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

From time to time we publish summaries of interesting trust and estate cases.

In today’s post we discuss a recent Oregon Appeals Court case that addressed the availability of a constructive trust to remedy a breach of duty by a successor trustee. The case is a good illustration of the legal remedies available to beneficiaries who pursue claims against trustees behaving badly.

Olson v. Howard, 237 Or App 256, 239 P.3d 510, (2010)

Background: Plaintiff, the beneficiary of a trust, brought an action against the trustee and the purchaser of land from the trust, alleging that the purchase was the result of self-dealing by the trustee. The settlor of the trust had named himself trustee and appointed Howard as successor trustee. Howard, purporting to act as successor trustee, sold the property to his son, the defendant, for $55,000. Plaintiff contended that the fair market value of the property was actually $122,760. Moreover, defendant borrowed the money to purchase the property from his father, Howard. Seven years after the sale, plaintiff filed claims against both defendant and Howard, alleging that Howard acted unlawfully when he essentially sold the trust property to himself for grossly inadequate consideration, and that defendant knowingly and willfully acted as a strawman in the transaction. Plaintiff then sought return of the property to the trust, a resale of the land, and distribution of the proceeds of that sale to the trust beneficiaries. The trial court dismissed the case after finding that plaintiff failed to provide an “objectively reasonable” basis for his claim. 

Holding: The trial court erred in determining that plaintiff’s contentions were devoid of factual and legal support. Plaintiff’s claim sought the imposition of a constructive trust, which would be available to him upon showing that the defendant possessed property that should belong to the trust as a result of the property being transferred without authority, by a self-interested party, and without sufficient consideration. Moreover, the fact that plaintiff had signed a release as a trust beneficiary relinquishing all claims against the trustee or trust did not prohibit his claim, as the release did not bar claims against the defendant. The case was remanded to the lower court.

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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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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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Effective September 28, 2009, a new bill passed by the 2009 Oregon legislature imposes a new tax on what a legislative staff summary refers to as a “specified group of health insurers.” In particular, the new law assesses a 1% tax upon the gross amount of premiums earned by health insurance providers. The stated purpose of the new tax is to provide health insurance to low income children – a commendable objective.

As the popularity of insurance companies is probably not high, most people might not have a great deal of sympathy for the plight of the newly taxed. However, the tax has already begun to “trickle down” to the rest of us. I've recently read a copy of a letter from a CEO of a major Oregon health insurance provider to a customer. Noting the new tax’s impending effective date, the letter pleasantly informs the small business insurance customer that “your premium rates will be adjusted to reflect the new 1 percent tax.”

However, the “trickle” does not stop with the small business. The owner of that business will now need to make a difficult decision as to whether to raise prices, absorb the cost, cut costs of other employee benefits, or pass the additional costs on to employees. You get the idea – the tax lands upon small businesses and their employees at a time when many such businesses are stretched to the breaking point (assuming they’ve made it this far in the recession).

Is this really the intended consequence of the new policy? I welcome your comments and questions.
 

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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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