An Overview of Beneficiary Laws in Oregon
This week’s article, An Overview of Beneficiary Laws in Oregon, is the theme assignment. These articles are designed not only to increase our audience but to connect with ideas that are important to The Wu Group, including scholarly and evidence-based justice.
As a Graduate Scholar of Social Justice in the Criminology and Criminal Justice Department at Portland State University, I have been tasked with writing an article providing context for this week’s theme, and unpacking the legal jargon in some of the phrases bible-humpers love to throw around at people like the Co-Owner of The Wu Group, who have put the vast majority of their savings into small life insurance policies to provide for their children in the event the unexpected happens.
Understanding the understanding of how beneficiary laws work in Oregon can take a bit of work to unpack, but I will try to make it clear and straightforward below. As you read, be sure to refer back to the promoted article linked above, comprehensive overview of beneficiary laws in Oregon, where we attempt to explain the legal jargon there and detail the history behind why certain laws exist in Oregon.
In general, non-judicial beneficiary laws govern who obtains property or funds when an individual passes away, and are usually detailed in the financial agreements themselves (whether it be an insurance policy or a will). Executing these agreements requires one to understand the scope and rules of what is required. This can be difficult as legal language is usually designed with the intention of shielding the corporation from risk and liability, and not to be easily understandable without help of a lawyer.
These laws serve as a reference point for the planning process with regards to managing money and financial planning. In a way, they define what is allowed legally, and who is entitled to what assets when it comes time to disbursement.
Oregon’s Legislature has extended the list of persons entitled to apply for community property right of survivorship. The following are Oregon Revised Statute (ORS) 109.060(10) definitions:
- A spouse;
- A de facto spouse;
- An irrevocable Trust;
- Widows and widowers;
- Stepchildren;
- Foster children;
- Grandparents.
Essentially, community property allows for both parties to own property or items in common during marriage or domestic partnership. That property or assets obtained after the entry into marriage or domestic partnership is considered jointly owned by both parties and is subject to distribution upon divorce or death of either party.
In Oregon, after executing and submitting the proper paperwork along with any necessary fees to the probate court, there are certain timelines that must be followed which determine how to handle unexpected situations, such as no one claiming the beneficiary rights, or it becomes a conflict of interest for the beneficiary to proceed.
That is why it is even more important for those involved to understand the legal terminology associated with these beneficiary laws, how they apply here in Oregon, and how they may differ from other states’ laws.
For example, the following terms may be helpful to look up as you plan your estate:
- Revocable Trust
- Grantor
- Trustee
- Trust Property
- Beneficiaries
- Spendthrift Trust
- Protectable Interest
- Alienation
- Trust Value
- Trustee’s Powers and Duties
- Support Trust
- Discretionary Trust
- Charitable Trust
- Reverse Trust
As you can see, the language surrounding these laws varies in tone and length. Below are the definitions of a couple of the more complicated terms.
A spendthrift trust is a limitation against the beneficiary transferring their protectable interest in the trust to the general public. Any contract made with the beneficiary is considered voidable, and prevents creditors from enforcing payment. Although a spendthrift trust may be utilized in order to protect certain trust resources from being used for any intended purpose, beneficiary execution of this trust is not without its complications.
Take for example the case in Oregon of In Re: Whitney Trust (523 P.2d 1246) where the Oregon Court of Appeals decided that Mr. Whitney’s spouse and three children had visible and tangible assets that could have been shared if he had not instead “conveyed all his property to a trust, from which he would derive ample income during his life and at his death the property would pass to three charities,” thereby cutting his family out of the estate under Oregon’s intestacy law.
The appellate justice went on to explain, “if the beneficiary is entitled to receive income from the trust, the beneficiary’s interest ordinarily would not be subject to enforcement of claims upon the beneficiary’s debts.” (523 P.2d 1248). This case illustrates the very issue surrounding these relevant beneficiary laws. Without legal counsel to explain to the beneficiary or spouse what this means, one could easily end up losing all rights to inherit property or assets.
This outcome indicates that this case should not have played out the way that it did. Instead of Mr. Whitney’s trust going to his grandchildren and charities, the funds should have been awarded to the children of Mr. Whitney, and to his spouse, regardless if remarried, for him to be legally accountable for his debts. As a couple, they had agreed in pre-nuptial documents that all marital property was shared equally.
However, the problem was that Mr. Whitney only distributed his interest to his children, and did not include his spouse in the execution of this particular trust. Had Mr. Whitney thought to involve his spouse and executor of the trust, we would have seen a very different outcome to this case.
As this area of law continues to shift, and as we head towards modernized legislation, it is important to understand how these laws apply to you. How do you handle beneficiary designations? How do they differ by state? And how are certain decisions made in the probate courts affecting you? By staying informed on this specific topic, one can identify methods to be utilized both personally and professionally to benefit clients and business interests.