is still a possibility that Congress will retroactively reinstate the estate and GST taxes to the beginning of the year, but as each day goes by, this gets more and more unlikely. Even if the House could get their act together, I would be surprised to see anything come out of the Senate Finance Committee.

Apart from tax uncertainty, the continuing inaction could also pose a problem for individuals with wills using formula clauses. These clauses work well when the estate tax is in force but they may produce unintended consequences when there is no estate tax. Action may need to be taken if it becomes clear that Congress will not be addressing the situation.

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I have spoken with several charities lately regarding their fundraising efforts. It seems that when the economy goes south, the charities take it on the chin more than other businesses. This is due to the fact that they rely on charitable contributions to operate. For many of these charities, now, more than ever, is when they need charitable contributions to fulfill their mission.

If you are charitably inclined, there are tax-advantaged ways to make a gift to a favorite charity while enjoying the income from that gift during your lifetime. Many educational and charitable organizations offer plans that combine the benefits of an immediate income tax deduction and lifetime income from the charitable gift. In most cases, you can make the gift in cash or securities. Here is a brief overview of the major types of deferred charitable gifts.

(1) A pooled income fund is probably the most common type of deferred giving plan. It closely resembles a mutual fund. When you make a gift to a pooled income fund, it is merged with gifts of other donors, and you receive your allocable share of the income earned by the fund. Distributions from the fund are usually made quarterly and are taxable as ordinary income. There is no guarantee as to the rate of earnings; that depends on the fund's success.

You get an immediate income tax deduction for the year in which you make a gift to a pooled income fund. The amount of your deduction depends on a combination of your age and the fund's highest rate of earnings in the previous three years. The deduction will be less than the full value of your contribution, because it represents the present value of the funds that the charity will withdraw from the fund after your death.

(2) In a charitable remainder unitrust (CRUT), a separate fund is set up to hold your gift until your death, at which time it will become the charity's property. You decide at the outset on the annual percentage of the fair market value of the assets that you are to receive as income for life. For example, you may make a $50,000 gift to a CRUT and specify an 8% return. Your annual income will be $4,000. If the value of the CRUT assets drops in the next year to only $40,000, your income that year will be $3,200. If the value goes up to $60,000 in the following year, your income that year will be $4,800.

Unlike a pooled income fund, a CRUT is handled individually. Therefore, gifts using a CRUT are usually larger than those to a pooled income fund. Just as with a pooled income fund, your deduction for a gift to a CRUT will be less than the full value of your contribution.

(3) A charitable remainder annuity trust (CRAT) is similar to a CRUT in that your gift to the charity is placed in an individual trust. The CRAT provides an annual payment of a fixed dollar amount for your lifetime. This differs from a CRUT, which provides a fixed percentage of the asset value.

For example, say that you make a $50,000 gift to a CRAT that will pay you $4,000 a year for life, after which the trust principal passes to the charity. If the CRAT earns less than $4,000 a year, it will sell assets to make up the difference. If it earns more than $4,000, it will pay you $4,000 and add the excess to the trust principal.

Your income tax deduction from a gift to a CRAT is based on your age and the amount of your annual payment. As a rule of thumb, the older you are, the larger the deduction, and the greater the annual payment, the smaller the deduction.

(4) In a charitable gift annuity, you make a gift to charity in exchange for a guaranteed income for life. This is very much like buying an annuity in the commercial marketplace, except that you get an immediate charitable deduction equal to the excess of what you paid over what the annuity is worth, based on IRS tables.
Unlike the pooled income fund, CRUT, and CRAT, your income from the charitable gift annuity is an obligation of the charity that does not depend on investment results. The rate of return on your gift annuity is not variable, as in a pooled income fund, or negotiable, as in a CRUT or CRAT. Instead, it is most likely to come from a table based on your age at the time of the gift.

A portion of each year's payment is tax-free, because the tax law allows you to recover your original payment over your life expectancy. In the year when you buy the annuity, you get a charitable deduction for a portion of the purchase price, determined from an IRS table geared to your age.

If the idea of deferred charitable giving appeals to you, please give us a call. We can discuss the pros and cons of the various types of deferred giving, and arrive at an arrangement that is right for you.
 

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In my experience, one of the most common areas of confusion in wealth and estate planning is beneficiary designations and their importance in many key areas.

Many important assets in an individual’s portfolio often pass at that person’s death by beneficiary designation and not by that person’s will or trust. Common examples of these types of assets include life insurance, retirement plans, individual retirement accounts (IRAs), and annuities. For many, these assets represent a significant portion of their overall assets, yet the beneficiary designations for these assets are sometimes not carefully considered.

Above all, it is very important to recognize that your will or revocable living trust does not control or “override” the beneficiary designations. For example, a parent’s will may direct assets to a trust for minor children if both parents are deceased. If the parent’s life insurance designation names the children directly, then the life insurance proceeds will “miss” the trust entirely, thus potentially requiring a conservatorship for the proceeds until the children reach age 18. While the children may legally be adults at age 18, they may not have sufficient maturity and experience to properly manage large sums of money (think expensive red sports cars here). The better approach would have been for the life insurance beneficiary designation to name the children’s trust as the beneficiary under the life insurance policy upon the death of the surviving parent. 

It’s also very important that you understand the tax consequences of your beneficiary designations. For example, if you designate your spouse as your beneficiary under your IRA, your spouse will be able to take advantage of a tax-free rollover of the IRA account into his or her own IRA. On the other hand, if a beneficiary other than a spouse is designated, then the beneficiary will have to take mandatory distributions from the IRA, which in turn will be subject to income taxes. In addition, while the estate tax is in currently in flux, assets passing by beneficiary designation are generally subject to the estate tax in the same manner as any other asset.

The best approach is to carefully consider and integrate beneficiary designations as part of a well-designated estate plan.

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 Late in 2009, the IRS announced that the annual gift tax exclusion will remain unchanged in 2010 at $13,000. Under the Tax Code, this amount is adjusted based upon the Consumer Price Index. The annual gift tax exclusion amount was last changed at the beginning of 2009 when the amount increased from $12,000 to $13,000. 

If a gift is less than the exclusion amount, then (i) no gift tax will be due, (ii) no gift return must be filed, and (iii) the donor’s lifetime gift-tax exemption (currently $1 million) is not reduced. This is one of the few “free Bingo spots” in the Tax Code.

The gift tax exclusion amount applies on a per-donor, per-donee basis. This means that a married couple can make gifts to a single donee equal to $26,000. For example, a married couple with two children can make gifts totaling $52,000 per year. 

For cash gifts, the amount of the gift is equal to (not surprisingly) the amount of cash given. However, for gifts of property (both real property and personal property), the value of a gift for this purpose is based upon the fair market value of the property on the date the gift is made. Often, gifts of property have significant estate planning benefits (more on these issues in a later blog article).

I welcome your comments and questions!

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On December 16, 2009, the Wall Street Journal reported that the Democrats’ attempt to extend the Federal Estate Tax exemption of $3.5 million into 2010 has been blocked by the Republicans. Senator Max Baucus is quoted as saying, “We clearly will work to do this retroactively, so that when the law is changed, it will have retroactive application.” 

The Republicans believe that the repeal should be allowed to take effect as provided under current law, and Senator John Kyl (R, Arizona) stated, “The problem doesn’t have to exist. They’ll just leave the existing law alone and let the rate go to zero, where everyone wants it anyway.”

 Thus, as the law stands today, Federal Estate Tax will be

• zero in 2010;
• with certain exceptions the tax basis step-up will be repealed for 2010;
• The estate tax exemption will return to $1,000,000 in 2011.

It is an interesting and continuing revelation about the extent of the massive gridlock in the current Congress when the Democrats could not even muster enough votes to pass a mere extension of the $3.5 million exemption for the first three months of 2010.

It remains to be seen whether or not enough votes can be mustered to make any estate tax changes in 2010. If the Senate could not pass an estate tax bill with a 60 vote majority, I am skeptical that it will get accomplished in 2010. 

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Recently, the Oregon Legislature passed a tax amnesty program with the hope of raising $16.2 million in additional revenue. (See Revenue Impact of Proposed Legislation (pdf)) The amnesty applies to corporate income and excise tax, personal income tax, inheritance tax, and transit district (self-employment) taxes. Any Oregon taxpayer with any of these underreported taxes or unfiled tax returns for any period prior to January 1, 2008 will be eligible to apply. (For a copy of the bill see SB880-B (pdf))

• Short time period: The tax amnesty program is only open for 50 days, beginning on October 1, 2009 and closing on November 19, 2009.
• Minimal Benefit: The only benefits being offered are the waiver of one half of the interest and all penalties. Not much of an incentive.
• No Taxes Waived: All the taxes due and the reduced interest must either be paid in full within 60 days of the application or be paid under an installment plan on or before May 31, 2011. Failure to complete an installment plan voids the amnesty benefits.
• Gotcha Penalty: Anyone who is eligible for this program, but fails to apply will be subject to an additional 25% penalty. This penalty can apply to tax adjustments discovered after November 19, 2009. Also any taxpayer who has received a notice of delinquency or notice of assessment from the Oregon Department of Revenue for any year that would be eligible for the amnesty program cannot participate.

This program is a "cruel joke" because:

• The amnesty program is only open for 50 days.
• The amnesty offer is minimal. There is no provision to compromise taxes.
• Anyone who is currently delinquent with Oregon taxes is probably not eligible.
• An eligible taxpayer who chooses not participate will have an additional 25% penalty added on.
• If there is a tax adjustment after the amnesty program has closed it is possible that the additional penalty can be assessed even though the tax payer was not aware of additional tax liability during the 50 day election period.

In conclusion it is hard to see that this program will help either the state of Oregon or its taxpayers.

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