Administering Oregon Estates: 2012 Edition
Cosponsored by the Estate Planning and Administration Section
Friday, November 16, 2012 9 a.m.–4:30 p.m.
Oregon Convention Center Portland, Oregon
6 General CLE credits and .5 Ethics credit Administering Oregon Estates: 2012 Edition
Section Planners
Holly N. Mitchell, Duffy Kekel LLP, Portland Jack V. Rounsefell, Attorney at Law, Gresham Katharine L. West, Wyse Kadish LLP, Portland Eric J. Wieland, Samuels Yoelin Kantor LLP, Portland
OREGON STATE BAR Estate Planning and Administration Section EXECUTIVE COMMITTEE
D. Charles Mauritz, Chair Marsha Murray-Lusby, Chair-Elect Eric H. Vetterlein, Past Chair Jeffrey M. Cheyne, Treasurer Matthew Whitman, Secretary Amy E. Bilyeu Eric R. Foster Janice E. Hatton Amelia E. Heath Melanie E. Marmion Holly N. Mitchell Jeffrey G. Moore Timothy O’Rourke Ian T. Richardson Erik S. Schimmelbusch Kenneth Sherman Margaret Vining
The materials and forms in this manual are published by the Oregon State Bar exclusively for the use of attorneys. Neither the Oregon State Bar nor the contributors make either express or implied warranties in regard to the use of the materials and/or forms. Each attorney must depend on his or her own knowledge of the law and expertise in the use or modification of these materials.
Copyright © 2012
OREGON STATE BAR 16037 SW Upper Boones Ferry Road P.O. Box 231935 Tigard, OR 97281-1935
Administering Oregon Estates: 2012 Edition ii Table of Contents
Schedule ...... v Faculty ...... vii 1A. Alternatives to Probate ...... 1A–i — David C. Streicher, Black Helterline LLP, Portland, Oregon 1B. Probate Jurisdiction and Procedures ...... 1B–i — Nikki C. Hatton, Schwabe Williamson & Wyatt PC, Portland, Oregon 1C. Preadministration Procedures 1C–i — Holly N. Mitchell, Duffy Kekel LLP, Portland, Oregon 1D. Initiating Probate and Small-Estate Proceedings 1D–i — Lisa N. Bertalan, Hendrix Brinich & Bertalan LLP, Bend, Oregon 1E. Special Considerations 1E–i — Leslie Sutton, Oregon Council on Development Disabilities, Salem, Oregon — Janice Hatton, Thorp Purdy Jewett Urness & Wilkinson PC, Springfield, Oregon 2. Intestate Succession, Wills, and Community Property ...... 2–i — Melinda Leaver Roy, Churchill Leonard Lawyers, Salem, Oregon 3. Rights of Interested Persons 3–i — Timothy J. Wachter, Duffy Kekel LLP, Portland, Oregon 4. Lawyer Professional Liability ...... 4–i — Bruce L. Schafer, Professional Liability Fund, Tigard, Oregon 5. Initial Responsibilities and Liabilities of Personal Representative ...... 5–i — Nicholas M. Frost, Hershner Hunter LLP, Eugene, Oregon 6. Oregon Estate Tax ...... 6–i — Jeffrey M. Cheyne, Samuels Yoelin Kantor LLP, Portland, Oregon 7. Managing Estate Assets ...... 7–i — Jonathan A. Levy, Cavanaugh Levy Bilyeu LLP, Portland, Oregon — Katie S. Groblewski, Stokes Lawrence PS, Seattle, Washington 8. Accounting, Distribution, and Closing—Outline ...... 8–i — Sam Friedenberg, Nay & Friedenberg, Portland, Oregon — Amy E. Bilyeu, Cavanaugh Levy Bilyeu LLP, Portland, Oregon 9. Claims Against the Estate ...... 9–i — Helen Rives Pruitt, Wyse Kadish LLP, Portland, Oregon 10. Litigation ...... 10–i — Jan K. Kitchel, Schwabe Williamson & Wyatt PC, Portland, Oregon — Katherine O. VanZanten, Schwabe Williamson & Wyatt PC, Portland, Oregon
Administering Oregon Estates: 2012 Edition iii Administering Oregon Estates: 2012 Edition iv Schedule
8:00 Registration 9:00 Initiating Probate and Alternatives to Probate F What to do immediately following a death F The how, why, and where of initiating probate F Pre-administration procedures F Post-death strategies for avoiding probate Lisa N. Bertalan, Hendrix Brinich & Bertalan LLP, Bend Holly N. Mitchell, Duffy Kekel LLP, Portland David C. Streicher, Black Helterline LLP, Portland
10:00 Wills, Intestate Succession, and Community Property Under Oregon Law F Is the will valid? F If not, who gets the estate? F Uniform Disposition of Community Property Rights at Death Act Margaret A. Vining, Holland & Knight LLP, Portland
10:30 Break 10:45 Rules and Rights That Affect Distribution F Effect of homicide or abuse F Elective share of surviving spouse F Disclaimers Timothy J. Wachter, Duffy Kekel LLP, Portland
11:15 Lawyer Professional Liability F Disclosure, conflicts, and other legal ethics F Who is your client? F Attorney-client privilege F How to handle mistakes Bruce L. Schafer, Professional Liability Fund, Tigard
12:15 Lunch 1:15 Personal Representatives: Getting Started F Initial instructions and considerations F Fiduciary duty and liability F Preparing the estate for administration Nicholas M. Frost, Hershner Hunter LLP, Eugene
1:45 Oregon Estate Tax F Ballot Measure 84—phasing out Oregon estate tax F New provisions for 2012 F State QTIP and Oregon special marital property elections Jeffrey M. Cheyne, Samuels Yoelin Kantor LLP, Portland
Administering Oregon Estates: 2012 Edition v Schedule (Continued)
2:15 managing Estate Assets F A personal representative’s duties to manage the estate F Investing and borrowing in probate F Selling and leasing estate property F Collecting debts owed to decedent F Dealing with the decedent’s business Jonathan A. Levy, Cavanaugh Levy Bilyeu LLP, Portland 2:45 Break 3:00 Accounting, Distribution, and Closing, or Showing Up, Getting Paid, and Getting the Heck Out of Dodge F Why we do accountings (other than the law requires them) F Ensuring your accounting will be approved (without objection from nefarious personal representatives and feuding families) F Distributing assets—cash, in-kind, sales, and beneficiary horse-trading F Beneficiaries and assets with issues—minors, special needs, and guns Amy E. Bilyeu, Cavanaugh Levy Bilyeu LLP, Portland 3:30 Practice Tips for Unusual Creditor Problems F Managing insolvent estates F Creditor/debtor laws outside of the probate code F Offers in compromise and settling claims Helen Rives Pruitt, Wyse Kadish LLP, Portland 4:00 The Stripper from Vegas vs. the Bad Seed: Estate Planning Gone Wrong F Will contest procedures F Proving your will contest F Wrongful death claims F Distribution of wrongful death proceeds Jan K. Kitchel, Schwabe Williamson & Wyatt PC, Portland Katherine O. VanZanten, Schwabe Williamson & Wyatt PC, Portland 4:30 Adjourn
Administering Oregon Estates: 2012 Edition vi Faculty
Lisa N. Bertalan, Hendrix Brinich & Bertalan LLP, Bend. Ms. Bertalan specializes in estate planning, probate, guardianships and conservatorships, and elder law. She served as a Bend Municipal Judge from 1997 to 2008. She is a member of the National Academy of Elder Law Attorneys and the Oregon Department of Justice Elder Abuse Task Force, a past member of the Oregon Long Term Care Advisory Committee and the Oregon State Bar Elder Law and Estate Planning and Administration section boards, and founder of her local Elder Abuse Roundtable. She drafted legislation to protect Oregon seniors from financial and physical abuse, codified at ORS Chapter 127, and she hosts a weekly TV segment that highlights and discusses issues affecting seniors. Amy E. Bilyeu, Cavanaugh Levy Bilyeu LLP, Portland. Ms. Bilyeu’s practice emphasizes estate planning and administration for small and large taxable estates, as well as business succession planning, income and gift tax planning, charitable planning, and estate planning for noncitizens. She is a member of the Oregon State Bar Estate Planning Section Executive Committee and is a chapter coauthor of Administering Oregon Estates (OSB Legal Pubs 2012). Ms. Bilyeu is also a member of the Oregon Mediation Association, Oregon Women Lawyers, and the Estate Planning Council of Portland. Ms. Bilyeu has taught continuing legal education seminars for the Oregon State Bar and others on both estate planning and administration matters. Ms. Bilyeu holds a Masters of Law in Taxation from the University of Washington School of Law. She is licensed to practice in Oregon and Washington. Jeffrey M. Cheyne, Samuels Yoelin Kantor LLP, Portland. Mr. Cheyne represents clients with their estate, tax, business, and real estate planning needs. He is a board member of the Portland Tax Forum, treasurer of the Oregon State Bar Estate Planning & Administration Section, and a Fellow in the American College of Trust and Estate Counsel. He currently serves on an Oregon State Bar Estate Planning & Administration Section workgroup that drafted legislation for the 2013 Oregon legislative session authorizing personal representatives, trustees, and guardians to have access to the digital accounts and digital assets of the deceased and the disabled. From 2009 through 2011, he served on the Oregon Law Commission Oregon Inheritance Tax Workgroup, which drafted and coordinated the passage of the transition legislation from the Oregon inheritance tax to the Oregon estate tax that passed in the 2011 Oregon legislative session. Mr. Cheyne is licensed in California, Oregon, and Washington. Nicholas M. Frost, Hershner Hunter LLP, Eugene. Mr. Frost practices in the fields of estate planning, business formation and succession planning, and trust and estate administration. Mr. Frost has taught as an adjunct professor at the University of Oregon Law School. He is a member of the Eugene Estate Planning Council, the Eugene-Springfield Tax Association, the American Bar Association, and the Oregon State Bar Business Law, Estate Planning and Administration, and Elder Law sections. He is admitted to practice in Oregon and Illinois. Jan K. Kitchel, Schwabe Williamson & Wyatt PC, Portland. Mr. Kitchel’s practice focuses on catastrophic personal injury, wrongful death, will and probate contests, and insurance coverage claims in the Pacific Northwest. He has also arbitrated cases in a number of forums, both as a litigant and an arbitrator. Mr. Kitchel is a member of the Oregon State Bar Litigation Section, the Washington State Bar Association Litigation Section, the American Trial Lawyers Association, the Oregon Trial Lawyers Association, the Washington State Trial Lawyers Association, and the Multnomah Bar Association. Mr. Kitchel has contributed to multiple CLE publications and given speeches and presentations on trial practice, personal injury, wrongful death, will contests, and other probate litigation. Mr. Kitchel is admitted to practice before the United States Supreme Court Jonathan A. Levy, Cavanaugh Levy Bilyeu LLP, Portland. Mr. Levy’s practice focuses on trusts and estates. He is a Fellow of the American College of Trust and Estate Counsel and a past chair of both the Oregon State Bar Estate Planning and Administration Section and the Oregon Bankers Association Trust Committee. Mr. Levy is an editor of Administering Oregon Estates and coauthor of its updated chapter on “Managing Estate Assets.”
Administering Oregon Estates: 2012 Edition vii Faculty (Continued)
Holly N. Mitchell, Duffy Kekel LLP, Portland. Ms. Mitchell practices in the areas of estate planning, including wills and trusts, and estate and gift taxation. She is a member of the Oregon State Bar Taxation Section, the Oregon State Bar Estate Planning and Administration Section CLE Committee, the Washington State Bar Association Real Property, Probate and Trust Section, and the Estate Planning Council of Portland. Ms. Mitchell is a regular speaker and author on estate planning and taxation topics. She is admitted to practice in Oregon and Washington. Helen Rives Pruitt, Wyse Kadish LLP, Portland. Ms. Pruitt’s practice areas include estate planning, family business planning, probate, and trust administration. She is a member of the Oregon State Bar Estate Planning and Administration Section, and she is admitted to practice in Oregon and Washington. Ms. Pruitt is a frequent author and speaker on estate planning and administration topics. Bruce L. Schafer, Professional Liability Fund, Tigard. Mr. Schafer has been the Director of Claims for the Professional Liability Fund since 1991 and served as a claims attorney from 1986 to 1991. Before his employment at the Professional Liability Fund, Mr. Schafer worked as an assistant prosecuting attorney in Toledo, Ohio, and in private practice in Portland with emphasis on construction law, business litigation, and insurance defense. He is a member of the Oregon State Bar Litigation and Alternative Dispute Resolution sections. Mr. Schafer is a frequent author and speaker on lawyer professional liability. David C. Streicher, Black Helterline LLP, Portland. Mr. Streicher, who is also a CPA, focuses his practice on business, tax, and estate planning matters. He provides a range of services to small and medium- sized businesses, many of which are family owned. He also has an active wills, living trusts, and estate administration practice and provides representation on purchasing and selling commercial real property, secured loans, and leases. He provides a full range of tax planning services on business, personal, and estate planning matters. Mr. Streicher is admitted to practice in both Oregon and Washington. Katherine O. VanZanten, Schwabe Williamson & Wyatt PC, Portland. Ms. VanZanten is an estate planning and tax attorney who works in both the Portland and Bend offices. She has significant experience in business planning, including developing wealth transfer strategies that encompass multi-tiered family businesses, charitable remainder trusts, and establishing charitable organizations. She regularly advises fiduciaries on their duties with respect to trust and probate administration. Ms. VanZanten is a member and past chair of the Oregon State Bar Taxation Section and a member of the Estate Planning Councils of Vancouver and Portland. She has been a member of the planning committee for the annual Portland Estate Planning conference since 2010. Ms. VanZanten is licensed in both Washington and Oregon, and she holds an LL.M. in Taxation from Golden Gate University School of Law. Margaret A. Vining, Holland & Knight LLP, Portland. Ms. Vining practices in the areas of tax, estate planning and administration, and business succession planning in Holland & Knight LLP’s Private Wealth Services section. Ms. Vining is a member of the Oregon State Bar Estate Planning and Administration Section Executive Committee. She is admitted to practice in Oregon and New York. She has other career experience in education, including significant experience in wilderness treatment programs for adjudicated youth. Timothy J. Wachter, Duffy Kekel LLP, Portland. Mr. Wachter’s practice emphasizes estate planning, estate and trust administration, charitable organizations, and related taxation issues. He is a former chair of the Oregon State Bar Estate Planning and Administration Section, a current member of the Estate Planning Council of Portland, and a Fellow in the American College of Trust and Estate Counsel. Mr. Wachter was a member of Oregon Law Commission’s 2007–2009 Elective Share Law Reform Work Group. He authored Chapter 8, “Rights of Interested Persons,” in Administering Oregon Estates (OSB Legal Pubs 2012).
Administering Oregon Estates: 2012 Edition viii Chapter 1A Alternatives to Probate
David C. Streicher Black Helterline LLP Portland, Oregon
Contents §1.4 Assessing the Need or Desirability for Probate 1A–1 §1.4-1 In General 1A–1 §1.4-2 Perfecting Chain of Title 1A–1 §1.4-3 Resolving Disputes Among Heirs and Beneficiaries 1A–1 §1.4-4 Protecting Against Creditors’ Claims ...... 1A–2 §1.4-5 Settling Tax Matters and Allocations 1A–2 §1.4-6 Value of Probate Assets ...... 1A–2 §1.5 Nonprobate Transfers of Probate Property ...... 1A–2 §1.5-7 Transfers of Interests in Closely Held Businesses ...... 1A–2 §1.5-8 Real Estate Title Insurance ...... 1A–3 §1.5-12 Motor Vehicles ...... 1A–3 §1.5-13 Bank, Trust Company, or National Bank Deposits ...... 1A–4 §1.7 Probate of Nonprobate Property ...... 1A–4 Form 1-2 Affidavit Pursuant to ORS 708A.430(2) ...... 1A–6 Chapter 1A—Alternatives to Probate
Administering Oregon Estates: 2012 Edition 1A–ii Chapter 1A—Alternatives to Probate
Chapter 1
ALTERNATIVES TO PROBATE
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
DAVID C. STREICHER, B.S., Portland State University (1979); J.D., University of Oregon (1984); member of the Oregon State Bar since 1984; member, Black Helterline LLP, Portland. The author acknowledges the work of D. Charles Mauritz and Kimberly K. Tellin, who contributed to the prior edition of this chapter.
§1.4 ASSESSING THE NEED OR DESIRABILITY FOR PROBATE §1.4-1 In General Most estates include at least some probate property, but this does not automatically mean that probate is necessary or desirable. No Oregon statute requires a probate simply because the estate contains probate assets. The necessity of probate hinges on the purposes to be accomplished and the adequacy of nonprobate means to achieve these results. Factors to consider when assessing the need or desirability of commencing a probate are discussed in §§1.4-2 to 1.4-6. §1.4-2 Perfecting Chain of Title Perhaps the most obvious purpose of probate is to transfer title to property. The personal representative’s conveyance establishes the legitimacy of the successors’ interests. Real estate is the most commonly affected class of property for which the chain of title is critical. Probate can resolve past title deficiencies and ensure that the successor can sell the property without title complications. §1.4-3 Resolving Disputes Among Heirs and Beneficiaries Most nonprobate alternatives require cooperation and agreement among all interested parties. If this is not realistic, or if there are disputes
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Administering Oregon Estates: 2012 Edition 1A–1 Chapter 1A—Alternatives to Probate
among heirs and devisees, probate is probably necessary to bring a conclusive resolution. See §1.5-5. §1.4-4 Protecting Against Creditors’ Claims Probate assets transferred without probate administration generally remain subject to all claims available against the decedent. Conversely, a probate insulates the successors from all unsecured claims. Particular attention should be paid to potential claims against the decedent for guarantees of business indebtedness, professional negligence, and personal injuries. These potential liabilities may warrant probate even though nonprobate alternatives are available. §1.4-5 Settling Tax Matters and Allocations The absence of a probate proceeding does not avoid the obligation to file income tax returns and death tax returns and to pay all outstanding taxes. See §§7.6-1 to 7.6-6(p); chapters 12–14. A probate will identify the person or persons liable for taxes. Without a probate, tax liabilities may unknowingly attach via transferee liability to the heirs or devisees. A probate may cause these taxes to be apportioned to, and deducted from, their shares, but this will extinguish their personal liability. §1.4-6 Value of Probate Assets As a practical matter, the use of nonprobate means to transfer probate property becomes less desirable and more difficult as the value of the property increases. For example, real estate is typically transferred through probate because the value usually warrants expending the time and resources necessary to avoid future title problems. In addition, a small estate affidavit cannot be used if the value of the estate exceeds the dollar amounts discussed in §§1.5-4 and 5.3-2.
§1.5 NONPROBATE TRANSFERS OF PROBATE PROPERTY §1.5-7 Transfers of Interests in Closely Held Businesses Absent a payable-on-death designation, publicly traded securities are difficult to transfer without probate. If the decedent holds the certificates, the transfer agent will inevitably demand letters testa-
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Administering Oregon Estates: 2012 Edition 1A–2 Chapter 1A—Alternatives to Probate
mentary. The same is generally true if the securities are held in “street name” in a brokerage account. Shares of closely held businesses are different. Third-party transfer agents are rarely used. If the other owners cooperate, interests in such businesses can often be transferred on the entity’s books with only modest supporting documentation. In general, a business entity’s ownership of its assets is not affected by transfers of interests in the entity itself. There are, however, exceptions. For example, if individual partners are the record owners of partnership assets, an informal transfer of a partnership interest may need to be coupled with a formal record transfer (such as a deed) of the underlying assets. For securities and security accounts transferable on death to a named beneficiary, see §1.6-1(c). §1.5-8 Real Estate Title Insurance If the sole purpose of a probate is to establish marketable title to real property, this result may be achieved through title insurance. Albeit in limited circumstances, title companies may be willing to insure title to real property without a probate or small estate affidavit. A universal prerequisite is that all devisees and heirs at law sign an affidavit of heirship similar to that described in §1.5-3. If one or more heirs are excluded as owners of the property (or if the county will not record a stand-alone affidavit of heirship), quitclaim deeds will also be necessary to vest title in the owners. Finally, the title insurance premium may be increased by approximately 100%, 50%, or 25% of the normal rate, depending on whether the sale occurs within six years after the decedent’s death, six to 15 years after death, or more than 15 years after death, respectively. Real property insured without a probate or small estate affidavit typically has a value of $200,000 or less. §1.5-12 Motor Vehicles The transfer at death of an interest in a vehicle is governed by ORS 803.094. The statute sets forth certain procedures that must be followed for the Driver and Motor Vehicle Services Division (DMV) to transfer an
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Administering Oregon Estates: 2012 Edition 1A–3 Chapter 1A—Alternatives to Probate
interest in a vehicle if the decedent’s estate is not being probated. ORS 803.094(2)(b)–(c). See Oregon DMV Form 516 (Inheritance Affidavit) or Oregon DMV Form 6797 (Small Estate Certification). Both forms are available at
§1.7 PROBATE OF NONPROBATE PROPERTY In both probate estates and nonprobate estates, members of the family frequently distribute the decedent’s personal effects, furniture, and
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Administering Oregon Estates: 2012 Edition 1A–4 Chapter 1A—Alternatives to Probate
other personalty among themselves without resort to probate. Usually, the property is of small value, and no purpose would be served to conduct a formal probate. However, a different conclusion may follow if items are of sufficient value, such as vehicles, jewelry, artwork, or antiques. The family members might not agree on who gets what, or (absent a probate) potential claims of creditors may follow the personal property. Thus, depending on the values involved, probate may be desirable even though it is not mandatory. The protection provided by probate, including insulation from liabilities and determination of heirs and creditors, is not available through any other means. But see ORS 130.350–130.450 for procedures governing resolution of creditors’ claims against assets passing under a revocable trust.
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Administering Oregon Estates: 2012 Edition 1A–5 Chapter 1A—Alternatives to Probate
Form 1-2 Affidavit Pursuant to ORS 708A.430(2)
[name of bank] Account No. ______[name of decedent] (SSN ____-____-____), Deceased ___/___/20___
The undersigned, being first duly sworn, states as follows: (a) The depositor, [name of decedent], died on ______, 20___, in ______, Oregon. Attached is a copy of [his / her] death certificate. (b) The total deposits of [name of decedent] in all financial institutions in Oregon do not exceed $25,000. (c) I am [state the relationship of the affiant to the deceased depositor]. (d) [Name of decedent] was not married at death. The names of the decedent’s surviving children and descendants of deceased children are: ______. (e) I promise to pay the expenses of the last sickness, funeral expenses, and just debts of [name of decedent] out of the deposit (to the full extent of the deposit, if necessary) in the order of priority described by ORS 115.125, and to distribute any remaining money to the persons entitled to it by law. This affidavit is made pursuant to ORS 708A.430, a copy of which is attached. DATED: ______, 20____.
/s/______[affiant’s name]
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Administering Oregon Estates: 2012 Edition 1A–6 Chapter 1A—Alternatives to Probate
STATE OF ______) ) ss. County of ______)
Personally appeared the above-named ______, who acknowledged the foregoing instrument to be [his / her] voluntary act and deed on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §1.5-13.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1A–7 Chapter 1A—Alternatives to Probate
Administering Oregon Estates: 2012 Edition 1A–8 Chapter 1B Probate Jurisdiction and Procedures
Nikki C. Hatton Schwabe Williamson & Wyatt PC Portland, Oregon
Contents §2.1 Right of the State to Control Probate Matters 1B–4 §2.2 Probate Jurisdiction ...... 1B–6 §2.2-1 Historically ...... 1B–6 §2.2-2 Jurisdiction Under the Probate Code ...... 1B–6 §2.2-3 Forums for Probate ...... 1B–10 §2.3 Venue ...... 1B–13 §2.3-1 Venue Choices for Probate ...... 1B–13 §2.3-2 Petition for Appointment of Personal Representative ...... 1B–14 §2.3-3 Venue as Jurisdictional Defect ...... 1B–14 §2.3-4 Second Administration Started in Another County ...... 1B–14 §2.4 Petitions 1B–16 §2.4-1 Form 1B–16 §2.4-2 Declaration Under Penalty of Perjury ...... 1B–17 §2.4-3 Who May Petition ...... 1B–17 §2.4-4 When Petitions Required ...... 1B–18 §2.5 Notice ...... 1B–18 §2.5-1 Generally ...... 1B–18 §2.5-2 Notice to Persons Under Disability ...... 1B–21 §2.5-3 Manner of Giving Notice ...... 1B–21 §2.5-4 Timing of Notice ...... 1B–22 §2.5-5 Proof of Notice ...... 1B–23 §2.5-6 Waiver of Notice ...... 1B–23 §2.5-7 Effect of Failure to Give Notice 1B–23 §2.6 Hearings ...... 1B–26 §2.6-1 When a Hearing Is Required ...... 1B–26 §2.6-2 Conduct of Hearings ...... 1B–27 §2.6-3 Stenographic Record 1B–28 §2.7 Orders and Judgments ...... 1B–28 §2.7-1 Generally ...... 1B–28 §2.7-2 Required and Permissible Orders or Judgments ...... 1B–30 §2.7-3 Orders of Probate Commissioner ...... 1B–31 §2.7-4 Effect of Violation of Orders ...... 1B–31 §2.8 Probate Costs; Expenses 1B–32 §2.8-1 Publication Costs 1B–32 §2.8-2 Appraiser’s Fees ...... 1B–32 §2.8-3 Bond Costs ...... 1B–33 §2.8-4 Personal Representative’s Compensation and Expenses ...... 1B–33 §2.8-5 Attorney Fees 1B–36 Chapter 1B—Probate Jurisdiction and Procedures
Table of Contents (continued)
§2.9 Finality of Orders and Judgments; Appeals 1B–41 §2.9-1 Generally ...... 1B–41 §2.9-2 Finality of Orders of Probate Commissioner ...... 1B–41 §2.9-3 Finality of Order Admitting Will to Probate ...... 1B–42 §2.9-4 Finality of Summary Determination of Claim ...... 1B–43 §2.9-5 Finality of Judgment of Distribution 1B–43 §2.9-6 Finality of Judgment Discharging Personal Representative 1B–44 §2.9-7 Effect of Order Reopening Estate 1B–45 §2.9-8 Recovery of Escheated Property ...... 1B–45 §2.9-9 Judgments and Orders ...... 1B–46 Appendixes 2A Table of Situations Requiring Petitions ...... 1B–47 2B Table of Notice Requirements ...... 1B–49 2C Table of Judgments and Orders in Probate Court ...... 1B–55 2D Table of Potential Probate Situations 1B–59 2E Table of Time Limitations ...... 1B–63 Forms 2-1 Order Transferring Venue 1B–68 2-2 Order Establishing Venue Where First Commenced 1B–71 2-3 Notice of Hearing ...... 1B–74 2-4 Admission of Personal Service ...... 1B–76 2-5 Waiver of Notice ...... 1B–77 2-6 Waiver of Notice and Consent to Entry of Order 1B–78
Administering Oregon Estates: 2012 Edition 1B–ii Chapter 1B—Probate Jurisdiction and Procedures
Chapter 2
PROBATE JURISDICTION AND PROCEDURES
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
NIKKI C. HATTON, B.A., University of Washington (1971); J.D., LL.M., University of Florida (1976, 1977); member of the Oregon State Bar since 1980 and the Washington State Bar Association since 2003; shareholder, Schwabe, Williamson & Wyatt, P.C., Portland. The author would like to thank Philip N. Jones, Duffy Kekel LLP, for preparing Appendix 2C (Table of Judgments and Orders in Probate Court).
§2.1 RIGHT OF THE STATE TO CONTROL PROBATE MATTERS ...... 2-4 §2.2 PROBATE JURISDICTION ...... 2-6 §2.2-1 Historically ...... 2-6 §2.2-2 Jurisdiction Under the Probate Code ...... 2-6 §2.2-2(a) Subject-Matter Jurisdiction ...... 2-6 §2.2-2(b) Venue ...... 2-8 §2.2-2(c) Powers of Probate Court ...... 2-9 §2.2-2(d) Due Process and Jurisdiction ...... 2-9 §2.2-3 Forums for Probate ...... 2-10 §2.2-3(a) Probate Jurisdiction ...... 2-10 §2.2-3(b) Transfer from County Court to Circuit Court ...... 2-10 §2.2-3(b)(1) Discretionary Transfer ...... 2-10 §2.2-3(b)(2) Mandatory Transfer ...... 2-11 §2.2-3(b)(3) Procedure for Transfer ...... 2-11 §2.2-3(c) The Probate Commissioner ...... 2-11 §2.2-3(c)(1) Generally ...... 2-11 §2.2-3(c)(2) Identity and Appointment of Commissioner ...... 2-11 2-1 2012 Revision
Administering Oregon Estates: 2012 Edition 1B–1 Chapter 1B—Probate Jurisdiction and Procedures
Chapter 2 / Probate Jurisdiction and Procedures
§2.2-3(c)(3) Powers of Probate Commissioner ...... 2-12 §2.2-3(c)(4) Finality of Commissioner’s Orders ...... 2-13 §2.3 VENUE ...... 2-13 §2.3-1 Venue Choices for Probate ...... 2-13 §2.3-2 Petition for Appointment of Personal Representative ...... 2-14 §2.3-3 Venue as Jurisdictional Defect ...... 2-14 §2.3-4 Second Administration Started in Another County ...... 2-14 §2.3-4(a) Generally ...... 2-14 §2.3-4(b) Transfer to Another Court ...... 2-15 §2.3-4(c) Venue Determined to Be in Original County ...... 2-15 §2.3-4(d) Accounting by Displaced Personal Representative ...... 2-16 §2.4 PETITIONS ...... 2-16 §2.4-1 Form ...... 2-16 §2.4-2 Declaration Under Penalty of Perjury ...... 2-17 §2.4-3 Who May Petition ...... 2-17 §2.4-4 When Petitions Required...... 2-18 §2.5 NOTICE ...... 2-18 §2.5-1 Generally ...... 2-18 §2.5-2 Notice to Persons Under Disability ...... 2-21 §2.5-3 Manner of Giving Notice ...... 2-21 §2.5-4 Timing of Notice ...... 2-22 §2.5-5 Proof of Notice ...... 2-23 §2.5-6 Waiver of Notice ...... 2-23 §2.5-7 Effect of Failure to Give Notice ...... 2-23 §2.6 HEARINGS ...... 2-26 §2.6-1 When a Hearing Is Required ...... 2-26
2-2 2012 Revision
Administering Oregon Estates: 2012 Edition 1B–2 Chapter 1B—Probate Jurisdiction and Procedures
Probate Jurisdiction and Procedures / Chapter 2
§2.6-2 Conduct of Hearings ...... 2-27 §2.6-2(a) Generally ...... 2-27 §2.6-2(b) Subpoena Powers ...... 2-27 §2.6-2(c) Summary Determination of Claims ...... 2-28 §2.6-3 Stenographic Record ...... 2-28 §2.7 ORDERS AND JUDGMENTS ...... 2-28 §2.7-1 Generally ...... 2-28 §2.7-2 Required and Permissible Orders or Judgments ...... 2-30 §2.7-3 Orders of Probate Commissioner ...... 2-31 §2.7-4 Effect of Violation of Orders ...... 2-31 §2.7-4(a) Contempt of Court ...... 2-31 §2.7-4(b) Breach of Fiduciary Duty ...... 2-32 §2.8 PROBATE COSTS; EXPENSES ...... 2-32 §2.8-1 Publication Costs ...... 2-32 §2.8-2 Appraiser’s Fees ...... 2-32 §2.8-3 Bond Costs ...... 2-33 §2.8-4 Personal Representative’s Compensation and Expenses ...... 2-33 §2.8-4(a) Personal Representative’s Compensation ...... 2-33 §2.8-4(a)(1) Amount of Compensation ...... 2-33 §2.8-4(a)(2) Court May Deny Compensation ...... 2-35 §2.8-4(b) Expenses ...... 2-35 §2.8-5 Attorney Fees ...... 2-36 §2.9 FINALITY OF ORDERS AND JUDGMENTS; APPEALS ...... 2-41 §2.9-1 Generally ...... 2-41 §2.9-2 Finality of Orders of Probate Commissioner ...... 2-41 §2.9-3 Finality of Order Admitting Will to Probate ...... 2-42 §2.9-4 Finality of Summary Determination of Claim ...... 2-43 §2.9-5 Finality of Judgment of Distribution ...... 2-43
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§2.9-6 Finality of Judgment Discharging Personal Representative ...... 2-44 §2.9-7 Effect of Order Reopening Estate ...... 2-45 §2.9-8 Recovery of Escheated Property ...... 2-45 §2.9-9 Judgments and Orders ...... 2-46 Appendix 2A Table of Situations Requiring Petitions ...... 2-47 Appendix 2B Table of Notice Requirements ...... 2-49 Appendix 2C Table of Judgments and Orders in Probate Court ...... 2-55 Appendix 2D Table of Potential Probate Situations ...... 2-59 Appendix 2E Table of Time Limitations ...... 2-63 Form 2-1 Order Transferring Venue ...... 2-68 Form 2-2 Order Establishing Venue Where First Commenced ...... 2-71 Form 2-3 Notice of Hearing ...... 2-74 Form 2-4 Admission of Personal Service ...... 2-76 Form 2-5 Waiver of Notice ...... 2-77 Form 2-6 Waiver of Notice and Consent to Entry of Order ...... 2-78
§2.1 RIGHT OF THE STATE TO CONTROL PROBATE MATTERS Probate jurisdiction and procedures in Oregon are generally contained in ORS 111.005–118.990. These statutes compose the current probate code as amended subsequent to its enactment in 1969. The state has the power to control the disposition and administra- tion of decedents’ estates, subject to federal Constitutional rights. The Oregon Supreme Court has stated that “the right of an individual to dispose of his property by will is not a natural right, but is one conferred by law.” In re Broders Estate, 224 Or 165, 171, 355 P2d 738 (1960). Even the right of intestate succession has been said to be “a creature of
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the law” and not a “natural right.” In re Broders Estate, 224 Or at 171; U. S. Nat. Bank of Portland v. Snodgrass, 202 Or 530, 540, 275 P2d 860 (1954). The United States Supreme Court has made similar holdings. In Irving Trust Co. v. Day, 314 US 556, 562, 62 S Ct 398, 86 L Ed 452 (1942), the Court ruled that the “[r]ights of succession to the property of a deceased, whether by will or by intestacy, are of statutory creation, and the dead hand rules succession only by sufferance.” The state’s power to legislate matters dealing with inheritance is not unlimited. In Zschernig v. Miller, 389 US 429, 436, 88 S Ct 664, 19 L Ed2d 683 (1968), the Court held that the operation and effect of former ORS 111.070, dealing with the right of aliens to inherit, amounted to “state involvement in foreign affairs and international relations—matters which the Constitution entrusts solely to the Federal Government.” Recognizing that the states have “traditionally regulated the descent and distribution of estates,” the majority held that a state’s probate laws “must give way if they impair the effective exercise of the Nation’s foreign policy.” Zschernig, 389 US at 440. In Tulsa Prof’l Collection Services, Inc. v. Pope, 485 US 478, 108 S Ct 1340, 99 L Ed2d 565 (1988), the United States Supreme Court ruled that an Oklahoma probate claim statute was unconstitutional. In deciding that the Fourteenth Amendment protected the right of an estate creditor to more than published notice, the Court stated: Nor is the State’s involvement in the mere running of a general statute of limitation generally sufficient to implicate due process. . . . But when private parties make use of state procedures with the overt, significant assistance of state officials, state action may be found...... Here, in contrast, there is significant state action. The probate court is intimately involved throughout, and without that involvement the time bar is never activated. Tulsa Prof’l Collection Services, Inc., 485 US at 485–487 (citations omitted). See §2.5-7. The Supreme Court found the state court involvement so pervasive and substantial that it had to be considered state action subject to the
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restrictions of the Fourteenth Amendment. Tulsa Prof’l Collection Services, Inc., 485 US at 487. All provisions of Oregon’s probate code can be assumed to be subject to the same due process scrutiny.
§2.2 PROBATE JURISDICTION §2.2-1 Historically The probate court has historically been one of limited jurisdiction. In re Murray’s Estate, 56 Or 132, 139, 107 P 19 (1910); In re Elder’s Estate, 164 Or 347, 351–352, 101 P2d 412 (1940). Property of a decedent must be located in Oregon before an Oregon probate court will accept jurisdiction, and “[w]hether there is property in Oregon upon which probate will operate depends on the situs of the property.” W. v. White, 307 Or 296, 300, 766 P2d 383 (1988) (citation omitted). In West, a decedent who had been domiciled in Massachusetts held a note secured by a trust deed on Oregon real property. The court held that the note was personal property, that its situs was in Massachusetts, and that the security was merely incident to the debt. Accordingly, there was no jurisdiction in Oregon. Prior Oregon law made proper venue a jurisdictional matter. If venue was in the wrong county, the courts of that county lacked authority (jurisdiction) even to appoint an administrator. Now, proper venue is not a jurisdictional matter. ORS 113.015(2). §2.2-2 Jurisdiction Under the Probate Code §2.2-2(a) Subject-Matter Jurisdiction Under ORS 111.085, the jurisdiction of the probate court includes, but is not limited to: (1) “Appointment and qualification of personal representatives”; (2) “Probate and contest of wills”; (3) “Determination of heirship”; (4) “Determination of title to and rights in property claimed by or against personal representatives, guardians and conservators”;
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(5) “Administration, settlement and distribution of estates of decedents”; (6) “Construction of wills, whether incident to the administra- tion or distribution of an estate or as a separate proceeding”; (7) “Guardianships and conservatorships, including the appoint- ment and qualification of guardians and conservators and the administra- tion, settlement and closing of guardianships and conservatorships”; (8) “Supervision and disciplining of personal representatives, guardians and conservators”; and (9) “Appointment of a successor testamentary trustee where the vacancy occurs prior to, or during the pendency of, the probate pro- ceeding.” Subsection (3) of ORS 111.085 allows heirship determinations even when no estate is being administered. Subsection (6) of the statute permits the probate court to construe wills, whether or not incident to the administration or distribution of an estate. ORS 111.085(6). The probate court has jurisdiction, for instance, to construe a will to determine whether the will exercised a power of appointment given by a separate trust agreement to the testator, even in the absence of assets to be administered. If the probate court has jurisdiction over an estate, but an error is committed in appointing the personal representative, the appointment is voidable, not void. If, however, the court lacks jurisdiction over the estate, the appointment is void and the acts of the personal representative are generally without effect. Rennie v. Pozzi, 294 Or 334, 338 n 3, 656 P2d 934 (1982). In Rennie, 294 Or at 343, the court decided that the provisions of ORS 114.255 supported (under certain conditions) the “relation back” validity of a personal representative’s reappointment. In that case, the initial invalid appointment was not due to a jurisdictional problem. The probate court has authority to entertain an action for a declaratory judgment. ORS 111.095; Buresh v. First Nat. Bank, 10 Or App 463, 473, 500 P2d 1063, aff’d as modified, 262 Or 104 (1972).
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Designating an action based on the purported invalidity of a will as a declaratory judgment action does not, however, permit a plaintiff to avoid the limitations period for bringing a will contest. Martin v. Kenworthy, 92 Or App 697, 698, 759 P2d 335 (1988). The jurisdiction of the probate court is not limited to the areas of authority listed in ORS 111.085. See ORS 111.085 (the “jurisdiction of the probate court includes, but is not limited to . . .”). For example, in Matter of Plue’s Estate, 63 Or App 677, 682, 666 P2d 835 (1983), the court ruled that although the Oregon Tax Court had exclusive jurisdiction to determine the amount of inheritance tax, the probate court, under the provisions of ORS 111.085(5)–(6), had jurisdiction to decide whether the tax liability would be apportioned among the persons interested in the estate. During the entire administration process, the probate court has exclusive jurisdiction over the decedent’s property. See ORS 114.225. In Matter of Phillips’ Estate, 23 Or App 363, 368, 542 P2d 928 (1975), the court ruled that “jurisdiction remained in the probate court until final distribution was decreed.” The court held that a separate partition suit involving land that was the subject of the probate administration was ineffective as to the property in administration. The court stated: “The issues on appeal are whether the probate court erred in distributing the decedent’s farm to the heirs as tenants in common despite a decree of partition by the circuit court entered by consent of the parties decreeing otherwise while the estate was in administration.” Matter of Phillips’ Estate, 23 Or App at 364. Similarly, federal courts have recognized that the administrative collection procedures of the Internal Revenue Service are not available while the assets of a deceased taxpayer are in the “control and custody” of the probate court. See United States v. Silverman, 621 F2d 961, 965– 966 (9th Cir 1980); see also United States v. McPherson, 631 F Supp 269 (MDNC 1986); United States v. Swink, 41 F Supp 98 (ED Va 1941). §2.2-2(b) Venue Although prior Oregon law made proper venue a jurisdictional prerequisite, ORS 113.015(2) expressly provides to the contrary. Filing a
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proceeding in an improper county is not a jurisdictional defect. See §§2.3-1 to 2.3-4(d) for further discussion of venue. §2.2-2(c) Powers of Probate Court A court having probate jurisdiction (i.e., having the authority to consider the subject matter) has the powers enumerated in ORS 111.095(1). The “general legal and equitable powers of a circuit court” apply to effectuate the jurisdiction of a probate court. The orders, judgments, and determinations of a probate court are entitled to the same finality and presumption of regularity as those of a court of record with general jurisdiction. The probate courts have specific authority to make determinations regarding their own jurisdiction and are expressly given “full” power to make declaratory judgments in all matters involved in the administration of an estate. ORS 111.095(2). All these powers apply with equal force to county courts when sitting in probate, subject only to the appeal rights and procedures set forth in ORS 111.105. §2.2-2(d) Due Process and Jurisdiction Jurisdiction has several forms, including the following: (1) Authority of a particular forum to act. This type of jurisdic- tion is usually referred to as “jurisdiction of the subject matter.” See ORS 111.075–111.085. (2) Authority of any court in a particular state to act. This type of jurisdiction, based on “sufficient affiliation” of the defendant with the forum state, is exemplified in Hanson v. Denckla, 357 US 235, 250–251, 78 S Ct 1228, 2 L Ed2d 1283 (1958). In the Hanson case, the majority of the United States Supreme Court held that a nonresident trustee did not have sufficient affiliation, or minimum contacts, with Florida to enable a Florida court to force the trustee to appear before its courts. This type of jurisdiction involves the authority of a court to reach beyond its borders and bring persons or property before it. (3) Authority of a court to affect the rights of persons who have no actual notice of the proceedings. This issue is present in all 2-9 2012 Revision
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proceedings involving adjudication of rights between persons (in personam) or between persons and property (in rem), and is one of fairness or due process. The basic test is whether the person has been given adequate notice of the judicial proceeding so that he or she has had an opportunity to come before the court and present his or her views. In several instances, Oregon has dealt with the issues of due process and notice, in state judicial decisions and in legislation enacted in response to a United States Supreme Court ruling. For a review of those cases, see §2.5-7. §2.2-3 Forums for Probate §2.2-3(a) Probate Jurisdiction “Jurisdiction of all probate matters, causes and proceedings is vested in the county courts of Gilliam, Grant, Harney, Malheur, Sherman and Wheeler counties and in the circuit court for each other county and as provided in ORS 111.115.” ORS 111.075. The original proposal of the Advisory Committee on Probate Law Revision (1968) was to give probate jurisdiction to the circuit courts throughout the state. However, to meet certain Eastern Oregon objec- tions, the legislature preserved probate jurisdiction in the county courts in the six counties listed above. The county courts in these six counties have all the broadened powers, discretion, and jurisdiction given to probate courts by the probate code. The county courts are not limited to probate jurisdiction in the former sense, but they have the general legal and equitable powers and authority of a circuit court as given by ORS 111.085 and 111.095. See also §5.2-1(a). §2.2-3(b) Transfer from County Court to Circuit Court §2.2-3(b)(1) Discretionary Transfer In its discretion, the county court may by order transfer an estate proceeding from that court to the circuit court of that county. ORS 111.115(1). This discretionary transfer requires the transfer of the entire estate proceeding. A transfer to the circuit court requires that the circuit court continue its jurisdiction of the entire estate until it is closed.
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§2.2-3(b)(2) Mandatory Transfer If a county judge is a party to, or is directly interested in, the estate proceeding, the county court must transfer the proceeding to the circuit court of that county. All matters, causes, and proceedings pertaining to the estate in which the county judge has an interest must be transferred. ORS 111.115(2). §2.2-3(b)(3) Procedure for Transfer The procedure for transferring an estate from the county court to the circuit court is set forth in ORS 111.115(3). Once the transfer order has been made by the county court, the county clerk must certify all original papers and proceedings pertaining to the estate and cause them to be filed in the circuit court. The circuit court thereafter has jurisdiction of all matters pertaining to that estate, just as if jurisdiction had originally been exclusively in that circuit court. §2.2-3(c) The Probate Commissioner §2.2-3(c)(1) Generally The position of probate commissioner was created to speed up the opening of estates and to relieve judges from duties that are essentially clerical, instead of adjudicatory, in nature. The commissioner also has authority to handle certain uncontested matters in connection with the opening of guardianships, conservatorships, and decedents’ estates. See §2.2-3(c)(3). Another objective behind the establishment of this position is to facilitate the opening of estates in the absence of the probate judge. This is particularly significant in those counties having only one such judge. See ORS 111.175–111.185. §2.2-3(c)(2) Identity and Appointment of Commissioner The court may appoint the clerk of the probate court or “some other suitable person at the county seat” to act as probate commissioner. ORS 111.175. If the clerk of the probate court is appointed probate commissioner, the deputy clerk has the power to perform any act as probate commissioner that the clerk may perform. The court clerk is fully responsible for the conduct of his or her deputy so acting. ORS 111.175.
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Although each county may have only one probate commissioner, when the court clerk is appointed as the commissioner, the court clerk’s deputy may act for him or her. As a result, appointment of the clerk, rather than “some other suitable person at the county seat,” results in making several persons available to exercise the powers of a probate commissioner.
PRACTICE TIP: The lawyer should check with the court clerk to determine whether a probate commissioner has been appointed for the county and the extent of the power and duties that have been delegated to that commissioner. §2.2-3(c)(3) Powers of Probate Commissioner To the extent authorized by rules of the court, a probate com- missioner may act on uncontested petitions for the (1) appointment of special administrators, (2) probate of wills, and (3) appointment of personal representatives, guardians, and conservators. ORS 111.185. Each probate court that takes advantage of the power to appoint a probate commissioner must promulgate rules establishing, and perhaps limiting, the commissioner’s authority. Pursuant to the authority given to the probate commissioner, he or she may make and enter orders on behalf of the court (1) admitting wills to probate; (2) appointing personal representatives, special admin- istrators, guardians, and conservators; and (3) setting the amount of the fiduciaries’ bonds. ORS 111.185(1). When entering orders, the probate commissioner is acting “on behalf of the court.” ORS 111.185(1). Unless set aside or modified by the judge, the commissioner’s orders have the same effect as if made by the judge. ORS 111.185(3). The probate commissioner may refer to the probate judge any matter presented to the commissioner. ORS 111.185(2). Because the probate commissioner’s authority is not exclusive, any matter that he or she is authorized to handle may also be handled by the probate judge in the first instance.
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§2.2-3(c)(4) Finality of Commissioner’s Orders The orders of the probate commissioner may be set aside by the probate court within 30 days after entry. ORS 111.185(1). See §2.9-2.
§2.3 VENUE §2.3-1 Venue Choices for Probate Any of the following counties have venue for a probate proceed- ing: (1) The county where the decedent had a domicile at the time of his or her death, ORS 113.015(1)(a);
NOTE: To constitute domicile, “there must be both the fact of a fixed habitation or abode in a particular place and an intention to remain there permanently and indefinitely.” In re Noyes’ Estate, 182 Or 1, 14, 185 P2d 555 (1947). (2) The county where the decedent had a place of abode at the time of death, ORS 113.015(1)(a);
NOTE: The two factors necessary to establish a domicile, that is, a fixed abode and an intent to remain there, are absent from this alternative. A temporary abode in a county will suffice for probate venue in that county. (3) Any county where the decedent’s property was located at the time of the decedent’s death or is located at the time the probate proceeding is commenced, ORS 113.015(1)(b); or
NOTE: Any property, real or personal, establishes venue. See ORS 114.205 (the probate code applies “without distinction between real and personal property”). (4) The county in which the decedent died, ORS 113.015(1)(c). Although venue may be appropriate in any one of several counties, an estate can be administered in only one county. See §2.3-4(a). See also §5.2-1(b).
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The filing of a proceeding in an improper county is not a jurisdictional defect. ORS 113.015(2). §2.3-2 Petition for Appointment of Personal Representative The facts relied on to establish venue must be alleged in the petition for appointment of the personal representative. ORS 113.035(3). See Forms 5-3, 5-4. §2.3-3 Venue as Jurisdictional Defect By statute, improper venue (i.e., incorrect county) “does not constitute a jurisdictional defect.” ORS 113.015(2). Before enactment of the probate code in 1969, proper venue was a jurisdictional matter. In re Armstrong’s Estate, 159 Or 698, 705, 82 P2d 880 (1938); Wink v. Marshall, 237 Or 589, 591–592, 392 P2d 768 (1964). §2.3-4 Second Administration Started in Another County §2.3-4(a) Generally An estate can be administered in only one county. If proceedings seeking the appointment of a personal representative of the same estate or proceedings to probate a will of the same decedent are commenced in more than one county, all proceedings are stayed except in the county where first commenced until a final determination of venue. ORS 113.025(1).
PRACTICE TIP: A lawyer who foresees a battle over venue should be the first to file the petition for appointment of the personal representative. The court where the first filing is made will be the one to resolve venue conflicts. When probate proceedings have been filed in more than one county, a petition for determination of venue should presumably be filed in the county where the first proceeding was commenced. Notice should be given in the manner provided by ORS 111.215 to: (1) The personal representative in the other estate proceeding; (2) The probate court of the other county; and (3) Each person who petitioned for the appointment of a personal representative (these persons are “interested” in the venue 2-14 2012 Revision
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determination because they each selected a county where proceedings were filed). In resolving venue conflicts, the court of the county where the proceeding was first begun may order that the proceeding be transferred only to a county where another proceeding has also been commenced. A venue transfer is strictly discretionary with the court and must be “for the best interest of the estate.” ORS 113.025(1). The standard of appellate review of venue decisions is, accordingly, abuse of discretion. See Forms 2-1 and 2-2. §2.3-4(b) Transfer to Another Court Proceedings undertaken in the first county with jurisdiction are in all respects valid and effective up to and including the entry of an order changing venue to the second county. The court of the second county (in which venue was ultimately determined to be “for the best interest of the estate,” ORS 113.025(1)) also has jurisdiction for all proceedings undertaken. ORS 113.025(2). Double jurisdiction therefore exists until an order of transfer is entered. If a change of venue is ordered, the clerk of the court where the proceeding was first commenced must send to the clerk of the court for the other county a transcript of the proceedings, together with all the original papers filed. ORS 113.025(2). Thereafter, the recipient court has exclusive jurisdiction over the estate proceedings. Because all papers filed in the first county are to be sent to the second county, apparently the only record of the disposition of the estate in the first county is the journal entry of the order transferring venue. §2.3-4(c) Venue Determined to Be in Original County As stated in §2.3-4(a), if venue is determined to be in the county where proceedings were first commenced, proceedings later commenced in another county “shall be stayed.” ORS 113.025(1). To the extent that proceedings were actually conducted in that second county, they are considered to have been undertaken with jurisdiction. ORS 113.025(2).
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§2.3-4(d) Accounting by Displaced Personal Representative The order determining proper venue in one county has the effect of terminating the proceedings in the other county. See ORS 113.025(2). The deposed personal representative must then turn over to the remaining personal representative any assets in the possession of the former and, within 30 days of the order terminating his or her authority, must also file an accounting in the court retaining jurisdiction and venue. ORS 116.083(1)(b). In order for the outgoing personal representative to be discharged and his or her bond (if any) exonerated, a judgment approving the account and discharging the personal representative should be entered in the surviving proceeding. If the deposed personal representative had previously published a notice to interested persons as required by ORS 113.155(1), the remaining personal representative should republish a notice to interested persons in that same county. Although the statute does not expressly require a second publication, the situation is analogous to ORS 113.225, which requires republication of the notice to interested persons by a successor personal representative.
§2.4 PETITIONS §2.4-1 Form The probate code provides that “[n]o particular pleadings or forms thereof are required in the exercise of jurisdiction of probate courts.” ORS 111.205. However, ORS 111.205 requires that the “proceedings shall be in writing” and that all petitions, reports, and accounts in proceedings before the probate court “must include a declaration under penalty of perjury in the form required by ORCP 1 E made by at least one of the persons making” them. See §2.4-2. UTCR 2.010 provides that all documents must be printed or typed. Furthermore, UTCR 2.010 and UTCR chapter 9 set forth other rules regarding the format of documents (e.g., size of paper, spacing, and information about the attorney of record).
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§2.4-2 Declaration Under Penalty of Perjury The probate code requires that petitions, reports, and accounts in probate proceedings “include a declaration under penalty of perjury in the form required by ORCP 1 E made by at least one of the persons making the petitions, reports and accounts or by the attorney for the person, or in case of a corporation by its agent.” ORS 111.205. A declaration under penalty of perjury must: (1) Be signed by the declarant; and (2) Include the following sentence “in prominent letters immediately above the signature of the declarant: ‘I hereby declare that the above statement is true to the best of my knowledge and belief, and that I understand it is made for use as evidence in court and is subject to penalty for perjury.’” ORCP 1 E. §2.4-3 Who May Petition Petitions in the probate court must be filed by “a party in interest.” ORS 111.205. Pursuant to ORS 111.005(19), the term interested person includes “heirs, devisees, children, spouses, creditors and any others having a property right or claim against the estate of a decedent that may be affected by the proceeding. It also includes fiduciaries representing interested persons.” In the Comments to the probate code concerning ORS 113.035 (relating to petitions for the appointment of a personal representative), the Advisory Committee on Probate Law Revision said that it “considered that any person who paid the fees and filed a petition complying with section 84 would of necessity be an interested person.” Proposed Oregon Probate Code (Preliminary Draft) (Aug 1968), at 84. See
COMMENT: Although it might be argued that “interested persons” are limited to persons specifically named in ORS 111.005(19), the intent of the drafters of the probate code appears to be that any person interested enough to file a petition is an “interested person” qualified to do so. ORS 113.085 even names
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the Director of Human Services or the Director of the Oregon Health Authority as having an interest if the decedent received public assistance, or the Department of Veterans Affairs if the decedent was a protected person under ORS 406.050(8). However, the safest approach is to have the probate petition signed by an interested person as defined by ORS 111.005(19). §2.4-4 When Petitions Required Because of the increased authority given to the personal repre- sentative by the probate code, only two petitions may be necessary in the ordinary simple estate: (1) A petition to open the estate, ORS 113.035 (see §§5.2-2(a) to 5.2-2(b)); and (2) A petition for a judgment of distribution, ORS 116.083(3)(b) (see §11.8-2). See Appendix 2A for a table of when petitions to the court are required. In the probate court, motions and complaints are rarely used. Instead, requests for the court to take action are filed as petitions. ORS 111.205.
§2.5 NOTICE §2.5-1 Generally Notice is critical to the estate-administration process. All known persons who may possibly be interested in the estate, its opening, its administration, and its closing must be given adequate notice so that they have an opportunity to make any appropriate objections. Although judicial scrutiny is substantially reduced by the current probate code, the notice requirements are materially enhanced, giving fair opportunity for those whose interests might be affected either to negotiate informally with the personal representative or to bring the matter before the probate court.
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When notice is required of a hearing on a petition or other matter on which an order is sought, the notice must include the date, time, and place of the hearing. ORS 111.215(1). See Form 2-3.
PRACTICE TIP: The description of the subject of the hearing should be carefully identified in the notice, so that interested persons who fail to appear at the hearing cannot later claim that they were misled. (Attaching a copy of the petition avoids the problem.) In both intestate estates and testate estates, notice must be given to heirs, devisees, and other interested persons (see ORS 113.035(5)–(9)) upon the personal representative’s appointment or upon admission of a will to probate. ORS 113.145, 113.155. Notice of the personal representative’s appointment must be either delivered or mailed to the heirs, devisees, and persons described in ORS 113.035(8)–(9). ORS 113.145. Heirs and devisees will accordingly have actual notice when a will has been admitted and will have adequate opportunity to file a timely contest. Notice to interested persons must be published in a newspaper as described in ORS 113.155. For further discussion of notice, see §5.2-8 and §§7.3-1(a) to 7.3-3(b). The notice to heirs and devisees required by ORS 113.145, as well as a copy of the death certificate, must be mailed or delivered to the Department of Human Services and the Oregon Health Authority within 30 days after the personal representative is appointed in all probates. ORS 113.145(6). Their mailing addresses and telephone numbers are as follows: Oregon Department of Human Services, Estate Administration Unit P.O. Box 14021 Salem, OR 97309-5024 phone: 800-826-5675 Oregon Health Authority 500 Summer St., NE, E-20 Salem, OR 97301-1097 phone: 503-947-2340
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If, before the filing of the final account, the personal representative has actual knowledge that the petition did not include the name and address of any person described in subsection (4), (5), (7), (8), or (9) of ORS 113.035, the personal representative must: (1) “Make reasonable efforts under the circumstances to ascertain each of those names and addresses,” ORS 113.145(5)(a); (2) “Promptly deliver or mail information as described in [ORS 113.145(1)] to each of those persons located after the filing of the petition and before the filing of the final account,” ORS 113.145(5)(b); and (3) “File in the estate proceeding, on or before filing the final account under ORS 116.083, proof of compliance with [ORS 113.145(5)] or a waiver of notice as provided under ORS 111.225,” ORS 113.145(5)(c). The personal representative must mail a copy of the notice of final account to each heir, each devisee, each unpaid creditor whose claim has not been barred, and any other person known by the personal representative to have an interest in the estate being distributed, including the Department of Human Services and the Oregon Health Authority. ORS 116.093.
NOTE: One of the purposes of the probate code is to give actual notice to all persons who might reasonably have an interest in the action taken or to be taken. The idea of notice by publication is preserved in only two situations, discussed in §2.5-3. The personal representative may apply to the court for authority, approval, or instructions on any estate matter, even for actions specifically authorized under the broad powers of ORS 114.305. ORS 114.275. The court, on such notice and hearing as it may prescribe, must then make an appropriate ruling. Although the notice requirements of this statute are completely discretionary with the court, all persons who might be directly interested in the matter must receive notice in order to be bound by the order.
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Any person who has knowledge that a decedent died wholly intestate, without a known heir, and owning property subject to probate in Oregon must give notice to an appointed estate administrator at the Department of State Lands within 48 hours of acquiring such knowledge. If the department is appointed personal representative, the director of the department will appoint an estate administrator to act for the department in administering the estate. ORS 113.238. See ORS 113.235. See Appendix 2B for a table of notice requirements. §2.5-2 Notice to Persons Under Disability Minors and incompetents must be given notice just as persons not under a disability are given notice. ORS 113.035(5)–(8). If a guardian or conservator has been appointed, service should also be made on that guardian or conservator.
PRACTICE TIP: The probate code does not require the appointment of a guardian, conservator, or guardian ad litem to receive notice on behalf of a minor or an incompetent. However, given that the courts are emphasizing due process requirements in connection with notice, prudence dictates that a guardian or conservator be appointed when the rights of an interested person are affected. §2.5-3 Manner of Giving Notice Except when notice by publication is specifically required by statute or court order (see, e.g., ORS 113.045), notice may be given in one or more of the following ways: (1) By mail, ORS 111.215(1)(a); (2) By personal delivery, ORS 111.215(1)(b); or (3) By publication, ORS 111.215(1)(c).
PRACTICE TIP: Notice by publication is permitted only when “the address of any person is not known or cannot be ascertained with reasonable diligence.” ORS 111.215(1)(c). Presumably, however, the court will not allow service by publication in probate matters any more liberally than is allowed in actions under ORCP
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7 D(6)(a). This rule permits service by publication only when an affidavit has been filed showing that service “cannot be made by any method otherwise specified in these rules or other rule or statute.” Except as noted above, the only other instance in which notice by publication is authorized or directed is the “notice to interested persons” announcing the appointment of the personal representative. ORS 113.155. But see §2.5-7. Notice by mail or by personal service may be made either on the person to be notified or on that person’s lawyer if the person “has appeared by attorney or requested that notice be sent to the attorney of the person.” ORS 111.215(1). However, the personal representative’s notice of disallowance of a claim must be given to both the claimant and, if any, the claimant’s lawyer. ORS 115.135(1). §2.5-4 Timing of Notice Unless the court or the probate code specifies a different period for giving notice, the method of giving notice affects the length of time required before the hearing for which the notice must be given. Notices of hearings must be given as follows: (1) If by mail, at least 14 days before the date set for the hearing, ORS 111.215(1)(a); (2) If by personal delivery, at least five days before the date set for the hearing, ORS 111.215(1)(b); or (3) If by publication, once in each of three consecutive weeks, the last publication to be at least 10 days before the date set for the hearing, ORS 111.215(1)(c). Upon a showing of good cause, the court may change the requirements regarding the method or time of giving notice for any hearing. ORS 111.215(2). This provision relates to notices of hearings only. The time period within which to object to an accounting or fee petition is 20 days. ORS 116.093; UTCR 9.060(4).
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§2.5-5 Proof of Notice When the probate code requires that notice be given of a probate matter, proof that notice was given must be made “at or before the hearing and filed in the proceeding.” ORS 111.215(3). Proof of giving notice is made as follows: (1) Proof of notice by mailing or personal delivery must be made in the form required by ORCP 9 C. ORS 111.218(1). ORCP 9 C provides that proof of such service may be made by a “written acknowledgment of service, by affidavit or declaration of the person making service, or by certificate of an attorney.” The proof of service “may be made upon the papers served or as a separate document attached to the papers.” ORCP 9 C. See Form 2-4. (2) Proof of notice by publication must be made in the form required by ORCP 7 F. ORS 111.218(2). ORCP 7 F(2)(b) provides that proof of publication may be made by an affidavit or a declaration of an employee of the newspaper publishing the notice. See Forms 5-12, 5-13, and 5-16. §2.5-6 Waiver of Notice A person who is “neither incompetent nor a minor” may waive notice by filing a signed written waiver in the proceeding or by appearance at the hearing. ORS 111.225. If a guardian, guardian ad litem, or conservator has been appointed for the person, the fiduciary may waive notice in the same manner. ORS 111.225. The written waiver may be signed by the lawyer for the person or the fiduciary. ORS 111.225. See Forms 2-5 and 2-6. §2.5-7 Effect of Failure to Give Notice A series of decisions by the Oregon courts and one by the United States Supreme Court demonstrate the consequences of insufficient notice in the probate context. Upon the filing of the final account and petition for distribution, ORS 116.093(1) requires that the personal representative give notice to each heir, each devisee, each creditor, and any “other person known to the personal representative to have or to claim an interest in the estate 2-23 2012 Revision
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being distributed.” Pursuant to the Oregon Supreme Court’s decision in Matter of DeMary’s Estate, 294 Or 650, 658–659, 661 P2d 931 (1983), if the personal representative fails to give such notice to an interested person, the judgment of final distribution may be rendered void as to that person and may be set aside. The claimant in Matter of DeMary’s Estate had filed a wrongful death action against the decedent’s estate, which action was dismissed without prejudice. On remand, the court of appeals concluded that the personal representative knew that the claimant still had a right against the estate to refile his action. Waybrant v. Bernstein, 75 Or App 550, 554, 706 P2d 1002 (1985). Because no notice had been given to the claimant, the closure order was void as to him. The trial court erred in denying the claimant’s equivalent of a petition to reopen the estate under ORS 116.233. ORS 113.145 requires that notice be given to interested persons upon the appointment of the personal representative. In Lawver v. Beesley, 86 Or App 711, 719–720, 740 P2d 1215 (1987), certain heirs of the decedent were not bound by the decree (now judgment) of final distribution because the personal representative breached the statutory duty to provide notice under ORS 113.145. Neither actual notice nor published notice to interested persons cured the defect. The decree was void as to the omitted heirs. However, in First Interstate Bank of Oregon, N.A. v. Haynes, 87 Or App 700, 743 P2d 1139 (1987), a lower court denied a creditor-bank’s attempt to reopen an estate. Although holding that the bank had a “colorable claim” because the bank was not given notice required under ORS 116.093(1)(c)–(d), which made the lower court’s denial appealable, the court affirmed on a res judicata theory. In doing so, the court noted that ORS 116.213 prohibits actions against the personal representative more than one year after entry of the discharge order. First Interstate Bank of Oregon, N.A., 87 Or App at 703–704. The court acknowledged the propriety of proceeding against the residuary legatees. Next, the United States Supreme Court decided Tulsa Prof’l Collection Services, Inc. v. Pope, 485 US 478, 487–491, 108 S Ct 1340, 99 L Ed2d 565 (1988), in which a probate “nonclaim” statute was declared unconstitutional. The Court held that a known creditor of the 2-24 2012 Revision
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decedent was entitled to actual notice of the time limitation for filing a claim, rather than the statutorily prescribed notice by publication. In response to the decision in Tulsa Prof’l Collection Services, Inc., the 1989 Oregon Legislature revised Oregon’s laws regarding claims against estates. A personal representative now has a duty to take reasonable actions to ascertain claims against an estate and to deliver notice to known claimants in person or by mail. ORS 115.003. The personal representative and the surety for the personal representative are liable (as are interested persons, including creditors and distributees who received assets) to any omitted creditor for the amount that the omitted creditor would have recovered. ORS 115.004(1). Service of a complaint on the lawyer for a closed small estate is not sufficient notice under ORCP 23 C (relation back of amendments to pleadings) when a personal representative was not appointed for a deceased tortfeasor within the statutory period of limitations. In Wheeler v. Williams, 136 Or App 1, 3, 900 P2d 1076 (1995), the original com- plaint named only “Ira O. Williams, deceased,” as the defendant. The court ruled that an amended complaint based on the subsequent appointment of a personal representative could not relate back. Under that rule, the person who must have received notice of the action was the personal representative of the estate. Wheeler, 136 Or App at 6.
COMMENT: It appears that any failure to give notice by mail or such other means (in addition to what is statutorily required) to ensure actual notice will result in an act being void as to the person not notified. The limitation imposed by ORS 116.233 for reopening an estate is now of questionable effect in matters beyond the exception included for claims under ORS 115.004 (recovery for failure to search for and give notice to claimants of the estate). The failure to give notice of the appointment of a personal representative to heirs and devisees under ORS 113.145(1) does not, however, invalidate a court’s decision in a will contest. The court is not deprived of authority to rule on the validity of the will. In re Estate of Eddy, 95 Or App 733, 737, 770 P2d 969 (1989). Will contests are discussed in chapter 15.
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Although declining to address whether an affidavit for service by publication was required to show due diligence under the general probate notice statute (ORS 111.215(1)(c)), the Oregon Supreme Court made this a requirement in a determination-of-heirship proceeding. In Matter of Riddle’s Estate, 288 Or 687, 607 P2d 1370 (1980), a petitioner presented no affidavit of due diligence, and neither the husband of the decedent’s sister (who died after the decedent) nor the sister was ever notified of the proceedings. Matter of Riddle’s Estate, 288 Or at 694–695. The supreme court reversed a court of appeals ruling in favor of the personal representative based on ORS 111.215(1)(c), by holding that due diligence was necessary under former ORS 15.170, which dealt with unknown heirs. Jurisdiction was never obtained over the heirs without notice. Matter of Riddle’s Estate, 288 Or at 694–695. (ORS 15.170 was repealed with the adoption of the Oregon Rules of Civil Procedure, but ORCP 7 D(6) imposes a similar obligation.)
§2.6 HEARINGS §2.6-1 When a Hearing Is Required Although most estates are administered with no hearings, hearings are required in the following situations: (1) In any contested matter, see ORS 113.075; (2) For authority of the personal representative to sell, mortgage, lease, or otherwise dispose of property (real or personal) if certain conditions exist, ORS 114.325(2) (see §§10.8-1(a) to 10.8-1(b)); (3) For a petition for an order of support for the surviving spouse or dependent children, ORS 114.015(4) (see §§6.2-1 to 6.2-4); (4) After a partial distribution, for an order directing distributees to return property, ORS 116.043 (see §11.8-1(b)); and (5) When objections have been filed to a judgment of final distribution, ORS 116.103 (see §§11.7-1 to 11.7-3).
PRACTICE TIP: Some counties may require an ex parte appearance before the judge or probate commissioner to obtain an
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order admitting the will to probate, appointing the personal representative, and fixing the amount of bond, if any. In Multnomah County and most other counties, no hearing is needed for these purposes. If a potential issue exists (e.g., regarding the amount of bond), the matter should be discussed initially with the court staff. Supplementary local rules are found at
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(5) As an officer or agent of a corporation, has refused to allow examination of the corporation’s books and records that the decedent had the right to examine. ORS 114.425(1). If a person cited as provided above fails to appear or to answer questions asked, the court may punish the person for contempt. ORS 114.425(2). §2.6-2(c) Summary Determination of Claims The procedure in a probate court proceeding for the summary determination of a claim disallowed, in whole or in part, by the personal representative is set forth in ORS 115.165: (1) The personal representative must move or plead to the claim as though the claim were a complaint filed in an action; (2) The court hears the matter without a jury, after notice to the claimant and the personal representative; (3) On the hearing, the court determines the claim in a “summary manner” and makes an order allowing or disallowing the claim in whole or in part; and (4) No appeal may be taken from the order of the court made on the summary determination. §2.6-3 Stenographic Record On the motion of a judge or on the request of an interested person, the court may require a court reporter to attend any hearing and make a stenographic record of the proceedings. ORS 111.265. No specific provision is made for an electronic record.
§2.7 ORDERS AND JUDGMENTS §2.7-1 Generally A personal representative must proceed with the administration, settlement, and distribution of the estate without adjudication, order,
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judgment, or direction of the court, except as otherwise provided in the will or the probate code. ORS 114.275. A personal representative or any interested person, however, may apply to the court at any time for authority, approval, or instructions on any matter concerning the administration, settlement, or distribution of the estate. The court then must instruct the personal representative or rule on the matter. ORS 114.275. Although an order or a judgment may not be required, the personal representative may obtain a court order approving the action. Because of the substantial authority given to the personal representative by ORS 114.305, court orders for authorized transactions are neither needed nor worthwhile, except in unusual situations or when the probate code specifically requires them.
COMMENT: Optional orders may be made by the court with or without a hearing as the court may prescribe. ORS 114.275. If the court requires a hearing, ORS 111.215 applies. Notice of the hearing must be mailed or personally delivered to all interested persons within the timeframe set forth in ORS 111.215. See §2.5-4. The broad powers granted to the personal representative by ORS 114.305 may be limited by the will or by court order. Those powers can otherwise be executed by the personal representative as long as the actions are reasonable and for the benefit of all interested persons. ORS 114.305; see ORS 111.005(19) (defining interested person). A personal representative is subject to prudent investor rules (ORS 130.750–130.775). ORS 114.305(6). The probate code expressly authorizes the personal representative to sell, mortgage, or otherwise deal with property without court order unless: (1) The sale is contrary to the will’s provisions; (2) The property is specifically devised and the will does not authorize the sale; or
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(3) The personal representative has been required to file a bond, the sale price of the property to be sold exceeds $5,000, and the bond has not been increased by an amount equal to the cash to be realized by the sale. ORS 114.325.
NOTE: The court may waive the requirement of a bond, but only under certain circumstances. ORS 113.105(4). The lawyer should not attempt to waive the bond under other circumstances, even if the court is willing to do so. Such an unauthorized waiver might invalidate the appointment of the personal representative. No order or confirmation is then required for the sale of real or personal property. Even when a bond is required, orders of sale are unnecessary as long as the bond already posted is sufficient, or the bond is increased to cover the sale proceeds, or the court has previously made other directions concerning the bond amount. ORS 113.105, 113.115. §2.7-2 Required and Permissible Orders or Judgments In a probate proceeding, a court order or judgment is required or may be appropriate in some situations. See Appendix 2C for cir- cumstances in which court orders are necessary. See also Appendix 2D. In the ordinary estate, only three orders or judgments are needed: (1) A limited judgment admitting the will to probate and appointing the personal representative and, unless waived by the will, fixing the amount of the bond, ORS 111.185(1), 111.275(1); (2) A general judgment, approving the final account and fixing compensation of the personal representative, ORS 116.113, 18.005(7); and (3) A supplemental judgment discharging the personal repres- entative, ORS 116.213; ORS 18.005(17). In a probate proceeding, the court “may enter a limited judgment only for the following decisions of the court” (ORS 111.275(1)), and then “only if the court determines that there is no just reason for delay” (ORS 111.275(2)):
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(1) A decision on a petition for appointment or removal of a personal representative; (2) A decision in a will contest filed in the probate proceeding; (3) A decision on an objection to an accounting; (4) A decision on a request made in the proceeding for a declaratory judgment under ORS 111.095; (5) A decision on a request for an award of expenses under ORS 116.183; and (6) “Such decisions of the court as may be specified by rules or orders of the Chief Justice of the Supreme Court under ORS 18.028,” ORS 111.275(1)(f). The judgment document “need not reflect the court’s determination that there is no just reason for delay.” ORS 111.275(2); see Interstate Roofing, Inc. v. Springville Corp., 347 Or 144, 148–156, 218 P3d 113 (2009). §2.7-3 Orders of Probate Commissioner The probate commissioner, rather than a judge, may enter orders on uncontested petitions for: (1) Appointment of a special administrator; (2) Probate of a will; (3) Appointment of a personal representative; and (4) Setting the amount of the fiduciary’s bond. ORS 111.185(1). Unless modified or set aside by a judge within 30 days after entry, the order of a probate commissioner has the same effect as if made by the judge. ORS 111.185(1), (3). §2.7-4 Effect of Violation of Orders §2.7-4(a) Contempt of Court Because the probate court has the general legal and equitable powers of a circuit court (ORS 111.095), it has the power to punish
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violations of its orders and judgments with contempt. The probate court has the power to enforce its orders and judgments by “an execution or warrant.” ORS 111.205(5). §2.7-4(b) Breach of Fiduciary Duty A personal representative who improperly exercises a power is liable for breach of fiduciary duty to interested persons for resulting damages or loss. The exercise of a power in violation of a court order is a breach of duty. The exercise of a power contrary to a provision in a will may be a breach of duty. ORS 114.395. See chapter 7 for a discussion of the liabilities of the personal representative.
§2.8 PROBATE COSTS; EXPENSES §2.8-1 Publication Costs The probate code requires that the following notices be published once in each of three consecutive weeks: (1) A notice to interested persons on the appointment of the personal representative (ORS 113.155); and (2) A notice of the time and place of a hearing when the person to be notified cannot be ascertained with reasonable diligence (ORS 111.215(1)(c)). The costs of publication are allowed to the personal representative in the settlement of the final account. ORS 116.183(1). See §2.8-4(b). §2.8-2 Appraiser’s Fees The personal representative must file an inventory of estate property showing estimates of the true cash values of estate properties. ORS 113.165. The personal representative may employ an independent appraiser to assist in appraising property “the value of which may be subject to reasonable doubt.” ORS 113.185(1). The need for a professional appraisal presumably will arise only when there are problems of valua- tion for estate tax purposes, for establishing the basis of the property, or for distribution among the various heirs or devisees. Appraisers are 2-32 2012 Revision
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entitled to reasonable fees and expenses to be paid as an expense of administration. ORS 113.185(4); see ORS 116.183. See §2.8-4. §2.8-3 Bond Costs The personal representative may be required to file a bond. ORS 113.105. See §§5.2-6(a) to 5.2-6(d) for discussion of the necessity and amount of the bond. The bond is “for the security and benefit of all interested persons and shall be conditioned upon the personal repre- sentative faithfully performing the duties of the trust.” ORS 113.105(1). The costs of the bond are paid by the estate. See §11.4-3. §2.8-4 Personal Representative’s Compensation and Expenses §2.8-4(a) Personal Representative’s Compensation §2.8-4(a)(1) Amount of Compensation The personal representative is entitled to receive compensation for services as provided in ORS 116.173. The compensation is a commission on the whole estate, as follows: (1) On the property subject to the jurisdiction of the court, including income and realized gains: (a) Seven percent of any sum not exceeding $1,000; (b) Four percent of all above $1,000 and not exceeding $10,000; (c) Three percent of all above $10,000 and not exceeding $50,000; and (d) Two percent of all above $50,000; plus (2) One percent of nonprobate but taxable property, exclusive of life insurance proceeds. ORS 116.173(1). See §§11.6-5(a) to 11.6-5(b). In addition, the court may allow further compensation “as is just and reasonable” for any extraordinary and unusual services not ordinarily required of a personal representative in the discharge of duties. ORS 116.173(2). The probate code does not explain how to determine when services are extraordinary or unusual. See In re Matter of Phillips’ Estate, 23 Or App 363, 370, 542 P2d 928 (1975) (“the trial judge concluded that 2-33 2012 Revision
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the additional fee was justified by the length of the proceeding, by the substantial savings effected for the heirs and by the preservation of the estate due to the personal representative’s necessary activities”). In Brown v. Hackney, 228 Or App 441, 447–449, 208 P3d 988 (2009), the court included the proceeds of a wrongful death action brought by the personal representative in its calculation of the amount of the personal representative’s fees. If the estate has more than one personal representative, the fee is not increased, but must be divided between them as they may agree or as the court may direct. ORS 116.173(1). The “appraised value of the estate, as shown in the inventory, is only prima facie evidence of the value of the estate accounted for and is not conclusive for the purpose of fixing the [personal representative’s] compensation.” In re Feehely’s Estate, 182 Or 246, 187 P2d 156 (1947); Kidney Ass’n of Oregon, Inc. v. Ferguson, 97 Or App 120, 129, 775 P2d 1383 (1989), modified, 100 Or App 523 (1990), rev’d in part on other grounds, 315 Or 135 (1992) (see §2.8-5). When a testator makes special provision in his or her will for the compensation of a personal representative, the personal representative is not entitled to any other compensation for services unless, before appointment, the personal representative signs and files with the clerk of the court a written renunciation of the compensation provided by the will. ORS 116.173(3).
PRACTICE TIP: If the will provides for compensation of the personal representative and the compensation may be less than that provided by statute, the personal representative may consider signing a renunciation of the compensation in the will and filing it with the clerk before his or her appointment. Then, when it is time to determine compensation based on the work actually done, the distributions, and the relative income and estate tax considerations, the personal representative would have flexibility, subject to court determination, to ask for (1) no fee, (2) the statutory fee, or (3) the fee prescribed in the will.
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Approval of extraordinary fees for the personal representative is within the probate court’s discretion and will be disturbed on appeal only for abuse of that discretion. Matter of Phillips’ Estate, 23 Or App 363, 370, 542 P2d 928 (1975). Although recognizing that principle, the Oregon Court of Appeals nevertheless reduced the personal repre- sentative’s extraordinary fee by almost two-thirds in Matter of Plue’s Estate, 63 Or App 677, 684, 666 P2d 835 (1983). In Matter of Plue’s Estate, the lawyer had charged less than the personal representative for the same matter, and the court found nothing in the record to show that the personal representative’s services were more extraordinary or more valuable than those rendered by the lawyer. §2.8-4(a)(2) Court May Deny Compensation The court has the power to deny in whole or in part the personal representative’s request for compensation. ORS 116.123. The court may also surcharge the personal representative for any loss caused by any breach of fiduciary duty. ORS 116.123. In a case in which the personal representative converted certain assets during administration, the trial court concluded that compensation was properly allowed because the personal representative’s actions were based on a “mistaken, if unwarranted belief” and were not done in bad faith. Matter of Steinberg’s Estate, 34 Or App 293, 298, 578 P2d 487 (1978). In Wall v. Malarkey, 252 Or 261, 262–263, 449 P2d 424 (1969), the court reversed a lower court’s denial of compensation to an executor who had “impeded the orderly administration” of the estate because of her conviction that the will she was administering was invalid. The court said that “[b]efore compensation can properly be denied the executrix’s disloyalty must manifest itself in some form of conduct which is detrimental to the administration of the estate in a material way.” Wall, 252 Or at 263. §2.8-4(b) Expenses The personal representative is entitled to recover from the estate “all necessary expenses incurred in the care, management and settlement of the estate,” including reasonable fees of appraisers, lawyers, and other 2-35 2012 Revision
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qualified persons employed by the personal representative. ORS 116.183(1). In addition, a personal representative who defends or prosecutes any proceeding “in good faith and with just cause” is entitled to receive from the estate necessary expenses and disbursements, including reasonable attorney fees, in the proceeding. ORS 116.183(2); In Matter of Unger’s Estate, 54 Or App 713, 716–717, 636 P2d 436 (1981). See §2.8-5 regarding attorney fees. In Matter of Unger’s Estate, 54 Or App at 716–717, the personal representative, who was also the sole beneficiary of the will, defended the will against a claim that the decedent lacked testamentary capacity. Although the appellate court held that the will was invalid because of lack of testamentary capacity, the court stated that “a personal representative, whether the sole beneficiary or not, who defends a will in good faith is entitled to recover expenses and attorney fees from the estate.” Matter of Unger’s Estate, 54 Or App at 716. The fact that the decedent lacked testamentary capacity does not imply bad faith on the part of the personal representative in defending the will. Matter of Unger’s Estate, 54 Or App at 716–717. To deny the personal repre- sentative expenses and fees of a will contest, the trial court must make a specific finding that the will was not defended in good faith. Matter of Unger’s Estate, 54 Or App at 716–717. Upon petition, the probate court may allow a partial award of the personal representative’s expenses before settlement of the final account, including fees of appraisers, lawyers, and other qualified persons. ORS 116.183(1). See §11.6-5(c). In an accounting, the fiduciary must disclose any financial transactions, including reimbursement of expenses, between the fiduciary and his or her family or friends. UTCR 9.170. UTCR 9.160 governs the form of accountings. See chapter 11. §2.8-5 Attorney Fees Authority for the compensation of the attorney for the personal representative is found in ORS 116.183. The statute allows the court to
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make a partial award of attorney fees before settlement of the final account. ORS 116.183(1). See §§11.6-6(a) to 11.6-6(b).
NOTE: The provision allowing the court to make a partial award of fees is permissive only. Few courts will allow interim payments of attorney fees, except perhaps in large, lengthy pro- bates. Pursuant to ORS 116.183, the court may award reasonable attorney fees after considering the following factors: (1) Customary fees in the community for similar services; (2) The time spent by the lawyer; (3) The lawyer’s experience in such matters; (4) The skill displayed by the lawyer; (5) The excellence of the result obtained; (6) Any agreement regarding the fees that may exist between the personal representative and the lawyer; (7) The amount of responsibility assumed by the lawyer considering the total value of the estate; and (8) Other factors that may be relevant.
PRACTICE TIP: Whether by detailed inclusion in an accounting or by separate affidavit, the above information must be presented to the court. Particular emphasis should be given to itemizing the work performed and the time spent. A personal representative “may make a valid contract with an attorney to represent the personal representative in the probate of an estate, but the contract binds only the personal representative and the attorney. The personal representative may look to the estate for reimbursement only for the amount of reasonable fees.” In re Conduct of Coe, 302 Or 553, 562 n 6, 731 P2d 1028 (1987).
COMMENT: Although a lawyer’s contract with the personal representative is listed as a factor, its weight (at least insofar as justifying a higher fee than usual) is presumably minimal.
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In addition to being charged with fees incurred by the lawyer for the personal representative, the estate may also be charged with attorney fees incurred by another party who, at the party’s own expense and not for the party’s sole benefit, successfully brings an action resulting in an increase in the assets of the estate. Schaad v. Lorenz, 69 Or App 16, 26, 688 P2d 1342 (1984) (citing Jones v. Kuhn, 59 Or App 135, 140, 650 P2d 999 (1982)). Any duty from the personal representative to the lawyer for the estate is secondary to the personal representative’s obligation to the estate. In a case in which the personal representative refused to use estate funds to appeal the probate court’s reduction of requested attorney fees, and no bad faith or fraud existed, the personal representative had no duty to the lawyer in either contract or tort to pursue the appeal. Smith v. U.S. Nat. Bank, 47 Or App 967, 976–977, 615 P2d 1119 (1980). In determining the amount of appropriate attorney fees, a probate court may consider whether the lawyer for the personal representative breached a fiduciary duty owed to the client. In Kidney Ass’n of Oregon, Inc. v. Ferguson, 315 Or 135, 144, 843 P2d 442 (1992), the sole beneficiary of an estate objected to the final accounting, contending that the lawyer should receive no fees from the estate because the lawyer committed an ethical violation by simultaneously representing the sole beneficiary and the personal representative in settling a claim against the estate. The supreme court said that a breach of fiduciary duty may be the result of a lawyer’s simultaneously representing two or more clients with a conflict of interest, the consequence of which could be a reduction of a fee or outright denial of a fee...... But, it is the breach of fiduciary duty owed to a client, rather than a violation of a disciplinary rule, that may result in a reduction or loss of a fee. Kidney Ass’n of Oregon, Inc., 315 Or at 144. However, in determining whether a lawyer breached a fiduciary duty to a client, “the court may consider the standard of conduct prescribed by the disciplinary rules.” Kidney Ass’n of Oregon, Inc., 315 Or at 144.
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In McNeely v. Hiatt, 138 Or App 434, 443, 909 P2d 191, adhered to on recons., 142 Or App 522 (1996), the plaintiffs, who successfully contested a will, were not equitably entitled to recover attorney fees, when no facts, statute, or rule was alleged as a basis for the award under ORCP 68 C(2)(a). On reconsideration, the court adhered to the denial of attorney fees, noting that courts may award attorney fees in the absence of a statute or contract when a beneficiary successfully brings suit to benefit an estate or a trust as a whole. In this case, only the plaintiffs benefited, and the court held that an award of fees would have been inequitable. When a lawyer continues to act for a former personal repre- sentative or trustee in a claim for attorney fees against the estate after agreeing to represent the successor fiduciary, a current conflict of interest exists. Conduct of Morris, 326 Or 493, 503–504, 953 P2d 387 (1998). See Roberts v. Fearey, 162 Or App 546, 555, 986 P2d 690 (1999).
PRACTICE TIP: An unreported case from Polk County (No. 92P4037) provides interesting and practical judicial commentary on the reasonable exercise of professional judgment in connection with probate fees. The personal representative’s lawyers requested fees of $165,427. The court determined that a fee of only $50,000 was appropriate, and found that the lawyer’s judgment concerning the expenditure of resources was “sorely lacking.” See the discussion in Steven W. Moulton, Collecting Fees in Probate Matters: Remember to Be Reasonable, OSB EST PLAN & ADMIN SEC NEWSLTR Vol XII, No 4 (OSB 1995), at 4–6. UTCR 9.060(2) provides that attorney fees “requested for a decedent’s estate must be supported by affidavit in compliance with ORS 116.183.” See §11.6-6(a). In addition, “[a]ll . . . attorney fee applications and accountings in decedent’s estates . . . must be served in the manner and on the persons described in ORS 116.093.” UTCR 9.060(4). See also the supplementary local rules (SLRs) adopted by Oregon counties in accordance with UTCR chapter 9, available at
CAVEAT: Lawyers must be aware of the rules and procedures that the probate judges follow in reviewing and approving requests
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for fees. For example, in Multnomah County, requests for attorney fees “must be accompanied by a statement for attorney fees, filed in the form required by UTCR 5.080, showing the number of hours expended, the hourly rate charged, and a designation of title for each person performing work.” SLR 9.095 (Multnomah). In Crook and Jefferson counties, the lawyer for the personal representative must “maintain time records for twelve (12) months and, upon request of the Court, shall furnish a copy of that record to the Court to assist the Court in fixing a reasonable attorney’s fee as provided by ORS 116.183.” SLR 9.061 (Crook/Jefferson). “[E]state lawyers who take attorney fees from an estate without obtaining prior court approval engage in unethical conduct.” In re Altstatt, 321 Or 324, 333, 897 P2d 1164 (1995). “Any such attorney fee that is collected without approval is unlawful and, hence, an ‘illegal fee,’” receipt of which is unethical conduct under ORPC 1.5(a). In re Altstatt, 321 Or at 333. In In re Conduct of Weidner, 320 Or 336, 340– 341, 883 P2d 1293 (1994), the court also found that a lawyer, while serving as personal representative, improperly took fees for predeath services when no formal claim had been filed against the estate. In affirming a probate court’s decision in Estate of Grove v. Selken, 109 Or App 668, 677, 820 P2d 895 (1991), the court disallowed payment of legal fees to the estate’s lawyer for certain work “more properly classified as administrative work of the personal representative.”
COMMENT: The lawyer in the Estate of Grove case also served as the personal representative. In Kidney Ass’n of Oregon, Inc. v. Ferguson, 97 Or App 120, 127–128, 775 P2d 1383 (1989), modified, 100 Or App 523 (1990), rev’d in part on other grounds, 315 Or App 135 (1992), the court denied compensation to a lawyer who performed nonlegal work on behalf of the personal repre- sentative. The Oregon Supreme Court ultimately approved the probate court’s award of attorney fees in that case. Kidney Ass’n of Oregon, Inc. v. Ferguson, 315 Or 135, 148, 843 P2d 442 (1992). Thus, the two decisions seem to be inconsistent.
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§2.9 FINALITY OF ORDERS AND JUDGMENTS; APPEALS §2.9-1 Generally Determinations, orders, and judgments of the probate court have the same finality as those of a court of record with general jurisdiction. ORS 111.095. No distinction in this regard is made for the eastern Oregon counties of Gilliam, Grant, Harney, Malheur, Sherman, and Wheeler, where the county court sits as the probate court (ORS 111.055), except that appeals from county courts are treated differently. Appeals from a county court sitting in probate are to the circuit court and then to the court of appeals; they are handled in the manner provided by ORS 5.120 for appeals in judicial proceedings in county courts generally. ORS 111.105(3). Appeals from a circuit court sitting in probate are on the record made in the probate court and are to the court of appeals. ORS 111.105(2). Although the probate court can continue to administer an estate while an appeal is pending, the actions it takes cannot substantively affect the subject of the appeal. In Matter of Trust of Crockett, 145 Or App 151, 155–156, 929 P2d 314 (1996), the trial court entered an order approving the sale of estate real property. Because a prior offer to purchase the property was the subject of an appeal, the trial court lacked jurisdiction to enter the second order. §2.9-2 Finality of Orders of Probate Commissioner A probate commissioner may make an order on certain uncontested petitions as described in §2.2-3(c)(3). The order is subject to being modified or set aside by the judge within 30 days after entry of the order. ORS 111.185(1). If the probate commissioner’s order is not set aside or modified by the judge, the order has the same effect as if made by the judge. ORS 111.185(3).
PRACTICE TIP: Because ORS 111.185(1) allows a 30-day period for the judge to modify or set aside a probate com- missioner’s order, it seems that any interested person who is aggrieved by the order should have the right during that 30-day
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period to file written objections to the order, and to petition the judge to modify it or to set it aside. See ORS 111.235. “Any matter presented to the probate commissioner may be referred by the probate commissioner to the judge.” ORS 111.185(2). §2.9-3 Finality of Order Admitting Will to Probate A will is proved and admitted to probate “in common form” when it is uncontested. See Matter of Ross’ Estate, 25 Or App 191, 196–198, 548 P2d 1001 (1976). Normally, this is done ex parte (by submission or appearance) and by the use of an affidavit of the attesting witnesses. ORS 113.055(1). Within the time set forth in ORS 113.075(3), any interested person may contest the probate of the will or its validity. ORS 113.075(1). If a contest is filed, the will must be proved “in solemn form,” which means that the facts of the will’s validity must be proved by testimony and, generally, in the same manner as in an action tried without a jury. ORS 113.055(4); see Matter of Ross’s Estate, 25 Or App at 196–198. Will contests are discussed in chapter 15. Although the 1979 Oregon Legislature amended ORS 111.105 and 111.205 to eliminate procedural differences between legal and equitable remedies, appellate review in will contests continues to be de novo. Sanders v. U.S. Nat. Bank, 71 Or App 674, 681–682, 694 P2d 548 (1985). Dictum to the contrary contained in a footnote in Matter of Summers’ Estate, 49 Or App 5, 8 n 3, 618 P2d 1287 (1980), is incorrect. Sanders, 71 Or App at 677–782. See §15.2-1(f). Although a separate contest proceeding normally follows an initial ex parte “common form” hearing, a consolidation of all issues is permissible when a party seeks to have a later will admitted after the admission of an earlier will. The bifurcation of issues should be avoided for purposes of judicial economy and convenience to the parties. Matter of Ross’s Estate, 25 Or App at 197–198. A personal representative may move for the original admission of a will in “solemn form” after giving proper notice. If potential contestants have notice and an opportunity to be heard, ORS 113.075 gives them no
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right in a contest proceeding to litigate issues already determined in the prior hearing. Matter of Summers’ Estate, 49 Or App at 8–9. In Matter of Summers’ Estate, 49 Or App at 8, the court also noted that ORS 113.055(4) was amended in 1979 to provide that “[i]n the event of contest of the will or of probate thereof in solemn form, proof of any facts shall be made in the same manner as in an action tried without a jury.” §2.9-4 Finality of Summary Determination of Claim If a disallowed claim is heard by the probate court in a summary- determination procedure under ORS 115.145–115.175, the order of that court is final and no appeal may be taken. ORS 115.165(2)–(3). Except for the rule that juries are not permitted when the summary-determination alternative is used, the significant difference between a summary determination and a separate action, under ORS 115.145(1)(b), is the absence of the right to appeal from the summary determination. If either party desires to retain appeal rights, the claimant must commence a separate action against the personal representative, on the claimant’s own initiative (ORS 115.145(1)(b)) or at the insistence of the personal representative. ORS 115.155. §2.9-5 Finality of Judgment of Distribution The judgment of final distribution is “a conclusive determination of the persons who are the successors in interest to the estate and of the extent and character of their interest therein,” subject only to the right of appeal (see ORS 111.105) and the power of the court to vacate the judgment. ORS 116.113(4). See Lothstein v. Fitzpatrick, 171 Or 648, 657–658, 138 P2d 919 (1943). See also ORCP 71. For a discussion of void judgments of distribution and cases on the effect of failure to give proper notice, see §2.5-7. To the extent that the final account is approved, the personal representative and surety (if any), subject to the right of appeal and the court’s power to vacate, are relieved of liability for administration. ORS 116.123.
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An appeal from a proceeding in the probate court is in the same manner provided by law for an appeal from the circuit court. ORS 111.105(2). The absence of a judgment of final distribution (or other judgment that is appealable under ORS 19.205) deprives the appellate court of jurisdiction. “An order entered in a probate proceeding is not appealable if it fails to settle the controversy completely and finally.” Springer v. Gollyhorn, 146 Or App 389, 393, 934 P2d 501 (1997). In the Springer case, the entry of a money judgment against a personal representative in favor of an heir did not finally settle the rights and liabilities of parties with an interest in the estate. The judgment had no more effect than an interim order, and the court dismissed the personal representative’s appeal. The 2003 Legislature amended ORS 116.113 to clarify that a court’s determination of the final distribution is a general judgment, replacing older language labeling it as a decree. A general judgment can be challenged on appeal. ORS 18.005(7), 19.205(1). The legislature did not amend the language concerning the status of orders of partial distribution under ORS 116.013. However, ORS 18.082(2) provides that general judgments incorporate earlier written decisions of the court that were not considered judgments. §2.9-6 Finality of Judgment Discharging Personal Representative After the filing of receipts or other proof of distribution, the court enters a supplemental judgment of discharge. ORS 116.213. Except as provided in ORS 115.004 (see §2.5-7), the discharge releases the personal representative from further duties and bars any action against the personal representative and surety. However, within one year after entry of the judgment of discharge, the court may in its discretion permit an action to be brought if the order was taken through fraud or misrepresentation by the personal representative or surety or through the mistake, surprise, or excusable neglect of the claimant. ORS 116.213.
COMMENT: The lawyer should carefully examine the one- year bar after considering the cases cited in §2.5-7.
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Even after entry of the order of discharge, the court may order the estate to be reopened “if other property is discovered, if any necessary act remains unperformed or for any other proper cause.” ORS 116.233. The court may order the reopening of an estate only after petition of an interested person and with such notice as the court may prescribe. ORS 116.233. The 2003 Legislature clarified that a court’s decision discharging the personal representative is a supplemental judgment to the general judgment of the final distribution (see §2.9-6), rather than an order. ORS 116.213. A supplemental judgment is “a judgment that may be rendered after a general judgment pursuant to a legal authority.” ORS 18.005(17). Supplemental judgments can also be challenged on appeal, as provided by ORS 19.205(1). §2.9-7 Effect of Order Reopening Estate If an estate is reopened, a claim already adjudicated or barred may not be asserted in the reopened administration. ORS 116.233. See §§11.10-1 to 11.10-4 regarding reopening an estate. §2.9-8 Recovery of Escheated Property Within 10 years after the death of a decedent whose estate escheated in whole or in part to the state, or within eight years after the entry of a judgment or order escheating property of a decedent to the state, a claim may be made for the property escheated, or for the proceeds of it, by a person who at the time of the escheat had no actual knowledge of the escheat or who at the time was unable to prove entitlement to the escheated property. ORS 116.253(1). The claim must be filed with the Director of the Department of State Lands. The claim is considered a contested case as provided in ORS 183.310. ORS 116.253(2). The petition must include a declaration under penalty of perjury in the form required by ORCP 1 E and must include the information set forth in ORS 116.253(2). In Hitcheva v. Div. of State Lands, 31 Or App 839, 844, 572 P2d 625 (1977), the decedent’s estate escheated to the state because of an Oregon statute that prevented an alien heir from inheriting property in
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Oregon. When the statute was subsequently ruled unconstitutional, the court reopened the estate on the petition of the alien heir. However, the court denied the heir’s claim for recovery because she had participated in the initial proceedings and “had knowledge” of the escheat. Hitcheva, 31 Or App at 844. §2.9-9 Judgments and Orders Some confusion exists regarding ORS 111.275 and limited judgments. ORS 111.275 provides that a probate court may enter a limited judgment only for the following decisions of the court and then only if there is no just reason for delay: (1) A decision on a petition for appointment or removal of a personal representative; (2) A decision in a will contest; (3) A decision on an objection to an accounting; (4) A decision on a request made for a declaratory judgment; (5) A decision on a request for an award of expenses; and (6) Such decision as may be specified by rules or orders of the Chief Justice of the Oregon Supreme Court.
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Appendix 2A Table of Situations Requiring Petitions
Situation ORS Citation Any contested question, request for judicial advice, 111.205, or application for court order authorizing doubtful 114.275 action Appointment of special administrator 113.005 Appointment of personal representative 113.035 Probate of will 113.035 Establishing foreign will 113.065 Increase or reduction of personal representative’s 113.115 bond (other than on court’s own motion) Remove ineligible personal representative 113.195(4) Support for surviving spouse or dependent children 114.015(1), 114.025(1), 114.035 Setting aside whole estate 114.085 Requiring testimony 114.425 Sale, mortgage, lease, or disposal of property when 114.325(2) (1) sale is in contravention of will, (2) property is specifically devised and will does not authorize its sale, or (3) bond has been required and is inadequate Personal representative fails or declines to sell, 114.335 mortgage, or lease property when cash needed Discovery of concealed property, 114.425 information
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Situation ORS Citation Creditor petitions for order directing 115.185 personal representative to pay claim allowed or established Partial distribution 116.013 Return of property partially distributed 116.043 Final distribution 116.083(3)(b) Dispensing with vouchers 116.083(2)(d) Distribution to foreign personal 116.163 representative Partial award of personal representative’s expenses, 116.183(1) including fees Personal representative unable to 116.203 distribute property to distributees Compensation of personal representative 116.173 Recovery of escheated property 116.253 Apportionment of estate and inheritance taxes 116.323 Reopening of estate 116.233 Administration of estate of absentee 117.005
COMMENT: See §2.4-4.
CAVEAT: This table is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this table.
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Appendix 2B Table of Notice Requirements
By and to How When ORS Whom Given Given Given Citation Notices by Personal Representative If all heirs and devisees Delivery On appoint- 113.045 cannot be identified or or mail ment of found, notice to estate personal administrator appointed by representative Director of Department of or any time State Lands under ORS after appoint- 113.235 ment if it appears that any heir or devisee of decedent cannot be identified or found Notice to court of felony Delivery On conviction 113.092 conviction of person or mail nominated as personal representative Notice to heirs and Delivery Within 30 113.145 devisees or mail days after appointment Notice to interested Publication On 113.155 persons appointment
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By and to How When ORS Whom Given Given Given Citation Notice of hearing on Various Before hearing 113.025, venue determination, to methods 111.215 personal representative in other proceedings, to probate court of other county, and to each person who petitions for appointment of the personal representative Petition for authority to Various Before hearing 114.325(2), sell, mortgage, lease, or methods 111.215 otherwise dispose of property if (1) sale is contrary to will, (2) property is specifically devised and will does not authorize sale, or (3) required bond of personal representative is inadequate Notice to known claimants Delivery Within 30 115.003(2) or mail days after expiration of three-month or extended period after appointment Notice to claimant of Delivery Within 60 115.135(1) disallowance of claim or mail days after claim is presented
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By and to How When ORS Whom Given Given Given Citation Notice to claimant Delivery Within 30 115.155 rejecting summary or mail days after determination of claim request for summary determination Petition or other matter on Various If by mail, at 111.215, which court order or methods least 14 days 114.275 judgment is sought; notice before given to each person hearing; if by interested delivery, at least 5 days before hearing; or if by publication when address is unknown, publication once each week for 3 consecutive weeks, with last notice at least 10 days before hearing Petition for judgment of As court As court 116.013 partial distribution; notice prescribes prescribes given as court prescribes Notice of hearing for Delivery Before hearing 116.043, return of property partially or mail 111.215 distributed; notice given to all persons interested
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By and to How When ORS Whom Given Given Given Citation Notice of time for Delivery At least 20 116.093, objections to final account or mail days before UTCR and petition for date fixed in 9.060(4) distribution; notice given notice to each heir, devisee, unpaid creditor whose claim is not barred, and interested person Petition for partial award Per court Per court 116.183(1), of personal order order 116.093, representative’s expenses, UTCR including fees 9.060(4) Notices by Others By successor personal Publication On 113.225 representative, notice to appointment interested persons By any interested person, Delivery When 113.087(2) notice of any proceeding or mail proceeding instituted instituted By surviving spouse, As Within 90 114.600, claim for elective share; described months after 114.610 manner of making election in ORS decedent’s and notice as described in 114.610 death ORS 114.610
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By and to How When ORS Whom Given Given Given Citation By surviving spouse or Delivery 14 days before 114.015, dependent child, claim for or mail hearing 111.215 support order; notice to personal representative and to all persons whose distributive shares would be affected By creditor, notice to Delivery Within 30 115.145(1)(a) personal representative of or mail days after request for summary notice of determination of disallowance disallowed claim By court, notice to Delivery 14 days before 115.165(2), claimant and personal or mail hearing 111.215 representative of hearing for summary determination of claim By any interested person, As court As court 116.233 petition to reopen estate prescribes prescribes By any interested person, Various Before 111.215, petition on which court methods hearing, 114.275 order is sought; notice various given to each person timelines interested depending on method of notice
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By and to How When ORS Whom Given Given Given Citation By court clerk, notice of Mail and Before hearing 117.015 hearing on petition for delivery; date set by administration of estate of publication clerk, not less absentee; notice must be or other than 30 days given to absentee, means by after filing of devisees, and heirs court order petition
COMMENT: See §§2.5-1 to 2.5-4.
CAVEAT: This table is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this table.
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Appendix 2C Table of Judgments and Orders in Probate Court
NOTE: This table was compiled by Philip N. Jones, Duffy Kekel LLP.
Court Action Probate Estates
Decision on a petition for appointment of Limited judgment. personal representative. ORS 111.275(1)(a). See Comments (1)– (3). Usually also admits will to probate.
Admitting will to probate. Limited judgment, if it also appoints a personal representative. ORS 111.275(1). See Comments (1)– (3).
Decision on a petition for removal of Limited judgment, whether granting or personal representative. denying removal. ORS 111.275(1)(a). See Comments (1)–(2).
Decision in a will contest. Limited judgment. ORS 111.275(1)(b). See Comments (1)–(2).
Declaratory-judgment decisions. Limited judgment. ORS 111.275(1)(d). See Comments (1)–(2).
Decisions awarding fees and/or expenses Limited judgment. ORS 111.275(1). See (see below for final accountings). Comments (1)–(2).
Decision approving an interim Order. accounting without objection and without awarding fees or expenses.
Decision on interim accounting after Limited judgment. ORS 111.275(1)(c), objection, or awarding fees or expenses. (e). See Comments (1)–(2).
Decision on petition for final accounting, General judgment approving final approving distribution, and awarding fees account and approving final and expenses, or after an objection. distribution. ORS 111.275(1) (see Comments (1)– (2)); ORS 116.113; ORS 18.005(7).
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Court Action Probate Estates
Decision on petition for final accounting Order approving final account and and approving distribution without general judgment of final distribution. objection, but not awarding fees or ORS 116.113; ORS 18.005(7). expenses.
Discharging fiduciary after general Supplemental judgment. judgment on final account. ORS 116.213; ORS 18.005(17).
Additional decisions after entry of Supplemental judgment. general judgment. ORS 18.005(17).
COMMENTS: See §2.7-2. (1) ORS 111.275(2) requires the court to determine “that there is no just reason for delay” before entering a limited judgment under ORS 111.275(1). However, the limited-judgment document need not reflect that determination. ORS 111.275(2); see Interstate Roofing, Inc. v. Springville Corp., 347 Or 144, 148–156, 218 P3d 113 (2009). The safest practice would be to include that representation in the petition and then to include that determination in the limited judgment. It is also not necessary to use the word “adjudged” in a limited judgment. Interstate Roofing, Inc., 347 Or at 156–164. (2) ORS 111.275(1) provides that the court “may” enter a limited judgment in the specified situations. Most courts now require the use of a limited judgment, even though the use of an order appears to be permissive under the statute. An order would be appropriate in these situations if there is a reason for delaying entry of an appealable judg- ment, such as when a proceeding is close to being terminated and a general judgment can be used to combine all the rulings of the court. (3) The use of the term limited judgment in ORS 111.275 may be confusing to financial institutions and others dealing with a fiduciary operating pursuant to an appointment under a limited judgment. To clarify that the fiduciary has full powers to act as fiduciary, it is sug- gested that both the caption and the body of the limited judgment reflect those full powers. For example, the document appointing a personal
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representative might be labeled as a “limited judgment admitting will to probate and appointing personal representative with full powers.” (4) The provisions summarized in Comments (1)–(3) were enacted by HB 2359 (2005 Or Laws ch 568) and codified as part of ORS chapters 111 (general provisions), 116 (probate estates), and 125 (pro- tective proceedings). Additional changes were made by the 2009 Legislature. See 2009 Or Laws ch 50. (5) ORS 111.205(4) states that the probate court operates through orders and judgments. ORS 111.275(1) provides that limited judgments may be used only in certain enumerated situations. For estates, ORS 116.113 states that a general judgment must be used to direct the distribution of assets. Accordingly, the above table indicates that an order should be used in all situations in which the statute is silent as to the type of document to employ. For the same reason, court decisions should be in the form of orders in situations not described in the above table. (6) For the definitions of general judgment and limited judgment, see ORS 18.005. A general judgment is a judgment that disposes of all the remaining issues (requests for relief) that have not previously been decided by a limited judgment. ORS 18.005(7). How- ever, a proceeding might result in interim rulings on various issues, and those interim rulings will be entered as limited judgments if they dispose of one or more issues (one or more requests for relief), but less than all the issues. ORS 18.005(13). They will be entered as orders if they do not dispose of a request for relief. ORS 18.005(13). A limited judgment may not be used to dispose of a “portion of a claim . . . ; rather, a limited judgment must dispose of a whole claim or of all claims against a party.” Steele v. Mayoral, 231 Or App 603, 611, 220 P3d 761 (2009). A supplemental judgment may be entered after the entry of a general judgment. ORS 18.005(17). A supplemental judgment usually deals with the discharge of the fiduciary and other matters specifically authorized by statute in probate, conservatorship, and guardianship pro- ceedings. See ORS 116.213 (discharge of personal representative). Limited judgments, general judgments, and supplemental judg- ments are appealable, assuming that the appealing party preserved the
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right to appeal by timely objecting to the entry of the judgment and by filing a notice of appeal within the applicable time period. ORS 19.205. The time period for appeal is generally 30 days from entry of the judgment. ORS 19.255. (7) In trust proceedings, a general judgment is usually entered at the conclusion of the proceeding. However, a proceeding might result in interim rulings on various issues, which are discussed above. In those situations, ORS 111.275 (which governs probates) does not apply, and ORS 18.005(7)(a) and ORS 18.005(13)(d) do apply. That latter statute authorizes limited judgments only when a legal authority specifically authorizes the use of a limited judgment. As a result, limited judgments are available to a lesser degree in trust matters than in probates, and orders should be used for most interim rulings in trust proceedings. (8) In wrongful death probates, an order should be used to approve a settlement and/or an apportionment of the proceeds of the wrongful death action pursuant to ORS 30.040 and 30.050. After the order is entered and the proceeds distributed, the lawyer must file receipts with the court and request a general judgment incorporating the prior order(s), discharging the personal representative, exonerating the bond (if any), and closing the estate. See ORS 116.083–116.133.
CAVEAT: The above comments only summarize the law. The lawyer must review the text of the statutes regarding the application of the law to particular situations. Statutes not cited here may also be relevant.
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Appendix 2D Table of Potential Probate Situations
ORS Citation Situation
Opening Estate
Order appointing special administrator (if uncontested, 111.185(1), may be made by probate commissioner) 113.005
Limited judgment admitting will to probate (may be 111.185(1), made by probate commissioner) 111.225, 113.125(1)
Limited judgment appointing personal representative 111.185(1), and setting bond (may be made by probate 111.275, commissioner) 113.105, 113.085
Requiring personal administrator to give bond even 113.105(1) though waived by will
Increasing or reducing amount of personal 113.115 representative’s bond
Order establishing (or transferring) venue 113.025
Provisions for Spouse, Children
Order support of spouse, dependent children 114.015, 114.085
Order temporary support of spouse, dependent 114.035 children
Order modifying or terminating support order 114.045
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ORS Citation Situation
Granting, reducing, or denying, spouse’s elective 114.725 share (if decedent and surviving spouse were living apart)
Dealing with Property
Sale of property, when court order is required to do so 114.325(2)
Limiting powers of personal representative 114.305
Requiring personal representative to raise cash 114.335
Claims
Requiring payment of allowed claim to creditor 115.185
Inheritance Tax
Apportionment of estate and inheritance taxes 116.323
Compromise of inheritance tax claim 118.350
Accountings
Annual, extending time for 116.083(1)(a)
Requiring at other times 116.083(1)(d)
Waiver of vouchers accompanying account 116.083(2)(d)
Time for hearing objections filed to final account 116.103
General judgment approving final account 116.113, 111.275, 18.005
Setting apart whole estate for support—summary 114.085 closing
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ORS Citation Situation
Partial distribution 116.013
Return of property after partial distribution 116.043
Claim unliquidated at time of distribution 115.085(3)
General judgment of final distribution 116.113, 111.275, 18.005
Abatement of certain specifically devised property 116.133(5)
Denying payment of interest to general pecuniary 116.143(2) devisee in certain cases
Distribution to foreign personal representative 116.163
Escheat 116.193
Disposition of unclaimed assets 116.203
Supplemental judgment of discharge of personal 116.213 representative
Reopening estate 116.233
Miscellaneous
Fix compensation of personal representative 116.173
Removal of personal representative 113.195
Limited judgment appointing successor personal 113.215, representative 111.275
Surcharging or denying compensation to personal 116.123 representative
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ORS Citation Situation
Appointing appraiser 113.185(2)
Changing method or time of notice of hearing 111.215(2)
Discovery of property, writings, or information 114.425
Transferring jurisdiction from county court to circuit 111.115 court
Death of absentee 117.035
COMMENT: See §2.7-2.
CAVEAT: This table is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this table.
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Appendix 2E Table of Time Limitations
Action Required Time Limitation ORS Citation
Present claims before Within four months after 115.005(2)– being barred first publication of notice (4) to interested persons, or 30 days after mailing or delivery of required notice (whichever is later)
Personal representative Within 60 days after claim 115.135(1) gives notice of claim presented disallowance
Personal representative At least 30 days before 115.135(3) rescinds previous filing of final account allowance of claim
Claimant files separate Within 30 days after date 115.145(1) action or files request for of mailing or delivery of summary determination notice of claim’s of disallowed claim disallowance
Personal representative Within 30 days after 115.155 rejects summary service of claimant’s determination of claim, request for summary demands separate action determination
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Action Required Time Limitation ORS Citation
Claimant must file Within 60 days after 115.155 separate action on claim receipt of notice that personal representative rejects request for summary determination
Closing of estate After expiration of four 114.085 summarily when entire months after first net estate set aside for publication of notice to support interested persons
File appeal in tax court to Within 90 days of service 118.171, inheritance tax by mail of order 305.560, determination 305.280
Give notice of hearing If by personal delivery, at 111.215(1), least five days before (2) hearing; if by mail, at least 14 days before hearing; or if by publication, publication once each week for three consecutive weeks, with last notice at least 10 days before hearing (however, the court may change any of these time requirements)
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Action Required Time Limitation ORS Citation
File objections to a On or before date set for 111.235 petition already filed hearing
Modify or set aside order Within 30 days after entry 111.185(1) of probate commissioner of order
Require testimony of Within 30 days after order 113.055(2) witness attesting to will, admitting will is made file petition for
Personal representative Within 30 days after 113.145(4) files affidavit of giving appointment notice to heirs, devisees
Personal representative Within 60 days after 113.165 files inventory appointment, unless court grants longer time
Surviving spouse elects Within nine months after 114.610, to receive elective share death of spouse 114.600
Contest will Within four months after 113.075(3) date of delivery or mailing of information to devisees and heirs, or within four months after date of first publication of notice to interested persons, whichever is later
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Action Required Time Limitation ORS Citation
File accountings Within 60 days after 116.083 anniversary date of appointment, unless court orders otherwise; within 30 days after removal or resignation of personal representative; when estate is ready for distribution; at such other times as ordered by the court
Mail notice of time fixed At least 20 days before 116.093(1) for filing objections to date fixed in notice final account and petition for distribution
File objections to final Within the time fixed in 116.103 account and petition for notice distribution
Action against personal Within one year after entry 116.213 representative who has of judgment of discharge been discharged (by permission of probate court, if judgment was taken through either (1) fraud or misrepresentation of personal representative or (2) mistake or neglect of claimant
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Action Required Time Limitation ORS Citation
Claim for return of Within 10 years after the 116.253(1) escheated property death of a decedent whose estate escheated to the state, or within eight years after entry of an order or judgment of escheat
Delivery of personalty of No sooner than three 116.263 nonresident decedent to months after death of foreign personal nonresident decedent representative
Absentee’s right to Within five years after 117.075(2) recover distributed distribution property or proceeds from it
COMMENT: This table lists various statutory time limitations and deadlines that must be observed under the probate code, as discussed in pertinent chapters of this publication. The code authorizes the court to extend or vary the stated time period in only some cases.
CAVEAT: This table is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this table.
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Form 2-1 Order Transferring Venue
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. _____ ) ______, ) ORDER TRANSFERRING ) VENUE Deceased. )
On the petition of ______for determination of venue, the Court finds:
1. On ______, 20___, ______filed a petition in the probate court of ______County for the appointment of ______as personal representative of the estate of ______, deceased, and on ______, 20___, the probate court appointed ______as the personal representative.
2. On ______, 20___, ______filed a petition in the probate court of ______County for the appointment of ______as personal representative of the estate of the same decedent and that court, on ______, 20___, appointed ______as the personal representative.
3. After learning that proceedings for the appointment of a personal representative for the estate of the same decedent had been commenced in more than one county, ______petitioned this Court for a determination of venue pursuant to ORS 113.025 and caused due notice to be served on each person interested in the subject of the petition.
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4. The transfer of administration of this estate to ______County is in the best interest of the above-entitled estate. IT IS THEREFORE ORDERED that:
5. All proceedings in ______County concerning the administration of the estate of the above-named decedent are hereby stayed and forever terminated.
6. The clerk of this Court will transmit to the clerk of the probate court of ______County a transcript of the proceedings herein, together with all original papers filed in this proceeding, including this order. DATED: ______, 20___.
/s/______[judge’s name] Judge
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
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LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §§2.3-4(a) to 2.3-4(b). See UTCR 2.010 and UTCR 9.030 for the form of documents, including requirements regard- ing document title, spacing, and format. NOTE: The last page of every order in the probate court must include the “name, address, telephone number, fax number, e-mail address, and bar number of the attorney of record.” UTCR 9.030(1). The last page of every order must also include the name, address, and telephone number of the personal representative. UTCR 9.030(2). See also UTCR 2.010(7), (12).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 2-2 Order Establishing Venue Where First Commenced
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. _____ ) ______, ) ORDER ESTABLISHING ) VENUE WHERE FIRST Deceased. ) COMMENCED
On the petition of ______for determination of venue, the Court finds:
1. On ______, 20___, ______filed a petition in this court for the appointment of ______as personal representative of the above-entitled estate, and on ______, 20___, this Court appointed ______as personal representative.
2. On ______, 20___, ______filed a petition in probate court of ______County for the appointment of ______as personal representative for the estate of the same decedent and that court, on ______, 20___, appointed ______as the personal representative.
3. After learning that proceedings for appointment of a personal representative for the estate of the same decedent had been commenced in more than one county, ______petitioned this Court for a determination of venue pursuant to ORS 113.025 and caused due notice to be served on each person interested in the subject of that petition.
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4. The administration of the estate of the above-named decedent in this county is for the best interest of the estate.
IT IS THEREFORE ORDERED that:
5. (a) All proceedings in ______County concerning administration of the estate of the above-named decedent are forever stayed; and (b) The clerk of this Court will transmit to the clerk of the probate court of ______County a certified copy of this order. DATED: ______, 20___.
/s/______[judge’s name] Judge
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
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LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §§2.3-4(a) to 2.3-4(c). See UTCR 2.010 and UTCR 9.030 for the form of documents, including requirements regarding document title, spacing, and format.
NOTE: The last page of every order in the probate court must include the “name, address, telephone number, fax number, e-mail address, and bar number of the attorney of record.” UTCR 9.030(1). The last page of every order must also include the name, address, and telephone number of the personal representative. UTCR 9.030(2). See also UTCR 2.010(7), (12).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 2-3 Notice of Hearing
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. _____ ) ______, ) NOTICE OF HEARING ) Deceased. )
NOTICE IS HEREBY GIVEN that ______has filed herein a [nature of document filed], a copy of which is attached, and that a hearing has been set thereon on ______, 20___, at ___ [a.m. / p.m.] in the ______courtroom of this Court, located at ______. DATED: ______, 20___.
/s/______[petitioner’s name] Petitioner
PETITIONER: [name] [address] [telephone no.] [fax no.]
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LAWYER FOR PETITIONER: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §2.5-1. See UTCR 2.010 for the form of docu- ments. See also UTCR 9.030(1).
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 2-4 Admission of Personal Service
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. _____ ) ______, ) ACCEPTANCE OF ) PERSONAL SERVICE Deceased. )
STATE OF ______) ) ss. County of ______)
Service of notice of hearing on [describe petition, report, etc.] is hereby accepted on ______, 20___, by receiving a certified copy. /s/______
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §2.5.5.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 2-5 Waiver of Notice
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. _____ ) ______, ) WAIVER OF NOTICE ) Deceased. )
The undersigned hereby waives notice of the time and place of hearing on [describe petition, report, account, etc., as to which notice is waived]. DATED: ______, 20___.
/s/______[name of person entitled to notice]
PERSON ENTITLED TO NOTICE: [name] [address] [telephone no.]
NOTE: Only persons entitled to notice can waive notice. COMMENT: See §2.5-6.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 2-6 Waiver of Notice and Consent to Entry of Order
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. _____ ) ______, ) WAIVER OF NOTICE AND ) CONSENT TO ENTRY OF Deceased. ) ORDER
The undersigned hereby waives notice of the time and place of hearing on [describe petition, report, account, etc., for which notice is waived], acknowledges receipt of a copy of the [petition, report, account, etc.], and consents to the immediate entry of the order requested therein. DATED: ______, 20___.
/s/______[name of person entitled to notice]
PERSON ENTITLED TO NOTICE: [name] [address] [telephone no.]
COMMENT: See §2.5-6.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1B–80 Chapter 1C Preadministration Procedures
Holly N. Mitchell Duffy Kekel LLP Portland, Oregon
Contents §3.1 Scope of Chapter 1C–2 §3.2 Role of Lawyer as Counselor ...... 1C–3 §3.3 Disposition of Remains ...... 1C–4 §3.3-1 Anatomical Gifts 1C–4 §3.3-2 Autopsy and Other Investigation Regarding Cause of Death ...... 1C–8 §3.3-3 Funeral, Burial, and Cremation 1C–9 §3.4 Collection of Documents and Information ...... 1C–14 §3.4-1 Wills, Codicils, and Trust Agreements 1C–14 §3.4-2 Other Documents ...... 1C–18 §3.4-3 Determining Interested Parties 1C–19 §3.5 Protection of Property 1C–20 §3.5-1 Power of Personal Representative Before Appointment 1C–20 §3.5-2 Special Administrator ...... 1C–20 §3.5-3 Safekeeping and Special Arrangements 1C–20 §3.5-4 Custody of Decedent’s Pet ...... 1C–21 §3.5-5 Delivery to Heirs or Devisees 1C–21 §3.6 Preparing for Administration 1C–23 §3.6-1 Alternatives to Probate ...... 1C–23 §3.6-2 Special Proceedings ...... 1C–24 §3.6-3 Advice to Interested Parties of Analysis and Recommendations 1C–25 §3.6-4 Selection of Venue ...... 1C–25 §3.6-5 Filing the Petition ...... 1C–26 §3.6-6 Information Lists, Checklists, and Calendars 1C–27 Chapter 1C—Preadministration Procedures
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Chapter 3
PREADMINISTRATION PROCEDURES
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
HOLLY N. MITCHELL, B.A., Lewis & Clark College (1975); J.D., Lewis & Clark Law School (1984); member of the Oregon State Bar since 1984 and the Washington State Bar Association since 2006; attorney, Duffy Kekel LLP, Portland. The author made extensive use of the previous chapter material prepared by Kornelia A. Dornmire and acknowledges her contribution.
§3.1 SCOPE OF CHAPTER ...... 3-2 §3.2 ROLE OF LAWYER AS COUNSELOR ...... 3-3 §3.3 DISPOSITION OF REMAINS ...... 3-4 §3.3-1 Anatomical Gifts ...... 3-4 §3.3-1(a) Anatomical Gifts Before Death ...... 3-4 §3.3-1(b) Gift at the Time of Donor’s Death ...... 3-6 §3.3-2 Autopsy and Other Investigation Regarding Cause of Death ...... 3-8 §3.3-3 Funeral, Burial, and Cremation ...... 3-9 §3.3-3(a) Right to Control ...... 3-9 §3.3-3(b) Special Administrator to Take Charge of Remains ...... 3-11 §3.3-3(c) Arrangements by Deceased or Others, Inter Vivos ...... 3-11 §3.3-3(d) Arrangements with Funeral Director ...... 3-12 §3.3-3(e) Cremation ...... 3-13 §3.4 COLLECTION OF DOCUMENTS AND INFORMATION ...... 3-14 §3.4-1 Wills, Codicils, and Trust Agreements ...... 3-14 §3.4-2 Other Documents ...... 3-18
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§3.4-3 Determining Interested Parties ...... 3-19 §3.5 PROTECTION OF PROPERTY ...... 3-20 §3.5-1 Power of Personal Representative Before Appointment ...... 3-20 §3.5-2 Special Administrator ...... 3-20 §3.5-3 Safekeeping and Special Arrangements ...... 3-20 §3.5-4 Custody of Decedent’s Pet ...... 3-21 §3.5-5 Delivery to Heirs or Devisees ...... 3-21 §3.6 PREPARING FOR ADMINISTRATION ...... 3-23 §3.6-1 Alternatives to Probate ...... 3-23 §3.6-2 Special Proceedings ...... 3-24 §3.6-2(a) Absentees and Missing Persons ...... 3-24 §3.6-2(b) Small Estates ...... 3-24 §3.6-2(c) Wrongful Death ...... 3-25 §3.6-3 Advice to Interested Parties of Analysis and Recommendations ...... 3-25 §3.6-4 Selection of Venue ...... 3-25 §3.6-5 Filing the Petition ...... 3-26 §3.6-6 Information Lists, Checklists, and Calendars ...... 3-27 §3.6-6(a) Master Information List and Information Checklist ...... 3-27 §3.6-6(b) Probate Checklist ...... 3-27
§3.1 SCOPE OF CHAPTER This chapter covers matters that require attention after the death of a person, but before administration. Topics included are counseling of the family, disposition of remains, collection of documents and information, protection of property, and preparation for administration.
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§3.2 ROLE OF LAWYER AS COUNSELOR The role of a lawyer as family counselor has no greater sig- nificance than when assisting a decedent’s family and friends. The bereaved are frequently in a state of confusion or emotional shock and face unfamiliar problems, often aggravated by incorrect or conflicting advice. Whether the lawyer has a close personal relationship and intimate knowledge of the decedent’s financial affairs, or whether this is the initial contact with the family, the lawyer can, by patient explanation, do much to allay the family’s fears and concerns and assist with matters that require attention. Counseling may also include determining whether sufficient cash is available for immediate needs; suggesting the names of accountants, investment counselors, and other advisers whose assistance may be needed; and helping the family notify interested persons of the decedent’s death. Among those to be notified are (1) the next of kin, (2) the post office, (3) institutions holding funds, (4) partners and associates, (5) parties to contracts and pending transactions, (6) law enforcement agencies, (7) the Social Security Administration or the Railroad Retirement Board, (8) the United States Department of Veterans Affairs, (9) the Public Welfare Division, (10) pension and profit-sharing trusts, (11) trustees of trusts, and (12) insurance companies. It may be appropri- ate to delay notifying some or all of these persons until the personal representative is appointed. The lawyer should consider meeting with family members to explain the general terms of the provisions of a will (if any), the process of administration, and the wishes and directions of the decedent (if known by the lawyer). Although the family members may have already read and understood the will, a traditional “reading of the will” or review of its provisions may be helpful. Being available on short notice to accommodate the travel plans of the interested parties and for necessary funeral and burial arrangements is important and will be appreciated by the family.
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NOTE: In Oregon, a surviving registered domestic partner has the same rights and benefits granted to a surviving spouse under Oregon law. ORS 106.340. Therefore, references in this chapter to surviving spouses also include registered domestic partners.
§3.3 DISPOSITION OF REMAINS §3.3-1 Anatomical Gifts In 2007, the Revised Uniform Anatomical Gift Act, ORS 97.951– 97.983, was enacted in Oregon. Section 3.3-1(a) discusses anatomical gifts made before death, and §3.3-1(b) discusses anatomical gifts made after the decedent’s death. §3.3-1(a) Anatomical Gifts Before Death During the donor’s lifetime, an anatomical gift to take effect on the donor’s death may be made for the purpose of transplantation, therapy, research, or education. ORS 97.955(1). A gift may include the donor’s organs, eyes, and tissue. See ORS 97.969. An anatomical gift may be made by (1) an adult donor; (2) an emancipated minor; (3) a minor who is eligible to apply for a driver’s permit; (4) an agent under a power of attorney for health care or an advance directive (unless the power of attorney or other record prohibits the agent from making the gift), or an agent expressly authorized to make an anatomical gift by a signed document; (5) a parent of the donor, if the donor is an unemancipated minor; or (6) the donor’s guardian. ORS 97.955(2). An adult donor may make an anatomical gift (1) by a designation on the donor’s driver license or identification card; (2) in a will (see ORS 112.225 regarding who may make a will); (3) by an oral or written designation made during a terminal illness or injury, witnessed by two adults, one of whom is disinterested; (4) by a donor card or other record signed by the donor; or (5) by “authorizing that a statement, symbol or designation indicating that the donor has made an anatomical gift is to be included on a donor registry.” ORS 97.957(1). Method five (5) can be accomplished by registering online at
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A document creating an anatomical gift is valid if it was executed in accordance with ORS 97.951–97.982; the laws of the state or country where it was executed; or “[t]he laws of the state or country where the person making the gift was domiciled, had a place of residence or was a national at the time the document of gift was executed.” ORS 97.976(1). If an anatomical gift is valid under the statute, the laws of Oregon govern the interpretation of the document creating the gift. ORS 97.976(2). Except as provided in ORS 97.959(7)–(8) (regarding gifts made by an unemancipated minor or by an agent or guardian of a donor), an anatomical gift made under ORS 97.957 may be amended or revoked only by the donor in accordance with ORS 97.959. ORS 97.959(1). An anatomical gift made by a designation on a driver license or identification card is not revoked by the revocation, suspension, expiration, or cancellation of the driver license or identification card on which the gift was made. ORS 97.957(3). An anatomical gift made by will may be revoked in the manner generally provided for the amendment or revocation of wills. ORS 97.959(6); see also ORS 97.959(4). An anatomical gift by will remains effective even though the will is not offered for probate or is sub- sequently declared invalid for testamentary purposes. ORS 97.957(4). A donor or other authorized person may amend or revoke an anatomical gift other than one made on a driver license or will as follows: (1) By a record signed by the donor or the authorized person; (2) By a record signed by a person acting at the direction of the donor or authorized person, if the donor or authorized person is physically unable to sign and the record is witnessed by at least two adults, at least one of whom is disinterested; (3) By a later-executed document that amends or revokes a previous gift; (4) By destruction or cancellation of the document evidencing the gift with the intent to revoke the gift;
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(5) By any form of communication made by the donor during a terminal illness or injury addressed to at least two adults, at least one of whom is a disinterested witness; or (6) By a parent of an unemancipated minor, if the minor dies and the parent is reasonably available. ORS 97.959. An agent or guardian of a donor may amend or revoke an anatomical gift only if (1) the agent or guardian made the gift under subsection (2)(b) or (2)(d) of ORS 97.955 or (2) the “power of attorney for health care or other record appointing the agent expressly authorizes the agent to amend or revoke anatomical gifts.” ORS 97.959(8). A donor’s revocation of an anatomical gift “is not a refusal” and does not prohibit another authorized person from making an anatomical gift of the donor’s body or body part. ORS 97.963(2). Similarly, a revocation of an anatomical gift by an authorized person does not prohibit another authorized person from making an anatomical gift. ORS 97.963(4). §3.3-1(b) Gift at the Time of Donor’s Death An anatomical gift of a decedent’s body may be made by any member of the following classes of persons, in the following order of priority, who is “reasonably available” at the time of the decedent’s death and who has no knowledge of either a contrary direction given by the decedent or an objection by a person in the same or a prior class: (1) An agent of the decedent under a power of attorney for health care or advance directive; (2) The spouse of the decedent; (3) An adult child of the decedent; (4) A parent of the decedent; (5) An adult sibling of the decedent; (6) An adult grandchild of the decedent; (7) A grandparent of the decedent;
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(8) An adult who “exhibited special care and concern for the decedent”; (9) A guardian of the decedent at the time of death; or (10) Any other person having the authority to dispose of the decedent’s body. ORS 97.965. An anatomical gift by a person other than the decedent can be made by a signed document, or by the person’s oral communication that is electronically recorded or is contemporaneously reduced to a record and signed by the recipient of the communication. ORS 97.967(1). If an authorized person makes an anatomical gift of the decedent’s bodyremains, any member of the same or prior class may revoke or amend the gift, if the procurement organization, transplant hospital, physician, or technician removing the body part is notified before removal procedures have begun. ORS 97.967(2)–(3). However, if an anatomical gift was made by the decedent or another person under ORS 97.957 and the gift was not revoked at the time of the decedent’s death, the gift is irrevocable and is not subject to the consent, concurrence, cancellation, or substantial revision of any person. ORS 97.963(1). If a prospective donor has an advance directive and the terms of the advance directive conflict with the express or implied terms of a potential anatomical gift regarding “administration of measures necessary to ensure the medical suitability of a body part for transplantation, therapy, research or education,” the prospective donor and his or her attending physician must confer to resolve the conflict. ORS 97.978(2). If the prospective donor is incapable of resolving the conflict, the conflict must be resolved by the prospective donor’s agent under the advance directive or, if the agent is not reasonably available, by another person authorized by law (other than in ORS 97.951–97.982) to make health care decisions for the prospective donor. ORS 97.978(3). If an anatomical gift conflicts with any direction regarding the disposition of the decedent’s remains pursuant to ORS 97.130 (see §3.3- 3(a)), the donation of anatomical gift takes priority if the person making
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the anatomical gift is of a priority the same as, or higher than, the person directing disposition of remains. ORS 97.130(5). §3.3-2 Autopsy and Other Investigation Regarding Cause of Death An autopsy may be performed to obtain evidence of a criminal act, malpractice, or other negligence (or the absence of these), or to establish the time of death. The evidence provided by an autopsy may support an insurance claim by establishing that the death was accidental, by establishing that the death occurred within the policy period, or by negating an excluded cause of death. The medical examiner must investigate all deaths (1) “[a]pparently homicidal, suicidal or occurring under suspicious or unknown cir- cumstances”; (2) resulting from unlawful drug use; (3) occurring while in police custody or incarceration; (4) “[a]pparently accidental or following an injury”; (5) occurring during or arising from employment; (6) occurring while not under the care of a physician during the period immediately preceding death; (7) related to disease that might constitute a threat to public health; or (8) involving the disposal of a human body in an offensive manner. ORS 146.090. A medical examiner or district attorney may order an autopsy in any death requiring investigation. ORS 146.117. When no autopsy is ordered by a medical examiner or district attorney pursuant to ORS 146.117, an autopsy may be conducted with the prior written consent of a person within the first applicable class of the following listed classes: (1) “The spouse of the decedent”; (2) “A son or daughter of the decedent 18 years of age or older”; (3) “Either parent of the decedent”; (4) “A brother or sister of the decedent 18 years of age or older”; (5) “A guardian of the decedent at the time of death”; (6) “A person in the next degree of kindred to the decedent”;
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(7) “The personal representative of the estate of the decedent”; or (8) “The person nominated as the personal representative of the decedent in the decedent’s last will.” ORS 97.082(1). §3.3-3 Funeral, Burial, and Cremation §3.3-3(a) Right to Control Any person of sound mind who is age 18 or older may direct the disposition of his or her own remains, either by completion of a signed instrument or by prearrangement with any licensed funeral service practitioner. ORS 97.130(1). If the decedent’s direction cannot be carried out, either because the parties who are financially responsible for the disposition lack sufficient funds or because the disposition would be unlawful, then the direction is void. ORS 97.130(6). In the absence of actual notice of a contrary direction by the decedent, the disposition of the decedent’s remains may be determined by a person within the first applicable listed class among the following listed classes who is available at the time of death: (1) “The spouse of the decedent”; (2) “A son or daughter of the decedent 18 years of age or older”; (3) “Either parent of the decedent”; (4) “A brother or sister of the decedent 18 years of age or older”; (5) “A guardian of the decedent at the time of death”; (6) “A person in the next degree of kindred to the decedent”; (7) “The personal representative of the estate of the decedent”; (8) “The person nominated as the personal representative of the decedent in the decedent’s last will”; or
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(9) “A public health officer.” ORS 97.130(2). The decedent or any person authorized under ORS 97.130(2) may delegate the authority to direct the manner of disposition of the decedent’s remains to any person who is 18 years of age or older. ORS 97.130(3)(a). The delegation of authority may be made by completion of either (1) a written instrument in the form set forth in ORS 97.130(7) or in a form substantially similar to it, see Form 3-1; or (2) a “written instrument recognized by the Armed Forces of the United States, as that term is defined in ORS 348.282, if the decedent died while serving in the Armed Forces of the United States.” ORS 97.130(3). The instrument described in ORS 97.130(7) requires the signatures of the delegating party and two witnesses. A duly appointed delegate has the same authority to dispose of the decedent’s remains as the delegating party. ORS 97.130(3). If a decedent or a decedent’s designee issues more than one authorization or direction for disposal of the decedent’s remains, only the most recent is binding. ORS 97.130(4). If the person who is authorized to direct the manner of disposition of the decedent’s cremated remains transfers any portion of the cremated remains to another person, “the recipient of the cremated remains has the authority to direct the manner of disposition of the cremated remains in the recipient’s possession.” ORS 97.130(10). If a donation of an anatomical gift conflicts with directions for the disposition of the decedent’s remains under ORS 97.130, the donation of the anatomical gift takes priority only if the person making it is of the same or a higher priority than the person directing the disposition of the remains. ORS 97.130(5). See §3.3-1(b). A cemetery authority, crematory operator, or licensed funeral service practitioner interring or cremating remains pursuant to a written instrument signed by the decedent or a person described in ORS 97.130(2) has no liability for any failure to conform to the priority of control of the remains, unless it received two or more conflicting written instruments before interment or cremation. ORS 97.145.
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§3.3-3(b) Special Administrator to Take Charge of Remains If the disposition of the decedent’s remains is required before the appointment and qualification of a personal representative, the court may appoint a special administrator to take charge of the remains. ORS 113.005(1). See §§6.1-1 to 6.1-6. §3.3-3(c) Arrangements by Deceased or Others, Inter Vivos Testamentary or other written instructions by the deceased may provide valuable guidance. These instructions may not be controlling, however, because they may be unlawful, too expensive to comply with, or simply impractical. Obviously, these directions must be discovered promptly, or they are useless. If the lawyer is consulted about funeral plans before the death of the decedent, the lawyer should advise against including a dollar limit because of unpredictable factors, such as inflation, changed customs, and prices varying with locality. For the same reason, in most cases, a will should not provide too specifically for the type of casket. A search should be made for an existing contract with a funeral director stating an agreed-on price. The price may have been paid in full or in part. Extra services in addition to those specified are not included in the agreed-on price. A search should also be made for a deed to a grave lot or a contract for a grave, crypt, or niche; charges for opening the grave, crypt, or niche may already have been paid. Other items that may have been similarly provided for are a marker; lettering on a marker, crypt, or niche; an outer case for a grave; and an urn for a niche. Funeral benefit insurance is fairly common and, although the amount may be inadequate, it may help determine how much to spend. Fraternal societies and unions frequently have funeral benefits that can usually be readily discovered. If the decedent or spouse was a veteran, inquiry should be made of the U.S. Veterans Administration about possible funeral and burial benefits, and whether there is a right to burial in a national cemetery.
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A trust in which the deceased was an actual or contingent beneficiary may provide that the trustee will defray the cost of the funeral and burial of the decedent. Occasionally, prior approval of arrangements by the trustee is required. Other options for inter vivos planning are prearranged funeral plans and trusts, which are expressly regulated under Oregon law. ORS 97.923–97.949. Under specific statutory authority, the Secretary of State administers a separate trust fund, the “Funeral and Cemetery Consumer Protection Trust Fund,” for the sole purpose of providing restitution to purchasers who have suffered pecuniary loss arising out of pre- arrangement sales contracts or preconstruction sales contracts. ORS 97.945(2). §3.3-3(d) Arrangements with Funeral Director The funeral director will require written authority for funeral arrangements, including the authorizing party’s personal agreement to pay for the arrangements. Upon authorization, the funeral director customarily takes full charge and advises in all particulars relating to the funeral and burial. The authorization specifies in detail the services to be rendered or arranged, and the cost of each item, including removal and preparation of the body; the apparel in which the body is to be dressed; the casket; the outer case; burial, cremation, or entombment; music; clergy; opening grave; hearse, limousine, and motorcycle escort; memorial folders; publication of death and funeral notices; and copies of the death certificate. Frequently, separate arrangements must be made for burial, etc. The type of casket ordered usually determines the cost of the funeral; the same services are generally rendered, and the same facilities of the funeral director are available, regardless of the agreed-to cost. The cost must, of course, be decided on in light of the resources of the estate and the surviving relatives. It is possible, under some circumstances, simply to have a body cremated or buried without embalming, a casket, a funeral, or other religious or memorial service. The regulations of Oregon’s Mortuary and Cemetery Board provide that if a dead human body is to be held longer than 24 hours, it must be either embalmed or refrigerated until final disposition. OAR
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830-030-0010(1). Some religious sects discourage embalming, but in an area where refrigeration of the body is not available, embalming may be difficult to avoid. All dead human bodies must be cremated, interred, or entombed within 10 days after the funeral establishment takes possession of the remains. OAR 830-030-0010(4). If the human remains will be held longer than 10 days because of exigent circumstances, the licensee responsible for those remains must notify the office of the Mortuary and Cemetery Board. OAR 830-030-0010(4). If the remains are to be shipped to another locality, the funeral director can make arrangements and must ensure compliance with state requirements. Most funeral directors are familiar with the requirements of other states and foreign governments regarding the release of, and the shipping of, bodies to or from Oregon. Arrangements with funeral directors frequently provide for interest after a specified date, and sometimes for a discount for early payments. (The federal Truth in Lending Law governs these practices.) If such a saving will be lost by waiting to pay until the personal representative is appointed and has adequate funds, a relative may advance the funds and obtain reimbursement later from the estate. Occasionally, at the time for disposing of the remains, the family might not know whether the estate will be probated or whether sufficient funds will be available to pay the expenses. If the assets are insufficient to pay all expenses and claims in full, the personal representative may pay “[e]xpenses of a plain and decent funeral and disposition of the remains of the decedent,” with priority over certain other expenses and claims. ORS 115.125(1)(c). §3.3-3(e) Cremation In general, the State Mortuary and Cemetery Board regulates cemetery authorities and licensed funeral service practitioners with respect to cremation. See OAR 830-030-0040, 830-030-0050. A burial or cremation permit seems to be required only in cases in which the death must be investigated. ORS 146.121. If a cemetery authority, crematory operator, or licensed funeral service practitioner has been authorized to cremate the remains of a 3-13 2012 Revision
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decedent pursuant to ORS 97.130, the authorization must also contain further instructions regarding the final disposition of the cremated remains. ORS 97.150(1)(a). If no instructions have been given, the cemetery authority, crematory operator, or licensed funeral service practitioner must, within 180 days after the cremation, attempt to notify the person who has the right to direct disposition of the remains. ORS 97.150(1)(b)–(c). The notice must state that the cemetery authority, crematory operator, or licensed funeral service practitioner intends to dispose of the cremated remains in the absence of instructions to the contrary. If authorization is not forthcoming within 30 days after the date of the notice, the cemetery authority, crematory operator, or licensed funeral service practitioner “may dispose of the cremated remains as is legally practicable.” ORS 97.150(1)(d). Nothing in Oregon law gives a cemetery authority or a licensed funeral service practitioner the exclusive right to carry out instructions regarding the final disposition of the decedent’s remains. Thus, a person may be authorized to scatter the remains at sea or in the air or to deposit them at a particular location. A number of federal and state envi- ronmental and health laws may be broad enough to govern the scattering of ashes, but the Coast Guard, Environmental Protection Agency, Federal Aviation Administration, Mortuary and Cemetery Board, Department of Environmental Quality, State Marine Board, and Mental Health Division appear to have no current regulations dealing with the final disposition of cremated remains. Generally, scattering at sea is done beyond the three- mile limit, and scattering of ashes over a national or state park should be avoided. See
§3.4 COLLECTION OF DOCUMENTS AND INFORMATION §3.4-1 Wills, Codicils, and Trust Agreements The original will is normally found in the decedent’s safe-deposit box or home or in the office of the lawyer who drafted it. If the decedent kept the will in his or her safe-deposit box, and no survivor is authorized to open the box, the personal representative named in the will, if known,
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and the personal representative’s lawyer should contact the institution to arrange a will search. If a key cannot be located, the box will have to be drilled. The procedures for opening the safe-deposit box of a decedent who was the sole lessee or last surviving lessee of the box are found in ORS 708A.655 and 723.844. Subject to ORS 114.537 (regarding small estates), the institution leasing the box must cause or permit the box to be opened upon being furnished with a certified copy of the death certificate (or other satisfactory evidence of death) and an affidavit by the requesting person stating that: (1) The person believes that the box may contain the decedent’s will, a trust instrument of which the decedent was a trustor or trustee at the time of the decedent’s death, or documents pertaining to the disposition of the decedent’s remains or property of the decedent’s estate; (2) The individual is an “interested person” (as defined in ORS 708A.655(3) and 723.844(3), discussed below); and (3) The person wishes to open the box to search for a will or trust instrument, to obtain documents relating to the disposition of the decedent’s remains, to inventory the contents of the box, or to remove property of the estate of the decedent, pursuant to a small estate affidavit filed under ORS 114.515. ORS 708A.655(2), 723.844(2).
NOTE: The statutes define interested person to include a broad range of individuals, such as the decedent’s spouse or heir; a person named as personal representative in a purported will of the decedent; a person who is authorized to file a small estate affidavit under ORS 114.515; a trustee, purported trustee, or successor trustee for the decedent; a court-appointed guardian or conservator for the decedent; an agent with right of access under a durable power of attorney; a person designated by the decedent in a writing that is both acceptable to the institution and filed with the institution before the decedent’s death; or an estate administrator of the Department of State Lands (if there are no heirs). ORS 723.844(3), 708A.655(3).
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The search must be conducted in the presence of at least one employee of the institution. ORS 708A.655(11), 723.844(11). The scope of the institution’s duties depends on the purposes of the search. ORS 708A.655(4)–(8), 723.844(4)–(8). If the box is opened to search for a will or a trust instrument, the institution must (1) remove any document that appears to be a will or trust instrument, (2) make a “true and correct” copy of the document, and (3) deliver the original instrument to the personal representative or the successor trustee (as the case may be) or, if such a person is not named in the instrument or cannot be located, retain the original instrument in the box or deliver any original will to a court with jurisdiction over the decedent’s estate. ORS 708A.655(4)–(5), 723.844(4)–(5). On request, the institution may give a copy of the will, trust instrument, or other document pertaining to the disposition of the remains of the decedent to any interested person. ORS 708A.655(4)–(5), 723.844(4)–(5).
PRACTICE TIP: If a trustor is concerned about confidentiality, a copy of the trust should generally not be placed in a safe-deposit box, because the class of persons who may have access to the safe- deposit box is quite large.
PRACTICE TIP: Notice in a state or county bar publication or listserv requesting information about the existence of a will for a named individual is now commonplace.
COMMENT: Retention of an original will by the drafting lawyer is not as prevalent as in the past. This may be due in part to a fear that in addition to the duties to maintain the will in safekeeping and to deliver it on the testator’s death to the named personal representative or to the court, a lawyer in possession of an original will may have increased duties and responsibilities with respect to advising a client about changes in the law and the need to revise the will. Safe-deposit boxes are no longer frozen by the Oregon Department of Revenue. Although safe-deposit boxes are an appropriate place to keep original wills, problems may arise by keeping them there. If a surviving joint tenant or other person is authorized to enter the box, obtaining the
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will should not be a problem, as long as the key can be located. If not, arrangements must be made with the institution to drill the box. If there is no survivor authorized to open the box, the personal representative named in the will, if known, and the personal representative’s lawyer should arrange with the institution to make a will search. Once again, if a key cannot be located, the box will have to be drilled. A representative of the institution must be present during a review of the box’s contents. ORS 708A.655(11), 723.844(11). If a will is found, the institution will deliver it to the named personal representative. If the safe-deposit box contains valuable documents, but probate is not necessary and there is no person authorized to enter the box, the institution will presumably deliver the documents to a person named in the document, such as a surviving joint tenant. But the institution could probably require appointment of a personal representative before releasing the box’s contents. A small estates affidavit or an indemnity agreement might be satisfactory. If an affidavit of at least one of the witnesses made at the time of executing the will or at any time thereafter is not attached to the original will or codicil (ORS 113.055(1)), the witnesses to the will must be located and their affidavits obtained. The affidavits may be used instead of the personal presence of the witnesses in court. Under ORS 113.055(3), if no evidence of the attesting witnesses is available, the court may allow proof of the will by testimony or other evidence that the signature of either the testator or at least one of the witnesses is genuine. If the original will cannot be located, the facts and circumstances surrounding its execution and safekeeping should be investigated. Copies of the will should be located in case there is a desire to offer a photocopy for probate. If the original will has been admitted to probate in another jurisdiction, a certified copy of the will and a certified copy of the order admitting it to probate in the domiciliary jurisdiction will be required in order to probate the will in Oregon. ORS 113.065. The will and all amendments to it should be examined to make sure that they were properly executed and attested, to determine whether the testator had testamentary capacity (see ORS 112.225, 112.232), and
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to determine whether the will has been revoked in whole or in part (see ORS 112.285, 112.305, 112.315). See chapter 4 (discussing wills). §3.4-2 Other Documents Review and analysis of many other documents are essential to making informed decisions regarding the decedent’s affairs. Documents to be located include: (1) Cemetery deeds, burial instructions, and donor cards with respect to anatomical gifts; (2) Powers of attorney and any documents related to per- formance of duties by an attorney-in-fact (even though the authority of the attorney-in-fact terminates at death, the documents may provide information about the decedent’s assets); (3) Deeds, leases, and agreements with respect to real property (to ascertain how the property is owned, its approximate value, and the interests that others may have in it); (4) Stock and bond certificates, brokerage account statements, and any other documents related to the ownership of securities; (5) Bank registers, bank account statements, certificates of deposit, letters of credit, and other banking documents; (6) Insurance policies, including not only policies insuring the decedent’s life, but also policies owned by the decedent or for which he or she is the beneficiary; (7) Partnership agreements and corporate buy-sell agreements; (8) Annuity contracts or agreements; (9) Retirement benefits, including correspondence from employers explaining options and benefits and company booklets; (10) Appraisals; (11) Prenuptial agreements; (12) Divorce and separation agreements, including property- settlement agreements; (13) Income tax returns; 3-18 2012 Revision
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(14) Gift tax returns; (15) Estate tax returns for deceased family members; (16) Notes, guaranties, and security agreements; and (17) Copies of pleadings and other documents in cases in which the decedent was a litigant. It is important to review originals or copies of documents rather than lists prepared by the family or others. Family members often believe that assets are owned jointly, when they are actually owned by the decedent. A mistake in relating a serial number or certificate number can cause considerable confusion, delay, and expense. Documents evidencing a decedent’s indebtedness are as important as those representing his or her assets. Thus, copies of mortgages, deeds of trust, leases, promissory notes, pledge agreements, guaranties, installment sale contracts, and similar documents must also be reviewed. §3.4-3 Determining Interested Parties The identity of heirs, devisees, creditors, trustees, personal repre- sentatives, and those who are or may be parties to litigation involving the decedent must be ascertained. Current addresses and Social Security numbers for the beneficiaries and those involved in administration should be obtained. Care should be exercised in determining the heirs. Children of a deceased child or other heir are easily overlooked, particularly if a divorce is involved. Preparing an informal family tree can be very beneficial in this regard. Whether pretermitted children exist (ORS 112.405), whether a devise lapses (ORS 112.395), and whether a sur- vivorship requirement (ORS 112.570–112.590) or a will provision is applicable must be determined. The urgency of promptly investigating and preserving evidence of claims against or on behalf of the estate cannot be overemphasized. Included are claims for wrongful death, claims for malpractice or bodily injury, claims for damage to the decedent’s property, insurance claims, potential claims against the estate for services rendered to the decedent, and will contests. See chapters 9 and 15. Witnesses should be inter- viewed, signed statements obtained, and physical evidence preserved.
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§3.5 PROTECTION OF PROPERTY §3.5-1 Power of Personal Representative Before Appointment Pursuant to ORS 114.255, the acts of a personal representative occurring before appointment have the same effect as those occurring after appointment, and the personal representative may ratify and accept acts on behalf of the estate done by others. In Rennie v. Pozzi, 294 Or 334, 343, 656 P2d 934 (1982), the court held that an action filed by the named personal representative before his appointment was deemed com- menced, even though the statute of limitations had run before the appointment became valid. The possibility exists, of course, that someone other than the person expecting to be appointed will become the personal repre- sentative, or that a particular problem will justify the appointment of a special administrator or some other form of court blessing. §3.5-2 Special Administrator If, before the appointment and qualification of a personal repre- sentative, property of a decedent is in danger of loss, injury, or deterioration, or disposition of the remains of the decedent is required, the court may appoint a special administrator to take charge of the property or the remains. ORS 113.005(1). See §§6.1-1 to 6.1-6 for a detailed discussion of special administration. §3.5-3 Safekeeping and Special Arrangements Action may need to be taken to protect some of the decedent’s property before a personal representative is appointed. Perishable property may need to be refrigerated or otherwise protected. Antiques, collectibles, and other valuable items may need to be stored or guarded to protect them. Certain items, such as valuable paintings, may need to be stored in a temperature-controlled vault. New door locks may be appropriate. Arrangements must be made for pets (provisions are occasionally made in the will or a trust) and for farm animals. See §3.5-4 (custody of the decedent’s pet).
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Rings, other jewelry, and all kinds of indicia of ownership of assets need to be collected and kept in a safe place. Newspapers and other deliveries should, in most cases, be stopped and decisions made concerning utilities. Keeping the heat on may be necessary to avoid frozen pipes. Insurance coverage on any real property and on personal property should be reviewed to make sure that coverage continues after death. Special arrangements may be necessary if the residence is not occupied. Car insurance can be troublesome. Assurances should be obtained that either the decedent’s policy or the driver’s policy, or both, covers anyone operating the vehicle. Precautions must be taken during the funeral to prevent theft at the decedent’s home. §3.5-4 Custody of Decedent’s Pet Immediately on the decedent’s death, a family member of the decedent, a friend of the decedent, or an animal shelter may take custody of any pet of the decedent that is worth less than $2,500. The person who takes custody of the pet may be reimbursed from the estate for the cost of caring for the animal. The person who takes care of the pet must, on request, deliver the animal to the decedent’s personal representative or to any heir or devisee entitled to receive possession of the animal. ORS 114.215(3). §3.5-5 Delivery to Heirs or Devisees In many instances, the heirs or devisees may wish to divide and take possession of personal property items before the appointment of the personal representative. This is particularly true when relatives from out of town have come for the funeral, but must return to their homes before the opening of the estate. The statute giving a personal representative the power to act before appointment is not a solution because, even if a personal representative were appointed, a court order authorizing partial distribution would be necessary before distribution could be made. When the assets are clearly sufficient to pay taxes, claims, and administration
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expenses, and agreement can be reached among all the interested parties, division and removal of the property will usually present no problems. The person taking possession must understand, however, that he or she is only holding the property in safekeeping pending a court order authorizing distribution, and that it may be necessary to return the property if creditors or other heirs or devisees establish a right to the property. The person taking possession must also understand that it may be necessary to make the property available for appraisal. In these instances, the person taking possession of the property should execute a receipt acknowledging custody and agreeing to return the property to the personal representative if a demand for return is made. Even if it appears unnecessary for the personal representative to take possession of certain property (see ORS 114.225), a receipt or statement of custody should be obtained from the person retaining control. See chapter 1. In most cases, all the property should be retained until it can be inventoried and valued. Disputes among interested parties about the division of personal property can cause some of the most difficult problems of administering an estate. Those having access to the property must be particularly careful to avoid charges that they have removed property without authorization. In determining whether heirs or beneficiaries should take custody of property, the estate tax regulations with respect to valuation of household and personal effects should be kept in mind. Treasury Regula- tion §20.2031-6(a)–(b) provides that all articles in the same room having a value in excess of $100 should be itemized, and that articles having marked artistic or intrinsic value in excess of $3,000 should be appraised. Treasury Regulation §20.2031-6(c) covers disposition of household effects before IRS investigation. It requires that notice be given to the district director if distribution or sale of any portion of the household or personal effects of the decedent will be made in advance of an investigation by an IRS officer. This procedure is not generally followed, but should be kept in mind when heirs or beneficiaries take valuable articles into custody.
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PRACTICE TIP: If the person signing a custody receipt is not a devisee of any other property, it may be appropriate for the receipt to include a waiver of further notice of estate proceedings. This waiver may eliminate the necessity of obtaining further consent or giving notice to the devisee with respect to partial distributions and requests for fees and compensation, and on filing the final account. Nonetheless, before custody of any property changes hands, an assessment of the advantages and disadvantages of disclaiming property should be made and communicated to the potential distributees of the estate. For example, the decedent’s surviving spouse may wish to disclaim, in whole or part, certain interests in property so that those interests pass in a way that would allow the decedent’s estate to take full advantage of the available exemptions from federal estate and gift taxes and Oregon estate tax. If this type of postmortem tax planning would be advantageous, a potential disclaimant should ensure that his or her acceptance of the property or any benefit from it will not inadvertently jeopardize a future disclaimer of it. See Uniform Disclaimer of Property Interests Act, ORS 105.623–105.649, which is discussed in §§8.3-2(a) to 8.3-2(f).
§3.6 PREPARING FOR ADMINISTRATION §3.6-1 Alternatives to Probate Affidavits of heirship, transfers pursuant to specific statutory authority, and other methods of avoiding probate should be carefully considered. These matters are fully discussed in chapter 1. Qualifying estates may be administered under the small estates procedures set forth in ORS 114.505–114.560. See chapter 5 for further discussion. Although avoiding probate may be possible, it may not be desir- able, given the facts and circumstances of a particular estate. The savings of time and expense in avoiding probate may be more than offset by the need to determine or cut off creditors’ claims or to take advantage of income tax or other planning devices. Obtaining a bond and indemnity agreement or paying a double title insurance policy premium may equal the cost of probate. 3-23 2012 Revision
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Conversely, if creditors’ claims exceed the value of the assets, the named personal representative and the beneficiaries may consider abandoning the estate, leaving the creditors to institute probate pro- ceedings if they determine that it is advisable. §3.6-2 Special Proceedings §3.6-2(a) Absentees and Missing Persons Provisions for administering the estate of an absentee are set forth in ORS 117.005–117.095. The statutes eliminated the former requirement that seven years of unexplained absence must elapse before a person is presumed dead and his or her estate subject to administration. The law now provides that a petition for the administration of the estate of an absentee may be filed when (1) “the whereabouts of the absentee is and has been unknown for a period stated of not less than one year, and . . . the petitioner has reason to believe and believes the absentee is dead”; (2) the “death of the absentee at the time, location and in the circumstances stated in the petition is probable” and “in doubt solely by reason of the failure to find or identify the remains of the absentee”; or (3) the absentee is presumed dead under the provisions of ORS 176.740 (regarding a presumption of death for persons missing after a natural disaster or an act of war, terrorism, or sabotage). ORS 117.005(3). See chapter 6 for further discussion. The management of the financial resources of a person who has disappeared is governed by ORS chapter 125, which deals with protective proceedings. See ORS 125.005(3) (financially incapable “means a condition in which a person is unable to manage financial resources of the person effectively for reasons including . . . dis- appearance”). Before initiating a protective proceeding or filing a petition to administer the estate of an absentee, the lawyer must determine which, if either, of these two courses to pursue. §3.6-2(b) Small Estates If a decedent’s estate meets the requirements of ORS 114.515 (including that the fair market value of the estate is $275,000 or less), the
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estate may be administered under the small estates procedures set forth in ORS 114.505–114.560. The cases in which the small estates procedure can be used and the procedures to be followed are fully discussed in §§5.3-1 to 5.3-8(d). §3.6-2(c) Wrongful Death When “the death of a person is caused by the wrongful act or omission of another,” a duly appointed personal representative of the decedent may maintain an action against the wrongdoer for the benefit of the decedent’s survivors. ORS 30.020(1). Actions for wrongful death are governed by ORS 30.010–30.100. For discussion of wrongful death claims and procedures, see §§15.3-1 to 15.3-8. Damages recovered in an action for wrongful death are not assets of the estate. See ORS 30.020. §3.6-3 Advice to Interested Parties of Analysis and Recommendations After collecting and analyzing all of the documents and informa- tion relevant to the decedent’s estate, the lawyer should arrange a meeting with interested persons to advise them of the lawyer’s findings and recommendations. In scheduling the meeting, the lawyer should allot enough time to explain the procedures, problem areas, anticipated costs, and time involved, and to answer any questions that arise. Meeting with interested persons and giving them adequate information will go a long way toward establishing a smooth working relationship with those persons, and will help them understand the importance of the services that the lawyer is performing. This is also an appropriate time for the lawyer to determine whom he or she represents and to give careful consideration to possible conflicts of interest. §3.6-4 Selection of Venue Administration of a decedent’s estate is proper in the county where the decedent was domiciled or had a place of abode at the time of death, where property of the decedent was located at the time of death or is located at the time the proceeding is commenced, or where the decedent died. ORS 113.015. Venue may be a particularly important consideration
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when a wrongful death action will be commenced. If proceedings are commenced in more than one county, they are stayed except in the county where first commenced until a final determination is made regarding the proper venue. A court is authorized to transfer venue if it determines that a transfer is in the best interest of the estate. ORS 113.025. For further discussion of venue, see §§2.3-1 to 2.3-4(d). §3.6-5 Filing the Petition The information that must be included in a petition for the appointment of a personal representative and for the probate of a will is set forth in ORS 113.035. See §§5.2-2(a) to 5.2-2(b).
PRACTICE TIP: If the creditworthiness of the proposed personal representative is in doubt, the lawyer should submit a bond application before preparing the petition in order to deter- mine whether the nominee is bondable. Prompt action to file the petition requesting the appointment of a personal representative in an intestate situation may be very important. Although ORS 113.085 directs the court to give preference to certain persons in appointing a personal representative, in some counties, a petitioner is not required to allege that no other person has a preferential right to be appointed. As a result, the first person to file will probably be appointed. Once a personal representative is appointed, a formal hearing may be necessary to have the appointed personal representative removed and the person with priority appointed. It may take several months to obtain a hearing date. In the meantime, the appointed personal repre- sentative’s actions are valid. If all persons with a preferential right to appointment are unable or unwilling to serve, the better practice would be to allege this fact in the petition for appointment and, if practicable, to obtain and file written declinations to serve. In Multnomah County and many other counties, the court generally will not appoint a person with a lower level of priority absent at least these allegations in the petition.
QUERY: Would an action for damages for the expense of removing a personal representative be appropriate when the appointment was obtained with the knowledge that another person
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was entitled to preference and planned to petition the court for appointment? §3.6-6 Information Lists, Checklists, and Calendars §3.6-6(a) Master Information List and Information Checklist Retaining information that has been collected so that it can be effectively used in the administration process is essential. A master information list (MIL) and an information checklist can act as an inter- view guide, can prompt a list of questions to ask in obtaining required information, and can provide an organized way to record that information for future use. See Appendixes 3A and 3B for examples of such lists. The MIL can be a source for preparing the petition for appointment of the personal representative, the inventory, federal and Oregon estate tax returns, and fiduciary income tax returns. The MIL in Appendix 3A includes general information, asset information, and information regard- ing transactions occurring during administration of the estate. §3.6-6(b) Probate Checklist A probate checklist, such as that set forth in Appendix 3C, may be used in conjunction with, or apart from, a master information list (see §3.6-6(a)). The sample probate checklist set forth in Appendix 3C contains general information, suggestions for action to be taken, and a manual system for keeping track of due dates and recording actions that have been taken.
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Administering Oregon Estates: 2012 Edition 1C–27 Chapter 1C—Preadministration Procedures
Administering Oregon Estates: 2012 Edition 1C–28 Chapter 1D Initiating Probate and Small-Estate Proceedings
Lisa N. Bertalan Hendrix Brinich & Bertalan LLP Bend, Oregon
Contents §5.1 Scope of Chapter 1D–4 §5.2 Regular Probate ...... 1D–5 §5.2-1 Jurisdiction and Venue ...... 1D–5 §5.2-2 Petition ...... 1D–6 §5.2-3 Escheat ...... 1D–9 §5.2-4 Proof of Will ...... 1D–10 §5.2-5 Appointment of Personal Representative 1D–14 §5.2-6 Bond 1D–17 §5.2-7 Letters Testamentary or Letters of Administration 1D–19 §5.2-8 Notices ...... 1D–20 §5.2-9 Removal of Personal Representative 1D–21 §5.2-10 Successor Personal Representative 1D–23 §5.3 Probate of Small Estates 1D–24 §5.3-1 Generally ...... 1D–24 §5.3-2 Estates Qualifying for Small-Estates Procedure ...... 1D–25 §5.3-3 Small-Estate Affidavit ...... 1D–26 §5.3-4 Transfers of Property Pursuant to Affidavit 1D–30 §5.3-5 Duties and Powers of Affiant 1D–33 §5.3-6 Purchaser of Small-Estate Property ...... 1D–34 §5.3-7 Creditors ...... 1D–34 §5.3-8 Liability of Heirs and Devisees Who Receive Decedent’s Property . . . . . 1D–36 Forms 5-1 Initiating Probate: Critical Dates Checklist ...... 1D–39 5-2 Letter to Personal Representative ...... 1D–41 5-3 Petition for Probate of Will and Appointment of Personal Representative . . 1D–45 5-4 Petition for Administration of Intestate Estate and Appointment of Personal Representative ...... 1D–51 5-5 Affidavit ofAttesting Witness to Will ...... 1D–56 5-6 Affidavit of itnessW to Signature of Testator or Witness ...... 1D–58 5-7 Limited Judgment Admitting Will to Probate and Appointing Personal Representative ...... 1D–60 5-8 Limited Judgment for Administration of Intestate Estate and Appointment of Personal Representative ...... 1D–62 5-9 Personal Surety Bond ...... 1D–64 5-10 Information to Heirs and Devisees (Testate Estate) ...... 1D–66 5-11 Information to Heirs (Intestate Estate) 1D–69 5-12 Affidavit of Proof of Mailing or Delivery of Information to Heirs and Devisees 1D–72 5-13 Affidavit of Mailing Information to Oregon Department of Human Services . 1D–74 5-14 Waiver of Notice of Information ...... 1D–76 5-15 Notice to Interested Persons ...... 1D–78 Chapter 1D—Initiating Probate and Small-Estate Proceedings
Table of Contents (continued)
5-16 Affidavit of Publication ...... 1D–80 5-17 Affidavit of Claiming Successor of Small Estate (Testate Estate) ...... 1D–81 5-18 Affidavit of Claiming Successor of Small Estate (Intestate Estate) . . . . . 1D–87
Administering Oregon Estates: 2012 Edition 1D–ii Chapter 1D—Initiating Probate and Small-Estate Proceedings
Chapter 5
INITIATING PROBATE AND SMALL-ESTATE PROCEEDINGS
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
LISA N. BERTALAN, B.A., University of Colorado, (1987); J.D., University of Oregon (1991); member of the Oregon State Bar since 1991; partner, Hendrix Brinich & Bertalan LLP, Bend. The author acknowledges the contribution of J. Anthony Giacomini for his work on the prior edition of this chapter.
§5.1 SCOPE OF CHAPTER ...... 5-4
§5.2 REGULAR PROBATE ...... 5-5
§5.2-1 Jurisdiction and Venue ...... 5-5
§5.2-1(a) Probate Jurisdiction ...... 5-5
§5.2-1(b) Venue ...... 5-5
§5.2-2 Petition ...... 5-6
§5.2-2(a) Generally ...... 5-6
§5.2-2(b) Contents of Petition ...... 5-7
§5.2-3 Escheat ...... 5-9
§5.2-4 Proof of Will ...... 5-10
§5.2-4(a) Affidavit of Attesting Witness ...... 5-10
§5.2-4(b) Self-Proving Will ...... 5-11
§5.2-4(c) Testimony of Attesting Witness ...... 5-11
§5.2-4(d) Missing Witness ...... 5-12
§5.2-4(e) Foreign Will ...... 5-12
§5.2-4(f) International Will ...... 5-13
§5.2-4(g) Probate in Solemn Form ...... 5-13
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§5.2-4(h) Contested Will ...... 5-14
§5.2-5 Appointment of Personal Representative ...... 5-14
§5.2-5(a) Preference in Appointing Personal Representative ...... 5-14
§5.2-5(b) Disqualification of Personal Representative ...... 5-15
§5.2-5(c) Nonresident Personal Representative ...... 5-16
§5.2-5(d) Limited Judgment ...... 5-16
§5.2-6 Bond ...... 5-17
§5.2-6(a) Necessity of Bond; Court Discretion ...... 5-17
§5.2-6(b) Amount of Bond ...... 5-18
§5.2-6(c) Increasing, Decreasing, or Requiring New Bond ...... 5-18
§5.2-6(d) Court Approval of Bond ...... 5-19
§5.2-7 Letters Testamentary or Letters of Administration ...... 5-19
§5.2-8 Notices ...... 5-20
§5.2-9 Removal of Personal Representative ...... 5-21
§5.2-9(a) Grounds for Removal ...... 5-21
§5.2-9(b) Procedure for Removal ...... 5-22
§5.2-10 Successor Personal Representative ...... 5-23
§5.2-10(a) Appointment of Successor ...... 5-23
§5.2-10(b) Letters of Administration/Testamentary ...... 5-23
§5.2-10(c) Powers of Successor ...... 5-23
§5.2-10(d) Publication of Notice to Interested Persons ...... 5-23
§5.3 PROBATE OF SMALL ESTATES ...... 5-24
§5.3-1 Generally ...... 5-24
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§5.3-2 Estates Qualifying for Small-Estates Procedure ...... 5-25
§5.3-3 Small-Estate Affidavit ...... 5-26
§5.3-3(a) Contents of Affidavit ...... 5-26
§5.3-3(b) Who May File ...... 5-29
§5.3-3(c) When and Where the Affidavit May Be Filed ...... 5-30
§5.3-4 Transfers of Property Pursuant to Affidavit ...... 5-30
§5.3-4(a) Transfers of Personal Property ...... 5-31
§5.3-4(b) Transfers of Real Property ...... 5-32
§5.3-5 Duties and Powers of Affiant ...... 5-33
§5.3-6 Purchaser of Small-Estate Property ...... 5-34
§5.3-7 Creditors ...... 5-34
§5.3-8 Liability of Heirs and Devisees Who Receive Decedent’s Property ...... 5-36
§5.3-8(a) Liability to Creditors ...... 5-36
§5.3-8(b) Liability to Personal Representative ...... 5-37
§5.3-8(c) Liability to Omitted Heirs and Devisees ...... 5-37
§5.3-8(d) Bar of Claims Against the Property ...... 5-38
Form 5-1 Initiating Probate: Critical Dates Checklist ...... 5-39
Form 5-2 Letter to Personal Representative ...... 5-41
Form 5-3 Petition for Probate of Will and Appointment of Personal Representative ...... 5-45
Form 5-4 Petition for Administration of Intestate Estate and Appointment of Personal Representative ...... 5-51
Form 5-5 Affidavit of Attesting Witness to Will ...... 5-56
Form 5-6 Affidavit of Witness to Signature of Testator or Witness ...... 5-58
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Form 5-7 Limited Judgment Admitting Will to Probate and Appointing Personal Representative ...... 5-60
Form 5-8 Limited Judgment for Administration of Intestate Estate and Appointment of Personal Representative ...... 5-62
Form 5-9 Personal Surety Bond ...... 5-64
Form 5-10 Information to Heirs and Devisees (Testate Estate) ...... 5-66
Form 5-11 Information to Heirs (Intestate Estate) ...... 5-69
Form 5-12 Affidavit of Proof of Mailing or Delivery of Information to Heirs and Devisees ...... 5-72
Form 5-13 Affidavit of Mailing Information to Oregon Department of Human Services ...... 5-74
Form 5-14 Waiver of Notice of Information ...... 5-76
Form 5-15 Notice to Interested Persons ...... 5-78
Form 5-16 Affidavit of Publication ...... 5-80
Form 5-17 Affidavit of Claiming Successor of Small Estate (Testate Estate) ...... 5-81
Form 5-18 Affidavit of Claiming Successor of Small Estate (Intestate Estate) ...... 5-87
§5.1 SCOPE OF CHAPTER This chapter discusses (1) procedures for initiating Oregon pro- bate, (2) the issues surrounding initial probate estate administration, and (3) the probate of a decedent’s property by a small-estate affidavit, including the transfer of property pursuant to the affidavit. The probate portion of this chapter includes discussions on petitions for the appointment of a personal representative and the probate of a will; initial estate administration; escheat; proving wills in common form (including a will with missing witnesses, a foreign will, and an international will); probate in solemn form; the personal representative’s
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qualifications; limited judgment appointing the personal representative; bond requirements; letters testamentary or letters of administration; notices of the personal representative’s appointment to heirs, devisees, and other interested persons; grounds and procedure for removal of the personal representative; and the appointment, letters, powers, and publication of notice to interested persons by a successor personal repre- sentative. Forms referred to in the text appear at the end of the chapter. Because keeping track of the required filings is critical, this chapter also includes a checklist as Form 5-1 (Initiating Probate: Critical Dates Checklist) and a sample letter to the personal representative as Form 5-2.
§5.2 REGULAR PROBATE §5.2-1 Jurisdiction and Venue §5.2-1(a) Probate Jurisdiction Probate jurisdiction is vested in the circuit courts, except in the following counties: Gilliam, Grant, Harney, Malheur, Sherman, and Wheeler. In these counties, probate jurisdiction is vested in the county courts. ORS 111.055, 111.075. See §§2.2-1 to 2.2-3(c)(4) for further discussion of probate jurisdiction.
PRACTICE TIP: If the estate will be probated in a county in which the county court has probate jurisdiction, a lawyer who anticipates questions of law involving the estate should consider transferring the proceedings to a circuit court. The procedure is set forth in ORS 111.115. §5.2-1(b) Venue Venue for a probate proceeding is appropriate in any county where (1) the decedent was domiciled, (2) the decedent had a place of abode at death, (3) the decedent had real or personal property in the county at the time of death, (4) the decedent had real or personal property in the county at the time of the initiation of probate, or (5) the decedent died. ORS 113.015(1). See §§2.3-1 to 2.3-3 for further discussion of venue, including filing in a county other than those counties specified in ORS 113.015(1). 5-5 2013 Revision
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PRACTICE TIP: The above options allow flexibility in choosing the forum for probate. For instance, venue is proper in a county where property existed at the time of initiating the probate. Because personal property can be moved after the owner’s death, probate may take place in a county most convenient and cost- effective for the personal representative. Regardless of the forum selected, the person initiating probate should consider publishing notice to interested persons not only in the forum county, but also in additional counties where the notice would most likely notify potential creditors or other interested persons of the decedent’s death. See Tulsa Prof’l Collection Services, Inc. v. Pope, 485 US 478, 108 S Ct 1340, 99 L Ed2d 565 (1988). See also ORS 115.003 and chapter 9 for further discussion of the personal representative’s duty to search diligently for creditors, and when mailing of a direct notice to a creditor is required. §5.2-2 Petition §5.2-2(a) Generally A petition commences probate proceedings. ORS 113.035. Any interested person may file a petition in the court with jurisdiction and venue for the appointment of a personal representative for either an intestate estate (the decedent died without a will) or a testate estate (the decedent died with a will). ORS 113.035. The term interested person is statutorily defined, and the definition must be carefully observed. It includes an heir, a devisee, a child, a spouse, a creditor, or any other person having a property right or claim against the decedent’s estate. The term also includes fiduciaries representing the interested person. ORS 111.005(19). See §2.4-3. Other persons should not file a petition; doing so may invalidate the appointment. No notice of hearing on the petition is required unless the estate will escheat or the probate is initiated in solemn form. See §5.2-3, regard- ing escheat, and §5.2-4(g), regarding probating a will in solemn form.
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§5.2-2(b) Contents of Petition The probate code does not set forth any particular form of petition for the appointment of a personal representative and for the probate of a will, but it does specify the information that a petition must include. ORS 113.035, 113.135; see also UTCR 2.010(7), 9.030; ORS 111.205; ORCP 1 E. Also, ORS 111.205 requires that the “proceedings shall be in writing.” See also UTCR 2.010(3) (all documents must be printed or typed). Furthermore, UTCR 2.010 sets forth other rules regarding the format of documents, and both UTCR 2.010(7) and UTCR 9.030 require that certain information about the attorney be included in documents filed in a proceeding. Pursuant to ORS 113.035, a petition must include the following information: (1) The decedent’s name, age, domicile, post office address, date and place of death, and Social Security number or taxpayer identification number;
NOTE: Although ORS 113.035(1) requires that a petition for the appointment of a personal representative and for the probate of a will include the decedent’s Social Security number, UTCR 2.100(1)(a) sets forth procedures “to identify and segregate protected personal information when submitting a document to a court in a case and to request the information be kept from inspection by the general public.” The procedures to identify and segregate protected personal information that already exists in a case file are set forth in UTCR 2.110. (2) Whether the decedent died testate or intestate; (3) The facts relied on to establish venue; (4) The name and post office address of the person nominated as personal representative, and the facts showing that the person is qualified to act; (5) The names, relationship to the decedent, and post office addresses of the decedent’s heirs, and the ages of any minor heirs;
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(6) A statement that “reasonable efforts have been made to identify and locate all heirs of the decedent”; also, if the petitioner “knows of any actual or possible omissions from the list of heirs, the petition must include a statement indicating that there are omissions from the information relating to heirs”; (7) If the decedent died testate, the names and post office addresses of the decedent’s devisees, and the ages of any who are minors; (8) The name and post office address of any person asserting an interest in the estate, or on whose behalf an interest has been asserted, based on a contention that (a) the will alleged in the petition “is ineffective in whole or part”; (b) “[t]here exists a will that has not been alleged in the petition to be the will of the decedent”; or (c) the decedent “agreed, promised or represented that the decedent would make or revoke a will or devise, or not revoke a will or devise, or die intestate”; (9) The name and post office address of any person asserting an interest in the estate, or on whose behalf an interest has been asserted, “based on a contention that a parent of the decedent willfully deserted the decedent or neglected without just and sufficient cause to provide proper care and maintenance for the decedent, as provided by ORS 112.047” (see §§8.4-1, 8.1-4(a) to 8.1-4(c)); (10) Whether the original will is in the court’s possession or accompanies the petition; otherwise, the petition must state the contents of the will and indicate that it is lost, destroyed, or otherwise unavailable, and that it was not revoked (unless the petition is for probate of a foreign will and an authenticated copy of the foreign will accompanies the petition); and (11) A statement of the extent and nature of the estate’s assets, to enable the court to set the amount of the personal representative’s bond. In addition, the petition must include a declaration under penalty of perjury in the form required by ORCP 1 E, made by at least one of the persons making the petition. ORS 111.205. The declaration must appear in prominent letters immediately above the signature of the declarant. ORCP 1 E.
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Also, the last page of the petition must include the name, address, telephone number, fax number, e-mail address, and Oregon State Bar number of the lawyer of record. UTCR 9.030(1); see also UTCR 2.010(7).
PRACTICE TIP: A petition for the appointment of a personal representative to administer an intestate estate is essentially the same as a petition for the appointment of a personal representative and probate of a testate estate. See ORS 113.035. However, the two petitions are slightly different. Each petition must state whether the decedent died testate or intestate. ORS 113.035(2). If the decedent died testate, the petition must list the names and addresses of the devisees named in the will. ORS 113.035(7). If the decedent died intestate, the petition must request that the court appoint the appropriate personal representative under ORS 113.085(1). See §§5.2-3, 5.2-5(a) to 5.2-5(b). Furthermore, in an intestate estate, a bond is normally required and will not be waived unless the exceptions listed in ORS 113.105 are met. See §5.2-6(a).
PRACTICE TIP: ORS 113.135 and UTCR 2.010 and UTCR 9.030 are interrelated, but the statute is not as broad as the UTCR rules. To ensure compliance with the law, the petitioner should check the current rules and statutes and avoid relying on preprinted forms. See Forms 5-3 and 5-4. §5.2-3 Escheat If no known person takes by descent, the intestate estate escheats to the state of Oregon. ORS 112.055(1). If a devisee or a person entitled to a share of the estate under ORS 112.025–112.035 (share of surviving spouse) or ORS 112.045 (share of a person other than a surviving spouse) cannot be identified or found, then that person’s share of the estate escheats to the state of Oregon. ORS 112.055(2). Provisions for dealing with the person’s share of the estate are set forth in ORS 112.055(3).
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If the estate is to escheat to the state, the personal representative must deliver or mail to an estate administrator of the Department of State Lands (DSL) a copy of the petition filed under ORS 113.235 and a copy of any last will of the decedent. The personal representative must also file proof of the delivery or mailing with the court. ORS 113.045(1). See ORS 111.218 (proof of mailing or other delivery). After appointment, if the personal representative cannot identify or find all heirs and devisees of the decedent, the personal representative must so notify the DSL. ORS 113.045(2). If it appears at the onset of probate administration that the decedent died wholly intestate and without heirs, the court must appoint the DSL as the personal representative of the estate. The attorney general represents the DSL in the intestate proceedings. ORS 113.085(2). But see ORS 113.085(3) (when the estate is insolvent, the court, with the DSL’s written authorization, may appoint another person to administer the estate). Otherwise, the court may enter an order of escheat at any time after the expiration of four months after the date of first publication of notice to interested persons, if “it appears . . . that there is no known person to take by descent.” ORS 116.193. Thereafter, the net estate is distributed to the Department of State Lands without further proceedings and the estate is summarily closed. ORS 116.193.
NOTE: For a discussion of statutory presumptions that apply in a proceeding to determine whether a missing person has died, see §4.1-2(g). See ORS 116.253 regarding the recovery of escheated property. §5.2-4 Proof of Will §5.2-4(a) Affidavit of Attesting Witness The probate code permits proof of a will ex parte by the affidavit of an attesting witness made at any time. ORS 113.055(1). This procedure is historically referred to as probate in common form, as dis- tinguished from probate in solemn form. Interested persons are protected under ORS 113.145 and 113.055(2), which require the giving of notice of the probate and allow interested persons 30 days to seek the affiant’s testimony or deposition. See §5.2-4(c), regarding the testimony of attest- 5-10 2013 Revision
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ing witnesses, and §5.2-4(g), regarding probate in solemn form. If the petition involves the assertion of an invalid will, another will, or the right to receive pursuant to an agreement, notice of such allegations must be given to the devisees and heirs. ORS 113.035(8).
PRACTICE TIP: In the usual case, the probate judge or probate commissioner will receive only the petition for the probate of the will, the affidavits of witnesses (which generally contain only conclusions), the will, and the form of the limited judgment admitting the will to probate. This procedure commences the administration of the estate and, in almost every case, is adequate. See Form 5-5. §5.2-4(b) Self-Proving Will The probate code provides that affidavits of attesting witnesses to a will may be made at the time the will is executed or any time thereafter. ORS 113.055. If the attesting witnesses’ affidavits were made at the time of the will’s execution, and if the affidavits are attached to the will as part of the will, the will is self-proving in an ex parte proof-of-will hearing. §5.2-4(c) Testimony of Attesting Witness Within 30 days after a limited judgment admitting a will to probate is made, an interested person may file a motion for the taking of a subscribing witness’s testimony. The court may require that the witness be brought before the court. If the witness is outside the reach of a subpoena, the court may order that the witness’s deposition be taken. ORS 113.055(2). PRACTICE TIP: The extent of proof required is not specified in ORS 113.055(2). The degree of proof in a contest of a will or probate in solemn form is specified in ORS 113.055(4). Provisions regarding contesting a will are set forth in ORS 113.075. Looking at these probate code provisions together suggests that an interested person’s resort to ORS 113.055(2) is not a will contest and requires only testimony establishing the facts set forth in the witness’s affidavits, such as the witness’s qualification; that the testator signed the will in the presence of each witness, or directed
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some person to sign for him or her, or acknowledged a signature previously made; and that the witnesses were requested to attest the will by signing their names in the testator’s presence. See ORS 112.235. However, the cautious personal representative may want to offer all evidence as specified in ORS 113.055(4) if ORS 113.055(2) is invoked within the time for a will contest set forth in ORS 113.075(3). §5.2-4(d) Missing Witness The affidavit or testimony of only one of the attesting witnesses is necessary to prove a will. ORS 113.055(1). If this evidence is unavail- able, the court may allow proof of the will by testimony or other evidence that the signature of the testator, or at least one of the witnesses, is genuine. ORS 113.055(3). Under ORS 112.245, an interested person (one who is devised a personal and beneficial interest in the estate) is permitted to be a witness to a will. Presumably, the affidavit or testimony of an heir, devisee, or other interested person may be used to attest to the genuineness of a testator’s or witness’s signature. COMMENT: A useful research tool to determine who can be a witness to prove the execution of a will is the case In re Warren’s Estate, 138 Or 283, 4 P2d 635 (1931). See Form 5-6.
PRACTICE TIP: Although ORS 112.245 allows an interested person to be a witness to a will, caution dictates that witnesses to a will be disinterested persons. §5.2-4(e) Foreign Will A foreign will that operates on property in Oregon may be presented for probate in this state in a petition filed by an interested person in the same manner as in the probate of a will of a domiciliary. ORS 113.065. The petitioner must file a certified copy of both the will and the order admitting the will to probate in the foreign jurisdiction. The petition must contain the jurisdictional and other statutory facts required by the probate code or the rules. ORS 113.065(1).
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A foreign will may be contested for any cause that would be grounds for rejection of a will of a testator who died domiciled in this state. ORS 113.065(2). See §§6.6-1(a) to 6.6-6, regarding ancillary administration. §5.2-4(f) International Will An international will is valid as to form and formalities of execution if it complies with the requirements of the Uniform Inter- national Wills Act, set forth in ORS 112.232. ORS 112.232(2). Among other requirements, the will offered into probate must be accompanied by a certificate in the form specified by ORS 112.232(5). See §4.2-2(c). §5.2-4(g) Probate in Solemn Form Probate in solemn form, which is taken from the old English practice, requires the same proof as in an action tried without a jury. ORS 113.055(4). See §2.9-3. “Proceedings in ‘solemn form’ . . . require that all ‘interested persons’ be notified and allowed to appear in order to assert whatever position they may have with regard to the propounded will.” Matter of Ross’ Estate, 25 Or App 191, 196, 548 P2d 1001 (1976). An important difference between probate in common form and probate in solemn form is that “the latter constitutes an adversary proceeding in which parties in interest opposed to the will have an opportunity to contest its validity, while in the former contestants are neither notified nor permitted to appear.” Matter of Ross’ Estate, 25 Or App at 196. Thus, interested parties have the right to cross-examine the attesting witnesses and to introduce evidence attacking the validity of the will before the will is admitted to probate. All statements in the petition for probate must be proved, including the testamentary capacity of the testator and the execution and attestation of the will. See 1 NICHOLAS JAUREGUY & WILLIAM E. LOVE, OREGON PROBATE LAW AND PRACTICE §462 (1958). Probate in solemn form can be initiated by the petitioner or by an interested person. If the petitioner initiates probate in solemn form, the petitioner must obtain a hearing date for presenting the will, give the decedent’s heirs and devisees notice of that hearing, and file an affidavit of the giving of the notice. See JAUREGUY & LOVE, supra.
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PRACTICE TIP: An interested person who desires to contest the validity of a will that has not yet been presented for probate may initiate the will contest by commencing a probate in solemn form. This procedure sets the stage for evidence attacking the will to be presented in the same manner as in an action tried without a jury. See ORS 113.055(4). §5.2-4(h) Contested Will “Any interested person may contest the probate of a will or the validity of the will or assert an interest in the estate” for the reasons and within the time limits set forth in ORS 113.075, ORS 113.075(1), (3). If a will is contested, proof of any facts must be made in the same manner as in an action tried without a jury. ORS 113.055(4). See §§15.2- 1(a) to 15.2-2(g), regarding will contests. §5.2-5 Appointment of Personal Representative §5.2-5(a) Preference in Appointing Personal Representative Upon the filing of a petition, the court must appoint a “qualified person it finds suitable” as the personal representative of the estate, giving preference to the persons listed in ORS 113.085(1), in the order set forth in the statute. ORS 113.085(1). Thus, the court has some discre- tion in appointing a personal representative, except in an escheat estate. See Wharff v. Rohrback, 152 Or App 68, 73–74, 952 P2d 87 (1998). ORS 113.085(1) sets forth the following order of preference: (1) The executor named in the will; (2) The decedent’s surviving spouse or the nominee of the surviving spouse; (3) The decedent’s nearest of kin or that kin’s nominee; (4) The Director of the Department of Human Services, the Director of the Oregon Health Authority, or “an attorney approved under ORS 113.086, if the decedent received public assistance as defined in ORS 411.010 or received care at an institution described in ORS 179.321(1) or (2) and it appears that the assistance or the cost of care may be recovered from the estate of the decedent”;
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(5) The Department of Veterans Affairs, if the decedent was a protected person, and the department joined in the petition for appoint- ment; or (6) Any other person qualifying. If the decedent died “wholly intestate and without known heirs,” the Department of State Lands (DSL) must be appointed as personal representative. ORS 113.085(2). But see ORS 113.085(3) (when the estate is insolvent, the court, with the DSL’s written authorization, may appoint another person to administer the estate). See §5.2-3, regarding an escheat estate.
PRACTICE TIP: The lawyer should check the county’s supplemental local rules, which may require the petition to allege that the proposed personal representative has ORS 113.085 preference to be appointed. §5.2-5(b) Disqualification of Personal Representative The grounds for which a person may be disqualified from serving as personal representative are set forth in ORS 113.092 and 113.095. A person nominated as personal representative who has been convicted of a felony must inform the court of the conviction. ORS 113.092(1). The conviction will not disqualify the nominee unless (1) the court finds that “the facts underlying the conviction are substantially similar to facts which would constitute grounds for removal” of the per- son as personal representative under ORS 113.195(2); and (2) the court “has reasonable grounds to believe that such person will be unfaithful to or neglectful of the trust.” ORS 113.092(1). A person’s failure to inform the court of the felony conviction may disqualify him or her from serving as personal representative, or may constitute grounds for removal as personal representative. ORS 113.092(2). Under ORS 113.095, the following persons are disqualified from serving as personal representative: (1) An incompetent; (2) A minor;
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(3) A person suspended for misconduct or disbarred from the practice of law, during the period of suspension or disbarment; (4) A person who has resigned from the Oregon State Bar when charges of professional misconduct are pending, or when disciplinary proceedings are pending against the person, until the person is reinstated; and (5) A licensed funeral service practitioner, unless the decedent was a relative of such practitioner or was a partner, employee, or employer of the practitioner petitioning for appointment as personal representative. §5.2-5(c) Nonresident Personal Representative Nonresidents of Oregon are not disqualified from acting as per- sonal representatives. Anyone who accepts appointment as personal representative submits to the personal jurisdiction of the court. ORS 113.087. §5.2-5(d) Limited Judgment If the court determines that “there is no just reason for delay,” the court in a probate proceeding may enter a limited judgment for a “decision on a petition for appointment or removal of a personal repre- sentative.” ORS 111.275(1)(a), (2). “The judgment document need not reflect the court’s determination that there is no just reason for delay.” ORS 111.275(2). See Form 5-7, which is used for a testate estate, and Form 5-8, which is used for an intestate estate. Further, all such limited judgments must comply with UTCR 2.010 and 9.030. PRACTICE TIP: Petitions and limited judgments “not requir- ing a court appearance may be mailed to the trial court administrator, with self-addressed stamped envelopes or postcards for responses.” UTCR 9.010.
PRACTICE TIP: If the bond requirements are known before the ex parte hearing, that amount can be filled in before presenting the limited judgment to the court. Otherwise, the amount of bond
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and the form of surety can be filled in after the court’s ruling at the hearing. §5.2-6 Bond §5.2-6(a) Necessity of Bond; Court Discretion The personal representative must file a bond unless (1) the will waives the bond requirement; or (2) the personal representative is (a) the sole heir or devisee, (b) the Department of State Lands, (c) the Depart- ment of Veterans Affairs, (d) the Director of Human Services, (e) the Director of the Oregon Health Authority, (f) an attorney approved under ORS 113.086, or (g) a trust company. ORS 113.105, 709.240. Note, however, that the court has discretionary authority with respect to the bond. The probate court has discretion to require a bond, even if the will provides that no bond is required. ORS 113.105(1). The court also has discretion to waive the bond requirement if all the devisees and heirs known to the court agree, in writing, that the requirement be waived, and their signed agreement waiving bond is filed with the court at the time the petition for appointment of the personal representative is filed. ORS 113.105(4). The court also has discretion to increase or reduce the amount of the bond, or to require a new bond as the circumstances dictate. ORS 113.115. See §5.2-6(c). CAVEAT: The lawyer should not seek a waiver of the bond under other circumstances. To do so might invalidate the appoint- ment of the personal representative.
PRACTICE TIP: The lawyer should check the county’s supplemental local rules regarding bond requirements. For example, in Multnomah County, if the probate court is not satisfied that the creditors will be paid, the court may require the personal representative of an intestate estate to post a bond—even if the personal representative is the sole heir or devisee of the estate. SLR 9.065 (Multnomah County).
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§5.2-6(b) Amount of Bond The probate code offers no particular formula for determining the amount of the personal representative’s bond. The amount must “be adequate to protect interested persons,” but, in any event, it may not be less than $1,000. ORS 113.105(2). In setting the amount of the bond, the court must consider (1) the nature, liquidity, and value of the estate’s assets; (2) anticipated income during administration; and (3) the probable indebtedness and taxes. ORS 113.105(2). §5.2-6(c) Increasing, Decreasing, or Requiring New Bond The court, in its discretion, may increase or reduce the amount of the bond, or require a new bond as the circumstances dictate. ORS 113.115. If a request is made to approve a surety bond in an amount less than the aggregate value of the property in the estate, as disclosed by the petition for appointment, a supporting affidavit, signed by the personal representative, guardian, conservator, or lawyer of record, must be filed. This requirement may be satisfied by an appropriate statement in the petition. UTCR 9.020. The bond may need to be increased if the personal representative intends to exercise the power to sell estate property under ORS 114.325, the sale price of the property to be sold exceeds $5,000, and the amount of the personal representative’s bond has not been increased by the amount of cash to be realized on the sale. ORS 114.325(2)(c). PRACTICE TIP: If a major asset of the estate will not be sold or exchanged immediately, the court may permit reduction of the amount of the bond by issuing an order restricting the personal representative’s authority to deal with or alienate property until such time as a need arises to transfer the asset. A request for such an order should be included in the petition for probate if it is to be truly cost-effective. An example of such language follows: “No real property may be sold, conveyed, hypothecated, or leased for a term greater than five years without further order of the Court.”
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PRACTICE TIP: The lawyer should obtain a bond for the amount needed and file it with the petition in order to expedite the personal representative’s appointment. Bonds in a form acceptable for filing with the court are usually prepared by the selected commercial surety company. However, commercial surety com- panies seem increasingly reluctant to issue bonds for personal representatives because of poor credit history. Therefore, the lawyer should make certain in advance that the personal representative can qualify for a bond. If the personal representative cannot obtain a bond, a personal surety bond may be necessary. A personal surety bond acceptable to the court must be by one or more sufficient personal sureties approved by the court. A personal surety must be a resident of this state. ORS 113.105. Most likely, the personal representative’s lawyer will then need to prepare the bond. See Form 5-9. §5.2-6(d) Court Approval of Bond Court approval of the personal representative’s bond is necessary. ORS 113.105. Neither the probate code nor the Uniform Trial Court Rules specify any particular form of the court’s approval of the bond.
PRACTICE TIP: The bond should include language for court approval. Form 5-9 contains a court-approval provision and a place for the judge’s signature. §5.2-7 Letters Testamentary or Letters of Administration After the personal representative is appointed and the required bond (if any) is filed with the court, the court must issue letters testamentary or letters of administration to the personal representative. ORS 113.125. Letters testamentary are issued when the decedent dies testate. See the form in ORS 113.125(2). Letters of administration are issued when the decedent dies intestate. See the form in ORS 113.125(3). “The duties and powers of a personal representative commence upon the issuance of letters.” ORS 114.255. See §§10.2-2 to 10.2-3.
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COMMENT: Letters are the personal representative’s basis of authority to execute the powers conferred by law. Their purpose is to give to the personal representative authentic evidence of authority. Some persons with whom the personal representative may have occasion to deal may want to see the letters. 2 NICHOLAS JAUREGUY & WILLIAM E. LOVE, OREGON PROBATE LAW AND PRACTICE §588 (1958) (citation not verified by publisher). §5.2-8 Notices Upon appointment, a personal representative must give notice of the proceeding to the decedent’s heirs, the decedent’s devisees, and interested persons as specified by the probate code. See ORS 113.145, 113.155. In addition, the personal representative must give the Oregon Department of Human Services and the Oregon Health Authority the same notice, plus a copy of the decedent’s death certificate. ORS 113.145(6).
NOTE: Notice to the Oregon Department of Human Services constitutes notice to the Oregon Health Authority. OAR 943-001- 0020(2)(e); see also OAR 407-043-0010(4)(h)(A). If the personal representative has not identified and found all of the decedent’s heirs and devisees, the personal representative must deliver or mail a copy of the petition and a copy of the decedent’s will (if any) to an estate administrator of the Department of State Lands. ORS 113.045(1). This responsibility continues throughout the probate proceeding. ORS 113.045(2). Therefore, if at any time after appointment the personal representative cannot identify and find an heir or devisee, the personal representative must give notice of that fact to an estate administrator at the Department of State Lands. In either instance, the personal repre- sentative must file proof of such delivery or mailing with the court. ORS 113.045(1)–(2). See ORS 111.218(1); see also §2.5-5. For further discussion of notice, including the manner of giving notice, proof of notice, and waiver of notice, see §§2.5-1 to 2.5-7 and §§7.3-1(a) to 7.3-3(b). See also Forms 5-10 to 5-16.
NOTE: Before the court will approve the final account, the personal representative must file proof that the heirs, devisees, and 5-20 2013 Revision
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interested persons received notice of the opportunity to file objections to the account. ORS 116.093. See §2.5-5 (proof of notice). When the probate code allows notice by publication (see ORS 111.215(1)(c) and 113.155), proof of publication may be made by an affidavit or a declaration of an employee of the new- spaper publishing the notice. ORCP 7 F(2)(b); ORS 111.218(2). In most instances, the newspaper automatically sends to counsel the required affidavit. Local practice may require the personal representative’s lawyer to prepare the affidavit. See Form 5-16.
PRACTICE TIP: Within 30 days after appointment, the per- sonal representative must file proof of service by mail or delivery of information to the persons described in ORS 113.035, the Oregon Department of Human Services, and the Oregon Health Authority. ORS 113.145(1), (4), (6). Such proof should be filed as soon as the notice is given, rather than at the end of the 30-day period, because under ORS 113.075(3) any “interested person,” a term much broader than an heir or a devisee (see ORS 111.005(12), (18), (19)), can contest a will for up to four months after the date of delivery or mailing of the information described in ORS 113.145, or four months after the first publication of notice to interested persons, whichever is later. The casual practice of filing proof of mailing or delivering information to persons entitled to notice and proof of publication at the time of filing the final account and petition for a judgment of distribution is extremely ill- advised. This practice could delay the final account an additional four months in order to allow time for possible will contests under ORS 113.075. For this reason, both Form 5-10 and Form 5-11 include wording from ORS 113.075. §5.2-9 Removal of Personal Representative §5.2-9(a) Grounds for Removal The probate code provides for both mandatory and discretionary removal of the personal representative.
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The court must remove the personal representative if the personal representative ceases to be qualified or becomes incapable of discharging his or her duties. ORS 113.195(1). The court, in its discretion, may remove the personal representative when he or she has been unfaithful to, or neglectful of, the trust, or has failed to inform the court of a past felony conviction. ORS 113.195(2)– (3). See Roley v. Sammons, 215 Or App 401, 412, 170 P3d 1067 (2007) (“removal is justified . . . when past conduct of the personal representative shows unfaithfulness or neglect of the trust or, under the equitable authority of the court, when the personal interests of the personal representative conflict with a substantial and legitimate interest of a beneficiary of the estate”); Holst v. Purdy, 117 Or App 307, 844 P2d 229 (1992). The following sources describe some of the grounds for removal: Dave R. Bonelli, Annot, Delay of Executor or Administrator in Filing Inventory, Account, or Other Report, or in Completing Administration and Distribution of Estate, as Ground for Removal, 33 ALR4TH 708 (1984) (supplemented periodically) (citation not verified by publisher); Wanda Ellen Wakefield, Annot, Adverse Interest or Position as Disquali- fication for Appointment of Administrator, Executor, or Other Personal Representative, 11 ALR4TH 638 (1982) (supplemented periodically) (citation not verified by publisher). See also 5 WEST’S OREGON DIGEST, EXECUTORS AND ADMINISTRATORS key 35(1) (1956); 2 NICHOLAS JAUREGUY & WILLIAM E. LOVE, OREGON PROBATE LAW AND PRACTICE §593 (1958) (citation not verified by publisher). The procedure for removing a personal representative is discussed in §5.2-9(b). §5.2-9(b) Procedure for Removal “When grounds for removal of a personal representative appear to exist [(see §5.2-9(a))], the court, on its own motion or on the petition of any interested person, shall order the personal representative to appear and show cause why the personal representative should not be removed.” ORS 113.195(4). A copy of the order to show cause and a copy of the
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petition (if any) must be served upon both the personal representative and the surety. ORS 113.195(4). §5.2-10 Successor Personal Representative §5.2-10(a) Appointment of Successor “When a personal representative dies, is removed by the court, or resigns and the resignation is accepted by the court,” the court must appoint a successor personal representative only if the former personal representative was the sole or last surviving personal representative, and administration of the estate has not been completed. ORS 113.215(1). Otherwise, the appointment of a successor personal representative is discretionary with the court. ORS 113.215(1). §5.2-10(b) Letters of Administration/Testamentary If a proven will is later set aside, the letters testamentary or the letters of administration must be revoked and new letters of administra- tion issued to a successor personal representative. ORS 113.215(2). If a will is proved after letters of administration have been issued, letters testamentary are then issued to a successor personal representative. ORS 113.215(3). §5.2-10(c) Powers of Successor The successor personal representative “has all the rights and powers of the predecessor,” including the powers conferred by the will, unless the powers conferred by the will were clearly personal to the predecessor. ORS 113.215(4). See chapter 7. §5.2-10(d) Publication of Notice to Interested Persons “If the personal representative dies, is removed by the court or resigns after the notice to interested persons required by ORS 113.155 has been published but before the expiration of four months from the date of first publication, the successor personal representative” must publish notice to interested persons as if the successor were the original personal representative. ORS 113.225. The new notice must contain all the information required in the original notice and, in addition, must state (1) that the original personal representative died, was removed by the court, or resigned; (2) the date of death, removal, or resignation; and 5-23 2013 Revision
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(3) the date of appointment of the successor personal representative. The republished notice must also state that claims against the estate must be presented to the successor personal representative within four months after the date of the first publication of the republished notice, or they may be barred. ORS 113.225(1). See Form 5-15. “[I]f the original personal representative dies, is removed by the court, or resigns after the expiration of four months from the date of the first publication of the [original] notice,” then the successor personal representative need not publish a new notice. ORS 113.225(2).
§5.3 PROBATE OF SMALL ESTATES §5.3-1 Generally The probate code provides a procedure for transferring personal property and real property, within specified monetary limits, to those who claim the right to succession to the property by means of an affidavit filed with the probate clerk. ORS 114.505–114.560. This procedure pro- vides an economical and time-saving approach for settling estates with minimum assets. If a decedent’s assets that would otherwise be subject to a regular probate are within the monetary limits of the probate code (see §5.3-2), the affidavit procedure avoids the necessity of proceeding through the full probate process to transfer the decedent’s assets to their proper recipients. However, the code does not preclude appointing a personal representative for property that meets the monetary limits of property qualifying for the small-estate affidavit procedure, if the personal representative’s appointment is sought within four months after the affidavit filing. See ORS 114.555.
PRACTICE TIP: The small-estate affidavit is often useful when the decedent owned substantial nonprobate property and also owned either a minimal amount of personal property or some real property that was not owned in a nonprobate form. The purpose of the small-estates procedure is to expedite transfers of the decedent’s property to beneficiaries in lieu of formal probate administration.
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§5.3-2 Estates Qualifying for Small-Estates Procedure An estate qualifies for the small-estate procedure only if: (1) The fair market value of the estate is $275,000 or less; (2) Not more than $75,000 of that fair market value is attri- butable to personal property; and (3) Not more than $200,000 of that fair market value is attri- butable to real property. ORS 114.515(2). Estate means the decedent’s property that is subject to admin- istration in Oregon. ORS 114.505(3).
CAVEAT: If a person who is eligible to file a small-estate affidavit “is aware that the decedent was the sole lessee or the last surviving lessee of a safe deposit box at the time of the decedent’s death,” the person may not file a small-estate affidavit until after an inventory of the box has been taken under ORS 708A.655. ORS 114.537(1). The person must consider the contents of the box in determining whether the decedent’s estate is within the limits prescribed by ORS 114.515(2). If the person then files a small- estate affidavit, the value of the contents of the box must be stated in the affidavit. If, after filing the affidavit, the person becomes aware that “the decedent was the sole lessee or the last surviving lessee of a safe deposit box at the time of the decedent’s death,” the person must promptly request an inventory of the box under ORS 708A.655, ORS 114.537(2). After consideration of the value of the contents of the box, the person must file an amended affidavit under ORS 114.515 if the decedent’s estate remains within the limits prescribed by ORS 114.515(2). However, if the decedent’s estate then exceeds the limits prescribed by the statute, the person must file notice with the court that the decedent’s estate is no longer subject to the small-estates procedure. ORS 114.537(2).
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§5.3-3 Small-Estate Affidavit §5.3-3(a) Contents of Affidavit A small-estate affidavit filed under ORS 114.515 must: (1) State the decedent’s name, age, domicile, post office address, and Social Security number, ORS 114.525(1) (see UTCR 2.100– 2.110 regarding segregating personal information from a document sub- mitted to the court); (2) State the date and place of the decedent’s death, ORS 114.525(2);
NOTE: A certified copy of the death certificate must be attached to the affidavit. ORS 114.525(2). (3) Describe and state the fair market value of all property to which the affidavit is to apply, including a legal description of any real property, ORS 114.525(3); (4) State the value of the contents of any safe-deposit box, if the affiant “is aware that the decedent was the sole lessee or the last surviving lessee of a safe deposit box at the time of the decedent’s death,” ORS 114.537(1) (see the caveat in §5.3-2); (5) State that no application or petition for the appointment of a personal representative has been granted in Oregon, ORS 114.525(4); (6) State whether the decedent died testate or intestate, ORS 114.525(5);
NOTE: If the decedent died testate, the original will must be attached to the affidavit. ORS 114.525(5). (7) List all the decedent’s heirs and the last address of each heir known to the affiant, and state that a copy of the affidavit showing the date of filing and a copy of the will, if any, will be delivered to each heir or mailed to the heir at his or her last-known address, ORS 114.525(6); (8) If the decedent died testate (a) list the devisees of the decedent and each devisee’s last address known to the affiant, and (b) state that a copy of the will and a copy of the affidavit showing the
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date of filing will be delivered to each devisee or mailed to the devisee at his or her last-known address, ORS 114.525(7); (9) State the interest in the property described in the affidavit to which each heir or devisee is entitled, and the interest, if any, that will escheat, ORS 114.525(8); (10) State that reasonable efforts have been made to ascertain creditors of the estate, ORS 114.525(9); (11) List any expenses of, and claims against, the estate that remain unpaid or on account of which the affiant or any other person is entitled to reimbursement from the estate, including the known or estimated amounts thereof and the creditors’ names and addresses as known to the affiant, and state that a copy of the affidavit showing the date of filing will be delivered to each creditor who has not been paid in full, or mailed to the creditor at its last-known address, ORS 114.525(9); (12) List separately the name and address of each person known to the affiant to assert a claim against the estate that the affiant disputes, and the known or estimated amount of the claim, and state that a copy of the affidavit showing the filing date will be delivered to each such person or mailed to the person at his or her last-known address, ORS 114.525(10); (13) State that a copy of the affidavit showing the filing date will be mailed or delivered to the Oregon Department of Human Services and the Oregon Health Authority, ORS 114.525(11);
NOTE: By administrative rule, notice to the Oregon Department of Human Services constitutes notice to the Oregon Health Authority. OAR 943-001-0020(2)(e); see also OAR 407- 043-0010(4)(h)(A).
PRACTICE TIP: The address of the Department of Human Services is: Oregon Department of Human Services, Estate Administration Unit, PO Box 14021, Salem OR 97309-5024. (14) State that claims against the estate that are not listed in the affidavit, or that are in amounts larger than those listed in the affidavit, may be barred unless (a) a claim is presented to the affiant, within four
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months of the filing of the affidavit, at the address stated in the affidavit for presentment of claims, or (b) a personal representative of the estate is appointed within four months after the filing of the affidavit, ORS 114.525(12); and (15) If the affidavit lists one or more claims that the affiant disputes, state that any such claim may be barred unless (a) a petition for summary determination is filed within four months of the filing of the affidavit, or (b) a personal representative of the estate is appointed within four months after the filing of the affidavit, ORS 114.525(13). See Forms 5-17 and 5-18.
NOTE: Any error or omission in an affidavit filed under ORS 114.515 “may be corrected by filing an amended affidavit within four months after the filing of the affidavit.” ORS 114.515(7).
PRACTICE TIP: Although the statute is silent on this issue, errors or omissions in an affidavit discovered after the four-month period will require the filing of a petition to reopen the estate and the appointment of a personal representative under ORS 116.233. See §§11.10-1 to 11.10-4.
NOTE: ORS 114.515 also allows the filing of a supplemental affidavit to include property not described in the original affidavit. ORS 114.515(8). However, a supplemental affidavit may not be filed if inclusion of the additional property would disqualify the estate from the small estates procedure. ORS 114.515(8); see ORS 114.515(2) (discussed in §5.3-2). Furthermore, if the property is discovered after the estate has been closed, the estate will need to be reopened. See §§11.10-1(a)(1) to 11.10-1(a)(3).
PRACTICE TIP: Because the names and addresses of agencies tend to change, the lawyer should verify the agency’s title and address before preparing and filing a small-estate affidavit. The telephone number for the Estate Administration Unit is 800-826- 5675 (toll-free in Oregon).
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§5.3-3(b) Who May File The probate code provides that any of the following persons may file a small-estate affidavit: (1) “One or more of the claiming successors of the decedent,” ORS 114.515(1)(a);
NOTE: See ORS 114.505(2) for the definition of claiming successors. A creditor may be a claiming successor. ORS 114.505(2)(c). See §5.3-7. (2) “If the decedent died testate, any person named as personal representative in the decedent’s will,” ORS 114.515(1)(b); (3) If the decedent received certain public assistance or received care at an institution described in ORS 179.010, and “it appears that the assistance or the cost of the care may be recovered from the estate of the decedent,” the Director of Human Services, the Director of the Oregon Health Authority, or a lawyer approved by either director under ORS 114.517 or 114.515(1)(c); or (4) If the decedent died intestate and without heirs, and the estate appears to be insolvent, a creditor of the estate who has requested and received authorization to file a small-estate affidavit from an estate administrator of the Department of State Lands, ORS 114.520(1).
NOTE: Both the creditor’s request and the estate admin- istrator’s permission must be in writing. ORS 114.520(2). Within 30 days after receiving the request, the estate administrator must either authorize the creditor, in writing, to file an affidavit, or inform the creditor that the Department of State Lands will file an affidavit as claiming successor. ORS 114.520(2)(a)–(b). However, before reaching its decision, the estate administrator must investigate the estate’s assets and liabilities and find that “it appears . . . that the estate is insolvent.” ORS 114.520(1)–(2). A creditor who is authorized to file a small-estate affidavit must note at the top of the affidavit that it is being filed by a
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creditor of the estate and attach to it the estate administrator’s written authorization to file the affidavit. ORS 114.520(3).
PRACTICE TIP: If the small estate involves title to real property, getting all claiming successors to join in the affidavit simplifies securing title insurance later on, because the record will show that all of the claiming successors participated in the small- estate procedures. However, the probate code does not require that all of the decedent’s claiming successors join in the affidavit. §5.3-3(c) When and Where the Affidavit May Be Filed The affidavit cannot be filed earlier than 30 days after the death of the decedent. ORS 114.515(3).
CAVEAT: If the person filing the small-estate affidavit “is aware that the decedent was the sole lessee or the last surviving lessee of a safe deposit box at the time of the decedent’s death,” the person may not file the affidavit until after an inventory of the box has been taken. ORS 114.537(1). See §5.3-2. The affidavit may be filed with the clerk of the probate court of any county where (1) the decedent had a domicile, (2) the decedent had “a place of abode” at the time of death, (3) the decedent had real or personal property at the time of death, (4) the decedent had real or personal property at the time the proceeding is commenced, or (5) the decedent died. ORS 114.515(1), 113.015. §5.3-4 Transfers of Property Pursuant to Affidavit After filing a small-estate affidavit (see §§5.3-3(a) to 5.3-3(c)), the affiant is authorized to “take control of the property of the estate coming into the possession of the affiant.” ORS 114.545(1)(a). See §5.3-4(a), regarding personal property, and §5.3-4(b), regarding real property. No sooner than 10 days after filing a small-estate affidavit (see §5.3-3(a)), the affiant may deliver a certified copy of the affidavit to “any person who was indebted to the decedent or who has possession of personal property belonging to the estate.” ORS 114.535(1). See §5.3- 4(a), regarding the transfer of personal property.
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The affiant may convey any of the estate property (real or personal) before the expiration of the four-month period stated in ORS 114.555 (see §5.3-8(b)) if (1) “each heir or devisee succeeding to the interest conveyed joins in the conveyance,” and (2) any net proceeds of the sale will become a part of the estate. ORS 114.545(1)(f). See §5.3-5, regarding the affiant’s duty to pay certain expenses and claims. See also §5.3-6, regarding a conveyance to a good-faith purchaser. If no personal representative is appointed within four months after the filing of a small-estate affidavit, ORS 114.555 provides that the interest of the decedent in all of the property described in the affidavit is transferred to the person or persons shown by the affidavit to be entitled thereto, and any other claims against the property are barred, except: (1) As provided in ORS 114.540, 114.545 and 114.550; and (2) For the purposes of a surviving spouse’s claim for an elective share in the manner provided by ORS 114.600 to 114.725. §5.3-4(a) Transfers of Personal Property If a certified copy of the affidavit is delivered to a person indebted to the decedent or in possession of the decedent’s personal property (see §§5.3-3(a) to 5.3-4), that person must “pay, transfer, deliver, provide access to and allow possession of the personal property to the affiant,” as provided in ORS 114.535. ORS 114.535(1). Subject to ORS 114.537 (regarding safe-deposit boxes; see §5.3- 2), if a copy of the affidavit is delivered to a person who controls access to personal property belonging to the decedent’s estate, “including personal property held in a safe deposit box for which the decedent was the sole lessee or the last surviving lessee,” the person must (1) give the affiant access to the property, and (2) allow the affiant to take possession of it. ORS 114.535(2). Subject to ORS 114.537, if a copy of an affidavit is delivered to a person who has received property of the decedent under ORS 446.616 (an interest in a manufactured structure), ORS 708A.430 or 723.466 (a deposit in a financial institution or a credit union), ORS 803.094 (an
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interest in a vehicle), or a similar statute providing for the transfer of property of an estate that is not being probated, the person must “pay, transfer, deliver, provide access to or allow possession of the property to the affiant if the person would be required to pay, transfer, deliver, provide access to or allow possession of the property to a personal representative of the estate.” ORS 114.535(3). A transfer agent of any corporate security registered in the dece- dent’s name must change the registered ownership on the corporation’s books to the person entitled to the security on the presentation of a certified copy of the affidavit. ORS 114.535(5). Any person who “pays, transfers, delivers, provides access to or allows possession of property of a decedent in the manner provided by [ORS 114.535] is discharged and released from any liability or responsibility for the property in the same manner and with the same effect as if the property had been transferred, delivered or paid to a personal representative of the estate of the decedent.” ORS 114.535(4). If a person to whom an affidavit is delivered refuses to relinquish any personal property as required by the statute, “the property may be recovered or payment, delivery, transfer of or access to the property may be compelled upon proof of the transferee’s entitlement in a proceeding brought for the purpose by or on behalf of the transferee.” ORS 114.535(6).
PRACTICE TIP: The small-estate affidavit may be unneces- sary if the personal property to be transferred consists of a deposit of $25,000 or less in a financial institution or credit union (ORS 708A.430, 723.466), title to a motor vehicle (ORS 803.094), or a pet (ORS 114.215(3)). Transfers of these items may occur as indicated by the above-mentioned sections. §5.3-4(b) Transfers of Real Property If real property is involved in a small-estate proceeding, the affiant must “cause to be recorded in the deed records of any county in which real property belonging to the decedent is situated an affiant or claiming successor’s deed executed in the manner required by ORS chapter 93.” ORS 114.545(3). 5-32 2013 Revision
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PRACTICE TIP: When dealing with real property, the lawyer who considers the small-estate affidavit and procedure appropriate should consult with a title company to learn the kind of proof or documentation the title company requires to insure title and the amount of any additional premium the title company may charge.
PRACTICE TIP: If there are several heirs or devisees of real property, they should all join in the affidavit or the signing of the deed. See ORS 114.545(1)(f).
PRACTICE TIP: If an heir or a devisee desires to sell an interest in the real property to another heir or devisee, the lawyer should obtain a quitclaim deed from the selling heir or devisee contemporaneously with the signing of the affidavit. §5.3-5 Duties and Powers of Affiant The probate code specifies the duties of a person who files a small- estate affidavit. Pursuant to ORS 114.545, the affiant: (1) Must take control of the property coming into the affiant’s possession; (2) Must, within 30 days after filing the affidavit, mail, deliver, or record “each instrument which the affidavit states will be mailed, delivered or recorded”; (3) Must pay or reimburse any person who has paid certain expenses and claims, including (a) expenses of administration listed in the affidavit, (b) expenses of a funeral and disposition of the decedent’s remains as listed in the affidavit, (c) claims listed in the affidavit as undisputed, (d) allowed claims presented to the affiant within four months after the affidavit was filed (see ORS 114.540), and (e) claims that the probate court has directed the affiant to pay; NOTE: The expenses and claims must be paid from and to the extent of the property of the estate, and must be paid in the order of priority set forth in ORS 115.125. ORS 114.545(1)(c)–(d). See §5.3-7, regarding claims of creditors. (4) May (as allowed by the statute) transfer or sell any vehicle that is part of the estate; and 5-33 2013 Revision
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(5) May (as allowed by the statute) convey any real or personal property that is part of the estate if “each heir or devisee succeeding to the interest conveyed joins in the conveyance” and any proceeds become part of the assets subject to the small-estate affidavit.
PRACTICE TIP: The affiant’s duties and powers parallel, in abbreviated form, those of a personal representative. Therefore, if the heirs or devisees are different from the affiant, that is, if not all of the heirs or devisees join in the affidavit, the affiant must take care to deal with the decedent’s property in a fiduciary manner. In such a situation, the lawyer should caution the affiant to keep records and provide reports, similar to those in a regular probate, directly to at least those heirs or devisees who do not join in the affidavit. §5.3-6 Purchaser of Small-Estate Property The affiant may sell the decedent’s interest in real property or personal property before the expiration of the four-month period following the filing of the small-estate affidavit, if each heir or devisee joins in the conveyance, the grantee of the conveyance is a purchaser in good faith and for a valuable consideration, and the proceeds of the sale (“net of the reasonable expenses of sale and any debt secured as of the date of the decedent’s death by a duly perfected lien on the property”) become a part of the estate subject to ORS 114.505–114.560. ORS 114.545(1)(f). If these conditions are met, “the purchaser has no duty with respect to application of the consideration paid for the conveyance.” ORS 114.545(1)(f). If no personal representative is appointed within four months after the filing of the affidavit, the heir or devisee succeeding to the decedent’s interest in the property can convey that interest free of any interest of any claiming successor. ORS 114.545(1)(f).
NOTE: “If the property is a manufactured structure as defined in ORS 446.561, the affiant must assign interest in the structure as provided in ORS 446.616.” ORS 114.545(1)(f). §5.3-7 Creditors The statutes governing the small-estates procedure protect credi- tors by, among other things, allowing them to (1) file a small-estate 5-34 2013 Revision
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affidavit (see §5.3-3(b)), (2) present claims against the estate, and (3) file a petition for summary review of administration of an estate. ORS 114.505(2)(c), 114.515(1)(a), 114.540(3), 114.545(1)(c)–(d), 114.550. “Any creditor of the estate entitled to payment or reimbursement from the estate under ORS 114.545(1)(c) who has not been paid or reimbursed the full amount owed such creditor within 60 days after the date of the decedent’s death” may file a small-estate affidavit. ORS 114.505(1)(c), 114.515. A creditor may present a claim to the affiant within four months after the affidavit (or an amended or supplemental affidavit) was filed. Each claim presented must (1) be in writing; (2) describe the nature and amount of the claim, if ascertainable; and (3) state the names and addresses of the claimant and the claimant’s lawyer, if any. ORS 114.540(1), 115.005. A claim presented to the affiant is considered allowed as presented unless, within 60 days after the presentment date, the affiant mails or delivers a notice of disallowance of the claim, in whole or in part, to the claimant and any lawyer for the claimant. A notice of disallowance of a claim must inform the claimant that the claim has been disallowed, in whole or in part, and that, to the extent disallowed, the claim will be barred unless the claimant proceeds as specified in the code or a personal representative is appointed within four months after the filing of the affidavit. ORS 114.540(2). If the affiant disallows a timely claim presented by a creditor of the estate, the creditor “may within 30 days after the date of mailing or delivery of the notice of disallowance file with the probate court a petition for summary determination of the claim by the court.” ORS 114.540(3). An unpaid creditor whose claim is listed in the affidavit as disputed may “within four months after the filing of the affidavit file with the probate court a petition for summary determination of the creditor’s claim by the court.” ORS 114.540(3). Once the creditor petitions for a summary determination, the court will hear the matter without a jury, after notice to the creditor and the 5-35 2013 Revision
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affiant. Any interested person may be heard in the proceeding. The claim may be proved as provided in ORS 115.195(2). ORS 114.540(3). Upon the hearing, the court will determine the claim in a summary manner, and must order that the claim be allowed or disallowed in whole or in part. If the court allows the claim in whole or in part, the order must direct the affiant, to the extent of property of the estate allocable to the payment of the claim pursuant to ORS 115.125, or any claiming successor to whom payment, delivery or transfer has been made under ORS 114.505 to 114.560 as a person entitled thereto as disclosed in the affidavit, to the extent of the value of the property received, to pay to the creditor the amount so allowed. ORS 114.540(3). No appeal may be taken from the court order made on a summary determination. ORS 114.540(3). If the person who filed the small-estate affidavit fails to pay the expenses and claims of the estate as described in §5.3-5, then any person who received property pursuant to the affidavit procedure is “personally answerable and accountable” to (1) creditors of the estate to the extent of the value of the property received (to the extent that the creditors are entitled to payment pursuant to the code), and (2) any later-appointed personal representative of the decedent’s estate. ORS 114.545(2). If an amended or supplemental affidavit is filed, a claim against the estate must be filed within four months after the filing of the amended or supplemental affidavit. ORS 114.515(7)–(8). Each claim presented to the affiant must include the information required by ORS 115.025. ORS 114.540(1). §5.3-8 Liability of Heirs and Devisees Who Receive Decedent’s Property §5.3-8(a) Liability to Creditors Any heir or devisee who received payment, delivery, or transfer of the decedent’s property pursuant to a small-estate affidavit is “personally answerable and accountable” to the decedent’s creditors who present their claims to the affiant within four months after the filing of the
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affidavit. ORS 114.545(2)(a). The liability of such a person is limited to the value of the property received. ORS 114.545(2)(a). §5.3-8(b) Liability to Personal Representative If a personal representative of the decedent’s estate is appointed within four months after the filing of a small-estate affidavit, then the personal representative is entitled to take control of the decedent’s property and proceed with probating the estate. See ORS 114.545(2)(b), 114.555. The administration of the estate through the probate court then takes precedence over the previous affidavit filing. The appointment of a personal representative makes the heirs and devisees participating in the small-estate affidavit proceeding “personally answerable and accountable” to the personal representative. ORS 114.545(2)(b).
COMMENT: If a personal representative is appointed later than four months after the filing of the affidavit, it is unclear whether that personal representative would have an enforceable right to take control of the decedent’s property transferred to the heirs or devisees, or whether the personal representative could only administer the unpaid claims against the recipient or recipients of the decedent’s property. §5.3-8(c) Liability to Omitted Heirs and Devisees The probate code does not specifically address the consequences of omitting an heir or a devisee in a small-estate affidavit.
COMMENT: The code does not change the law of intestate succession nor testate distribution. Instead, by reference to “heirs” and “devisees” in ORS 114.505(2), the code preserves the law. It would seem that an omitted heir or devisee would be entitled to whatever relief is available to an heir or a devisee who is the victim of estate chicanery. Although ORS 114.555 states that “any other claims against the property are barred,” this would not seem to apply to an omitted heir or devisee, because the statute does not expressly state an intent to bar an heir or a devisee. ORS 114.555 seems to be directed more to creditors than to heirs or devisees.
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§5.3-8(d) Bar of Claims Against the Property If a personal representative is not appointed within four months after the filing of a small-estate affidavit, the decedent’s interest in all of the property described in the affidavit is transferred to the person shown in the affidavit to be entitled to it, and all other claims against the property are barred, except as provided in ORS 114.540 (procedure for claims and summary determination), ORS 114.545 (liability of a person who receives estate property), ORS 114.550 (summary review of administration of the estate), and ORS 114.600–114.725 (surviving spouse’s claim for an elective share). ORS 114.555. An “affiant or any claiming successor of the estate who has not been paid the full amount owed such claiming successor may, within two years after the filing of an affidavit under ORS 114.515, file with the probate court a petition for summary review of administration of the estate.” ORS 114.550. A creditor cannot file this petition if the creditor received a copy of the small-estate affidavit within 30 days after the affidavit was filed, the creditor was shown as a disputed creditor in the affidavit, and the creditor had not filed a petition for summary determination under ORS 114.540. ORS 114.550. A person who files a petition for summary determination under ORS 114.540 or a petition for summary review of administration of an estate under ORS 114.550 must pay the filing fee established under ORS 21.135. ORS 114.552(1).
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Form 5-1 Initiating Probate: Critical Dates Checklist
Estate of Court Case No. Personal Representative Date of Death Tax ID #
Due Date Item Date Filed REGULAR PROBATE PROCEEDINGS
Petition for appointment of personal representative
Bond (if required) Order appointing personal representative After appointment (or Letters issued if bond required, after bond approved); see ORS 113.125, 113.105
Within 30 days of Notice to heirs/devisees appointment; see ORS 113.145(4)
Affidavit of mailing Within 30 days of Mailing notice and death certificate to appointment; see ORS Department of Human Services 113.145(6)
Upon appointment Send notice to interested persons to (after letters issued by newspaper for publication court); see ORS 113.155
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Due Date Item Date Filed On receipt; see ORS File proof of publication of notice to 113.155(4) interested persons Within nine months Any petition for spouse’s elective after decedent’s death share must be filed (ORS 114.610(1)(c))
State law (see ORS Disclaimer 105.623–105.649); federal law, nine months (see IRC §2518) File five months after Proof of compliance with ORS appointment; see ORS 115.003(1)–(2) with checklist of 115.003(4) actions taken and copies of any notice delivered or mailed
SMALL-ESTATE PROCEEDING No earlier than 30 days Small-estate affidavit after decedent’s death (ORS 114.515) Four months after Transfer property to claiming filing of affidavit; ORS successors 114.555; see ORS 114.545(1)(e)–(f)
COMMENT: See §5.1.
CAVEAT: This checklist is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this checklist.
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Form 5-2 Letter to Personal Representative
______, 20____
[personal representative’s name] [address]
Dear ______: Again, please let me express my sympathy to you on the death of ______. I hope the service we provide will make the estate- administration process as easy as possible for you. Before we can begin assisting you in the administration of [decedent’s name]’s estate, we need the following: the original will (if any); a certified copy of the death certificate; and the names, addresses, ages, and Social Security numbers of all heirs and devisees, if any (beneficiaries). We can begin preparing the petition as soon as we receive this information. So that you will have an idea of what probating [decedent’s name]’s estate involves, this letter outlines the steps required by the court and the taxing authorities concerning administering the estate, and your responsibilities as personal representative. Probate begins with filing a petition with the probate court. We will prepare the petition for your signature. The petition requests [both] your appointment as personal representative [and admission of the will to probate]. Within a day or two after the petition is filed, the judge will sign an order approving the petition [and bond]. Then the court clerk will issue letters [testamentary / of administration] (Letters) certifying your appointment as personal representative. The Letters show you are authorized to deal with all facets of the estate, such as collecting insurance proceeds, collecting debts owed the estate, establishing an estate bank account, paying creditors’ claims, signing releases, listing real property for sale, transferring bank accounts,
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and any other duties that become necessary as a result of your appoint- ment as personal representative. Immediately after Letters are issued to you, you must publish a notice to interested persons in [name of newspaper] stating your appointment as personal representative and requiring all persons having claims against the estate to present them to you. This puts creditors on notice that they have four months within which to file claims against the estate for payment of their accounts. The publishing of notice to interested persons does not cut off claims of known creditors. To accomplish that, you must completely review the financial records and affairs of [decedent’s name] and ascertain the identity and address of each person either having or potentially asserting a claim against the estate. Enclosed is a Creditor Search Checklist as a guide in performing this duty. If you know of a creditor and the creditor does not file a claim in response to the published notice to interested persons, you must take the initiative to see that the creditor is satisfied either by payment or settlement. In short, you cannot “wait out the time” and then try to assert a defense of “nonclaim.” Next, we will prepare notices for all heirs and beneficiaries advising them that you have been appointed personal representative and informing them how to obtain information about the estate. Both this notice to heirs and the published notice for creditors are required by law. An inventory of the estate assets must be filed within 60 days after your appointment as personal representative. The estate assets will consist of all property owned individually by [decedent’s name]. You, as personal representative, must arrange for preparation of various income, fiduciary, and estate tax returns, both federal and state. To assist you in meeting this responsibility, we suggest you use the services of [decedent’s name]’s certified public accountant, public accountant, or tax preparer, if any. Otherwise, we recommend you retain those services and follow the timelines given by the professional you hire. Bear in mind that regardless of other tax due dates, estate tax returns are due nine months after death.
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If the probate proceeding is not completed within a year, you must file annual accountings for each year. Each annual accounting must report all receipts and disbursements and the disposition of estate property during the period covered by the annual accounting. This accounting must also describe estate assets remaining under your control as personal representative. It may also seek partial payment of your personal representative’s fees and expenses, as well as partial payment of our attorney fees and related expenses. Although the annual accounting does not require court approval at that time, any request for personal representative fees or attorney fees requires court approval before payment. Once the creditors and all taxes have been paid, the estate will be ready for distribution. Before distribution can be made, however, you must file a final accounting with the court reporting all receipts and disbursements and the disposition of estate property during the probate (including those reported in the annual accountings, if any), and a description of estate assets available for distribution. This accounting must also detail your personal representative’s fees and our attorney fees, which must be approved by the court. The final accounting includes a petition for a judgment of distribution of the estate assets to the beneficiaries, and a request that you be authorized to pay attorney fees and costs, accountant fees, if any, and your personal representative fee and costs. After the judge approves the accounting, authorizing payment of fees and costs, and directing distribution, distributions will be made. We will assist you in making distribution to the beneficiaries and securing receipts from each distributee for filing with the court. Once all receipts are filed, we usually prepare a petition to the court for an order discharging you as personal representative and closing the estate.
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If you have any questions at any time during the administration of this probate, please do not hesitate to call me.
Very truly yours,
/s/______[lawyer’s name]
COMMENT: See §5.1.
CAVEAT: This sample letter is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this letter.
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Form 5-3 Petition for Probate of Will and Appointment of Personal Representative
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) ORS 21.170 Deceased. ) ) PETITION FOR PROBATE ) OF WILL AND ) APPOINTMENT OF ) PERSONAL ) REPRESENTATIVE ) ) VALUE OF ESTATE IS ) NOT MORE THAN ) $______
______, petitioner, alleges: 1. The following information is given with regard to the decedent: (a) Name: (b) Birth Date: (c) Domicile: (d) Post Office Address: (e) Date of Death:
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(f) Place of Death: (g) Social Security No.: 2. The decedent died testate. The will [as ratified and modified by the (number) codicil] of the decedent and the proof of [its / their] due execution are presented to the Court herewith. [See the second note below.] There is no just reason for delay in entering a limited judgment for appointment of a personal representative. [See ORS 113.035(10) regarding submission of a copy of the decedent’s will if the original will is lost or destroyed, but not revoked.] 3. Venue is established in ______County, Oregon, in that, at the time of the decedent’s death, [set forth one or more of grounds specified in ORS 113.015]. 4. ______, whose post office address is ______and whose telephone number is ______, is nominated as personal representative [set forth one or more of grounds specified in ORS 113.085, e.g., under the will of the decedent]. ______is qualified to act as personal representative and is not disqualified to serve as personal representative under the provisions of ORS 113.095. The decedent’s will waives any bond requirement and specifies that no bond will be required of any personal representative of the decedent’s will. [See the first Note below.] 5. Petitioner has made reasonable efforts to identify and locate all the decedent’s heirs; their names, relationship to the decedent, and post office addresses are as follows: NAME RELATIONSHIP ADDRESS
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6. The names and post office addresses of the devisees of the decedent are as follows: NAME ADDRESS
[See the second Note below.] 7. As far as is known to petitioner, the nature, extent, liquidity, and apparent value of assets of this estate subject to probate are [real / personal] property with an aggregate value of not less than $______[nor more than $______]. 8. The personal representative has employed ______, whose post office address is ______, and whose telephone number is ______, as lawyer(s) to represent the personal representative in the administration of this estate. 9. Petitioner does not know of any person who asserts an interest in the estate under subsection (8) or (9) of ORS 113.035, nor does petitioner know of any person on whose behalf such an interest has been asserted. [See the second Note below.] WHEREFORE, 10.
Petitioner prays for a limited judgment: (a) Declaring this will to be the last will and testament of the decedent and admitting the same to probate [see the second Note below]; and (b) Appointing______as personal representative to serve without bond.
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DATED: ______, 20___. I HEREBY DECLARE THAT THE ABOVE STATEMENT IS TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF, AND THAT I UNDERSTAND IT IS MADE FOR USE AS EVIDENCE IN COURT AND IS SUBJECT TO PENALTY FOR PERJURY.
/s/______[petitioner’s name] Petitioner
PETITIONER: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §§5.2-2(a) to 5.2-2(b). See also, e.g., §§5.2-4(a), 5.2-5(a), 5.2-6(a).
NOTE: If a bond is not waived by the will, but waiver or reduction is appropriate, paragraphs 4 and 9 can be revised to fit these facts as suggested below: Waiver: Delete the last sentence of paragraph 4 and substitute the following language: “The decedent’s will does not waive bond. No bond is necessary because the personal representative is the sole beneficiary of the estate and there are no
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known creditors. It is in the best interests of those interested in this estate that the personal representative’s bond be waived by order of this court to minimize administration costs.” No changes are needed in paragraph 9. Reduction, if the bond amount is set but it is less than the aggregate value of the assets set forth in the petition: Delete the last sentence of paragraph 4 and substitute the following language: “The decedent’s will does not waive bond. The personal representative’s bond should be set at $______by order of this court to reduce administration costs. The bond amount is less than the aggregate value contained in this petition. The lesser amount is requested because there are no known creditors having claims exceeding $______in the aggregate and the estate is liquid.” Paragraph 10(b) should also be revised by deleting “. . . to serve without bond” and substituting “. . . and fixing the amount of bond at $______issued by a surety company authorized to transact surety business in the state of Oregon.”
NOTE: If any person is asserting an interest in the estate based on a contention described in subsection (8) or (9) or ORS 113.035 (e.g., the will is ineffective, see §5.2-2(b)), the petition must be revised accord- ingly. ORS 113.035(8)–(9) requires the petition to include the name and post office address of any person asserting such an interest.
NOTE: If a devisee is not entitled to receive the devise, paragraph 6 should explain why the devise failed (e.g., [devisee’s name] predeceased the decedent on [date of death] and that devisee’s devise failed or that devisee wrongfully killed the decedent on [date]).
NOTE: See §5.2-2(b) regarding segregating protected personal information, such as a Social Security number, from a document submitted to a court. COMMENT: See UTCR 2.010 and 9.030 for the form of documents, including requirements regarding document title, spacing, and format. See also ORS 111.205. Also, check for any relevant supplementary local rules.
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NOTE: The last page of every petition in the probate court must include the “name, address, telephone number, fax number, e-mail address, and bar number of the attorney of record.” UTCR 9.030(1). See also UTCR 2.010(7), which requires that all documents include the author’s name, address, telephone number, and fax number (if any). CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 5-4 Petition for Administration of Intestate Estate and Appointment of Personal Representative
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) ORS 21.170 Deceased. ) ) PETITION FOR ) ADMINISTRATION OF ) INTESTATE ESTATE ) AND APPOINTMENT OF ) PERSONAL ) REPRESENTATIVE ) ) VALUE OF ESTATE IS ) NOT MORE THAN ) $______
______, petitioner, alleges: 1. The following information is given with regard to the decedent: (a) Name: (b) Birth Date: (c) Domicile: (d) Post Office Address: (e) Date of Death:
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(f) Place of Death: (g) Social Security No.: 2. The decedent died intestate. There is no just reason for delay in entering a limited judgment for appointment of a personal representative. 3. Venue is established in ______County, Oregon, in that, at the time of the decedent’s death, [set forth one or more of grounds specified in ORS 113.015]. 4. Petitioner nominates ______, whose post office address is ______, and whose telephone number is ______, as personal representative. ______is qualified to act as personal representative and is not disqualified to serve as personal representative under the provisions of ORS 113.095. Petitioner has preference to serve pursuant to ORS 113.085 because ______. Petitioner requests that the bond of the personal representative be set at $______by a surety company authorized to transact surety business in the state of Oregon to minimize costs of administration. [See the Note below.] 5. Petitioner has made reasonable efforts to identify and locate all the decedent’s heirs; each heir’s name, relationship to the decedent, and post office address are as follows: NAME RELATIONSHIP ADDRESS
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6. As far as is known to petitioner, the nature, extent, liquidity, and apparent value of assets of this estate subject to probate are [real / personal] property with an aggregate value of not less than $______. 7. The personal representative has employed ______, whose address is ______, and whose telephone number is ______, as lawyer to represent the personal representative in the administration of this estate. 8. Petitioner does not know of any person who asserts an interest in the estate under subsection (8) or (9) of ORS 113.035, nor does petitioner know of any person on whose behalf such an interest has been asserted. WHEREFORE, 9. Petitioner prays for a limited judgment: (a) Admitting this estate to administration; and (b) Appointing ______as personal representative and fixing the amount of bond at $______issued by a surety company authorized to transact surety business in the state of Oregon [see the Note below]. DATED: ______, 20___.
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I HEREBY DECLARE THAT THE ABOVE STATEMENT IS TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF, AND THAT I UNDERSTAND IT IS MADE FOR USE AS EVIDENCE IN COURT AND IS SUBJECT TO PENALTY FOR PERJURY.
/s/______[petitioner’s name] [address] [telephone no.] [fax no.] Petitioner
/s/______[lawyer’s name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address] Of Attorneys for Petitioner
COMMENT: See §§5.2-2(a) to 5.2-2(b). See also, e.g., §§5.2-4(a), 5.2-5(a), 5.2-6(a). See UTCR 2.010 and 9.030 for the form of documents, including requirements regarding document title, spacing, and format. See also ORS 111.205.
NOTE: The facts may support either bond waiver or bond reduction. Paragraphs 4 and 9 can be revised to fit these facts. The following are suggested revisions of these paragraphs: Waiver: Delete the last sentence in paragraph 4 and substitute the following sentence: “No bond is necessary because the personal representative is the sole beneficiary of the estate and there are no known creditors.” Delete from paragraph 9 “. . . fixing the amount of bond at $______issued by a surety company
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authorized to transact business in the State of Oregon” and substitute “. . . bond to be waived.” Reduction: Add to paragraph 4: “The bond amount is less than the aggregate value contained in this petition. The lesser bond amount is just and in the best interests of those interested in the estate because there are no known creditors having claims exceeding $______in the aggregate and the estate is liquid.” Paragraph 9 remains unchanged.
NOTE: See §5.2-2(b) regarding segregating protected personal information, such as a Social Security number, from a document submitted to a court.
NOTE: The last page of every petition in the probate court must include the “name, address, telephone number, fax number, e-mail address, and bar number of the attorney of record.” UTCR 9.030(1). See also UTCR 2.010(7), which requires that all documents include the author’s name, address, telephone number, and fax number (if any). Also, check for any relevant supplementary local rules.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 5-5 Affidavit of Attesting Witness to Will
AFFIDAVIT OF ATTESTING WITNESS TO WILL
STATE OF ______) ) ss. County of ______)
I, ______, make the following statements: On the date of the will of ______, of which a photocopy is attached hereto, ______signed the will in my presence and declared it to be [his / her] will, whereupon, at [his / her] request and in [his / her] presence I attested the will by signing my name thereto. To the best of my knowledge and belief, the testator was at that time over the age of 18 years and of sound mind.
/s/______[affiant’s name] [address] [telephone no.] [fax no.]
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SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §5.2-4(a).
NOTE: See UTCR 2.010 and UTCR 9.030 and check for any relevant supplementary local rules. See also ORCP 1 E.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form. 5-57 2013 Revision
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Form 5-6 Affidavit of Witness to Signature of Testator or Witness
AFFIDAVIT OF WITNESS TO SIGNATURE OF TESTATOR OR WITNESS
STATE OF ______) ) ss. County of ______)
I, ______, make the following statements: [Here set forth in some detail your acquaintance with the person whose signature you undertake to prove.] I have examined the will of ______, to which this affidavit is attached [or, the will of ______, of which a photocopy is attached hereto], dated ______.
I am well acquainted with the signature of ______. The signature on the will is genuine.
/s/______[affiant’s name] [address] [telephone no.] [fax no.]
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SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §5.2-4(d). See also ORCP 1 E.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 5-7 Limited Judgment Admitting Will to Probate and Appointing Personal Representative
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) LIMITED JUDGMENT Deceased. ) ADMITTING WILL ) TO PROBATE AND ) APPOINTING PERSONAL ) REPRESENTATIVE WITH ) FULL POWERS
The Court accepts the petition of ______for the probate of the will [, as modified by codicil(s),] of the above-named decedent. There is no just reason for delay in entering judgment. IT IS THEREFORE ORDERED AND ADJUDGED that: (a) The will dated ______, 20___ [, as modified by codicil(s),] is hereby admitted to probate; (b) ______is appointed as personal representative of the estate with full powers; and (c) The personal representative is not required to file a bond, and letters testamentary will be issued forthwith to the personal representative in the manner provided by law.
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DATED: ______, 20___.
/s/______[judge’s name] Judge
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [lawyer’s name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §5.2-5(d). See UTCR 2.010 and UTCR 9.030 for the form of documents.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7). See also UTCR 2.010(12).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form. 5-61 2013 Revision
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Form 5-8 Limited Judgment for Administration of Intestate Estate and Appointment of Personal Representative
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) LIMITED JUDGMENT Deceased. ) FOR ADMINISTRATION ) OF INTESTATE ESTATE ) AND APPOINTMENT OF ) PERSONAL ) REPRESENTATIVE WITH ) FULL POWERS
On petition of ______for administration of the above-named decedent, the Court finds the allegations of the petition to be true. There is no just reason for delay in entering judgment. IT IS THEREFORE ORDERED AND ADJUDGED that: (a) The estate is admitted to administration. (b) ______is appointed as personal representative of the estate with full powers; and (c) The bond of the personal representative is fixed in the amount of $______to be issued by a surety company authorized to transact surety business in the state of Oregon, and letters of administration will be issued forthwith to the personal representative in the manner provided by law.
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DATED: ______, 20___.
/s/______[judge’s name] Judge
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [lawyer’s name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §5.2-5(d). See UTCR 2.010 for the form of documents. See also UTCR 9.030 and check for any relevant supplementary local rules.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7). See also UTCR 2.010(12).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 5-9 Personal Surety Bond
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) PERSONAL SURETY Deceased. ) BOND
We, ______, as personal representative and principal, and ______, as surety, do hereby undertake, jointly and severally, that we will pay to all interested persons in the above estate a sum not exceeding $______. If the personal representative faithfully performs all duties as personal representative, this bond will be void; otherwise, it will remain in full force and effect. DATED: ______, 20___.
/s/______[name of personal representative and principal] [address ] [telephone no.] [fax no.]
/s/______[surety’s name] [address ] [telephone no.] [fax no.]
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STATE OF ______) ) ss. County of ______)
I, ______, being first duly sworn on oath say: I am a resident of the state of Oregon; I am worth the sum of not less than $1,000 over and above all my debts and liabilities, and exclusive of property exempt from execution.
/s/______[surety]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
APPROVED: ______, 20___.
/s/______[judge’s name] Judge
COMMENT: See §§5.2-6(a) to 5.2-6(c).
NOTE: UTCR 2.120, adopted in 2005, provides that unless otherwise required by statute, an affidavit required by the UTCR “need not be notarized, but it must be signed by the affiant and must include a sentence, in prominent letters immediately above the signature of the affiant, that is in substantially the same form as the sentence for a declaration under penalty of perjury as specified in ORCP 1E.” CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 5-10 Information to Heirs and Devisees (Testate Estate)
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) INFORMATION TO Deceased. ) HEIRS AND DEVISEES
TO: HEIRS AND DEVISEES of the above-named decedent: [names and addresses of heirs and/or devisees]
The following information is given to you as an heir or devisee of the above-named decedent, who died on ______, 20___, in ______County, Oregon. Estate proceedings in the decedent’s estate, bearing the clerk’s file number ______, have been commenced and are now pending in the above-entitled Court wherein the decedent’s will has been admitted to probate. On ______, 20___, ______was duly appointed and is now serving as personal representative of the estate. Your rights may be affected by this proceeding; additional information may be obtained from the records of the Court, the personal representative, or the lawyer for the personal representative. The names, addresses, and contact information of the personal representative and the lawyer for the personal representative are as follows:
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Personal Representative: [name] [address] [telephone no.] Lawyer for the Personal Representative: [lawyer’s name] [address] [telephone no.]
Under Oregon law, when a will has been admitted to probate, any interested person may contest the probate of the will or the validity of the will or assert an interest in the will for any reason specified in ORS 113.075(1), but such an action must be commenced within four months after the date of delivery or mailing of the information described in ORS 113.145, or four months after the first publication of notice to interested persons, whichever is later. If you contemplate asserting any of the rights described in this paragraph, those rights may be barred unless you proceed as provided in ORS 113.075 within the specified time period.
Respectfully,
/s/______[name] Personal Representative
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
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LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See ORS 113.145. See also §5.2-8.
NOTE: If any person is likely to assert an interest in the estate for any of the reasons described in subsection (8) or (9) of ORS 113.035, this notice should include the statement about that claimant required by ORS 113.145(1)(g)–(h).
NOTE: The personal representative must also send a copy of this notice to the Oregon Department of Human Services and the Oregon Health Authority, plus a copy of the decedent’s death certificate. See Form 5-13.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1D–68 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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Form 5-11 Information to Heirs (Intestate Estate)
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) INFORMATION TO Deceased. ) HEIRS
TO: THE HEIRS of the above-named decedent: [names and addresses of heirs]
The following information is given to you as an heir of the above- named decedent, who died at ______on ______, 20___, in [place of death]. Estate proceedings in the decedent’s estate, bearing the clerk’s file number ______, have been commenced and are now pending in the above-entitled Court. On ______, 20___, the undersigned was duly appointed and is now serving as personal representative of the estate. So far as known, the decedent left no will and none has been proved in the proceedings. Your rights may be affected by this proceeding; additional information may be obtained from the records of the Court, the undersigned personal representative, or the lawyer for the personal representative. The names, addresses, and contact information of the personal representative and the lawyer for the personal representative are as follows:
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Administering Oregon Estates: 2012 Edition 1D–69 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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Personal Representative: [name] [address] [telephone no.] Lawyer for the Personal Representative: [lawyer’s name] [address] [telephone no.]
ORS 113.075 provides that any person may assert an interest in the estate for the reason that there exists a will that has not been alleged in the petition or that the decedent agreed, promised, or represented that the decedent would make a will or devise. Such an action must be commenced before the later of four months after the date of delivery or mailing of the information described in ORS 113.145, or four months after the first publication of notice to interested persons. If you contemplate asserting any of the rights described in this paragraph, those rights may be barred unless you proceed as provided in ORS 113.075 within the specified time period.
Respectfully,
/s/______[name] Personal Representative
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
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Administering Oregon Estates: 2012 Edition 1D–70 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
NOTE: If there is any person likely to assert an interest in the estate for any of the reasons described in subsection (8) or (9) of ORS 113.035, be sure to include the statement about that claimant required by ORS 113.145(1)(g).
COMMENT: See §5.2-8.
NOTE: The personal representative must also send a copy of this notice to the Oregon Department of Human Services, plus a copy of the decedent’s death certificate. See Form 5-13.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1D–71 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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Form 5-12 Affidavit of Proof of Mailing or Delivery of Information to Heirs and Devisees
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) AFFIDAVIT OF PROOF Deceased. ) OF MAILING OR ) DELIVERY OF ) INFORMATION TO ) HEIRS AND DEVISEES
STATE OF ______) ) ss. County of ______)
I, ______, depose and say that: I am the personal representative of the estate of the above-named decedent; on the appointment of the personal representative, I delivered or mailed to each of the following named persons the information required by ORS 113.145 in the above-entitled estate; a true copy of the information so delivered or mailed is attached hereto and made a part hereof. The information was delivered by me as set forth below, to each of the following named persons, personally and in person: NAME DATE OF DELIVERY
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[The information was mailed on ______, 20___, to each of the following named persons:
NAME DATE OF DELIVERY]
Each such information was contained in a separate sealed envelope with postage thereon fully prepaid, one addressed to each of the persons at the address as it appears in the petition filed herein for the appointment of a personal representative.
/s/______[personal representative’s name] [address] [telephone no.] [fax no.]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §5.2-8. See also ORS 111.218 and ORCP 9 C (proof of mailing or other delivery). A declaration under penalty of perjury may be used in lieu of a notarized affidavit. ORCP 1 E.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 5-13 Affidavit of Mailing Information to Oregon Department of Human Services
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) AFFIDAVIT OF MAILING Deceased. ) INFORMATION TO ) OREGON DEPARTMENT ) OF HUMAN SERVICES
STATE OF ______) ) ss. County of ______)
I, ______, being duly sworn, depose and say that: I am the lawyer for the personal representative of the above estate; on the appointment of the personal representative, I mailed a true copy of Information to Heirs and Devisees (Testate Estate / Intestate Estate) and the decedent’s death certificate, as required by ORS 113.145, to the Department of Human Services and the Oregon Health Authority to the following addresses: Oregon Department of Human Services Estate Administration Unit PO Box 14021 Salem, OR 97309-5024 Oregon Health Authority 500 Summer St., NE, E-20 Salem, OR 97301-1097
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The Information was mailed on ______, 20___.
/s/______[affiant’s name] [address] [telephone no.] [fax no.]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
NOTE: Adapt the form for testate or intestate estate.
COMMENT: See §5.2-8; see also §2.5-5. See ORS 111.218 and ORCP 9 C (proof of mailing or other delivery). A declaration under penalty of perjury may be used in lieu of a notarized affidavit. ORCP 1 E.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1D–75 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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Form 5-14 Waiver of Notice of Information
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) WAIVER OF NOTICE OF Deceased. ) INFORMATION
The undersigned hereby waives notice of the information required by ORS 113.145(1) to be given by the personal representative to the undersigned. DATED: ______, 20___.
/s/______
STATE OF ______) ) ss. County of ______) ______, being duly sworn, depose and say: I am the undersigned in the above-entitled waiver of notice of information and the foregoing waiver of notice of information is true as I verily believe.
/s/______[name] [address] [telephone no.] [fax no.]
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SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §5.2-8; see also §2.5-5. See ORS 111.218 and ORCP 9 C (proof of mailing or other delivery). A declaration under penalty of perjury may be used in lieu of a notarized affidavit. ORCP 1 E.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1D–77 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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Form 5-15 Notice to Interested Persons
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) NOTICE TO INTERESTED Deceased. ) PERSONS
NOTICE IS HEREBY GIVEN that the undersigned has been appointed personal representative. All persons having claims against the estate are required to present them, with vouchers attached, to the undersigned personal representative at [address], within four months after the date of first publication of this notice, or the claims may be barred. All persons whose rights may be affected by the proceedings may obtain additional information from the records of the Court, the personal representative, or the lawyers for the personal representative, ______. Dated and first published on ______, 20___.
/s/______[name] Personal Representative
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.] 5-78 2013 Revision
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LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
Attention: Legal Advertising Please publish the above notice once each week for three successive weeks and insert the date of first publication in the notice where required. Please call and confirm dates of publication.
Very truly yours,
/s/______[name] Personal Representative
COMMENT: See §5.2-8.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1D–79 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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Form 5-16 Affidavit of Publication
AFFIDAVIT OF PUBLICATION
STATE OF ______) ) ss. County of ______)
I, ______, being first duly sworn, depose and say that I am the principal clerk of the publisher of the ______, a newspaper of general circulation, as defined by ORS chapter 193, printed and published at ______in the aforesaid county and state; that the ______, a printed copy of which is hereto annexed, was published in the entire issue of said newspaper for three insertions in the following issues: ______.
/s/______[clerk’s name]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §5.2-8. Proof of notice by publication must be made in the form required by ORCP 7 F. ORS 111.218(2). ORCP 7 F(2)(b) provides that proof of publication may be made by an affidavit or a declaration of an employee of the newspaper publishing the notice.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1D–80 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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Form 5-17 Affidavit of Claiming Successor of Small Estate (Testate Estate)
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) AFFIDAVIT OF Deceased. ) CLAIMING SUCCESSOR ) OF SMALL ESTATE ) (TESTATE ESTATE)
STATE OF ______) ) ss. County of ______)
______, being first duly sworn, say: I am a claiming successor, as defined in ORS 114.505(2), to a portion of the decedent’s estate. I am hereinafter referred to as “affiant.” This affidavit is hereinafter referred to as “affidavit.” This affidavit is made pursuant to ORS 114.505–114.560. 1. The following information is given with regard to the decedent: (a) Name: (b) Age: (c) Domicile: (d) Post Office Address: (e) Social Security No.:
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Administering Oregon Estates: 2012 Edition 1D–81 Chapter 1D—Initiating Probate and Small-Estate Proceedings
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2. The decedent died on ______, 20___, at ______; a certified copy of the decedent’s death certificate is attached as Exhibit 1. 3. The decedent’s property subject to administration in Oregon consists of the following: (a) Real property and value thereof: [describe in full as shown on last deed in mesne chain of title and set value opposite]; and (b) Personal property and fair market value thereof: [describe each item and set value opposite]. [See the caveat in §5.3-2 regarding the contents of a safe-deposit box.] 4. No application or petition for the appointment of a personal representative has been granted in Oregon. 5. The decedent died testate; the decedent’s will is attached as Exhibit 2. [See ORS 113.035(10) regarding submission of a copy of the decedent’s will if the original will is lost or destroyed, but not revoked.] 6. The decedent’s heirs, each heir’s relationship to the decedent, and each heir’s last address known to the affiant are as follows:
NAME RELATIONSHIP ADDRESS
A copy of the will, and this affidavit showing the date of filing, will be delivered or mailed to each heir at the heir’s last-known address. 7. The decedent’s devisees and each devisee’s last address known to the affiant are as follows:
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NAME ADDRESS
A copy of the will, and a copy of this affidavit showing the date of filing, will be delivered or mailed to each devisee at the devisee’s last- known address. 8. The interest in the decedent’s property described in this affidavit to which each devisee is entitled is: NAME INTEREST
9. Reasonable efforts have been made to ascertain each creditor of the estate. The expenses of and claims against the estate remaining unpaid or on account of which the affiant or any other person is entitled to reimbursement from the estate, including any known or estimated amount thereof, and the name and address of each creditor, as known to the affiant, are: [Name, address, description of expense or claim, and known or estimated amount of it] A copy of the affidavit showing the date of filing will be delivered to each creditor who has not been paid in full or mailed to the creditor at its last-known address. 10. The name and address of each person known to the affiant to assert a claim against the estate that the affiant disputes and the last-known or estimated amount thereof are as follows: [Name, address, and known or estimated amount]
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A copy of the affidavit showing the date of filing will be delivered to each of the above, or mailed to each person at his or her last-known address. 11. A copy of this affidavit showing the date of filing will be mailed or delivered to the Oregon Department of Human Services and the Oregon Health Authority by depositing the copy of the affidavit in the United States Postal Service in a sealed envelope, with postage prepaid, to the following addresses: Oregon Department of Human Services Estate Administration Unit PO Box 14021 Salem, OR 97309-5024 Oregon Health Authority 500 Summer St., NE, E-20 Salem, OR 97301-1097 12. Claims against the estate not listed in this affidavit, or in amounts larger than those listed in this affidavit, may be barred unless (a) a claim is presented to the affiant within four months of the filing of this affidavit at the address set forth in this affidavit, or (b) a personal representative of the estate is appointed within the time allowed under ORS 114.555. 13. Any listed claim that the affiant disputes may be barred unless (a) a petition for summary determination is filed within four months of the filing of this affidavit, or (b) a personal representative of the estate is appointed within the time allowed under ORS 114.555. 14. The address for the purposes of presenting a claim to the affiant is: ______.
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15. Any noun or verb used in this affidavit is to be construed as either singular or plural as the context requires. 16. Exhibits 1 and 2 attached to this affidavit are each hereby made a part of this affidavit as though fully set forth at the place where reference to the exhibit is made.
/s/______[affiant’s name] [address] [telephone no.] [fax no.]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
[Repeat for each additional claiming successor]
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STATE OF ______) ) ss. County of ______)
I, ______, join in this affidavit.
/s/______[affiant’s name] [address] [telephone no.] [fax no.]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §§5.3-3(a) to 5.3-3(c).
NOTE: See UTCR 2.100–2.110 regarding segregating protected personal information, such as a Social Security number, from a document submitted to a court. PRACTICE TIP: A declaration under penalty of perjury may be used in lieu of a notarized affidavit. ORCP 1 E.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 5-18 Affidavit of Claiming Successor of Small Estate (Intestate Estate)
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) AFFIDAVIT OF Deceased. ) CLAIMING SUCCESSOR ) OF SMALL ESTATE ) (INTESTATE ESTATE)
STATE OF ______) ) ss. County of ______)
______, being first duly sworn, say: I am a claiming successor, as defined in ORS 114.505(2), to a portion of the decedent’s estate. I am hereinafter referred to as “affiant.” This affidavit is hereinafter referred to as “affidavit.” This affidavit is made pursuant to ORS 114.505–114.560. 1. The following information is given with regard to the decedent: (a) Name: (b) Age: (c) Domicile: (d) Post Office Address: (e) Social Security No.:
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2. The decedent died on ______, 20___, at [place]; a certified copy of the decedent’s death certificate is attached as Exhibit 1. 3. The decedent’s property subject to administration in Oregon consists of the following: (a) Real property and value thereof: [describe in full as shown on last deed in mesne chain of title and set value opposite]; and (b) Personal property and fair market value thereof: [describe each item and set value opposite]. [See the caveat in §5.3-2 regarding the contents of a safe-deposit box.] 4. No application or petition for the appointment of a personal representative has been granted in Oregon. 5. The decedent died intestate. 6. The decedent’s heirs, each heir’s relationship to the decedent, and each heir’s last address known to the affiant are as follows:
NAME RELATIONSHIP ADDRESS
A copy of this affidavit showing the date of filing will be delivered or mailed to each heir at the heir’s last-known address.
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7. The interest in the decedent’s property described in this affidavit to which each heir is entitled is: NAME INTEREST
8. Reasonable efforts have been made to ascertain each creditor of the estate. The expense of and claim against the estate remaining unpaid or on account of which the affiant or any other person is entitled to reimbursement from the estate, including any known or estimated amount thereof, and the name and address of each creditor, as known to the affiant, are: [Name, address, description of expense or claim, and known or estimated amount of it] A copy of the affidavit showing the date of filing will be delivered to each creditor who has not been paid in full or mailed to the creditor at its last-known address. 9. The name and address of each person known to the affiant to assert a claim against the estate that the affiant disputes and the last-known or estimated amount thereof are as follows: [Name, address, and known or estimated amount] A copy of the affidavit showing the date of filing will be delivered to each of the above or mailed to each person at his or her last-known address. 10. A copy of this affidavit showing the date of filing will be mailed or delivered to the Oregon Department of Human Services and the Oregon Health Authority by depositing the copy of the affidavit in the United
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States Postal Service in a sealed envelope, with postage prepaid, to the following addresses: Oregon Department of Human Services Estate Administration Unit PO Box 14021 Salem, OR 97309-5024 Oregon Health Authority 500 Summer St., NE, E-20 Salem, OR 97301-1097 11. Claims against the estate not listed in this affidavit, or in amounts larger than those listed in this affidavit, may be barred unless (a) a claim is presented to the affiant within four months of the filing of this affidavit at the address set forth in this affidavit, or (b) a personal representative of the estate is appointed within the time allowed under ORS 114.555. 12. Any listed claim that the affiant disputes may be barred unless (a) a petition for summary determination is filed within four months of the filing of this affidavit, or (b) a personal representative of the estate is appointed within the time allowed under ORS 114.555. 13. The address for the purposes of presenting a claim to the affiant is: ______. 14. Any noun or verb used in this affidavit shall be construed as either singular or plural as the context requires. 15. Exhibit 1 attached to this affidavit is hereby made a part of this affidavit as though fully set forth at the place where reference to the exhibit is made.
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/s/______[affiant’s name] [address] [telephone no.] [fax no.]
SUBSCRIBED AND SWORN TO before me on ______, 20____.
/s/______Notary Public for Oregon My commission expires: ______
[Repeat for each additional claiming successor]
STATE OF ______) ) ss. County of ______)
I, ______, join in this affidavit.
/s/______[affiant’s name] [address] [telephone no.] [fax no.]
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SUBSCRIBED AND SWORN TO before me on ______, 20____.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §§5.3-3(a) to 5.3-3(c).
NOTE: See UTCR 2.100–2.110 regarding segregating protected personal information, such as a Social Security number, from a document submitted to a court.
PRACTICE TIP: A declaration under penalty of perjury may be used in lieu of a notarized affidavit. ORCP 1 E.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 1D–92 Chapter 1D—Initiating Probate and Small-Estate Proceedings
Administering Oregon Estates: 2012 Edition 1D–93 Chapter 1D—Initiating Probate and Small-Estate Proceedings
Administering Oregon Estates: 2012 Edition 1D–94 Chapter 1E Special Considerations
Leslie Sutton Oregon Council on Development Disabilities Salem, Oregon
Janice Hatton Thorp Purdy Jewett Urness & Wilkinson PC Springfield, Oregon
Contents §6.1 Special Administration ...... 1E–3 §6.1-1 General Purpose ...... 1E–3 §6.1-2 Jurisdiction ...... 1E–3 §6.1-3 Grounds for Appointment ...... 1E–3 §6.1-4 Qualifications for Appointment ...... 1E–4 §6.1-5 Powers and Limitations of Special Administrator ...... 1E–5 §6.1-6 Accounting and Compensation ...... 1E–5 §6.2 Support of Surviving Spouse and Dependent Children During Administration 1E–6 §6.2-1 Generally ...... 1E–6 §6.2-2 Procedure for Obtaining Support ...... 1E–7 §6.2-3 Nature and Extent of Support ...... 1E–8 §6.2-4 Limitations on Support ...... 1E–8 §6.3 Setting Aside the Whole Estate 1E–9 §6.3-1 General Purpose ...... 1E–9 §6.3-2 Statutory Provisions for Setting Aside the Whole Estate ...... 1E–9 §6.3-3 Procedure for Summary Closure 1E–10 §6.4 Insolvent Estates ...... 1E–11 §6.4-1 Insolvent Estate Defined ...... 1E–11 §6.4-2 Limitations ...... 1E–11 §6.5 Estates of Absentees ...... 1E–11 §6.5-1 Generally ...... 1E–11 §6.5-2 Statutory Procedure ...... 1E–12 §6.6 Ancillary Administration ...... 1E–13 §6.6-1 Preliminary Considerations 1E–13 §6.6-2 Procedure 1E–16 §6.6-3 Establishing a Foreign Will ...... 1E–16 §6.6-4 Title to and Possession of Property ...... 1E–16 §6.6-5 Claims Against the Estate 1E–17 §6.6-6 Distribution 1E–17 §6.7 Taxes Regarding Nonresident Decedents ...... 1E–18 §6.7-1 Settlement of Disputes Regarding Domicile ...... 1E–18 §6.7-2 Payment of Inheritance Tax by Foreign Personal Representative 1E–18 §6.7-3 Recovery of Foreign Death Taxes 1E–19 Chapter 1E—Special Considerations
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SPECIAL CONSIDERATIONS
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
LESLIE SUTTON, B.S., University of Washington (1998); J.D., Lewis & Clark Law School (2004); member of the Oregon State Bar since 2010 and the Washington State Bar Association since 2005; policy analyst, Oregon Council on Development Disabilities, Salem. JANICE HATTON, B.A., The College of Idaho (1987); J.D., University of Oregon (1990); member of the Oregon State Bar since 1991; shareholder, Thorp, Purdy, Jewett, Urness & Wilkinson, P.C., Springfield. The authors acknowledge the contributions of Stuart B. Allen, Tara Hendison, C. Craig Heath, and Scott McGraw for their work on the prior versions of this chapter.
§6.1 SPECIAL ADMINISTRATION ...... 6-3 §6.1-1 General Purpose ...... 6-3 §6.1-2 Jurisdiction ...... 6-3 §6.1-3 Grounds for Appointment ...... 6-3 §6.1-4 Qualifications for Appointment ...... 6-4 §6.1-5 Powers and Limitations of Special Administrator ...... 6-5 §6.1-6 Accounting and Compensation ...... 6-5 §6.2 SUPPORT OF SURVIVING SPOUSE AND DEPENDENT CHILDREN DURING ADMINISTRATION ...... 6-6 §6.2-1 Generally ...... 6-6 §6.2-2 Procedure for Obtaining Support ...... 6-7 §6.2-3 Nature and Extent of Support ...... 6-8 §6.2-4 Limitations on Support ...... 6-8 §6.3 SETTING ASIDE THE WHOLE ESTATE ...... 6-9 §6.3-1 General Purpose ...... 6-9
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§6.3-2 Statutory Provisions for Setting Aside the Whole Estate ...... 6-9 §6.3-3 Procedure for Summary Closure ...... 6-10 §6.4 INSOLVENT ESTATES ...... 6-11 §6.4-1 Insolvent Estate Defined ...... 6-11 §6.4-2 Limitations ...... 6-11 §6.5 ESTATES OF ABSENTEES ...... 6-11 §6.5-1 Generally ...... 6-11 §6.5-2 Statutory Procedure ...... 6-12 §6.6 ANCILLARY ADMINISTRATION ...... 6-13 §6.6-1 Preliminary Considerations ...... 6-13 §6.6-1(a) Purpose ...... 6-13 §6.6-1(b) Necessity for Ancillary Administration ...... 6-13 §6.6-1(c) Nonprobate Administration of Real Property of Nonresident Decedent ...... 6-14 §6.6-1(d) Nonprobate Administration of Personal Property of Nonresident Decedent ...... 6-14 §6.6-1(d)(1) Release to Foreign Personal Representative ...... 6-14 §6.6-1(d)(2) Release of Bank Accounts ...... 6-15 §6.6-2 Procedure ...... 6-16 §6.6-3 Establishing a Foreign Will ...... 6-16 §6.6-4 Title to and Possession of Property ...... 6-16 §6.6-5 Claims Against the Estate ...... 6-17 §6.6-6 Distribution...... 6-17 §6.7 TAXES REGARDING NONRESIDENT DECEDENTS ...... 6-18 §6.7-1 Settlement of Disputes Regarding Domicile ...... 6-18 §6.7-2 Payment of Inheritance Tax by Foreign Personal Representative ...... 6-18 §6.7-3 Recovery of Foreign Death Taxes ...... 6-19
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§6.1 SPECIAL ADMINISTRATION §6.1-1 General Purpose The purpose of the appointment of a special administrator is to pre- serve the assets of a decedent’s estate until the assets can be delivered to the person fully authorized to handle their administration. 31 AM JUR2D Executors and Administrators §1051 (2011). See ORS 113.005(1). The appointment of a special administrator is limited to situations in which the appointment of a personal representative has been impossible or untimely, and an emergency exists regarding the preservation of estate assets. By its very nature, such an appointment is limited in scope to assets of the estate that are in danger, and only pending the appointment of a personal representative. 31 AM JUR2D Executors and Administrators §1054 (2011). Probate is significantly an ex parte practice. The lawyer should review UTCR 5.060 (stipulated and ex parte matters). A motion for an ex parte order must contain the term ex parte in the caption and must be accompanied by the proposed order. UTCR 5.060(2). §6.1-2 Jurisdiction The court with probate jurisdiction may appoint a special administrator to preserve estate assets. ORS 113.005(1). §6.1-3 Grounds for Appointment The statute governing the appointment of special administrators is ORS 113.005. Under the statute, the court may appoint a special admin- istrator only if, before the appointment of a personal representative: (1) The decedent’s property is in danger of loss, injury, or dete- rioration; or (2) Disposition of the decedent’s remains is required. ORS 113.005(1). The statute contemplates an emergency requiring the immediate attention of a person authorized to act, and a reason why a personal representative cannot be appointed in time to act. A special administrator may be appointed only for the emergency situations contemplated by the
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statute. Dibble v. Meyer, 203 Or 541, 544–545, 278 P2d 901 (1955) (a special administrator could not be appointed to continue an annulment suit). Situations appropriate for the appointment of a special admin- istrator include the following: (1) Perishable goods need to be sold or protected, and the personal representative is not immediately available; or (2) The decedent’s remains require disposition and no one authorized by ORS 97.130(2) is able and willing to take the necessary action.
NOTE: Although ORS 113.005(1) authorizes the appoint- ment of a special administrator for the purpose of disposing of the decedent’s remains, the 1997 Legislature amended ORS 97.130 to remove the special administrator from the list of persons who may direct disposition of the decedent’s remains. See §3.3-3(a). The personal representative is now on the list. ORS 97.130(2)(g). However, it seems apparent that if no one authorized in ORS 97.130 is available, a special administrator may be appointed. See Forms 6-1 and 6-2. §6.1-4 Qualifications for Appointment ORS 113.005 does not specify any qualifications for a special administrator. The statute requires only that the special administrator file a bond in an amount set by the court and conditioned on the special administrator’s faithful performance of the duties of the trust. ORS 113.005(2). Because the appointment of a special administrator is an emergency proceeding, the statutory preferences in ORS 113.085 for appointing a personal representative need not be considered. Likewise, ORS 113.095, listing persons who are not qualified to act as personal representatives, does not apply to the appointment of a special admin- istrator. See ORS 111.005(26).
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representative under the provisions of ORS 113.095, even though the restrictions of this statute do not apply to the appointment of a special administrator. §6.1-5 Powers and Limitations of Special Administrator The powers of the special administrator are enumerated in ORS 113.005(3). The special administrator may: (1) Incur expenses for the funeral, burial, or other disposition of the decedent’s remains in a manner suitable to the decedent’s condition in life; (2) Incur expenses for the protection of the property of the estate; and (3) Sell perishable property of the estate, whether or not listed in the petition, if necessary to prevent loss to the estate. ORS 113.005(4) prohibits the special administrator from: (1) Approving or rejecting claims of creditors; (2) Paying claims or expenses of administration; or (3) Taking possession of estate assets other than those in danger of loss, injury, or deterioration. Historically, special administrators have not been given authority over real property because it is not likely to dissipate. 31 AM JUR2D Executors and Administrators §1054 (2011). The special administrator’s powers end when the personal representative is appointed and qualified. ORS 113.005(5). See 31 AM JUR2D, supra, §1056. §6.1-6 Accounting and Compensation Within 30 days of the issuance of letters testamentary to a personal representative, a special administrator must file an account with the court and deliver to the personal representative the assets of the estate that are in the possession of the special administrator. ORS 113.005(5). The accounting should be filed with the court and service made on the per- sonal representative with a time set for filing objections. If the personal
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representative objects to the accounting, the court hears the objections. The court examines the accounting whether or not objections are made. ORS 113.005(5). Because the special administrator does not have the power to pay claims or expenses of the estate, he or she should request approval for the payment of the fees and expenses as part of the accounting. If approved by the court, the compensation of the special administrator and the expenses properly incurred, including attorney fees, are paid as expenses of administration. ORS 113.005(6).
PRACTICE TIP: In the initial petition, the lawyer may wish to request that the special administrator’s fees and costs be paid, upon court approval, from assets of the estate. This practice should avoid any argument over compensation once the personal representative is named and the special administrator is removed. In addition, in the initial petition, the lawyer may wish to ask the court to author- ize a particular form of accounting of the special administrator. Confirming the form of accounting ahead of time may prevent unnecessarily lengthy accountings, costs, and fees. When accounting, the lawyer should be sure to comply with UTCR 9.050, 9.060, 9.160, 9.180, 9.190, unless the court directs otherwise. See chapter 11.
§6.2 SUPPORT OF SURVIVING SPOUSE AND DEPENDENT CHILDREN DURING ADMINISTRATION §6.2-1 Generally The probate court has broad discretion in ordering support from a decedent’s estate for the decedent’s surviving spouse and dependent chil- dren. Generally, support has priority over inheritances, devises, claims, and expenses of administration, and support is not charged against the distributive share of the person receiving it. ORS 114.075. See §§7.5-1(a) to 7.5-3. This priority is limited in the case of an insolvent estate. ORS 114.065. See §§6.2-4, 6.4-1 to 6.4-2.
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A related benefit available to the surviving spouse and dependent children is the right to occupy the decedent’s principal place of abode for one year after the decedent’s death. ORS 114.005. For further discussion, see §§7.5-1(a) to 7.5-3. See §§6.3-1 to 6.3-3 regarding setting aside the whole estate for support of the spouse and dependent children. §6.2-2 Procedure for Obtaining Support The procedure for obtaining support is outlined in ORS 114.015– 114.035. The petition for support may be filed by or on behalf of the surviving spouse or any dependent child. ORS 114.015(1). The personal representative may submit the petition. ORS 114.015(2). The petition should include, at least, the following: (1) A description of property, other than property of the estate, available for the support of the surviving spouse and dependent children; (2) An estimate of the expenses anticipated for their support; and (3) If the petitioner is the personal representative, statements of the nature and estimated value of the property of the estate and of the nature and estimated amount of claims, taxes, and expenses of admin- istration. ORS 114.025. The petition must be served on the personal representative unless he or she is the petitioner. ORS 114.015(2). Unless the court orders otherwise, notice must be given to all of the persons whose distributive shares may be diminished if the petition is granted. ORS 114.015(3).
NOTE: Creditors are not entitled to notice of the hearing and are taken into consideration only if solvency of the estate becomes an issue. See ORS 114.015(3), 114.065. If the personal representative is not the petitioner, the personal representative must file an answer. The answer must include the statements described in item (3) above. ORS 114.025(2).
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A hearing may be held no sooner than five days after notice is personally served, or 14 days after notice is mailed. ORS 111.215(1)(a)– (b). See Forms 6-3 to 6-6. See also Forms 6-7 to 6-8 regarding setting aside the whole estate for support of the spouse and dependent children. §6.2-3 Nature and Extent of Support The court “shall make necessary and reasonable provision from the estate of a decedent for the support of the spouse and dependent children of the decedent.” ORS 114.015. See ORS 114.025. In a case predating the current probate code, the court held that support is not limited to mere subsistence and does not require the recipients to liquidate their assets before requesting and receiving support. In re Booth’s Estate, 220 Or 534, 550–551, 349 P2d 840 (1960).
NOTE: A list of considerations for the court in support determinations can be found in J. C. Vance, Annot, Amount of Allowance from Decedent’s Estate for Widow & Family Where Not Fixed by Statute, 1963 WL 13600 (1963) (originally published in 1963 in 90 ALR2d 687, but frequently updated with new cases). These considerations include the value, size, condition, and solvency of the estate, as well as the social position and manner of living of the surviving spouse. See §7.5-2(b). The form of support ordered by the court may consist of any one or more of the following: (1) transfer of title to personal property, (2) transfer of title to real property, or (3) periodic payments of money during administration of the estate for up to two years after the dece- dent’s death. ORS 114.055(1). See §6.2-4 regarding limitations on insolvent estates. See Form 6-6. §6.2-4 Limitations on Support If the court determines that the estate will be insolvent after provision is made for the support of the surviving spouse and dependent children, the order of support may not exceed one-half of the estimated value of the property of the estate. Any periodic payments ordered as
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support may not continue for more than one year after the date of the decedent’s death. ORS 114.065. See §§6.3-1 to 6.3-3.
§6.3 SETTING ASIDE THE WHOLE ESTATE §6.3-1 General Purpose The purpose of summary closure is to speed up the closure of an estate when the entire net estate is necessary for the support of the decedent’s spouse and dependent children. ORS 114.085. The procedure recognizes the burden placed on persons who were fully dependent on the decedent before the decedent’s death. The procedure applies in favor of the surviving spouse and dependent children of the deceased, not merely minor children, and permits the whole net estate to be set aside, if needed, for their reasonable support. ORS 114.085. The support amount is not limited by the statute, except by what the court deems reasonable and necessary. Support in a summary closure differs from support allowed during administration. In particular, support for purposes of summary closure is secondary to claims of creditors and expenses of administration. How- ever, because summary closure is a determination of support, the procedural guidelines of ORS 114.015 must be followed. See Forms 6-7 and 6-8. A complete discussion of these requirements can be found in §6.2-2. §6.3-2 Statutory Provisions for Setting Aside the Whole Estate The basis for terminating administration and setting aside the whole estate for the surviving spouse and dependent children is set forth in ORS 114.085. After the expiration of four months following the date of the first publication of notice to interested persons, the surviving spouse may file a petition requesting summary closure. See ORS 114.015–114.025. The only issue appears to be whether, after payment of the claims, taxes, and expenses of the estate, the balance of the estate should be set aside for support of the surviving spouse and dependent children. If the court finds that the set-aside is necessary, the estate can
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be summarily closed and no further proceeding is needed. ORS 114.085. See Forms 6-7 and 6-8.
COMMENT: The court should not allow the summary-closure statute to be used to defeat the decedent’s testamentary plan unless compelling reasons are evident. The potential for inequities exists, especially in a subsequent-marriage situation. §6.3-3 Procedure for Summary Closure ORS 114.085 is devoid of any procedural language regarding setting aside the whole estate for support of the spouse and dependent children. However, because the issue is one of support for the surviving spouse and dependent children, it is reasonable to look to ORS 114.015– 114.025 for the requirements of the petition for setting aside the entire estate. The petition should include the following: (1) A listing of the claims, taxes, and expenses of the estate and a statement that they have been, or can be, paid; (2) Facts showing the need to set aside the entire net estate for the support of the spouse or dependent children; (3) A list of the property available from the estate to provide for the support requested and authorizing delivery; (4) Other property available to the spouse and dependent children; (5) Authorization for payment of the personal representative and attorney fees; and (6) A time for hearing objections to the set-aside.
NOTE: Because creditors of the estate have priority in this case, it appears that the issue of notice to unknown creditors is relevant. The petitioner should be advised to file an affidavit outlining the steps taken to discover the decedent’s creditors. See ORS 115.003. See Forms 6-7 and 6-8.
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§6.4 INSOLVENT ESTATES §6.4-1 Insolvent Estate Defined An estate is insolvent when claims, taxes, and expenses of administration exceed the value of the estate assets. §6.4-2 Limitations If the court determines that the estate will be insolvent after provision is made for the support of the spouse and children, support is limited to one-half of the estimated value of the estate, and payments of support may not continue for more than one year after the decedent’s death. ORS 114.065. This period is in contrast to a solvent estate, in which support may be ordered for up to two years. ORS 114.055(1)(c).
NOTE: ORS 115.125(1)(a) and 114.025(1) refer to spouse and “children,” while ORS 114.005, 114.015, 114.035, and 114.085 refer to spouse and “dependent children.” There appears to be no reason for this inconsistency, and the above statutes should probably be read as if they referred only to dependent children. However, the term dependent children is not limited to minor children of the decedent, but likely includes children who are poor and unable to maintain themselves. See ORS 109.010.
§6.5 ESTATES OF ABSENTEES §6.5-1 Generally Absentees should be distinguished from incapacitated persons, whose estates are covered by ORS chapter 125. The procedure to be followed for administration of estates of absentees is found in ORS chapter 117. The term absentee is not defined by the probate code. However, ORS 117.005 requires the petitioner to allege certain informa- tion in addition to what is required under ORS 113.035 (see §5.2-2(b)). The petitioner must state: (1) Whether or not the absentee was an Oregon resident when last heard from;
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(2) The absentee’s address at his or her last-known domicile; and (3)(a) That, to the petitioner’s best knowledge and after diligent search, the absentee’s whereabouts “is and has been unknown for a period stated of not less than one year, and that the petitioner has reason to believe and believes the absentee is dead”; or (b) that the absentee’s death “at the time, location and in the circumstances stated in the petition is probable, and that the fact of death is in doubt solely because of the failure to find or identify the remains of the absentee”; or (c) that the absentee’s death is presumed as the result of a particular disaster, natural or otherwise (see ORS 176.740). ORS 117.005.
NOTE: ORS 117.005–117.095, relating to the administration of estates of absentees, also apply to nonresident absentees owning property within Oregon. §6.5-2 Statutory Procedure A date for hearing a petition filed under ORS 117.005 must be set not fewer than 30 days after the petition is filed, unless the court sets an earlier date. ORS 117.015(1). A copy of the notice of the hearing must be sent to (1) the absentee at his or her last-known address by registered mail or by certified mail with return receipt and (2) the heirs and devisees by ordinary mail. ORS 117.015(1). The court may order that additional notice of the hearing be given by publication or other means. ORS 117.015(2). The court may appoint a guardian ad litem to appear for the absentee. The court may direct either the petitioner or the guardian ad litem to use additional methods in searching for the absentee. ORS 117.025. Once the court has determined that the absentee has died, the court enters an order and grants letters testamentary or letters of administration, depending on the court’s determination of whether the absentee died testate or intestate. ORS 117.035. The estate then proceeds as provided for the estates of other decedents. ORS 117.055. See chapter 5.
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If it is later proved that the absentee is alive, letters previously granted by the court are revoked. Acts of the personal representative before revocation of letters are valid, but after revocation the personal representative has no power to act further, except to pay claims allowed and proved. The personal representative has 30 days after letters testa- mentary are revoked to file an account, and to turn over the estate assets to the absentee or to the absentee’s designated agent. ORS 117.065. If the personal representative already sold or distributed property of an absentee, the absentee’s rights are limited. The absentee has no rights in the property sold, but only to the proceeds realized from the sale, or as much of the proceeds as remain in the personal repre- sentative’s possession when the estate is closed. ORS 117.075(1). Additionally, for a period of five years after distribution of the estate, the absentee has the right to recover from the distributees any of the estate or proceeds of the estate that remain in their possession. The absentee has no right of recovery, however, from purchasers of property sold by the distributees. ORS 117.075(2).
NOTE: ORS 117.095 provides that the costs and expenses of granting letters and their revocation will be borne by the estate. However, if the petition is rejected, the petitioner is liable for the costs, expenses, and charges.
§6.6 ANCILLARY ADMINISTRATION §6.6-1 Preliminary Considerations §6.6-1(a) Purpose The purpose of an ancillary administration is to administer property located in Oregon when the principal administration is in a for- eign jurisdiction. The proceeding in Oregon may be necessary to enable heirs, devisees, or creditors to realize on estate assets or to clear title to real property located in Oregon. §6.6-1(b) Necessity for Ancillary Administration Ancillary administration is generally required when the non- resident decedent owned real property in Oregon. It may also be 6-13 2012 Revision
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necessary for items of personal property when the items have not been turned over to a foreign personal representative under ORS 116.263. Ancillary administration is not appropriate for intangible personal property having no fixed situs in the state. In the case of such intangible assets, the situs of the property is the decedent’s domicile. See W. v. White, 307 Or 296, 300, 766 P2d 383 (1988) (a promissory note evidencing a debt owing to a nondomiciliary testator had its situs in the testator’s domicile, even though the note was secured by a trust deed on real property in Oregon; thus, the note did not constitute property in Oregon on which jurisdiction to probate the nondomiciliary’s will could be founded). §6.6-1(c) Nonprobate Administration of Real Property of Nonresident Decedent Title to real property held by a nonresident decedent, as a tenant by the entirety or jointly with the right of survivorship, does not require ancillary administration. Title may be cleared by recording a death certificate in the county where the property is located. Nonsurvivorship real property interests of the nonresident decedent will generally require ancillary administration to determine heirship and to cut off claims of creditors. It may be possible to negotiate with title companies to insure title to real property without probate. Title insurance can usually be acquired through the use of an affidavit of heirship, including a statement that the decedent’s debts, taxes, and expenses have been paid in full. Title compa- nies traditionally charge an additional fee for insuring titles transferred through affidavits, rather than through the probate process. §6.6-1(d) Nonprobate Administration of Personal Property of Nonresident Decedent §6.6-1(d)(1) Release to Foreign Personal Representative Any person who is indebted to the nonresident decedent’s estate or who holds personal property belonging to the estate may pay the debt or deliver the property to the foreign personal representative. ORS 116.263. The payment or delivery can be made three months or more after the
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death of the nonresident decedent, on an affidavit of the foreign personal representative stating: (1) The date of the death of the nonresident decedent; (2) That no local administration or application therefor is pending in Oregon; and (3) That the foreign personal representative is entitled to pay- ment or delivery. ORS 116.263(1). Payment or delivery made in good faith on the basis of the affidavit discharges the debtor or person in possession of the property. ORS 116.263(2). Payment or delivery may not be made if the debtor or the person in possession of the nonresident decedent’s property has been notified by a resident creditor that the payment or delivery should not be made. ORS 116.263(3). §6.6-1(d)(2) Release of Bank Accounts Bank accounts of a nonresident decedent held in a survivorship account may be withdrawn by the surviving depositor at any time. Financial institutions will most likely require the beneficiary to provide a death certificate and to prove identity before the bank releases accounts in which the decedent held title as trustee or accounts with a payable-on- death designation. If the deposit is $25,000 or less and the decedent’s total deposits in Oregon do not exceed that sum, a bank account in the name of the nonresident decedent alone may be (but is not required to be) released: (1) To the surviving spouse; (2) If there is no surviving spouse, to the Oregon Health Author- ity (OHA) or the Department of Human Services (DHS) on demand of the OHA or the DHS no fewer than 46 days and no more than 75 days from the date of the depositor’s death when there is a preferred claim under ORS 411.708, 411.795, 416.350;
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(3) If there is no surviving spouse and no claim by the OHA or the DHS, to the depositor’s surviving children who are 18 years of age or older; (4) If there is no surviving spouse, no OHA or DHS claim, and no surviving children, to the depositor’s surviving parents; or (5) If there are none of the above, to the depositor’s surviving siblings who are 18 years of age or older. ORS 708A.430(1). Provisions similar to those in ORS 708A.430 also apply to a decedent’s deposits held by mutual savings banks and credit unions. See ORS 716.024, 723.466. See also §1.6-1(e). §6.6-2 Procedure As in most states, Oregon has no statutory provisions specifically outlining a procedure for estates needing ancillary administration. The procedures continue to be governed by the statutes pertaining to domiciliary estates. §6.6-3 Establishing a Foreign Will A foreign will that may operate on property in Oregon may be admitted to probate in Oregon on petition, “by filing a certified copy of the will and a certified copy of the order admitting the will to probate or evidencing its establishment in the jurisdiction where the testator died domiciled.” ORS 113.065(1). If a nonresident decedent’s will was not probated in the jurisdiction where the testator died domiciled, the original will can be offered for probate in Oregon in the same manner as a resident’s will. If the original will has been filed in a foreign jurisdiction, a copy of the nonresident decedent’s will is acceptable when certified by the clerk of the court where the will was filed. ORS 111.245. §6.6-4 Title to and Possession of Property As is the case with respect to a resident decedent, the title to the decedent’s property vests in the heirs or devisees, subject to the support of the surviving spouse and children, the rights of creditors, the right of
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the surviving spouse to elect against the will, administration, and sale by the personal representative. ORS 114.215(1). Once appointed, the ancillary personal representative becomes entitled to possession of all of the decedent’s estate. ORS 114.225. The ancillary personal representative of a deceased contract vendor has the right to convey title to real property in Oregon to a contract vendee. ORS 114.333. §6.6-5 Claims Against the Estate All creditors of the estate may file claims regardless of their domicile. All of the claims filed in the ancillary estate proceeding are subject to the same priority for payment as claims in a resident proceeding. See ORS 115.125. The ancillary personal representative should see that all of the claims are paid before distributing the estate. §6.6-6 Distribution When the administration of an estate in Oregon has been completed and the estate is ready for distribution, the court, upon application by the personal representative, may authorize the delivery to the personal representative of an estate of a decedent pending in a foreign jurisdiction of such property as the court finds appropriate for the payment of debts, taxes or other charges or for distribution to the distributees of the estate in the foreign jurisdiction. ORS 116.163. Alternatively, the court can adjudge distribution directly to the heirs or devisees of the estate as determined under Oregon statutes. ORS 116.113. See chapter 11. In determining whether to petition for distribution of the assets to the personal representative of the domiciliary jurisdiction or to petition for distribution to the heirs and devisees in accordance with Oregon statutes, the following considerations are relevant: (1) Whether the law covering the distributee’s share is the same in both jurisdictions; (2) The need to construe the will or to determine the amount due to a distributee;
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(3) The testator’s intent; (4) The likelihood of avoiding delay or circuitousness of procedure; (5) Whether all of the interested persons appear in the ancillary administration; (6) Whether the interested parties have consented to distribution in the ancillary jurisdiction; (7) The location of the asset; and (8) The competency of the domiciliary representative. See Thomas Kay Woolen Mill Co. v. Sprague, 259 F 338 (D Or 1919); see also 31 Am Jur2d Executors and Administrators §1092 (2011).
§6.7 TAXES REGARDING NONRESIDENT DECEDENTS An out-of-state fiduciary should be aware of the possibility of an Oregon estate tax owed by the estate under ORS chapter 118. The tax is based on worldwide assets, not just Oregon assets. See chapter 14. §6.7-1 Settlement of Disputes Regarding Domicile When the Oregon Department of Revenue (DOR) and a taxing official of another state disagree over a decedent’s domicile for the purpose of estate taxes or each claim’s taxing authority over the same property, the DOR may negotiate and enter into an agreement with the other state’s official and the executor regarding the payment of estate taxes, interest, and penalties. ORS 118.540. The DOR may also enter into binding arbitration or into a compromise agreement with the other state’s official and the executor addressing the disputed liability for estate taxes. ORS 118.540. §6.7-2 Payment of Inheritance Tax by Foreign Personal Representative A foreign personal representative must pay any estate tax due to the state of Oregon. Any assignment or transfer of stock or obligations by
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the foreign personal representative is invalid unless the Oregon tax is paid before the transfer. ORS 118.310. §6.7-3 Recovery of Foreign Death Taxes A foreign personal representative or other person required to pay a death tax due to the United States or any other state may institute an action in an Oregon court to recover the proportionate amount of the tax due from any beneficiary domiciled in Oregon or who owns property in Oregon subject to attachment. ORS 116.373.
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Administering Oregon Estates: 2012 Edition 1E–20 Chapter 2 Intestate Succession, Wills, and Community Property
Melinda Leaver Roy Churchill Leonard Lawyers Salem, Oregon
Contents §4.1 Intestate Succession ...... 2–4 §4.1-1 Property Passing by Intestate Succession ...... 2–4 §4.1-2 Rules of Intestate Succession ...... 2–5 §4.1-3 Rules Governing Heirs ...... 2–17 §4.2 Wills ...... 2–24 §4.2-1 Who May Make a Will 2–24 §4.2-2 Effect of Testator’s Intent and Local Law ...... 2–26 §4.2-3 Execution of a Will 2–27 §4.2-4 Testamentary Additions to Trusts ...... 2–29 §4.2-5 Contracts to Make a Will ...... 2–29 §4.2-6 Revoking or Altering a Will 2–35 §4.2-7 Effect of Will Provisions 2–39 §4.2-8 Disposition of Wills ...... 2–46 §4.2-9 Elective Share of Surviving Spouse ...... 2–49 §4.3 Uniform Disposition of Community Property Rights at Death Act ...... 2–49 §4.3-1 Property Subject to Uniform Act ...... 2–49 §4.3-2 Effect of Uniform Act on Decedent’s Estate 2–50 §4.3-3 Rights of Third Parties to Community Property ...... 2–51 §4.3-4 Right to Sever Interests in Community Property 2–51 §4.3-5 Effect of Uniform Act ...... 2–51 Chapter 2—Intestate Succession, Wills, and Community Property
Administering Oregon Estates: 2012 Edition 2–ii Chapter 2—Intestate Succession, Wills, and Community Property
Chapter 4
INTESTATE SUCCESSION, WILLS, AND COMMUNITY PROPERTY
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
MELINDA LEAVER ROY, B.A., Wheaton College (1989); J.D., University of Florida (1993); member of the Oregon State Bar since 1994; attorney, Churchill Leonard Lawyers, Salem. *The author wishes to acknowledge and thank the many persons who assisted with the preparation of this chapter, including the former author of this chapter, James T. Kulla, and the author’s law clerk, Emilee A. Provost.
§4.1 INTESTATE SUCCESSION ...... 4-4 §4.1-1 Property Passing by Intestate Succession ...... 4-4 §4.1-2 Rules of Intestate Succession ...... 4-5 §4.1-2(a) Surviving Spouse ...... 4-5 §4.1-2(a)(1) Surviving Spouse Defined ...... 4-5 §4.1-2(a)(2) Surviving Spouse’s Share, with No Issue Surviving...... 4-7 §4.1-2(a)(3) Surviving Spouse’s Share, with Issue Surviving ...... 4-7 §4.1-2(b) Issue’s Share ...... 4-7 §4.1-2(b)(1) Issue’s Share, with Spouse Surviving ...... 4-7 §4.1-2(b)(2) Issue’s Share, with No Spouse Surviving ...... 4-7 §4.1-2(b)(3) Distribution Method to Issue ...... 4-8 §4.1-2(c) Parent’s Share ...... 4-9 §4.1-2(d) Parent’s Issue’s Share ...... 4-10 §4.1-2(e) Grandparents’ and Their Issue’s Share ...... 4-11 §4.1-2(f) Persons Related Through Two Lines ...... 4-13 §4.1-2(g) Escheat Estates; Missing Persons ...... 4-15
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§4.1-3 Rules Governing Heirs ...... 4-17 §4.1-3(a) Time of Determining Relationship; After-Born Heirs ...... 4-17 §4.1-3(b) Uniform Simultaneous Death Act ...... 4-17 §4.1-3(c) Persons of the Half-Blood ...... 4-20 §4.1-3(d) Adopted Persons ...... 4-20 §4.1-3(e) Succession When Parents Not Married ...... 4-22 §4.1-3(f) Advancements ...... 4-22 §4.1-3(g) Effect of Homicide or Abuse on Inheritance ...... 4-23 §4.2 WILLS ...... 4-24 §4.2-1 Who May Make a Will ...... 4-24 §4.2-2 Effect of Testator’s Intent and Local Law ...... 4-26 §4.2-2(a) Intention of Testator Expressed in Will as Controlling ...... 4-26 §4.2-2(b) Local Law of State Selected by Testator Controlling Unless Against Public Policy ...... 4-26 §4.2-2(c) Uniform International Wills Act ...... 4-26 §4.2-3 Execution of a Will ...... 4-27 §4.2-3(a) Formalities, Signing, and Attestation ...... 4-27 §4.2-3(b) Witness as a Beneficiary ...... 4-28 §4.2-3(c) Validity of Execution of a Will ...... 4-29 §4.2-4 Testamentary Additions to Trusts ...... 4-29 §4.2-5 Contracts to Make a Will ...... 4-29 §4.2-5(a) Contract Law Governs ...... 4-31 §4.2-5(b) Statute of Limitations ...... 4-31 §4.2-5(c) Problems of Proof ...... 4-33 §4.2-6 Revoking or Altering a Will ...... 4-35 §4.2-6(a) Governing Statutes Are Exclusive ...... 4-35 §4.2-6(b) Express Revocation or Alteration ...... 4-35 §4.2-6(c) Revival of Revoked or Invalid Will ...... 4-36
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§4.2-6(d) Revocation by Marriage ...... 4-36 §4.2-6(e) Revocation by Dissolution or Annulment of Marriage ...... 4-38 §4.2-6(f) Executory Contract of Sale of Devised Property Not a Revocation ...... 4-38 §4.2-7 Effect of Will Provisions ...... 4-39 §4.2-7(a) Will Governs Disposition of Estate ...... 4-39 §4.2-7(b) Devise Passes All Interests of Testator ...... 4-40 §4.2-7(c) Encumbrance or Disposition of Devised Property ...... 4-40 §4.2-7(d) Devise of a Life Estate ...... 4-41 §4.2-7(e) Property Acquired After Making Will ...... 4-41 §4.2-7(f) Direction to Pay Debts, Taxes, and Other Charges ...... 4-42 §4.2-7(g) Nonademption of Specific Devises ...... 4-43 §4.2-7(h) Devises to Testator’s Issue; Antilapse ...... 4-43 §4.2-7(i) Effect of Failure of Devise ...... 4-45 §4.2-7(j) After-Born and After-Adopted Children: Pretermitted Children ...... 4-45 §4.2-7(k) Effect of General Disposition or Residuary Clause on Testator’s Power of Appointment ...... 4-46 §4.2-8 Disposition of Wills ...... 4-46 §4.2-8(a) Exclusive Manner of Disposing of Wills ...... 4-46 §4.2-8(b) Duties of Custodian of Will ...... 4-46 §4.2-8(c) Procedure for Destruction of 40-Year- Old Will ...... 4-47 §4.2-8(d) Liability for Destruction of Will ...... 4-48 §4.2-8(e) Court May Order Delivery of Will ...... 4-49 §4.2-9 Elective Share of Surviving Spouse ...... 4-49 §4.3 UNIFORM DISPOSITION OF COMMUNITY PROPERTY RIGHTS AT DEATH ACT ...... 4-49 §4.3-1 Property Subject to Uniform Act ...... 4-49
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§4.3-2 Effect of Uniform Act on Decedent’s Estate ...... 4-50 §4.3-2(a) Distribution and Disposition of Community Property ...... 4-50 §4.3-2(b) Perfection of Title to Community Property ...... 4-50 §4.3-3 Rights of Third Parties to Community Property ...... 4-51 §4.3-4 Right to Sever Interests in Community Property ...... 4-51 §4.3-5 Effect of Uniform Act ...... 4-51
§4.1 INTESTATE SUCCESSION §4.1-1 Property Passing by Intestate Succession Any part of the “net estate” of a decedent not effectively disposed of by will passes by intestate succession, as provided in ORS 112.025– 112.055. ORS 112.015. The term net estate is defined in ORS 111.005(23) as “the real and personal property of a decedent, except property used for the support of the surviving spouse and children and for the payment of expenses of administration, funeral expenses, claims and taxes.” The portion of a decedent’s net estate that is subject to intes- tate succession is referred to as the net intestate estate. ORS 112.015; see ORS 111.005(24). If a decedent dies intestate as to all or any of his or her property, the inclusion of a disinheritance clause in the decedent’s will does not operate to prevent the distribution of the decedent’s net intestate estate to the decedent’s intestate heirs. In McClain v. Hardy, 184 Or App 448, 450, 56 P3d 501 (2002), the decedent specifically provided in her will that, with the exception of a few items of personal property, nothing was to be distributed to her daughter. Instead, the will provided that the decedent’s net estate was to be distributed to the decedent’s husband, who had predeceased the decedent. The Oregon Court of Appeals held that the disinheritance clause in the decedent’s will did not operate to prevent the decedent’s daughter from taking the decedent’s net estate pursuant to the intestate succession rules of ORS 112.025–112.055. McClain, 184 Or App at 454.
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NOTE: The general rules of intestate succession do not apply in the situations covered by the following statutes: (1) ORS 112.047 provides for the forfeiture of a parent’s share of property passing by intestate succession if the parent “willfully deserted” the decedent child or neglected the child “without just and sufficient cause to provide proper care and maintenance,” ORS 112.047(1)–(2) (see §4.1-2(c)); and (2) ORS 112.465 prohibits a “slayer” or an “abuser” of a decedent from inheriting from the decedent (see §4.1-3(g)). §4.1-2 Rules of Intestate Succession §4.1-2(a) Surviving Spouse §4.1-2(a)(1) Surviving Spouse Defined The 1993, 1995, and 1999 Legislatures all passed legislation con- cerning the definition of the term spouse for purposes of intestate succ- ession. The 1993 Legislature defined the term spouse as the person who was legally married to the decedent at the time of the decedent’s death or, if the decedent was not legally married at the time of his or her death, any person with whom the decedent lived for at least 10 years, if that person and the decedent represented themselves and conducted their affairs as husband and wife. Former ORS 112.017(2). The 1993 Legislature’s definition of spouse applied only to dece- dents who died on or after September 15, 1992. Additionally, if a decedent died before November 4, 1993, this definition of spouse did not apply if estate proceedings were commenced and an order of final distribution was entered pursuant to ORS 116.113 before November 4, 1993. 1993 Or Laws ch 598, §5. The 1995 Legislature repealed subsection (2) of former ORS 112.017, which defined the term spouse to include any person with whom the decedent lived for at least 10 years as husband and wife. In its place, the legislature enacted a provision that defined the term spouse to mean any person with whom the decedent cohabited for a period of at least 10 years if: 4-5 2012 Revision
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(1) The period of cohabitation ended not earlier than two years before the decedent’s death; (2) Both the decedent and the person were capable of entering into a valid contract of marriage under ORS chapter 106; (3) During the 10-year period of cohabitation, the decedent and the person mutually assumed marital rights, duties, and obligations; (4) During the 10-year period of cohabitation, the decedent and the person held themselves out as husband and wife and acquired a uniform and general reputation as husband and wife; (5) During at least the last two years of the 10-year period of cohabitation, the decedent and the person were domiciled in Oregon; and (6) Neither the decedent nor the person was legally married to another person at the time of the decedent’s death. Former ORS 112.017(2). The 1995 amendments to former ORS 112.017(2) applied to the estates of all decedents who died on or after September 9, 1995. Regarding the estates of decedents who died before September 9, 1995, and on or after September 15, 1992, the 1993 Legislature’s version of ORS 112.017(2) was applied unless the decedent died before November 4, 1993, and estate proceedings were commenced and an order of final distribution was entered before November 4, 1993. 1995 Or Laws ch 235, §2. The 1999 Legislature repealed ORS 112.017. The repeal of former ORS 112.017 applies to the estates of all decedents who die on or after January 1, 2000.
CAVEAT: Even though Oregon no longer recognizes the rights of a so-called common-law spouse for purposes of intestate succession, a person who is a common-law spouse under the laws of another state may constitute a “spouse” for purposes of ORS 112.025–112.045. In addition, pursuant to ORS 106.340(1), a surviving “domestic partner” (as defined by ORS 106.310) will have the same intestate inheritance rights as a surviving spouse.
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Administering Oregon Estates: 2012 Edition 2–6 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property §4.1-2(a)(2) Surviving Spouse’s Share, with No Issue Surviving If there is no surviving issue, ORS 112.035 leaves all of the net intestate estate of the decedent to the surviving spouse. Surviving Spouse; No Surviving Issue
NOTE: This diagram and the diagrams in the following sections indicate what part of the intestate estate each heir takes. Heirs with an X through their name are deceased. §4.1-2(a)(3) Surviving Spouse’s Share, with Issue Surviving If the decedent leaves a surviving spouse and issue, and if all of the decedent’s surviving issue are also issue of the surviving spouse, the surviving spouse inherits the entire net intestate estate. ORS 112.025(1). If the decedent leaves a surviving spouse and issue, and if one or more of the surviving issue are not the issue of the surviving spouse, the surviving spouse inherits one-half of the net intestate estate. ORS 112.025(2). §4.1-2(b) Issue’s Share §4.1-2(b)(1) Issue’s Share, with Spouse Surviving If the decedent’s spouse survives and all of the decedent’s issue are also issue of the surviving spouse, the issue take no part of the net intestate estate. ORS 112.025(1). If the decedent’s spouse survives, and if one or more of the decedent’s surviving issue are not issue of the surviving spouse, then all of the decedent’s issue take one-half of the net intestate estate. ORS 112.025(2). §4.1-2(b)(2) Issue’s Share, with No Spouse Surviving If a spouse does not survive the decedent, the decedent’s issue take all of the net intestate estate. ORS 112.045(1).
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Surviving Issue; No Surviving Spouse
§4.1-2(b)(3) Distribution Method to Issue If the decedent’s issue “are all of the same degree of kinship to the decedent,” they take equally. But if the issue are of unequal degree, the issue of more remote degree take by representation. ORS 112.045(1). See diagram in §4.1-2(b)(2). Taking by representation is explained in ORS 112.065 as follows: “Representation” means the method of determining the passing of the net intestate estate when the distributees are of unequal degrees of kinship to the decedent. It is accomplished as follows: The estate shall be divided into as many shares as there are surviving heirs of the nearest degree of kinship and deceased persons of the same degree who left issue who survive the decedent, each surviving heir of the nearest degree receiving one share and the share of each deceased person of the same degree being divided among the issue of the deceased person in the same manner. This calculation is similar to, but slightly different than, per stirpes distribution, which divides the estate at every degree of kinship, regard- less of whether any persons survive at that level.
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Administering Oregon Estates: 2012 Edition 2–8 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property §4.1-2(c) Parent’s Share If there is no surviving spouse and no surviving issue, the decedent’s surviving parent or parents take the net intestate estate. ORS 112.045(2). No Spouse; No Issue; Two Parents Surviving
No Spouse; No Issue; One Parent Surviving
The 2005 Legislature enacted a statute that provides for the forfeiture of a parent’s share of property passing by intestate succession, if the parent “willfully deserted” the decedent child or neglected the child “without just and sufficient cause to provide proper care and maintenance.” ORS 112.047(1)–(2). If the decedent was an adult when he or she died, the statute applies if the parent willfully deserted or neglected the decedent “for the 10-year period immediately preceding the date on which the decedent became an adult.” ORS 112.047(1). If the decedent was a minor when he or she died, the statute applies if the parent willfully deserted or neglected the decedent child for the life of the decedent or “for the 10-year period immediately preceding the date on which the decedent died.” ORS 112.047(2).
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If the statute applies, property that would pass by intestate succession under ORS 112.045 from the estate of a decedent to a parent of the decedent “shall pass and be vested as if the parent had predeceased the decedent.” ORS 112.047(1)–(2). For purposes of subsections (1) and (2) of ORS 112.047, the court “may disregard incidental visitations, communications and contributions in determining whether a parent willfully deserted the decedent or neglected without just and sufficient cause to provide proper care and maintenance for the decedent.” ORS 112.047(3). Furthermore, in determining the requisite desertion or neglect, the court “may consider whether a custodial parent or other custodian attempted, without good cause, to prevent or to impede contact between the decedent and the parent whose intestate share would be forfeited” under the statute. ORS 112.047(4). The intestate share of a parent of a decedent may be forfeited under the statute only pursuant to a court order entered after the filing of a petition under ORS 112.049. A petition to commence probate filed under ORS 113.035 may not request the forfeiture of the intestate share of a parent of a decedent under the statute. ORS 112.047(5). §4.1-2(d) Parent’s Issue’s Share If there is no surviving issue, spouse, or parent, the decedent’s estate passes to the decedent’s brothers and sisters and to the issue of any deceased brother or sister by right of representation. ORS 112.045(3). No Surviving Spouse, Issue, or Parent
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Administering Oregon Estates: 2012 Edition 2–10 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property If there is no surviving brother or sister of the decedent, the issue of deceased brothers and sisters take equally if all are of the same degree of kinship to the decedent. But if they are of unequal degree, those of more remote degree take by representation. ORS 112.045(3). No Surviving Spouse, Issue, Parent, Brother, or Sister
§4.1-2(e) Grandparents’ and Their Issue’s Share Grandparents and issue of deceased grandparents take only if there is no surviving issue, spouse, parent, brother, sister, or issue of a deceased brother or sister. It is clear, then, that all issue of the decedent’s parents must be exhausted before grandparents or their issue take. ORS 112.045(4). If there is at least one surviving grandparent, the issue of any deceased grandparent take by representation. ORS 112.045(4). Each surviving paternal and maternal grandparent takes an undivided one- quarter share of the net intestate estate. If any grandparent is deceased, his or her issue take by representation the undivided one-quarter share of the deceased grandparent. Thus, a surviving paternal grandfather inherits a one-quarter share, and the issue of the paternal grandfather’s deceased wife inherit another one-quarter share. If both maternal grandparents are deceased, their issue take by representation the other undivided one-half share. If no grandparents survive, the issue of the deceased grand- parents, both maternal and paternal, take equally if they are of the same degree of kinship to the decedent. If they are of unequal degree of kinship, then the issue of more remote degree take by representation. 4-11 2012 Revision
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ORS 112.045(4). Thus, if all four grandparents are deceased, leaving two uncles on the paternal side and the children of a deceased aunt on the maternal side, each surviving uncle inherits an undivided one-third share of the net intestate estate, and the issue of the deceased aunt inherit the other one-third share and take it by representation. See the fourth diagram below. There is no limitation on inheritance by lineal descendants of the intestate’s grandparents. ORS 112.045 and 112.055 exclude more remote relatives claiming through great-grandparents. If, at the time of taking, surviving grandparents are married to each other, they take real property as tenants by the entirety and personal property as joint owners with the right of survivorship. ORS 112.045(5). Grandparents Survive
Paternal Grandparents Do Not Survive; Maternal Grandparents Survive
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All Grandparents Deceased
§4.1-2(f) Persons Related Through Two Lines “A person who is related to the decedent through two lines of relationship is entitled to only a single share based on the relationship which would entitle the person to the larger share.” ORS 112.115. The clear intent of the statute is that only one intestate share may be inherited. For example, under the provision for inheritance by issue of grandparents on both the maternal side and the paternal side, the marriage of cousins might otherwise entitle their issue to inherit from both sets of grandparents.
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Inheritance Through Two Lines of Relationship
NOTE: The fractions in parentheses indicate the share that would have been received but for the intermarriage of Cousins B and C. The fractions below each box indicate the share actually received. The three maternal cousins (Cousins C, D, and E) would have each received a one-fifteenth share, until the two cousins’ (B and C) marriage joined the lines and caused the issue of that marriage to share the larger (one-tenth) portion coming through Cousin B. Except for the rule stated, the children of the married cousins would have inherited the one-tenth interest of one parent and the one- fifteenth interest of the other parent, thus giving them a larger interest than the children of the other cousins. To carry out the rule, the one- fifteenth interests of Cousins D and E are increased to include the one- fifteenth interest (originally to go to Cousin C) that would otherwise be inherited by the children of the cousins’ marriage.
PRACTICE TIP: It is crucial for a person to make a will if he or she wants to remember a living great-grandparent, a second cousin (a descendant of the great-grandparents), or others who are
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Administering Oregon Estates: 2012 Edition 2–14 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property not otherwise entitled to inherit under the laws of intestate succession. §4.1-2(g) Escheat Estates; Missing Persons The circumstances under which all or any part of an estate will escheat to the state of Oregon are set forth in ORS 112.055, which was significantly amended in 2003. If a devisee is not identified or cannot be found, the share of that devisee escheats to the state of Oregon. ORS 112.055(2). See §5.2-3.
COMMENT: Presumably, the share of any such devisee will escheat only if applicable antilapse rules fail to give the property to someone else. See §4.2-7(h) for a discussion of the antilapse statute. The statute also provides that if a person entitled to take under ORS 112.025–112.045 (i.e., a person who is an intestate heir) cannot be identified or found, the intestate heir’s share will escheat to the state of Oregon. Escheat of an intestate heir’s share can thus occur even if other intestate heirs can be found. ORS 112.055(2).
PRACTICE TIP: Because the results from the application of this statute might not conform to the testator’s wishes, the drafter should always specifically state those wishes in the testator’s will. Resorting to the statutory presumptions is not a good practice. The 2003 Legislature also created presumptions regarding miss- ing persons. ORS 112.058. “After diligent search and inquiry appropriate to the circumstances” (ORS 112.058(1)(b)), the following presumptions apply in a proceeding to determine whether a missing person has died: (1) A missing person whose death cannot be proved by any other means is presumed to live to 100 years of age, ORS 112.058(1)(b)(A); (2) A missing person who was exposed to a specific peril when he or she became missing is presumed deceased if “it is reasonable to expect from the nature of the peril that proof of death would be impractical,” ORS 112.058(1)(b)(B); 4-15 2012 Revision
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(3) A missing person whose absence is unexplained is presumed deceased if “the character and habits of the person are inconsistent with a voluntary absence for the time that the person has been missing,” ORS 112.058(1)(b)(C); and (4) A missing person known to have been alive who has not been seen or heard from for seven years is presumed deceased if (a) “the person has been absent from his or her usual residence,” (b) “the absence is unexplained,” (c) “there are other persons who would have been likely to have heard from the missing person during that period were the missing person alive,” and (d) “those other persons have not heard from the missing person,” ORS 112.058(1)(b)(D). A missing person who is presumed dead under any of the above presumptions is also presumed to have had two children in addition to any known issue, unless the presumption of death arises by reason of the application of subsection (B) or (C) of ORS 112.058(1)(b) (see presumptions (2) and (3) above). ORS 112.058(2). These two presumed children have rights as intestate takers and, if they cannot be found, their share of the estate is subject to escheat. If a devisee or an intestate heir is not identified or found, the estate administrator of the Department of State Lands may (1) take custody of the estate property; (2) incur and recover certain specified expenses on behalf of the estate; (3) have access to the records of the decedent that are not confidential or privileged by statute; (4) have access to the property of the decedent; and (5) sell perishable property of the estate. ORS 113.242(1)–(2). The Department of State Lands will also have the same preference that the missing devisee or intestate heir would have had for the purpose of appointment as a personal representative, contesting a will of the decedent, and receiving informa- tion concerning the estate. ORS 112.055(3). For further discussion of escheat, see §5.2-3.
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Administering Oregon Estates: 2012 Edition 2–16 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property §4.1-3 Rules Governing Heirs §4.1-3(a) Time of Determining Relationship; After-Born Heirs The relationships existing at the time of the decedent’s death govern the passing of the net intestate estate. However, a posthumous child (one conceived before the death of the decedent and born alive thereafter) inherits as though he or she were alive at the time of the decedent’s death. ORS 112.075. See LaDu v. Oregon Clinic, P.C., 165 Or App 687, 692, 998 P2d 733 (2000) (“although the probate code is silent as to the distribution of the estate of a stillborn fetus, it clearly indicates that a stillborn fetus is incapable of inheriting by intestate succession”). A posthumous child might be a child of the decedent, or might be the child of an intestate heir. §4.1-3(b) Uniform Simultaneous Death Act When the disposition of property depends on whether a specified person survives the death of another person, Oregon’s Uniform Simul- taneous Death Act (USDA), ORS 112.570–112.590, creates a presump- tion that the specified person died before the other person. ORS 112.572. This presumption may, however, be rebutted, and is subject to certain exceptions. ORS 112.572, 112.586.
NOTE: The 1999 Legislature amended Oregon’s USDA by repealing former ORS 112.575–112.645 and replacing those statutes with ORS 112.570–112.590. The presumption under the USDA may be rebutted if “it is established by clear and convincing evidence that the specified person survived the other person by at least 120 hours.” ORS 112.572. In the absence of contradicting evidence, the time of death set forth in a certified or authenticated death certificate or government agency report constitutes conclusive proof of the time of death. ORS 112.582(2)(a), (5). A person whose death is not otherwise established under ORS 112.582, but who has been absent for a continuous period of five years, is presumed to be deceased if the person made no contact with another person during that five-year period, and the person’s absence “cannot be
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satisfactorily explained after diligent search or inquiry.” ORS 112.582(4). A person presumed deceased under ORS 112.582(4) is presumed to have died at the end of the five-year period unless “it is proved by a preponderance of the evidence that death occurred at a different time.” ORS 112.582(4). Except as provided in ORS 112.586, ORS 112.580 describes the devolution of property held by two or more co-owners: (1) If two co-owners hold property with right of survivorship (e.g., as joint tenants or tenants by the entirety, see ORS 112.570(1)) and both co-owners die, half of the property passes as if one co-owner had survived the second co-owner by 120 hours or more, and half of the property passes as if the second co-owner had survived the first co- owner by 120 hours or more, “unless it is established by clear and con- vincing evidence that one of two co-owners survived the other co-owner by at least 120 hours” (in which event the survivorship property passes to the heirs or devisees of the co-owner who survived the other by at least 120 hours), ORS 112.580(1); and (2) If more than two co-owners hold the property and “it is not established by clear and convincing evidence that at least one of the co- owners survived the others by at least 120 hours, the property passes in the proportion that one bears to the whole number of co-owners,” ORS 112.580(2). However, the survivorship rules of ORS 112.570–112.590 do not apply if: (1) A “governing instrument” contains a simultaneous-death clause or expressly provides that a person is required or not required to survive the death of another person, ORS 112.586(2)–(4); or (2) Application of the statute would result in (a) the escheat of an intestate estate, (b) the possible invalidity of an interest under the rule against perpetuities, or (c) there are multiple governing instruments and the application of the survivorship rules “would result in an unintended failure or duplication of a disposition,” ORS 112.586(1), (5)–(6).
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NOTE: The term governing instrument means (1) a deed: (2) a will; (3) a transfer on death deed under ORS 93.948–93.979 (see §1.5-9); (4) a trust; (5) an insurance or annuity policy with a payable-on-death designation; (6) a pension, profit-sharing, retire- ment, or similar benefit plan; (7) an instrument creating or exercis- ing a power of appointment or a power of attorney; or (8) any other similar instrument. ORS 112.570(2). Unless a payor or other third party has received written notice of a claim under ORS 112.588(2), “the payor or other third party is not liable for making a payment to, transferring property to, or conferring any other benefit on a person who appears to be entitled to the payment, property or benefit under a good faith reading of a governing instrument.” ORS 112.588(1). However, the third party is liable for a payment, transfer, or other benefit conveyed after receiving such a notice. ORS 112.588(1). ORS 112.588(2) establishes procedures for providing a payor or other third party with written notice of a claim that a person is not entitled to receive payment, property, or other benefit by reason of the survivorship rules set forth in ORS 112.570–112.590. On receipt of such notice, the payor or other third party may deposit the disputed money or property with any court conducting probate proceedings for one of the decedents’ estates or, if probate proceedings have not been commenced, with the probate court in the county in which one of the decedents resided. ORS 112.588(3). If a person who has no notice of a claim under ORS 112.588 purchases property for value or receives payment, property, or other benefit in full or partial satisfaction of a legally enforceable obligation, the person is not liable to another person with a claim to the payment, property, or benefit by reason of the operation of the survivorship rules set forth in ORS 112.570–112.590. ORS 112.590(1). Such a person need not return the payment, property, or other benefit. ORS 112.590(1). A person who receives payment, property, or other benefit to which the person is not entitled by reason of the survivorship rules must return the payment, property, or other benefit if:
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(1) The person was aware of a claim to the payment, property, or other benefit under the survivorship rules at the time the purchase, payment, or delivery was made; or (2) The person received the payment, property, or other benefit “for no value.” ORS 112.590(2). “A person who receives any payment, property or other benefit to which the person is not entitled because any part of ORS 112.570 to 112.590 is preempted by federal law must return the payment, property or other benefit if the person received the payment, property or other benefit for no value.” ORS 112.590(3). Any person who is required to, but who fails to, return any payment, property, or other benefit under ORS 112.590 is personally liable to a person with a right to the property under the survivorship rules established under ORS 112.570–112.590, or with a right to the property by reason of federal preemption of all or part of the survivorship rules. ORS 112.590(4). §4.1-3(c) Persons of the Half-Blood “Persons of the half blood inherit the same share that they would inherit if they were of the whole blood.” ORS 112.095. §4.1-3(d) Adopted Persons The law relating to the status of adopted persons provides that inheritance rights are derived from the adoptive parents, rather than from the natural parents. These inheritance rights are set forth explicitly in ORS 112.175–112.195.
NOTE: The statutes treat an adopted person as “the natural child of the adoptive parents” and apply “for all purposes of intestate succession.” ORS 112.175(1)–(2). The phrase all pur- poses of intestate succession is statutorily defined as “succession by, through or from a person, both lineal and collateral.” ORS 111.005(5). This wording gives the adopted person a status for purposes of inheritance from adoptive relatives, and gives the adoptive relatives a status for purposes of inheritance from the 4-20 2012 Revision
Administering Oregon Estates: 2012 Edition 2–20 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property adopted person. It also gives any children of the adopted person the right to inherit from the adoptive relatives. The statute denies rights of intestate succession from and by the natural relatives of an adopted child, except as follows: (1) If a natural parent of a child marries or remarries and the child is adopted by the stepparent, the child will “continue also to be treated, for all purposes of intestate succession, as the child of the natural parent who is the spouse of the adoptive parent,” ORS 112.175(2)(a); and (2) If a natural parent of a child dies, the other natural parent remarries, and the child is adopted by the stepparent, the child will “continue also to be treated, for all purposes of intestate succession by any person through the deceased natural parent, as the child of the deceased natural parent,” ORS 112.175(2)(b). The entire Oregon probate code applies to adopted persons who are adopted in this state or elsewhere. ORS 112.175(3). A child adopted more than once is treated as the child of the parents who most recently adopted the child; the child ceases to be treated as the child of his or her previous adoptive parents, except that the adopted child continues to be treated as the child of his or her natural parent or previous adoptive parent in the situations described in ORS 112.175(2), discussed above. ORS 112.185. Unless a contrary intent is expressed in the instrument, all references in a will or other instrument to a person or member of a class described generically in relation to a particular person as children, issue, descendants, heirs, or other relatives include any person who “would be treated as so related for all purposes of intestate succession.” ORS 112.195. However, an adopted person so included must have been adopted as a minor or must have been adopted after having been a member of the household of the adoptive parent while a minor. ORS 112.195. ORS 111.015(1) provides that a will is construed based on the law in effect on the date of execution, unless the will expresses a contrary
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intent. Before 1947, adopted persons did not inherit in Oregon. See 1947 Or Laws ch 562. §4.1-3(e) Succession When Parents Not Married Pursuant to ORS 112.105, the right of inheritance extends to and from children born out of wedlock, as described in ORS 109.060, which gives such children the same legal status as those born in wedlock. For purposes of intestate succession, before the relationship of father and child and other relationships dependent on the establishment of paternity can be given effect under ORS 112.105(1): (1) The paternity of the child must have been established under ORS 109.070 during the lifetime of the child, ORS 112.105(2)(a); or (2) The father must have acknowledged himself to be the father, in writing, signed by him during the lifetime of the child, ORS 112.105(2)(b). Thus, if paternity of the child is to be established under ORS 109.070, it must be established during the lifetime of the child and not afterwards. §4.1-3(f) Advancements If a person dies intestate as to all of his or her estate, a lifetime transfer by the decedent to an heir is treated as an advancement against the heir’s share of the estate, if (1) the decedent declared, in writing, that the transfer was an advancement, or (2) the heir acknowledged, in writing, that the transfer was an advancement. ORS 112.135. See §8.1- 3. The property advanced is to be valued as of (1) the time the heir “came into possession or enjoyment of the property,” or (2) the date of the decedent’s death, whichever occurs first. ORS 112.135. If the value of the advancement exceeds the value of the heir’s share of the estate, the heir is not required to refund the difference to the estate. ORS 112.145(1).
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Administering Oregon Estates: 2012 Edition 2–22 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property If the value of the advancement is less than the value of the heir’s share of the estate, the heir is entitled to receive “such additional amount as will give the heir the heir’s share of the estate.” ORS 112.145(1). If the recipient of the property advanced fails to survive the decedent, the amount of the advancement is “taken into account in computing the share of the issue of the recipient, whether or not the issue take by representation.” ORS 112.155. §4.1-3(g) Effect of Homicide or Abuse on Inheritance ORS 112.465 prohibits a “slayer” or an “abuser” of a decedent from inheriting from the decedent as follows: (1) Property that would have passed by reason of the death of a decedent to a person who was a slayer or an abuser of the decedent, whether by intestate succession, by will, by transfer on death deed or by trust, passes and vests as if the slayer or abuser had predeceased the decedent. (2) Property that would have passed by reason of the death of an heir or devisee of a decedent to a person who was the slayer or abuser of the decedent, whether by intestate succession, by will, by transfer on death deed or by trust, passes and vests as if the slayer or abuser had predeceased the decedent unless the heir or devisee specifically provides otherwise in a will or other instrument executed after the death of the decedent.
NOTE: The 2011 Legislature amended subsections (1) and (2) of ORS 112.465 to prohibit slayers and abusers from inheriting by a transfer on death deed. 2011 Or Laws ch 212, §26. For further discussion of transfer on death deeds, see §1.5-9. For purposes of ORS 112.455–112.555, a slayer is “a person who, with felonious intent, takes or procures the taking of the life of a decedent.” ORS 112.455(3). “A final judgment of conviction of feloni- ous and intentional killing is conclusive for purposes of ORS 112.455 to 112.555.” ORS 112.555. Without such a conviction, the probate court may determine by a preponderance of the evidence whether a killing was felonious and intentional for purposes of ORS 112.455–112.555. ORS 112.555. See §§8.1-4(a) to 8.1-4(c).
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ORS 112.455–112.555 apply to an abuser “only if the decedent dies within five years after the abuser is convicted of a felony by reason of conduct that constitutes physical abuse of the decedent, as described in ORS 124.105, or financial abuse of the decedent, as described in ORS 124.110.” ORS 112.457; see ORS 112.455(1), (2)(b). Although neither a slayer nor an abuser may receive his or her intestate share from the person who was slain or abused, the slayer or abuser’s issue, or other persons taking through the slayer or abuser, take that share as if the slayer or abuser had predeceased the decedent.
§4.2 WILLS §4.2-1 Who May Make a Will Any person who is 18 years of age or older or who has been lawfully married, and who is of sound mind, may make a will. ORS 112.225. Marriage is “a civil contract entered into in person by males at least 17 years of age and females at least 17 years of age, who are otherwise capable, and solemnized in accordance with ORS 106.150.” ORS 106.010. As required by ORS 112.225, a person must be of sound mind to make a will. The requirements for testamentary capacity are well settled and have been stated by the Oregon Court of Appeals in Golden v. Stephan, 5 Or App 547, 550, 485 P2d 1108 (1971), as follows: (1) The person must be able to understand the nature of the act in which the person is engaged, that is, the execution of a will; (2) The person must know the nature and extent of his or her property; (3) The person must know, without prompting, the claims, if any, of those who are, should be, or might be the natural objects of the person’s bounty; and (4) The person must be cognizant of the scope and reach of the provisions of the document.
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Administering Oregon Estates: 2012 Edition 2–24 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property Whether a testator has testamentary capacity is determined at the precise moment that he or she executes a will. See, e.g., Perry v. Adams, 112 Or App 77, 81, 827 P2d 930 (1992); Matter of Unger’s Estate, 47 Or App 951, 955, 615 P2d 1115 (1980). A will is not executed until all of the requirements of ORS 112.235, which are discussed in §4.2-3(a), have been satisfied. Perry, 112 Or App at 81. In other words, a will is not executed when the testator signs the will unless that act is done in the presence of witnesses, and the witnesses then sign the will before the testator loses testamentary capacity. Perry, 112 Or App at 81–82. “The testimony of subscribing witnesses, aided by the presump- tion of competency which accompanies a will that has been duly executed, carries great weight in the determination of [a] decedent’s tes- tamentary capacity.” Matter of Unger’s Estate, 47 Or App at 955; see also Bigej v. Boyer, 108 Or App 663, 669, 817 P2d 760 (1991).
PRACTICE TIP: In light of the above rule, the lawyer should take care in choosing subscribing witnesses when the capacity of the testator might be questioned later. In Bigej, 108 Or App at 669, the Oregon Court of Appeals discounted the testimony of the subscribing witness (the lawyer who drafted the will), because he had only minimal contact with the testator and was not familiar with her mental or medical condition. Similarly, in Matter of Unger’s Estate, 47 Or App at 955–958, the Oregon Court of Appeals discounted the testimony of the subscribing witnesses (the lawyer who drafted the will and his secretary), and relied on the testimony of medical experts who had extended contact with the testator before and after she signed the will.
PRACTICE TIP: When questions exist regarding a person’s testamentary capacity, the lawyer preparing the will should, before the execution of the will, consult with any family members, friends, and health care professionals who have had an opportunity to interact with and to observe the person on a continuing basis regarding the person’s testamentary capacity. It may also be advis- able to videotape the execution of the will or the testimony of the
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subscribing witnesses, but that technique could backfire. Another way to prepare for a potential will contest is to obtain affidavits of long-time friends of the decedent who have no stake in the inheri- tance, and who can attest to the testator’s mental acuity on or near the day of signing. §4.2-2 Effect of Testator’s Intent and Local Law §4.2-2(a) Intention of Testator Expressed in Will as Controlling The intention of a testator as expressed in his or her will controls the legal effect of the testator’s dispositions. ORS 112.227. The rules of construction expressed in ORS 112.227, 112.230 (see §4.2-2(b)), and 112.410 (effect of general disposition or residuary clause on testator’s power of appointment) apply unless a contrary intention is indicated by the will. ORS 112.227. If a provision in a will disposing of property is ambiguous, the courts may interpret the will so as to resolve the ambi- guity. McClain v. Hardy, 184 Or App 448, 453, 56 P3d 501 (2002). Conversely, if a provision in a will disposing of property is unambiguous, the inclusion of a dispute-resolution provision in the will that gives the personal representative the authority to resolve disputes arising out of the distribution of the estate does not trump the court’s authority to enforce the unambiguous intent of the testator. Roley v. Sammons, 215 Or App 401, 408, 170 P3d 1067 (2007). §4.2-2(b) Local Law of State Selected by Testator Controlling Unless Against Public Policy The meaning and legal effect of a disposition in a will are deter- mined by the local law of the state selected by the testator unless the application of that law is contrary to Oregon’s public policy. ORS 112.230. The construction of a will is governed by the law in effect on the date of its execution, unless the will expresses a contrary intent. 4 PAGE ON WILLS §30.27, at 208–209 (William J. Bowe & Douglas H. Parker eds., 2004) (citation not verified by publisher). §4.2-2(c) Uniform International Wills Act The Uniform International Wills Act (UIWA), which appears in ORS 112.232, prescribes the requirements that must be met in order for
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Administering Oregon Estates: 2012 Edition 2–26 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property a will to qualify as an international will in terms of format and formali- ties of execution. The validity of an international will that complies with the requirements of the UIWA is not affected by the location of assets, or by the nationality, domicile, or residence of the testator. ORS 112.232(2)(a). However, a statutory certificate must be attached to the will, and the certificate must be signed by an “authorized person” (which includes certain members of the diplomatic and consular service of the United States as well as Oregon lawyers). ORS 112.232(1)(b), (5), (9). A will executed in compliance with the UIWA is deemed to have complied with the formalities of ORS 112.235. ORS 112.235(4). A will is lawfully executed if it complies with the UIWA. ORS 112.255(2). §4.2-3 Execution of a Will §4.2-3(a) Formalities, Signing, and Attestation A will must be in writing, signed by the testator or by some other person at the testator’s direction and in his or her presence, and attested by two or more competent witnesses. ORS 112.235. Any person who, at the testator’s direction, signs the name of the testator on the will must also sign his or her own name on the will and write on the will that he or she signed the name of the testator at the testator’s direction. ORS 112.235(2). The person who signs the testator’s name need not be a witness to the will. ORS 112.235(1)(b). The statute also permits the testator to acknowledge, in the presence of each of the witnesses, the signature previously made on the will by the testator or at the testator’s direction. ORS 112.235(1)(c). In Kirkeby v. Covenant House, 157 Or App 309, 313, 970 P2d 241 (1998), the decedent acknowledged her previously made signature on her will to a witness during a telephone conversation. After the telephone con- versation, a representative of the decedent delivered the decedent’s will to the witnesses to sign. The Oregon Court of Appeals held that the decedent’s telephonic acknowledgment of her signature did not satisfy the “in the presence” requirement of ORS 112.235(1)(c), because the decedent’s will was not before the witnesses at the time of the acknowl- edgment. Kirkeby, 157 Or App at 319–320. The court reasoned that 4-27 2012 Revision
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without having the decedent’s will in front of them, the witnesses could not have known whether the instrument that was later presented to them was, in fact, the instrument that contained the signature that the decedent had previously acknowledged, or whether the decedent had actually signed the instrument at the time she stated in her acknowl- edgment. Kirkeby, 157 Or App at 320. At least two witnesses must either see the testator sign the will or hear the testator acknowledge the signature on the will. ORS 112.235(3)(a)–(b); see Kirkeby, 157 Or App 319–320 (“to satisfy the ‘in the presence’ requirement of ORS 112.235(1)(c), the will, bearing the signature that the testator acknowledges, must be before the witness at the time of the acknowledgment”). Publication by the testator is not required. Each witness must attest the will by signing his or her name to it. ORS 112.235(3)(c). In Perry v. Adams, 112 Or App 77, 827 P2d 930 (1992), the Oregon Court of Appeals held that the execution of a will is not complete until all of the formalities of execution set forth in ORS 112.235 are satisfied. Thus, testamentary capacity may not be deter- mined when a testator signs a will unless that act is done in the presence of witnesses, and the witnesses then attest the will. Perry, 112 Or App at 82. It therefore follows that, although ORS 112.235 does not require witnesses to sign a will at the time and place it is signed by the testator, witnesses must sign the will before the testator loses testamentary capacity or dies. See Perry, 112 Or App at 82; Rogers v. Rogers, 71 Or App 133, 136, 691 P2d 114 (1984) (the requirements of execution were not satisfied when a witness attested the will 11 months after the testator died). §4.2-3(b) Witness as a Beneficiary An interested person may serve as an attesting witness without invalidating the will. An interested witness is one to whom a personal and beneficial interest in the estate is devised. ORS 112.245.
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Administering Oregon Estates: 2012 Edition 2–28 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property §4.2-3(c) Validity of Execution of a Will A will is lawfully executed if it is: (1) In writing; (2) Signed by, or at the direction of, the testator; and (3) Otherwise executed in accordance with the law of (a) this state at the time of execution or at the time of the testator’s death, (b) the domicile of the testator at the time of execution or at the time of the testator’s death, or (c) the place of execution at the time of execu- tion. ORS 112.255(1). Furthermore, a will is lawfully executed if it complies with the Uniform International Wills Act. ORS 112.255(2). See §4.2-2(c). §4.2-4 Testamentary Additions to Trusts Under the Uniform Testamentary Additions to Trusts Act, ORS 112.265, a devise may be made by a will to a trustee of a trust if (1) the trust “is established or will be established by the testator, or by the testator and some other person or persons, or by some other person or persons”; (2) the trust “is identified in the testator’s will”; and (3) the terms of the trust “are set forth in a written instrument, other than a will, executed before, concurrently with, or after the execution of the testator’s will, or in the valid last will of a person who has predeceased the testator.” ORS 112.265(1). The trust may be funded during the testator’s lifetime or upon the testator’s death by the testator’s devise to the trustee. ORS 112.265(2). Thus, the trust need not be funded during the testator’s lifetime and may acquire assets solely from a testamentary devise. All property devised to such a trust will be administered and disposed of in accordance with the provisions of the trust instrument, including any amendments made to it before or after the death of the testator. ORS 112.265(4)(b). §4.2-5 Contracts to Make a Will Pursuant to ORS 112.270(1), “[a] contract to make a will or devise, or not to revoke a will or devise, or to die intestate, executed after January 1, 1974,” may be established only by:
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(1) “Provisions of a will stating material provisions of the contract”; (2) “An express reference in a will to a contract and extrinsic evidence proving the terms of the contract”; or (3) “A writing signed by the decedent evidencing the contract.” “The execution of a joint will or mutual wills does not create a presumption of a contract not to revoke the will or wills.” ORS 112.270(2). ORS 112.270 applies only to wills executed after January 1, 1974. ORS 112.270(1). For wills executed before 1974, no specific guidelines establish what is required to show the existence of such a contract; however, it has been held that when a person seeks specific performance of a contract to make mutual wills, and the contract was entered into before the effective date of ORS 112.270, the person seeking specific performance must show that it is much more probable than not that the parties to the alleged contract manifested the essential mutual assent. See Willbanks v. Goodwin, 300 Or 181, 202, 709 P2d 213 (1985); DeLaMater v. DeLaMater, 69 Or App 40, 44, 688 P2d 1350 (1984). In Krueger’s Estate v. Ropp, 282 Or 473, 478 & n 2, 579 P2d 847 (1978), the court noted ORS 112.270, but did not apply the statute in determining whether an oral contract existed. The court stated that an “oral contract to devise or bequeath property must be proved by clear, concise, and convincing evidence.” Krueger’s Estate, 282 Or at 478. In Lawrence v. Ladd, 280 Or 181, 188 n 11, 570 P2d 638 (1977), the court noted the applicability of ORS 112.270 but, because the statute was not raised as a bar by the defendant, the court did not apply it. See Richardson v. Richardson, 58 Or App 338, 648 P2d 377 (1982). The procedures for contesting a will are set forth in ORS 113.075. See §§15.2-1(a) to 15.2-2(g). If the will contest involves a contract to make a will, the action must be commenced by the filing of a separate action, outside the probate court, to enable either party to demand a jury trial. ORS 113.075(2).
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Administering Oregon Estates: 2012 Edition 2–30 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property A petition for the probate of a will must name any person known to the petitioner as having a potential interest in the estate that arises out of a contract to make a will or devise. ORS 113.035(8)(c). Furthermore, the personal representative must deliver to any such person a copy of the information required to be given to the devisees and heirs of the estate. ORS 113.145(1). If, during the administration of the estate, the personal representative receives actual knowledge that a person has a potential interest in that estate, based on a contract to make a will or devise, the personal representative must make reasonable efforts to ascertain the name and address of the person and notify that person of the probate proceedings. ORS 113.145(5). See §2.5-1. §4.2-5(a) Contract Law Governs In general, contracts to make a will or not to revoke a will are governed by the principles of contract law, and not by the principles of probate law. Florey v. Meeker, 194 Or 257, 280, 240 P2d 1177 (1952); see ORS 112.270. Therefore, once a contract has been established, the law of contracts governs its interpretation and application. Florey, 194 Or at 280–281. See CONTRACT LAW IN OREGON (Oregon CLE 2003 & Supp 2008) (discussing principles of contract law). Thus, a contract to make a will, or not to revoke a will, will be binding if the parties are competent to contract with one another, and if there is no fraud, undue influence, duress, or mistake. Matter of Marriage of Ellinwood, 59 Or App 536, 539, 651 P2d 190 (1982). In addition, the fairness of the contract will usually be determined as of the date of the contract. Matter of Marriage of Ellinwood, 59 Or App at 539. An action for breach of a contract to make a will may be brought during the life of the promisor. Dickie v. Dickie, 95 Or App 310, 314 & n 5, 769 P2d 225 (1989) (“when the promisor in a contract to devise specified real property sells it instead, the promisee may sue for breach of contract”). §4.2-5(b) Statute of Limitations As stated in §4.2-5(a), the principles of contract law govern the interpretation and application of a contract to make a will or not to revoke a will. See ORS 112.270. The statute of limitations for contracts
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is generally six years. See ORS 12.080. In the past, the statute of limitations did not begin to run until the death of the promisor-testator. Catching v. Lashway, 84 Or App 602, 606, 735 P2d 13 (1987); Schaad v. Lorenz, 69 Or App 16, 26, 688 P2d 1342 (1984). The reasoning for the rule was that the will is an ambulatory document, and therefore, the promisor-testator is able to perform the contract until his or her death. Schomp v. Brown, 215 Or 714, 723, 335 P2d 847, decision clarified on denial of reh’g, 215 Or 714 (1959). It could also be argued that the promisee may or may not have known of the conveyance and, in the case of a third-party beneficiary of a contract to make a will, may not even have known of the existence of the contract, or of the will, until after the death of the promisor-testator. For estates of decedents dying after July 1, 1992, an action to contest a will, including a will contest based on a contract to make a will or not to revoke a will, must be commenced before the later of: (1) “Four months after the date of delivery or mailing of the information described in ORS 113.145 [information to devisees, heirs, and interested persons] if that information was required to be delivered or mailed to the person on whose behalf the petition is filed,” ORS 113.075(3)(a); or (2) “Four months after the first publication of notice to interested persons if the person on whose behalf the petition is filed was not required to be named in the petition as an interested person,” ORS 113.075(3). A will contest must be commenced by the filing of a petition in the probate proceeding, “except that [a will contest based on a contract to make a will] may be commenced by the filing of a separate action in any court of competent jurisdiction.” ORS 113.075(2). A cause of action based on a decedent’s promise that he or she would make or revoke a will or devise, or not revoke a will or devise, or die intestate may not be presented as a claim under ORS chapter 115 (claims against estates). ORS 113.075(4).
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Administering Oregon Estates: 2012 Edition 2–32 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property §4.2-5(c) Problems of Proof Contracts to make a will or not to revoke a will may take numer- ous forms, including the following: (1) A contemporaneous written agreement embodying the contract that may appear as part of a joint or mutual will or as a separate written agreement, Ricks v. Brown, 15 Or App 160, 515 P2d 206 (1973); (2) A separate agreement regarding wills in the form of a reconciliation agreement or a divorce settlement, see Matter of Mar- riage of Ellinwood, 59 Or App 536, 651 P2d 190 (1982); (3) An oral agreement asserted by a party to the agreement or a third-party beneficiary to establish that mutual wills were executed pursuant to a contract, Parker v. Richards, 43 Or App 455, 602 P2d 1154 (1979); Woelke v. Calfee, 45 Or App 459, 608 P2d 606 (1980); (4) A claim to a will based on services performed for the decedent, Musselman v. Mitchell, 46 Or App 299, 305–306, 611 P2d 675 (1980); Krueger’s Estate v. Ropp, 282 Or 473, 579 P2d 847 (1978); and (5) Actual contractual language contained within a joint or mutual will that can support a binding and enforceable contract, Shea v. Begley, 94 Or App 554, 766 P2d 418 (1988); Schaad v. Lorenz, 69 Or App 16, 19–20, 688 P2d 1342 (1984).
NOTE: Some of these methods of proof, such as those in items (3) and (4) above, may be barred by the provisions of ORS 112.270(1) (procedures for establishing a contract to make a will or devise, or not to revoke a will or devise). In cases in which a contemporaneous written agreement embody- ing the contract appears as part of a joint or mutual will, or exists as a separate written agreement, Oregon courts have enforced the will as if it were a contract, although the courts have held that a subsequent will is entitled to probate. In this latter situation, the promisee’s remedy lies in a separate suit in equity to impose a constructive trust on the assets, rather than a will contest. Catching v. Lashway, 84 Or App 602, 606,
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735 P2d 13 (1987); Ankeny v. Lieuallen, 169 Or 206, 218, 113 P2d 1113, 127 P2d 735 (1942). When two parties enter into a joint and mutual will, and then one of the parties dies, the surviving party is typically free to revoke that joint and mutual will. However, if it can be established that the joint and mutual will is contractual in nature, the surviving party is not free to repudiate the underlying contract. Schaad, 69 Or App at 21. In Catching, 84 Or App at 605 (citations omitted, emphasis added), the Oregon Court of Appeals discussed problems of proof that arise in many cases regarding contracts to make or not to revoke wills, and stated: Plaintiffs acknowledge that they must prove the existence of a contract to make a will by clear and convincing evidence. . . . The mere existence of a joint will or mutual reciprocal wills is not sufficient to prove that there was a contract to make those wills.... On the other hand, the existence of mutual wills, coupled with extrinsic evidence of an oral agreement between the testators, has led the Supreme Court to decide that there was a contract to make the wills. . . . In the absence of either a separate written document or contractual language in the will, the extrinsic evidence adduced to support the claim of an existing contract to make a will must be strong. . . . Because a contract to make a will is generally covered by the same principles of law that apply to other types of contracts, . . . extrinsic evidence is admissible to show that the will was only part of the agreement between the testators. . . . The question of whether a contract exists depends on the particular facts of each case.... In DeLaMater v. DeLaMater, 69 Or App 40, 688 P2d 1350 (1984), a husband and wife had executed joint and mutual wills, and both parties were aware of the mutual testamentary provisions at the time of execution. The court held that those facts alone did not establish the existence of a contract to make a will. DeLaMater, 69 Or App at 43– 46. The court cited BERTEL M. SPARKS, CONTRACTS TO MAKE WILLS 27–28 (1956), for the rule that a contract not to revoke a will is not established by the fact that the parties had agreed to make mutual wills. DeLaMater, 69 Or App at 46 n 3.
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Administering Oregon Estates: 2012 Edition 2–34 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property The fact that such wills are usually executed as a result of a common intention does not in any way mean that they were executed pursuant to a contract between the parties regarding the making of such wills. Their execution does not give rise to a presumption or inference that they were made pursuant to a contract. Am. Nat. Red Cross v. Wilson, 274 Or 237, 240, 545 P2d 883 (1976). However, a joint and mutual will that contains specific contrac- tual language within its four corners will generally be held to be an enforceable and binding contract. Shea, 94 Or App at 557–558; Schaad, 69 Or App at 19–21. In Baker v. Mohr By & Through Adams, 111 Or App 592, 596, 826 P2d 111 (1992), the Oregon Court of Appeals held that the require- ment in ORS 112.270(1)(c) that a contract to make a will or devise be both in writing and signed by the decedent did not bar a claim to enforce a contract to make a will that “was in writing and signed by the decedent but was subsequently destroyed or concealed by the person seeking to evade its provisions.” Thus, contracts to make or not to revoke wills may take numerous forms, and the problems of proof that need to be addressed depend on the form by which the contract has arisen. §4.2-6 Revoking or Altering a Will §4.2-6(a) Governing Statutes Are Exclusive Pursuant to ORS 112.275, a will may be altered or revoked only as provided in ORS 112.285–112.315, which are discussed in §§4.2- 6(b) to 4.2-6(f). §4.2-6(b) Express Revocation or Alteration A will may be revoked or altered by another will. ORS 112.285(1). A will may be revoked by being “burned, torn, canceled, oblit- erated or destroyed, with the intent and purpose of the testator of revoking the will, by the testator, or by another person at the direction of the testator and in the presence of the testator.” ORS 112.285(2). The injury or destruction by a person other than the testator at the direction 4-35 2012 Revision
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and in the presence of the testator must be proved by at least two witnesses. ORS 112.285(2). The same degree of mental capacity is required to revoke a will as is required to execute one. Wood v. Bettis, 130 Or App 140, 143, 880 P2d 961 (1994). See §4.2-1, for a discussion of testamentary capacity. In Wood, 130 Or App at 143–146, for example, the Oregon Court of Appeals held that the testator lacked the testamentary capacity to revoke his will when he tore it up because at that time the testator did not understand the value and extent of his property, the natural objects of his bounty, or the nature of the business in which he was engaged. §4.2-6(c) Revival of Revoked or Invalid Will If a will or a part of a will has been revoked or is invalid, it may be revived by “re-execution of the will or by the execution of another will in which the revoked or invalid will or part thereof is incorporated by reference.” ORS 112.295. Under the doctrine of “dependent relevant revocation,” a court can probate a will that was revoked by a testator through the execution of a subsequent will if the subsequent will is later declared to be invalid, and if the court determines that the testator did not intend to die intestate. Kirkeby v. Covenant House, 157 Or App 309, 314–315, 970 P2d 241 (1998). If a testator destroys a valid will, his or her prior will is not revived. Instead, the person then has no valid will. ORS 112.295. §4.2-6(d) Revocation by Marriage The law regarding the revocation of a will by marriage has changed over the years. Before 1965, a will was automatically revoked on the subsequent marriage of the testator, regardless of the intent of the testator. The law was amended in 1965 to provide that the subsequent marriage of the testator revokes his or her will, unless the will expressly declared the intention of the testator that it should not be revoked by a subsequent marriage. ORS 112.305, enacted in 1969 and currently in effect, goes further than the 1965 amendment in giving effect to the actual intention of the testator.
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Administering Oregon Estates: 2012 Edition 2–36 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property Under ORS 112.305, the subsequent marriage of the testator revokes a will only if the spouse of that subsequent marriage survives the testator. Thus, if after making a will, the testator marries and the spouse of that marriage predeceases the testator, the will of the testator will not be deemed to have been revoked by the subsequent marriage. However, if the spouse of the subsequent marriage survives the testator, the marriage is deemed to revoke the testator’s will, unless the will expresses a contrary intent, the will was drafted under circumstances indicating that it was in contemplation of the marriage, or an antenuptial agreement between the testator and his or her spouse dealt with the decedent’s estate. Unless an exception to ORS 112.305 applies, a subsequent mar- riage of the testator will revoke the testator’s will and the surviving spouse is entitled to an intestate share of the decedent’s estate, not- withstanding that the surviving spouse did not bring any property into the marriage, or that the marriage lasted only for a short period of time, or even that divorce proceedings are pending. In Stevenson v. U.S. Nat. Bank of Oregon, 72 Or App 39, 41, 695 P2d 77 (1985), the testator and his fiancee entered into a prenuptial agreement, which provided that the parties could dispose of their respective properties as they wished, and that, “should the marriage be terminated by death or dissolution, each party would retain the property owned by the party prior to the marriage.” They were married the next day. Ten months later, the wife sued the testator for divorce. While the divorce was pending, the testator executed a will leaving all his property to his children. The testator and the spouse then entered into a property-settlement agreement that specifically superseded the prenuptial agreement. Ten months after the divorce, the parties remarried and a short time thereafter the testator filed a petition for divorce. Shortly after the petition was filed, the testator was killed and his will was entered into probate. The court ruled that neither of the exceptions under ORS 112.305 applied because the will did not evidence an intent that it was not to be revoked by the marriage, and the prenuptial agreement of the testator and his spouse had been superseded by the property-settlement agreement. Accordingly, the testator had no
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valid will at the time of his death, and the surviving spouse was entitled to an intestate share of the decedent’s net estate. §4.2-6(e) Revocation by Dissolution or Annulment of Marriage Unless a will evidences a different intent of the testator, the divorce or annulment of the testator’s marriage after the execution of the will “revokes all provisions in the will in favor of the former spouse of the testator and any provision [in the will] naming the former spouse as executor, and the effect of the will is the same as though the former spouse did not survive the testator.” ORS 112.315. Before the effective date of ORS 112.315 (which was enacted in 1969), the dissolution or annulment of the testator’s marriage sub- sequent to the execution of a will resulted in the revocation of the entire will in the absence of an expression in the will of the testator’s intention that the will would not be deemed to have been so revoked. §4.2-6(f) Executory Contract of Sale of Devised Property Not a Revocation An executory contract of sale made by a testator to convey property devised in a previously made will does not revoke the previous devise. Instead, the property passes by the devise, “subject to the same remedies on the agreement . . . against devisees as might be had against the heirs of the testator if the property had descended to them.” ORS 112.325. In the absence of a statute like ORS 112.325, the proceeds of the sale of devised real property sold on contract would go to those entitled to the testator’s personal property and not to the testator’s devisee. See In re Pape’s Estate, 135 Or 650, 652–653, 297 P 845 (1931). The statute protects the devisee’s interest in the proceeds of the contract covering the devised real property. ORS 112.325 is limited in its applicability to devised real property that is sold under an executory contract of sale subsequent to the making of the will. If the testator contracts to sell real property that has not been devised by his or her will, the statute does not apply. Instead, under the
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Administering Oregon Estates: 2012 Edition 2–38 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property doctrine of equitable conversion, the proceeds of sale will go to those entitled to the testator’s personal property. In like manner, if the sale of devised property is not by contract, but is effected by a conveyance with a purchase money mortgage back to the grantor, ORS 112.325 does not apply. Instead, ORS 112.385(4), as modified by the testator’s will, would determine the devisee’s entitlement to any of the payments on the mortgage. A testator who, at the time of making a will, recognizes the possibility that he or she may be entering into a contract to sell specif- ically devised property should be aware that unless the will provides differently, the devisee will take the property subject to the contract, and in effect the devise will be the equivalent of the vendor’s beneficial interest in the contract. Although ORS 112.325 refers generally to “property” and not exclusively to real property, thereby being applicable under the definition of property in ORS 111.005(27) to both real property and personal property, the statute has no significant effect on the descent of the vendor’s interest in devised personal property sold pursuant to a contract, because the doctrine of equitable conversion applies exclu- sively to real property. §4.2-7 Effect of Will Provisions §4.2-7(a) Will Governs Disposition of Estate ORS 112.415 is designed to create certainty that, except as otherwise expressly provided by law, no person is entitled to take any portion of the estate of a testator disposed of by the will other than as provided in the will. Statutes expressly providing otherwise include the antilapse statute (ORS 112.395), the pretermitted child statute (ORS 112.405), the statutes governing elective rights of a surviving spouse (ORS 114.600–114.725), and other comparable laws of a specific nature.
NOTE: Effective January 1, 2011, the 2009 Legislature substantially revised Oregon’s laws regarding a surviving spouse’s elective share, repealing former ORS 114.105–114.165 and enact-
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ing ORS 114.600–114.725. The 2011 Legislature made technical corrections to the statutes. See 2011 Or Laws ch 305. These corrections apply to the surviving spouses of all decedents who die on or after June 9, 2011. For further discussion of the elective share of the surviving spouse, see §§8.2-5(a) to 8.2-5(i)(2). §4.2-7(b) Devise Passes All Interests of Testator A devise of property passes the testator’s entire interest in the property at the time of the testator’s death, unless the will evidences a different intent. ORS 112.355. Consistent with ORS 114.205, this statute applies without distinction between real property and personal property. §4.2-7(c) Encumbrance or Disposition of Devised Property Pursuant to ORS 112.335, “[a]n encumbrance or disposition of property by a testator after the testator makes a will does not affect the operation of the will upon a remaining interest therein that is subject to the disposal of the testator at the time of the death of the testator.” The primary purpose of ORS 112.335 is to eliminate any inference that an alteration in the nature of the estate or interest held by the testator constitutes a revocation of the devise. For a definition of the rather limited extent to which the devisee of property encumbered by the testator either before or after the testator makes a will is entitled to exoneration out of other assets of the estate, see ORS 115.255. The following testamentary provision tends to duplicate the statute: In the event that any property or interest in property passing under this will is encumbered by a mortgage or a lien or is pledged to secure any obligation, it is my intention that such indebtedness will not be charged to or paid from my estate, but that the devisee will take such property or interest in property subject to all encumbrances existing at the time of my death. To abrogate the effect of the statute, the following testamentary direction might be used: In the event that any property or interest in property passing under this will is encumbered at the time of my death by a mortgage or a lien or is pledged to secure any obligation, I direct my executor to pay and 4-40 2012 Revision
Administering Oregon Estates: 2012 Edition 2–40 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property discharge as soon after my death as may be practicable such loan, obligation, lien, or charge with interest and penalties, if any, out of the general assets and at the expense of my estate, regardless of whether or not I am or my estate is liable for the payment thereof. The Oregon Supreme Court has held that, absent a clear expression of intent to the contrary in a will or otherwise, the decedent’s estate is not liable for contribution to a surviving joint tenant toward debt secured by real property that passes to the surviving joint owner and obligor by right of survivorship. Bonner v. Arnold, 296 Or 259, 265, 676 P2d 290 (1984).
PRACTICE TIP: If the testator has an interest in real property securing a debt that is held as joint tenants with the right of survivorship, and the testator wants the estate to be liable, in whole or in part, for the debt, the will should specifically provide for contribution by the estate. §4.2-7(d) Devise of a Life Estate “A devise of property to any person for the term of the life of the person, and after the death of the person to the children or heirs of the person, vests an estate or interest for life only in the devisee and remainder in the children or heirs.” ORS 112.345. The purpose of ORS 112.345 was to abolish, and to some extent enlarge, the ancient Rule in Shelley’s Case. See Wolfe v. Shelley, 1 Co Rep 93b, 76 Eng Rep 206 (CP) (1579–1581), discussed at
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The statute is designed to make clear that after-acquired property can pass by will. It applies with equal force to real property and personal property. The following testamentary provision is in keeping with the statute: I give and devise to my son, Jacob, all real property that I may own at the time of my death. §4.2-7(f) Direction to Pay Debts, Taxes, and Other Charges Most wills contain general testamentary directions to pay debts, charges, taxes, and administration expenses. Varying interpretations of such directions have been arrived at by the authorities in response to specific problems. ORS 115.255–115.275 set forth rules for paying encumbrances on devised property, and ORS 116.303–116.383 deal with the apportion- ment of estate taxes. All of these statutes are conditioned on the fact that the will does not provide otherwise. A common form of testamentary direction for payment of debts and other charges follows: I direct my personal representative to pay from my estate all my just debts, the expenses of my last illness, funeral, and final interment, and the expenses of administration of my estate. This language would not be considered a direction of exoneration from encumbrances or against apportionment of estate taxes. If exonera- tion from encumbrances is desired by the testator, the will should specifically state so. The following is an example of a provision for exoneration from encumbrances: I give and devise to my son, Jacob, all real property that I may own at the time of my death. If any of this real property is subject to encumbrances of any kind, whether voluntary or involuntary, I direct my personal representative to pay and fully satisfy such encumbrances from my estate.
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Administering Oregon Estates: 2012 Edition 2–42 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property If the testator also desires that death taxes be paid from the residue of the estate without apportionment, the will should specifically state so, for example: I direct my personal representative to pay from my estate all inheritance, estate, transfer, and succession taxes that become payable by reason of my death, and I authorize my personal representative to contest or compromise any claims for such taxes. I further direct that all such taxes will be paid without apportionment thereof and without withholding or collecting any part thereof from any beneficiary under my will or under any life insurance of mine that may be subject to such tax or from the surviving owner of any property owned jointly with me, it being my intention that all such taxes will be paid from my estate as an expense of administration. §4.2-7(g) Nonademption of Specific Devises Rules for nonademption of specific devises are set forth in ORS 112.385. At common law, what was known as the doctrine of ademption by extinction applied without regard to the testator’s intent. Under this doctrine, if real or personal property was specifically given by will to a named person, and the property was destroyed or sold between the time of execution of the will and the testator’s death, the devise or bequest failed. The reasoning behind the failure of the devise or bequest was that there was no property in the estate to satisfy the specific gift. ORS 112.385 changes the common law. It is specific in its approach to the many situations covered under the statute. It avoids the adoption of a broad approach that would abolish the doctrine of ademp- tion by extinction entirely, and it is intended to carry out the normal intent of the testator. §4.2-7(h) Devises to Testator’s Issue; Antilapse At common law, a devise or bequest to a person who predeceased the testator would lapse in the absence of a special provision in the will preventing it. ORS 112.395 changes the common law. Under the statute, when property is devised to any person who is related to the testator by blood or adoption, and that person dies before the testator and leaves
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lineal descendants, the descendants take by representation the property that the devisee would have taken if the devisee had survived the tes- tator, unless otherwise provided in the testator’s will. The statute covers a devisee under a class gift if the devisee’s death occurred after the execution of the will. Although the language of the statute is of a mandatory nature, a testator using appropriate words can prevent the statute from operating. For example, the testator can provide for a substitute devise, such as the one below, in the event that the devisee predeceases the testator, or the testator can simply provide that in such event, the devise will lapse: I devise to my brother, John Doe, the sum of $5,000. If my brother does not survive me, the foregoing devise to him will lapse, and in lieu thereof I devise the sum of $5,000 to Mary Doe, wife of my brother, John Doe. If the foregoing will provision had not specified otherwise, and if the brother had predeceased the testator, and had been survived by descendants, those descendants would take the $5,000 bequest by representation under the antilapse statute. Because the brother is related to the testator by blood or adoption, ORS 112.395 would apply. In this example, mention of what would happen if the brother’s wife failed to survive the testator has been omitted intentionally, because she is not related to the testator by blood or adoption, and if she failed to survive, whether or not she was survived by descendants, the bequest to her would lapse. The following provision is another example that may slightly alter the effect of the statute: I devise to my brother, John Doe, the sum of $5,000. If my brother does not survive me, the foregoing devise to him will lapse and in lieu thereof I devise the sum of $5,000 in equal shares to the children of my brother, John Doe, who are living at the time of my death. The antilapse statute is an example of a statute intended to carry out the assumed desire of the testator. As always, the drafter of the will should use specific language that carries out the actual intent of the testator, rather than relying on the statute.
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Administering Oregon Estates: 2012 Edition 2–44 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property §4.2-7(i) Effect of Failure of Devise Except as provided in the antilapse statute (ORS 112.395; see §4.2-7(h)), which is concerned exclusively with devises to persons who are related by blood or adoption to the testator, ORS 112.400(1) declares that “[i]f a devise other than a residuary devise fails for any reason, it becomes a part of the residue.” Regarding the residue, if there are two or more residuary devisees and the share of one of them fails, that share “passes to the other residuary devisee or to other residuary devisees in proportion to their interests in the residue.” ORS 112.400(2).
PRACTICE TIP: As always, the lawyer should determine the wishes of the testator and, if the results flowing from application of this statute do not conform with those wishes, the lawyer must take care in expressing the testator’s wishes in the will. §4.2-7(j) After-Born and After-Adopted Children: Pretermitted Children A pretermitted child is a child of a testator who (1) is born or adopted after the execution of the testator’s will, (2) is neither provided for in the will nor in any way mentioned in it, and (3) survives the testator. ORS 112.405(1). Under ORS 112.405, if the will makes no provision for a child who is living at the time of the execution of the will, that child does not qualify as a pretermitted child. The statute further specifies that if the testator made no provision for children who were living when the testator executed the will, it is reasonable to assume that the testator had no desire to provide for after-born children. ORS 112.405(2). Conversely, if the testator provided for children who were living when the testator executed the will, it is assumed that the testator also wanted to provide for after-born and after-adopted children. ORS 112.405(3). The share to which the pretermitted child is entitled in this instance is computed in accordance with the formula set forth in ORS 112.405(3)(b). If the testator had no children living when the testator made the will, a pretermitted child would “take a share of the estate as though the
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testator had died intestate.” ORS 112.405(4). As always, the lawyer should address such a possibility in the will, rather than allow the statute to control. §4.2-7(k) Effect of General Disposition or Residuary Clause on Testator’s Power of Appointment A general residuary clause in a will or a will making general disposition of all of the testator’s property does not exercise a power of appointment held by the testator, unless specific reference is made to the power in the will or there is some other indication of intention in the will to include the property subject to the power. ORS 112.410. §4.2-8 Disposition of Wills §4.2-8(a) Exclusive Manner of Disposing of Wills ORS 112.800–112.830 set forth the exclusive manner for dispos- ing of a will. “Any person having custody of a will has a duty to maintain custody of the will and may not destroy or discard the will, disclose its contents to any person[,] or deliver the will to any person except as authorized by the testator or as permitted by ORS 112.800 to 112.830.” See §§4.2-8(b) to 4.2-8(e). §4.2-8(b) Duties of Custodian of Will ORS 112.810 describes the duties of the custodian of a will. Any person having custody of a will: (1) Must deliver the will to the testator on the testator’s demand, unless the person is a lawyer and is entitled to retain the will pursuant to ORS 87.430 (possessory lien); (2) May at any time deliver the will to the testator; (3) Must deliver the will to the testator’s conservator upon the conservator’s demand; (4) Upon demand from the attorney-in-fact, must deliver the will to “an attorney-in-fact acting under a durable power of attorney signed by the testator expressly authorizing the attorney-in-fact to demand custody of the will”;
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Administering Oregon Estates: 2012 Edition 2–46 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property (5) May deliver the will to “any lawyer licensed to practice law in Oregon willing to accept delivery of the will if the person does not know or cannot ascertain, upon diligent inquiry, the address of the testator”; or (6) Must, within 30 days after receiving information that the testator is deceased, deliver the will to a court with jurisdiction over the testator’s estate or to a personal representative named in the will. ORS 112.810(1). Oregon law sets forth a procedure for gaining access to the safe- deposit box of a decedent for the purpose of obtaining the decedent’s will. See ORS 112.810(2). After receiving a certified copy of the decedent’s death certificate and a statutorily prescribed affidavit, a financial institution, trust company, savings association, or credit union must deliver the decedent’s original will to the decedent’s personal representative. ORS 708A.655(2)–(5), 723.844(2)–(5).
NOTE: The 2011 Legislature amended ORS 708A.655 and 723.844 to set forth a procedure to authorize financial institutions to release the contents of a safe-deposit box to the affiant of a small-estate affidavit. See ORS 114.537. For further discussion of the procedure to transfer the contents of a safe deposit box, see §3.4-1. If the decedent’s will fails to name a personal representative or if the financial institution, despite reasonable efforts, cannot determine the location of the personal representative, the institution may either retain the will or deliver it to a court having jurisdiction of the decedent’s estate. ORS 708A.655(4), 723.844(4). §4.2-8(c) Procedure for Destruction of 40-Year-Old Will A lawyer who has custody of a will may destroy the will in accordance with ORS 112.820, if (1) the lawyer is licensed in Oregon, (2) the will is at least 40 years old, (3) the testator’s address is unknown and cannot be found after diligent inquiry, and (4) the will is not subject to a contract to make a will or devise or not to revoke a will or devise. ORS 112.815.
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A lawyer who is authorized to destroy a will under ORS 112.815 may proceed under ORS 112.820 as follows: (1) The lawyer must first publish a notice in a newspaper in the county of the testator’s last-known address, if any—otherwise in the county of the lawyer’s principal place of business; the notice must state the name of the testator, the date of the will, and the intent of the lawyer to destroy the will if the testator does not contact the lawyer within 90 days after the date of the notice, ORS 112.820(1)(a); (2) If the testator fails to contact the lawyer within 90 days after the date of the notice, the lawyer may destroy the will, ORS 112.820(1)(b); (3) Within 30 days after destruction of the will, the lawyer must file with the probate court in the county where the notice was published an affidavit that states the information required by the statute, ORS 112.820(1)(c); and (4) The lawyer must pay the required fee for filing the affi- davit, ORS 112.820(1)(d); see ORS 21.145.
PRACTICE TIP: The 2011 Legislature amended ORS 112.820(1) to increase the court filing fee for the affidavit required by the statute from $17.00 to $105.00. The lawyer should take into account the amount of this fee before agreeing to store an original will for a client or to accept original will files from a retiring lawyer or the estate of a deceased lawyer, as authorized by ORS 112.810(1)(e) . A will may be destroyed by a lawyer, without notice to any person or court, if the will has not been admitted to probate within 40 years after the death of the testator. ORS 112.820(2). §4.2-8(d) Liability for Destruction of Will A person who violates any provision of the statutes governing the disposition of a will (ORS 112.800–112.830; see §§4.2-8(a) to 4.2-8(c)) is “liable to any person injured by such violation for any damages sustained thereby.” ORS 112.825. A lawyer who destroys a will in
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Administering Oregon Estates: 2012 Edition 2–48 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property accordance with ORS 112.800–112.830 is not liable to the testator or any other person for its destruction or disposal. ORS 112.825. §4.2-8(e) Court May Order Delivery of Will The court with jurisdiction over the decedent’s estate may order a person to deliver the decedent’s will to the court. ORS 112.830. §4.2-9 Elective Share of Surviving Spouse For estate planning purposes, a lawyer must be cognizant of the fact that if a decedent is domiciled in this state at the time of death and dies with a valid will, the surviving spouse has a right to an elective share. Effective January 1, 2011, the 2009 Legislature repealed Ore- gon’s former elective share laws (former ORS 114.105–114.165), and replaced them with ORS 114.600–114.725. These statutes represent a major revision to Oregon’s elective share law. The 2011 Legislature made technical corrections to the 2009 law (see 2011 Or Laws ch 305), which apply to the surviving spouses of all decedents who die on or after June 9, 2011. For further discussion of the elective share of the surviving spouse, see §§8.2-5(a) to 8.2-5(i)(2).
§4.3 UNIFORM DISPOSITION OF COMMUNITY PROPERTY RIGHTS AT DEATH ACT In 1973, the legislature passed the Uniform Disposition of Com- munity Property Rights at Death Act, ORS 112.705–112.775. See §§4.3-1 to 4.3-5. §4.3-1 Property Subject to Uniform Act The Uniform Disposition of Community Property Rights at Death Act (the “Uniform Act”) applies to the disposition at death of all community property acquired by a married person, including (1) all property that was acquired as or became community property under the laws of another jurisdiction; (2) all property (including Oregon real property), or the proportionate part of it, that was acquired with the
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income of or proceeds from community property; and (3) all property that is otherwise traceable to community property. ORS 112.715. The following rebuttable presumptions apply in determining whether the Uniform Act applies to specific property: (1) Property acquired during marriage by a spouse while domi- ciled in a community-property state is rebuttably presumed to be subject to the Uniform Act, ORS 112.725(1); and (2) Real property located in Oregon, and any personal property acquired by a married person while domiciled in a noncommunity- property state, are not subject to the Uniform Act, if title to the property “was taken in a form which created rights of survivorship.” ORS 112.725(2). §4.3-2 Effect of Uniform Act on Decedent’s Estate §4.3-2(a) Distribution and Disposition of Community Property Upon the death of a married person, one-half of the community property to which the Uniform Disposition of Community Property Rights at Death Act applies is the property of the surviving spouse and is not subject to testamentary disposition by the decedent or distribution under Oregon’s laws of intestate succession. ORS 112.735. The other half of the property is subject to testamentary disposition (or intestate succession distribution), unless it is held under a limitation imposed by law that would prevent such disposition. ORS 112.775(3). The decedent’s half of the property is not subject to the surviving spouse’s right to elect against the will. ORS 112.735. §4.3-2(b) Perfection of Title to Community Property If the title to any property to which the Uniform Disposition of Community Property Rights at Death Act (the “Uniform Act”) applies was held by the decedent at the time of death (see §4.3-1), “title of the surviving spouse may be perfected by an order of the probate court or by execution of an instrument by the personal representative or the heirs
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Administering Oregon Estates: 2012 Edition 2–50 Intestate Succession, Wills, and Community Property / Chapter 4 Chapter 2—Intestate Succession, Wills, and Community Property or devisees of the decedent with the approval of the court.” ORS 112.745. Neither the court nor the personal representative has a duty to discover whether any of the decedent’s property is subject to the Uniform Act, unless a written demand is made by the spouse or a suc- cessor in interest. ORS 112.745. Similarly, the personal representative has no duty to discover whether any of the survivor’s property is subject to the Uniform Act, except on written demand by an heir, devisee, or creditor of the decedent, but the personal representative may institute an action to perfect title to the decedent’s half of such property. ORS 112.755. §4.3-3 Rights of Third Parties to Community Property The Uniform Disposition of Community Property Rights at Death Act (the “Uniform Act”) protects third persons in their dealings with community property on the basis of its apparent title. If a surviving spouse has apparent title to property to which the Uniform Act applies, a purchaser for value or a lender taking a security interest in the property takes his or her interest in the property free of any rights of the personal representative, an heir, or a devisee. ORS 112.765(1). If the personal representative, an heir, or a devisee has apparent title, a purchaser for value or a lender taking a security interest takes his or her interest free of any rights of the surviving spouse. ORS 112.765(2). The Uniform Act does not define rights of creditors with respect to property to which the Uniform Act applies. ORS 112.775(1). §4.3-4 Right to Sever Interests in Community Property The Uniform Disposition of Community Property Rights at Death Act does not affect the right of married persons to sever or alter their community-property interests. ORS 112.775. §4.3-5 Effect of Uniform Act The Uniform Disposition of Community Property Rights at Death Act (the “Uniform Act”) can have a major impact on the disposition of property at death. Accordingly, a lawyer should review ORS 112.705– 4-51 2012 Revision
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112.775 whenever the decedent has lived at any time during marriage in a community-property jurisdiction. That review is particularly important because the person interested in a determination of community-property status has the responsibility for asserting the claim by making a written demand on the personal representative. See ORS 112.745, 112.755. Absent such demand by the surviving spouse, the successor in interest to the surviving spouse, or an heir, devisee, or creditor of the decedent, neither the personal representative nor the court has any duty to discover or to attempt to discover whether any of the decedent’s prop- erty qualifies under the Uniform Act. See §4.3-2(b). As of August, 2012, no Oregon appellate cases have been found found construing, applying, or explaining the Uniform Act.
PRACTICE TIP: Caution is the byword when working with clients who own community-property assets, or who have moved to Oregon from a community-property state. At last count, 10 states have a form of co-ownership of property known as com- munity property. These states are Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Oregon is surrounded by four of these states. Accordingly, a lawyer cannot rely entirely on the rebuttable presumption in ORS 112.725(2), which provides that real property located in Oregon “acquired by a married person while domiciled in a jurisdiction under whose laws property could not then be acquired as community property, title to which was taken in a form which created rights of survivorship,” is presumed not to be property to which the Uniform Act applies. First, the presumption is rebuttable, and second, the authors of the Uniform Act, in their prefatory notes, state that severance or alteration of community-property interests, which is allowed by the Uniform Act (see ORS 112.775(2)), should follow the procedures provided in the law of the community-property state. See
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by which the real estate is sold, conveyed or encumbered.” IDAHO CODE ANN §32-912; see Lowry v. Ireland Bank, 779 P2d 22, 27 (Idaho 1989) (“community real property can be validly encumbered only if both spouses join in executing the instrument of encumbrance”). In Texas, community property “is subject to the joint management, control, and disposition of the spouses, unless the spouses provide otherwise by power of attorney in writing or other agreement.” TEX FAM CODE ANN §3.102 (Vernon 2011); see Muller v. Evans, 516 SW2d 923 (Tex 1974). The Multnomah County probate court ruled several years ago that the law of the community-property state controlled on this type of issue, and that the property, even though converted to joint tenancy with right of survivorship, remains community property until severed or altered as required by the law of the state where the parties were domiciled when they acquired their assets.
PRACTICE TIP: Estate planning lawyers with clients who have moved to Oregon from community-property states must be aware of all of the requirements for the alteration of community- property interests.
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Administering Oregon Estates: 2012 Edition 2–54 Chapter 3 Rights of Interested Persons
Timothy J. Wachter Duffy Kekel LLP Portland, Oregon
Contents §8.2 Claiming an Interest in a Distribution 3–1 §8.2-5 Surviving Spouse’s Elective Share ...... 3–1 §8.3 Altering Intestate Succession and Testamentary Disposition ...... 3–13 §8.3-2 Disclaiming an Interest ...... 3–13 §8.1 Rights of Heirs and Devisees ...... 3–20 §8.1-4 Effect of Homicide or Abuse ...... 3–20 Forms 8-1 Election to Receive Elective Share of Estate Under ORS 114.610 ...... 3–24 8-2 Disclaimer by Heir 3–27 8-3 Disclaimer by Surviving Spouse ...... 3–30 8-4 Written Partial Disclaimer of Bequest of Partnership Interest 3–33 8-5 Disclaimer to Cover Residuary Interest ...... 3–36 8-6 Disclaimer of Intestate Succession or Devise ...... 3–38 8-7 Nontestamentary Disclaimer ...... 3–40 Appendix—Selected Oregon Revised Statutes ...... 3–43 Chapter 3—Rights of Interested Persons
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Chapter 8
RIGHTS OF INTERESTED PERSONS
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
TIMOTHY J. WACHTER, B.A., Washington State University (1984); J.D., Willamette University (1987); member of the Oregon State Bar since 1987; partner, Duffy Kekel, LLP, Portland.
§8.2 CLAIMING AN INTEREST IN A DISTRIBUTION §8.2-5 Surviving Spouse’s Elective Share §8.2-5(a) In General For deaths occurring on or after January 1, 2011, a surviving spouse may elect to receive the elective share provided under ORS 114.600–114.725. Under the prior law (see former ORS 114.105– 114.165), because the elective share was limited to 25% of the decedent’s net probate estate, a spouse’s elective-share rights could be defeated through the use of nonprobate transfers. Under the current law, the elective share applies to the augmented estate, which generally includes all probate and nonprobate assets of both the deceased spouse and the surviving spouse. ORS 114.605, 114.630–114.635. See §§8.2-5(i)(1) to 8.2-5(i)(2) for discussions on a spouse’s elective share under the prior law. Once the augmented estate is determined as provided in ORS 114.600–114.725, the elective share is a dollar amount calculated as a percentage of the augmented estate. ORS 114.605. The percentage varies, depending on the length of the marriage, in accordance with the following schedule, which is set forth in ORS 114.605(2): If the decedent and the spouse were The elective-share percentage is: married to each other: Less than 2 years 5% of the augmented estate
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If the decedent and the spouse were The elective-share percentage is: married to each other: 2 years but less than 3 years 7% of the augmented estate 3 years but less than 4 years 9% of the augmented estate 4 years but less than 5 years 11% of the augmented estate 5 years but less than 6 years 13% of the augmented estate 6 years but less than 7 years 15% of the augmented estate 7 years but less than 8 years 17% of the augmented estate 8 years but less than 9 years 19% of the augmented estate 9 years but less than 10 years 21% of the augmented estate 10 years but less than 11 years 23% of the augmented estate 11 years but less than 12 years 25% of the augmented estate 12 years but less than 13 years 27% of the augmented estate 13 years but less than 14 years 29% of the augmented estate 14 years but less than 15 years 31% of the augmented estate 15 years or more 33% of the augmented estate If the aggregate value of the surviving spouse’s estate, including probate and nonprobate property received from the decedent, is less than the elective-share amount, any additional amount required to satisfy the elective-share amount is paid out of the decedent’s probate and non- probate estate. ORS 114.615. §8.2-5(b) Availability of Election An election to receive an elective share of the estate is available to a surviving spouse only if the decedent is domiciled in Oregon on the date of the decedent’s death. ORS 114.600(1). If a decedent dies while domiciled outside of Oregon, the surviving spouse’s rights in the decedent’s property are governed by the law of the decedent’s domicile. ORS 114.600(3).
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The surviving spouse may elect to claim the elective share personally, or a conservator, guardian, or agent under the authority of a power of attorney may claim the elective share on the surviving spouse’s behalf. ORS 114.625. The election, however, must be made before the death of the surviving spouse. ORS 114.600(1). If the election is timely made before the death of the surviving spouse, the personal repre- sentative for the estate of the surviving spouse may take steps to secure payment of the elective share. ORS 114.600(1). Although not expressly provided for in ORS 114.600–114.725, the election to receive an elective share of the estate is also available to a partner in a domestic partnership. See ORS 106.340. §8.2-5(c) Mechanics of Election The surviving spouse may claim the elective share only as described in ORS 114.610, but the election must be made within nine months after the death of the decedent as follows: (1) If a probate proceeding has been commenced for the decedent’s estate, the surviving spouse may file a motion in the probate proceeding to exercise the elective share within nine months after the death of the decedent. A copy of the motion must be served on the per- sonal representative, as well as on all persons entitled to receive information under ORS 113.145, and on all distributees and recipients of portions of the augmented estate known to the surviving spouse who can be located with reasonable efforts. ORS 114.610(1)(b). See Form 8-1. (2) If no probate proceeding has been commenced, the surviving spouse may file a petition for the appointment of a personal repre- sentative for the estate of the deceased spouse, and then file a motion for the exercise of election, within nine months after the decedent’s death. ORS 114.610(1)(a)). (3) The surviving spouse may claim the elective share by filing a petition for the exercise of the election in circuit court within nine months after the death of the decedent. ORS 114.610(1)(c), 114.720(1). The venue for the proceeding is the same as the venue for a probate pro- ceeding. ORS 114.720, 113.015. A copy of the petition must be served on all persons who would be entitled to notice under ORS 113.145, as
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well as on all of the distributees and recipients of portions of the augmented estate known to the spouse who can be located with reasonable efforts. ORS 114.720(1). The proceeding is governed by the Oregon Rules of Civil Procedure, and any party may request that the pleadings and records in the proceedings be sealed. ORS 114.720(1). If a probate proceeding is commenced for the estate of the deceased spouse, whether before or after a petition under ORS 114.720 has been filed, the court is required to consolidate the circuit court proceeding with the probate proceeding. ORS 114.720(3). §8.2-5(d) Determining the Augmented Estate ORS 114.630 provides that the augmented estate consists of three separately described components: (1) the decedent’s probate estate (see §8.2-5(d)(1)), (2) the decedent’s nonprobate estate (see §8.2-5(d)(2)), and (3) the surviving spouse’s estate (see §8.2-5(d)(3)).
NOTE: Before an amendment that became effective on June 9, 2011, ORS 114.630 provided that the augmented estate consisted of the three components described above, as well as two additional components: (1) the decedent’s probate transfers to the surviving spouse, and (2) the decedent’s nonprobate transfers to the surviving spouse. See former ORS 114.630(1). This prior law applies to the surviving spouse of a decedent who died between January 1, 2011 and June 8, 2011. See 2011 Or Laws ch 305, §§4, 7. §8.2-5(d)(1) Decedent’s Probate Estate The decedent’s probate estate includes the value of all of the estate property that is subject to probate and that is available after payment of claims and administrative expenses, or the value of all of the property that could be administered pursuant to a small-estate affidavit (see §§5.3- 1 to 5.3-2). ORS 114.650. The probate estate does not include any pro- bate property that constitutes a probate transfer to a surviving spouse. ORS 114.650.
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§8.2-5(d)(2) Decedent’s Nonprobate Property The decedent’s nonprobate property consists of the decedent’s interest in property, described in ORS 114.665, that is not included in the decedent’s probate estate and that does not constitute a transfer to the decedent’s surviving spouse. ORS 114.660. Effective June 9, 2011, the value of the decedent’s nonprobate estate is reduced by all of the debts and liabilities of the decedent that are not paid in probate, all of the costs incurred in settling claims against the nonprobate estate, and admin- istrative expenses. ORS 114.660; see 2011 Or Laws ch 305, §§2, 7. The list of nonprobate property included in the augmented estate is broad, and includes the following: (1) Property held in a form of survivorship tenancy immediately before the death of the decedent, in an amount equal to the value of the decedent’s fractional interest that passes by right of survivorship at the decedent’s death to a surviving tenant other than the decedent’s surviving spouse, ORS 114.665(1); (2) Property held immediately before death under a payable-on- death designation or deed, under a transfer-on-death registration or in a co-ownership registration with right of survivorship, in an amount equal to the value of the decedent’s interest that passes on the decedent’s death to any person other than the decedent’s estate or surviving spouse, ORS 114.665(2); (3) Property owned immediately before death for which the decedent had the power to designate a beneficiary, “but only to the extent that the decedent could have designated the decedent, or the spouse of the decedent, as the beneficiary,” ORS 114.665(3); and NOTE: The “but only to the extent” clause quoted above applies only to decedents dying on or after June 9, 2011. See 2011 Or Laws ch 305, §§3, 7.
COMMENT: Examples of property covered by the statute include life insurance, annuities, and retirement plans, including public and private pensions, disability compensation, and similar arrangements.
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(4) “[P]roperty that immediately before death the decedent could have acquired by the exercise of a revocation, without regard to whether the revocation was required to be made by the decedent alone or in conjunction with other persons,” ORS 114.665(4). In recognition that life insurance is commonly used for shareholder agreements, satisfaction of support obligations, and other funding purposes, the present value of life insurance proceeds payable to a beneficiary other than a spouse is not included as a nonprobate asset of the decedent. ORS 114.665(5), 114.660; see also ORS 114.690(1)(c). In contrast, if the insurance is payable to the surviving spouse, the entire amount of life insurance proceeds is includible in the decedent’s nonprobate transfers to the surviving spouse. ORS 114.690(1)(c); see §8.2-5(d)(3). §8.2-5(d)(3) Surviving Spouse’s Estate Effective June 9, 2011, the surviving spouse’s estate includes: (1) The decedent’s probate transfers to the spouse (as described in ORS 114.685), ORS 114.675(1)(a);
COMMENT: Pursuant to ORS 114.685, a decedent’s probate transfers to a surviving spouse include all probate property that passes to the surviving spouse after payment of claims and expenses of administration. (2) The decedent’s nonprobate transfers to the spouse (as described in ORS 114.690), ORS 114.675(1)(b);
COMMENT: For this purpose, a decedent’s nonprobate trans- fers include all property that passes outside probate to the surviv- ing spouse upon the decedent’s death, including any survivorship interest, insurance proceeds payable to the surviving spouse by reason of the decedent’s death, and all other property that would have been included in the decedent’s nonprobate estate had it passed to a person other than the decedent’s spouse. ORS 114.690. Social Security benefits are not included as part of the surviving spouse’s estate. ORS 114.690(2).
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(3) All other property of the spouse, as determined on the date of the decedent’s death, ORS 114.675(1)(c); and (4) Any property that would have been included in the surviving spouse’s estate “except for the exercise of a disclaimer by the spouse after the death of the decedent,” ORS 114.675(1)(d) (see §§8.3-2(a) to 8.3-2(f) regarding disclaimers).
CAVEAT: For purposes of determining a decedent’s non- probate and probate transfers to a surviving spouse, any property that has been disclaimed by the surviving spouse will continue to be included as part of the surviving spouse’s estate for purposes of the elective share. ORS 114.675(1)(d).
NOTE: ORS 114.675 was amended effective June 9, 2011. For decedents who died between January 1, 2011 and June 8, 2011, see 2011 Or Laws ch 305, §§5, 7. §8.2-5(d)(4) Valuation Generally, the value of an asset is the value used for purposes of federal and gift tax laws. In determining the value of probate and non- probate property, the value is reduced by the amount of any enforceable claims and encumbrances on the property. ORS 114.650, 114.660. In determining the value of the surviving spouse’s estate, however, specific trust-valuation rules apply to an interest in a trust that is provided for the benefit of the spouse by the decedent. For a trust that provides for the distribution of income and prin- cipal to a surviving spouse, the entire value of the trust corpus will be considered as part of the surviving spouse’s estate, if all of the trust income must be distributed to the surviving spouse during the spouse’s lifetime, and either (1) the spouse has a general power of appointment that the spouse may exercise, acting alone, to or for the benefit of the surviving spouse or the surviving spouse’s estate, ORS 114.675(2)(a), or (2) “the trust principal may be accessed only by the trustee or the spouse and only for the purpose of providing for the health, education, support or maintenance of the spouse,” ORS 114.675(2)(b).
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For an income-only trust, one-half of the value of the trust corpus will be considered as part of the surviving spouse’s estate, if (1) all trust income must be distributed to or for the benefit of the surviving spouse during the spouse’s lifetime, and (2) neither the trustee nor the spouse has the power to distribute trust principal to or for the benefit of the surviving spouse or any other person during the spouse’s lifetime. ORS 114.675(2)(c). Amounts distributed to a surviving spouse from a unitrust under ORS 129.225 are also considered income. ORS 114.675(2)(d). For any other beneficial interest in a trust established for the benefit of the surviving spouse, the surviving spouse’s estate includes the present value of amounts payable under the trust to the surviving spouse. ORS 114.630(3). The value of the interest is determined under federal estate and gift tax laws. ORS 114.630(4).
NOTE: ORS 114.630, 114.660, and 114.675 were amended effective June 9, 2011. For decedents who died between January 1, 2011 and June 8, 2011, see 2011 Or Laws ch 305, §§2, 4, 5, 7.
COMMENT: As with other new laws, provisions in the elective-share laws will require further legislative refinement or court interpretation. One of these provisions is found in ORS 114.675(2)(b), which includes 100% of the trust corpus in the surviving spouse’s estate if access to the trust principal is allowed only for the purpose of providing for the health, education, support, or maintenance of a spouse. A marital trust for the benefit of a spouse may contain broader access powers than those pro- vided in ORS 114.675(2)(b). For example, a trust may provide for the distribution of principal for the comfort and happiness of a surviving spouse. Presumably, a trust that provides greater access to principal than provided for by this statute would also be 100% includible, but based on the statutory provisions for valuing a trust for the benefit of a spouse, it is not clear whether a trust that provides broader access powers than those limited to “health, education, support or maintenance” would be 100% includible, 50% includible as an income-only trust, or valued under subsection (3) or (4) of ORS 114.630.
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Similarly, there is limited guidance regarding the valuation of a spouse’s beneficial interest in a sprinkling trust that allows for discretionary distribution of income or principal to a spouse and the spouse’s children. Although the valuation of a spouse’s beneficial interest in a sprinkling trust is determined under federal and gift tax law pursuant to ORS 114.630(4), the value may not be readily ascertainable under current tax laws. If a spouse’s bene- ficial enjoyment in the trust is restricted, the fair-market value of the interest may need to be determined based on all of the facts and circumstances relating to the interest. Treas Reg §1.7520- 3(b)(1)(ii)–(iii). These facts and circumstances may include the life expectancy of the spouse, the trust distribution standard, the needs of the spouse, the spouse’s available resources, and other factors. See Treas Reg §1.7520-3(b)(2)(ii)(A). §8.2-5(d)(5) Exclusions from Augmented Estate The augmented estate does not include the following interests: (1) “Any value attributable to future enhanced earning capacity of either spouse,” ORS 114.635(1); (2) “Any property that is irrevocably transferred before the death of the decedent spouse,” ORS 114.635(2); (3) Any property that is transferred on or after the death of the decedent spouse “with the written approval joinder or written consent of the surviving spouse,” ORS 114.635(3); (4) Any community property, whether under ORS 112.705– 112.775 (see §8.2-4(a)) or under the laws of the jurisdiction where the community property is located, ORS 114.665(4); or (5) Any property that is held by either spouse in a fiduciary capacity, ORS 114.635(5). NOTE: The discussion above reflects the 2011 amendments to ORS 114.635. The amendments apply only to decedents dying on or after June 9, 2011. See 2011 Or Laws ch 305, §§1, 7.
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§8.2-5(e) Payment of Elective Share Under ORS 114.615, once the elective share amount is calculated, the court considers the values of (1) the decedent’s probate estate, (2) the decedent’s nonprobate estate, (3) the surviving spouse’s estate, (4) the decedent’s probate transfers to the surviving spouse, and (5) the dece- dent’s nonprobate transfers to the surviving spouse. If the aggregate values of the surviving spouse’s estate and the decedent’s probate and nonprobate transfers to the surviving spouse do not satisfy the amount of the elective share, any additional amount required to satisfy the elective share is to be paid out of the decedent’s probate and nonprobate estate. ORS 114.615. The priority for the payment of this amount is set forth in ORS 114.700. Pursuant to ORS 114.700, the surviving spouse’s estate (as described in ORS 114.675) is “applied first to satisfy the dollar amount of the elective share.” ORS 114.700(1). If, after this application of the surviving spouse’s estate, the amount of the elective share is not fully satisfied, the amounts included in the decedent’s estate and nonprobate estate are applied as necessary. ORS 114.700(2). Unless otherwise provided by the decedent in a will, trust, or other instrument, the amounts needed to satisfy the elective share will be collected from the probate and nonprobate estates “in a manner that ensures that the probate and nonprobate estates bear proportionate liabil- ity for the amounts necessary to pay the elective share amount.” ORS 114.700(3)(a). Unless the decedent provides otherwise, the amounts applied against the unsatisfied elective-share amount must be apportioned among all recipients of the decedent’s estate “in a manner that ensures that each recipient bears liability for a portion of the payment that is proportionate to the recipient’s interest” in the estate. ORS 114.700(3)(b)–(c). For nonprobate property, only the original recipients of estate property, or those persons who receive estate property for less than fair consideration from an original recipient, may be required to make a pro- portional contribution to the spouse’s elective share. ORS 114.705(1). A recipient who is required to make a contribution toward the satisfaction
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of the elective-share amount may return the property to satisfy the recipient’s obligation, or pay money equal to the value of the property. ORS 114.705(2).
COMMENT: If the decedent’s nonprobate estate includes an IRA that does not name the spouse as a designated beneficiary, careful consideration must be given to the income tax consequences relating to a return of a portion of the IRA to satisfy the recipient’s contribution obligation. Among other considera- tions, if a spouse does not qualify as a “designated beneficiary” for the returned portion of the IRA, this may result in a loss of any tax deferral by the surviving spouse and taxable income to either the estate or to the recipient returning the IRA. See generally IRC §401(a)(9) and regulations issued thereunder.
NOTE: ORS 114.700 was amended effective June 9, 2011. For decedents who died between January 1, 2011 and June 8, 2011, see 2011 Or Laws ch 305, §§6–7. §8.2-5(f) Protective Orders If a surviving spouse files a motion or petition to claim the elective share (see §8.2-5(c)), any person who received any part of the decedent’s probate or nonprobate estate may request that the court issue a protective order to prohibit or impose conditions on the transfer of property included in the augmented estate. ORS 114.710(1). In addition, any recipient of any part of the probate or nonprobate estate who is required to make a contribution toward satisfaction of the elective share may file a motion or petition requesting a determination of his or her proportionate contribution toward the elective-share amount. Once the court makes that determination, the person may be discharged from all further contribution claims if the amount or security for the amount determined is deposited with the court. ORS 114.710(2). §8.2-5(g) Waiver of Elective Share The right of election under the elective-share statutes may be waived before or after marriage by a written contract, agreement, or waiver signed by the surviving spouse. ORS 114.620(1). For this pur-
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pose, a written agreement that waives all rights in the property of the estate of a present or prospective spouse is a waiver of all rights to an elective share. ORS 114.620(2).
CAVEAT: If a decedent owned a qualified plan subject to the Employee Retirement Income Security Act (ERISA), the waiver may also need to meet the applicable ERISA requirements for the waiver of the spouse’s interest in the qualified plan to be effective. See ERISA §205, IRC §417(a)(2).
COMMENT: ORS 114.620 waivers are enforceable under a different standard than the standard that governs the execution of a premarital agreement under ORS 108.700–108.740, but conflict rules regarding the representation of multiple parties continue to be present.
NOTE: A written agreement or waiver entered into before January 1, 2011, whether prenuptial or postnuptial, that waives the elective share is effective as a waiver, unless a court determines that the agreement or waiver is not enforceable under the standards of ORS 114.620. 2009 Or Laws ch 574, §24. §8.2-5(h) Separation If the decedent and the surviving spouse were living apart at the time of the decedent’s death, the court may deny the surviving spouse the right to the elective share or reduce the amount of the elective share “to such amount as the court determines reasonable and proper.” ORS 114.725. In making this determination, the court considers various factors, including whether the marriage was a first or subsequent mar- riage, the contribution of the surviving spouse to the property of the decedent in the form of services or transfers of property, the length and cause of the separation, and any other relevant circumstances. ORS 114.725. §8.2-5(i) Spouse’s Elective Share Under Prior Law §8.2-5(i)(1) Law Before January 2011 For deaths occurring before January 1, 2011, a surviving spouse’s elective share is one-fourth of the net probate estate of the deceased
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spouse, reduced by the value of certain property given to the surviving spouse under the deceased spouse’s will. Former ORS 114.105–114.165. The elective share is limited to not more than one-half of the sum of (1) the probate estate, (2) most of the nonprobate estate, and (3) certain gifts made by the decedent. Former ORS 114.125; see 2009 Or Laws ch 574, §23 This prior law applies to the surviving spouse of a decedent who died between January 1, 2011 and June 8, 2011. See 2011 Or Laws ch 305, §7. §8.2-5(i)(2) Law from January 1, 2011 to June 8, 2011 Oregon’s elective-share statutes enacted effective January 1, 2011, were subsequently amended in 2011, with the changes becoming effec- tive June 9, 2011. 2011 Or Laws ch 305. For deaths occurring between January 1, 2011 and June 8, 2011, the prior versions of ORS 114.630, 114.635, 114.660, 114.665, 114.675, and 114.700 apply. See 2011 Or Laws ch 305.
§8.3 ALTERING INTESTATE SUCCESSION AND TESTAMENTARY DISPOSITION §8.3-2 Disclaiming an Interest §8.3-2(a) In General Pursuant to the Uniform Disclaimer of Property Interests Act (the “UDPI Act”), ORS 105.623–105.649, a person may disclaim, in whole or in part, any interest in property or any power over property. If the requirements of the UDPI Act are met, the disclaimed interest passes as if the disclaimant never had an interest in the disclaimed property. See In re Nistler, 259 BR 723, 727 (Bankr D Or 2001); see also ORS 105.633. In addition to the requirements of the UDPI Act, if a disclaimer also meets the requirements of a qualified disclaimer under IRC §2518, the disclaimer will not result in a taxable gift being made by the disclaimant. Disclaimers can be used in many ways to alter the distribution of an estate, to cure defects in an estate plan, to avoid ownership of property (such as contaminated real estate), and to engage in other postmortem
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planning. The many uses of a disclaimer are not covered in this chapter, which is limited to a review of the procedural rules for disclaimers. ORS 105.633 describes specific rules that apply to the disposition of an interest in property that has been disclaimed. If the will creating the property interest provides for the disposition of the interest in the event that the interest is disclaimed, the disclaimed interest passes in accordance with the will. ORS 105.633(2)(b). If the will does not provide for the disposition of a disclaimed interest, or if the interest arises under the laws of intestate succession, the following rules apply: (1) If the disclaimant is an individual, except as provided in ORS 105.633(3)(a)(B)–(C), the disclaimed interest passes as if the disclaimant had died immediately before the time of distribution. ORS 105.633(3)(a)(A). (2) If the disclaimant’s descendants would have shared in the disclaimed interest by any method of representation had the disclaimant died before the time of distribution, the disclaimed interest passes only to the disclaimant’s descendants who survive the time of distribution. ORS 105.633(3)(a)(B). (3) If the disclaimed interest would pass to the disclaimant’s estate had the disclaimant died before the time of distribution, the dis- claimed interest passes by representation to the descendants of the disclaimant who survive the time of distribution. If no descendant sur- vives the time of distribution, the disclaimed interest passes to those persons who would receive the transferor’s estate under the intestate succession laws of the transferor’s domicile had the transferor died at the time of distribution. However, if the transferor’s surviving spouse is living, but is remarried at the time of distribution, the transferor is deemed to have died unmarried at the time of distribution. ORS 105.633(3)(a)(C). (4) If the disclaimant is not an individual, the disclaimed interest passes as if the disclaimant did not exist. ORS 105.633(3)(b).
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A disclaimer is irrevocable when “the disclaimer is delivered or filed pursuant to ORS 105.642 or when the disclaimer becomes effective as provided in ORS 105.633 to 105.641, whichever occurs later.” ORS 105.629(5); see Fleenor v. Williamson, 171 Or App 599, 606–607, 17 P3d 520 (2000) (once a disclaimer is made, it cannot be revoked or revised). §8.3-2(b) Requirements of a Disclaimer–Oregon Law For purposes of Oregon law, to be effective a disclaimer must: (1) “Be in writing or otherwise recorded by inscription on a tangible medium or by storage in an electronic or other medium in a manner that allows the disclaimer to be retrieved in perceivable form,” ORS 105.629(3)(a); (2) “Declare that the person disclaims the interest in the property or in the power,” ORS 105.629(3)(b); (3) “Describe the interest in property or power over property that is disclaimed,” ORS 105.629(3)(c); (4) Be signed by the disclaimant, ORS 105.629(3)(d); and (5) Be delivered or filed in the manner provided in ORS 105.642, ORS 105.629(3)(e). The delivery of the disclaimer may be made by personal delivery, first class mail, or another method likely to result in receipt of the disclaimer. ORS 105.642(2). If the interest being disclaimed is created under the laws of intestate succession or by a will, other than an interest in a testamentary trust, the disclaimer must be delivered to the personal representative of the decedent’s estate. ORS 105.642(3)(a). But if no personal repre- sentative is serving at the time the disclaimer is made, the disclaimer must be filed with a court having authority to appoint the personal representative. ORS 105.642(3)(b). If the interest being disclaimed is an interest in a testamentary trust created by a will, the disclaimer must be delivered to the trustee. ORS 105.642(4)(a). If a trustee is not serving at the time the disclaimer is
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made, but a personal representative for the decedent’s estate is serving, the disclaimer must be delivered to the personal representative. ORS 105.642(4)(b). If neither a trustee nor a personal representative is serving at the time the disclaimer is made, the disclaimer must be filed with the court having authority to enforce the trust. ORS 105.642(4)(c).
PRACTICE TIP: Although not required by statute, to document the timely delivery or filing of the disclaimer, the disclaimant should request the personal representative to acknowledge receipt of the disclaimer and request filing of the disclaimer in the probate proceeding. A person may disclaim any interest in property, or any power over property. The Uniform Disclaimer of Property Interests Act (the “UDPI Act”) provides detailed rules regarding the disclaimer of different types of property interests, including the effect of the disclaimer and the delivery and filing requirements. To execute a disclaimer, the lawyer must properly identify the property interest being disclaimed and follow the proper procedural requirements set forth in the UDPI Act. In this regard, specific provisions govern the disclaimer of survivorship rights in jointly held property (ORS 105.634), the disclaimer of a power of appointment or other powers not held in a fiduciary capacity (ORS 105.638), and the disclaimer of an interest by an appointee of a power of appointment (ORS 105.639). In addition, with regard to a trust, a trustee may disclaim assets that would otherwise become trust property (ORS 105.636), or a fiduciary may disclaim powers held in a fiduciary capacity (ORS 105.641). These disclaimers must be consistent with the trustee’s fiduciary duties. See Forms 8-2 to 8-7. §8.3-2(c) Tax-Qualified Disclaimer–Federal Law The tax consequences of a disclaimer are determined pursuant to IRC §2518 and the regulations promulgated under it. If the disclaimer does not meet the requirements of IRC 2518, the disclaimer is not qualified and may result in a taxable gift from the disclaimant to the recipient of the disclaimed property. For a disclaimer to be deemed a
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qualified disclaimer for federal tax purposes, it must meet all of the following requirements: (1) The disclaimer must be an “irrevocable and unqualified” refusal to accept an interest in property. IRC §2518(b). (2) The refusal must be in writing. IRC §2518(b)(1). The writ- ing must be delivered in person or by registered or certified mail within the time limits specified in IRC §2518(b)(2). The writing may be, but is not required to be, filed in the court exercising probate jurisdiction. If the disclaimer relates to real property, it may be recorded. (3) The written disclaimer “must be delivered to the transferor of the interest, the transferor’s legal representative, the holder of the legal title to the property to which the interest relates, or the person in posses- sion of such property.” Treas Reg §25.2518-2(b)(2); IRC §2518(b)(2). (4) The disclaimer must be made, delivered, and received not more than nine months after the later of (a) the day the transfer creating the interest in the disclaimant is made, or (b) the disclaimant’s 21st birthday. IRC §2518(b)(2)(A)–(B); Treas Reg §25.2518-2(d)(3). (5) The disclaimant must not have accepted the interest, or any of its benefits, before the disclaimer. Acceptance of any consideration in return for making the disclaimer is treated as an acceptance of the benefits of the interest disclaimed. IRC §2518(b)(3); Treas Reg §25.2518-2(d)(1). (6) The interest must pass to either the decedent’s spouse or a person other than the disclaimant as a direct result of the disclaimant’s refusal to accept the property, without any direction by the disclaimant. IRC §2518(b)(4)(A)–(B); Treas Reg §25.2518-2(e).
CAVEAT: Under the Internal Revenue Code, with certain exceptions, a disclaimer must be filed within nine months after the date of the transfer creating the interest in the disclaimant. IRC §2518(b)(2). Under Oregon law, no nine-month requirement applies to the disclaimer of property. Therefore, if a disclaimer is made after the nine-month period, it may be a valid disclaimer for state purposes, but it would not be a qualified disclaimer under
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IRC §2518. If so, the disclaimer would transfer a property right, but a gift tax might be triggered.
COMMENT: Oregon law places no restrictions on whole or partial disclaimers. See ORS 105.629(1). In contrast, under federal law, a disclaimant can only disclaim a partial interest if it is an undivided portion of each interest or right owned by the dis- claimant in the separate interest that is disclaimed. Treas Reg §25.2518-3(b). Consequently, a partial disclaimer that might not meet federal tax standards is valid for nontax purposes. The federal regulations governing valid partial disclaimers involve a narrow and steep path. Consequently, before using a partial disclaimer for federal tax purposes, the lawyer must carefully examine the Internal Revenue Code, Treasury Regula- tions, Tax Court cases, and federal cases to avoid what might be considered a valid partial disclaimer which, in reality, is not. Because of the many factors involved in a partial disclaimer, this section does not provide exhaustive examples of partial disclaimers for federal tax purposes.
COMMENT: One example of a partial disclaimer that can create problems is a disclaimer of an undivided portion of a separate interest in property when the disclaimant also has another separate interest in the same property, if the disclaimed separate interest was created by the transferor and can be separated from the other interest.
EXAMPLE: Consider the following facts: A gives B an undivided one-fourth interest in A’s cattle ranch. Later on, A’s will devises B another undivided one-fourth interest in the same cattle ranch with a remainder over to C if the devise fails. B decides to disclaim the devise so that C can receive it. B’s disclaimer does not clearly describe the devise and the description could include the earlier gift.
COMMENT: Tax-qualified disclaimers of certain survivorship interests in property are possible. A surviving owner of a joint bank, brokerage, or other investment account may disclaim (within
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nine months of that owner’s death) the portion of the account con- tributed by the deceased owner, as long as the owner could have unilaterally retrieved his or her contribution without the consent of the others. Treas Reg §25.2518-2(c)(4)(iii). Also, if a survivorship asset is established, such as a tenancy by the entirety in real estate, the disclaimant may disclaim the interest that he or she acquired at the creation of the tenancy within nine months of the creation; in contrast, the disclaimant has until nine months after the owner’s death to disclaim the interest that the disclaimant later acquires by survivorship. See Treas Reg §25.2518-2(c)(4)(i), Treas Reg §25.2518-2(c)(5), examples (7)–(8), (10).
COMMENT: As the foregoing discussion demonstrates, dis- claimer planning requires a yeoman’s working knowledge of Oregon law, tax law, and the facts. The lawyer should not delegate disclaimer planning to a legal assistant or another nonlawyer staff member, unless that person has the prerequisite knowledge to make an informed and correct decision. Likewise, disclaimer planning should not be undertaken by a lawyer who does not have adequate knowledge of the subject area. Consequently, this discus- sion is an introductory guide only, and a thorough analysis of Oregon and federal tax law that takes into consideration the facts and circumstances surrounding the interest to be disclaimed must be undertaken before an interest in property is disclaimed. §8.3-2(d) Right to Disclaim May Be Barred A disclaimer may be barred or limited as described in ORS 105.643–105.649. A disclaimer is barred by a written waiver of the right to disclaim. ORS 105.643(1). Also, a disclaimer of an interest in property is barred if any of the following events occur before the disclaimer is effective: (1) “The disclaimant accepts the interest sought to be disclaimed,” ORS 105.643(2)(a); (2) “The disclaimant voluntarily assigns, conveys, encumbers, pledges or transfers the interest sought to be disclaimed or contracts to do so,” ORS 105.643(2)(b); or
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(3) “The interest sought to be disclaimed is sold pursuant to a judicial sale,” ORS 105.643(2)(c). A disclaimer is also barred if the purpose or effect of the disclaimer is to prevent a victim of a crime from recovering money or property to be applied against a judgment for restitution under ORS 137.101–137.109. ORS 105.643(6). §8.3-2(e) Effect on Other Rights The Uniform Disclaimer of Property Interests Act does not limit any right of a person to waive, release, disclaim, or renounce an interest in property, or power over property, under any other law. ORS 105.628(2). §8.3-2(f) Prior Law In enacting the Uniform Disclaimer of Property Interests Act, the 2001 Legislature repealed the Uniform Disclaimer of Transfers by Will, Intestacy or Appointment Act, former ORS 112.650–112.667. The Uniform Disclaimer of Transfers Under Nontestamentary Instruments Act, former ORS 105.625–105.640, was also repealed. Except as otherwise provided in ORS 105.643, an interest in property or power over property existing on January 1, 2002, may be disclaimed in the manner provided by ORS 105.623–105.649 after January 1, 2002, unless the time for delivering or filing a disclaimer had expired under the law in effect immediately before January 1, 2002. See 2001 Or Laws ch 245, §20.
§8.1 RIGHTS OF HEIRS AND DEVISEES §8.1-4 Effect of Homicide or Abuse §8.1-4(a) In General A slayer is prevented from receiving property that would have passed to the slayer by reason of the death of the person whose life is taken by the slayer. ORS 112.465(1). Similarly, an abuser is prevented from receiving property that would have passed to the abuser by reason of the death of a decedent who
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died not later than five years after the abuser has been convicted of a felony by reason of conduct against the decedent under ORS 124.105 (physical abuse) or ORS 124.110 (financial abuse). ORS 112.465(1), 112.455(2)(b). In addition, limitations apply to a slayer’s or an abuser’s rights to receive property indirectly through an heir or devisee of the decedent. ORS 112.465(2). Specifically, if property would have passed to the slayer or abuser by reason of the death of an heir or devisee of the decedent, the abuser or slayer is prevented from receiving the property, unless the heir or devisee specifically provided for the slayer or abuser in a will (or other instrument) after the death of the decedent. Under these provisions, the slayer or abuser will be treated as predeceasing the decedent. ORS 112.465(2). The term slayer is defined as “a person who, with felonious intent, takes or procures the taking of the life of a decedent.” ORS 112.455(3). “A final judgment of conviction of felonious and intentional killing is conclusive for purposes of ORS 112.455 to 112.555.” ORS 112.555. If the slayer has not been convicted of felonious and intentional killing, the court may determine the issue for purposes of ORS 112.455–112.555 based on a preponderance of the evidence. ORS 112.555. Pursuant to the definition of slayer, the statutes on homicidal death do not apply if the decedent’s death was caused without felonious intent, such as death caused by recklessness or negligence, which may be prosecuted as manslaughter in the first degree (ORS 163.118), manslaughter in the second degree (ORS 163.125), or criminally negligent homicide (ORS 163.145). §8.1-4(b) Property Interests Covered In addition to property that would have passed by intestate succession, a will, a trust, or a transfer-on-death deed to the slayer or abuser (see §8.1-4(a)), the following property vests as if the slayer or abuser had predeceased the decedent (ORS 112.465): (1) Property owned by the decedent and the slayer or abuser, as tenants by the entirety or with a right of survivorship (ORS 112.475);
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(2) Property owned by the decedent, the slayer or abuser, and others with a right of survivorship (ORS 112.485); (3) Property in which the slayer or abuser owns a reversion or vested remainder subject to an estate for the lifetime of the decedent (ORS 112.495); (4) Property appointed by the decedent’s will for the benefit of the slayer or abuser (ORS 112.505(1)); (5) Property owned either presently or in remainder by the slayer or abuser, subject to divestment by the decedent’s exercise of a power of revocation or a general power of appointment (ORS 112.505(2)); (6) Proceeds of life insurance and other benefit plans of the decedent payable to, or for the benefit of, the slayer or abuser as the beneficiary or assignee of the decedent (ORS 112.515(1)); and
NOTE: If proceeds are payable from an heir or devisee of the decedent to a slayer or abuser, the slayer or abuser will be entitled to receive proceeds only if the heir or devisee has specifically provided for the payment by written instrument executed after the death of the decedent. ORS 112.515(2). (7) Proceeds of insurance on the life of the slayer or abuser when the decedent is the beneficiary or assignee of the policy (ORS 112.525). Insurance companies, banks, trustees, and other obligors who make payment or perform an obligation to the slayer or abuser without written notice by a person claiming under ORS 112.455–112.555 are protected by ORS 112.535. Similarly, purchasers for value who deal with the slayer without notice are protected by ORS 112.545.
PRACTICE TIP: In a homicide case in which the victim and the slayer are husband and wife, or are otherwise in a position to inherit from each other, and large estates are involved, the use of a wrongful death action against the slayer or the slayer’s estate can be an effective estate-planning technique.
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§8.1-4(c) Prior Law ORS 112.455–112.555 replace former law, which had been construed as inapplicable when a cotenant of a tenancy by the entirety property murders the other cotenant. Wenker v. Landon, 161 Or 265, 273–274, 88 P2d 971 (1939). The Wenker case was overruled by use of a constructive trust theory in Hargrove v. Taylor, 236 Or 451, 453–454, 389 P2d 36 (1964). By adopting ORS 112.475, the legislature confirmed the theory implicit in Hargrove and in this part of the probate code—the murderer should not profit by the decedent’s death. In 2005, the probate code was amended to prevent abusers, as well as slayers, of the decedent from profiting upon the decedent’s death. ORS 112.475.
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Form 8-1 Election to Receive Elective Share of Estate Under ORS 114.610
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) MOTION TO EXERCISE Deceased. ) ELECTIVE SHARE OF ) ESTATE UNDER ORS ) 114.610
1. I, ______, am the surviving spouse of the above- named decedent, who died testate and was domiciled in Oregon at the time of death. 2.
The date of the decedent’s death was ______, 20__. 3. I hereby elect to receive the elective share provided by ORS 114.600–114.725. 4. As of the date of the decedent’s death, my property, other than any probate or nonprobate transfers from the decedent, is as follows: [Describe] 5. I have, or am entitled to receive, the following nonprobate property from the decedent listed under ORS 114.690:
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[Describe]
DATED:______, 20___.
/s/______[surviving spouse’s name]
SURVIVING SPOUSE [name] [address] [telephone no.] [fax no.]
LAWYER FOR SURVIVING SPOUSE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
NOTE: The election must be made within nine months after the date of the decedent’s death as described in §8.2-5(c). ORS 114.610. A copy of the motion must be served on the personal representative or the personal representative’s lawyer, all persons who would be entitled to receive information under ORS 113.145, and all distributees and recip- ients of portions of the augmented estate known to the surviving spouse who can be located with reasonable efforts. ORS 114.160(1)(b). If no probate proceeding has been commenced, the surviving spouse may file a petition for the appointment of a personal repre- sentative for the estate of the deceased spouse, and then file a motion for
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Administering Oregon Estates: 2012 Edition 3–25 Chapter 3—Rights of Interested Persons
the exercise of election, within nine months after the decedent’s death. ORS 114.610(1)(a). See §8.2-5(c).
COMMENT: See §§8.2-5(a) to 8.2-5(c). See UTCR 2.010 and UTCR 9.030 for the form of documents, including requirements regarding document title, spacing, and format.
NOTE: In the probate court, the last page of every petition, motion, and order must include the “name, address, telephone number, fax number, e-mail address, and bar number of the attorney of record.” UTCR 9.030(1). See also UTCR 2.010(7), which requires that all docu- ments include the author’s name, address, telephone number, and fax number (if any). CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 3–26 Chapter 3—Rights of Interested Persons
Form 8-2 Disclaimer by Heir
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) DISCLAIMER BY HEIR Deceased. )
1. I, ______, the [e.g., son or daughter] of the above-named decedent, hereby disclaim my entire interest in the estate of the above-named decedent pursuant to ORS 105.623–105.649, the Uniform Disclaimer of Property Interests Act. 2. This disclaimer is delivered to ______, personal representative of the decedent’s estate, either in person or by registered or certified mail. 3. I have not accepted any of the property or interest or benefit under the decedent’s estate, and my right to disclaim is not barred by any of the other events described in ORS 105.643. 4. This disclaimer is irrevocable.
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Administering Oregon Estates: 2012 Edition 3–27 Chapter 3—Rights of Interested Persons
DATED: ______, 20____.
/s/______[disclaimant’s name] Disclaimant [address] [telephone no.] [fax no.]
STATE OF ______) ) ss. County of ______)
I, ______, being duly sworn, depose and say: I am the disclaimant named in the above disclaimer by heir and the foregoing disclaimer by heir is true as I verily believe.
/s/______[disclaimant’s name]
SUBSCRIBED AND SWORN TO before me on ______, 20__.
/s/______Notary Public for Oregon My commission expires: ______
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Administering Oregon Estates: 2012 Edition 3–28 Chapter 3—Rights of Interested Persons
Received this ____ day of ______, 20__.
/s/______[personal representative’s name] Personal Representative [address] [telephone no.] [fax no.]
COMMENT: See §§8.3-2(a) to 8.3-2(d). See UTCR 2.010 and UTCR 9.030 for the form of documents.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 3–29 Chapter 3—Rights of Interested Persons
Form 8-3 Disclaimer by Surviving Spouse
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) DISCLAIMER BY Deceased. ) SURVIVING SPOUSE
1. I, ______, the surviving spouse of the above- named decedent, pursuant to ORS 105.623–105.649, hereby disclaim my interest in the following estate property: [For example: Bearer Bonds described in attached Schedule A $161,146.20 AAA Life Insurance, Account #18261 $12,000.00 Boat Sale Proceeds, Oregon Title #123456 $1,000.00 1995 Pickup, Oregon license #ABC 123 $2,000.00
Contents of Residence described in Probate $7,930.00 Appraisal of Household Items made by AAA Appraisers dated 1/1/03 TOTAL $184,076.20]
2. In order to effectuate this disclaimer, I also disclaim the interest in my deceased spouse’s estate, which is established by article IV and article VI of my deceased spouse’s last will and testament (the will).
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Administering Oregon Estates: 2012 Edition 3–30 Chapter 3—Rights of Interested Persons
3. This disclaimer is precautionary. It is intended to be effective only to the extent that I otherwise have an interest in the disclaimed property pursuant to the documents establishing title to the property or the provisions of articles IV and VI of my deceased spouse’s will. 4. To the extent that property passes by reason of this disclaimer to the residue of my deceased spouse’s estate, which is governed by the provisions of article VII of my deceased spouse’s will, I hereby make the following further disclaimer with respect to the residuary trust estab- lished by article VII: I disclaim the right as cotrustee of that residuary trust to direct the beneficial enjoyment of the disclaimed property with respect to any of my children and the issue of any deceased child of mine. 5. Except as specified above in paragraph 4, I do not disclaim my interest in the residuary trust established by article VII of my deceased spouse’s will. 6. This disclaimer is irrevocable.
DATED: ______, 20____.
/s/______[surviving spouse’s name] [address] [telephone no.] [fax no.]
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Administering Oregon Estates: 2012 Edition 3–31 Chapter 3—Rights of Interested Persons
STATE OF ______) ) ss. County of ______)
I, ______, being duly sworn, depose and say: I am the disclaimant in the above-entitled disclaimer by surviving spouse and the foregoing disclaimer by surviving spouse is true as I verily believe.
/s/______[disclaimant’s name]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §§8.2-5(a) to 8.2-5(c). See UTCR 2.010 and UTCR 9.030 for the form of documents.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 3–32 Chapter 3—Rights of Interested Persons
Form 8-4 Written Partial Disclaimer of Bequest of Partnership Interest
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) WRITTEN PARTIAL Deceased. ) DISCLAIMER OF ) BEQUEST OF ) PARTNERSHIP ) INTEREST
1. I, ______, declare that I am the ______of the decedent, who died on ______, 20___, and who was domiciled in ______County, Oregon, leaving a will that was duly admitted to probate in the above-captioned court on ______, 20___, and under the terms of which I am the sole beneficiary. 2. I hereby disclaim, renounce, and refuse to accept ____% of the decedent’s _____% interest in ______, a [general / limited] partnership. 3. I affirm I have not accepted any interest in or benefit from the property interests hereby disclaimed, and I have not received and I will not receive any consideration in money or money’s worth for making this disclaimer.
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Administering Oregon Estates: 2012 Edition 3–33 Chapter 3—Rights of Interested Persons
4. I intend that this disclaimer constitutes a disclaimer under ORS 105.623–105.649, the Uniform Disclaimer of Property Interests Act, and a qualified disclaimer as defined in IRC §2518(b) or the corresponding provisions of any subsequent federal tax law. 5. This disclaimer is irrevocable.
DATED: ______, 20____.
/s/______[disclaimant’s name] Disclaimant [address] [telephone no.] [fax no.]
STATE OF ______) ) ss. County of ______)
I, ______, being duly sworn, depose and say: I am the disclaimant in the above-entitled disclaimer and the foregoing written partial disclaimer of bequest of partnership interest is true as I verily believe.
/s/______[disclaimant’s name]
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Administering Oregon Estates: 2012 Edition 3–34 Chapter 3—Rights of Interested Persons
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
Received this ____ day of ______, 20__.
/s/______[personal representative’s name] Personal Representative [address] [telephone no.] [fax no.]
COMMENT: See §§8.2-5(a) to 8.2-5(c). See UTCR 2.010 and UTCR 9.030 for the form of documents.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 3–35 Chapter 3—Rights of Interested Persons
Form 8-5 Disclaimer to Cover Residuary Interest
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) DISCLAIMER OF Deceased. ) RESIDUARY INTEREST
The undersigned, pursuant to ORS 105.623–105.649, the Uniform Disclaimer of Property Interests Act, hereby disclaims any and all interest to the real property described that is included in the remainder and residue of the estate or trust created by Article __ of the will of the above-named decedent. [Describe the interest and the real property the same as required for a deed.] DATED: ______, 20____.
/s/______[disclaimant’s name] Disclaimant [address] [telephone no.] [fax no.]
STATE OF ______) ) ss. County of ______)
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Administering Oregon Estates: 2012 Edition 3–36 Chapter 3—Rights of Interested Persons
I, ______, being duly sworn, depose and say: I am the disclaimant in the above-entitled disclaimer and the foregoing disclaimer of residuary interest is true as I verily believe.
/s/______[disclaimant’s name]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
Received this ____ day of ______, 20__.
/s/______Personal Representative [address] [telephone no.] [fax no.]
COMMENT: See §§8.2-5(a) to 8.2-5(c). See UTCR 2.010 and UTCR 9.030 for the form of documents.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 3–37 Chapter 3—Rights of Interested Persons
Form 8-6 Disclaimer of Intestate Succession or Devise
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) DISCLAIMER OF Deceased. ) INTESTATE ) SUCCESSION OR DEVISE
The undersigned, pursuant to ORS 105.623–105.649, the Uniform Disclaimer of Property Interests Act, hereby disclaims [specify whether the disclaimer is the whole or only a part of the property and describe with particularity the property being disclaimed].
DATED: ______, 20____.
/s/______[disclaimant’s name] Disclaimant [address] [telephone no.] [fax no.]
STATE OF ______) ) ss. County of ______)
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Administering Oregon Estates: 2012 Edition 3–38 Chapter 3—Rights of Interested Persons
I, ______, being duly sworn, depose and say: I am the disclaimant in the above-entitled disclaimer and the foregoing disclaimer of intestate succession or devise is true as I verily believe.
/s/______[disclaimant’s name]
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
Received this ____ day of ______, 20__.
/s/______Personal Representative [address] [telephone no.] [fax no.]
COMMENT: See §§8.2-5(a) to 8.2-5(c). See UTCR 2.010 and UTCR 9.030 for the form of documents.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 3–39 Chapter 3—Rights of Interested Persons
Form 8-7 Nontestamentary Disclaimer
[Name and address of Keogh trustee] Re: Account No. ______Keogh Account of ______
Ladies or Gentlemen: The undersigned is the adult child of [name of vested owner], and a beneficiary of [name of vested owner’s] Keogh account with your institution. Pursuant to ORS 105.623–105.649, the Uniform Disclaimer of Property Interests Act, the undersigned hereby disclaims the entire interest in the above-entitled account. The event determining that the undersigned has an interest in the account is the date of death of [name of vested owner], which is [date of death]. For your information, a copy of [name of vested owner]’s certificate of death is attached. This disclaimer is mailed by certified mail on a date that is less than nine months after [operative disclaimer date]. This disclaimer is delivered to [deliveree] as the person having possession of the disclaimed account. This disclaimer relates back for all purposes to [operative date], and the account herein disclaimed shall devolve as if the undersigned disclaimant had died before [date]. The undersigned has not accepted the above-described account or any interest or benefit thereunder.
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Administering Oregon Estates: 2012 Edition 3–40 Chapter 3—Rights of Interested Persons
The undersigned hereby authorizes [lawyer name and address], attorney at law, to represent the undersigned regarding effecting this disclaimer.
/s/______[disclaimant’s name] Disclaimant [address] [telephone no.] [fax no.]
STATE OF ______) ) ss. County of ______)
The above instrument was acknowledged by the above-named ______to be [his / her] voluntary act.
SUBSCRIBED AND SWORN TO before me on ______, 20___.
/s/______Notary Public for Oregon My commission expires: ______
COMMENT: See §§8.2-5(a) to 8.2-5(c). CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 3–41 Chapter 3—Rights of Interested Persons
Administering Oregon Estates: 2012 Edition 3–42 Chapter 3—Rights of Interested Persons
Appendix—Selected Oregon Revised Statutes 124.105 Physical abuse subject to action. (1) An action may be brought under ORS 124.100 for physical abuse if the defendant engaged in conduct against a vulnerable person that would constitute any of the following: (a) Assault, under the provisions of ORS 163.160, 163.165, 163.175 and 163.185. (b) Menacing, under the provisions of ORS 163.190. (c) Recklessly endangering another person, under the provisions of ORS 163.195. (d) Criminal mistreatment, under the provisions of ORS 163.200 and 163.205. (e) Rape, under the provisions of ORS 163.355, 163.365 and 163.375. (f) Sodomy, under the provisions of ORS 163.385, 163.395 and 163.405. (g) Unlawful sexual penetration, under the provisions of ORS 163.408 and 163.411. (h) Sexual abuse, under the provisions of ORS 163.415, 163.425 and 163.427. (i) Strangulation, under ORS 163.187. (2) An action may be brought under ORS 124.100 for physical abuse if the defendant used any unreasonable physical constraint on the vulnerable person or subjected the vulnerable person to prolonged or continued deprivation of food or water. (3) An action may be brought under ORS 124.100 for physical abuse if the defendant used a physical or chemical restraint, or psychotropic medication on the vulnerable person without an order from a physician licensed in the State of Oregon or under any of the following conditions: (a) For the purpose of punishing the vulnerable person. (b) For any purpose not consistent with the purposes authorized by a physician. (c) For a period significantly beyond that for which the restraint or medication was authorized by a physician. [1995 c.671 §2; 2003 c.577 §4; 2005 c.386 §2] 124.110 Financial abuse subject to action. (1) An action may be brought under ORS 124.100 for financial abuse in the following circumstances: (a) When a person wrongfully takes or appropriates money or property of a vulnerable person, without regard to whether the person taking or appropriating the money or property has a fiduciary relationship with the vulnerable person. (b) When a vulnerable person requests that another person transfer to the vulnerable person any money or property that the other person holds or controls and that belongs to or is held in express trust, constructive trust or resulting trust for the vulnerable person, and the other person, without good cause, either continues to hold the money or property or fails to take reasonable steps to make the money or property readily available to the vulnerable person when: (A) The ownership or control of the money or property was acquired in whole or in part by the other person or someone acting in concert with the other person from the vulnerable person; and (B) The other person acts in bad faith, or knew or should have known of the right of the vulnerable person to have the money or property transferred as requested or otherwise made available to the vulnerable person. (c) When a person has at any time engaged in conduct constituting a violation of a restraining order regarding sweepstakes that was issued under ORS 124.020.
Administering Oregon Estates: 2012 Edition 3–43 Chapter 3—Rights of Interested Persons
(2) A transfer of money or property that is made for the purpose of qualifying a vulnerable person for Medicaid benefits or for any other state or federal assistance program, or the holding and exercise of control over money or property after such a transfer, does not constitute a wrongful taking or appropriation under subsection (1)(a) of this section or the holding of money or property without good cause for the purposes of subsection (1)(b) of this section. [1995 c.671 §3; 1999 c.305 §2; 1999 c.875 §8; 2005 c.386 §3] 163.205 Criminal mistreatment in the first degree.(1) A person commits the crime of criminal mistreatment in the first degree if: (a) The person, in violation of a legal duty to provide care for another person, or having assumed the permanent or temporary care, custody or responsibility for the supervision of another person, intentionally or knowingly withholds necessary and adequate food, physical care or medical attention from that other person; or (b) The person, in violation of a legal duty to provide care for a dependent person or elderly person, or having assumed the permanent or temporary care, custody or responsibility for the supervision of a dependent person or elderly person, intentionally or knowingly: (A) Causes physical injury or injuries to the dependent person or elderly person; (B) Deserts the dependent person or elderly person in a place with the intent to abandon that person; (C) Leaves the dependent person or elderly person unattended at a place for such a period of time as may be likely to endanger the health or welfare of that person; (D) Hides the dependent person’s or elderly person’s money or property or takes the money or property for, or appropriates the money or property to, any use or purpose not in the due and lawful execution of the person’s responsibility; (E) Takes charge of a dependent or elderly person for the purpose of fraud; or (F) Leaves the dependent person or elderly person, or causes the dependent person or elderly person to enter or remain, in or upon premises where a chemical reaction involving one or more precursor substances: (i) Is occurring as part of unlawfully manufacturing a controlled substance or grinding, soaking or otherwise breaking down a precursor substance for the unlawful manufacture of a controlled substance; or (ii) Has occurred as part of unlawfully manufacturing a controlled substance or grinding, soaking or otherwise breaking down a precursor substance for the unlawful manufacture of a controlled substance and the premises have not been certified as fit for use under ORS 453.885. (2) As used in this section: (a) “Controlled substance” has the meaning given that term in ORS 475.005. (b) “Dependent person” means a person who because of either age or a physical or mental disability is dependent upon another to provide for the person’s physical needs. (c) “Elderly person” means a person 65 years of age or older. (d) “Legal duty” includes but is not limited to a duty created by familial relationship, court order, contractual agreement or statutory or case law. (e) “Precursor substance” has the meaning given that term in ORS 475.940. (3) Criminal mistreatment in the first degree is a Class C felony. [1973 c.627 §3; 1981 c.486 §1; 1993 c.364 §2; 2005 c.708 §1]
Administering Oregon Estates: 2012 Edition 3–44 Chapter 3—Rights of Interested Persons
164.015 “Theft” described. A person commits theft when, with intent to deprive another of property or to appropriate property to the person or to a third person, the person: (1) Takes, appropriates, obtains or withholds such property from an owner thereof; (2) Commits theft of property lost, mislaid or delivered by mistake as provided in ORS 164.065; (3) Commits theft by extortion as provided in ORS 164.075; (4) Commits theft by deception as provided in ORS 164.085; or (5) Commits theft by receiving as provided in ORS 164.095. [1971 c.743 §123; 2007 c.71 §47] 164.055 Theft in the first degree.(1) A person commits the crime of theft in the first degree if, by means other than extortion, the person commits theft as defined in ORS 164.015 and: (a) The total value of the property in a single or aggregate transaction is $1,000 or more; (b) The theft is committed during a riot, fire, explosion, catastrophe or other emergency in an area affected by the riot, fire, explosion, catastrophe or other emergency; (c) The theft is theft by receiving committed by buying, selling, borrowing or lending on the security of the property; (d) The subject of the theft is a firearm or explosive; (e) The subject of the theft is a livestock animal, a companion animal or a wild animal removed from habitat or born of a wild animal removed from habitat, pursuant to ORS 497.308 (2)(c); or (f) The subject of the theft is a precursor substance. (2) As used in this section: (a) “Companion animal” means a dog or cat possessed by a person, business or other entity for purposes of companionship, security, hunting, herding or providing assistance in relation to a physical disability. (b) “Explosive” means a chemical compound, mixture or device that is commonly used or intended for the purpose of producing a chemical reaction resulting in a substantially instantaneous release of gas and heat, including but not limited to dynamite, blasting powder, nitroglycerin, blasting caps and nitrojelly, but excluding fireworks as defined in ORS 480.110 (1), black powder, smokeless powder, small arms ammunition and small arms ammunition primers. (c) “Firearm” has the meaning given that term in ORS 166.210. (d) “Livestock animal” means a ratite, psittacine, horse, gelding, mare, filly, stallion, colt, mule, ass, jenny, bull, steer, cow, calf, goat, sheep, lamb, llama, pig or hog. (e) “Precursor substance” has the meaning given that term in ORS 475.940. (3) Theft in the first degree is a Class C felony. [1971 c.743 §125; 1973 c.405 §1; 1983 c.740 §32; 1987 c.907 §4; 1991 c.837 §9; 1993 c.252 §5; 1993 c.680 §20; 2005 c.706 §10; 2009 c.16 §3; 2009 c.610 §6]
Administering Oregon Estates: 2012 Edition 3–45 Chapter 3—Rights of Interested Persons
Administering Oregon Estates: 2012 Edition 3–46 Chapter 4 Lawyer Professional Liability1
Bruce L. Schafer Professional Liability Fund Tigard, Oregon
Contents I. Most Common Errors/Claim Allegations 4–1 A. Estate Planning 4–1 B. Trust and Estate Administration ...... 4–1 C. Administrative Errors—General ...... 4–2 II. Relevant Ethical Issues ...... 4–2 A. Conflict of Interest ...... 4–2 B. Who Is the Client? Identification/Misidentification of Client and to Whom Attorney May Owe Fiduciary or Other Obligations ...... 4–2 C. Confidentiality ...... 4–2 D. Client Conservator/Trustee Improperly Takes Assets 4–2 E. Disclosures ...... 4–3 III. Solutions/Dealing with Potential Professional Liability Claims ...... 4–3 Appendix A—Relevant ORPCs ...... 4–5 RPC 1.2(c) 4–5 RPC 1.6(a), Basic Rule of Confidentiality ...... 4–5 RPC 1.7, Conflict of Interest—Current Clients in General 4–5 RPC 1.8(c), Conflict of Interest—Current Client ...... 4–6 RPC 1.14, Representing Client with Diminished Capacity ...... 4–6 RPC 1.16, Declining or Terminating Representation 4–6 RPC 3.3, Obligation of Candor Toward the Tribunal 4–7 RPC 5.4(a) and (e), Professional Independence of Lawyer ...... 4–8 RPC 5.5(a), Unauthorized Practice of Law ...... 4–8 Appendix B—Citations ...... 4–9
1 Disclaimer: Bruce Lee Schafer is not an expert in estate planning, trusts, or estate administration. This article is not intended to establish any standard of care. Although the author is an employee of the Professional Liability Fund, these materials do not constitute any statement by the Professional Liability Fund. Chapter 4—Lawyer Professional Liability
Administering Oregon Estates: 2012 Edition 4–ii Chapter 4—Lawyer Professional Liability
I. Most Common Errors/Claim Allegations A. Estate Planning 1. Failure to accomplish testamentary intent—Ambiguity or error that defeats intent of decedent/testator. a. Missed gift. b. Erroneous provisions contrary to instructions. c. Failure to obtain necessary information. d. Technical errors (example—improper language for special needs trust, erroneous drafting causing adverse tax consequences, etc.). e. Ambiguous provisions. 2. Tax errors. 3. Undue influence or lack of capacity. a. Absence of proof that would validate the will. b. Allowing undue influence on frail client. c. Financial elder abuse—ORS 124.110. 4. Husband and wife wills with potential conflicts of interest (especially if his and her children). 5. Living trust mills or other volume practices. a. “Cookie cutters” result in increased risk of failure to determine and achieve testamentary intent. b. Excessive fees if inappropriate estate planning vehicle. c. Potential violation of RPC 5.5(a) if aiding nonlawyer in practice of law if close relationship with nonlawyer. See also RPC 1.7(a), conflict of interest, and RPC 1.7(a) (2), obligation to disclosure self interest; RPC 7.2 marketing; and RPC 5.4(a), fee sharing with nonlawyer. 6. Inadequate documents in file. a. Questionnaire? b. Listing of assets? c. Documentation of important decision by client? 7. Passage of time/missed deadlines. a. Change in value of assets. b. Testator dies before will prepared. c. Late denial of claims. B. Trust and Estate Administration 1. Late disclaimers or improper use of disclaimers. 2. Premature or erroneous distribution from estate or trust. 3. Disputes with beneficiaries (as trustee). 4. Acting as trustee and attorney can create trouble with beneficiaries. 5. Disputes between beneficiaries—conflicts of interest.
Administering Oregon Estates: 2012 Edition 4–1 Chapter 4—Lawyer Professional Liability
6. Failure to timely transfer assets into trust/living trusts resulting in probate expenses or tax consequence. 7. Fee disputes. C. Administrative Errors—General 1. Breach of fiduciary duty. 2. Failure to determine duties owed to the estate and/or beneficiaries. 3. Dilatory behavior: Estate or trust opened too long, delays, missed deadlines. 4. Failure to timely file accountings or other eports.r 5. Embezzlement by staff. 6. Bad behavior by trustee, conservator, or parent. 7. Erroneous instructions to client. 8. Staying on as fiduciary too long while there are disputes between beneficiaries or dilatory administration. 9. Breach of confidentiality. 10. Erroneous mailing to wrong persons. 11. Late filing of tax returns. 12. Defective or absence of required notices. II. Relevant Ethical Issues A. Conflict of Interest 1. Self-interest—representing family member. Are you a beneficiary? 2. Conflict between multipleclients (husband and wife) may require disclosure and waiver. 3. Conflict between beneficiaries—withdraw or obtain instructions omfr court. 4. Trustee and also attorney for trust? Perhaps it is best to be one or the other, but not both. B. Who Is the Client? Identification/Misidentification of Client and to Whom AttorneyM ay Owe Fiduciary or Other Obligations 1. In re Weidner, 310 Or 757, 801 P2d 828 (1990)—reasonable expectations test. 2. The Ethical Oregon Lawyer, §5.2. 3. Roberts v. Fearey, 162 Or App 546, 986 P2d 690 (1999) (attorney for trustee does not normally have a fiduciary duty to beneficiaries). C. Confidentiality 1. Frail client accompanied by trusted friend or family member prompting confidentiality concerns. 2. Lawyer as witness. 3. Communication with nonclients. D. Client Conservator/Trustee Improperly Takes Assets 1. Duty to ward or beneficiaries? 2. Duty to court? 3. Advise client or withdraw?
Administering Oregon Estates: 2012 Edition 4–2 Chapter 4—Lawyer Professional Liability
E. Disclosures 1. To client of malpractice/error or other disclosure must be timely and complete (In re Brandt and Griffin,331 Or 113, 10 P3d 906 (2000)). 2. To multiple clients of potential conflict of interest between them. III. Solutions/Dealing with Potential Professional Liability Claims A. Decline representation. B. Withdraw. C. Limit the client’s role—example: who keeps the estate checkbook? D. Documentation of communications with client. E. Contact PLF. 1. Coverage Plan Section III.3—What is a covered activity, your conduct in a special capacity, with comments. 2. Section 1.1—definition of business trustee. 3. When do you involve the PLF? a. When you learn of the error or potential error. b. When you receive a claim or an accusation. c. When you learn you will or may be a witness. F Dispute between heirs. F Will contest. F File requested. F Deposition or trial testimony requested. 4. Repair possibilities—examples. a. Modification or reformation of trust (ORS 130.220—to correct mistake or ambiguity; ORS 130.225—modification to achieve settler’s tax objectives). b. Assistance with mitigation. c. Provide representation in dealing with taxing authorities.
Administering Oregon Estates: 2012 Edition 4–3 Chapter 4—Lawyer Professional Liability
Administering Oregon Estates: 2012 Edition 4–4 Chapter 4—Lawyer Professional Liability
Appendix A—Relevant ORPCs
RPC 1.2(c) Cannot counsel client to engage in illegal or fraudulent conduct but may discuss legal consequences. Rule 1.2 Scope of Representation and Allocation of Authority Between Client and Lawyer . . . . (c) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law. RPC 1.6(a), Basic Rule of Confidentiality Don’t “reveal information relating to the representation of a client” unless client gives informed consent. Rule 1.6 Confidentiality of Information (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b). . . . . RPC 1.7, Conflict of Interest—Current Clients in General
Note: 1.7(b)(4) requires informed consent, confirmed in writing, for lawyer to be able to represent client despite conflict. Rule 1.7 Conflict ofI nterest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a current conflict of interest. A current conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; (2) there is a significant risk that the epresentationr of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer; or (3) the lawyer is related to another lawyer, as parent, child, sibling, spouse or domestic partner, in a matter adverse to a person whom the lawyer knows is represented by the other lawyer in the same matter. (b) Notwithstanding the existence of a current conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not obligate the lawyer to contend for something on behalf of one client that the lawyer has a duty to oppose on behalf of another client; and (4) each affected client gives informed consent, confirmed in writing.
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RPC 1.8(c), Conflict of Interest—Current Client Specific role egardingr lawyer as beneficiary of gifts, including testamentary gifts. Rule 1.8 Conflict of Interest: Current Clients: Specific Rules . . . . (c) A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift, unless the lawyer or other recipient of the gift is related to the client. For purposes of this paragraph, related persons include a spouse, domestic partner, child, grandchild, parent, grandparent, or other relative or individual with whom the lawyer or the client maintains a close familial relationship. . . . . RPC 1.14, Representing Client with Diminished Capacity Rule 1.14 Client with Diminished Capacity (a) When a client’s capacity to make adequately considered decisions in connection with a representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client. (b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian. (c) Information relating to the representation of a client with diminished capacity is protected by Rule 1.6. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client’s interests. RPC 1.16, Declining or Terminating Representation (a) Mandatory, (b) Permissive, (c) Procedure, (d) Minimize prejudice. Rule 1.16 Declining or Terminating Representation (a) Except as stated in paragraph (c), a lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if: (1) the representation will result in violation of the Rules of Professional Conduct or other law; (2) the lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client; or (3) the lawyer is discharged. (b) Except as stated in paragraph (c), a lawyer may withdraw from representing a client if:
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(1) withdrawal can be accomplished without material adverse effect on the interests of the client; (2) the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent; (3) the client has used the lawyer’s services to perpetrate a crime or fraud; (4) the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement; (5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled; (6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or (7) other good cause for withdrawal exists. (c) A lawyer must comply with applicable law requiring notice to or permission of a tribunal when terminating a representation. When ordered to do so by a tribunal, a lawyer shall continue representation notwithstanding good cause for terminating the representation. (d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred. The lawyer may retain papers, personal property and money of the client to the extent permitted by other law. RPC 3.3, Obligation of Candor Toward the Tribunal Rule 3.3 Candor Toward the Tribunal (a) A lawyer shall not knowingly: (1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer; (2) fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel; (3) offer evidence that the lawyer knows to be false. If a lawyer, the lawyer’s client, or a witness called by the lawyer, has offered material evidence and the lawyer comes to know of its falsity, the lawyer shall take reasonable remedial measures, including, if permitted, disclosure to the tribunal. A lawyer may refuse to offer evidence, other than the testimony of a defendant in a criminal matter, that the lawyer reasonably believes is false; (4) conceal or fail to disclose to a tribunal that which the lawyer is required by law to reveal; or (5) engage in other illegal conduct or conduct contrary to these Rules. (b) A lawyer who represents a client in an adjudicative proceeding and who knows that a person intends to engage, is engaging or has engaged in criminal or fraudulent
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conduct related to the proceeding shall take reasonable remedial measures, including, if permitted, disclosure to the tribunal. (c) The duties stated in paragraphs (a) and (b) continue to the conclusion of the proceeding, but in no event require disclosure of information otherwise protected by Rule 1.6. (d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will enable the tribunal to make an informed decision, whether or not the facts are adverse. RPC 5.4(a) and (e), Professional Independence of Lawyer 1. 5.4(a), limitations on sharing fees with nonlawyer. 2. 5.4(e), Prohibition on referring client to nonlawyer in return for something of value for referral. Rule 5.4 Professional Independence of a Lawyer (a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that: (1) an agreement by a lawyer with the lawyer’s firm or firm members may provide for the payment of money, over a reasonable period of time after the lawyer’s death, to the lawyer’s estate or to one or more specified persons. (2) a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may, pursuant to the provisions of Rule 1.17, pay to the estate or other representative of that lawyer the agreed-upon purchase price. (3) a lawyer or law firm may include nonlawyer employees in a compensationor retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement. (4) a lawyer may share court-awarded legal fees with a nonprofit organization that employed, retained or recommended employment of the lawyer in the matter. . . . . (e) A lawyer shall not refer a client to a nonlawyer with the understanding that the lawyer will receive a fee, commission or anything of value in exchange for the referral, but a lawyer may accept gifts in the ordinary course of social or business hospitality. RPC 5.5(a), Unauthorized Practice of Law Lawyer shall not assist another in practicing law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction. Rule 5.5 Unauthorized Practice of Law; Multijurisdictional Practice (a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so. . . . .
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Appendix B—Citations
1. In re Weidner, 310 Or 757, 801 P2d 828 (1990). See also The Ethical Oregon Lawyer §5.2, regarding determining whether a lawyer-client relationship exists; and Oregon Formal Ethics Opinion 2005-146. 2. Hale v. Groce, 83 Or App 55, 730 P2d 576, 304 Or 281, 744 P2d 1289 (1987). Notwithstanding lack of privity with the attorney who prepared the will, an intended beneficiary of a will might be able to pursue a claim against the attorney as an intended third-party beneficiary. 3. Reynolds v. Schrock, 341 Or 338, 142 P3d 1062 (2006). Lawyer cannot be liable for breach of fiduciary duty to nonclient unless lawyer was acting outside course and scope of representation of his client. 4. Roberts v. Fearey, 162 Or App 546, 986 P2d 690 (1999). An attorney who represents a fiduciary represents only the fiduciary and not those to whom the fiduciary-client owes a duty. 5. Davis v. Somers, 140 Or App 567, 915 P2d 1047 (1996). Statute of ultimate repose begins to run with the error (preparation of defective will), even though the will did not “take effect” until the death of the testator. 6. Caba v. Barker, 341 OR 534, 143 P3d 174 (2006). Supreme Court reversed Court of Appeals, holding that drafting a will does not, as a matter of law, include an implied promise to obtain a particular result for an intended will beneficiary. There is no implied promise to make a will invulnerable to a will contest. 7. ORS 40.225(3) and 4(b), also known as Oregon Rules of Evidence 503(3) and 4(b). Relevant provisions regarding lawyer-client privilege. 8. ORS 130.220; 130.225. Reformation/modification of trust to correct mistakes/achieve settler’s tax objectives.
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Administering Oregon Estates: 2012 Edition 4–10 Chapter 5 Initial Responsibilities and Liabilities of Personal Representative
Nicholas M. Frost Hershner Hunter LLP Eugene, Oregon
Contents §7.1 Lawyer’s Instructions to Personal Representative ...... 5–1 §7.1-1 Personal Representative Is the Client ...... 5–1 §7.1-2 Clear Division of Responsibilities ...... 5–2 §7.1-3 Lawyer’s Instructions for Personal Representative ...... 5–3 §7.2 Liabilities of Personal Representative ...... 5–11 §7.2-1 Fiduciary Duties ...... 5–11 §7.2-3 Personal Liability to Persons Interested in the Estate ...... 5–13 §7.2-4 General Principles of Liability ...... 5–13 §7.3 Notices ...... 5–16 §7.3-1 To Heirs, Devisees, and Interested Persons ...... 5–16 §7.3-2 Publication of Notice to Interested Persons 5–17 §7.3-3 Diligent Search for and Notice to Claimants ...... 5–19 §7.4 Reporting Assets 5–21 §7.4-1 Identifying Assets 5–21 §7.4-2 The Inventory ...... 5–22 §7.4-3 Form of the Inventory 5–26 §7.4-4 Assets Outside Oregon ...... 5–28 §7.4-5 Incomplete Inventory ...... 5–29 §7.6 Initial Tax Matters ...... 5–29 §7.6-1 Introduction ...... 5–29 §7.6-2 Gathering Information ...... 5–29 §7.6-3 Notices and Applications ...... 5–30 §7.6-4 Due Dates and Filing Requirements 5–31 §7.6-6 Elections 5–34 Forms 7-1 Inventory of Property of Decedent’s Estate 5–41 7-2 Supplemental Inventory ...... 5–45 7-3 Amended Inventory 5–47 Chapter 5—Initial Responsibilities and Liabilities of Personal Representative
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Chapter 7
INITIAL RESPONSIBILITIES AND LIABILITIES OF PERSONAL REPRESENTATIVE
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
NICHOLAS M. FROST, B.A., J.D., University of Michigan (2003, 2006); member of the Illinois State Bar Association since 2006 and the Oregon State Bar since 2010; associate, Hershner Hunter, LLP, Eugene. The authors gratefully recognize the work of David N. Andrews, who collaborated on the previous edition of this chapter.
§7.1 LAWYER’S INSTRUCTIONS TO PERSONAL REPRESENTATIVE §7.1-1 Personal Representative Is the Client “Under Oregon law, a lawyer for a personal representative repre- sents the personal representative and not the estate or the beneficiaries as such.” OSB Legal Ethics Op No 2005-62. See also OSB Legal Ethics Op No 2005-119. The lawyer is employed to assist the personal representative in the administration of the estate, and “to perform acts of administration . . . on behalf of the personal representative.” ORS 114.305(18). See also ORS 113.135. The same rule applies to lawyers representing trustees. “[W]hen an attorney undertakes to represent a fiduciary, he or she represents only the fiduciary and does not, at the same time, maintain an attorney-client relationship with those to whom the fiduciary-client owes a duty.” Roberts v. Fearey, 162 Or App 546, 553, 986 P2d 690 (1999). The lawyer may represent the personal representative in his or her fiduciary capacity and in his or her individual capacity as a beneficiary, even if the personal representative’s interest as a beneficiary is in conflict with the interests of other beneficiaries. OSB Legal Ethics Op No 2005-119.
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Idaho and Washington have reached similar conclusions. See THE ETHICAL OREGON LAWYER §5.6 (Oregon CLE 2006). A lawyer representing the personal representative may also represent one or more beneficiaries, if doing so does not create a current client conflict under Oregon RPC 1.7. See OSB Legal Ethics Op No 2005-119, n 2.
PRACTICE TIP: A lawyer should be careful not to blur the lines of representation by accidentally appearing to represent estate or trust beneficiaries other than the fiduciary. See Roberts, 162 Or App at 553. Blurring the lines of representation can be a problem if beneficiaries call the personal representative’s lawyer with questions about the estate. The lawyer should advise the bene- ficiaries in the first written communication about the estate that the lawyer represents the personal representative, and not the bene- ficiaries or the estate itself. Reminders may be necessary if beneficiaries appear not to understand.
PRACTICE TIP: The Oregon State Bar Professional Liability Fund has dealt with claims arising from lawyers who work with personal representatives who allowed their personal goals as bene- ficiaries to interfere with their duty to the estate. Lawyers should remind the personal representative of his or her fiduciary duties in that situation. In Reynolds v. Schrock, 341 Or 338, 340, 142 P3d 1062 (2006), the Oregon Supreme Court held that a lawyer may not be held jointly liable with a client for the client’s breach of a fiduciary duty “unless the third party shows that the lawyer was acting outside the scope of the lawyer-client relationship.” See §§7.1-2 to 7.1-3. §7.1-2 Clear Division of Responsibilities Early in the process of the administration of an estate, the lawyer should discuss with the personal representative the division of respon- sibilities, including the role of other professionals, such as accountants and investment advisors. The summary of duties mailed by the probate
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court to each individual fiduciary may provide a useful framework for discussing the personal representative’s duties and the hidden pitfalls. Personal representatives who fail to follow basic fiduciary principles are a frequent cause of conflict in probate administration. See §7.1-3. §7.1-3 Lawyer’s Instructions for Personal Representative Generally, the lawyer should discuss the following matters with the personal representative: (1) Outline Obligations. The lawyer should explain the major obligations of a personal representative: (a) to discover, preserve, and collect income from all assets; (b) to notify all interested persons; (c) to pay appropriate obligations and taxes; (d) to distribute the assets in accordance with the decedent’s will, or the laws of intestate succession; and (e) to close the estate. (2) Division of Responsibilities Regarding Assets. The lawyer should discuss with the personal representative the division of responsi- bilities between the lawyer and the client, and with other professionals, with respect to locating assets, preparing the inventory, determining values, and deciding whether or not appraisers are to be employed. (3) Commingling of Assets. Many personal representatives, particularly a personal representative who is the major beneficiary, will not understand the need to strictly segregate the estate’s funds from the personal representative’s own funds. The lawyer should stress that courts look harshly on commingling assets and emphasize the need to keep funds separate. (4) Bank Accounts. The estate will need a separate bank account or accounts, and all of the decedent’s bank accounts should be transferred to the estate account. The bank will require certified copies of the letters testamentary and a taxpayer identification number to open the new account(s). Banks and savings institutions will usually permit withdrawal of savings certificates and certificates of deposit without penalty following the death of the depositor. However, the personal representative should be certain of the institution’s policy before with- drawing time deposits.
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PRACTICE TIP: Asking the accountant who will be filing the estate’s fiduciary income tax return to obtain the taxpayer iden- tification number for the estate should be done early in the process. Doing so will get the accountant involved early in the process, allowing him or her to make tax planning suggestions that the personal representative can use to the estate’s advantage when planning the administration of the estate.
PRACTICE TIP: Because of the importance of maintaining accurate records for preparing the final account, it is good practice for the lawyer to keep the check register for the personal repre- sentative, to handle all deposits, to write checks for the personal representative’s signature, and to set up the account to prohibit use of counter checks or ATM access by the personal representative. Setting up the accounts in this way will discourage the personal representative from commingling funds and will simplify the preparation of any required accountings. (5) Income Tax Returns. The personal representative should locate and review at least the last three years of the decedent’s income tax returns for future use. See §§7.6-2 to 7.7.6-3(a). The lawyer should also remind the personal representative of the tax accounting responsibilities during the probate period and discuss the estate with the accountant to address any tax problems that can reasonably be anticipated.
PRACTICE TIP: The lawyer should advise the personal representative to consider hiring the decedent’s accountant to pre- pare the decedent’s final income tax return. The Oregon State Bar Professional Liability Fund has dealt with claims in which it is alleged that the accountant did not have clear instructions to file the decedent’s final return. (6) Life Insurance Claims. The personal representative has no direct responsibility for collecting life insurance proceeds payable to named beneficiaries, because life insurance policies are not assets of the estate. However, the personal representative is often the person best
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positioned to know what policies exist, to find records of the contracts, and to render assistance in collecting any insurance proceeds. Insurance payable to the estate (either because there is no beneficiary or because the estate is named) will, of course, be treated as any other probate asset. Because IRS Form 712 (Life Insurance Statement), issued by the insurance company, must be filed if a federal or Oregon estate tax return is required, the personal representative or lawyer should request Form 712 from the life insurance company, in writing, to assure receipt in a timely manner. Most insurance companies will not issue Form 712 unless requested to do so.
PRACTICE TIP: Life insurance policies may be associated with the decedent’s health or with dental insurance policies, bank accounts, credit union accounts, credit cards, employee benefit plans, home mortgage, or other accounts or assets.
PRACTICE TIP: If the estate or personal representative is not a beneficiary of a policy, the insurance company likely will not discuss the policy with the personal representative. If this is the case, the personal representative should send the company a death certificate and contact information for the named beneficiaries. (7) Other Insurance. The personal representative should examine the decedent’s other insurance policies, such as fire, theft, casualty, liability, health, and accident policies. When appropriate, he or she should make insurance claims. In general, coverage of assets pas- sing into the hands of the personal representative must be maintained, and increased when inadequate. Among the matters to be determined are: (a) Whether the insurance is for replacement cost and, if not, whether the coverage should be changed to replacement cost; (b) If the policy is for replacement cost, whether the amount of insurance is sufficient for the replacement cost provision and, if the amount is insufficient, whether it should be increased;
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(c) Whether the home insurance policy will be continued if the home is vacant (the decedent’s policy will address coverage after vacancy; some policies will cancel the insurance after the property has been vacant for a specified period of time);
PRACTICE TIP: Many policies covering vacant property exclude coverage for damage from vandalism, malicious mischief, or broken glass. Most policies also exclude coverage for damage to or resulting from any plumbing, heating, air-conditioning, or sprinkler system while the dwelling is vacant or unoccupied, unless reasonable care has been used to maintain the heating system or to shut off the water supply and drain the system and appliances of water. The personal representative should discuss the policy terms with the insurance agent, including the policy’s definition of vacant and, if necessary, change policies or add a rider providing better coverage; (d) Whether earthquake and flood insurance should be obtained; (e) What the policy limits are for property such as silver, jewelry, furs, guns, etc. (if coverage is inadequate, the personal represen- tative should determine whether such items should be specially insured or moved to safer storage); (f) Whether liability policies, such as the automobile policy, should be continued; (g) Whether any umbrella policy should be continued or, if none exists, whether one should be obtained; and (h) Whether business interests, commercial properties, or other special interests require consultation with the insurance adviser.
PRACTICE TIP: The inventory (see §§7.4-1 to 7.4-5) should be assembled quickly, even if values are not yet finally established, so that the insurance coverage can be reviewed again in light of the property discovered. The personal representative should keep in mind that fair-market value and replacement cost are not the same.
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Some insurers automatically extend coverage under the home- owners’ policy to the legal representative of the deceased, but only with respect to the premises and property of the deceased covered under the policy at the time of death. Some policies define insured to include the person with proper temporary custody of the property until appointment and qualification of a legal representative. The personal representative should immediately notify the insurance carriers of the decedent’s death, and have them substitute him or her as the insured. The personal representative should also consider whether the provisions of ORS 114.215 (regarding the immediate vest- ing of title in the heirs or devisees) suggest that the heirs or devisees should also be named as insureds.
PRACTICE TIP: The personal representative should cancel policies of insurance that cover risks that ended with the death of the decedent, such as health and accident, medical and dental, and errors and omissions policies. The personal representative should also stop any automatic withdrawals of premiums from the decedent’s bank account, and apply for the refund of any unearned premiums. (8) Social Security. In addition to the Social Security benefits that may be payable to survivors, medical, hospital, and funeral benefits for the decedent may be payable to the personal representative or the surviving spouse. (9) Mail. Arrangements should be made for forwarding the decedent’s mail to the personal representative or, even better, to the lawyer. The post office provides cards for giving notice of forwarding mail. Important information concerning assets and liabilities may be lost if the mail is not forwarded. If a surviving spouse is not the personal representative, forwarding the mail may not be practical. For decedents who transacted business on the Internet, the personal representative may need to access the decedent’s e-mail and Internet banking and other accounts. (10) Outline of Estate Plan. It is useful for the attorney to prepare an outline of the dispositive terms of the will early in the
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process, especially if there are specific or general devises, tax-planning trusts, or other complicating factors. Preparing the outline may uncover issues that would otherwise be missed. The outline becomes a useful guide during administration, as well as for explaining the will to the personal representative and devisees. The earlier an outline is prepared, the more useful it will be. Understanding and planning the administra- tion of the estate at a very early date improves efficiency and avoids mistakes. (11) Cash Flow. Many estates experience cash flow problems. It is helpful to determine as early as possible the cash needs of the estate, and to develop a strategy to generate that cash. The personal represen- tative should consider bills, court fees, support needs, income and estate taxes, and any other cash needs that may arise. (12) Asset Sales. Specifically devised property cannot be sold without authorization in the will or a court order. ORS 114.325(2)(b). Family sentiment may dictate against sales if other property is available. The Oregon State Bar Professional Liability Fund has received claims because the personal representative sold property that family members wanted, or conducted a sale without giving the beneficiaries a chance to bid on the property. (13) Disclaimers. Disclaimers are powerful postmortem plan- ning tools if used properly. To be effective for gift tax purposes, most disclaimers must be made within nine months after the decedent’s death. See IRC §2518(b)(2). Note that for decedents dying in 2010, the time for making a disclaimer was extended by §301(d)(1)(c) of the 2010 Tax Act, Pub. L. 111-312, 111th Cong., 2nd Sess (2010). See also the Oregon Uniform Disclaimer of Property Interests Act, ORS 105.623– 105.649, which does not impose a time limit on disclaimers. See also ORS 105.645, as amended by 2011 Or Laws ch 526, §16. For a more complete discussion of disclaimers, see §§8.3-2(a) to 8.3-2(f). The Oregon State Bar Professional Liability Fund has dealt with claims concerning disclaimers that were not filed within the time limits imposed by IRC §2518(b)(2).
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(14) Environmental Hazards. As early as possible, the lawyer should try to determine whether any property belonging to the decedent has been environmentally contaminated. See §§7.2-4(a)(3), 10.8-4 to 10.8-4(d).
PRACTICE TIP: Under OAR 340-122-0140, only financial institutions serving in a fiduciary capacity, but not individuals serving as personal representatives, are protected from potential personal liability if the estate includes contaminated property. Therefore, the nominated individual personal representative should consider declining the appointment if the estate might contain contaminated property. In light of the favorable treatment given to banks and trust companies by the rule, it may be wise to nominate a bank or a trust company as the personal representative. (15) S Corporation Stock. If the decedent owned stock in an S corporation, the lawyer should immediately consider the effect of the decedent’s will on the S election. The transfer of shares to an ineligible shareholder, such as a corporation, partnership, nonresident alien, and certain trusts, can cost the corporation its S election. See IRC §1361(b)(1). See also 1 ADVISING OREGON BUSINESSES §§13.7–13.13 (Oregon CLE 2001 & Supp 2007). In addition, care must be taken to avoid having more than 100 shareholders. IRC §1361(b)(1)(A). (16) Bond Requirements. If the will does not provide for waiver of the bond required by ORS 113.105, or if the personal representative is not the sole heir and devisee, the individual personal representative will need to obtain a bond. Corporate personal representatives are exempt from the bond requirement by ORS 113.105(3), as are certain other persons described in ORS 113.105(1). Under ORS 113.105, the court has the authority to require a bond, notwithstanding a provision in the will that no bond is required. Local practice in some counties requires a bond of out-of-state personal representatives. ORS 113.105(4) allows the court to waive the bond only if all of the heirs and devisees consent in writing and the agreement is filed with the petition for the appointment of the personal representative.
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COMMENT: It may be possible to persuade a court to agree to waive bond without complying with the requirement that all of the heirs and devisees consent, but this could invalidate the appoint- ment of the personal representative if a dispute arises. However, in Smith v. Wells, 128 Or App 492, 500, 876 P2d 850 (1994), the Oregon Court of Appeals approved the waiver of bond without the consent of the heirs and devisees, because the personal repre- sentative, a stranger to the decedent, did not know the identity of the heirs and devisees. Note that in the Smith case, the probate was opened under ORS 30.090 at the request of a tort claimant. Smith, 128 Or App at 500. The personal representative’s own liability insurer may be a source for the bond. The personal representative must ensure that the bond is large enough to cover all of the estate’s assets and any increase from income. ORS 113.105(2).
PRACTICE TIP: Some bonding companies will attempt to make the lawyer jointly liable by asking the lawyer to cosign the bond or verify the personal representative’s financial status. Lawyers should refuse to do so. (17) Investment Options. The lawyer should alert the personal representative to the investment obligations under the Oregon Uniform Prudent Investor Act, ORS 130.750–130.775. See §10.4-1(b)(1). See also ADMINISTERING TRUSTS IN OREGON ch 9 (Oregon CLE 2007). Hiring an appropriate investment adviser to assist the personal represen- tative with investment decisions, in compliance with ORS 130.680(1), will help protect the personal representative from liability. See ORS 130.680(3). (18) Elective-Share Claims. If the decedent left a surviving spouse, the personal representative should consider whether an elective- share claim by the spouse under ORS 114.600–114.725 is possible. If it is, the personal representative should try to calculate the value of the augmented estate (see ORS 114.630) and the value of assets passing to the surviving spouse to determine, as early as possible, whether an elective-share claim can succeed. If a claim appears to be possible, the
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personal representative should look for any evidence of a waiver of the elective-share right by the spouse. See ORS 114.620. (19) Parental Neglect. If a parent is an intestate heir of the deceased, the personal representative should consider whether the parent may be deemed to have predeceased the decedent under the parental-neglect statute. ORS 112.047.
PRACTICE TIP: It is advisable for the lawyer to send a letter to the personal representative summarizing the basic items of instruction outlined above, as well as summarizing the basic provi- sions of the will.
§7.2 LIABILITIES OF PERSONAL REPRESENTATIVE §7.2-1 Fiduciary Duties The personal representative should understand that he or she is a fiduciary. See ORS 114.395. Among other things, the personal repre- sentative is under a duty to follow the testator’s intent as expressed in the will (see ORS 112.227, 114.265); to collect income from property of the estate; and to preserve, settle, and distribute the estate “with as little sacrifice of value as is reasonable under the circumstances.” ORS 114.265. Although the Oregon Uniform Trust Code is not directly appli- cable to personal representatives, the rules applicable to trustees under the Uniform Trust Code should be followed by the personal repre- sentative. See ORS 114.395. The Uniform Trust Code provides that a fiduciary has the following duties: (1) a duty of good faith, ORS 130.650; (2) a duty of loyalty, ORS 130.655; (3) a duty of impartiality, ORS 130.660; (4) a duty of care, ORS 130.665; (5) a duty to administer the trust at reasonable cost, ORS 130.70; (6) a duty to use any special skills or expertise that the fiduciary has or represents that he or she has, ORS 130.675; (7) a duty to keep accurate records, ORS 130.695; (8) a duty to enforce and defend claims, ORS 130.700; and (9) a duty to inform and report to beneficiaries, ORS 130.710.
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A fiduciary is not required to be an expert in every aspect of estate administration and, therefore, is able to delegate certain duties, notably for investment decisions, as long as he or she exercises due care in the selection of the delagatee. ORS 130.680. If the personal representative breaches a fiduciary duty, the personal representative is liable “for resulting damage or loss to the same extent as a trustee of an express trust.” ORS 114.395; see Moser v. Van Winkle, 103 Or App 398, 402–403, 797 P2d 1063 (1990); see also ORS 130.800, 130.805. The court may surcharge the personal repre- sentative for “any loss caused by any breach of duty and deny in whole or in part the right of the personal representative to receive compensation.” ORS 116.123. Several specific instances in which a per- sonal representative might be personally liable are listed in ORS 116.063. See §§10.4-1(c)(1) to 10.4-1(c)(3). In Estate of Grove v. Selken, 109 Or App 668, 676–677, 820 P2d 895 (1991), the probate court imposed a surcharge on the personal representative for loss caused by his breach of a fiduciary duty. The lawyer who drafted the decedent’s will became the personal repre- sentative. In his capacity as personal representative, the lawyer found a document purporting to create a joint tenancy between the decedent and the lawyer’s wife as to part of the decedent’s extensive book collection. Estate of Grove, 109 Or App at 671. The lawyer assumed that the books passed to his wife by operation of law, but did not disclose the existence of the document or of his assumption about its impact until the final accounting. A devisee objected to the final accounting. The probate judge surcharged the lawyer as personal representative for the value his wife had received from the sale of the books, and for excessive payments that he made to his relatives and to himself as lawyer for the estate. Estate of Grove, 109 Or App at 672–673. The Oregon Court of Appeals affirmed, agreeing that, as personal representative, the lawyer had breached his fiduciary duty when he (1) failed to notify the devisees about the document regarding the books within a reasonable time; (2) decided to accept the document at face value, despite the conflict of interest; (3) acted as his wife’s agent in the
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book sale; and (4) commingled estate property with property that he thought belonged to his wife. Estate of Grove, 109 Or App at 675–676. The court of appeals also affirmed that ORS 116.123 gives the probate court authority to enter a personal judgment against a personal representative for breach of a fiduciary duty. Estate of Grove, 109 Or App at 676. §7.2-3 Personal Liability to Persons Interested in the Estate Under ORS 114.395, 116.063(3), and 116.123, the personal representative is liable for the breach of a fiduciary duty to the extent of the loss or damage caused. Any person who seeks to impose personal liability on the personal representative must prove some loss or damage. The personal representative will be liable for the breach of a fiduciary duty to the same extent as the trustee of an express trust in similar circumstances would be liable. ORS 114.395; see Moser v. Van Winkle, 103 Or App 398, 403, 797 P2d 1063 (1990) (the personal representative was liable for the costs and attorney fees incurred in investigating a breach-of-duty claim). §7.2-4 General Principles of Liability The principles regarding a trustee’s liability do not apply directly to personal representatives, but personal representatives, like trustees, are fiduciaries, so the principles applicable to trustees are analogous and provide guidance for personal representatives. See ORS 114.395; see also ORS 130.650–130.910. The general principles of trustee liability are spelled out in the RESTATEMENT (SECOND) OF TRUSTS §§201–226 (1959), as supplemented by the RESTATEMENT (THIRD) OF TRUSTS §§90–92 (Prudent Investor Rule) (1992). See also 3 AUSTIN WAKEMAN SCOTT & WILLIAM F. FRATCHER, SCOTT AND ASCHER ON TRUSTS §24 (5th ed 2007) (supplemented periodically) (citation not verified by publisher), for an in-depth commentary on the Restatement. In general, a trustee is in breach of the trust if the trustee inten- tionally or negligently violates a duty owed to a beneficiary. In some situations, however, a trustee can be liable even though not personally at fault, because of a mistake of law regarding the extent of the duties and
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powers, or a mistake of fact or law in the exercise of powers or the performance of duties. See SCOTT AND ASCHER ON TRUSTS, supra, §201. When it does not result from a breach of trust, the mere failure to make a profit, or a loss or depreciation in value of trust property, is not sufficient to impose personal liability on the trustee. RESTATEMENT (SECOND) OF TRUSTS §204 (1959). §7.2-4(a) Specific Situations §7.2-4(a)(1) Basis for Liability Under ORS 116.063(1), a personal representative is responsible for, and is chargeable in his or her accounts for, the entire estate of the decedent that comes into his or her possession at any time, including income. The personal representative may also be responsible for any property that is not part of the estate, if he or she commingles it with the assets of the estate, and for any property received in his or her representative capacity under a duty imposed by law. ORS 116.063(2). The personal representative may be liable for any loss to the estate arising from neglect or unreasonable delay in collecting assets, neglect in paying over money or delivering property of the estate, failure to pay taxes as required by law, or failure to close the estate within a reasonable time. ORS 116.063(3). In a case that preceded the probate code, Fitchard v. Hirschberg’s Estate, 128 Or 317, 330, 272 P 906, 274 P 505 (1929), the court stated that, under some circumstances, delay in closing an estate may make a personal representative liable to the beneficiaries for interest on funds denied to the beneficiaries. The personal representative may also be liable for (1) embezzle- ment, (2) commingling estate assets with other property, (3) unautho- rized self-dealing, (4) wrongful acts or omissions of a copersonal representative that the personal representative could have prevented by exercising ordinary care, and (5) “[a]ny other negligent or willful act or nonfeasance in the administration of the estate by which loss to the estate arises.” ORS 116.063(3)(d)–(f). See Matter of White’s Estate, 289 Or 13, 18, 609 P2d 365 (1980), in which the court included, under ORS 116.063(2)(b), the personal
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representative’s obligation to properly manage a claim for wrongful death.
See also RESTATEMENT (SECOND) OF TRUSTS §§205–206 (1959), under which a trustee may be surcharged for any loss or depreciation in value of trust property, when he or she violates the duty of loyalty or is otherwise in breach of trust. Under ORS 116.073, the personal representative is not personally liable for (1) “[d]ebts due the decedent or other assets of the estate that remain uncollected without the fault of the personal representative,” or for (2) “[l]oss by the decrease in value or destruction of property of the estate if the loss is caused without the fault of the personal representative.” §7.2-4(a)(2) Continuation of Decedent’s Business If the decedent was engaged in any business or venture at the time of death, the probate code authorizes the personal representative to (1) continue the business or venture to preserve its value, (2) incorporate or otherwise change the business form of the business or venture, or (3) discontinue and wind up the business or venture. ORS 114.305(21)– (23). If the personal representative chooses to operate the business, he or she must comply with payroll tax laws and other statutory requirements of the business. The failure to do this could result in personal liability. For a more detailed discussion of issues with continuing the decedent’s business, see §§10.10-1 to 10.10-4(d)(2). §7.2-4(a)(4) Search for Claimants The personal representative’s obligation to search for, and provide notice to, persons who may have a claim against the estate is detailed in ORS 115.003–115.004. See §7.3-3(a). The search for claim- ants is necessary due process to allow the bar on claims not asserted within the short time periods provided in the probate code. See Tulsa Prof’l Collection Services, Inc. v. Pope, 485 US 478, 487–488, 108 S Ct 1340, 99 L Ed2d 565 (1988). The failure to diligently follow these
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procedures may result in personal liability for the personal representa- tive. ORS 115.004(1). However, persons who receive distributions or other payment from the estate must indemnify the personal representa- tive and the surety to the extent that the distribution or payment would have been reduced if the personal representative had properly handled the claims procedure and, in some circumstances, for the attorney fees in defending against allegations that the personal representative handled the claims improperly. ORS 115.004(3)–(4). Claims against the estate are discussed more fully in chapter 9.
§7.3 NOTICES §7.3-1 To Heirs, Devisees, and Interested Persons §7.3-1(a) Generally Upon appointment, the personal representative must deliver or mail information to the devisees, heirs, and other interested persons. The contents and required recipients of the notice are detailed in ORS 113.145(1). Additional language must be provided to any person who challenges the will, or who has been identified in the petition for appointment as contending that a parent of the decedent willfully deserted the decedent or failed to provide proper care. See ORS 113.145(1)(g)–(h). The notice to such persons must contain a statement that the person’s rights may be barred unless he or she proceeds as provided in ORS 113.075 (for persons challenging the will) or ORS 112.049 (for persons alleging forfeiture of a parent’s share). See §§2.5-1 to 2.5-4, 5.2-2(b). See Forms 5-10 and 5-11.
PRACTICE TIP: Although not expressly required by statute, it is good practice to voluntarily supply copies of the will to persons who are substantially interested in its contents. In any event, copies can be obtained from the court by those sufficiently interested to procure them. Within 30 days after appointment, the personal representative must file proof of delivery or mailing of the notice required by ORS
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113.145. A copy of the notice and the names (but not the addresses) of the persons to whom the notice was delivered or mailed must be included in the affidavit. ORS 113.145(4). See Form 5-12. If at any time before the filing of the final account the personal representative has actual knowledge that the petition for appointment failed to name any person nominated as personal representative, or any heir, devisee, or person required to be named as challenging the will (see ORS 113.035(8)), or a parent who deserted the decedent (see ORS 113.035(9)), the personal representative must promptly deliver or mail the notice described in ORS 113.145(1) to that person, and file with the court proof of compliance with this requirement. ORS 113.145(5). See ORS 111.215 (proof of notice). See also §§2.5-1, 2.5-5, 5.2-8. Notice must also be mailed or delivered to the Department of Human Services (DHS) and the Oregon Health Authority within 30 days after the personal representative’s appointment. ORS 113.145(6). Although many experienced practitioners recommend sending notice to both agencies as required by the statute, notice to the DHS is sufficient to provide notice to the Oregon Health Authority. OAR 943-001- 0020(2)(e). The address for DHS is: Oregon Department of Human Services, Estate Administration Unit, PO Box 14021, Salem, OR 97309- 5024. §7.3-2 Publication of Notice to Interested Persons §7.3-2(a) Generally Upon appointment, the personal representative must notify all of the interested persons of the estate proceeding by publishing a specific notice in a newspaper published in the county where the proceeding is pending. ORS 113.155(1). The term interested person includes “heirs, devisees, children, spouses, creditors and any others having a property right or claim against the estate of a decedent.” ORS 111.005(19). The required contents of the notice are detailed in ORS 113.155(2). The notice must be published once in each of three consecutive weeks. ORS 113.155(1). See Form 5-15. The personal representative must file proof of publication, including a copy of the notice. ORS 113.155(4); see ORS 111.218. See §2.5-5; Form 5-16. The publishing newspaper will
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usually provide the affidavit if asked to do so at the time that the advertising copy is submitted. If an heir or a devisee cannot be identified or found, that person’s share escheats to the state of Oregon. ORS 112.055(2). See §4.1-2(g). The Department of State Lands is entitled to the same notice as would have been given to the missing heir or devisee. ORS 112.055(3)(c)(B). Under ORS 112.058(1), a missing person whose death cannot be proved, or who cannot be presumed dead under the rules of that statute, is presumed to have lived to age 100. An heir whose death is presumed is also presumed to have two children, in addition to any known children, unless the presumption of death arises under certain specific circumstances. ORS 112.058(2). The share of the missing person and the share of his or her presumed children escheat to the state of Oregon. ORS 112.055(2).
PRACTICE TIP: Estate planners may wish to include language in their wills to avoid an unintended escheat that will occur if an heir or devisee cannot be identified or found. For instance, a will could provide that “any devisee or heir who cannot be identified or found, as that phrase is used in ORS 112.055, will be deemed to have predeceased me without issue.” §7.3-2(b) Effect of Failure to Publish The personal representative’s failure to publish the required notice is a breach of duty to the persons concerned, but does not affect the validity of the representative’s appointment or the exercise of his or her duties or powers. ORS 113.155(3). The failure to publish the required notice under ORS 113.155(1) was one of several examples of lawyer misconduct cited in In re Conduct of Gresham, 318 Or 162, 166, 864 P2d 360 (1993), leading to the suspension of the lawyer in the case. §7.3-2(c) Successor Personal Representative When a successor personal representative is appointed within four months after publication of the notice required in ORS 113.155, the successor must publish a new notice to interested persons in slightly different form, as set forth in ORS 113.225.
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§7.3-3 Diligent Search for and Notice to Claimants §7.3-3(a) Generally Because the probate code allows the claims of creditors to be cut off if not asserted within a short period of time (30 days after direct notice or four months after published notice, ORS 115.005(2)), the personal representative must search for claimants entitled to notice. ORS 115.003. During the three months after appointment, unless the court allows a longer time period, the personal representative must (1) “make reasonably diligent efforts to investigate the financial records and affairs of the decedent,” and (2) “take such further actions as may be reason- ably necessary to ascertain the identity and address of each person who has or asserts a claim against the estate.” ORS 115.003(1). See §9.3-3. The personal representative may request, and the court must allow, a longer time if the personal representative “cannot complete reasonably diligent efforts to identify persons with claims” during the three-month period. The court may allow another extension if the search cannot be completed within the first extension. ORS 115.003(1). Not later than 30 days after expiration of the time to search for claimants, including any extensions, the personal representative must give notice “to each person known by the personal representative during such period to have or assert a claim against the estate.” ORS 115.003(2). The contents of the notice are described in detail in ORS 115.003(3). The notice has the effect of cutting off creditors’ claims if not asserted within 30 days. ORS 115.005(2)(b). It is not “necessary to give notice on account of a claim that has already been presented, accepted or paid in full or on account of a claim that is merely conjectural.” ORS 115.003(2). If a claimant is discovered after the expiration of the period allowed to search for claimants, including any extensions, the personal representative may cause the notice to be given to the discovered claimant. ORS 115.003(2).
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Within 60 days after the expiration of the period allowed to search for claimants, including any extensions, the personal representa- tive must file proof of compliance with the statute. ORS 115.003(4). The proof must include a copy of the form of the notice, the date of delivery or mailing of the notice, and the name and address of each person given notice. ORS 115.003(4). See ORS 111.218 (proof of notice).
PRACTICE TIP: In Lane County, the local practice is to require that the affidavit of compliance include a list of the steps taken to comply with the requirements of ORS 115.003. See Form 9-4. §7.3-3(b) Failure to Make Search or Give Notice The personal representative’s failure to make reasonably diligent efforts to ascertain claims or to cause notice to be delivered or mailed is a “breach of duty to the persons concerned, but does not affect the validity of appointment, duties or powers or the exercise of duties or powers.” ORS 115.003(5). See §9.3-3 (the failure to give actual notice to known creditors violates the due process clause). A claimant who was not given the required notice has a cause of action against the personal representative and the surety for the amount that the claimant would have been paid from the estate if all of the claims not barred from payment had been timely presented and had been allowed by the personal representative. Any payment by others reduces the claim against the personal representative by a like amount. ORS 115.004(1). The claimant also has a cause of action against each interested person who received a distribution or other payment from the estate, to the extent that payment of the claim would have reduced payment to that person. ORS 115.004(2). The personal representative and surety are indemnified against liability on such a claim, to the extent that the payment received by the interested persons would have been reduced by the payment of the claim. ORS 115.004(3).
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To the extent that the interested persons must indemnify the personal representative, they must also indemnify for costs, including attorney fees, if the personal representative prevails against the claimant. If the claimant prevails, the indemnity is for costs that could have reasonably been incurred by the estate on disallowance of the claim if it had been timely presented. ORS 115.004(4). Except as provided in ORS 115.004(6), an action against the personal representative, the surety, or an interested person must “be commenced within two years after the death of the decedent or within the statute of limitations applicable to the claim, whichever is earlier.” ORS 115.004(5). Under ORS 115.004(6), an action for indemnity must be brought within the time period for an action against the personal representative described above, except that the time for such an action is extended during the pendency of an underlying action, if: (1) The person seeking indemnity gives notice to each party from whom indemnity is sought within 180 days after being served with the complaint in the underlying action; and (2) The action for indemnity is commenced within one year after the judgment in the underlying action becomes final and not subject to further appeal.
§7.4 REPORTING ASSETS §7.4-1 Identifying Assets Generally, the personal representative is responsible for identifying and locating the decedent’s assets. The personal representative should review the decedent’s mail, tax returns, filing system, computer records, and other sources of information to identify and locate assets. As financial institutions move toward paperless records, access to the decedent’s computer, and computer passwords, will be of increasing importance. The personal representative can also search for the dece- dent’s unclaimed property by going to the national Web site at
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For a discussion of managing estate assets, see chapter 10. §7.4-2 The Inventory §7.4-2(a) Filing the Inventory Within 60 days after appointment, unless the court extends the time, the personal representative must file an inventory listing all of the property of the estate that has “come into the possession or knowledge of the personal representative.” ORS 113.165. The inventory must show estimates of the true cash values of the assets as of the date of the decedent’s death. True cash value means the gross value of the assets, not net equity. Any debt against assets is not deducted in arriving at true cash value. See Form 7-1.
PRACTICE TIP: The duty to file an inventory within 60 days runs from the date of the appointment of the personal repre- sentative, not from the date that letters testamentary or letters of administration are issued. ORS 113.165. If a personal repre- sentative has been appointed, but a bond is required, letters testamentary or letters of administration will not be issued until the bond is filed. ORS 113.125(1). Gathering needed information to complete the inventory may be difficult before the letters are issued. To avoid problems completing the inventory within the statutory time period, it is helpful to discuss the availability of a bond with the bonding company before petitioning for appoint- ment. That way, the bonding company will be ready to issue the bond as soon as it receives a copy of the order appointing the personal representative. It will also be known early in the process whether or not the proposed personal representative is bondable.
PRACTICE TIP: The following property is not part of the probate estate and should not be listed in the inventory: property held with right of survivorship or in a tenancy by the entirety, passing to the surviving joint tenant; life insurance and other property passing outside the estate; and property subject to ancillary probate in another state. Listing such property is required
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on estate tax returns, but the property’s existence and value need not be placed in the public record.
PRACTICE TIP: When personal property either has significant economic value or is specifically devised, it should be itemized separately in the inventory. Otherwise, it is common practice to lump together similar kinds of items.
PRACTICE TIP: The personal representative need not include in the inventory any of the decedent’s pets valued at less than $2,500. ORS 114.215(3). Aside from meeting the statutory requirements for an inventory described in ORS 113.165, the personal representative should consider the following when preparing the inventory: (1) The inventory identifies the decedent’s assets. The function of the probate estate is to transfer title from the decedent to the heirs and devisees; that transfer cannot be accomplished without identifying the decedent’s assets in the court proceedings. (2) The inventory is a guide in managing and administering the estate. The fair-market values determined for inventory purposes are relevant in determining the amount of insurance coverage needed, as well as asking prices for the property to be sold. The inventory, there- fore, is helpful for planning the cash flow of the estate and determining what insurance protection is appropriate. (3) The inventory helps establish the tax basis of the decedent’s assets for income tax purposes. IRC §1014. A detailed itemization of the decedent’s assets with the fair-market value of those assets helps with income tax returns. (4) The inventory gives an early indication of whether federal or Oregon estate tax returns must be filed. For a discussion of when estate tax returns must be filed, see §7.6-4(b). See also chapters 12, 14. §7.4-2(b) Supplemental Inventory The personal representative must file a supplemental inventory within 30 days after receiving possession or knowledge of property
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belonging to the estate that was not included in the inventory, or include the property in the next accounting. ORS 113.175. See Form 7-2.
PRACTICE TIP: If the time for the annual or final accounting is closed, the personal representative can include later-discovered property in an amended inventory filed with the accounting.
PRACTICE TIP: A careful lawyer will distinguish between an “amended inventory” (see Form 7-3), which corrects the informa- tion in the inventory filed, and a supplemental inventory, which adds omitted property to the inventory.
PRACTICE TIP: If joint property (for example, a joint bank account) is disclaimed by the surviving joint owner, the disclaimed interest in the property becomes part of the probate estate. The personal representative should file a supplemental inventory listing the disclaimed property. See §§8.3-2(a) to 8.3-2(f) for discussions of disclaiming property. §7.4-2(c) Appraisal of Property The personal representative may employ an appraiser to assist “in the appraisal of any property of the estate the value of which may be subject to reasonable doubt.” ORS 113.185(1). In lieu of an appraisal, the personal representative is obliged to show in the inventory “estimates” of the “respective true cash values” of all of the property as of the date of the decedent’s death. ORS 113.165. Note that ORS 118.100(6), enacted in 2011, requires that an executor filing an Oregon estate tax return explain “how the reported values were determined and attach copies of any appraisals.” The court has discretion to direct that all or any part of the estate property be appraised by one or more court-appointed appraisers. ORS 113.185(2). The appraisal must reflect the true cash value as of the date of the decedent’s death, must be in writing, and must be signed by the appraiser(s). ORS 113.185(3). The appointed appraisers are entitled to be paid a fee from the estate for their services and to be reimbursed from the estate for expenses they have incurred. ORS 113.185(4).
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PRACTICE TIP: Appraisal fees should be agreed on in advance of appraisal. The fees should be based on the complexity of the appraisal, rather than on the value of the property appraised. §7.4-2(d) Requirements for Tax Purposes Because the decedent’s property is given a new income tax basis at death equal to its fair-market value under IRC §1014, the personal representative should establish the fair-market value as of the date of the decedent’s death. In some estates involving decedents dying in 2010, the personal representative was allowed to allocate only a limited basis increase to the estate’s assets. Former IRC §1022. See chapter 12. For taxable estates, IRC §2031 and Treas Reg §20.2031-1(b) require that the value of every item of property be included at its fair market value as of the date of the decedent’s death, unless the alterna- tive valuation date is selected under IRC §2032, or unless the special valuation provisions of IRC §2032A are used. The alternate valuation date and the special-use valuation provisions are discussed in §§12.__ to 12.__. If the alternate valuation date under IRC §2032 or the special valuation provisions under IRC §2032A are used, the devisee’s tax basis in the property is determined by those values. IRC §1014. An estate that is not required to file a federal estate tax return, but that is subject to the Oregon estate or inheritance tax, may use the alternate valuation date. ORS 118.010(8). Real property that is subject to a conservation easement may have some of its value excluded under IRC §2031(c). Penalties are provided under IRC §6662(g) for valuation understatements for the purposes of estate and gift taxes. Also, overstatements of value may give rise to income tax penalties. IRC §6662(e)(1)(A). See chapter 12 for a more complete discussion of estate taxation.
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§7.4-3 Form of the Inventory §7.4-3(a) Generally The inventory should be in a form that sufficiently describes the decedent’s assets, so that a stock transfer agent or title officer can quickly and accurately identify the property to be transferred. Items listed on the inventory may be in a format that is easily tied to items appearing on the federal or Oregon estate or inheritance tax return, if required. See §7.6-4(b). See also chapters 12, 14. The inventory should set forth sufficient information so that a tax auditor can verify the information submitted without having to ask additional questions. For example, the account number and tax lot information from the property tax statement should be included, because it is common practice for auditors to verify the assessed values. For general guidelines, see Treas Reg §§20.2031-1 to 20.2031-8. A sample inventory is included in Form 7-1.
PRACTICE TIP: If each inventory item is listed by number, later reports to the court, such as the annual or final accounts, can refer to the item by number, and thus be easier to follow. §7.4-3(b) Real Property The inventory should list real property with a correct legal description, as well as the county’s tax account number and tax lot number. The inventory should report the full value of the property, not merely the decedent’s equity in the property.
PRACTICE TIP: A subnote should show any encumbrances on the property so that heirs and devisees are not misled about the estate’s net value. See Form 7-1. §7.4-3(c) Stocks and Bonds The inventory should give a precise description of the stocks and bonds and show the number of shares or bonds. See Form 7-1. The inventory should list the value of publicly traded stocks and bonds by using the mean between the highest and the lowest quoted selling prices on the valuation date. See Treas Reg §20.2031-2(b)(1). If the valuation
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date is on a weekend or holiday, or if no sales took place on the valuation date but sales occurred within a reasonable time before and after that date, a weighted average is used to determine value. See Treas Reg §20.2031-2(b)(1). If a stock is trading ex-dividend, and the date of record for payment is after the valuation date, the amount of the declared dividend is added to the ex-dividend quotation. See Treas Reg §20.2031-2(i). If the valuation date is after the record date, but prior to payment, the dividend is listed as a separate item. See Treas Reg §20.2033-1(b). The valuation of shares of stock in a closely held corporation or other business entity is a complex matter that is beyond the scope of this chapter. §7.4-3(d) Mutual Funds Mutual funds are generally valued at the last public redemption price of the shares on the date of the decedent’s death. Treas Reg §20.2031-8(b). §7.4-3(f) Cash and Bank Accounts Bank accounts reported in the inventory should be listed and itemized separately, with the name of the bank, the branch, and the account number. A joint or beneficiary account should not be listed in the inventory unless it is turned back to the estate, or the decedent’s interest is disclaimed by the joint owner or beneficiary. See Form 7-1. §7.4-3(g) Household Goods and Personal Effects In general, household goods and personal effects can be lumped together in the inventory without a detailed itemization of each and every piece. See Form 7-1. But see Treas Reg §20.2031-6(a) (if the estate is taxable, the IRS considers it “desirable” to list items room by room on the estate tax return). §7.4-3(h) Antiques, Art Work, Coins, Jewelry, etc. An appraisal is necessary to assess items with significant artistic or intrinsic value if the value is in excess of $3,000. See Treas Reg §20.2031-6(b). After appraisal, the personal representative should ensure that insurance coverage is adequate. See §7.3 (item (7)). 27 2012 Revision
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§7.4-3(i) Community Property in Name of Decedent Property of the decedent located in Oregon may be treated as community property if the property was acquired in a community- property state, or is traceable to such property. ORS 112.715. If titled in the decedent’s name, community property should be shown on the inventory at its full value. If the surviving spouse believes that the property is community property, then the spouse must make a written demand for a set-aside of the survivor’s share of the community property. ORS 112.745. Otherwise, all of the decedent’s property is subject to testamentary or intestate succession distribution. The court cannot set aside the survivor’s share of the community property unless all of the property is shown on the inventory. If the surviving spouse holds title to community property, neither the court nor the personal representative is required to determine whether part of that property should pass with the decedent’s estate, unless written demand is made by an heir, devisee, or creditor. ORS 112.755. For discussion of community property, see §§4.3 to 4.3-5. §7.4-3(k) Annuities, Life Estates, and Remainders Annuities, life estates, and remainders should be valued using the tables provided by the IRS. See Treas Reg §20.2031-7. §7.4-4 Assets Outside Oregon Oregon courts have jurisdiction over a resident decedent’s personal property wherever it is located. ORS 14.030. If the decedent was an Oregon resident, the only asset that could be outside of Oregon, for probate purposes, would be real estate. Real estate outside of Oregon is not part of an Oregon probate, and should not be listed in the inventory. California financial institutions may refuse to deliver personal property to an Oregon personal representative, if that property exceeds $150,000 in value. See CAL PROB CODE §§12570, and 13100; Robertson
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v. U. S. Nat. Bank, 235 Cal App2d 63, 44 Cal Rptr 871 (1965). See §§6.6-1(a) to 6.6-6 for a discussion of estates of nonresident decedents. If the decedent was not an Oregon resident, the only property to be listed in the inventory would be Oregon real estate. §7.4-5 Incomplete Inventory If all of the information required cannot be compiled by the deadline for filing an inventory, an incomplete inventory may be filed listing what is known. In this situation, the personal representative should list the property in the inventory and indicate that the value has not yet been established. Difficulties can be created on audit if one value has been reported on the inventory and a different value is reported on the estate tax return. The inventory should be amended when the value is finally determined. See Form 7-3.
PRACTICE TIP: The court may grant an extension of the time for filing an inventory if the personal representative files a petition within 60 days after his or her appointment, stating specific reasons why the inventory cannot be completed within the 60-day period required by the statute. See ORS 113.165.
§7.6 INITIAL TAX MATTERS §7.6-1 Introduction Sections 7.6-2 to 7.6-6(p) below are not intended to be a complete discussion of federal and Oregon estate and inheritance tax issues, but are intended to guide lawyers in the early stages of dealing with tax issues. Discussion of estate and inheritance taxation can be found in chapters 12–14. §7.6-2 Gathering Information The tax preparer should review copies of the decedent’s federal and Oregon income tax returns for at least the last three years. The returns provide information about the decedent’s assets, as well as the status of tax matters. If the returns cannot be located among the decedent’s papers or obtained from the decedent’s accountant, the
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lawyer can request copies from the Internal Revenue Service, starting with a request for a transcript on IRS Form 4506-T. See
PRACTICE TIP: Title companies or the assessor’s office can provide printouts indicating the true cash and assessed values of real property, a legal description or a reference to a deed, and the status of the taxes. §7.6-3 Notices and Applications §7.6-3(a) Income Taxes The personal representative should apply for a taxpayer identification number for the estate, using IRS Form SS-4. (The number is not needed if the estate holds no liquid assets and does not expect to file an income tax return.) Form SS-4 is available as an electronic fill-in form at the IRS Web site,
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prompt assessment of taxes if the notice of fiduciary relationship is not filed. §7.6-4 Due Dates and Filing Requirements §7.6-4(a) Due Dates The lawyer for the personal representative should enter the following dates in a tickler system: (1) Estate Tax Returns. Returns must be filed within nine months after the decedent’s date of death. See IRC §6075; ORS 118.100(1). The filing thresholds are discussed in §7.6-4(b). (2) Estate Tax Alternate Valuation Date. Property remaining in the estate six months after the date of the decedent’s death must be valued as of the date six months after the date of the decedent’s death. See IRC §2032. See also §§7.6-6(h), 12.__. (3) Property Taxes: Property taxes are due on November 15. See ORS 311.250. (4) Property Tax Exemption for Veterans. The surviving spouse of a veteran qualifying for the exemption under ORS 307.250 must file a claim for the exemption “on or before April 1 of the assessment year for which the exemption is claimed, except that when the property designated is acquired after March 1 but prior to July 1 the claim shall be filed within 30 days after the date of acquisition.” ORS 307.260. (5) Decedent’s Final Income Tax Returns: The decedent's final income tax returns are normally due on or before April 15. See Treas Reg §1.6072-1(b); IRC §443(a)(2); ORS 316.382. No return needs to be filed if the decedent had not earned sufficient income for the year by the date of death to require one. The personal representative should keep records documenting the lack of a need to file. (6) First Fiduciary Income Tax Returns: Fiduciary income tax returns must be filed by April 15 if the estate uses a calendar year, or within three months and 15 days following the close of the fiscal year if the estate elects a fiscal year. See IRC §6072(a). The estate may elect to have a fiscal year other than the calendar year. See §7.6-6(d). It is 31 2012 Revision
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helpful to log the latest possible date for filing, which would be 15 months and 15 days after the end of the month immediately preceding the decedent’s death. An estate that has less than $600 gross income need not file an income tax return. IRC §6012(a)(3). (7) Estimated Tax Payments: Quarterly payments are due for any tax year ending two or more years after the decedent’s death, depending on the amount of taxable income. This could apply to a tax year beginning as early as one year after the decedent’s death, if a short first fiscal year is elected. See IRC §6654(l)(2). §7.6-4(b) Filing Requirements The lawyer for the personal representative should prepare a rough estimate of assets, liabilities, and income to review in view of the following filing requirements: (1) Federal Estate Tax: A federal estate tax return must be filed if the gross estate exceeds the applicable exclusion amount. IRC §6018(a). The applicable exclusion amount is defined in IRC §2010(c). The applicable exclusion amounts under IRC §2010(c) as amended by the 2010 Tax Act (Pub L No. 111-312, §§302(a)(l), 303(a) and 304) for years 1997 or later are:
YEAR OF DEATH APPLICABLE EXCLUSION AMOUNT 1997 $600,000 1998 $625,000 1999 $650,000 2000–2001 $675,000 2002–2003 $1,000,000 2004–2005 $1,500,000 2006–2008 $2,000,000 2009 $3,500,000 2010 Unlimited/$5,000,000
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YEAR OF DEATH APPLICABLE EXCLUSION AMOUNT 2011 $5,000,000 2012 $5,120,000 (after inflation adjustment) 2013 $1,000,000 (unless Congress acts) For purposes of the filing requirements, the gross estate means the gross value, at the time of death, of all of the decedent’s assets, wherever they are located (see IRC §2031(a)), plus the amount of the adjusted taxable gifts (as defined in IRC §2001(b)) since 1976, plus the aggregate amounts of the pre-1977 specific gift tax exemption (under former IRC §2521 as it existed before 1977) used between September 8, 1976, through December 31, 1976. IRC §6018(a)(3). For estates of decedents dying in 2010, the executor could elect out of the federal estate tax. See §301(c) of the 2010 Tax Act (Pub L No. 111-312, §301(c), 124 Stat 3300). A discussion of the rules for electing out of the federal estate tax is beyond the scope of this chapter. (2) Oregon Estate or Inheritance Tax: The 2003 Oregon Legislature reacted to the increases in the federal applicable exclusion amount by “decoupling” the Oregon inheritance tax from the federal estate tax. ORS 118.007. As a result, since 2006, if an Oregon decedent’s taxable estate exceeds $1,000,000, an Oregon inheritance tax is payable. ORS 118.010(4). The Oregon inheritance tax return requires the personal repre- sentative to fill out the schedules associated with a federal estate tax return, even if no federal estate tax return is required. For deaths occurring before January 1, 2012, the Oregon Inheritance Tax Return, Form IT-1, is available on the Oregon Department of Revenue’s Web site, at
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PRACTICE TIP: Because the Oregon estate tax is based on filling out federal estate tax return schedules, it is relatively easy, in the case of the first spouse to die, to file the federal estate tax return needed to claim the deceased spousal unused exclusion amount under IRC §2010(c)(4)–(5). See §12.__. (3) Decedent’s Final Income Tax Return: The filing requirements vary, depending on the status of the decedent. See instructions to IRS Form 1040, available at
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indicate that the taxpayer is deceased and show the date of death. The personal representative should sign the return on behalf of the decedent, irrespective of whether the filing status is joint or individual. A copy of the letters testamentary should be attached to the return. If a refund is due the estate, IRS Form 1310, “Statement of Person Claiming Refund Due a Deceased Taxpayer,” also should be completed and submitted with the federal return, and the similar Oregon Form 243 also should be filed. (2) The Following Two Years. If the surviving spouse’s home is the principal residence of a dependent child or stepchild, the surviving spouse may qualify to elect to use joint return rates for two years after the decedent’s death. See IRC §§1(a), 2(a). The right termin- ates if the surviving spouse remarries. IRC §2(a)(2)(A). After the two- year period, the surviving spouse is entitled to file as a “head of household” if he or she meets the requirements. (3) Payments of Quarterly Estimates. Estimated taxes for the decedent are not required after the date of the decedent’s death. See IRC §6654(l)(2). However, if the decedent and the surviving spouse filed jointly, the surviving spouse is still liable for making estimated payments for the tax year. See Treas Reg §1.6654-2(e)(7)(ii). For a general discussion of estimated taxes, see Estimated Tax, 581-2nd Tax Mgmt (BNA) (2008) (citation not verified by publisher).
NOTE: Congress repealed former IRC §§6015 and 6153, the statutes that exempted the decedent from estimated tax filings (although §6015 has since been replaced). The regulations written for repealed IRC §§6015 and 6153, Treas Reg §§1.6015 and 1.6153-1(a)(4), still provide support for the conclusion that estimated taxes need not be paid. Until new regulations under IRC §6654 are released covering estimated tax payments for a single decedent, most commentators suggest following the regulations under the repealed sections. For instance, despite the repeal of IRC §6153 by the Deficit Reduction Act of 1984, Pub L No 98-369, §412(a)(3), 98 Stat 792, the IRS subsequently applied Treas. Reg §1.6153-1(a)(4) to deter-
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mine that no estimated income tax had to be paid after the death of an individual. Priv Ltr Rul 91-02-010 (Oct 10, 1990). The IRS further noted that there was “no indication of a legislative purpose in enacting section 6654 to change the position set forth in section 1.6153-1(a)(4) of the regulations.” Priv Ltr Rul 91-02-010, supra.
PRACTICE TIP: The lawyer should consider filing IRS Form 5495 to allow the personal representative to request discharge from personal liability for the decedent’s income taxes. See IRC §6905. The corresponding Oregon form is entitled “Election for Final Tax Determination for Income Taxes and Application for Discharge from Personal Liability for Tax of a Decedent’s Estate.” Oregon Form 150-101-151. §7.6-6(b) Disclaimers The surviving spouse and other beneficiaries may elect to disclaim benefits received by reason of the decedent’s death. See IRC §2518 and ORS 105.623–105.649. See also §§7.1-3 (item (13)), §§8.3- 2(a) to 8.3-2(f). The use of disclaimers as a postmortem planning tool can ameliorate mistakes in a decedent’s estate plan, such as to allow a trust to qualify for the marital deduction, or to allow beneficiaries to redirect assets to those with a greater need. Care is needed to ensure that the disclaimer will have the desired effect. Fleenor v. Williamson, 171 Or App 599, 17 P3d 520 (2000) (an heir who had executed a complete and unconditional disclaimer of an interest in an estate could not later revoke or revise that disclaimer based on a unilateral mistake of law). §7.6-6(c) Personal Representative’s Compensation A personal representative who is also a residuary beneficiary may wish to elect to waive compensation. Compensation is taxable income to the personal representative, but is not subject to self-employment taxes as long as the personal representative is not a professional fiduciary. Rev Rul 58-5, 1958-1 CB 322 (1958). If the personal repre- sentative is the sole residuary beneficiary of a taxable estate, the decision depends on a comparison of the estate tax and the personal representative’s income tax. When appropriate, the personal representa-
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tive should promptly waive compensation to avoid being considered, for tax purposes, in constructive receipt of the income. See Rev Rul 66-167, 1966-1 CB 20 (1966), providing a safe harbor if the personal repre- sentative who wishes to waive compensation does so within six months after appointment. §7.6-6(d) Accounting Method, Fiscal Year The personal representative may elect either the cash method or the accrual method of accounting for the estate, and may select the fiscal year for the estate. See IRC §§441, 443(a)(2), 446. The election must be made by the time the first estate income tax return is due (not including extensions). Treas Reg §1.441-1(c)(1). By choosing a fiscal year other than a calendar year, the personal representative can defer the time when estate income is taxed to the beneficiaries, or divide into two tax years income that would otherwise be “bunched” into one calendar year. If the trustee elects under IRC §645 to have the decedent’s revocable trust taxed as part of the decedent’s estate, the trustee may also elect to use a fiscal year for the trust.
PRACTICE TIP: The personal representative and the accoun- tant who will prepare the fiduciary income tax return should attempt to identify opportunities to save or defer taxes by selecting a fiscal year end that may be more advantageous than a calendar year. §7.6-6(h) Valuation Elections For federal estate tax purposes, the personal representative may elect to value the assets of the estate six months after the decedent’s death rather than on the date of death. IRC §2032. The election may be made, however, only if both the gross estate and the estate tax are decreased by reason of the election. See IRC §2032(c). The personal representative may make the election for Oregon purposes whether or not a federal estate tax return is filed. ORS 118.010(8). The personal representative should also consider electing special- use valuation under IRC §2032A, if the estate consists largely of farm, ranch, or timber property. Such property, and commercial fishing busi-
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nesses, may also be eligible for the Oregon natural resources credit under ORS 118.140. See §14.__. §7.6-6(j) Extension of Time to Pay The personal representative may elect to extend the time for payment of the federal estate tax under IRC §6161 or, if the estate consists largely of a closely held business, under IRC §6166, or under both sections, and to extend the time for payment of the Oregon estate tax under ORS 118.225. An extension of time to file may be filed (on IRS Form 4768) as late as the due date of the estate tax return. The estate will automatically receive a six-month extension of time to file. However, the tax payment date is not extended unless the estate makes an election under either IRC §6161 or IRC §6166. See the instructions for Form 4768, available at
PRACTICE TIP: Careful use of disclaimers may allow beneficiaries to modify a credit shelter trust that does not qualify for the QTIP election into a trust that does qualify. See Treas Reg §20.2056(b)-7(h), example (4).
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§7.6-6(l) Oregon Special Marital Property Oregon allows bypass trusts that fail to qualify for the QTIP election to qualify for the marital deduction, even if the trust allows the accumulation of income, provided that any permissible beneficiaries who are not the surviving spouse make an election described in ORS 118.016(2), releasing all rights to distributions from the property or trust during the lifetime of the surviving spouse.
PRACTICE TIP: The release described in ORS 118.016(2) should be treated as a disclaimer and made only in a manner that will qualify as a disclaimer under IRC §2518. Otherwise, the consenting beneficiaries may be considered to have made a taxable gift of the released interest. See §7.1-3 (item (13)); see also §8.3- 2(c). Under ORS 118.013(2), Oregon special marital property consists of any portion of a trust or other property interest: (1) “In which principal or income may be accumulated or distributed to or for the benefit of only the surviving spouse of the decedent during the lifetime of the surviving spouse”; (2) “In which a person may not transfer or exercise a power to appoint any part of the trust or other property interest to a person other than the surviving spouse during the lifetime of the surviving spouse”; and (3) “For which the executor of the estate of the decedent has made the election described in ORS 118.016(1).” If a trust or other property interest would qualify as Oregon special marital property under ORS 118.013(2) “except that the trust or other property interest allows principal or income to be distributed to other persons in addition to the surviving spouse,” ORS 118.013(3) allows the executor to “elect to set aside a share of the trust or other property interest as a separate share of the trust or property interest or as a separate trust, which shall qualify as Oregon special marital property,” if:
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(1) The executor makes the election described in ORS 118.016(1); (2) Each “permissible distributee” (as defined in ORS 130.010) makes the election described in ORS 118.016(2); (3) The surviving spouse makes the election described in ORS 118.016(2); and (4) “All statements of elections are attached to the estate tax return filed with respect to the estate of the decedent, or are filed or maintained as records as otherwise prescribed by the Department of Revenue by rule.” §7.6-6(m) Gain or Loss Recognition In general, estates are not required to recognize gain or loss on distribution of property to residuary beneficiaries. As a result of IRC §643(e)(3), passed in the Deficit Reduction Act of 1984, however, a personal representative may elect to recognize gain or loss on distribution of assets in kind in the same manner as if the property had been sold to the beneficiary at its fair market value. IRC §643(e)(3). Otherwise, the property distributed in kind will have built-in apprecia- tion or depreciation based on the change in value subsequent to the date of death or alternate valuation date, as applicable. In deciding whether to make the election, the personal representa- tive should compare the effective income tax rates imposed on the estate and on the beneficiary. §7.6-6(o) Review Payout Options The lawyer should review various payout options from IRAs, profit-sharing plans, 401(k) plans, and other deferred compensation plans. The Professional Liability Fund notes that claims about distribu- tions from IRAs are becoming more common. Lawyers should consider the complicated tax rules governing IRAs before advising a beneficiary how to handle an IRA.
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Form 7-1 Inventory of Property of Decedent’s Estate
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) INVENTORY OF Deceased. ) PROPERTY OF ) DECEDENT’S ESTATE
The personal representative sets forth an inventory of all of the property of the estate that has come into the personal representative’s possession or knowledge, with the personal representative’s estimate of the true cash value of the property as of the date of death of the decedent, as follows:
Estimated Value on Date of Death I. REAL PROPERTY: Real property and improvements located at 687 Oak Hill Drive, Eugene, Lane County, Oregon, and further described as Lot 13, Block 4, First Addition to Willamette Heights as platted and recorded in Book 12, page 13, Lane County Oregon Plat Records in Lane County, Oregon. County tax account no: ______Tax lot number: ______2010-2011 Assessor’s RMV Land: $115,000 Improvements: 80,000 $195,000.00 (Encumbered by a mortgage to ABC Bank with an unpaid balance at date of death of $25,351.90)
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II. STOCKS AND BONDS: 150 shares American Telephone & Telegraph Co., common selling ex- dividend at $50.25 per share. 7,537.50 American Telephone & Telegraph
Co. Declared but unpaid dividend.
[note: to be used when decedent dies
after ex-dividend but before 75.00 payment] III. 100 shares American Telephone & Telegraph Co., preferred at $40.00 per share. 4,000.00 IV. $10,000 Portland General Electric 7.8% bond, Series VII, maturing 12/1/2015. 9,300.00 V. 100 shares ABC 2.81% preferred, maturity 6/30/2017. 3,500.00 VI. 599.813 shares Founders Mutual Depositor Co., at $25.25 per share. 15,145.27 VII. $50 Series E Bond dated May, 1980. 223.50 VIII. Dividend Reinvestment Account No. 1234 at Chase Bank for AT&T dividends, 12.456 shares at $50.25 per share. 625.91 IX. MORTGAGES, NOTES AND CONTRACTS: Vendor’s interest in a land sale contract between decedent as seller, and Mary Doe as purchaser, held in escrow at XYZ Escrow as its number 1234, in original amount of $100,000 bearing interest at 7% covering Lot 12, Block 2, Third Addition to Oak Heights, in Eugene, Lane County, Oregon Unpaid balance at date of death: 55,653.85 Interest accrued to date of death: 32.98 55,686.83
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X. Promissory note in original amount of $100,000 dated 6/25/2002 bearing 10% per annum interest, given by John C. Jones, secured by a trust deed dated 6/25/2002, recorded at Reel 1234R as instrument number 2002-16543, Lane County Official Records covering: Lot 11, Block 2, Third Addition to Solar Acres, in Eugene, Lane County, Oregon. Unpaid balance at date of death: 18,757.83 Interest accrued to date of death: 72.98 18,830.81 XI. CASH: Cash found on person 105.36 XII. Uncashed checks: ABC Company, dividend: 75.00 Medicare: 103.10 Car Insurance Co.: 25.00 203.10 XIII. ABC National Bank of Oregon Eugene Main Branch, Account No. 012 345 678 1,010.56 XIV. Time certificate No. 456 issued by XYZ Bank of Oregon, N.A.: 10,000.00 Interest accrued to date of death: 45.00 10,045.00 XV. MISCELLANEOUS: Miscellaneous household goods, furnishings, equipment, and all personal jewelry, clothing, and
other articles of personal and domestic use or ornament located in decedent’s residence at 687 Oak Hill Drive, Eugene, Oregon 2,000.00 XVI. 1 cherry dresser that belonged to
decedent’s grandmother 750.00 XVII. Family Bible Nominal TOTAL INVENTORY VALUE $322,922.92
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DATED: ______, 20___.
I hereby declare that the above statement is true to the best of my knowledge and belief, and that I understand it is made for use as evidence in court and is subject to penalty for perjury.
/s/______[name] Personal Representative
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §§7.4-2(a), 7.4-3(a) to 7.4-3(k). See UTCR 2.010 and 9.030 for the form of documents. See also ORS 111.205.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 7-2 Supplemental Inventory
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) SUPPLEMENTAL Deceased. ) INVENTORY
The personal representative sets forth this supplemental inventory of all the property of the estate omitted from the inventory previously filed that has now come into the personal representative’s possession or knowledge, with an estimate of the respective true cash values of the property as of the date of death of the decedent as follows: Estimated Value on Date of Death Total estimated true cash value of estate per inventory filed ______, 20___ $322,922.92 CASH: XVIII. Currency found in envelope in file drawer. $ 1,050.00 Total supplemental inventory value $323,972.92
DATED: ______, 20___.
I hereby declare that the above statement is true to the best of my knowledge and belief, and that I understand it is made for use as evidence in court and is subject to penalty for perjury.
/s/______[name] Personal Representative
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PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §7.4-2(b). See UTCR 2.010 and UTCR 9.030 for the form of documents. See also ORS 111.205.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 7-3 Amended Inventory
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) AMENDED INVENTORY Deceased. )
The personal representative sets forth this amended inventory of the personal representative’s revised estimate of the respective true cash values of the following listed property as of the date of death of decedent: Estimated Value on Date of Death Total estimated true cash value of estate per inventory filed ______, 20___ $650,510.00 XIX. 11,469.513 shares Franklin Custodian Fund, Inc. a/c 90100030332 Originally reported $21,233.30 Adjusted to 21,792.07 558.77 XX. 2,798.646 shares Fund of America, Inc., a/c 555-0014456-6 Originally reported 34,718.52 Adjusted to 31,204.90 (3,513.62) Total amended inventory estimated true cash value $647,555.15
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DATED: ______, 20___.
I hereby declare that the above statement is true to the best of my knowledge and belief, and that I understand it is made for use as evidence in court and is subject to penalty for perjury.
/s/______[name] Personal Representative
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §§7.4-2(b), 7.4-5. See UTCR 2.010 and UTCR 9.030 for the form of documents. See also ORS 111.205.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7)
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Administering Oregon Estates: 2012 Edition 5–50 Chapter 6 Oregon Estate Tax
Jeffrey M. Cheyne Samuels Yoelin Kantor LLP Portland, Oregon
Contents §14.1 Introduction ...... 6–2 §14.1-1 Measure 84 ...... 6–2 §14.1-2 Terminology ...... 6–2 §14.2 The New Post-2011 Oregon Estate Tax ...... 6–5 §14.2-1 Calculating the Oregon Estate Tax 6–5 §14.2-2 Lifetime Gift Transfers 6–8 §14.2-3 Residents v. Nonresidents 6–9 §14.2-4 Effective Date of the New Law 6–14 §14.3 The Old Pre-2012 Oregon Inheritance Tax ...... 6–15 §14.3-1 Calculating the Oregon Inheritance Tax—The Four Steps 6–15 §14.3-2 Lifetime Gift Transfers 6–16 §14.3-3 Residents v. Nonresidents 6–24 §14.4 Procedures Applicable to Both Old and New Law 6–28 §14.4-1 Extensions ...... 6–28 §14.4-2 The Oregon Alternate Valuation Date Election 6–30 §14.4-3 Appraisals ...... 6–31 §14.4-4 The Oregon Special Marital Deduction and Schedule OSMP 6–31 §14.4-5 The Oregon QTIP Election ...... 6–34 Chapter 6—Oregon Estate Tax
Administering Oregon Estates: 2012 Edition 6–ii Chapter 6—Oregon Estate Tax
OREGON ESTATE TAX
This chapter is excerpted from an unedited version of Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
JEFFREY M. CHEYNE, B.A., University of Oregon (1968); J.D., University of San Diego School of Law (1975); LLM (Tax), University of San Diego School of Law (1984), member of the Oregon State Bar since 1990, member of the Washington State Bar since 2003 and the State Bar of California since 1975; partner, Samuels Yoelin Kantor LLP, Portland.
§14.1 INTRODUCTION ...... 2 §14.1-1 Measure 84 ...... 2 §14.1-2 Terminology ...... 2 §14.2 THE NEW POST-2011 OREGON ESTATE TAX ...... 5 §14.2-1 Calculating the Oregon Estate Tax ...... 5 §14.2-2 Lifetime Gift Transfers ...... 8 §14.2-3 Residents v. Nonresidents ...... 9 §14.2-4 Effective Date of the New Law ...... 14 §14.3 THE OLD PRE-2012 OREGON INHERITANCE TAX ...... 15 §14.3-1 Calculating the Oregon Inheritance Tax—The Four Steps ...... 15 §14.3-2 Lifetime Gift Transfers ...... 16 §14.3-3 Residents v. Nonresidents ...... 24 §14.4 PROCEDURES APPLICABLE TO BOTH OLD AND NEW LAW ...... 28 §14.4-1 Extensions ...... 28 §14.4-2 The Oregon Alternate Valuation Date Election ...... 30 §14.4-3 Appraisals ...... 31 §14.4-4 The Oregon Special Marital Deduction and Schedule OSMP ...... 31 §14.4-5 The Oregon QTIP Election ...... 34
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§14.1 INTRODUCTION The 2011 legislature made significant changes to the Oregon inheritance tax, which became effective for decedents dying on or after January 1, 2012. The tax imposed by the new law is now known as the Oregon estate tax. Portions of this chapter are based on materials prepared by Phil Jones and Holly N. Mitchell, of Duffy Kekel LLP, Portland, Oregon. Note that this chapter is based on the Internal Revenue Code, federal regulations, the Oregon Revised Statutes, Oregon Administrative Rule and reported state and federal cases as of December 31, 2011. Before relying on any statements in this chapter, please review current statutes, regulations, rules and case law to determine if any changes have occurred after December 31, 2011.
§14.1-1 Measure 84 On Tuesday, November 6, 2012, voters decided whether or not to phase out the Oregon estate tax. If the Measure failed the Oregon estate tax will continue. If the Measure passed, please refer to the additional materials about Measure 84.
§14.1-2 Terminology The following terminology applies to both the old inheritance tax and the new estate tax, except where noted. In reviewing these definitions, keep in mind that the old Oregon inheritance tax was tied to the federal estate tax as the federal statutes existed on December 31, 2000, while the new Oregon estate tax is tied in as of December 31, 2010. ORS 118.007. Thus, where relevant, the Oregon estate tax ties to provisions of the Tax Relief, Unemployment Insurance Reauthorization,
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and Job Creation Act of 2010 (Public Law 111-312) which became effective on December 17, 2010. Gross Estate—the total value of all assets (worldwide), without any reduction for debts, expenses, or other deductions. The gross estate is the same for both federal and Oregon purposes. ORS 118.005(6) (2011). The filing thresholds for both federal and Oregon purposes are measured against the gross estate to determine whether a return is required to be filed. ORS 118.160(1). Filing Threshold—the value of the gross estate above which a return is required to be filed. The Oregon filing threshold has been $1,000,000 since 2006. ORS 118.160(1)(b)(D) and ORS 118.160(1)(c) (2011). Because of the revenue implications, the Oregon filing threshold is not scheduled to change. The federal filing threshold for 2008 was a gross estate of $2,000,000. In 2009, the federal filing threshold was a gross estate of $3,500,000. The federal tax was bifurcated in 2010 with estate representatives having a choice between a $5,000,000 exemption or no federal estate tax. In 2011 and 2012 the filing threshold is $5,000,000 with the exemption indexed in 2012. Deductions—include debts, administration expenses, marital bequests, charitable bequests, funeral expenses, and other items. Deductions are usually slightly different for Oregon and federal purposes. For example, the Oregon inheritance tax is allowed as a deduction for federal purposes (IRC §2058), but not for Oregon purposes. Federal Taxable Estate—the gross estate minus deductions. §2051. The federal taxable estate is usually different than the Oregon taxable estate. In general terms, the federal taxable estate is the amount that is multiplied by the federal rate tables to calculate the federal estate
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tax (the exception to that statement is when adjusted taxable gifts have been made). Oregon Taxable Estate—The 2011 law, for the first time, specifically adopted the phrase “Oregon taxable estate” and defined it. ORS 118.005(7) (2011). The Oregon taxable estate is defined as the federal taxable estate, as adjusted by ORS 118.010(3) (2011). Those adjustments include ignoring the state death tax deduction under IRC §2058, adding back in OSMP property from a prior estate (unless already included in the federal estate), and adding back in marital deduction and QDOT property from a prior estate, but subtracting OSMP property claimed in this estate, and other exclusions and deductions. ORS 118.010 (2011). Adjusted Taxable Gifts—Cumulative gifts made in excess of the annual exclusion. IRC §2001(b); §2503. Tentative Tax—the federal estate tax before the application of the unified credit. Adjusted Taxable Estate—The Oregon taxable estate minus $60,000. IRC §2011(b)(3). This is the amount on which the Table B Oregon inheritance tax is calculated under old Oregon law. This amount does not include adjusted taxable gifts. The term “adjusted taxable estate” is no longer used in connection with the calculation of the federal estate tax, and it is not used in connection with the new Oregon law. State Death Tax Credit—This federal credit has been fully phased out for deaths occurring after 2004. IRC §2011(b)(2)(B). For federal purposes, it has been replaced by a deduction. IRC §2058. However, the old state death tax credit rate table is still used to calculate the old Oregon inheritance tax. ORS 118.010(2) (2009). The state death tax credit rate
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table is shown as Table B in the IT-1 instructions for deaths prior to 2012.
§14.2 THE NEW POST-2011 OREGON ESTATE TAX §14.2-1 Calculating the Oregon Estate Tax With the repeal of the two table tax calculations, Table A and Table B, the computation of the Oregon estate tax will be simpler since only one tax table is used. There is no longer any need to determine the adjusted taxable gifts for the Table A tax calculation or the adjusted taxable estate for the Table B tax calculation. The purpose of this section is to walk through, step by step, the process to determine the new Oregon estate tax. Step 1—Determine the Gross Estate. The first step is to identify the decedent’s worldwide assets and then determine the total value of those assets. This includes all of the decedent’s assets, both in Oregon and outside of Oregon. These worldwide assets constitute the “gross estate” under section 2031 of the Internal Revenue Code and ORS 118.005(6) (2011). Step 2—Determine if an Oregon Estate Tax Return is Required. If the value of the gross estate is less than $1,000,000, then no Oregon estate tax return is required to be filed. ORS 118.160(1)(c) (2011). However, since the gross estate includes the value of a decedent’s worldwide assets, it is possible for a resident or nonresident decedent estate with assets located in Oregon worth substantially less than $1,000,000 to still be subject to the filing requirement because the gross estate value is over $1,000,000. Thus, a nonresident decedent with a deeded time-share interest in a beach property at the Oregon coast and a
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worldwide gross estate value over $1,000,000 would be subject to an Oregon estate tax return filing requirement, even though the value of the property located in Oregon is worth substantially less than $1,000,000. If the value of the gross estate is $1,000,000 or more, then an Oregon estate tax return is required, and it is due on the date the federal estate tax is payable; or if no federal estate tax return is required, the Oregon estate tax return is due nine months after the date of the death of the decedent. ORS 118.100(1) and 118.160(1)(c) (2011). Six-month and other extensions to file the return are discussed below. Step 3—Determine the Federal Taxable Estate. If an Oregon estate tax return is required, then the next step is to determine the federal taxable estate which is defined above and is specifically referenced by the Oregon estate tax law. ORS 118.005(5) (2011). The federal taxable estate is, generally, the gross estate minus the applicable deductions that are claimed on a federal estate tax return. If no federal estate tax return is required, then the representative of the estate must continue to complete a federal estate tax return because the schedules from the federal estate tax return must be attached to the Oregon estate tax return. Step 4—Determine the Oregon Taxable Estate. After the amount of the federal taxable estate is determined, then the next step is to determine the Oregon taxable estate by making the adjustments provided in ORS 118.010(3) (2011). ORS 118.005(7) (2011). The Oregon taxable estate is defined above, and generally, it provides additions and deletions to the federal taxable estate to arrive at the Oregon taxable estate. Note that the Oregon taxable estate includes the value of the decedent’s worldwide assets and worldwide deductions.
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Step 5—Calculate the Preliminary Oregon Estate Tax. Once the Oregon taxable estate is determined, the preliminary Oregon estate tax can be calculated. ORS 118.010(4) (2011). If the Oregon taxable estate is less than $1,000,000, the Oregon estate tax is zero. If the Oregon Taxable Estate is $1,000,000 or more, the tax rate begins at 10% for the first dollar over $1,000,000, and the tax rate incrementally increases from 10% to a maximum of 16% for Oregon taxable estate values over $9,500,000 million. Assuming that a decedent died in 2012 with an Oregon taxable estate of $4,500,000 million, the preliminary Oregon estate tax would be $367,500. Step 6—Determine the Actual Oregon Estate Tax. If the decedent was domiciled in Oregon at the time of his or her death and no real or tangible personal properties were located outside of Oregon, then the Oregon estate tax would be $367,500. If the decedent was domiciled in Oregon, but had real or tangible personal property located outside of Oregon or had intangible personal property subject to a death tax in another state or country, then the preliminary Oregon estate tax would be subject to the fractional adjustment discussed in the section titled “Residents v. Nonresidents.” ORS 118.010(5) (2011). If the decedent was not domiciled in Oregon at the time of his or her death, but had real property or tangible personal property located in Oregon, then the preliminary Oregon estate tax would be subject to a fractional adjustment discussed in the section below titled “Residents v. Nonresidents” Id. The Oregon estate tax is due when the federal estate tax is payable, or if no federal estate tax return is required, the Oregon estate tax is due nine months after the date of the death of the decedent. ORS 118.100(1) (2011). Requests for extensions to pay the tax are discussed below.
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The Oregon tax form for reporting 2012 estates has changed. Form IT-1 will not be used for 2012 estates. Instead, the form will be changed and its new name will be the 2012 Oregon Form OR 706. The title of the new form will be Oregon Estate Transfer Tax Return.
§14.2-2 Lifetime Gift Transfers With the old pre-2012 Oregon inheritance tax, the decedent’s lifetime gifts in excess of the annual exclusion amounts which are described as “adjusted taxable gifts” were taken into account in a complicated way. In contrast, the new Oregon estate tax ignores adjusted taxable gifts, because neither the gross estate nor the federal taxable estate include those gifts in their definitions. IRC §2001(b). This presents a significant lifetime planning opportunity. An elderly person with an estate of $4,900,000 (just below the federal unified credit of $5,000,000 in place as of this writing) could make a gift (deathbed or otherwise) of $4,000,000 to her children. The gift would not be taxable for federal gift tax purposes because the gift would be within the $5,000,000 federal lifetime gift exclusion. Although the gift would be brought back into the federal estate as an adjusted taxable gift, the total estate of the decedent would be below the federal estate tax unified credit of $5,000,000. More importantly, the decedent would die with a gross estate of $900,000, which is below the Oregon filing threshold. ORS 118.160(1)(c) (2011). As a result, no federal estate or gift tax would be due, and no Oregon estate tax would be due. The Oregon tax savings would be $380,400 under the old law, and $413,500 under the new law. In the above illustration, significant tax savings would be experienced even if the gift were not successful in reducing the Oregon
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estate below the filing threshold. If the decedent in the above illustration had given away only $3,000,000, rather than $4,000,000, her Oregon taxable estate would be $1,900,000, rather than $900,000. In that situation, the resulting Oregon estate tax would be $91,000. Had the gift not been made, the resulting estate tax under the new law would have been $413,500, for a tax savings of $322,500. Be careful, however, because the gift-tax savings from this sort of death-bed gift may be offset by the loss of a stepped-up basis for income- tax purposes. Lifetime gifts generally do not receive a stepped-up income-tax basis at death. In contrast, most assets transferred at death do receive a stepped-up basis. Consider, for example, a $1 million gift in 2012 by the elderly person described above. The Oregon estate tax savings would be $112,000. If the assets given away had an income-tax adjusted basis of $100,000, the donee would acquire the assets with that same low basis of $100,000. Later, when the donee sells the gifted assets for $1,000,000, there would be a taxable gain of $900,000. Using a combined Oregon and federal income taxes rate of 24.5%, the combined income taxes would be $220,500, almost double the Oregon estate tax savings.
§14.2-3 Residents v. Nonresidents Oregon taxes resident decedents on all types of property (tangible and intangible) wherever situated. The tax is calculated on the entire Oregon taxable estate (wherever located), and then the tax is multiplied by a fraction, the numerator of which is the sum of (a) real property located in Oregon, (b) tangible personal property located in Oregon, and (c) intangible personal property wherever located (but excluding
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intangible personal property subject to a death tax in another state or country). The denominator is the entire gross estate. ORS 118.010(2)(a) and (5). Nonresident decedents are taxed based on the proportional value of real and tangible personal property located in Oregon.. Thus, the tax is calculated on the Oregon taxable estate (which includes Oregon and non-Oregon assets, both tangible and intangible), and then the tax is multiplied by a fraction, the numerator of which is the value of the Oregon tangible personal property and the Oregon real property (but no intangible property), and the denominator is the entire gross estate. ORS 118.010(2)(b) and (6). Unlike the old Oregon inheritance tax, nonresidents are no longer taxed on intangible property located in Oregon. That change greatly simplifies the calculation of the tax. It also avoids two murky issues: whether an asset constitutes intangible personal property located in Oregon, and whether a nonresident’s home state taxes intangible personal property of Oregon decedents. In short, under the new Oregon statutory scheme, tangible property (both real and personal) will be taxed only by the state in which it is located. This is true for both resident and nonresident estates. Intangible personal property held by resident estates will be taxed regardless of location, except that intangible personal property subject to a death tax in another state or country shall be excluded from the numerator of the fraction. ORS 118.010(5). Intangible personal property held by nonresident estates will not be taxed. ORS 118.010(2), (5), and (6). These statutes can produce some unexpected results. As noted above, the filing threshold of $1,000,000 is based on the gross estate,
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regardless of where the assets of the gross estate are located. ORS 118.160(1)(b)(D). As a result, a nonresident with a gross estate of $1,000,000 or more, but with a small amount of Oregon tangible assets, will be required to file an Oregon estate tax return, and will be required to pay Oregon estate tax if the taxable estate exceeds $1,000,000, even if the state of residence imposes no estate or inheritance tax. For example, if an Oregon resident moves to California (which has no estate or inheritance tax), but leaves behind in Oregon either real property or tangible personal property, that person’s estate will be subject to Oregon estate tax if the taxable estate (wherever located) exceeds $1,000,000. The same result will take place if the person never lived in Oregon, but happens to own real or tangible personal property in Oregon. Because of the fractional method of calculating the tax, even a small amount of Oregon tangible property will trigger a tax. If all of the Oregon property of a nonresident passes to a surviving spouse or to a charity, the Oregon estate tax on nonresidents is not necessarily eliminated. Marital deductions and charitable deductions, like all other deductions, reduce the taxable estate, not the gross estate, and the fractional formula employs the gross estate as its denominator and the gross estate located in Oregon as its numerator. The fact that some or all of the numerator passes to a spouse or a charity does not affect the fraction or the resulting percentage. Marital deductions and charitable deductions will reduce the overall Oregon tax, but they will not reduce the percentage of the tax payable to Oregon, nor will they reduce the assets (the gross estate) to be measured against the filing threshold. As a result, the amount of tax payable to Oregon will remain the same regardless of whether Oregon assets or foreign assets pass to the spouse
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or to charity (assuming that the value passing to the spouse or to charity remains the same). As a further example, if the surviving spouse was as Oregon resident when the first spouse died, but then moves to California (which has no estate or inheritance tax), but is the beneficiary of a state QTIP trust or an OSMP trust which holds either Oregon real property or tangible personal property, that surviving spouse’s estate will be subject to Oregon inheritance tax if the taxable estate (wherever located) exceeds $1,000,000. The same result occurs if the Oregon property is subject to an encumbrance. The encumbrance reduces the taxable estate, but it does not reduce the amount of the gross estate in Oregon, nor does it reduce the gross estate located elsewhere. Thus it is possible to owe Oregon inheritance tax on a nonresident estate even when the net value of the Oregon assets is negative due to an encumbrance on the Oregon assets. Equally puzzling is the fact that the legislature drafted the statute in a manner that reflects a determination by the legislature that personal property of a nonresident can have a situs in Oregon. Yet the Oregon Court of Appeals has held in a probate case that the personal property of a nonresident decedent has the same situs as the decedent’s domicile. West v. White, 92 Or. App. 401 (1988). Although the West case dealt with an intangible (a promissory note), the holding is not limited to intangible personal property. Keep in mind, however, that no Oregon estate tax return will be due (and no tax will be due) if the world-wide gross estate of the decedent is less than the filing threshold of $1,000,000. ORS 118.160(1)(b)(D).
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The bottom line: nonresident clients with even a small amount of Oregon tangible assets should review their situation in order to determine whether steps should be taken to minimize or eliminate the Oregon estate tax. Those steps might include disposing of Oregon assets or moving the Oregon assets to another state, such as the state of residence, depending on the estate or inheritance tax laws of the state of residence. Or a nonresident might consider placing Oregon tangible property into an entity created in another state, such as a limited liability company, although the efficacy of that technique is not clear. Even Oregon residents can reduce their Oregon estate tax by holding tangible assets in other states, but the amount of overall tax savings will depend on the inheritance tax laws of those other states. Nonresident surviving spouses who are beneficiaries of a state QTIP trust or an OSMP trust present an interesting challenge. If the surviving spouse moves to another state such as California, and the state QTIP trust or OSMP trust then liquidates all of the Oregon property held in trust, what part, if any, of the surviving spouse’s estate is reportable in Oregon? Even though the trust holds no Oregon property at the time of the surviving spouse’s death, ORS 118.010(3)(a)(B) requires that the property in a state QTIP or OSMP trust be included in the Oregon taxable estate. When the surviving spouse dies, it is unclear whether the entire value of property held in a state QTIP or OSMP trust is treated as Oregon property because it was claimed as a deduction in the first deceased spouse’s estate. But a number of practitioners believe that a nonresident is taxable in Oregon only to the extent the estate holds real or tangible personal property located in Oregon; thus, no tax would be due. ORS 118.010(2)(b). Thus, even if the Oregon taxable estate exceeds
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$1,000,000, the Oregon estate tax should be zero because the numerator of the fraction would be zero. The Department of Revenue has adopted an administrative rule 150-118.010(8), which specifies that a nonresident is taxable in Oregon only to the extent that a QTIP trust holds real or tangible personal property located in Oregon. This rule, if adopted, should become effective in July or August 2012. The administrative rules of the Department of Revenue should be reviewed periodically to determine the status of this rule and others.
§14.2-4 Effective Date of the New Law Technically the effective date for HB 2541 is September 29, 2011; however, except for the revisions to ORS 105.645 (the taxable disclaimer statute) all of the other provisions apply to estates of decedents who die on or after January 1, 2012. Thus, the current law (ORS 2009 provisions) still applies for 2011 decedents. A copy of the new legislation can be found at
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§14.3 THE OLD PRE-2012 OREGON INHERITANCE TAX §14.3-1 Calculating the Oregon Inheritance Tax—The Four Steps These four steps do not appear in the Oregon inheritance tax statutes, but these steps must be followed in order to calculate the Oregon tax: (1) Calculate the gross estate, in order to determine if a return is required based on the filing threshold of $1,000,000. If no return is due, stop here. (2) Calculate the Oregon inheritance tax on the adjusted taxable estate using Table B in the IT-1 instructions. This rate table is the old federal state death tax credit rate table. Do not apply a unified credit. This step produces a tax even if the adjusted taxable estate is as small as $40,000. (3) Calculate the federal estate tax (using 2000 federal law) on the federal taxable estate (defined by 2000 federal law) using Table A in the IT-1 instructions. Include adjusted taxable gifts in the calculation. Then apply a unified credit of $345,800 (unified credit equivalent of $1,000,000). The result of this step can be called the federal cap. (4) Pay the lesser of the two amounts shown in steps 2 and 3. The number $1,093,784 is a magic number in the calculation of the Oregon inheritance tax. As noted above, estates pay Oregon inheritance tax in an amount equal to the lesser of the Oregon inheritance tax or the federal cap. Taxable estates below $1,093,784 pay an amount equal to the federal cap, while taxable estates above that amount pay a tax equal to the Oregon inheritance tax (the state death tax credit). As a result, taxable estates between $1,000,000 and $1,093,784 pay Oregon inheritance tax at a marginal rate of 41%, because the federal cap (and its federal estate tax
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rate table) is the limiting factor on the Oregon inheritance tax. Above $1,093,784, the marginal rate drops to 6.4% because the state death tax credit rate table is the limiting factor. That rate eventually climbs to 16% for very large estates. The significance of the number $1,093,784 is also discussed below, in the discussion of the impact of adjusted taxable gifts. Although ORS 118.220 and OAR 150-118.100(1) provide that the Oregon inheritance tax is due and payable on the date that the federal estate tax is due, those provisions should not be interpreted as excusing the filing of an Oregon return (or the paying of the Oregon tax) for estates that owe no federal estate tax under current federal law. Because ORS 118.007 provides that Oregon is “frozen” to the federal estate tax as of December 31, 2000, ORS 118.220 and OAR 150-118.100(1) should be interpreted based on whether a federal estate tax would have been due under December 31, 2000, federal law. Force v. Dept. of Revenue (Estate of Pierson), 350 Or. 179, 252 P3d 206 (OR 2011). OAR 150-118.260(1)- (A) and OAR 150-118.100(1) confirm that the Oregon return is due nine months after the date of death. (In early 2011, the Oregon Department of Revenue announced that the automatic extension of time to file for 2010 deaths provided for in the federal Tax Relief Act of 2010 does not apply to Oregon returns.)
§14.3-2 Lifetime Gift Transfers How do adjusted taxable gifts impact the Oregon inheritance tax? The answer is that adjusted taxable gifts are not taxed in the calculation of the Oregon inheritance tax, but they are taxed in the calculation of the federal cap. Here is a more detailed answer:
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Adjusted taxable gifts are the cumulative amounts of gifts of the decedent that did not qualify for the annual exclusion, combined with the cumulative amounts by which qualifying gifts exceeded the annual exclusion. IRC §2001(b) and §2503. In order to determine the impact of adjusted taxable gifts on the Oregon inheritance tax, it is necessary to carefully analyze how the adjusted taxable gifts fit into the four-step process of calculating the Oregon inheritance tax. Note: IRC §2035(a), which purports to bring back into the federal gross estate certain gifts made within three years of death, is usually not applicable. The 1976 federal change that abandoned the "contemplation of death" rule and enacted a "three-year rule" was itself largely abandoned in 1981, and §2035(a) now has very limited application. Section 2035(b) brings back into the gross estate gift taxes paid within three years of the decedent’s death, but relatively few decedents have paid gift taxes. Before we work through the four steps, it will be helpful to refine some of the terms defined above: Gross Estate. Oregon has adopted the federal definition of gross estate, so the gross estate will be the same for federal and Oregon purposes. ORS 118.005(5); IRC §2031. The gross estate does not include adjusted taxable gifts. Adjusted Taxable Estate. The adjusted taxable estate is equal to the taxable estate minus $60,000. IRC §2011(b)(3). None of the gross estate, the taxable estate, or the adjusted taxable estate includes adjusted taxable gifts. IRC §2001(b). For simplicity of illustration, assume a 2009 death of an unmarried decedent with no deductions of any kind (no marital bequests, charitable
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bequests, claims, or administration expenses). We will ignore annual exclusions. Step 1— Filing Threshold. The first step in calculating the Oregon inheritance tax is to determine whether the estate exceeds the Oregon filing threshold. The filing threshold is determined by the value of the gross estate. If the gross estate equals or exceeds $1,000,000, then an Oregon return is due, and the second, third, and fourth steps must then be analyzed. If the gross estate is less than $1,000,000, the filing threshold is not met, no return is due, and the other steps need not be examined. If no return is due, then no tax is due. ORS 118.160(1)(b)(D) (2009). If a client dies with a gross estate of $1,100,000, an Oregon return is due, and the other steps (described below) will result in a tax. But if that client makes a gift of $150,000 immediately before her death, her gross estate will be $950,000, because the gross estate does not include adjusted taxable gifts. As a result, no return will be due, and no tax will be due. In both cases, her children will receive the entire estate. In the first example, they will pay an Oregon inheritance tax of $38,800, but in the second example the estate will pass 100% tax free. Yet in both examples the client started out with the same assets. By making a $150,000 gift, the client saved her family $38,800. (A decision whether to make such gifts should also take into account that lifetime gifts generally do not receive a stepped-up basis at death, while assets transferred at death do receive a stepped up basis.) Step 2—Calculate the Oregon Inheritance Tax. If a return is due, the second step is to calculate the Oregon inheritance tax. The Oregon inheritance tax is based on the amount of the adjusted taxable estate. The adjusted taxable estate is equal to the taxable estate minus $60,000. IRC
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§2011(b)(3). The adjusted taxable estate does not include taxable gifts. The amount of the Oregon tax is based on a rate table that is identical to the old federal table for the state death tax credit. ORS 118.010(2) (2009). That table appears as Table B in the instructions to the Form IT- 1. That rate table does not utilize a unified credit. Instead, it generates a tax as soon as the adjusted taxable estate exceeds $40,000. In our example, if the gift had not been made, the estate of $1,100,000 would generate an Oregon inheritance tax of $38,800. But that amount is not necessarily the amount you pay. Instead, we must continue on to step 3. Step 3—Calculate the Federal Cap. The third step is to calculate what we will call the federal cap. This is the federal estate tax the estate would have paid (in our example) for a 2009 death based on the federal law applicable to a 2009 death as that law existed in 2000. At that time, the federal unified credit equivalent was scheduled to be $1,000,000 for a 2009 death. Unlike the calculation of the Oregon inheritance tax, the calculation of the federal estate tax (and thus the federal cap) requires that any adjusted taxable gifts be added back in before the estate tax is calculated. IRC §2001(b). In our example of a $1,100,000 estate, the federal cap would be calculated on $1,100,000, regardless of whether or not our decedent had made the deathbed gift of $150,000. The federal cap is calculated using the federal estate tax rate table that appears as Table A in the instructions to the Form IT-1. After the tax is calculated, the unified credit of $345,800 (which is the tax equivalent of assets worth $1,000,000) is applied. The result is the federal cap. In our illustration, the resulting federal cap would be $41,000. Step 4—Amount of Tax to Pay. The amount of the Oregon inheritance tax is the lesser of the results of step 2 and step 3. Here’s
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why: ORS 118.010(2) imposes a tax equal to the maximum allowable state death tax credit available for the year of death based on 2000 federal law. However, an estate can receive a credit only against tax it actually owes. The credit cannot exceed the tax. As a result, if the 2000 federal tax was less than the amount calculated by the state death tax credit table, then that lower amount of the tax limits the availability of the credit. The federal tax “caps” the credit. In our example of the $1,100,000 estate with no gift, the lesser of the two steps is $38,800. If the $150,000 gift had been made, the tax would have been zero, because no return would have been due. After reviewing that analysis, we can answer our question: Does the Oregon inheritance tax apply to adjusted taxable gifts? The answer takes three forms: (1) If the decedent used adjusted taxable gifts to reduce her gross estate below the Oregon filing threshold, then the adjusted taxable gifts (and the rest of her estate) completely avoid the Oregon inheritance tax. ORS 118.160(1)(b)(D) (2009). (2) If her gross estate (after the gifts) is above the Oregon filing threshold, then a return will be due. Her adjusted taxable gifts will not be taken into account in calculating the Oregon inheritance tax (step 2), but those gifts will be taken into account in the calculation of the federal cap (step 3). In most cases, making adjusted taxable gifts will (with one minor exception) reduce the Oregon inheritance tax by the amount of the marginal rate of the state death tax credit applied to the adjusted taxable estate. For example, the tax savings resulting from a $10,000 taxable gift from a $1,100,000 estate would be $560, or 5.6% of the gift. If the estate were $3,000,000, the tax savings would be $880, or 8.8% of the gift.
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(3) The one minor exception: If the Oregon inheritance tax is greater than the federal cap, then the federal cap will be the determining factor because it is the lesser of the two. In that situation, making adjusted taxable gifts will not reduce the tax due because the federal cap includes a tax on the gifts. This exception occurs only if the taxable estate (before the gifts) is less than $1,093,784. Below this amount the Oregon inheritance tax is greater than the federal cap, and the gifts will be taxed. But even this minor exception has an exception: If the taxable estate (before the gifts) is only slightly below $1,093,784, and the gifts are large enough to bring the Oregon inheritance tax below the federal cap, then tax savings can still be obtained. Although the Oregon inheritance tax does not generally apply to adjusted taxable gifts, that is not to say that adjusted taxable gifts have no consequence in connection with the Oregon inheritance tax. For example, the presence of adjusted taxable gifts can significantly reduce the amount that can be placed in a credit shelter trust, even though no federal tax is due. Consider the following example: Decedent makes adjusted taxable gifts in the amount of $800,000, then dies in 2011 leaving a gross estate of $3,000,000, a surviving spouse, and a typical tax-planning will that calls for the creation of two trusts, a credit shelter trust and a marital trust, to be funded with the entire $3,000,000 gross estate. Both trusts are drafted so that they are eligible for a QTIP election, either federal or Oregon. The gross estate is well below the federal $5,000,000 unified credit, even if adjusted taxable gifts are included, so no federal return or federal tax is due. And no Oregon inheritance tax will be due, as a result of the marital deduction. But how much marital deduction is needed to reduce the Oregon inheritance tax to zero? And how large may the
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Oregon-exempt credit shelter trust be, assuming that the goal is to maximize the size of the Oregon-exempt trust in order to minimize the tax due on the second death? The answer is surprising: The estate will need to claim a $2,800,000 marital deduction by making an Oregon QTIP election on $2,800,000 of the trusts, and the Oregon-exempt trust will be limited to only $200,000. That result is caused by several factors. First, the calculation of the Oregon inheritance tax (Step 2) does not employ a unified credit or an exemption; it triggers Oregon tax at only $40,000. Second, the calculation of the federal cap (Step 3) takes into account the adjusted taxable gifts, which effectively means that the adjusted taxable gifts end up consuming some of the federal unified credit that was available under 2000 law. In our example, in order to reduce the Oregon inheritance tax to zero, either Step 2 or Step 3 needs to be reduced to zero, because the amount to be paid is the lesser of those two steps. In order to reduce Step 2 to zero, the marital deduction would have to be $2,900,000 (the other $100,000 would be protected by the $40,000 Oregon “exemption” and by the $60,000 difference between the taxable estate and the adjusted taxable estate). In order to reduce Step 3 to zero, the marital deduction would have to be $2,800,000 in order to “shelter” $2,000,000 of the trusts and the $800,000 of adjusted taxable gifts, leaving $1,000,000 to be protected by the $1,000,000 unified credit available in 2011 under the 2000 law, since Step 3 is based on 2000 law. As a result, a marital deduction of $2,800,000 will need to be claimed (by making an Oregon QTIP election), and the size of the Oregon-exempt trust will be limited to only $200,000. (Of course, a different result might be desirable if it is decided to pay some tax in the first estate in order to reduce the tax payable in the second estate.)
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If you plan to use the alternate valuation date election to eliminate an Oregon inheritance tax that would otherwise be due, and your client has made adjusted taxable gifts, the reduction in value attributable to the alternate valuation election must be large enough to reduce the federal cap to zero. In other words, the taxable estate plus the adjusted taxable gifts (the federal tax computation base) must be reduced to a point below $1,000,000 in order to reduce the federal cap to zero. Simply reducing the Oregon gross estate to a point below $1,000,000 is not sufficient. This is because the estate will pay the lesser of the federal cap (step 3) or the Oregon inheritance tax, which is based on the state death tax credit table (step 2). The state death tax credit table does not employ a unified credit. Instead, the tax is imposed on all amounts over $40,000. Unless the federal cap is zero, the estate will pay some Oregon tax. Because an Oregon return must be filed in order to make an Oregon alternate valuation date election, using the alternate valuation date to reduce the gross estate below $1,000,000 does not avoid the filing requirement. §2032(d); OAR 150-118.010(7)(1). You could calculate some illustrations to determine the amount of tax savings that might be obtained by making various taxable gifts. It all depends on the size of the estate and the size of the gifts. As a general rule, the client will save the most money if the gifts reduce the gross estate to a point below the $1,000,000 Oregon filing threshold, but lesser tax savings are available even if the resulting gross estate is still above the filing threshold. Also, keep in mind that the tax savings described above are understated, because they do not take into account the annual exclusion.
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§14.3-3 Residents v. Nonresidents Oregon taxes resident decedents on (1) tangible personal property located in Oregon, (2) real property located in Oregon, and (3) all intangible property regardless of situs. But the tax is calculated on the entire taxable estate (wherever located), and then the tax is multiplied by a fraction, the numerator of which is the sum of the three classifications described above, and the denominator is the entire gross estate. ORS 118.010(3). Nonresident decedents are taxed on property located in Oregon, including tangible personal property and real property. Nonresidents are also taxed on intangibles located in Oregon, unless the state of domicile grants reciprocity (an exemption for intangibles owned by nonresident decedents). But the tax is calculated on the entire taxable estate (wherever located), and then the tax is multiplied by a fraction, the numerator of which is the value of the assets subject to tax in Oregon, and the denominator is the entire gross estate. ORS 118.010(4). The definition of intangibles located in Oregon appears to be very broad, at least according to the regulations. OAR 150-118.010(1)(2) and (3). In short, under the Oregon statutory scheme tangible property (both real and personal) will be taxed only by the state in which it is located, in both resident and nonresident estates. Intangible personal property held by resident estates will be taxed regardless of location, and intangible personal property held by nonresident estates will be taxed only if it is located in Oregon and the resident state does not grant a reciprocal exemption. ORS 118.010; OAR 150-118-010(3) and (4). These statutes can produce some unexpected results. As noted above, the filing threshold of $1,000,000 is based on the gross estate,
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regardless of where the assets of the gross estate are located. ORS 118.160(1)(b)(D). As a result, a nonresident with a gross estate of $1,000,000 or more, but with a small amount of Oregon assets, will be required to file an Oregon inheritance tax return, and will be required to pay Oregon inheritance tax if the taxable estate exceeds $1,000,000, even if the state of residence imposes no estate or inheritance tax. For example, if an Oregon resident moves to California (which has no estate or inheritance tax), but leaves behind in Oregon either real property, tangible personal property, or (more likely) intangible personal property (such as an Oregon bank account), that person’s estate will be subject to Oregon inheritance tax if the taxable estate (wherever located) exceeds $1,000,000. The same result will take place if the person never lived in Oregon, but happens to own real or personal (tangible or intangible) property in Oregon. Because of the fractional method of calculating the tax, even a small amount of Oregon property will trigger a tax. And the definition of intangible personal property is extremely broad, at least according to the regulations. OAR 150-118.010(1)(2) and (3). The same result will take place if the person lived in Washington, except Washington has its own estate tax, and Oregon exempts the intangible personal property of Washington residents because Washington grants a reciprocal exemption for intangible personal property of Oregon residents. RCW 83.100.040; WAC Ch. 458-57-125. As a result, an Oregon tax will be due from a Washington resident estate if the estate holds Oregon real property or tangible personal property located in Oregon, even if the value of the Oregon property is small.
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A reciprocal exemption for intangible property does not exist between Oregon and California. California has no estate or inheritance tax, and the Oregon regulations provide that the exemption exists in Oregon only if the foreign state imposes an estate or inheritance tax and exempts the intangible personal property of Oregon residents. OAR 150- 118.010(4)(b); California Revenue and Taxation Code §13302. If all of the Oregon property of a nonresident passes to a surviving spouse or to a charity, the Oregon inheritance tax on nonresidents is not necessarily eliminated. Marital deductions and charitable deductions, like all other deductions, reduce the taxable estate, not the gross estate, and the fractional formula employs the gross estate as its denominator and the gross estate located in Oregon as its numerator. The fact that some or all of the numerator passes to a spouse or a charity does not affect the fraction or the resulting percentage. Marital deductions and charitable deductions will reduce the overall Oregon tax, but they will not reduce the percentage of the tax payable to Oregon, nor will they reduce the assets (the gross estate) to be measured against the filing threshold. As a result, the amount of tax payable to Oregon will remain the same regardless of whether Oregon assets or foreign assets pass to the spouse or to charity (assuming that the value passing to the spouse or to charity remains the same). The same result occurs if the Oregon property is subject to an encumbrance. The encumbrance reduces the taxable estate, but it does not reduce the amount of the gross estate in Oregon, nor does it reduce the gross estate located elsewhere. Thus it is possible to owe Oregon inheritance tax on a nonresident estate even when the net value of the Oregon assets is negative due to an encumbrance on the Oregon assets.
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As mentioned above, the Oregon Department of Revenue has adopted a very broad definition of intangible personal property located in Oregon. The statute variously refers to such property as “within the jurisdiction of the state,” or “located in Oregon.” ORS 118.010(1) and (4). The regulations adopt the position that property within the jurisdiction of the state includes (for example) stock in an Oregon corporation, accounts in Oregon banks, and promissory notes given by an Oregon resident. The regulations also define “intangible personal property” as including “stocks, bonds, notes, currency, bank deposits, accounts receivable, patents, trademarks, copyrights, royalties, goodwill, partnership interests, life insurance policies, and other choices (sic) in action.” OAR 150-118.010(1)(3). The ambiguous drafting of the statute and the regulations raises many questions. Why do ORS 118.010(1) and ORS 118.010(4)(a) both refer to “property within the jurisdiction of the state,” while the fractional formula in ORS 118.010(4)(a) includes only property “located in Oregon,” particularly when the regulations at OAR 150-118.010(1)(2) specifically state that “within the jurisdiction of the state” is broader than “‘within the state’ which denotes locality”? And it seems hard to believe that a court would allow Oregon to tax stock in an Oregon publicly- traded corporation held by the estate of a nonresident, as suggested by OAR 150-118.010(1)(2)(a). Equally puzzling is the fact that the legislature drafted the statute in a manner that reflects a determination by the legislature that personal property of a nonresident can have a situs in Oregon. Yet the Oregon Court of Appeals has held in a probate case that the personal property of a nonresident decedent has the same situs as the decedent’s domicile.
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West v. White, 92 Or. App. 401 (1988). Although the West case dealt with an intangible (a promissory note), the holding is not limited to intangible personal property. Keep in mind, however, that no Oregon inheritance tax return will be due (and no tax will be due) if the world-wide gross estate of the decedent is less than the filing threshold of $1,000,000. ORS 118.160(1)(b)(D). The bottom line: nonresident clients with even a small amount of Oregon assets should review their situation in order to determine whether steps should be taken to minimize or eliminate the Oregon inheritance tax. Those steps might include disposing of Oregon assets or moving the Oregon assets to another state, such as the state of residence, depending on the inheritance tax laws of the state of residence. Even Oregon residents can reduce their Oregon inheritance tax by holding tangible assets in other states, but the amount of overall tax savings will depend on the inheritance tax laws of those other states.
§14.4 PROCEDURES APPLICABLE TO BOTH OLD AND NEW LAW §14.4-1 Extensions Extensions of the time to file and the time to pay are both available regarding the Oregon inheritance tax. If a federal extension is requested on IRS Form 4768, a copy of that form should be filed with the Oregon return, when it is filed, and the appropriate boxes should be checked on page 1 of the Oregon return. If no federal return is being filed, or if a federal extension is not being requested, the same Form 4768 should be used, but the words “For Oregon Only” should be typed in the top margin
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of the form, and the form should be filed with the Department of Revenue prior to the due date. OAR 150-118.225(1)(a). A copy should also be attached to the return when it is filed. A six-month extension of time to file is automatic, but a request for extension of time to pay requires an explanation of why the extension is needed, and the Department will respond with either an approval or a rejection. Oregon follows federal law in reviewing such requests. See ORS 118.225 and OAR 150-118.225(2)(a). An extension of time to file does not extend the time to pay, nor does an extension of time to pay extend the time to file. Interest continues to accrue during the extension period. OAR 150-118.225(1)(b); 150- 118.260(1)-(B). If all or part of the Oregon estate tax cannot be paid within nine months after the date of death, the executor may apply for an extension of the time to pay the tax. If the executor secures the payment of the tax with a bond, deposit or other good collateral acceptable to the Department of Revenue may extend the time for the payment of the tax up to 14 years. ORS 118.160. However, under the old law, even though the executor obtained permission from the Department to extend the time for payment and paid the tax in the agreed installments, the tier 2 penalty interest (currently 4%) under ORS 305.222 was added to the delinquency rate of 5% for a total of 9% starting sixty days after the tax was assessed. The Oregon interest rate of 9% currently is significantly higher that the interest rate payable under an installment plan under IRC 6166. The new law drops the tier-two interest rate under ORS 305.222 but retains the delinquency rate under ORS 305.220. Thus, under the current rates an
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installment plan approved by the Department will impose a 5% interest rate. ORS 118.160(5) (2011).
§14.4-2 The Oregon Alternate Valuation Date Election Like other federal elections, the alternate valuation date election is available for Oregon purposes. ORS 118.010(8) (2011); OAR 150- 118.010(7). Under federal law, the election may be made on a timely filed federal return, or it may be made on a federal return filed up to one year after its due date, including extensions. §2032(d). Oregon has adopted those federal procedural requirements. As a result, if an Oregon alternate valuation election is desired, an Oregon return must be filed and the election must be made on that return, even if the election causes the gross estate to fall below the filing threshold, and that return must be filed no later than one year after the due date, even if it is a no-tax-due return. OAR 150-118.010(7)(1). See also pages 9-10 of the IT-1 instructions. If the alternate valuation date election is made for Oregon purposes, but not made for federal purposes, then the estate and its beneficiaries will have a different federal basis in the assets than their Oregon basis in the assets. ORS 316.716. Keep in mind that a federal alternate valuation date election cannot be made if the election would not reduce federal taxes. §2032(c). Thus an estate that owes Oregon taxes, but owes no federal taxes, cannot make a federal alternate valuation date election, but may make an Oregon election. In addition, as discussed above, if a federal alternate valuation date election is made, the same election must be made for Oregon purposes. OAR 150-118.140(2).
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§14.4-3 Appraisals ORS 118.100(6) (2011) now requires that an estate tax return must “explain, on the return, how the reported values were determined.” The executor must also “attach copies of any appraisals.” Apparently, this latter provision does not require the executor to obtain an appraisal, but if one is obtained, a copy must be attached. This new statute apparently reflects the reluctance of the Department of Revenue to accept county property tax values as evidence of fair market value because the Department believes that the county values do not generally represent the fair market value as of the date of death.
§14.4-4 The Oregon Special Marital Deduction and Schedule OSMP In the classic estate plan for a married couple, the estate of the first spouse to die is divided into a credit shelter trust equal to the federal estate tax exemption, and the remainder of the estate is given to the surviving spouse, either outright or in a QTIP or other trust that qualifies for the marital deduction. The assets distributed to the credit shelter trust are shielded from tax by the federal estate tax exemption and the state inheritance tax exemption, and the assets given to the surviving spouse are shielded from tax by the marital deduction, at least at the first death. The beauty of this plan is that it uses both spouses’ exemption amounts and produces no tax at the first death. This plan worked well for Oregon residents until 2002, when Oregon broke from the federal estate tax system. Following the break, the federal exemption amount climbed from $1 million in 2002 to $3.5 million in 2009, was unlimited in 2010, and then was $5 million in 2011 and 2012. (The federal exemption after 2012
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was not known as of this writing). The Oregon exemption amount, however, stayed at $1 million for deaths after 2005. If the classic estate plan for a married couple were followed today, and the credit shelter trust were funded to the full amount of the federal exemption, the estate of the first to die would owe Oregon tax on the value of the credit shelter trust in excess of the $1 million Oregon exemption. Under the new system, to avoid tax at the first death an estate had two choices. The first solution was to limit the credit shelter trust to $1 million, but there were obvious problems with this solution. Most of the existing marital funding formulas are tied to the federal exemption and therefore, by their terms, would not allow funding only up to the Oregon exemption amount. Also, the reduced funding would fail to use the full federal exemption amount for the deceased spouse. The second solution was to elect an Oregon QTIP for the assets in the credit shelter trust in excess of $1million, and thereby defer the Oregon tax until the later death of the surviving spouse. This solution would work well for many, but not all, estates. Although the terms of many credit shelter trusts qualify for a QTIP election, some do not. For example, in some credit shelter trusts the surviving spouse is not entitled to all of the income (accumulation trust) and in some trusts the surviving spouse is not the only trust beneficiary during the surviving spouse’s lifetime (trust with other beneficiaries). Either of those facts would disqualify a trust for QTIP treatment. To help solve the problems caused by the difference between the federal and Oregon exemption amounts, and to deal with the fact that some credit shelter trusts do not qualify for a QTIP election, in 2005 the Oregon legislature enacted an Oregon special marital election. ORS 118.013-019. The Oregon special marital property election (OSMP
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election) is an irrevocable election that allows a QTIP-like deferral for trusts (or other property interests, or a portion of a trust or other property) that would not otherwise qualify for an Oregon QTIP election. For example, trusts that permit income to be accumulated, and trusts that permit distributions to beneficiaries other than the surviving spouse, do not quality as QTIP trusts. Credit shelter trusts frequently contain such provisions. Under the OSMP election, both an accumulation trust and a trust with other beneficiaries are allowed to defer inheritance tax until the death of the surviving spouse. ORS 118.013(2) and (3); ORS 118.019 (2009). By using an OSMP election (or an Oregon QTIP election) for the portion of the credit shelter trust that exceeds $1million, an estate can fund the credit shelter trust to the full federal exemption amount and still pay no Oregon tax at the first death. On the second death, the OSMP assets will be included in the gross estate of the surviving spouse, valued as of the date of death of the surviving spouse. ORS 118.019 (2009). The OSMP election for an accumulation trust is made by the executor attaching a statement to the inheritance tax return that: (1) identifies the trust (or other property interest) that constitutes the OSMP, (2) affirms that the identified property meets the requirements of OSMP, and (3) affirms that the trust will be administered as required by the statute. ORS 118.016(1). The OSMP election for a trust that has other (non-spouse) beneficiaries allows the executor to set aside a portion of the trust as a separate share (or as a separate trust) as Oregon special marital property. ORS 118.013(3). In addition to the election described above for an accumulation trust, the surviving spouse and each potential beneficiary who is living at the time of the election must sign a notarized statement in
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which they: (1) consent to a portion of the trust (usually the amount in excess of $1,000,000) being set aside as OSMP, (2) agree to release all rights to distributions from the OSMP property during the surviving spouse’s lifetime (except distributions to the spouse are permitted), and (3) agree that all other provisions of the trust will remain in effect. ORS 118.016(2). The statute provides language to be used when obtaining these consents. The statutory language is contained in Schedule OSM P
§14.4-5 The Oregon QTIP Election ORS 118.010(7) (2009) and OAR 150-118.010(7) allow estates to make for Oregon purposes all of the elections permitted under federal law, as the federal law existed on December 31, 2000. The availability of an Oregon QTIP election is specifically mentioned in ORS 118.010(8) (2011) and OAR 150-118.010(7). An Oregon QTIP election is made by filing an Oregon-only Schedule M that specifically identifies the property subject to the Oregon-only QTIP election. OAR 150-118.010(7)(3) provides that when an Oregon election is made, the obligations of the electing parties, agreements required of persons benefitting from the elections, and the inclusions of property in the estate of a surviving spouse shall apply for Oregon purposes just as they would have applied under the 2000 Internal Revenue Code for federal purposes. As a result, all of the other federal requirements for QTIP elections and QTIP property apply for Oregon purposes. When would an executor prefer to make an Oregon QTIP election rather than an Oregon OSMP election? Obviously, if the trust interest would not qualify as a QTIP, but would qualify as an OSMP, then the OSMP election should be made. But if the trust interest qualifies as both
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a QTIP interest and an OSMP interest, either election could be made, and there seems to be little reason to prefer one over the other. The QTIP election is governed by federal law, and is not subject to the identification requirement of ORS 118.016 or Schedule OSMP, so it may seem that the QTIP election might be easier and simpler to make. However, the instructions to the Form IT-1 do require identification of specific assets that will be subject to the QTIP election. Making a QTIP election would, however, eliminate the requirement of filing a Schedule OSM P Some practitioners believe that a trust that qualifies as a QTIP trust is eligible only for a QTIP election, and that such a trust may not be subject to an OMSP election. In other words, the OSMP election is limited to trusts that do not qualify for a QTIP election.
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Administering Oregon Estates: 2012 Edition 6–36 Chapter 7 Managing Estate Assets
Jonathan A. Levy Cavanaugh Levy Bilyeu LLP Portland, Oregon
Katie S. Groblewski Stokes Lawrence PS Seattle, Washington
Contents §10.1 Nature of Personal Representative’s Position 7–5 §10.2 Personal Representative’s Powers and Duties Generally ...... 7–6 §10.2-1 Introduction ...... 7–6 §10.2-2 When Powers Commence 7–6 §10.2-3 General Duties ...... 7–6 §10.2-4 General Powers ...... 7–7 §10.2-5 The Personal Representative’s Authority ...... 7–8 §10.3 Possession and Control of Property of the Estate ...... 7–9 §10.3-1 Introduction ...... 7–9 §10.3-2 Gathering Information ...... 7–9 §10.3-3 Should Possession Be Taken? 7–11 §10.3-4 Insuring Estate Assets ...... 7–13 §10.3-5 Repair of Estate Assets ...... 7–13 §10.3-6 Funds to Be Used for Expenses 7–14 §10.3-7 Payment of Taxes 7–15 §10.4 Investing Estate Funds ...... 7–16 §10.4-1 Preliminary Considerations 7–16 §10.4-2 Practical Considerations in Investing ...... 7–20 §10.5 Borrowing Money ...... 7–24 §10.5-1 Preliminary Considerations 7–24 §10.5-2 Fundamental Considerations 7–24 §10.5-3 Loan Purposes and Procedure ...... 7–26 §10.6 Transfer of Securities ...... 7–26 §10.6-1 Introduction ...... 7–26 §10.6-2 Laws Affecting Transfers ...... 7–27 §10.6-3 Mechanics of Transfer ...... 7–30 §10.7 Transfers of Property to Complete Contracts ...... 7–33 §10.7-1 Definitions ...... 7–33 §10.7-2 General Principles ...... 7–33 §10.7-3 Limitations ...... 7–34 §10.7-4 Method of Transferring Property 7–34 §10.8 Sales, Leases, and Management of Real Property ...... 7–35 §10.8-1 Sale of Property ...... 7–35 §10.8-2 Leases of Property ...... 7–38 §10.8-3 Undeveloped Real Property ...... 7–39 Chapter 7—Managing Estate Assets
Table of Contents (continued) §10.8-4 Environmental Contamination 7–39 §10.9 Collecting Estate Assets ...... 7–43 §10.9-1 Introduction ...... 7–43 §10.9-2 Compromise or Adjustment of Indebtedness to Estate ...... 7–43 §10.9-3 Litigation ...... 7–44 §10.10 Continuance or Liquidation of Decedent’s Business or Venture ...... 7–48 §10.10-1 Scope of Authority and Limitations in Handling Decedent’s Business . . . . 7–48 §10.10-2 Ongoing Management of a Business 7–49 §10.10-3 Management or Transfer Issues ...... 7–50 §10.10-4 Specific Business Interests 7–51 §10.11 Encumbered Assets ...... 7–54 §10.11-1 Introduction ...... 7–54 §10.11-2 Voluntary and Involuntary Encumbrances ...... 7–55 §10.11-3 Responsibilities of Personal Representative 7–55 §10.11-4 Will Provisions ...... 7–57 §10.11-5 Heirs and Encumbrances ...... 7–57 §10.12 Unusual Assets 7–57 §10.12-1 Natural Resources ...... 7–57 §10.12-2 Contraband and Firearms 7–58 §10.12-3 United States Savings Bonds ...... 7–59 §10.12-4 Personal Property ...... 7–59 §10.12-5 Appraisal of Unusual Assets ...... 7–60 §10.12-6 Cooperative Apartments or Condominiums ...... 7–60
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This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
JONATHAN S. LEVY, A.B., Harvard College (1977); J.D., University of Michigan Law School (1982); member of the Oregon State Bar since 1988; partner, Cavanaugh Levy Bilyeu LLP, Portland. KATIE S. GROBLEWSKI, B.A., University of Washington (2000); J.D., Seattle University Law School (2003); LL.M., Taxation, University of Washington (2004); member of the Washington State Bar Association since 2003 and the Oregon State Bar since 2006; associate, Stokes Lawrence, P.S., Seattle, Washington. The authors wish to acknowledge the contributions of Sally C. Landauer and D. Ed Fletcher to the prior versions of this chapter, much of which has been retained in this revision.
§10.1 NATURE OF PERSONAL REPRESENTATIVE’S POSITION ...... 10-5 §10.2 PERSONAL REPRESENTATIVE’S POWERS AND DUTIES GENERALLY ...... 10-6 §10.2-1 Introduction ...... 10-6 §10.2-2 When Powers Commence ...... 10-6 §10.2-3 General Duties ...... 10-6 §10.2-4 General Powers ...... 10-7 §10.2-5 The Personal Representative’s Authority ...... 10-8 §10.2-5(a) Under the Probate Code ...... 10-8 §10.2-5(b) Under the Will ...... 10-8 §10.2-5(c) Acts with Copersonal Representatives ...... 10-8 §10.3 POSSESSION AND CONTROL OF PROPERTY OF THE ESTATE ...... 10-9 §10.3-1 Introduction ...... 10-9
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§10.3-2 Gathering Information ...... 10-9 §10.3-3 Should Possession Be Taken? ...... 10-11 §10.3-4 Insuring Estate Assets ...... 10-13 §10.3-5 Repair of Estate Assets ...... 10-13 §10.3-6 Funds to Be Used for Expenses ...... 10-14 §10.3-7 Payment of Taxes ...... 10-15 §10.4 INVESTING ESTATE FUNDS ...... 10-16 §10.4-1 Preliminary Considerations ...... 10-16 §10.4-1(a) Scope of Authority to Invest...... 10-16 §10.4-1(b) Sources of Authority to Invest ...... 10-16 §10.4-1(b)(1) Statutory Authority to Invest ...... 10-17 §10.4-1(b)(2) Court Authorization to Invest ...... 10-18 §10.4-1(b)(3) Testamentary Authority to Invest ...... 10-18 §10.4-1(c) Personal Representative’s Liability ...... 10-18 §10.4-1(c)(1) Failure to Invest ...... 10-18 §10.4-1(c)(2) Investing Without a Court Order ...... 10-19 §10.4-1(c)(3) Standard of Care in Investments ...... 10-19 §10.4-2 Practical Considerations in Investing ...... 10-20 §10.4-2(a) Liquidity Problems ...... 10-20 §10.4-2(a)(1) Necessity for Liquidation ...... 10-20 §10.4-2(a)(2) Time of Liquidation ...... 10-20 §10.4-2(a)(3) Consent of Interested Parties ...... 10-22 §10.4-2(b) Common Investment Problems ...... 10-22 §10.4-2(b)(1) Stock Rights ...... 10-22 §10.4-2(b)(2) Fractional Shares ...... 10-22 §10.4-2(b)(3) Shares in Mutual Funds ...... 10-23 §10.4-2(c) Deposit Insurance ...... 10-23 §10.5 BORROWING MONEY ...... 10-24
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§10.5-1 Preliminary Considerations ...... 10-24 §10.5-1(a) Scope ...... 10-24 §10.5-1(b) Statutory Power ...... 10-24 §10.5-2 Fundamental Considerations ...... 10-24 §10.5-2(a) The Decision to Borrow ...... 10-24 §10.5-2(a)(1) Risk of Devaluation ...... 10-24 §10.5-2(a)(2) Business Judgment Necessary ...... 10-24 §10.5-2(b) Basic Problems in Borrowing ...... 10-25 §10.5-2(c) Special Problems in Borrowing ...... 10-25 §10.5-3 Loan Purposes and Procedure...... 10-26 §10.6 TRANSFER OF SECURITIES ...... 10-26 §10.6-1 Introduction ...... 10-26 §10.6-2 Laws Affecting Transfers ...... 10-27 §10.6-3 Mechanics of Transfer ...... 10-30 §10.6-3(a) Transfer to the Personal Representative ...... 10-30 §10.6-3(b) Transfer to a Buyer ...... 10-31 §10.6-3(c) Transfer to a Co-Owner ...... 10-31 §10.6-3(d) Transfer to a Distributee ...... 10-32 §10.7 TRANSFERS OF PROPERTY TO COMPLETE CONTRACTS ...... 10-33 §10.7-1 Definitions ...... 10-33 §10.7-2 General Principles ...... 10-33 §10.7-3 Limitations ...... 10-34 §10.7-4 Method of Transferring Property ...... 10-34 §10.8 SALES, LEASES, AND MANAGEMENT OF REAL PROPERTY ...... 10-35 §10.8-1 Sale of Property ...... 10-35 §10.8-1(a) Notice, Hearing, and Court Order ...... 10-35 §10.8-1(b) Serving Notice of Hearing ...... 10-36 §10.8-1(c) Personal Representative Fails or Declines to Sell Property ...... 10-37
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§10.8-1(d) Sale Subject to Liens ...... 10-37 §10.8-1(e) Voidable Sales ...... 10-37 §10.8-2 Leases of Property ...... 10-38 §10.8-3 Undeveloped Real Property ...... 10-39 §10.8-4 Environmental Contamination ...... 10-39 §10.8-4(a) Federal Superfund Statute (CERCLA) ...... 10-40 §10.8-4(b) Federal Claims Priority Statute ...... 10-41 §10.8-4(c) Oregon Cleanup Statute ...... 10-41 §10.8-4(d) How to Protect the Personal Representative ...... 10-42 §10.9 COLLECTING ESTATE ASSETS ...... 10-43 §10.9-1 Introduction ...... 10-43 §10.9-2 Compromise or Adjustment of Indebtedness to Estate ...... 10-43 §10.9-3 Litigation ...... 10-44 §10.10 CONTINUANCE OR LIQUIDATION OF DECEDENT’S BUSINESS OR VENTURE ...... 10-48 §10.10-1 Scope of Authority and Limitations in Handling Decedent’s Business ...... 10-48 §10.10-2 Ongoing Management of a Business ...... 10-49 §10.10-3 Management or Transfer Issues ...... 10-50 §10.10-3(a) Entity Agreements ...... 10-50 §10.10-3(b) Minority, Noncontrolling Interests ...... 10-50 §10.10-3(c) Buy-Sell Agreements ...... 10-51 §10.10-4 Specific Business Interests ...... 10-51 §10.10-4(a) Private Corporations ...... 10-51 §10.10-4(b) Partnerships ...... 10-52 §10.10-4(c) Limited Liability Companies ...... 10-53 §10.10-4(d) Sole Proprietorships ...... 10-53 §10.10-4(d)(1) Nonprofessional Sole Proprietorships...... 10-53
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§10.10-4(d)(2) Professional Sole Proprietorships ...... 10-53 §10.11 ENCUMBERED ASSETS ...... 10-54 §10.11-1 Introduction ...... 10-54 §10.11-2 Voluntary and Involuntary Encumbrances ...... 10-55 §10.11-3 Responsibilities of Personal Representative ...... 10-55 §10.11-4 Will Provisions ...... 10-57 §10.11-5 Heirs and Encumbrances ...... 10-57 §10.12 UNUSUAL ASSETS ...... 10-57 §10.12-1 Natural Resources ...... 10-57 §10.12-2 Contraband and Firearms ...... 10-58 §10.12-3 United States Savings Bonds ...... 10-59 §10.12-4 Personal Property ...... 10-59 §10.12-5 Appraisal of Unusual Assets ...... 10-60 §10.12-6 Cooperative Apartments or Condominiums ...... 10-60
§10.1 NATURE OF PERSONAL REPRESENTATIVE’S POSITION A personal representative is a fiduciary to both the estate and the interested persons of the estate. ORS 114.265, 114.395. Although a per- sonal representative is not a trustee in the strict sense, his or her liability to interested persons for damage or loss resulting from a breach of duty is the same as that of a trustee of an express trust. ORS 114.395, 130.800–130.810. Personal liability to third parties is that of an agent for a disclosed principal. ORS 114.405(1). A personal representative is not an agent of the decedent. In re Gorday Garment Co., 2 F Supp 162, 164 (D Or 1932), aff’d sub nom. Crocker v. Kay, 62 F2d 391 (9th Cir 1932). See chapter 7, which discusses in greater detail the liability of a personal representative.
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§10.2 PERSONAL REPRESENTATIVE’S POWERS AND DUTIES GENERALLY §10.2-1 Introduction The powers, authority, and duties of the personal representative emanate from the Oregon probate code, the will, and orders of the court. The will and orders of the court may restrict or expand the personal representative’s authority and powers vested by the code. §10.2-2 When Powers Commence The powers, authority, and duties of the personal representative commence on the issuance of letters. See §5.2-7. All relate back in time, however, to the moment of death, to give prior acts of the personal representative the same effect as if they occurred after the issuance of the letters. ORS 114.255. A person designated in a will as a personal representative com- monly participates in the opening of the decedent’s safe-deposit box, arranges for the decedent’s burial, and performs other acts for the benefit of the decedent or the decedent’s estate before the issuance of the letters. See chapter 3. If the transaction undertaken is one that is an authorized trans- action after the issuance of the letters, any third party involved will be protected by the subsequent issuance of the letters. Similarly, a personal representative may ratify and accept acts performed on behalf of the estate by others, if those acts would have been proper for the personal representative to perform. ORS 114.255. §10.2-3 General Duties The general duties of the personal representative are “to preserve, settle and distribute the estate” in accordance with the will (if any) and the probate code, “as expeditiously and with as little sacrifice of value as is reasonable under the circumstances.” ORS 114.265. The personal representative must act reasonably for the benefit of interested persons. ORS 114.305. Upon the issuance of the letters, the personal representative is obligated to embark on the duties without adjudication or order of the 10-6 2012 Revision
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court, unless he or she chooses to apply to the court for authority, approval, or instructions, or unless he or she is precluded by the terms of the will or by a court order obtained by the intervention of an interested person. If requested by the personal representative, the court will autho- rize, approve, or instruct with or without a hearing as the court decides. ORS 114.275. §10.2-4 General Powers In general, the personal representative has the power “to sell, mortgage, lease or otherwise deal with property of the estate without notice, hearing or court order.” ORS 114.325(1). However, the personal representative may not sell property, except after notice, hearing, and order of the court if: (1) the sale contravenes the will, (2) the property is specifically devised and the will does not permit its sale, or (3) a bond increase is needed as provided in ORS 114.325(2)(c). ORS 114.325(2). A person who deals with or assists a personal representative without actual knowledge that the personal representative is improperly exercising his or her power is protected under the probate code “as if the personal representative properly exercised the power.” ORS 114.385. Such a person has no duty (1) to inquire whether the personal repre- sentative is properly exercising his or her power, or (2) to inquire about the provisions of any will or court order that may affect the propriety of the acts of the personal representative. This protection extends to persons dealing with or assisting a personal representative appointed under ORS 113.085 without actual knowledge that the personal repre- sentative was not qualified as provided in ORS 113.095, or that the appointment of the personal representative involved procedural irregu- larity.
EXAMPLE: Although the personal representative is generally empowered to sell property of the estate, if the personal repre- sentative does so in violation of a prohibition in the will or an order of the court, ORS 114.385 protects the person who innocently deals with the personal representative.
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§10.2-5 The Personal Representative’s Authority §10.2-5(a) Under the Probate Code Unless restricted by the will or a court order, a personal representative acting reasonably for the benefit of interested persons is authorized by the probate code to do all things required for the prudent collection, management, and distribution of the assets of the estate. ORS 114.305. Authorized transactions are enumerated in ORS 114.305; they are similar in many respects to the powers of a trustee found in the Uniform Trust Code, ORS 130.650–130.725. §10.2-5(b) Under the Will The testator is, of course, free to enlarge, limit, or restrict the authority of the personal representative. See ORS 114.305.
PRACTICE TIP: In view of the broad powers and authority that the probate code grants to a personal representative, a lawyer should explain carefully to a client who is about to make or alter a will the position, powers, and authority of the personal representa- tive, unless provision is made otherwise in the will. This explana- tion could be accomplished by reviewing with the client certain provisions of the code, particularly ORS 114.225, 114.265, 114.275, 114.305, 114.325, 114.385, 114.395, and 114.405. §10.2-5(c) Acts with Copersonal Representatives When two or more persons are appointed copersonal representa- tives, the concurrence of all the representatives is required for all of the acts pertaining to the administration and distribution of the estate, except: (1) Any one of them “may receive and receipt for property due the estate”; (2) “When the concurrence of all cannot readily be obtained in the time reasonably available for emergency action”; (3) When any others have delegated their power to act; (4) When the will provides otherwise; or (5) When the court otherwise directs. 10-8 2012 Revision
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ORS 114.415(1). A person who deals with a copersonal representative, unaware that another copersonal representative has been appointed, is fully pro- tected under the probate code. ORS 114.415(2).
§10.3 POSSESSION AND CONTROL OF PROPERTY OF THE ESTATE §10.3-1 Introduction On the decedent’s death, the title to the decedent’s property vests in the decedent’s devisees or, in the absence of a will, in the decedent’s heirs, subject to certain rights and interests. ORS 114.215(1). The personal representative, however, has both the right and the obligation to take possession and control of all property in the decedent’s estate. See, e.g., ORS 114.225, 114.265. Early in the process, the lawyer should determine how closely he or she needs to work with the personal representative to gather, value, and manage estate assets. Many persons named as personal repre- sentatives have never been involved in a probate, and most are mourning the loss of a loved one. While significant lawyer involvement may become expensive, some personal representatives are simply inattentive to detail, lack practical sense, or have not handled significant financial matters before. It is therefore imperative that the lawyer assist the personal representative so that he or she does not become his or her own worst enemy. The lawyer should ensure that the personal representative understands the fiduciary duties that he or she is assuming on behalf of heirs, devisees, and creditors. See, e.g., §7.1-3. §10.3-2 Gathering Information The first step that the personal representative should take to determine the scope and breadth of the decedent’s assets is to locate the available agents, advisors, and involved family members (including, obviously, a surviving spouse) to discuss the decedent’s affairs. The personal representative should also go through the decedent’s papers and residence, and should review the decedent’s mail for important
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clues about the decedent’s income, assets, and debts. If the estate will need to file an estate tax return, the personal representative will need detailed information about nonprobate assets payable to named benefi- ciaries, as well as probate assets. See §§3.4-1 to 3.4-2. The decedent’s records may be incomplete, but income tax returns, bank statements, dividend statements, and custodial receipts often reveal bank accounts, investments, and the location of a safe-deposit box. Warehouse receipts are signs that the decedent owned furs, jewelry, or paintings stored elsewhere. Once an initial snapshot of the decedent’s assets has been taken, the personal representative should monitor all correspondence relating to the decedent’s assets. This would include arranging for the decedent’s mail to be forwarded to the personal representative and canceling all subscriptions, unless a surviving spouse or other relative remains in the house who can be trusted to forward relevant mail to the personal representative and to collect newspapers and magazines. If the decedent owned a business, the personal representative should gather relevant documents from the place of business and from the secretary of state of the business’s state of formation (if any). A prudent personal representa- tive should determine the designated registered agent of the business, and either change it to the personal representative (if the decedent had been the prior agent), or contact the current agent to notify the agent of the decedent’s death. Handling business assets is covered in more detail in §§10.10-1 to 10.10-4(d)(2). Finally, early in the process, the personal representative or the lawyer should also inform family members of what the probate process will entail and the length of time it will likely take to complete. The personal representative or the personal representative’s lawyer should also inquire about any special concerns about the estate and desires of the family members to receive particular assets. The more the personal representative knows more about the family’s desires regarding estate assets, the better he or she will be able to judge how and whether to take possession of the assets and then manage them as part of the estate. If the decedent’s family and advisors are not forthcoming or are of little assistance, the probate code sets forth discovery procedures to 10-10 2012 Revision
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enable the personal representative to learn of the existence and location of estate assets. ORS 114.425. Pursuant to ORS 114.425, the court may order any person to appear and give testimony by deposition, if it appears probable that the person: (1) Has concealed, secreted, or disposed of (a) any property of the decedent’s estate, or (b) any writing, instrument, or document per- taining to the estate; (2) Has been entrusted with property of the decedent’s estate and fails to account for it to the personal representative; (3) Has knowledge or information that is necessary to the administration of the estate; or (4) As an officer or agent of a corporation, has refused to allow examination of the books and records of the corporation that the dece- dent had the right to examine. A person who fails to appear or to answer questions asked as authorized by court order is subject to contempt proceedings. ORS 114.425(2). See Forms 10-5 to 10-6. See also chapter 15. §10.3-3 Should Possession Be Taken? The less hazardous course for the personal representative may be to refrain from taking possession of an asset whenever possible, because he or she becomes accountable for the estate assets in his or her possession. ORS 114.225, 116.063. See chapters 7, 11. Presumably, the personal representative is not accountable for assets left in the posses- sion of an heir or a devisee. See ORS 116.063(1); but see ORS 116.063(3)(a), regarding negligent failure to collect assets. Nonetheless, the fiduciary’s responsibility to the estate and to the beneficiaries dictates that when any question exists regarding the safety of the property or the need for the assets to settle the claims of creditors and to administer the estate, the personal representative should ordinarily assume possession of and control over the property. In contrast, a personal representative may wish to permit an heir or devisee to retain or take possession of a motor vehicle, motor boat, or similar item, when (1) it appears that the estate will not need to sell the
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vehicle or boat to satisfy claims or expenses; (2) the heir or devisee will be eligible to receive the vehicle or boat at the close of the estate; (3) the personal representative transfers title to the vehicle or boat to the heir or devisee; and (4) the heir or devisee agrees, in writing, to insure the vehicle or boat and to return it to the estate if the personal repre- sentative later informs the heir or devisee that it is needed to pay claims or expenses. Form 10-1 is an example of a custody receipt. Alternatives to delivery by custody receipt are (1) selling the property to the heir or devisee, in exchange for a note for the value (that can later be distributed to the heir or devisee after an order for distribu- tion is taken); or (2) keeping possession during probate, but disabling the vehicle or other property.
COMMENT: The personal representative should be wary of distributing a vehicle or similar item to an heir or devisee by custody receipt, if the personal representative knows, or should know, that the heir or devisee has a bad driving record. Distribu- tion to such a person could arguably give rise to a claim for negligent entrustment. Instead, if the heir or devisee will ultimately end up with the vehicle, the personal representative should wait until distribution is protected by a court judgment of distribution. Even if the heir or devisee has a good driving record, the personal representative may have some potential liability if the heir or devisee is involved in a collision. Before distributing the vehicle or a similar item, the personal representative should update the insurance as described in §10.3-4. Any pet of a decedent with a value of less than $2,500 need not be listed on the inventory of the estate and, therefore, taking possession of any such pet is unnecessary. ORS 114.215(3). A relative or friend of the decedent or an animal shelter may take custody of the pet imme- diately on the decedent’s death. The person who takes custody of the pet is entitled to payment from the estate for the cost of caring for the pet. On request, the person must deliver the pet to the personal representa- tive or to any heir or devisee entitled to its possession. ORS 114.215(3).
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§10.3-4 Insuring Estate Assets The personal representative is authorized to insure assets of the estate against damage or loss, ORS 114.305(13), and his or her failure to obtain such insurance may constitute negligence, ORS 114.405(3), 116.063(3)(g). Until distribution of an asset is made with court approval, the personal representative should insure all estate property, whether or not in the possession of the personal representative. The personal representative should ensure that the estate is named as an additional insured, even if an asset is held in a revocable trust created by the decedent. When personal property of the estate is a motor vehicle, the personal representative should review the vehicle insurance coverage and keep it in force, or the title should be transferred to the beneficiary of the vehicle by custody receipt, as described in §10.3-3. A motor vehicle is potentially a large liability risk for the estate. Under most vehicle insurance policies, the personal representative becomes the named insured until the next renewal date. At the renewal date (if title has not been transferred to the devisee or heir), the personal representa- tive and any person driving the car should be designated as the named insured and additional driver, respectively. Most estates will also have real property that should be insured, and the personal representative should be aware of the difficulty and additional expense of insuring a decedent’s unoccupied residence. Many homeowners’ insurance policies do not cover an unoccupied dwelling. The personal representative should check with the decedent’s insurance agent promptly if the house is to be left vacant. The personal representa- tive may also consider allowing a family member to remain in the house as a caretaker, to preserve both the assets in the dwelling and the insurance on the house and its contents. §10.3-5 Repair of Estate Assets The personal representative is charged with the duty to preserve the estate. ORS 114.265. This charge probably imposes a duty to make such repairs as are required to preserve the estate assets. Conceivably, preservation of estate assets could involve repairs or improvements
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greater than the ordinary. However, the probate code provides for the allocation of income to make “ordinary repairs.” ORS 116.007(2)(a). The implication is that only ordinary repairs, not improvements, are per- mitted. See In re Stout’s Estate, 151 Or 411, 423, 50 P2d 768 (1935).
PRACTICE TIP: When it is unclear whether the personal representative should invest estate money for substantial repairs or improvements, the personal representative should seek court instructions or the informed consent of all of the interested parties. §10.3-6 Funds to Be Used for Expenses The decedent’s will may provide direction to the personal representative about what assets of the estate bear the estate’s expenses (e.g., the residue). However, if the will is silent on this issue, then the statutes direct the personal representative to pay all expenses of administration from the “principal” of the estate. ORS 116.007. Without direction from the will, the personal representative must determine how each estate asset that is included in the definition of “principal” of the estate should bear expenses, because different classes of gifts are treated differently. ORS 116.007(2)(a) specifically provides that expenses related to the operation of specifically devised property should be deducted from the income received from such property. ORS 116.007(2)(b) provides that all other devises (except nonmarital, out- right pecuniary devises, such as a credit-shelter bequest) should proportionately bear all of the other expenses of the estate management. This default statutory allocation is buttressed by the Uniform Principal and Income Act, ORS chapter 129. Some administration expenses that are related to specifically bequeathed property may reasonably be a general administration expense, instead of an operational expense allocated to such property’s income (e.g., boundary-line issues related to real property). The personal representative should review the will and the default statutes, as well as the type of expense, to understand how best to keep track of expenses.
PRACTICE TIP: The personal representative must separately keep track of all of the income and expenses of separately bequeathed property. For rental property, the personal representa-
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tive should consider maintaining a separate bank account for the property, or creating a separate single-member LLC (owned by the estate) to hold the rental property during the period of administra- tion. The personal representative should also consider distributing specifically devised property to the devisees by means of a petition for partial distribution to eliminate the problem of property that cannot carry its own expenses. See ORS 116.013. §10.3-7 Payment of Taxes The personal representative “is chargeable in the accounts of the personal representative” and may be liable for all of the property coming into his or her possession. ORS 116.063(1). The personal repre- sentative has a duty to pay taxes that accrue on the property and its income for the period that the property is in the representative’s possession. In re Banfield’s Estate, 137 Or 256, 281, 3 P2d 116 (1931). In addition, the personal representative may be liable for any loss to the estate arising from failure to pay taxes as required by law. ORS 116.063(3)(c). ORS 115.125, which sets forth the order of payment of expenses and claims, places in fourth priority taxes with preference under federal law, and places in sixth priority those taxes with preference under Oregon law that are due and payable while possession of the decedent’s estate is retained by the personal representative. The personal repre- sentative should begin preparing to raise cash to pay all of the necessary taxes as soon as possible during the administration of the estate. If necessary, the personal representative may need to sell assets, borrow funds, or request an extension of time to pay certain taxes (if available). ORS 116.113(2) provides that the personal representative is not entitled to approval of the final account until all Oregon income and personal property taxes have been paid “and appropriate receipts and clearances therefor have been filed,” or until payment of those taxes has been secured by bond, deposit, or otherwise. See chapter 11. However, the courts do not actually require the filing of “receipts and clearances” for the taxes. See ORS 116.083(3)(a), which requires only that the final account include a statement that the taxes have been paid, “or if not so
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paid, that payment of those taxes has been secured by bond, deposit or otherwise, and that all required tax returns have been filed.” A personal representative should not distribute all of the property of the estate without evaluating whether all of the decedent’s taxes have been paid, including taxes related to real property and business interests. If the estate is taxable for Oregon inheritance tax purposes, the personal representative should complete a Request for Discharge from Personal Liability for Oregon Inheritance Tax. See
§10.4 INVESTING ESTATE FUNDS §10.4-1 Preliminary Considerations §10.4-1(a) Scope of Authority to Invest The personal representative’s authority to invest estate funds and, equally important, the limitations on that authority, are set forth in ORS 114.305(6). Estate funds cannot be managed appropriately, however, without an understanding of the cash needs of the estate. See §10.4- 2(a)(1). §10.4-1(b) Sources of Authority to Invest A personal representative has the duties of a trustee in managing the estate’s investment securities, but with a short-term focus. The sources of a personal representative’s investment authority are Oregon
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law, particular authorizations from a court, and the language in the will. See §§10.4-1(b)(1) to 10.4-1(b)(3). §10.4-1(b)(1) Statutory Authority to Invest In Oregon, two basic sources of law pertain to estate investing: ORS 114.305(6) and the Uniform Prudent Investor Act, ORS 130.750– 130.775. ORS 114.305(6) authorizes a personal representative to: Deposit funds not needed to meet currently payable debts and expenses, and not immediately distributable, in bank or savings and loan association accounts, or invest the funds in bank or savings and loan association certificates of deposit, or federally regulated money- market funds and short-term investment funds suitable for investment by trustees under ORS 130.750 to 130.775, or short-term United States Government obligations. ORS 130.750–130.775 is Oregon’s version of the Uniform Prudent Investor Act. See generally Jonathan Levy, Uniform Prudent Investor Act in Oregon, OSB EST PLAN & ADMIN SEC NEWSLTR, Jan 1999, at 1; ADMINISTERING TRUSTS IN OREGON ch 9 (Oregon CLE 2007). In addition, a personal representative may (1) vote stocks or other securities; (2) pay calls, assessments, and other sums chargeable or accruing from securities; (3) sell or exercise stock subscription or con- version rights; and (4) hold securities in the name of a nominee—all without specific court order. ORS 114.305(8)–(10), (12). However, the personal representative has no authority to buy securities or similar obligations unless a will or court order so authorizes. Other statutes outside the probate code permit executors or administrators to invest in certain specified investments. These include investments in real property mortgages insured by the Federal Housing Administration (ORS 86.620).
COMMENT: Although the considerations set forth in ORS 130.775 appear to broaden the scope of a personal representative’s investment powers, as opposed to the words of limitation in ORS 114.305(6), a personal representative should avoid investments that tend to fluctuate in value rapidly or widely.
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§10.4-1(b)(2) Court Authorization to Invest A personal representative may apply to the court for authority, approval, or instructions on any matter concerning the administration of the estate. The court may instruct or rule, with or without a hearing, as may be appropriate. ORS 114.275.
PRACTICE TIP: The prudent personal representative will obtain court authorization for investing estate funds in any form of investment other than one specifically authorized by ORS 114.305(6). A request for investment authority should not ask the court what to invest in, because the court has neither the time nor the special qualifications necessary to pass on the wisdom of specific investments. Likewise, a request for an order directing investment is inappropriate; the petition should merely ask the court to authorize such an investment. §10.4-1(b)(3) Testamentary Authority to Invest The personal representative may perform all lawful acts required or permitted by the decedent’s will. ORS 114.305(26). Thus, the will may grant to the personal representative investment authority that is broader than that authorized by statute. §10.4-1(c) Personal Representative’s Liability §10.4-1(c)(1) Failure to Invest When possible, a personal representative should invest surplus estate funds to earn interest, both as a general rule and, in particular, when the will includes general pecuniary devises. When a power or a duty to invest exists, but the personal repre- sentative fails to invest surplus funds, the personal representative may be surcharged with the interest that he or she might have obtained on those funds. 34 CJS Executors and Administrators §229 (1998); see Fitchard v. Hirschberg’s Estate, 128 Or 317, 329, 274 P 505 (1929); Estate of Bruner, 456 Pa Super 705, 691 A2d 530 (Pa Super Ct 1997); In re Estate of Perry, 157 Vt 650, 597 A2d 796 (1991). But see Matter of Steinberg’s Estate, 34 Or App 293, 578 P2d 487 (1978) (a personal representative who kept more funds than ultimately were needed in
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noninterest-bearing account, but with most of the liquid assets in a savings account, was not surcharged for loss of interest). Under ORS 116.143, general pecuniary devises, which are not entitled to a share of income, bear interest at a discount rate based on the 91-day U.S. Treasury bill auction, beginning one year after appoint- ment of the personal representative until payment, unless a contrary intent is evidenced in the will or unless otherwise ordered by the court. Discount rate means “the auction average rate on 91-day United States Treasury bills, as established by the most recent auction of these Treasury bills and as reported by the United States Department of the Treasury, Bureau of the Public Debt.” ORS 116.143(1). The discount rate is to be determined, with reference to the most recent auction date, before May 15 and before November 15 of each year. ORS 116.143(1). If payment of general pecuniary devises will be delayed, the personal representative should appropriately invest idle funds to meet the payment of such interest. §10.4-1(c)(2) Investing Without a Court Order If a personal representative makes an investment that is complained about later, the fact that he or she did not obtain a court order authorizing the investment is immaterial, if the investment is in accordance with the law. 31 AM JUR2D Executors and Administrators §369 (2002). See Annot, Liability of Trustee, Guardian, Executor, or Administrator for Loss of Funds as Affected by Failure to Obtain Order of Court Authorizing Investment, in Absence of Mandatory Statute, 116 ALR 437 (1938). This result should follow from the Oregon probate code, which authorizes personal representatives to act, subject to listed exceptions, without prior court authorization. See ORS 114.275, 114.305(6). §10.4-1(c)(3) Standard of Care in Investments In making investments, a personal representative acts as a trustee. 31 AM JUR2D Executors and Administrators §497 (2002); 34 CJS Executors and Administrators §224 (1998); see ORS 114.395. As such, a personal representative does not act at his or her peril in making investments, but must act only as a prudent investor. Compliance with
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the prudent investor rule is not determined by hindsight. Rather, it is determined in light of the facts and circumstances existing at the time of the trustee’s decision or action. ORS 130.770. In other words, trustees are not insurers. Uniform Prudent Investor Act §8 comment (available online at
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should work with the family, to the extent reasonable, to understand continued investment in, or maintaining status-quo holdings in, the business. Clearly, when the estate portfolio is not diversified, the personal representative should move quickly to sell concentrated holdings. See ORS 130.760, 130.765. Even with a diversified portfolio, the personal representative should strongly consider liquidating stocks, unless all of the heirs and devisees have given informed consent, or special language in the will authorizes retention. This cautious approach is based on the short-term focus of estate investing, the volatility of the stock market, and the stepped up basis for appreciated stock that should eliminate substantial capital-gain taxes on the sale. Statistics from three market downturns illustrate the stock market’s short-term volatility. The Dow Jones Industrial average dropped 89% from September 1929 through July 1932. JEREMY SIEGEL, STOCKS FOR THE LONG RUN 28 (1994). During the bear market of 1973 to 1974, the “Nifty Fifty,” a group of growth stocks favored by institutional investors, lost 80% in value from their peak. BRUCE TEMKIN, THE TERRIBLE TRUTH ABOUT INVESTING 115 (1999). The S&P 500 index fell 56.78% between October 9, 2007 and March 9, 2009. 2010 IBBOTSON SBBI CLASSIC YEARBOOK, at 13. Similarly, the personal representative should consider selling intermediate and long-term bonds, which may lose substantial value if interest rates rise. See Frank Fabozzi, Mark Pitts & Ravi Dattatreya, Price Volatility Characteristics of Fixed Income Securities, in THE HANDBOOK OF FIXED INCOME SECURITIES ch 5 (5th ed 1997). Other risks of bonds include the risk of default or downgrade of their ratings. See Ravi Dattatreya & Frank Fabozzi, Risks Associated with Investing in Fixed Income Securities, in THE HANDBOOK OF FIXED INCOME SECURITIES ch 3 (5th ed 1997). When the cash needs are known, the question of the timing for liquidation must also take into consideration the effect of liquidation on the use of the alternate valuation date for estate tax purposes. An asset sold during the six-month period after the date of death must be valued
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at its sale price if alternate valuation is selected; declines in value, although saving estate tax, also reduce the total value of the estate. Treas Reg §20.2032-1(a)(1). See §12.__. The lawyer for the personal representative should avoid giving investment advice, which is not covered by the Oregon State Bar’s Professional Liability Fund. See OSB Professional Liability Fund 2012 Claims Made Plan §V, 9. The lawyer should encourage a personal repre- sentative who lacks investment expertise to hire an outside investment manager. See RESTATEMENT (THIRD) OF TRUSTS §80 comment a & §90 comment j (2007) (a trustee who lacks necessary investment expertise may be liable for his or her failure to delegate). §10.4-2(a)(3) Consent of Interested Parties Either theory described in §10.4-2(a)(2) is open to criticism by estate beneficiaries when using hindsight. Therefore, if practicable, the personal representative should consult with, and obtain the consent of, beneficiaries regarding any major plan of liquidation and temporary investment. Creditors may also have a definite interest in the liquidation of estate assets, particularly when solvency of the estate may be an issue. §10.4-2(b) Common Investment Problems §10.4-2(b)(1) Stock Rights Stock rights represent the privilege of acquiring, at an advan- tageous price, additional shares of corporate stock, usually requiring the payment of a stipulated sum in cash. Stock rights are often issued on securities held by an estate. These rights have a market value. The time within which they can be exercised or sold is usually limited to a few days or weeks. Under ORS 114.305(10), the personal representative may sell or exercise stock subscription or conversion rights without court approval. §10.4-2(b)(2) Fractional Shares Akin to the problems connected with exercising stock rights are those involved in “rounding out” into full shares fractional shares of stock held by or issued to the estate. If the fractional shares result from
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the exercise of stock rights, the acquisition of additional shares would be permissible under ORS 114.305(10). In this respect, the estate is retain- ing its interest in the issuing company. §10.4-2(b)(3) Shares in Mutual Funds Administrators of mutual investment funds must distribute sub- stantially all of the capital gains to their shareholders, to avoid having income taxes levied against them. Shareholders usually have the option to receive either cash or additional shares of stock. Frequently, additional shares of stock are automatically received unless the holder makes a specific request for payment in cash. ORS 114.305(10) appears broad enough to cover this situation. Corporate fiduciaries ordinarily elect to receive the cash, on the theory that to receive the shares is tantamount to an unauthorized invest- ment of the estate funds, which may give rise to personal liability unless court approval is obtained. The usual procedure is to notify the company on the form provided for that purpose of the election to receive cash. Receipt of the cash is detailed in the next estate accounting to the court. §10.4-2(c) Deposit Insurance The personal representative should also keep in mind that deposit insurance coverage of an estate’s deposits in any single bank, savings and loan association, or credit union is limited. The recent mortgage crisis has led to an increase in bank failures, demonstrating the need for insurance of deposits from the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Insurance Fund. The insurance limit is now $250,000 for most bank and credit union accounts. See
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§10.5 BORROWING MONEY §10.5-1 Preliminary Considerations §10.5-1(a) Scope Sections 10.5-1(a) to 10.5-3 summarize some of the matters that a fiduciary should consider before borrowing money. §10.5-1(b) Statutory Power ORS 114.305(14) authorizes personal representatives to advance or borrow money, with or without security, when acting reasonably and for the benefit of interested persons. The right to borrow is subject to the basic test of whether borrowing money appears to be to the advantage of the estate and the beneficiaries. See ORS 114.265. §10.5-2 Fundamental Considerations §10.5-2(a) The Decision to Borrow §10.5-2(a)(1) Risk of Devaluation Within the first few months of estate administration, after deter- mining the cash needs of the estate, the personal representative should generally reduce sufficient assets of the estate to cash or cash equiva- lents, to provide for the payment of debts, taxes, pecuniary bequests, and expenses of administration. This practice minimizes the risks of devaluation of the estate assets, and avoids speculation with estate assets. If the estate contains sufficient liquidity, borrowing will not be necessary. §10.5-2(a)(2) Business Judgment Necessary A personal representative’s decision to borrow money may be based on a business-judgment test; that is, whether an estate asset might best be preserved by borrowing against the asset instead of selling it, keeping in mind the best interests of the beneficiaries of the estate. If the decision to borrow is supported and ratified by court approval, the personal representative will be more comfortable in electing to borrow. Even when court approval is available, the personal representative should present the borrowing versus sale choice to beneficiaries, and secure their written consent, approval, or instruction.
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PRACTICE TIP: When an existing loan is overdue, or should be extended or renewed, or when collateral for a secured loan should be substituted, the personal representative should secure an appropriate court order authorizing or approving the action. §10.5-2(b) Basic Problems in Borrowing Personal representatives must be cognizant of the risks involved in repaying a loan, particularly the risk of a drop in the market value of an asset to be used for repayment. The marketability of estate assets, such as real property or crops, may also be problematic. Fiduciaries should ordinarily avoid speculating with estate assets. Speculation can be implicit both in holding assets that are likely to fluctuate widely in value, and in creating, increasing, extending, or continuing loans made on the pledge of such assets. Sharp declines in the value of securities and property can occur quickly. §10.5-2(c) Special Problems in Borrowing Problems beyond the scope of this chapter arise when an estate includes assets such as (1) securities in a closely held corporation, or (2) a going business that needs substantial loan capital. In both situa- tions, an appraisal of the value of the business is probably required to determine the wisdom of increasing, extending, or continuing loans. A fiduciary is often required to consider the effect of a loan on the often-conflicting interests of remainder and income beneficiaries. The personal representative must recognize the effect on an estate of the sale of an asset, which may give rise to taxable gains or losses. On the other hand, although borrowing against an estate asset is not a taxable event, a loan gives rise to problems associated with making loan and interest payments out of current income. When the estate is to pass to a sole heir or devisee, a prudent personal representative will consider that person’s wishes. In any loan, secured or unsecured, the fiduciary must limit liabil- ity for repayment to the estate only and, preferably, to the estate asset given as security for the loan.
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PRACTICE TIP: Certain sources of cash are frequently avail- able for estate borrowing. Irrevocable life insurance trusts and life insurance proceeds payable to beneficiaries of the decedent are often intended to provide liquidity outside of probate. However, if no liquidity is available to the estate, the personal representative may apply for a hardship deferral of federal estate taxes. IRC §6161. The hardship deferral must be applied for and granted one year at a time, for up to 10 years. IRC §6161(a)(2). In addition, if qualified, the personal representative may elect to defer the payment of a closely held business-related portion of federal estate tax for up to 14 years. IRC §6166. The estate may pay interest at a rate of 2% on certain portions of the business-related estate tax extended under IRC §6166, and the hardship deferral interest rates are often higher. IRC §6601(j). Estates that must defer the payment of federal tax may also qualify for an Oregon inheritance tax deferral for the same period as the federal deferral, but the interest rates on the Oregon tax deferral are not special rates and are often much higher than the federal rates. §10.5-3 Loan Purposes and Procedure Although a personal representative has limited investment powers (see §§10.4-1(a) to 10.4-2(b)(3)), most of the objectives of a decedent’s estate can be realized by the personal representative’s borrowing of money under ORS 114.305(14), or through loans made in the continued operation of a business under ORS 114.305(21), if a sale of assets is not indicated.
§10.6 TRANSFER OF SECURITIES §10.6-1 Introduction Today, marketable securities held by estates are typically held in book-entry form by brokerages and other custodians. To manage the estate’s securities, the personal representative must obtain an estate EIN (employer identification number), open a new estate brokerage account, and transfer the securities to the new estate account. Thereafter, the
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personal representative may sell the estate securities or hold them for distribution of cash to the beneficiaries, or, if distribution of the securit- ies will occur in-kind, the personal representative may direct the broker to transfer the securities from the estate brokerage account to each beneficiary’s own brokerage account. However, in some cases, the decedent might own securities in certificate form, which may require additional steps to transfer the securities into the name of the personal representative or the beneficiaries. In these situations, the lawyer should understand the problems involved in transferring certificated shares to heirs and devisees. Sections 10.6-2 to 10.6-3(c) discuss the problems and mechanics of transferring and reissuing certificated securities. Section 10.6-3(d) discusses general issues related to the transfer of certificated or book- entry securities. §10.6-2 Laws Affecting Transfers The transfer of certificated securities is an internal matter of the issuing corporation, governed by the laws of the state in which the company is incorporated. The issuing corporation (the “issuer”), however, must also take into account the laws of the state in which the estate is administered. The laws of the state of administration determine the rights, powers, and authority of the estate representative and they further determine the requirements and procedures to be followed to transfer the securities from the estate to the beneficiaries. Therefore, for Oregon purposes, the Oregon probate code and the Oregon Uniform Commercial Code (UCC) govern the transfer of securities of an Oregon corporation from an Oregon estate. Assuming that the personal repre- sentative has been appointed and is transferring the securities in accordance with his or her duties, ORS chapter 78 determines what docu- ments a transfer agent or issuer may require. The issuer will register the transfer of a security as requested, if the requirements set forth in ORS 78.4010 are met. An indorsement or instruction must be made by the appropriate person, or by an agent who has actual authority to act on behalf of the appropriate person. ORS 78.4010(1)(b). In the case of a transfer from an
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estate, the indorsement or instruction is done by the personal representa- tive on behalf of the estate. See ORS 78.3040, regarding indorsements. Reasonable assurance, as described in ORS 78.4020, must be given that the indorsement or instruction is genuine and authorized. ORS 78.4010(1)(c). A person who guarantees the signature of an indorser of a security certificate warrants that the signature is genuine, that the signer is an appropriate person to indorse, and that the signer has the legal capacity to sign. ORS 78.3060. A guarantee may be made by an officer of a bank or by a broker who is a member of a recognized national stock exchange. The guarantee is usually stamped on the instrument of assignment, below or near the indorsement.
CAVEAT: The personal representative should not confuse a notary public with a guarantor of a signature. The indorsement of a notary is not the same as a signature guarantee, and is not sufficient. When the indorsement is made by a fiduciary, he or she must furnish appropriate evidence of appointment or incumbency. ORS 78.4020(1)(c). For a personal representative, appropriate evidence of appointment would be certified copies of letters testamentary or letters of administration (or other certificate) bearing a date of issuance within 60 days before the request for transfer. ORS 78.4020(3)(b). The letters are obtained from the clerk of the probate court. If the estate includes a number of certificated shares, the cost of those letters may be sub- stantial. The cost may be reduced by requesting the return of the certified copy of letters, although the 60-day requirement usually limits their use for further transfers. Photocopies are usually not acceptable.
PRACTICE TIP: In view of the 60-day requirement, the number of certified copies of letters requested at the inception of administration of the estate should be limited to those immediately required.
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PRACTICE TIP: Former ORS 118.320 required the Depart- ment of Revenue to consent prior to a transfer. Although the statute was repealed in 1987, some transfer agents may still request such a consent. The 2003 Legislature reinstated an inheritance tax in Oregon (see 2003 Or Laws ch 806), but did not reinstate ORS 118.320. Although the probate code contains a provision intended to deal with the problem of excessive documentation (see ORS 114.375), few transfer agents will alter their requirements for documentation, which are controlled by the UCC. If the issuer is an Oregon corporation, the requirements of transfer will undoubtedly be based on the laws discussed above. If, however, the issuer is located in another jurisdiction, that jurisdiction’s requirements for transfer may be different. If the UCC or the Uniform Act for Simplification of Fiduciary Security Transfers is in effect in that jurisdiction, the requirements of transfer should include those already discussed. But if neither of those acts has been adopted, some variations of those requirements may exist. The direct transfer of securities is effected through the secretary of the issuing corporation or its transfer agent, either of whom can advise the personal representative on the required documentation. Many transfer agents use printed lists of requirements covering all types of transfer. Additional requirements may include one or more of the follow- ing: (1) Some states impose a tax on the transfer of securities by a resident. Accordingly, an affidavit of residency, also known as an affidavit of domicile, is also required. Such an affidavit is furnished in lieu of an inheritance tax release or waiver when the decedent is a nonresident of that state. (2) Some transfer agents take the position that they must be satisfied that the security has been listed in the inventory of the estate. Therefore, they require certified copies of the inventory.
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(3) A certified order of the court may be required. (4) If the personal representative of the estate is a corporation, a certified copy of the resolution designating and authorizing the officer of that corporation to effect the assignment may be requested. (5) Rarely, a certified copy of the will of a decedent who died testate may be required. (6) If the transfer agent has knowledge of an impropriety in the transfer, or if an adverse claim has been lodged with the transfer agent or the issuer, additional requirements may be imposed. (7) A certified copy of the death certificate is sometimes required. §10.6-3 Mechanics of Transfer The steps and documents required to effect the transfer of a certificated security vary somewhat with the circumstances attending the transaction involved. A corporate fiduciary might be able to enter into an indemnification agreement with a transfer agent to reduce or eliminate the use oF Supporting documents. Unless that is done, the documents required in the more common situations would be as set forth in §§10.6-3(a) to 10.6-3(d). §10.6-3(a) Transfer to the Personal Representative Securities in the name of the decedent should not be retained in the decedent’s name if they have any significant income attributes, because the allocations between the fiduciary income tax return and the decedent’s final return will be more complicated and subject to error. The most efficient way to avoid the problem of interest and dividends being reported on the Social Security number of a decedent, instead of on the employer identification number (EIN) of the estate, is to move all of the certificated securities in the decedent’s name into a brokerage account in the name of the estate, where they can be held in street name (or book-entry) form. The transfer costs will be reduced or eliminated entirely by doing so; the proper EIN will be attached to all dividends, interest, and capital gains or losses; and the securities will be simple to transfer to the ultimate distributees.
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§10.6-3(b) Transfer to a Buyer If the personal representative sells certificated securities and if no court order authorizing the sale exists, the delivery of the following documents to the transfer agent should be sufficient to effect the transfer in the usual situation: (1) The security; (2) The assignment and power properly signed with the signature guaranteed; (3) A certified copy of letters; and (4) If appropriate, an affidavit of domicile of the decedent. If a court order authorizing or ordering the sale exists, the follow- ing documents, in addition to those listed above, should be furnished: (1) A certified copy of the court order; and (2) A certified copy of the bill of sale showing compliance with the court order by sale in the manner, for the price, and on the terms and conditions set forth therein. §10.6-3(c) Transfer to a Co-Owner The certificated security may be registered in the name of the decedent and one or more persons in the following situations: (1) If the security is registered in the name of the decedent and another person as joint tenants or with right of survivorship, the only step required is to effect the relinquishment of the decedent’s interest. The following documents should be submitted to the transfer agent: (a) a certified copy of the death certificate, (b) the security certificate, (c) the assignment and power signed by the survivor with the signature guaranteed, and (d) an affidavit of domicile of the decedent, if appropriate. (2) If the security is registered in the name of the decedent and one or more other persons as tenants in common, the only variations from the requirements applicable to joint tenants, discussed above, are that (a) the assignment and power must be signed by the decedent’s personal representative and each of the surviving co-owners, with all of 10-31 2012 Revision
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the signatures guaranteed, and (b) the security must be accounted for in the probate proceeding. (3) If the decedent was a life tenant, registration in the name of the remainderholder is accomplished by furnishing the transfer agent with a certified copy of the death certificate and a certified copy of the instrument creating the life estate and showing the name of the remainderholder. §10.6-3(d) Transfer to a Distributee If securities are to be transferred pursuant to an order for partial distribution or a judgment of final distribution, specific information should be included in the order or judgment to allow for the easy transfer of such securities. In some cases, ownership of the securities will need to be transferred to persons other than named devisees or intestate heirs, for example, when (1) a devisee or an heir has died and a new person has succeeded to the estate interest, (2) a devisee or heir has changed his or her name due to marriage or divorce, (3) the persons entitled to the estate have entered into an agreement about estate distribution pursuant to ORS 116.113(3), or (4) the devisees or heirs have agreed to a non-pro rata distribution of the estate. The order or the judgment should explain how and why the actual distribution varies from the will or the intestate shares, and the explanation should be sufficient to justify the actions of the transfer agent or broker relying on the judgment or order. Even then, additional documents may be required. In a normal distribution of certificated securities, the following documents should be forwarded to the transfer agent: (1) a certified copy of the order or judgment in which the distribution is described, (2) the security certificates, (3) the assignment and power signed by the personal representative with the signature guaranteed, (4) a certified copy of letters, and (5) an affidavit of domicile, if appropriate. For securities that are held in street name, a letter of instructions from the personal representative to the brokerage detailing how to distribute the securities in the estate account, together with current (within 60 days) letters testamentary or letters of administration, is
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normally all that the broker requires. The broker should also require a copy of the court order or judgment. If a brokerage account is frozen (to reduce the amount of the bond or in the case of an estate dispute), a certified copy of the order unfreezing the account must also accompany the letter of instructions.
PRACTICE TIP: Many brokers charge a set fee to transfer certificated securities. The personal representative or lawyer should ask several reputable brokers or corporate fiduciaries what they would charge. Generally, the personal representative or lawyer can find a broker who will effect these security transfers for substantially less cost and less effort than a lawyer or legal assis- tant. On the other hand, the transfer of securities in-kind from the estate account to an account or accounts in the names of the distributees is usually cost-free, if done in street names.
§10.7 TRANSFERS OF PROPERTY TO COMPLETE CONTRACTS §10.7-1 Definitions For purposes of the discussion in §§10.7-2 to 10.7-4, the follow- ing definitions apply: (1) A transfer is an act of the personal representative by which the title to the decedent’s property is conveyed; (2) Property includes both real property and personal property; and (3) A contract is an agreement of the decedent. §10.7-2 General Principles Except as restricted or otherwise provided in the will or by court order, a personal representative, acting reasonably for the benefit of interested persons, is authorized to complete, compromise, or refuse performance of the decedent’s contracts that continue as obligations of the estate. ORS 114.305(4).
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§10.7-3 Limitations Only enforceable contracts of the decedent are to be performed by the personal representative. If the contract was not enforceable against the decedent during his or her lifetime, the personal representative has the right and duty to refuse performance. See ORS 114.305(4).
PRACTICE TIP: In deciding whether a contract is enforceable, the personal representative should determine the existence of any bar, including the decedent’s discharge in bankruptcy, a statute of limitations, the lack or failure of consideration, incompetency, laches, prior performance, accord and satisfaction, the existence of other security, or any other matter that would abrogate the dece- dent’s or the estate’s liability under the contract. If the estate has exposure to litigation and possible liability, the personal representative may compromise the matter. ORS 114.305(4). The personal representative who is uncertain in any case about whether to complete or to refuse to complete a contract, or to negotiate a compromise, should petition the court for instructions on the matter and authority to act. ORS 114.275. See Form 10-2. §10.7-4 Method of Transferring Property Except when a personal representative elects to seek court instructions and authority to complete a decedent’s contract, the per- sonal representative makes a transfer by executing and delivering a deed, bill of sale, assignment, note, mortgage, or other appropriate instrument of conveyance. For a proper designation of the personal representative as a grantor, mortgagor, etc., see PRINCIPLES OF OREGON REAL ESTATE LAW §6.26 (Oregon CLE l995 & Supp 2003). If the decedent’s contract calls for part payment and a mortgage, trust deed, or security agreement for the balance, the personal repre- sentative has the authority to execute such instruments on behalf of the estate. ORS 114.325(1). See Form 11-6. The personal representative may deliver a deed in escrow with directions that the proceeds, when paid in accordance with the escrow
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agreement, be paid to the successors of the decedent as designated in the escrow agreement. ORS 114.305(4)(b). If a contract of the decedent to be completed by the personal representative is for a sale of real property, and a fulfillment deed is required, a warranty deed may be required. If the contract calls for a “good and sufficient deed,” a special warranty deed may be required. A personal representative’s deed, however, may be acceptable to the buyer in such cases, and such a deed should always be used for sales of real property initiated by the personal representative. See DOCUMENTATION OF REAL ESTATE TRANSACTIONS Form 5, §12 (OSB Legal Pubs 2008); PRINCIPLES OF OREGON REAL ESTATE LAW ch 6 (Oregon CLE 1995 & Supp 2003).
PRACTICE TIP: If the decedent’s contract calls for a warranty deed (or a special warranty deed), the personal representative should consider obtaining a preliminary title report and furnishing an owner’s title insurance policy.
CAVEAT: Unless the completion of the contract is being closed in escrow, the personal representative should be certain that any personal checks to the personal representative or the estate have been certified by the drawee bank before instruments of conveyance are delivered.
§10.8 SALES, LEASES, AND MANAGEMENT OF REAL PROPERTY §10.8-1 Sale of Property §10.8-1(a) Notice, Hearing, and Court Order In general, a personal representative may sell property of the estate without notice, hearing, or court order. ORS 114.325(1). How- ever, notice, a hearing, and a court order are required if: (1) The sale is in contravention of the provisions of the will; (2) The property is specifically devised and the will does not authorize its sale; or
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(3) A required bond has not been increased to cover the amount of cash realized on a sale when the sale price exceeds $5,000. ORS 114.325(2).
PRACTICE TIP: If the amount of the bond must be increased for a sale, the personal representative is required to obtain the increase-rider for the existing bond, and an application to the court for an order for that purpose is not necessary. The bond or increase-rider, when filed, should be approved by the court. The word Approved, with a line for the signature of the judge and date, can be written on the bond or rider, and is sufficient. See Forms 10-3 and 10-4. Supplementary local rules (SLRs), such as SLR 9.021 (Douglas County), may require corporate surety bonds when the personal representative exercises his or her power of sale. The SLRs are available online at
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In testate situations when the sale is contrary to directions in the will, or the sale is of property specifically devised, or the bond, if any, is not increased by the amount of the sale (see ORS 114.325(2)), the notice should be given to both the heirs and devisees until the period for contesting the will has expired (see ORS 113.075), and thereafter to the devisees.
CAVEAT: These requirements apply to sales of both real property and personal property, and the word devisees includes legatees. ORS 111.005(12), (27). §10.8-1(c) Personal Representative Fails or Declines to Sell Property If the sale of property of the estate is required for payment of spousal or child support, the elective share of the surviving spouse, claims, or expenses of administration, or for distribution, and the per- sonal representative fails or declines to sell the property, the court, on satisfactory proof by an interested person, may order the personal representative to make the sale. ORS 114.335. §10.8-1(d) Sale Subject to Liens Property sold by a personal representative is subject to liens and encumbrances against the decedent or the decedent’s estate, but it is not subject to the rights of creditors of the decedent or liens or encum- brances against the decedent’s heirs or devisees. ORS 114.345. §10.8-1(e) Voidable Sales A sale to the personal representative or to the personal representative’s spouse, agent, or lawyer, or to any corporation or trust in which the personal representative has more than a one-third beneficial interest, is voidable unless: (1) All interested persons affected by the transaction consent to it; (2) The will expressly authorizes the transaction by the per- sonal representative; or
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(3) The transaction was made in compliance with another statute or with a contract or other instrument executed by the decedent. ORS 114.355(1). However, the title of a purchaser for value without notice of the circumstances of the transaction with the personal representative is not affected unless the purchaser should have known of the defect in the seller’s title. ORS 114.355(2). See Advisory Committee comment on ORS 114.355, online at
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In leasing real estate of the estate, the personal representative should seek to minimize vacancies. If the property is vacant, the personal representative should consider renting it to reduce the risk of vandalism and to avoid the difficulties of insuring vacant buildings. The personal representative should also obtain background checks on tenants, to avoid tenants with a record of skipping rent or damaging property. The personal representative may be liable to the estate if he or she fails to demand and collect market rent. See Jarrett v. U.S. Nat. Bank of Oregon, 81 Or App 242, 725 P2d 384 (1986); Kinney v. Uglow, 163 Or 539, 98 P2d 1006 (1940). §10.8-3 Undeveloped Real Property Personal representatives often encounter problems when unde- veloped property is an asset of the estate. There may be no market for undeveloped property, and the expense of retaining it in the estate may be burdensome. The property may be subject to sewer liens, liens of local improvement districts, and tax liens. The personal representative may be asked to develop the property to make it saleable, but a prudent fiduciary should avoid doing so. If the beneficiaries want the property to be developed, a petition for partial distribution of the property to them may be appropriate so that they can do so. Title in the beneficiaries will aid their ability to obtain financing and will relieve the personal representative of liability for an unwise investment. A sale at a discount, after obtaining the devisees’ consent, is also occasionally possible. Oregon Measures 37 and 49 have altered the development rights related to undeveloped property in Oregon. See 2005 Or Laws ch 1; 2007 Or Laws ch 424. The personal representative should investigate carefully before developing or distributing an estate’s undeveloped property. See 2 LAND USE ch 5 (OSB CLE 2010). §10.8-4 Environmental Contamination Dealing with potential environmental contamination of real property is a serious matter. See §7.2-4(a)(3). The law, in general, imposes strict liability. The cleanup costs can be ruinous. Liability may be present for pollution that occurred long ago under actions that were 10-39 2012 Revision
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considered acceptable at the time. For example, in Newell v. Weston, 150 Or App 562, 946 P2d 691 (1997), the appeals court ruled that an Oregon statute requiring cleanup of discharges from underground storage tanks applied retroactively to a gasoline tank installed before the statute was enacted. The estate’s lawyer should consider associating with a specialist in environmental law. For an additional discussion of this general topic, see ADMINISTERING TRUSTS IN OREGON ch 19 (OSB CLE 2007). See also ENVIRONMENTAL AND NATURAL RESOURCES LAW (Oregon CLE 2002 & Supp 2006); 1 DAMAGES ch 21 (Oregon CLE 1998 & Supp 2007). See §§10.8-4(a) to 10.8-4(d). §10.8-4(a) Federal Superfund Statute (CERCLA) In general, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 USC §§9601–9675, makes the “owner and operator of . . . a facility” strictly liable for environmental cleanup costs incurred by the government. 42 USC §9607(a)(1), (4); see ORS 465.200(20). A facility includes any place where hazardous substances have “come to be located.” 42 USC §9601(9); see ORS 465.200(13). In Oregon, the personal representative is not considered to be the owner of estate property. See ORS 114.215(1). However, the personal representative may still be liable as an operator. See ORS 465.200(20). See also §§7.2-4(a)(3), 10.8-4(c). In response to concerns of lenders and fiduciaries, Congress amended CERCLA in 1997 to limit personal liability. The amendment also limited liability for underground storage tanks under the Resource Conservation and Recovery Act, 42 USC §§6901–6992k. The amend- ment provides, in part, that a fiduciary’s liability may not exceed the assets held in a fiduciary capacity, and that the fiduciary is not liable for administering a facility that was contaminated before the fiduciary relationship began. 42 USC §9607(n)(1), (4)(H). However, the exception does not protect the fiduciary if the contamination was due to the fiduciary’s own negligence. 42 USC §9607(n)(3).
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The 1997 amendment also establishes a safe harbor for activities of a fiduciary that do not cause it to be deemed to be an operator of a facility. These include cleaning up contamination at the instruction of an environmental agency, resigning as fiduciary, and monitoring the facility. 42 USC §9607(n)(4). §10.8-4(b) Federal Claims Priority Statute The Federal Claims Priority statute, 31 USC §3713, makes the personal representative indirectly liable for a decedent’s past violations of environmental laws. In relevant part, the statute provides that “[a] representative . . . of an estate . . . paying any part of a debt of the . . . estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government.” 31 USC §3713(b). Distributing assets to heirs is considered paying a debt of the estate. Thus, to the extent that a personal representative disburses and depletes an estate, he or she may be liable for the federal government’s existing claims against the deceased person. This liability is limited to the value of the assets in the estate (plus interest) and does not apply to state claims. Claims under the priority statute usually involve unpaid taxes. However, other federal obligations, including environmental liability, may qualify, particularly when the cleanup work has begun, or the dece- dent or a relative was notified by the Environmental Protection Agency of potential liability for the cleanup costs. See U.S. v. Moore, 423 US 77, 83–85, 96 S Ct 310, 46 L Ed2d 219 (1975); In re Jensen, 995 F2d 925 (9th Cir 1993). §10.8-4(c) Oregon Cleanup Statute Oregon’s environmental cleanup statute is similar to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 USC §§9601–9675 (see §10.8-4(a)). See ORS 465.200–465.455, 465.900. Owners and operators are strictly liable for remedial costs due to the release of a hazardous substance, but limited defenses exist for persons who (1) did not know of the contamination when they first became owner or operator, (2) acquired the facility by inheritance or bequest, or (3) are otherwise exempted from liability by
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rules adopted by the Oregon Department of Environmental Quality (DEQ). ORS 465.255, 465.440. The Oregon DEQ has adopted a rule limiting liability for fiduciaries similar to the 1997 federal amendment of CERCLA. OAR 340-122-0140. However, the DEQ rule protects only bank trust depart- ments and trust companies. The State of Oregon was concerned that a blanket rule for all fiduciaries would lead to abuse by individuals who would place their polluted properties into family trusts. Whether or not this concern was valid, it is the law in Oregon. Therefore, a personal representative can be held liable for cleanup costs under Oregon law even if the personal representative is protected under CERCLA. See §7.2- 4(a)(3). §10.8-4(d) How to Protect the Personal Representative A personal representative can take measures to minimize his or her exposure to environmental liability. First, the personal representative should investigate possible contamination before agreeing to serve as personal representative. Second, the personal representative should consider asking the court for instructions (see ORS 114.275), with notice to interested par- ties. This protects the personal representative from second-guessing by heirs and devisees, who might later complain that the personal representative either wasted their inheritance returning dirt to its pristine state, or failed to do a thorough cleanup. At the same time, seeking court instructions gives heirs and devisees a chance to be heard ahead of time. Third, the personal representative should consider hiring a property manager, environmental consultant, or both, with special expertise. Fourth, the personal representative should not lose hope of obtaining liability insurance coverage. See generally ENVIRONMENTAL LAW AND NATURAL RESOURCES LAW ch 22 (OSB CLE 2002 & Supp 2006). Although most comprehensive general liability policies sold since 1985 have pollution clauses that exclude coverage for environmental cleanup costs, older policies were not so tightly drafted. A personal representative may be able to obtain coverage under the pre-1985 policies owned by the former business whose activities caused the pollution. For 10-42 2012 Revision
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example, in St. Paul Fire & Marine Ins. Co., Inc. v. McCormick & Baxter Creosoting Co., 324 Or 184, 923 P2d 1200 (1996), the Oregon Supreme Court ruled that a wood-treating company was entitled to insurance coverage for environmental cleanup costs under insurance policies issued dating back to 1949. The court rejected arguments that coverage had expired and that the policies were limited to injuries caused by accidents. In addition, in 2003, the Oregon Legislature made it easier for policyholders to establish the terms of lost policies of general liability insurance and to settle claims with insurers for environmental coverage under such policies. See ORS 465.475–465.482 (as amended by 2003 Or Laws ch 799).
§10.9 COLLECTING ESTATE ASSETS §10.9-1 Introduction Persons holding assets belonging to the decedent’s estate will usually deliver them to the personal representative without any prob- lems or objections. However, disputes concerning collection of assets may arise. The personal representative is authorized to deal with those disputes in a number of ways. See §§10.9-2 to 10.9-3. §10.9-2 Compromise or Adjustment of Indebtedness to Estate If advantageous to both the estate and interested persons, the personal representative is authorized to “[c]ompromise, extend, renew or otherwise modify an obligation owing to the estate.” ORS 114.305(15). Also, “[a] personal representative who holds a mortgage, pledge, lien or other security interest may accept a conveyance or transfer of the encumbered asset in lieu of foreclosure in full or partial satisfaction of the indebtedness.” ORS 114.305(15). The personal representative may accept other real property in part payment of the purchase price of real property sold. ORS 114.305(16). The personal representative’s authority to so act is not without limitations or problems, including the following:
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(1) The will or a court order may restrict the personal repre- sentative’s authority. The court may issue restrictive orders on application of an interested person or the personal representative. ORS 114.275, 114.305. (2) The personal representative must act reasonably for the benefit of interested persons. ORS 114.305. However, what appears to be reasonable to one person may be deemed unreasonable by another person. When reasonableness may be an issue, the safer practice is for the personal representative to apply to the court for authority, approval, or instructions. See ORS 114.275. The court may act on the application with or without a hearing. The application and order should be prepared with care after consideration of the possible consequences. For example, the order should authorize rather than direct, because it may not be possible to effect the compromise. Changes in the proposed action may be needed. If the application and order cannot be complied with, a new application and order should be sought vacating the outstanding order and obtaining a new one. (3) Not all of the disputes that arise in the course of administra- tion may be resolved by compromise or other modification. The probate code authorizes compromise or other modification only with respect to obligations owing to the estate, and obligations of the estate resulting from the decedent’s contracts. ORS 114.305(4). Matters such as determining heirship and the claims of heirs or beneficiaries are not included in the authority of the personal representative. Compromises or modification in those matters may be effected only by the persons or heirs involved, or by the probate court. See ORS 111.095(2). §10.9-3 Litigation The personal representative may find that collecting the assets of the estate is undesirable or impossible without resorting to litigation or other formal proceedings. Several provisions in the probate code grant authority to discharge the personal representative’s duties in this respect. Those provisions, however, are not without limitations or restrictions. Limitations or restrictions such as the following may be
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found in the language of the provision or in other statutes or rules of law: (1) The discovery procedures available to the personal repre- sentative are found in ORS 114.425, and may be used in connection with litigation or other proceedings. See Forms 10-5 and 10-6. (2) The personal representative has the same right to perfect a lien or a security interest as the decedent would have if living. ORS 114.315. (3) The personal representative may prosecute “actions, claims or proceedings in any jurisdiction for the protection of the estate and of the personal representative in the performance of” fiduciary duties. ORS 114.305(19).
COMMENT: The phrase “for the protection of the estate” is broad enough to include the collection of the estate assets. ORS 114.225 gives the personal representative the right and the duty to collect the estate assets, although the personal representative is not required to collect and control an asset in the possession of the asset’s specific heir or devisee, unless the asset is necessary for purposes of administration. The phrase “in any jurisdiction” (ORS 114.305(19)) is to be construed in relation to the authority granted to the personal representative. Whether a court in another jurisdiction would recognize such authority depends, of course, on the laws of that jurisdiction. If the cause of action is assignable, the personal repre- sentative may wish to assign the cause of action to himself or herself in his or her individual capacity, and perhaps thus avoid technical problems that would exist if the proceedings were brought in the representative capacity.
NOTE: ORCP 26 A provides that “[e]very action shall be prosecuted in the name of the real party in interest. An executor [or] administrator . . . may sue in that party’s own name without joining the party for whose benefit the action is brought.” However, ORCP 26 A does not govern all proceedings; the requirement for parties is different in a number of situations. Under 10-45 2012 Revision
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ORS 105.005, a person must have a legal estate in, and a present right to, the possession of the subject real property to bring an action of ejectment. ORS 105.605 contains a similar requirement regarding suits to quiet title. The Declaratory Judgments Act (ORS chapter 28) requires the personal representative to include heirs and legatees as parties to any such proceeding. ORS 28.110. Under the probate code, title to personal property, as well as real property, vests in the heirs at law or devisees on the decedent’s death. ORS 114.215. For competing views on whether claims belong to the estate or the heirs or devisees, see Stephen L. Griffith, Hend- rickson’s Estate v. Warburton is Not the Only Law That Governs Representative Actions and Its Holding is Qualified, OSB EST PLAN & ADMIN SEC NEWSLTR, July 2005, at 2; James R. Cartwright, Hendrickson’s Estate v. Warburton Continues to be “Good Law,” OSB EST PLAN & ADMIN SEC NEWSLTR, July 2005, at 4. (4) The personal representative may prosecute claims of the decedent, including claims for personal injury or wrongful death. ORS 114.305(20); ORS 30.010 et seq.
NOTE: The personal representative’s petition for approval of a settlement of a personal injury claim must be accompanied by an affidavit setting forth all of the relevant information concerning the settlement, including medical reports on the nature and extent of the injury and the prognosis. UTCR 9.040. In addition to the affidavit, in some counties, Supplementary Local Rules require that the affidavit describe the incident, the injuries, the amount of the prayer and settlement, attorney fees and costs, disposition of the proceeds, the present value of any future payments in a structured settlement, and a brief statement explaining the reasons for the settlement. See SLR 9.051 (Lane) and SLR 9.055 (Multnomah), available online at
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(5) All causes of action or suit “by one person against another, survive to the personal representative of the former and against the personal representative of the latter.” ORS 115.305. (6) The personal representative has a limited right to recover property transferred by the decedent with the intent to defraud his or her creditors, or property transferred by any means that in law is void or voidable as against the decedent’s creditors. ORS 114.435. See Matter of Hill’s Estate, 27 Or App 893, 906, 557 P2d 1367 (1976). However, this right may be exercised by the personal representative only to the extent that such property is necessary for the payment of expenses of administration, funeral expenses, claims, and taxes. See Hendrickson’s Estate v. Warburton, 276 Or 989, 996, 557 P2d 224 (1976); Ledford v. Yonkers, 278 Or 37, 40, 562 P2d 970 (1977). (7) A personal representative who prosecutes any proceeding “in good faith and with just cause,” whether successful or not, is entitled to receive from the estate necessary expenses and disbursements incurred in the proceeding, including reasonable attorney fees. ORS 116.183(2). (8) The personal representative for the estate of a “vulnerable person” may bring a civil action against any person who physically or financially abused the decedent. ORS 124.100(2), (3)(c). The decedent must have been a vulnerable person when the cause of action arose. ORS 124.100(3)(c). The statute defines vulnerable person as (a) an “elderly” person who is 65 years of age or older (see ORS 124.100(1)(a)); (b) a “financially incapable” person (see ORS 124.100(1)(b), 125.005); (c) an “incapacitated” person (see ORS 124.100(1)(c), 125.005); or (d) a person “with a disability who is susceptible to force, threat, duress, coercion, persuasion or physical or emotional injury because of the person’s physical or mental impairment.” ORS 124.100(1)(e).
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§10.10 CONTINUANCE OR LIQUIDATION OF DECEDENT’S BUSINESS OR VENTURE §10.10-1 Scope of Authority and Limitations in Handling Decedent’s Business The probate code grants the personal representative much latitude in handling a decedent’s business affairs. The personal representative has authority to “[c]ontinue any business or venture in which the decedent was engaged at the time of death to preserve the value of the business or venture.” ORS 114.305(21).
CAVEAT: The personal representative’s authority under ORS 114.305(21) to continue a business or venture is qualified by the words “to preserve the value of the business or venture.” These words could be construed as limiting the authority of the personal representative. It could be argued that liquidation would be required if it could be accomplished without loss of value to the estate, even though it might be extremely profitable to continue the business or venture. Perhaps a more reasonable interpretation would be that the words are not words of limitation when they allow the personal representative to continue a business or venture, as long as the personal representative acts reasonably for the benefit of interested persons. The meaning, however, requires judicial or legislative clarification. The term venture also requires interpretation. Most authori- ties define venture as a specific enterprise involving risk. Undoubtedly, the term includes joint ventures. The absence of the word joint indicates that a broader meaning should be ascribed to the word. Participation in a partnership surely falls within its meaning. The personal representative may incorporate or otherwise change the business form of, or discontinue or wind up, any business or venture in which the decedent was engaged at the time of death. ORS 114.305(22)–(23). The personal representative’s discretion in these respects is limited by the requirement of acting reasonably for the
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benefit of interested persons. Other limitations, intended or not, probably exist.
QUERY: The authority of the personal representative to incorporate or otherwise change the business form of any such business or venture is not followed by any words of limitation. ORS 114.305(22). Does this mean that the business or venture is to be continued only to preserve its value? Remembering that the principal function of the personal representative is to “preserve, settle and distribute the estate ... as expeditiously and with as little sacrifice of value as is reasonable under the circumstances” (ORS 114.265), all of the powers listed in ORS 114.305 should be regarded as granting to the personal representative the needed authority to carry out those functions. §10.10-2 Ongoing Management of a Business Special problems arise when the decedent was a key person in a closely held business, whether the business is a corporation, a partnership, or a limited liability company. The personal representative must determine whether or not the business has adequate management and supervision, at least through a transition period. The personal repre- sentative must then consider whether it is in the best interests of the beneficiaries to continue the business, to sell the business or the estate’s business interest, or to liquidate the business. The personal representa- tive must evaluate this decision in view of the following considerations: (1) Was the decedent a key person in the business? (2) Is another person qualified and willing to manage a con- tinuing business? (3) Would adequate financing be available? (4) Is the profitability and stability of the business sufficient to justify leaving beneficiaries dependent on it? (5) Can the business or the estate’s interest be sold for a fair price?
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(6) Should the business be liquidated so that the risks of an ongoing business are avoided and its value as represented by the proceeds can be put into safer investments? Frequently, decedents fail to provide for business succession in their will, and the fiduciary has difficulty evaluating the qualifications of possible successors. These are also time-sensitive questions. If the decedent was a key person of the business, the value of the corporation may diminish rapidly on the owner’s death. Another item that should be considered in evaluating the estate’s continued ownership of a closely held business is whether or not the decedent has signed personal guarantees. §10.10-3 Management or Transfer Issues §10.10-3(a) Entity Agreements The business entity may have a series of entity management agreements. For corporations, the company documents may include articles of incorporation, bylaws, stock-restriction agreements, or buy- sell agreements. For partnerships and limited liability companies, those company documents may include a certificate of formation, articles of organization, an operating agreement, and a partnership agreement. The personal representative must review and understand the entity agree- ments before proceeding with any management or transfer of the estate’s interest in a business. §10.10-3(b) Minority, Noncontrolling Interests If the decedent held a minority interest in a closely held corporation, partnership, or limited liability company, or was a limited partner in a limited partnership, the fiduciary’s management and transfer choices will be tied to some extent by the size of the interest and the management scheme of the entity. Many investments (i.e., not operating businesses) are held as entities that are governed by strict notice periods to redeem the decedent’s interest. The personal representative must understand how to protect the value of a minority interest for the benefit of the beneficiaries. When someone other than the personal repre- sentative is in control of the entity, it may be prudent to quickly determine an exit strategy. 10-50 2012 Revision
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§10.10-3(c) Buy-Sell Agreements The personal representative will be forced to carry out a buy-sell agreement, if such an agreement is mandatory. However, if the sale is optional under the agreement, the personal representative will need to decide whether disposing of the business interest pursuant to the terms of the agreement is in the best interests of the estate. Valuation is often the most important issue, particularly when the value described in the buy-sell agreement might not be the same value that must be used for estate-tax valuation. In such a case, it is often best for all of the parties to use the estate-tax valuation, which may require some kind of modification, waiver, or ratification of the entity agreements. When a personal representative has an option either to sell the interest or to require other contracting parties to purchase it on the specified notice or demand, any personal representative who fails to give notice or to make demand when the sale is in the best interests of the estate is liable to beneficiaries for whatever loss results.
For more on buy-sell agreements, see 3 ADVISING OREGON BUSINESSES ch 47 (Oregon CLE 2003 & Supp 2009) (estate planning for owners of closely held businesses; 2 ADVISING OREGON BUSINESSES ch 23 (Oregon CLE 2001 & Supp 2007) (corporate buy-sell agree- ments). §10.10-4 Specific Business Interests §10.10-4(a) Private Corporations A corporation is owned by its shareholders and is managed by its officers and its board of directors. ORS ch 60. The personal repre- sentative should review the articles of incorporation, bylaws, and any other corporate documents to determine how the corporation must be managed throughout the probate proceeding. A corporation must have at least one director, and the estate of a deceased individual may not be a director. ORS 60.307(1). If the decedent was the sole shareholder and director of the corporation, and no succession plan for the management of the company exists, the estate, as the sole shareholder, may appoint a director. See ORS 60.331. The
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personal representative may also create a new structure or otherwise change the governing structure for the corporation under the emergency powers described in ORS 60.064 and 60.081, if permitted by the articles of incorporation. If the decedent was the sole or key person for the corporation, new directors and/or officers must be elected to maintain loans or ongoing corporate business. The death of a shareholder does not otherwise change the rights of the estate associated with the shares. §10.10-4(b) Partnerships The estate of a deceased partner succeeds to the decedent’s partnership interest, but not to partnership assets. See ORS 67.060. Therefore, the personal representative must review the partnership agreement, if any, to determine the rights of the estate in the partner- ship. ORS chapter 67 controls in the absence of a partnership agree- ment, or if a partnership agreement is silent on a particular issue. See ORS 67.015. Unless the partnership agreement provides otherwise, the death of a partner is not a cause of dissolution of the partnership, although it is a cause of dissociation of the deceased partner. See ORS 67.220(7)(a), 67.230, and 67.250 for the effect of dissociation in general. Dissociation itself might not be an event causing termination of the partnership (by statutory default or by the partnership agreement). If no partnership agreement exists, and if dissociation is not an event that causes the partnership to terminate under ORS 67.290, then the partners have an obligation to buy out the interest of the partnership. ORS 67.250. In addition, while the partnership is operating, the estate of a deceased partner is liable to that partner’s obligation to contribute to a partnership. ORS 67.255. Also, when distributions are made from a part- nership, distributions of cash and hard assets become part of the deceased partner’s estate. If there is no partnership agreement, and the dissociation of the deceased partner causes the termination of the partnership under ORS 67.290, the surviving partners have the right and obligation to wind up the partnership, and the estate is usually a passive recipient of whatever comes. Nonetheless, the personal representative cannot avoid oversight
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involvement in the winding up, because the estate is jointly and severally liable for fraud, waste, conversion, and other misdeeds of partners. See ORS 67.100, 67.105. §10.10-4(c) Limited Liability Companies Except as otherwise provided in the articles of organization or any operating agreement, a member’s interest in a limited liability company (LLC) ceases on the member’s death. ORS 63.265(1). Except as otherwise provided in ORS 63.265(2)(b), following the cessation of the member’s interest, the holder of the former member’s interest is considered to be an assignee of that interest and has all of the rights, duties, and obligations of an assignee under ORS chapter 63. ORS 63.265(2)(a). For the purposes of ongoing management, an assignee has no continuing management rights, and is entitled only to the economic benefit of the LLC. ORS 63.249. If the member who ceases to be a member is the only member of the LLC, the holder of the former member’s interest becomes a member simultaneously with, and on the cessation of, the former member’s interest. ORS 63.265(2)(b). Thus, the decedent’s estate may function as an assignee of a decedent’s membership interest in an LLC with two or more members, but the estate becomes the member when it is a single- member LLC. §10.10-4(d) Sole Proprietorships §10.10-4(d)(1) Nonprofessional Sole Proprietorships Unless family members are active and competent in the business, a personal representative should attempt to dispose of a sole proprietorship as soon as possible. Sole proprietorships are usually businesses in which the decedent was a key person, and the value of that business will diminish quickly unless it already has employees who can function as key persons, which is not unusual for old, established businesses with long-time employees. §10.10-4(d)(2) Professional Sole Proprietorships A personal representative must segregate and protect all of the files and records belonging to clients or patients of a deceased pro- 10-53 2012 Revision
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fessional, and must take steps to ascertain ownership and to prevent improper disclosure of information. The sale of a professional’s practice is very difficult, because so often it is a personally linked type of activity. Frequently, only the hard assets are saleable. If the deceased professional was a partner with other profes- sionals, a partnership agreement may permit the decedent’s firm to take over the business. However, in a sole proprietorship, records and files belong to the decedent, not a firm, and the personal representative has the problem of disposing of those records and files. A personal representative should, at the request of clients or patients, turn over pertinent records and files to the successors chosen by the clients or patients. Files and records remaining after a suitable length of time may need to be stored for many years. Strenuous efforts should be made to contact all of the patients and clients to enable them to determine the disposition of such records and files. In addition, the personal representative should promptly seek to collect fees for services performed by the decedent before his or her death. A decedent’s accounts receivable age rapidly, and the personal representative should arrange for billing and collections early in the administration to preserve their value.
§10.11 ENCUMBERED ASSETS §10.11-1 Introduction Some or all of the assets in the decedent’s estate may be encumbered. What authority and what responsibilities does the personal representative have with respect to any such encumbrances? Does it make any difference whether the encumbrance was created or arose before or after the will was made? Did the testator attempt to deal with and control the problem? Does a provision in the will directing payment of debts impose an obligation on the personal representative with respect to encumbrances? If property is specifically devised by will, the rights of a devisee of property that is subject to an encumbrance are to be determined in accordance with the law in effect on the date that the will
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was executed. ORS 115.255(5); see ORS 111.015(1). Sections 10.11-2 to 10.11-5 discuss these issues. §10.11-2 Voluntary and Involuntary Encumbrances The probate code classifies encumbrances as voluntary or involuntary. ORS 115.255(1). A voluntary encumbrance means “any mortgage, trust deed, security agreement, pledge or public improvement assessment lien, or any lien arising from labor or services performed or materials supplied or furnished, or any combination thereof, upon or in respect of property.” ORS 115.255(1)(a). An involuntary encumbrance is defined as any encumbrance other than a voluntary one. ORS 115.255(1)(b). The word encumbrance is not defined in the probate code. The context of the statute, however, indicates that it is a form of security given or that exists to secure an obligation. As a result, taxes and judgments are involuntary encumbrances. Furthermore, although leases, easements, and the like are encumbrances within the meaning of other legislation, they are not deemed encumbrances for purposes of ORS 115.255–115.275. §10.11-3 Responsibilities of Personal Representative A specific devisee takes the devised property subject to a voluntary encumbrance that exists on the date of the testator’s death, regardless of when the encumbrance came into being, that is, whether it was before or after the making of the will. ORS 115.255(2), (3)(b). The personal representative is not required to discharge a voluntary encumbrance (fully or partially) out of other assets not specifically devised, unless: (1) The will specifically directs full or partial discharge of the encumbrance out of other assets; (2) The personal representative receives rents or profits from the property, and the devisee requests (orally or in writing) that all or part of such rents or profits, or both, be applied in full or partial discharge of the obligation secured by the encumbrance; or
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(3) The devisee is to receive other property of the estate and the devisee requests, in writing, that the obligation secured by the encumbrance be fully or partially discharged out of such other property, or the proceeds of the sale of it. ORS 115.255(3)(b). If a claim based on an obligation secured by a voluntary encumbrance on specifically devised property is presented and paid, or if specifically devised real property subject to a voluntary encumbrance is redeemed, and the devisee is not entitled to exoneration under ORS 115.255(3), the personal representative acquires a lien on the property in the amount paid. ORS 115.255(4). If the encumbrance is an involuntary encumbrance, unless the will provides otherwise, the devisee of specifically devised property may require that the encumbrance be fully or partially discharged out of other assets not specifically devised. ORS 115.255(3)(a). Presumably, if need be, the personal representative would be obligated to sell assets not specifically devised to make any payment required to comply with the request. When any assets of the estate are encumbered by an encumbrance (involuntary or voluntary), the personal representative may discharge the encumbrance or any part of it, renew or extend any obligation secured by the encumbrance, or convey or transfer the assets to the creditor in satisfaction of the lien, in whole or in part, whether or not the holder of the encumbrance has filed a claim, if it appears to be for the best interest of the estate. ORS 115.275. The discharge of an encumbrance does not increase the share of the distributee entitled to the encumbered assets, unless the distributee is entitled to exoneration under ORS 115.255(3). ORS 115.275. Also, unless otherwise provided by the will, the personal representative “may redeem property of the estate sold on foreclosure of mortgage or upon execution if it appears that the redemption would be
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for the benefit of the estate and would not be prejudicial to creditors.” ORS 115.265. §10.11-4 Will Provisions The testator, of course, has the power to provide for the disposition of encumbrances. A mere direction in a will to pay debts is not to be considered a direction for exoneration from encumbrances. ORS 115.001. Something more is required if the testator desires to avoid the consequences that would otherwise result under the probate code.
PRACTICE TIP: A lawyer preparing a will for a client should always ask how the client would like the personal representative of the estate to deal with any encumbrances that may exist or that may arise after the making of the will. §10.11-5 Heirs and Encumbrances Under the probate code, the net intestate estate of the decedent descends to the decedent’s heirs. ORS 112.015; see also ORS 112.025– 112.055. The net estate is the property remaining after payment of claims and other obligations of the estate. ORS 111.005(23). The existence of an encumbrance against an asset of the estate will not alter the rights of one heir as against those of any other heir. If the obligation secured by the encumbrance is paid by the personal representative, the shares of all of the heirs in the net estate will be proportionately reduced. If the obligation is not so paid, the heirs will receive the asset subject to the encumbrance, and their proportionate interests will remain unaffected.
§10.12 UNUSUAL ASSETS §10.12-1 Natural Resources Special problems may arise when mineral rights or other natural resources are assets of the decedent’s estate. Specialized expertise may be required to safeguard the asset, to determine its appropriate market value, or to sell the asset. The personal representative may wish to work
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with a corporate fiduciary located in the geographic region dominated by such assets.
EXAMPLE: A number of banks based in Texas may provide or assist in obtaining the necessary expertise and advice on mineral rights. §10.12-2 Contraband and Firearms The decedent may have owned property, such as a firearm, that requires a special license or permit. Or the decedent may have had illegal narcotics in his or her possession. A personal representative who finds such items among the decedent’s effects must act promptly to protect both the personal representative and the estate against applicable penalties. Often, this means surrendering the article or item to the proper authority. In the case of illegal narcotic drugs, for example, a federal regulation may prescribe the procedure to be followed. Special licensing and registration rules apply to transfers of firearms. If the estate holds an automatic weapon, sawed-off rifle or shotgun, silencer, or other firearm regulated by the National Firearms Act, the personal representative must notify the compliance office of the Bureau of Alcohol, Tobacco, Firearms and Explosives. See 18 USC §922(k); Bureau of Alcohol, Tobacco, Firearms and Explosives, National Firearms Act (reprinted at
PRACTICE TIP: The personal representative should conduct all sales of firearms through a licensed gun dealer or licensed sales agent.
PRACTICE TIP: If the personal representative delivers contra- band to the proper authorities, he or she should request a receipt pending proper disposition of the contraband.
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§10.12-3 United States Savings Bonds When a decedent’s estate includes United States savings bonds, the personal representative should coordinate asset management and estate income tax planning. See §§1.6-2, 7.4-3(c). On some bonds, inter- est does not continue to accrue; on others, interest income is triggered when the bonds are redeemed.
PRACTICE TIP: The personal representative should analyze the tax consequences of establishing a short first year for tax purposes and redeem the savings bonds in order to capture the interest income in the estate and reduce the overall income tax burden, while at the same time providing cash for ultimate dis- tribution. In addition, the personal representative may elect to report all of the accrued interest up to the date of death for Series E, EE, or I bonds on the decedent’s final income tax return. When the heir later redeems the bonds, the only interest to report will be the interest that has accrued from the date of the decedent’s death. Rev Rul 68-145, 1968-1 CB 203 (1968). §10.12-4 Personal Property Personal property is frequently specifically devised to family members or other devisees. Distribution of specifically devised personal property does not carry out the income of the estate in an unanticipated manner. Fiduciary income tax returns that have distributable net income report any distribution from an estate to a beneficiary as taxable income, even if the distribution is not in cash; however, specifically devised property does not carry out taxable income to an heir or devisee unless the property earns income itself. IRC §663(a)(1). Therefore, unless the personal property is specifically devised, the personal representative should distribute personal property under a custody receipt, rather than an order for partial distribution, if the estate will be open past the end of the first fiscal year, in order to avoid an income distribution. Personal property not specifically devised and not wanted by the beneficiaries of the estate should be sold or donated to avoid incurring storage and insurance costs.
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§10.12-5 Appraisal of Unusual Assets Ample authority exists under Oregon law for a personal repre- sentative to engage experts to provide an estimate of the market value of the estate assets as of the decedent’s death. ORS 113.185. See §7.4-2(c). An appraisal is necessary to assess items with significant artistic or intrinsic value if the value is in excess of $3,000. See Treas Reg §20.2031-6(b). The expertise and counsel of an expert should be obtained when the personal representative might be dealing with a decedent’s closely held business. If the decedent owned a boat, ship, yacht, or other vessel, an expert may be necessary to properly value the asset. Obviously, an expert would not be required to value the decedent’s 12-foot runabout, but certainly would be required to value any vessel of significant worth. For an aircraft, the avionics contained in that aircraft are the most important feature in determining market value. An expert appraisal is important. Proper safeguarding and insurance are extremely critical, considering the significant value of the equipment. Competent appraisal, proper safekeeping, and insurance are also important if the estate contains jewelry, gold bullion, silver bullion, or other highly valuable items.
PRACTICE TIP: Appraisers often advertise their services and areas of expertise in the Oregon State Bar Bulletin, the ABA Journal, and other legal periodicals. The personal representative may also want to contact corporate fiduciaries or other law firms that have had the opportunity to deal previously with a particular asset. §10.12-6 Cooperative Apartments or Condominiums If the decedent was a resident of a condominium or retirement home facility for which a purchase price was paid, the personal repre- sentative should obtain copies of all of the documents pertaining to its ownership. There is no consistency from one organizational structure to another regarding the disposition of the condominium. The personal
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representative may be surprised to find that the decedent’s interest terminates without compensation on death.
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Administering Oregon Estates: 2012 Edition 7–62 Chapter 8 Accounting, Distribution, and Closing—Outline
Sam Friedenberg Nay & Friedenberg Portland, Oregon
Amy E. Bilyeu Cavanaugh Levy Bilyeu LLP Portland, Oregon Chapter 8—Accounting, Distribution, and Closing—Outline
Administering Oregon Estates: 2012 Edition 8–ii Chapter 8—Accounting, Distribution, and Closing—Outline
Chapter 11
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
ACCOUNTING, DISTRIBUTION, AND CLOSING
SAM FRIEDENBERG, B.A., Tufts University (1980); J.D., Northwestern School of Law, Lewis and Clark College (1985); member of the Oregon State Bar since 1985; partner, Nay & Friedenberg, Portland. AMY E. BILYEU, B.A., J.D., University of Oregon (1995, 2000); LLM (Taxation), University of Washington School of Law (2001); member of the Oregon State Bar since 2001 and Washington State Bar since 2007; partner, Cavanaugh Levy Bilyeu LLP, Portland. We acknowledge the contribution of David R. Allen for his work on the prior edition of this chapter.
§11.1 INTRODUCTION ...... 11-5 §11.2 WHEN AN ACCOUNTING IS REQUIRED ...... 11-6 §11.3 FINAL ACCOUNTING ...... 11-7 §11.3-1 Introduction ...... 11-7 §11.3-2 Summary of Tasks ...... 11-7 §11.3-3 Unresolved Issues ...... 11-10 §11.3-4 Accounting Options ...... 11-10 §11.3-4(a) “Ordinary” Accounting ...... 11-10 §11.3-4(b) “Consent” Accounting ...... 11-11 §11.4 NARRATIVE OF THE FINAL ACCOUNTING ...... 11-12 §11.4-1 Introduction ...... 11-12 §11.4-2 Term of Accounting ...... 11-13 §11.4-3 Requirement of a Bond ...... 11-13 §11.4-3(a) If No Bond Is Required ...... 11-14 §11.4-3(b) If Bond Is Required ...... 11-14 §11.4-3(c) Restriction of Assets in Lieu of Bond ...... 11-15 §11.4-4 Changes in Assets or Finances ...... 11-15
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§11.4-5 Fiduciary Disclosure ...... 11-17 §11.4-6 Information Required in Judgment ...... 11-17 §11.5 FINANCIAL INFORMATION OF THE ACCOUNTING ...... 11-18 §11.5-1 Background and Authority ...... 11-18 §11.5-2 Rules Are Flexible ...... 11-19 §11.5-3 Asset Schedule ...... 11-20 §11.5-3(a) Five-Column Requirement ...... 11-21 §11.5-3(a)(1) First Column: All Assets ...... 11-21 §11.5-3(a)(2) Second Column: Value at the Beginning of Accounting ...... 11-22 §11.5-3(a)(3) Third Column: Value of Later-Acquired Asset ...... 11-22 §11.5-3(a)(4) Fourth Column: Value at Disposition ...... 11-24 §11.5-3(a)(5) Fifth Column: Current Value ...... 11-24 §11.5-3(b) Sum of Each Column ...... 11-25 §11.5-3(c) Additional Information...... 11-25 §11.5-3(d) Household Goods ...... 11-25 §11.5-4 Receipts and Disbursements for Depository Accounts ...... 11-26 §11.5-4(a) Accounting for Receipts and Disbursements ...... 11-26 §11.5-4(b) Reconciliation of Account Balances ...... 11-28 §11.5-4(c) Vouchers...... 11-29 §11.5-4(d) Depository Statements ...... 11-30 §11.5-4(e) Sale of Real Property ...... 11-31 §11.5-5 Paragraph or Exhibit ...... 11-31 §11.5-6 Trust Companies as Personal Representatives ...... 11-31 §11.6 OTHER ACCOUNTING ISSUES ...... 11-32 §11.6-1 Formalities ...... 11-32 §11.6-1(a) Declaration Under Penalty of Perjury ...... 11-32 §11.6-1(b) Information—Lawyer and Personal Representative ...... 11-32 §11.6-2 Notice of Accountings ...... 11-33
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§11.6-2(a) Annual or Interim Accounting ...... 11-33 §11.6-2(b) Final Accounting ...... 11-33 §11.6-3 Allocation of Income ...... 11-34 §11.6-4 Reserves to Pay Expenses of the Estate ...... 11-34 §11.6-5 Personal Representative’s Fees ...... 11-35 §11.6-5(a) Statutory Fee ...... 11-35 §11.6-5(b) Additional Compensation ...... 11-36 §11.6-5(c) Interim Personal Representative’s Fees .... 11-36 §11.6-6 Attorney Fees ...... 11-37 §11.6-6(a) Request for Attorney Fees ...... 11-37 §11.6-6(b) Interim Legal Fees ...... 11-38 §11.6-7 Costs ...... 11-38 §11.7 OBJECTIONS TO THE FINAL ACCOUNTING ...... 11-39 §11.7-1 Who May Object...... 11-39 §11.7-2 Form of Objection ...... 11-39 §11.7-3 Hearing on Objection ...... 11-39 §11.8 DISTRIBUTION OF ESTATE ASSETS ...... 11-40 §11.8-1 Partial Distribution ...... 11-40 §11.8-1(a) Procedure for Partial Distributions ...... 11-42 §11.8-1(b) Return of Distributed Property ...... 11-42 §11.8-2 Final Distribution ...... 11-44 §11.8-2(a) General Judgment of Final Distribution ... 11-45 §11.8-2(b) Procedure for Distributions ...... 11-46 §11.8-2(c) Effect of Judgment ...... 11-49 §11.8-2(d) Settlement Agreements ...... 11-50 §11.8-3 Offset and Retainer ...... 11-50 §11.8-3(a) Defined ...... 11-50 §11.8-3(b) Procedure for Offset and Retainer ...... 11-51 §11.8-3(c) Priority of Right ...... 11-51 §11.8-3(d) Defenses ...... 11-52 §11.8-4 Disposition of Unclaimed Assets ...... 11-52 §11.8-4(a) “Unclaimed Asset” Defined ...... 11-52 §11.8-4(b) Procedure for Unclaimed Assets ...... 11-52 §11.8-4(c) Receipt After Delivery of Unclaimed Asset ...... 11-53
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§11.8-4(d) Recovery of Unclaimed Asset ...... 11-53 §11.8-5 Distribution to Foreign Personal Representative ...... 11-54 §11.8-6 Distribution to Persons Under Legal Disability ...... 11-54 §11.8-6(a) Distribution to Minors ...... 11-54 §11.8-6(b) Distribution to Other Protected Persons ... 11-56 §11.9 DISCHARGE OF PERSONAL REPRESENTATIVE ...... 11-56 §11.9-1 Procedure for Discharge of Personal Representative ...... 11-56 §11.9-2 Exceptions to Release of Personal Representative and Surety ...... 11-57 §11.10 REOPENING THE ESTATE ...... 11-58 §11.10-1 Grounds for Reopening an Estate ...... 11-58 §11.10-1(a) Subsequently Discovered Assets ...... 11-58 §11.10-1(a)(1) In General ...... 11-58 §11.10-1(a)(2) Small Estates ...... 11-59 §11.10-1(a)(3) Amending Tax Returns ...... 11-60 §11.10-1(b) Intestate Estate—Will Later Discovered .. 11-60 §11.10-1(b)(1) In General ...... 11-60 §11.10-1(b)(2) Recovering Assets Already Distributed ...... 11-61 §11.10-2 Personal Representative for Reopened Estate ...... 11-62 §11.10-3 Procedure for Reopening an Estate ...... 11-62 §11.10-4 Prior Claims ...... 11-63 Appendix 11A Asset Schedule ...... 11-64 Appendix 11B Receipts and Disbursements ...... 11-66 Form 11-1 Annual or Other Accounting ...... 11-68 Form 11-2 Final Accounting and Petition for General Judgment of Final Distribution ...... 11-78 Form 11-3 Notice for Filing Objections to Final Accounting and Petition for General Judgment of Final Distribution ...... 11-88 Form 11-4 Verified Statement in Lieu of Final Accounting and Petition for Judgment of Final Distribution ...... 11-90 Form 11-5 Receipt for Partial Distribution ...... 11-96
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Form 11-6 Deed of Personal Representative ...... 11-98 Form 11-7 Final Distribution Receipt ...... 11-101 Form 11-8 Report of Unclaimed Assets ...... 11-103 Form 11-9 Order of Escheat (of Unclaimed Assets) ...... 11-105 Form 11-10 Receipt for Unclaimed Assets ...... 11-108 Form 11-11 Supplemental Judgment Discharging Personal Representative and Closing Estate ...... 11-110 Form 11-12 Order Directing Notice of Petition to Reopen Estate ...... 11-112 Form 11-13 Notice of Petition to Reopen Estate ...... 11-114 Form 11-14 Order Reopening Estate ...... 11-117 Form 11-15 General Judgment Approving Final Account and Authorizing Final Distribution ...... 11-120 Form 11-16 Statement for Attorney Fees and Costs ...... 11-125 Form 11-17 Petition to Reopen Estate ...... 11-130
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Administering Oregon Estates: 2012 Edition 8–6 Chapter 9 Claims Against the Estate
Helen Rives Pruitt Wyse Kadish LLP Portland, Oregon
Contents §9.1 Overview ...... 9–1 §9.4 Types of Claims ...... 9–2 §9.4-1 Who May Make a Claim ...... 9–2 §9.4-2 Claims That Must Be Presented ...... 9–2 §9.4-3 Judgment Debts ...... 9–4 §9.4-4 Debts Not Due ...... 9–5 §9.4-5 Waiver of Defect ...... 9–6 §9.4-6 Rights Not Requiring Regular Presentment 9–6 §9.5 Disposition of Claims ...... 9–8 §9.5-4 Compromise of Claims ...... 9–8 §9.5-5 Applying for Court Instructions ...... 9–9 §9.5-8 Priority of Claims ...... 9–10 §9.5-9 Payment of Claims 9–10 §9.5-10 Interest on Claims ...... 9–11 Forms 9-1 Form of Claim Against Decedent’s Estate 9–13 9-2 Personal Representative’s Creditor Search Checklist ...... 9–15 9-3 Notice of Right to Assert Claims Against the Estate ...... 9–18 9-4 Proof of Personal Representative’s Compliance ...... 9–20 9-5 Notice of Disallowance of Claim 9–22 9-6 Request for Summary Determination of Claim 9–24 9-7 Notice by Personal Representative of Separate Action on Claim Required . . . 9–26 9-8 Checklist for Priority of Payment of Expenses and Claims ...... 9–28 Appendix—Claims Tracking Table 9–31 Chapter 9—Claims Against the Estate
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Chapter 9
CLAIMS AGAINST THE ESTATE
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
HELEN RIVES PRUITT, A.B., Wellesley College (1976); J.D., University of Oregon (1980); member of the Oregon State Bar since 1980 and the Washington State Bar Association since 1984; partner, Wyse Kadish, LLP, Portland. The author acknowledges the research contributed by Nancy L. Mensch in updating this chapter.
§9.1 OVERVIEW The presentation and collection of claims, as defined in the probate code, are resolved in probate proceedings governed by ORS 115.001– 115.335. The probate claims process is designed to determine and resolve outstanding claims against a decedent, so that the personal representative may promptly distribute the decedent’s estate to the beneficiaries, free of claims. The personal representative has a duty to notify potential claim- ants by publishing a notice of the probate proceeding in a local newspaper to invite claims, to search for potential claimants, to file proof of the search effort with the court, and to give individual notice to any claimants discovered during the search process. ORS 115.003(2)–(4). See §§2.5-1 to 2.5-5; see also §5.2-8. Some claims need not be presented, such as secured claims, claims covered by liability insurance, actions pending against the decedent on the decedent’s date of death, and certain equitable claims. See §§9.4-2(d), 9.4-6(a) to 9.4-6(f). Whether and in what order claims will be paid is based on the availability of funds and the statutory scheme of priorities. See §§9.5-8 to 9.5-9; Form 9-8. The 1997 Legislative Assembly enacted ORS 112.272 to validate in terrorem clauses. The statute defines the term in terrorem clause as “a provision in a will that reduces or eliminates a devise to a devisee if the devisee contests the will.” ORS 112.272(4). See §15.2-1(e). The statute
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also sets forth exceptions to the general validation of in terrorem clauses. ORS 112.272(2)–(3). Lawyers should review this statute and its excep- tions, because beneficiaries occasionally use the claim procedure to try to enhance their inheritances and avoid in terrorem clauses. A personal representative’s failure to object to this stratagem may lead to a waiver of the right to enforce the in terrorem clause.
§9.4 TYPES OF CLAIMS §9.4-1 Who May Make a Claim The probate code does not define the word claimant. Any person or entity that has a claim (as defined in ORS 111.005(7)) may file a claim against the estate. The creation of an obligation during the decedent’s lifetime is an essential element of a claim. See §9.2. §9.4-2 Claims That Must Be Presented §9.4-2(a) Generally All claims must be presented, except certain causes of action that might be thought of as claims, but are nevertheless exceptions to the rule. See §§9.4-6(a) to 9.4-6(f). A secured creditor that intends to rely solely on the security need not present a claim. ORS 115.065(1). See §9.4-2(d). §9.4-2(b) Contingent and Unliquidated Debts Contingent and unliquidated debts must be presented in the same manner as any other claim. ORS 115.085. If the contingent or unliquidated debt becomes absolute or liqui- dated before the distribution of the estate, the debt must be paid in the same manner as any other claim on an absolute or liquidated debt. ORS 115.085(2). If the debt does not become absolute or liquidated before the dis- tribution of the estate, the court has broad discretion to provide for payment of the claim: (1) The creditor and the personal representative may determine the value of the debt by agreement, arbitration, or compromise, and, if the
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court approves, the personal representative may pay the claim in the same manner as a claim on an absolute or liquidated debt. ORS 115.085(3)(a). (2) The court may order the personal representative to distribute the estate, but to retain sufficient estate funds to pay the debt if and when it becomes absolute or liquidated. If a debt does not become liquidated or absolute within two years after distribution of the remainder of the estate, the estate must be closed and the retained assets must be distributed. ORS 115.085(3)(b). If, after distribution, the debt becomes absolute or liquidated, the distributees remain liable for the claim to the extent of the assets they received from the estate. ORS 115.085(3)(d). (3) The court may order the personal representative to distribute the entire estate as though the claim did not exist, but the distributees remain liable to the extent that they received assets. ORS 115.085(3)(c)– (d). The distributees may arrange for payment of the claim by the methods described in ORS 115.085(3)(d). §9.4-2(c) Personal Representative’s Claims A claim of the personal representative, as a creditor, is not presented in the same manner as other claims. The personal repre- sentative’s claim must be filed with the court and must be approved by the court before payment. ORS 115.105. This approval is usually sought at the next accounting. Upon the application of the personal representative or of any interested person, the court may hear the claim either at the time of the hearing on the final account, or before that time on notice to interested persons. ORS 115.105. No provision is made for a separate action or an appeal by the personal representative from an adverse determination of his or her claim by the court. The court’s determination is apparently final. See ORS 115.105, 115.145.
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§9.4-2(d) Secured Claims A secured creditor may either (1) rely entirely on the security without presenting his or her claim, or (2) surrender the security and present a claim for the unsecured debt. ORS 115.065(1).
PRACTICE TIP: When the debt exceeds the value of the security, the secured creditor should present the claim if the objective is to recover more than the value of the security. ORS 115.065; see Meissner v. Murphy, 58 Or App 174, 179, 647 P2d 972 (1982) (“by exercising the remedies reserved under her security before filing a claim [against the decedent’s estate], plaintiff elected to rely solely on her security and, therefore, she is not entitled to recover a deficiency judgment”). If a secured claim is presented, the security must be described. If the security is an encumbrance that is recorded, it is sufficient to describe the encumbrance by reference to the book, page, date, and place of its recording. ORS 115.065(2). If the secured creditor does not surrender the security, payment to the creditor is based on (1) the amount of the claim allowed minus the amount realized on the security (if the creditor exhausts the security), or (2) the amount of the claim allowed minus the agreed value of the security (if the creditor does not exhaust the security). ORS 115.065(5). Because ORS 115.145 gives all creditors the right to either request a summary determination of the claim by the probate court or to file a separate action in a court of competent jurisdiction, a secured creditor has the same rights of review as other creditors whose claims are disallowed. See UTCR 9.070. The personal representative may convey the security to the secured creditor in full or partial satisfaction of the claim. ORS 115.065(6). §9.4-3 Judgment Debts A creditor may collect on a judgment debt obtained before the decedent’s death only by making a claim against the estate under the procedures described in ORS chapter 115 or under the small-estate pro- cedures prescribed by ORS 114.505–114.560 (see §5.3-7). ORS 18.312.
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The creditor must attach a copy of the judgment to its claim. ORS 115.070; see ORS 115.005. The personal representative may disallow such a claim only if (1) the judgment was void or voidable, (2) the judgment could have been set aside on the date of the decedent’s death, or (3) the claim was not presented within the time required by ORS 115.005. ORS 115.070. If the judgment was a lien against the decedent’s property, the personal representative should treat it as a secured debt. In all other cases, however, a judgment debt has the same priority under ORS 115.125 as it would have had were the debt not reduced to judgment. ORS 115.070. In 2007, the Oregon Legislature amended ORS 18.312 to allow secured creditors that obtain judgments of foreclosure to foreclose on the property even after the decedent’s death. If the proceeds from the sale of the property are not sufficient to satisfy the debt, the creditor may make a claim against the estate to recover the deficiency. ORS 18.312(2). §9.4-4 Debts Not Due §9.4-4(a) Presenting Claims on Debts Not Due A decedent’s obligations may not be due as of the date of the decedent’s death, and may not be due until long after the time anticipated to complete the administration of the estate. The presentation of claims on obligations not yet due is governed by ORS 115.075 as follows: (1) Claims, whether or not secured, may be presented as claims on debts due; (2) If the claim is allowed, allowance must be “in an amount equal to the value of the debt on the date of allowance”; (3) The creditor may withdraw the claim without prejudice to other remedies; and (4) Payment of the amount allowed discharges the debt and the security, if any. “The probate code contemplates a quick and final settlement of estates, with claimants being paid off immediately. See ORS 115.075 (claims for debts not yet due may be presented and allowed at their
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present value, facilitating settling the estate before future debts become due).” Thomas By & Through Petersen v. State By & Through Senior & Disabled Services Div., 319 Or 520, 527, 878 P2d 1081 (1994). §9.4-4(b) Secured Debts Not Currently Due A creditor with a secured claim against an estate for a debt not yet due must decide whether to present a claim against the estate or to rely on the security. See ORS 115.065. See also §9.4-4(a). The creditor’s deci- sion will be based generally on what the creditor perceives as the prospects for recovering the entire debt if the security is exhausted. See §9.4-2(d). Other factors that may influence the creditor’s decision include the value of the decedent’s estate, the existence of co-obligors, and the feasibility of accepting less than the face value of the debt. §9.4-4(c) Allowance of Claim for Debt Not Yet Due If allowed, a creditor’s claim against an estate for a debt not due entitles the claimant to “an amount equal to the value of the debt on the date of allowance.” ORS 115.075. Presumably, this means a discount to the present value of the debt. §9.4-5 Waiver of Defect Under ORS 115.035, the personal representative or the court may waive a defect in the form of a claim timely presented, but may not waive the presentment of a claim or the late presentment of a claim. Claims not presented as required by statute are barred from payment. ORS 115.005(2)–(4). See §9.3-4. §9.4-6 Rights Not Requiring Regular Presentment §9.4-6(a) Generally There are exceptions to the procedure for presenting claims against the estate of a decedent. Certain obligations incurred by the decedent before death (such as income taxes and insured liability claims) and other rights do not require presenting a claim. See §§9.4-6(b) to 9.4-6(f). §9.4-6(b) Expenses of Administration Expenses or liabilities that the personal representative incurs during the administration of the decedent’s estate are not claims against
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the estate, and should not be presented as claims or processed under the claim resolution procedure; they are instead obligations of the personal representative. Expenses that are properly incurred for the benefit of the estate may be reimbursed to the personal representative out of the estate assets. The order of payment of expenses and claims is set forth in ORS 115.125(1). See §§9.5-8 to 9.5-9; Form 9-8. A personal representative may be reimbursed for expenditures in connection with the administration of the estate and is entitled to a preference, even though allowing such expenses might not leave suffi- cient funds to pay the decedent’s creditors. Expenses of estate administration are the second level of priority after support for the decedent’s spouse and children. ORS 115.125(1). Similarly, compensation for the personal representative’s services and fees for his or her lawyer are not claims against the estate that must be presented, although these fees must be court-approved before payment. See ORS 116.173 (personal representative’s fees) and ORS 116.183 (attorney fees). Claims for attorney fees incurred before the decedent’s death may be barred if not timely presented under the claims procedures. See §9.3-4. A personal representative is not personally liable on contracts that he or she properly enters into in his or her fiduciary capacity “unless the personal representative expressly agrees to be personally liable.” ORS 114.405(2). Nor is the personal representative personally liable for torts committed in the course of administration “unless the personal representative is personally at fault.” ORS 114.405(3). Tort and contract obligations arising during the administration of the estate “may be allowed against the estate whether or not the personal representative is personally liable therefor.” ORS 114.405(4). In Widing, Matter of Estate of, 149 Or App 451, 453, 944 P2d 969 (1997), two estate beneficiaries lent money to the personal repre- sentatives of the estate “to pay estate taxes and to take care of other administrative expenses.” The trial court held that the loans were obligations of the estate, but that they did not have the priority of administrative expenses, leaving the beneficiaries in the same status as
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general creditors of the estate, although the debt was created after the decedent’s death and thus did not constitute a claim. §9.4-6(c) Tax Claims In general, because of lien statutes, neither the United States nor the state of Oregon needs to file claims for taxes that are due. See 26 USC §6324; ORS 118.210 et seq. If the personal representative fails to pay taxes, he or she remains personally liable in most instances, and the distributee remains liable to the extent of the value of the property transferred. The procedures for discharging the personal representative from personal liability for taxes are found in 26 USC §2204 and ORS 316.387. See IRS Form 5495 (Request for Discharge from Personal Liability Under IRC Section 6905), available at
§9.5 DISPOSITION OF CLAIMS §9.5-4 Compromise of Claims The personal representative has the power to compromise, settle, and satisfy claims against the estate. ORS 114.305(4), (25), 115.095. The personal representative may do so without prior court approval. ORS 114.275.
PRACTICE TIP: The personal representative should not pay or finally settle a compromised claim without considering whether the settlement should have court approval. The personal representative should consider giving notice of the proposed settlement to persons who would be affected by it. A personal representative may allow a claim that is insufficient in form as long as it is timely presented. ORS 115.035. However, a personal representative may not allow a claim that is not timely filed or that is barred by the statute of limitations, without the consent of all of the persons who would be adversely affected by allowance of the claim. ORS 115.205. See §9.3-4.
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PRACTICE TIP: When the estate property may be insufficient to pay all claimants in full, or when opposition to payment is anticipated, the personal representative should neither pay nor finally settle compromised claims until (1) the final account report- ing the settlement proposal is approved by the court, or (2) the notice to interested persons is given and court approval is obtained. §9.5-5 Applying for Court Instructions The personal representative or any interested person may petition the probate court to approve a settlement, interpret the language of the will that may be the basis for a dispute, or give him or her instructions on how to proceed. ORS 114.275. See Barker v. Barker, 65 Or App 635, 672 P2d 370 (1983).
PRACTICE TIP: A court order under ORS 114.275 can create a safe harbor by giving instructions concerning competing posi- tions or interpretations. If the personal representative’s good-faith resolution of a dispute is questioned by an heir, a devisee, or a creditor, and problems are anticipated, or if the issue is novel, the personal representative should petition the court for instructions.
CAVEAT: ORS 114.275 seems to allow some discretion regarding the notice required to be given to those affected by the proposed action, but if the proposed action would have an impact on the property rights of a party, the personal representative must give notice to the persons affected. The same due process requirements that led the 1989 Legislature to change the statute regarding notice to claimants are applicable here. See §9.3-4. There probably never can be too much notice. The failure to give notice of a proposed action can easily be the basis for review and rever- sal. See §9.3-3. As an alternative to a petition for instructions, the probate court’s jurisdiction includes the “full, legal and equitable powers to make declaratory judgments, as provided in ORS 28.010 to 28.160.” ORS 111.095(2). See ORS 28.040 (declaratory judgments in trusts and estates).
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§9.5-8 Priority of Claims When the estate assets are not sufficient to pay all of the claims and expenses in full, the personal representative must pay them in accordance with statutory priorities. ORS 115.125. See Form 9-8. Claims of any class are prorated if funds are insufficient to pay all of the claims of that class. ORS 115.125(2). A secured creditor whose lien attaches before the death of the decedent can claim the secured property on a “first in time, first in right” basis, rather than by accepting a pro rata distribution under ORS 115.125(2) to the extent of the value of secured property. Heiller v. Nelson, 127 Or App 189, 192, 872 P2d 26 (1994); see ORS 115.070 (if a “judgment was a lien against the property of the estate on the date of the decedent’s death it shall be treated as a claim on a debt due for which the creditor holds security”). If the claim exceeds the value of the secured property, the balance of the claim will be prorated by class in accordance with ORS 115.125. §9.5-9 Payment of Claims The payment of claims is governed by ORS 115.115. See Form 9-8 for a checklist on priority for payment of claims and expenses. Claims are paid only after “all known claims are barred under ORS 115.005(2)” (i.e., on the expiration of four months from the date of the publication of notices to interested persons under ORS 115.005(2)(a), or 30 days after the notice required under ORS 115.003(2)). ORS 115.115. See §9.3-4 (time for presenting claims). If a claim is allowed but not paid within six months, the creditor may apply to the court for an order compelling payment of the claim to the extent that funds of the estate are available. ORS 115.185. The personal representative may not allow and pay a claim that is barred by the statute of limitations, without the written consent of all of the persons who would be adversely affected by allowance of the claim. ORS 115.205. The priority order for the payment of claims is found in ORS 115.125. See §9.5-8; Form 9-8. Under ORS 115.125(1), child-support
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arrearages have priority over general creditors and certain state- reimbursement claims in a probate case in which assets are insufficient to pay all of the claims. See ORS 114.085 (setting apart the entire estate for the support of the surviving spouse and dependent children); ORS 114.065 (priorities of payment for an insolvent or partially insolvent estate). See also §§6.2-1 to 6.4-2 (support of a surviving spouse and children); §9.3-4 (claims filed after four-month period). §9.5-10 Interest on Claims In Thomas By & Through Petersen v. State By and Through Senior and Disabled Services Div., 319 Or 520, 878 P2d 1081 (1994), the state made a claim against the decedent’s estate for medical assistance provided to the decedent. The estate’s primary asset was a land sale contract, and the estate paid the claim over a nine-year period as the payments under the land sale contract were collected. The state asserted a right to interest on the claim pursuant to ORS 82.010(1). The supreme court held that the state was entitled to statutory interest from the date that was “six months after the date of the first publication of notice to interested persons,” because the personal representative had a duty to pay the state’s claim as of that date. Thomas By & Through Petersen, 319 Or at 529 (quoting ORS 115.185). The court ruled that the claim became “due” as defined under ORS 82.010(1), as of six months after the first publication. The court further ruled that the state did not have to assert a claim for interest in its claim, because the interest did not accrue until the estate did not pay the claim six months after the publication date. The court held that the state had adequately asserted its claim for interest in its objection to the final account. Thomas By & Through Petersen, 319 Or at 529–532.
PRACTICE TIP: When responding to any claim, the lawyer should keep the Thomas By & Through Petersen case in mind. To avoid a later demand for interest under the authority of this case, the lawyer should deal with the interest issue at the outset. For example, in responding to any claim, the lawyer could allow the claim in part (allowing only the principal), and disallow the claim in part (specifically disallowing any current or future demand for interest on the claim). The point is to avoid potential problems
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regarding the content of the claim. If the claimant presses the interest issue, the lawyer could settle the matter by negotiation. (Settlement options include reducing the interest accrued to the date of the claim, lowering the interest rate, and selling the estate’s contract receivables.) If settlement negotiations fail, the matter may be resolved by summary determination, litigation, or arbitra- tion. The lawyer should use all of his or her dispute-resolution tools. In short, the decision in the Thomas By & Through Petersen case is a practice tip in itself. The lawyer should review the rules set forth in the opinion and consider how the result might have been avoided. Interest on an unpaid claim is payable at the rate of 9% per annum from the time that payment of the claim was due. ORS 82.010(1). See Thomas By & Through Petersen, 319 Or at 529–530. For unliquidated claims, interest accrues from the date that the claim is established by judgment. ORS 82.010(2); In re McKinney’s Estate, 175 Or 28, 40, 149 P2d 980 (1944).
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Administering Oregon Estates: 2012 Edition 9–12 Chapter 9—Claims Against the Estate
Form 9-1 Form of Claim Against Decedent’s Estate
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) CLAIM AGAINST Deceased. ) DECEDENT’S ESTATE
I, [interested person or creditor’s name], claim: The above-entitled estate is indebted to [creditor’s name and address] in the amount of $______for [describe the nature of the claim]. [For example: Balance owing on installment contract for purchase of a Model X hearing aid. Original contract dated March 17, 2011, in amount of $675; payments received and credited to date $350; remaining unpaid balance $325, payable $50 per month.] I [am the claimant / am presenting this claim on behalf of the claimant and have personal knowledge of the facts stated above]. The amount of $______[is justly due the claimant / is justly owing to the claimant and will become due on ______, 20___]. No payments have been made that are not credited, and there is, to my knowledge, no offset or counterclaim except as stated above. Optional—Attached is a copy of [document evidencing claim]. Claimant’s lawyer is [name and address of claimant’s lawyer].
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DATED: ______, 20____.
/s/______[claimant’s name]
CLAIMANT: [name] [address] [telephone no.] [fax no.]
LAWYER FOR CLAIMANT: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §9.3-1. See UTCR 2.010 and UTCR 9.030 for the form of documents, including requirements regarding document title, spacing, and format.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 9-2 Personal Representative’s Creditor Search Checklist
As personal representative, you have a legal obligation to take reasonable actions during the first three months of administering this estate to identify every person to whom the decedent owes a debt or other obligation, and every person who claims to be owed such a debt, even if the claim is not valid. This checklist is intended to assure that you satisfy your legal obligation to identify claimants. Mark each item “X” if completed or “N/A” if inapplicable. You should return this completed checklist to the lawyer for the estate three months after the initiation of the estate proceeding. Within that time period, you should discuss with your lawyer the requirements for giving notice to claimants.
_____ Notify the Postal Service (by change of address notice) to forward to you all of the decedent’s mail, including mail to the decedent’s residence and any business address of the decedent. _____ Continually review all mail for bills or other indication of debt for three months after the date of your appointment. _____ Review all available bank account records of the decedent for the last year to identify regular installment payments and partial payments on indebtedness. Follow up with inquiries regarding all payments that suggest a continuing obligation. _____ Review all available records in the possession of the decedent. Follow up with inquiries as appropriate. _____ Ask each lawyer, accountant, or other financial consultant of the decedent known to you to have provided services to the decedent to provide you with information on any creditors of the decedent known to them. _____ Review income tax returns for the last three years with an accountant or the estate lawyer, who may obtain appropriate tax releases.
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_____ If the decedent was ever divorced, review divorce records to identify any unpaid obligations for property division, debts, spousal or child support, or attorney fees. _____ If any records or information shows that the decedent was involved in any litigation during the last 20 years, the estate lawyer should review the court judgment docket to verify whether judgments are outstanding. _____ Check with hospitals, ambulance companies, and physicians known to have provided recent care to the decedent to deter- mine whether any balances are owed that have not been paid by Medicare or medical insurance. _____ If the decedent has received any form of public assistance, including Medicaid payment of nursing home expenses, deter- mine whether any reimbursement is owed to the public welfare agency providing the assistance. _____ If the decedent was involved in an accident during the two years ending on the date of death, review the circumstances to identify any outstanding claims for personal injury or property damage allegedly caused by the decedent. _____ If the decedent operated a business, review business records and discuss potential claims with all business partners and associates. If the business was incorporated, check the corpo- rate minute book, and check for guarantees of corporate debts. Consider purchasing tail coverage on existing liability policies. _____ If the decedent owned real property, including a home, check with the tax assessor to determine whether property taxes have been paid. If the decedent rented an apartment or home or business property, verify that no further rent is owed. _____ If you have any claim against the estate on account of a debt, notify the estate lawyer to file a personal representative’s claim with the court.
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_____ Consider whether any other obligations of the decedent exist, but are not covered by this checklist.
COMMENT: See §9.3-3.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 9-3 Notice of Right to Assert Claims Against the Estate
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) NOTICE OF RIGHT TO Deceased. ) ASSERT CLAIMS ) AGAINST THE ESTATE
I am the personal representative for the estate of the above-named decedent. It appears that you may have or assert a claim against the estate of the decedent. In order to assert a claim, you must present that claim in writing to the personal representative. The name of the personal representative and the address at which claims are to be presented are: ______. The date of this notice and the date that this notice is delivered or mailed is: ______, 20___. Any claims against the estate not presented within 30 days of the date of this notice may be barred. DATED: ______, 20____.
/s/______[name] Personal Representative
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PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §9.3-3; ORS 115.003(3). See UTCR 2.010 and UTCR 9.030 for the form of documents.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 9-4 Proof of Personal Representative’s Compliance
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) DECLARATION OF Deceased. ) COMPLIANCE ) REGARDING SEARCH ) FOR CLAIMS AND ) NOTICE TO CLAIMANTS
I, [personal representative], say that: 1. I have completed a review of the financial records and affairs of the decedent and taken such further actions as appear to me reasonably necessary to ascertain the identity and address of each person who has or asserts a claim against the estate. Attached as part of this affidavit is a completed checklist of actions I have taken to identify persons with claims. 2. To the best of my knowledge and belief, no person has or asserts a claim against the estate, other than persons whose claims have been presented, accepted, or paid in full.
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DATED: ______, 20____.
I HEREBY DECLARE THAT THE ABOVE STATEMENT IS TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF, AND THAT I UNDERSTAND IT IS MADE FOR USE AS EVIDENCE IN COURT AND IS SUBJECT TO PENALTY FOR PERJURY.
/s/______[name] Personal Representative
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §9.3-3; ORS 115.003.
NOTE: See UTCR 2.010 and UTCR 9.030 for the form of docu- ments.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 9-5 Notice of Disallowance of Claim
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) NOTICE OF Deceased. ) DISALLOWANCE OF ) CLAIM
To: [creditor’s name] Your claim against the above estate has been [disallowed / allowed in the amount of $______and disallowed in the remaining amount]. Your claim and a copy of this notice, with proof of service by mail, will be filed in the above-entitled proceeding. Your claim[, to the extent that it is disallowed,] will be barred unless within 30 days after the date of mailing or delivery of this notice you file in this proceeding a request for summary determination of your claim, with proof of service as provided by ORS 115.145, or commence an action against the personal representative on the claim in a court of competent jurisdiction. DATED: ______, 20____.
/s/______[name] Personal Representative
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PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §9.5-1; ORS 115.135.
NOTE: See UTCR 2.010 and UTCR 9.030 for the form of docu- ments.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 9-6 Request for Summary Determination of Claim
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) REQUEST FOR Deceased. ) SUMMARY ) DETERMINATION
[Creditor’s name], pursuant to ORS 115.145(1)(a), hereby requests a hearing by this Court for summary determination of [her / his] claim, which was presented to the personal representative on ______, 20___, and [partially] disallowed by notice of the personal representative dated ______, 20___. Proof of service of this request on the [personal representative / lawyer for the personal representative] is attached. [Creditor’s name] is tendering the fee of $____ with this request. DATED: ______, 20___.
/s/______[name] Claimant
CLAIMANT: [name] [address] [telephone no.] [fax no.]
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LAWYER FOR CLAIMANT: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
COMMENT: See §9.5-3; ORS 115.145.
NOTE: See UTCR 2.010 and UTCR 9.030 for the form of documents. See also UTCR 9.070.
NOTE: “All documents must include the author’s name, address, telephone number, fax number, if any, and, if prepared by an attorney, the name, e-mail address, and the Bar number of the author and the trial attorney assigned to try the case.” UTCR 2.010(7).
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 9-7 Notice by Personal Representative of Separate Action on Claim Required
IN THE ______COURT OF THE STATE OF OREGON FOR THE COUNTY OF ______[Probate Department]
In the Matter of the ) Estate of ) Case No. ______, ) ) NOTICE OF SEPARATE Deceased. ) ACTION ON CLAIM ) REQUIRED
To: [creditor’s name] NOTICE IS HEREBY GIVEN pursuant to ORS 115.155 that if you desire to prove the claim presented to the undersigned on or about ______, 20___, and disallowed by the undersigned on or about ______, 20___, you must commence a separate court action against the personal representative within 60 days after the date you receive this notice. DATED: ______, 20____.
/s/______[name] Personal Representative
PERSONAL REPRESENTATIVE: [name] [address] [telephone no.] [fax no.]
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LAWYER FOR PERSONAL REPRESENTATIVE: [name] [OSB no.] [address] [telephone no.] [fax no.] [e-mail address]
NOTE: The personal representative should send a copy of this notice by certified mail, return receipt requested, to ascertain the date of delivery. The original of this notice (with proof of service) should be filed with the court.
COMMENT: See §9.5-3; ORS 115.155.
NOTE: See UTCR 2.010 and UTCR 9.030 for the form of docu- ments.
CAVEAT: This form is illustrative only. Each lawyer must depend on his or her own legal research, knowledge of the law, and expertise in using or modifying this form.
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Form 9-8 Checklist for Priority of Payment of Expenses and Claims
If the assets of the estate are not sufficient to pay all claims and expenses in full, the personal representative must make payment in the following order: _____ (1) Support of the decedent’s spouse and children, ORS 115.125(1)(a); _____ (2) Expenses of administration, ORS 115.125(1)(b); _____ (3) Expenses of a “plain and decent funeral and disposition of remains of the decedent,” ORS 115.125(1)(c);
CAVEAT: The personal representative of an estate having insufficient assets to pay all claims should closely review the propriety of the claim submitted for funeral expenses. The personal representative may be required to disallow payment to the extent the amount claimed exceeds the “plain and decent” standard. _____ (4) Debts and taxes with preference under federal law, ORS 115.125(1)(d); _____ (5) Reasonable and necessary medical expenses and hospital expenses of the decedent’s final illness, includ- ing compensation of persons attending the decedent, ORS 115.125(1)(e); _____ (6) Taxes with preference under state law that are due and payable while the personal representative has possession of the estate, ORS 115.125(1)(f); _____ (7) Debts owed to the decedent’s employees for labor performed within 90 days preceding the decedent’s death, ORS 115.125(1)(g); _____ (8) Child support arrearages, ORS 115.125(1)(h);
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_____ (9) A claim of the Department of Human Services or the Oregon Health Authority for the amount of the state’s monthly contribution to the federal government to defray the costs of outpatient prescription drug coverage provided to a person who is eligible for Medicare Part D prescription drug coverage and who receives benefits under the state medical assistance program or Title XIX of the Social Security Act, ORS 115.125(i); _____ (10) A claim of the Department of Human Services or the Oregon Health Authority for the net amount of assis- tance paid to or for the decedent, in the following order: (a) Public assistance, as defined in ORS 411.010, funded entirely by moneys from the General Fund, ORS 115.125(1)(j)(A); and (b) Public assistance, as defined in ORS 411.010, funded by a combination of state and federal funds, ORS 115.125(1)(j)(B); _____ (11) A claim of the Department of Human Services or the Oregon Health Authority for the care and maintenance of the decedent at a state institution, as provided in ORS 179.610–179.770, ORS 115.125(k); _____ (12) A claim of the Department of Corrections for care and maintenance of any decedent who was at a state institution to the extent provided in ORS 179.610– 179.770, ORS 115.125(1)(l); _____ (13) Any other claim presented both (a) within the statute of limitations applicable to the claim and (b) within the time for presenting claims against the estate (i.e., claims presented within four months of the first publication of notice to interested persons and claims presented within 30 days after notice is delivered or mailed to the last- known address of a person who was entitled to notice, see ORS 115.003(2)), ORS 115.125(1)(m); and
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_____ (14) Any other claim presented after the time for presenting claims against the estate, but presented both (a) before the expiration of the statute of limitations applicable to the claim, and (b) before the personal representative files the final account, ORS 115.005(2)–(3), 115.125(1)(m); however, such a claim may be paid only after payment of all expenses having priority over claims under ORS 115.125 and payment of all pre- viously presented claims, ORS 115.005(4).
COMMENT: See §§9.5-8 to 9.5-9; ORS 115.125. See also §9.5-3 (time for presenting claims).
NOTE: If the assets of the estate “are insufficient to pay in full all expenses or claims of any one class specified in [ORS 115.125(1)], each expense or claim of that class shall be paid only in proportion to the amount thereof.” ORS 115.125(2).
CAVEAT: This form reflects the 2012 edition of the probate code. Before using this checklist, the personal representative (or the personal representative’s lawyer) must check for any statutory amendments.
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Appendix—Claims Tracking Table Action Date of Date Action Taken Deadline ** Deadline Disallowance Claim description Claim Amount Date Claim by PR Received Date Letter Notice Delivered* ESTATE OF ______ESTATEAGAINST CLAIMS - Notice Date of Date Letter to Letter Claimant (Potential) and Address Claimant’s Name * ** Certified From Mail Receipt (60 days from day claim received)
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Administering Oregon Estates: 2012 Edition 9–32 Chapter 10 Litigation
Jan K. Kitchel Schwabe Williamson & Wyatt PC Portland, Oregon
Katherine O. VanZanten Schwabe Williamson & Wyatt PC Portland, Oregon
Contents §15.1 Scope of Chapter 10–2 §15.2 Will Contests ...... 10–3 §15.2-1 Procedural Requirements ...... 10–3 §15.2-2 Bases for Will Contest ...... 10–11 §15.3 Wrongful Death Claims and Procedures; Survivorship of Causes of Action ...... 10–23 §15.3-1 Introduction ...... 10–23 §15.3-2 Victim’s Personal Representative 10–24 §15.3-3 Distribution of Wrongful Death Proceeds 10–28 §15.3-4 Statutes of Limitations 10–30 §15.3-5 Attorney Fees and Personal Representative Fees 10–32 §15.3-6 Jury Instructions ...... 10–32 §15.3-7 Tortfeasor’s Personal Representative ...... 10–32 §15.3-8 Closing the Estate ...... 10–34 Chapter 10—Litigation
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LITIGATION
This chapter is excerpted from Administering Oregon Estates (OSB Legal Pubs 2012) due out in December 2012 and also available on the BarBooks™ online library.
JAN K. KITCHEL, B.S., Oregon State University (1973); J.D., Willamette University (1978); member of the Oregon State Bar since 1978 and the Washington State Bar Association since 1983; shareholder, Schwabe, Williamson & Wyatt, P.C., Portland. KATHERINE O. VANZANTEN, B.A., Boston University (1994); J.D., LL.M., Golden Gate University (1997); member of the Oregon State Bar since 1997; shareholder, Schwabe, Williamson & Wyatt, P.C., Portland.
§15.1 SCOPE OF CHAPTER ...... 15-2 §15.2 WILL CONTESTS ...... 15-3 §15.2-1 Procedural Requirements ...... 15-3 §15.2-1(a) The Primary Statute ...... 15-3 §15.2-1(b) Contents of Petition; Filing Fees ...... 15-6 §15.2-1(c) Parties to a Will Contest ...... 15-6 §15.2-1(d) Will Contest Distinguished from Other Claims ...... 15-7 §15.2-1(e) No-Contest Clause in Will ...... 15-9 §15.2-1(f) Will Contest: Action Tried Without a Jury ...... 15-10 §15.2-1(g) Judgment ...... 15-11 §15.2-2 Bases for Will Contest ...... 15-11 §15.2-2(a) Lack of Testamentary Capacity ...... 15-12 §15.2-2(b) Undue Influence ...... 15-14 §15.2-2(c) Insane Delusion ...... 15-18 §15.2-2(d) Fraud ...... 15-20 §15.2-2(e) Mistake ...... 15-20 §15.2-2(f) Revocation of Will ...... 15-21
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§15.2-2(g) Intentional Interference with Prospective Inheritance ...... 15-21 §15.3 WRONGFUL DEATH CLAIMS AND PROCEDURES; SURVIVORSHIP OF CAUSES OF ACTION ...... 15-23 §15.3-1 Introduction ...... 15-23 §15.3-2 Victim’s Personal Representative ...... 15-24 §15.3-2(a) Appointment ...... 15-24 §15.3-2(b) Petition for Appointment ...... 15-26 §15.3-2(c) Award and Settlement ...... 15-26 §15.3-3 Distribution of Wrongful Death Proceeds ...... 15-28 §15.3-3(a) In General ...... 15-28 §15.3-3(b) Compensating Decedent’s Family ...... 15-29 §15.3-3(c) Minors as Recipients of Proceeds ...... 15-29 §15.3-4 Statutes of Limitations ...... 15-30 §15.3-5 Attorney Fees and Personal Representative Fees ...... 15-32 §15.3-6 Jury Instructions ...... 15-32 §15.3-7 Tortfeasor’s Personal Representative ...... 15-32 §15.3-7(a) Effect of Tortfeasor’s Death ...... 15-32 §15.3-7(b) Parties ...... 15-32 §15.3-7(c) Petition for Appointment ...... 15-33 §15.3-8 Closing the Estate ...... 15-34
§15.1 SCOPE OF CHAPTER This chapter discusses: (1) Will contests (see §§15.2-1(a) to 15.2-2(g)); (2) Wrongful death claims and survivorship of causes of action (see §§15.3-1 to 15.3-8); and
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(3) Civil actions against persons who physically or financially abuse a vulnerable person (see §15.4). Litigation of creditors’ claims is discussed in chapter 8. The procedural requirements of will contests are explained in §§15. 2-1(a) to 15.2-1(g). The grounds for will contests are separately discussed in §§15.2-2 to 15.2-2(g). Litigation of wrongful death cases is discussed from both the plaintiff’s and the defendant’s points of view. The procedures are discussed involving both deceased plaintiffs and deceased defendants. (Often, litigators do not realize the probate procedures necessary in a wrongful death case until settlement or trial.)
§15.2 WILL CONTESTS §15.2-1 Procedural Requirements §15.2-1(a) The Primary Statute Any interested person (as defined in ORS 111.005(19)) may contest the probate of a decedent’s will by filing a petition in the probate proceedings within four months of the later of two events: (1) Four months after the date of delivering or mailing the information described in ORS 113.145 (information to devisees and heirs) if that information was required to be delivered or mailed to the person on whose behalf the petition is filed, ORS 113.075(3)(a); or (2) Four months after the first publication of notice to interested persons if the person on whose behalf the petition is filed was not required to be named in the petition as an interested person, ORS 113.075(3)(b). For a contestant to be an interested person, the contestant either must be an intestate heir, a devisee, or a creditor with a claim against the decedent’s estate or must have an interest in a previous will that was not revoked other than by the will that is being contested. See ORS 111.005(19). A non-heir party who was a beneficiary under a prior will that was revoked other than by the will being contested does not have
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standing. In re Carlson’s Estate, 153 Or 327, 334–335, 56 P2d 347 (1936). In In re Carlson’s Estate, 153 Or at 332, an earlier will, which was last seen in the decedent’s possession, could not be found and was presumed to have been revoked by the decedent’s physical act, independently of the execution of the later will. In Harris v. Jourdan, 218 Or App 470, 490, 180 P3d 119 (2008), the court concluded that the “evidentiary presumption in In re Carlson’s Estate simply is not applicable in this case” because the proponent of the later will “never contended that the [earlier] will was destroyed entirely independently of his influence on [the decedent’s] decision to draft the [later] will.” The court said that In re Carlson’s Estate “was decided under a different statutory scheme, and one that did not contain the current definition of an ‘interested person.’” The court in the Harris case concluded that a person is entitled to contest the probate of a will if he or she “can demonstrate the existence of a property right or claim that ‘may’ be affected by the proceeding.” Harris, 218 Or App at 488 (citing ORS 111.005(19)). A will contest is commenced “by the filing of a petition in the probate proceedings.” ORS 113.075(2). A petition that is filed beyond the four-month limitation period described in ORS 113.075(3) is untimely. Betz v. Ganos, 196 Or App 5, 10, 100 P3d 756 (2004). See ORS 113.145. It is not clear whether it is necessary to both file the petition and serve the personal representative within the four-month period, or whether it is sufficient to merely file within the time period and then serve the personal representative later. Under the former statute, which allowed contests within six months from the filing of probate, the Oregon Supreme Court held that the general statutes of limitations apply only to common-law rights of action. In re Desborough’s Estate, 220 Or 528, 531, 349 P2d 849 (1960), “They do not affect a special statutory proceeding which sets up its own limitation as has the probate code pertaining to will contests.” In re Desborough’s Estate, 220 Or at 531. Therefore, under In re Desborough’s Estate, the general statutes of limitations (see e.g., ORS 12.020), which provide that an action is
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commenced when the complaint is filed and the summons is served or delivered to the serving officer, do not govern a will-contest proceeding.
COMMENT: Serving the petition on the personal representative within the four-month period is arguably sufficient, even if the actual filing takes place after the four-month period has expired. Note, however, that if the will is contested on the ground that the decedent promised or represented that the decedent would either (1) make, revoke, or not revoke a will or (2) die intestate, the action may be commenced by the filing of a separate action in a court of competent jurisdiction. ORS 113.075(2). Such a cause of action may not be presented as a claim under ORS chapter 115. ORS 113.075(4). The time to file a will contest does not begin to run against a contestant who is an interested person (and thus is entitled to individual notice under ORS 113.145) until the individual notice has been mailed. In the case of a childless decedent, lost or unknown collateral relatives may occasionally “crawl out of the woodwork” to contest a will or assert intestate rights. The petition for admitting a will to probate must list the name and post-office address of any person asserting an interest in the estate, or on whose behalf an interest has been asserted, based on a contention that (1) the will alleged in the petition to be the decedent’s will is ineffective in whole or in part, (2) there exists a will that has not been alleged in the petition to be the decedent’s will, or (3) the decedent agreed, promised, or represented that he or she would make or revoke a will or devise, or not revoke a will or devise, or die intestate. ORS 113.035(8). See ORS 113.075(1). The notice required to be given to interested persons under ORS 113.145 must be delivered or mailed to any person asserting an interest in the estate as described in the previous paragraph. ORS 113.145(1)(g).
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§15.2-1(b) Contents of Petition; Filing Fees A will contest is commenced “by the filing of a petition in the probate proceedings.” ORS 113.075(2). See ORS 111.205 (pleadings and mode of procedure generally). The contents of a petition contesting a will are not set forth in ORS 113.075. The general practice is that the petition is filed in the probate proceeding itself (see ORS 113.075(2)), with the caption identifying the estate proceeding and, below that heading, listing the contestants and the respondents. The body of the petition should identify the parties to establish that the contestant has an interest in the proceeding, and should set forth the grounds of the will contest, for example, lack of testamentary capacity, undue influence, insane delusions, fraud, or mistake. See §§15.2-2 to 15.2-2(g) regarding the grounds for a will contest.
PRACTICE TIP: The form of the petition must comply with the requirements of UTCR 2.010 and 9.030. See
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interested persons.” ORS 111.005(19). See Harris v. Jourdan, 218 Or App 470, 490, 180 P3d 119 (2008). The personal representative is the only necessary opposing party and is called the respondent or the proponent. The beneficiaries of the challenged will are proper parties, but not necessary parties.
PRACTICE TIP: Strategic consideration should govern the decision whether to join additional parties other than the personal representative. For example, if the ground for the will contest is undue influence, the particular beneficiary who exercised the undue influence is usually joined to identify him or her as an adverse party. Often, the beneficiary who exercised undue influence is also the personal representative. Otherwise, the contestant may wish to avoid naming additional parties, who may merely line up additional opposing counsel against the contestant. Because the personal representative is already before the court and is usually represented by counsel, and if the petition contesting the will is filed in the probate proceeding (see §15.2-1(b)), serving the petition by mail on the lawyer for the personal representative is adequate. Other parties can be served with a copy of the petition and a summons, just as in other litigation. In the alternative, the other parties can be mailed a notice of time within which to object to the will-contest petition; if they fail to object, they will be bound by the result. A citation issued by the court ordering those parties to appear is also satisfactory but requires unnecessary time and effort. The foregoing are matters of general practice in Oregon without appellate court confirmation. A homeowner’s insurer has no duty to defend an action brought against the homeowner for undue influence and interference with economic relations. Drake v. Mut. of Enumclaw Ins. Co., 167 Or App 475, 481–482, 1 P3d 1065 (2000). §15.2-1(d) Will Contest Distinguished from Other Claims A will contest is a special type of claim “to” rather than “against” the estate. Claims “against” the estate are usually creditors’ claims, which must be presented within the statute of limitations applicable to 15-7 2012 Revision
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the claim and within a specified time or they are barred. ORS 115.005; see chapter 9. An anomalous third type of claim is a claim that the decedent violated a promise or an agreement to make a will, or not to revoke an existing will, or to die intestate. This is a claim “to” the estate, but it was not recognized by the legislature until 1991 as a basis for a will contest. See ORS 113.075(1)(c). See §15.2-2. Because the breach theoretically is not final until the date of death, the statute of limitations begins to run at the date of death. See chapter 8. A claim includes “liabilities of a decedent, whether arising in contract, in tort or otherwise.” ORS 111.005(7). This language seems not to limit a claim to a claim “against” the estate and seems to include a claim involving a contract to make a will. But see Harris v. Craven, 162 Or 1, 18, 91 P2d 302 (1939) (a contract to make a will is not within the claims statutes, which refer to claims that are pecuniary in nature; note, however, that this case predates the probate code).
NOTE: ORS 113.075 makes clear that such a claim cannot be presented as a claim against the estate under ORS chapter 115, making the statute consistent with case law. The court discussed the nature of a contract to make a will in First Nat. Bank of Oregon v. Dep’t of Revenue, State of Or., 294 Or 60, 67, 653 P2d 985 (1982). The court held that this was a claim to rather than against the estate and confirmed the rule that an inheritance tax is determined by the amount of the estate at the time of death, but it did not settle the statute-of-limitations question. The court of appeals resolved the question whether the claims statute of limitations governs an action to enforce a contract not to change a will in Willbanks v. Goodwin, 70 Or App 425, 430–431, 689 P2d 1004 (1984), rev’d on other grounds, 300 Or 181 (1985), holding that the claims statute of limitations does not apply to an action to enforce a contract not to change a will. See Betz v. Ganos, 196 Or App 5, 10, 100 P3d 756 (2004) (because the petitioner’s will contest was not filed within the four- month limitation period described in ORS 113.075(3), it was untimely filed).
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§15.2-1(e) No-Contest Clause in Will An in terrorem clause is “a provision in a will that reduces or eliminates a devise to a devisee if the devisee contests the will.” ORS 112.272(4). With certain exceptions, an in terrorem clause in a will is valid and enforceable. ORS 112.272(1). Except as provided in ORS 112.272, if a devisee contests a will that contains an in terrorem clause that applies to the devisee, the court must enforce the clause against the devisee even though the devisee establishes probable cause for the contest. ORS 112.272(1). ORS 112.272 prohibits the court from enforcing an in terrorem clause if: (1) The devisee contesting the will establishes that he or she “has probable cause to believe that the will is a forgery or that the will has been revoked,” ORS 112.272(2); or (2) The contest is brought by a fiduciary acting on behalf of a protected person under ORS chapter 125, a guardian ad litem appointed for a minor, or a guardian ad litem appointed for an incapacitated or financially incapable person, ORS 112.272(3). The in terrorem statute, enacted in 1997, probably puts to rest any controversy in prior case law. In Wadsworth v. Brigham, 125 Or 428, 454–455, 259 P 299 (1927), adhered to on reh’g, 125 Or 428, 266 P 875 (1928), the testator’s illegitimate daughter, who was not named in the will, contested the will. The will provided that any person who contested the will or claimed to be an heir of the testator would receive $5; any other devise or bequest under the will was revoked. The court held that when a will contest is brought in good faith, a no-contest provision is void as against public policy. In U.S. Nat. Bank of Portland v. Snodgrass, 202 Or 530, 555–556, 275 P2d 860 (1954), the court enforced a forfeiture clause in a trust provision that disinherited the testator’s daughter if she married a Catholic. Then, in Larson v. Naslund, 73 Or App 699, 705, 700 P2d 276 (1985), the court of appeals held that the Snodgrass decision overruled sub silentio the Wadsworth good-faith exception to the enforcement of a no-contest provision. In Larson, the court upheld a clause providing that any person who
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contested the will would receive $1 in lieu of any provision previously made for that person in the will. The court in Larson upheld the public policy of testamentary freedom as opposed to the public policy argument articulated in Wadsworth. The court concluded that “a will contestant must show that a no-contest provision is either unlawful or in contravention of some specific public policy or it will be enforced.” Larson, 73 Or App at 706.
COMMENT: No-contest clauses are common in wills that are the product of undue influence because of the chilling effect that the clause has on any person contemplating contesting the will.
QUERY: Does the presence of an in terrorem clause evidence overreaching on the part of a beneficiary’s who influenced the testator? Also, if a beneficiary receives nothing or only a small distribution under a will, the in terrorem clause will not be much of a deterrent. §15.2-1(f) Will Contest: Action Tried Without a Jury In a will contest, proof of any facts must be made in the same manner as in an action tried without a jury rather than as in a suit in equity. ORS 113.055(4). In Matter of Summers’ Estate, 49 Or App 5, 8 n 3, 618 P2d 1287 (1980), the court stated that this language means that appellate review of a will contest is not de novo. However, this dictum has been rejected. In Sanders v. U.S. Nat. Bank, 71 Or App 674, 680– 682, 694 P2d 548 (1985), the court held that the statute does not change the preexisting right to de novo review in will contests. This ruling was adhered to in Williams v. Overton, 76 Or App 424, 426, 709 P2d 1115 (1985), in which the court also exercised de novo review. The appellate courts continue to review will contests de novo. See, e.g, Harris v. Jourdan, 218 Or App 470, 473, 180 P3d 119 (2008). The language in ORS 113.055(4) does not convert a will contest from a suit in equity to an action at law, invoking the right to a jury trial. See Sanders v. U.S. Nat. Bank, 71 Or App at 680–681; Rantru v. Unger, 73 Or App 680, 682, 700 P2d 272 (1985).
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A plaintiff may be able to obtain a jury trial by contesting a will in an action alleging the tort of intentional interference with economic relations. See Allen v. Hall, 328 Or 276, 974 P2d 199 (1999) (discussed in §15.2-2(g)). The elements of proof in such an action may be more rigorous, however. §15.2-1(g) Judgment The 2003 Legislative Assembly enacted a comprehensive revision of the laws governing judgments and made numerous other legislative changes to the laws governing procedure in civil actions. See 2003 Or Laws ch 576. Oregon law now provides for three types of judgments: a general judgment, a limited judgment, and a supplemental judgment, See ORS 18.038; see also ORS 18.005 (definitions). The title of the judgment document must specify the type of judgment. See ORS 18.038. Any document captioned as a judgment is appealable. See ORS 19.205. The court must make a determination that there is no just reason for delay before entering a limited judgment. See ORS 18.052, 111.275(2). Although those words need not appear in the judgment, the best practice is to include them. See ORS 18.052, 111.275(2). An order approving a final accounting is a general judgment of final distribution. ORS 116.113; see ORS 116.093. An order closing the estate and discharging the personal representative is a supplemental judgment of discharge. ORS 116.213. On a determination that there is no just reason for delay, the court in a probate proceeding may enter a limited judgment for a decision in a will contest filed in the probate proceeding. ORS 111.275(1)(b), (2). “The judgment document need not reflect the court’s determination that there is no just reason for delay.” ORS 111.275(2). See Appendix 2C for a helpful table listing various judgments and orders and the corresponding ORS sections. §15.2-2 Bases for Will Contest The two most common substantive grounds for will contests are lack of testamentary capacity and undue influence. See §§15.2-2(a) to 15.2-2(b). Rarely does a contestant allege insane delusion. See §15.2- 2(c). Although a will may also be contested for want of proper 15-11 2012 Revision
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execution, this chapter does not discuss that issue. See §§4.2-3(a) to 4.2- 3(c).
NOTE: A foreign will that is offered for probate in this state “may be contested for a cause which would be grounds for rejection of a will of a testator who died domiciled in this state.” ORS 113.065(2). See §8.4-2. Oregon law articulates three substantive grounds on which a will may be contested. Pursuant to ORS 113.075(1), “[a]ny interested person may contest the probate of the will or the validity of the will or assert an interest in the estate” for any of the following reasons: (1) The will alleged in the probate petition is ineffective in whole or in part; (2) A will exists that has not been alleged in the probate petition to be the decedent’s will; or
(3) The decedent “agreed, promised or represented that the decedent would make or revoke a will or devise, or not revoke a will or devise, or die intestate.” The usual grounds for a will contest, that is, lack of testamentary capacity, undue influence, and insane delusion, apply to wills contested under item (1) above.
§15.2-2(a) Lack of Testamentary Capacity One of the requirements of a valid will is that it must be made by a person “who is of sound mind.” ORS 112.225. See §4.2-1. The requirements for testamentary capacity are as follows: (1) The person must be able to understand the nature of the act in which he or she is engaged (execution of his or her will); (2) The person must know the nature and extent of his or her property; (3) The person must know, without prompting, the claims, if any, of those who are, should be, or might be the natural objects of the person’s bounty; and 15-12 2012 Revision
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(4) The person must be cognizant of the scope and reach of the provisions of the document. Golden v. Stephan, 5 Or App 547, 550, 485 P2d 1108 (1971). Although the proponent of the will has the burden of proving testamentary capacity, “the proponent is aided by a presumption of competence [that] attends a properly executed will.” Golden, 5 Or App at 550; see also Matter of Unger’s Estate, 47 Or App 951, 955, 615 P2d 1115 (1980). A will contest may be commenced after the proponent of the challenged will offers it for probate in solemn form (i.e., by testimony of the attesting witnesses as to its execution). See §§5.2-4(a) to 5.2-4(h). The real burden of proof then shifts to the contestant and remains there. “Mental competency to make a will is determined at the precise moment the will is executed.” Matter of Gentry’s Estate, 32 Or App 45, 49, 573 P2d 322 (1978); Matter of Johnson’s Estate, 24 Or App 897, 905, 547 P2d 658 (1976). For this reason, great weight is given to the testimony of the attesting witnesses and any other disinterested persons present at the time of the will’s execution. Matter of Unger’s Estate, 47 Or App at 955. The will contestant will have difficulty overcoming the strong testimony of the attesting witnesses confirming the elements of testamentary capacity. See Whitteberry v. Whitteberry, 9 Or App 154, 157, 496 P2d 240 (1972). The testimony of attesting witnesses nonetheless has been overcome by stronger testimony to the contrary. See Matter of Unger’s Estate, 47 Or App at 958 (testimony from the examining physician and nursing home personnel outweighed that of the attesting witnesses who either had little opportunity to observe the testator or were not disinterested). The significance of the rule that testamentary capacity is determined at the time the will is executed is illustrated by holdings that a person determined to be mentally ill or insane can make a will during a lucid interval, In re Cook’s Estate, 231 Or 133, 136, 372 P2d 520 (1962), or that a person held to be incompetent and functioning under a guardianship may likewise execute a valid will, Matter of Gentry’s Estate, 32 Or App at 50.
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A relatively minimal level of mental competency has been held to be sufficient to execute a will. Wills have been upheld despite evidence that: (1) The testator had filthy living habits; his farm was in disrepair; animals had died because they had not been fed and had rotted on his farm; his house was filthy; he slept in his clothes; and he wore rain gear and rubber boots continuously, Vsetecka v. Novak, 4 Or App 463, 466, 478 P2d 655 (1971); (2) The testator was 94 years old, blind, failing physically, living in a nursing home, and afflicted with a chronic brain syndrome, Nease v. Clark, 6 Or App 589, 595, 488 P2d 1396 (1971); and (3) The testator had been judicially declared incompetent and required a guardian, Whitteberry, 9 Or App at 156. A testator is “not required to have had a high degree of mentality” at the time the will is executed and “one may have testamentary capacity even if mentally incompetent to execute contracts, deeds or other bilateral engagements.” In re Walther’s Estate, 177 Or 382, 388, 163 P2d 285 (1945); see Meister v. Finley, 208 Or 223, 232–233, 300 P2d 778 (1956) (a person “may have quite limited intelligence and still be competent to select the persons whom he wishes to receive his worldly goods at his death and to know that an instrument he signs will effectuate his purpose in that regard”). For discussion of representing clients with diminished capacity, see THE ETHICAL OREGON LAWYER ch 18 (Oregon CLE 2006). See also ELDER LAW ch 2 (Oregon CLE 2000 & Supp 2005). §15.2-2(b) Undue Influence A leading case in Oregon on the subject of undue influence is In re Reddaway’s Estate, 214 Or 410, 418, 329 P2d 886 (1958), in which the court stated the general principle that “the law will not permit improper influences to control the disposition of a person’s property.” Although the term undue influence cannot be specifically defined, the theory is that “the testator is induced by various means to execute an instrument which, although his, in outward form, is in reality not his
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will, but the will of another person which is substituted for that of testator.” In re Reddaway’s Estate 214 Or at 418 (quoting In re Porter’s Estate, 192 Or 483, 492, 235 P2d 894 (1951)). In other words, but for the wrongful influence exercised on the testator, he or she would not have executed that will. Every person is influenced by the attitudes, communications, and ideas of others; the court’s task is to analyze all the facts “to determine whether the influence in the particular case is ‘undue’”. In re Reddaway’s Estate 214 Or at 418; see also Slusarenko v. Slusarenko, 209 Or App 307, 325, 147 P3d 920 (2006); Harris v. Jourdan, 218 Or App 470, 491, 180 P3d 119 (2008). In In re Reddaway’s Estate, 214 Or at 419, the court did not approach its determination from the standpoint of the testator’s freedom of will but from the nature of the influencer’s conduct in persuading the testator to act and the unfairness of the advantage that is reaped as the result of wrongful conduct. See also Slusarenko, 209 Or App at 325. “Equity acts because there is want of conscience on the part of the donee, not want of consent on the part of the donor.” In re Reddaway’s Estate, 214 Or at 420. Undue influence is said to have “a closer kinship to fraud than to duress.” In re Reddaway’s Estate, 214 Or at 420. See §15.2-2(d). Although undue influence may be “a species of fraud,” in the strict sense fraud is not necessary. In re Reddaway’s Estate, 214 Or at 420. In a will contest, “the burden of proof as to undue influence is upon the contestant. However, where a confidential relationship exists between the testator and a beneficiary, along with other suspicious circumstances, the burden of production is placed upon the proponent.” McNeely v. Hiatt, 138 Or App 434, 441, 909 P2d 191 (1996) (quoting Nease v. Clark, 6 Or App 589, 596, 488 P2d 1396 (1971)). The proponent must then go forward with proof sufficient to overcome the adverse inference. When “a confidential relationship exists between a testator and the beneficiary, slight evidence is sufficient to establish undue influence.” In re Reddaway’s Estate, 214 Or at 420 (if the testamentary
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gift results in taking property away from those who had a reasonable expectation of being the recipients of the testator’s bounty, the burden is on the donee to produce evidence that improper influence was not used); see also Slusarenko, 209 Or App at 326. The influence must exist at the time the will is created. The courts recognize that cases of this type ordinarily must rest on circumstantial evidence. In re Reddaway’s Estate, 214 Or at 427. In In re Reddaway’s Estate, 214 Or at 421–427, the court stated the guidelines for suspicious circumstances in the form of seven factors, which have been followed in many subsequent decisions. The court also stated that “[i]nfluence gained by kindness and affection will not be regarded as ‘undue,’ if no imposition or fraud be practiced”; the court looks to the donee’s purpose and motive in inducing the testamentary gift. In re Reddaway’s Estate, 214 Or at 425 (emphasis original). The seven factors set forth in In re Reddaway’s Estate have been used in many subsequent decisions to resolve the difficult question of when a will has been the product of undue influence. See, e.g., Matter of Swenson’s Estate, 48 Or App 497, 500–502, 617 P2d 305 (1980). The seven factors are summarized as follows: (1) Procurement: the beneficiary participates in obtaining or preparing the will, In re Reddaway’s Estate, 214 Or at 421–422; (2) Lack of independent advice: “a beneficiary who participates in the preparation of a will and who occupies a confidential or fiduciary relationship to the testator” has a duty “to see that the testator receives independent and disinterested advice,” In re Reddaway’s Estate, 214 Or at 422; (3) Secrecy and haste: the fact of the will being kept from family members who might otherwise have been the natural objects of the testator’s bounty, In re Reddaway’s Estate, 214 Or at 423; (4) Change in the testator’s attitude following close association with the beneficiary, In re Reddaway’s Estate, 214 Or at 423–424;
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(5) Change in the testator’s plan of disposing of property: unexplained changes from previous wills or from intestate disposition, In re Reddaway’s Estate, 214 Or at 423–424; (6) An unnatural or unjust gift to the beneficiary as compared to those who otherwise would naturally be expected to take, In re Reddaway’s Estate, 214 Or at 424–426; and (7) The donor’s susceptibility to influence: a testator who is physically sick, emotionally or mentally confused, or becomes dependent on the beneficiary is susceptible to influence, In re Reddaway’s Estate, 214 Or at 426–427; see also In re Weir’s Estate, 21 Or App 476, 485, 535 P2d 119 (1975) (the court concluded that the will was the product of undue influence when the testator, a person of strong will, had become physically sick and infirm and, by reason of physical infirmities, depended on the beneficiary). The same seven factors have been used in actions to set aside deeds and to set aside transfers that establish joint tenancies because of undue influence. See, e.g., Ryan v. Colombo, 77 Or App 71, 77, 712 P2d 139 (1985); McKee v. Stoddard, 98 Or App 514, 520, 780 P2d 736 (1989). “[A]n inference of undue influence arises where the evidence establishes the existence of a confidential relationship, the beneficiary’s dominance over the testator and the presence of suspicious circumstances [the seven factors] surrounding execution of the will.” Sangster v. Dillard, 144 Or App 210, 216, 925 P2d 929 (1996), modified on recon. sub nom, Matter of Estate of Cochrane, 146 Or App 105 (1997). See also Harris, 218 Or App at 491–492. “The will’s proponent then bears the burden of producing evidence negating that inference.” Sangster, 144 Or App at 216. “Dominance does not necessarily require proof of an authoritative, controlling person bullying or directing the actions of a subservient one. It may exist more subtly ‘such as by suggestion or persuasion or by fostering a sense of need and dependence.’” Sangster, 144 Or App at 216 (quoting Knutsen v. Krippendorf, 124 Or App 299, 309, 862 P2d 509 (1993)). Dominance may be found when the testator
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“is isolated from the outside world and relies almost exclusively on the beneficiary to meet [the testator’s] daily needs.” Sangster, 144 Or App at 216 (citing In re Weir’s Estate, 21 Or App at 477). The facts that a beneficiary made the appointment and escorted a testator to an attorney’s office do not, in themselves, support an inference of undue influence.” Ramsey v. Taylor, 166 Or App 241, 264, 999 P2d 1178 (2000). Also relevant is the fact that the testator had met with his own lawyer without the beneficiary’s presence. A bequest to the lawyer who drafts the will, or to the lawyer’s secretary, creates a presumption of invalidity on the basis of undue influence, which must be overcome by clear and convincing evidence. Cline v. Larson, 234 Or 384, 411, 383 P2d 74 (1963). In the Harris case, the beneficiary of a previous will of the decedent contested the probate of a subsequent will on the ground of undue influence. Citing In re Carlson’s Estate, 153 Or 327, 56 P2d 347 (1936), the proponent of the subsequent will claimed that the court was required to first determine the validity of the earlier will before entertaining the contest of the later will. Harris, 218 Or App at 489– 490. The court disagreed: “Nothing in the statutory definition of an ‘interested person’ or Oregon case law suggests that a will contestant who seeks to inherit under an earlier, facially valid will must also demonstrate that the earlier will could survive a will contest.” Harris, 218 Or App at 490. §15.2-2(c) Insane Delusion An insane delusion affecting a natural object of a testator’s bounty may be sufficient to invalidate the will even though the testator is otherwise found to have testamentary capacity. In re Quaid’s Estate, 215 Or 603, 605–607, 335 P2d 86 (1959) (substantial evidence existed of expressions of the testator’s unreasonable hatred toward her daughter, including pictures of the daughter taken when she was a child, which the testator had defaced). “To be an insane delusion[,] a belief must have absolutely no foundation in fact.” Matter of Yett’s Estate, 44 Or App 709, 714, 606 P2d 1174 (1980). Any evidence, however slight, that provides a basis 15-18 2012 Revision
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for the testator’s belief negates the conclusion that the will was a product of the delusion rather than being the will of the testator. Matter of Yett’s Estate, 44 Or App at 714. See also Potter v. Jones, 20 Or 239, 249–250, 25 P 769 (1891) (“[d]elusions are conceptions that originate spontaneously in the mind without evidence of any kind to support them, and can be accounted for on no reasonable hypothesis”). An insane delusion that does not touch the subject matter of the will does not negate testamentary capacity. In re Walther’s Estate, 177 Or 382, 398–399, 163 P2d 285 (1945). “Whether [a] decedent’s thoughts . . . were insane delusions depends on whether there is any foundation in fact for them.” Sanders v. U.S. Nat. Bank, 71 Or App 674, 682, 694 P2d 548 (1985) (relying on the definition of insane delusion articulated in the Potter case). In the Sanders case, the decedent’s children challenged the will of their father, which left only one dollar to each of them. The court concluded that the father’s will was not the product of an insane delusion because there was “evidence to support decedent’s belief that his two children did not like him and that they were primarily interested in his money on his death.” Sanders, 71 Or App at 683. The reasoning in the Sanders case was followed in Dillon v. Phillips, 92 Or App 65, 68–69, 756 P2d 1278 (1988), in which the court upheld a father’s disinheritance of his children. The will stated that the children made misrepresentations to the decedent, were unwilling to help the decedent in his old age, and disliked the decedent. The court stated that the decedent’s statements, even if wrong, were not insane delusions if the decedent had even a slight basis for them. After noting a long history of family discord, the court concluded that the will was consistent with the testator’s treatment of his children during his lifetime.
PRACTICE TIP: The definition of paranoia (insane delusion) articulated in Potter, 20 Or at 249–250, may be attacked by substantial forensic psychiatric evidence showing how psychiatric criteria have changed from 1891 concepts.
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§15.2-2(d) Fraud In In re Reddaway’s Estate, 214 Or 410, 420, 329 P2d 886 (1958), the court stated that undue influence “has been characterized as ‘a species of fraud.’” However, other decisions have stated that fraud is a species of undue influence. See, e.g., In re Rosenberg’s Estate, 196 Or 219, 231, 246 P2d 858 (1952); In re Smith’s Estate, 212 Or 481, 483, 320 P2d 273 (1958). A will may be voided when it was the product of fraud in the inducement (facts led the testator to make the will) or fraud in the execution (the testator did not know that he or she was signing a will). In re Rosenberg’s Estate, 196 Or at 231. “Where a beneficiary under a will conceals or suppresses facts where it was [the beneficiary’s] duty to disclose such facts where there is a confidential relationship existing between [the beneficiary and the testator], such may constitute fraud sufficient to void a will.” In re Rosenberg’s Estate, 196 Or at 231. Also, when a will was executed [based] on false data brought about by [a] fraudulent representation by or on behalf of a party or parties benefiting from the will,” the will may be set aside on the ground of fraud even though “the will may express the [the testator’s] wishes and be [the testator’s] free and voluntary act at the time.” In re Rosenberg’s Estate, 196 Or at 231. This type of fraud is “a species of undue influence” and is governed by the same criteria generally recognized to prove fraud. In re Rosenberg’s Estate, 196 Or at 231, 247. The whole will is void even though the fraud is perpetrated by only one of the beneficiaries. In re Rosenberg’s Estate, 196 Or at 230–231. Very few appellate decisions involving will contests in Oregon are based on fraud in the standard sense, as compared to undue influence. §15.2-2(e) Mistake Mistake is not generally a basis for contesting a will or any part of the will. A court may invalidate a portion of a will when a mistake of facts influenced the disposition of property, and the disposition would not have been made had the facts been known. See Estate of LaGrand, 47 Or App 81, 86, 613 P2d 1091 (1980) (dictum). 15-20 2012 Revision
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§15.2-2(f) Revocation of Will A will may be contested if it has been revoked or altered as provided in ORS 112.285–112.315. If a will has been revoked by a subsequent will that cannot be found, the existence of that subsequent will must be proved with the type and quantum of proof necessary to prove a lost will. Melhase v. Melhase, 87 Or 590, 593, 171 P 216 (1918). The contestant should be prepared to prove that the lost more recent will either contained an express revocation clause or was so inconsistent with the earlier will as to revoke it. Johnstone v. Zimmer, 191 Or App 26, 33 n 3, 81 P3d 92 (2003). The existence of the later will can be proved orally, and it can have the effect of revoking an earlier will even though it is not presented for probate. Melhase, 87 Or at 593. See ORS 113.075(1)(b). §15.2-2(g) Intentional Interference with Prospective Inheritance In Allen v. Hall, 328 Or 276, 974 P2d 199 (1999), the decedent’s relatives brought an action against beneficiaries under the decedent’s will, alleging intentional interference with prospective inheritance. According to the relatives, the decedent had drafted a new will that named them as the beneficiaries of the estate, but the new will was never executed because of the defendants’ actions. The relatives claimed that the defendants intentionally and falsely represented to the decedent’s lawyer that the decedent was not lucid enough to execute a new will that the lawyer had prepared at the decedent’s request, and that the decedent thereafter did not have an opportunity to execute the new will. The relatives also alleged that the defendants intentionally and falsely represented to the hospital that one of the defendants had a power of attorney that authorized her to remove the decedent from life support. The court determined that it need not “decide in the abstract whether to recognize a separate and distinct claim for intentional interference with prospective inheritance in this state.” Allen, 328 Or at 288. However, the court held that the relatives’ complaint “state[d] a claim under a reasonable extension of the scope of the tort of intentional interference with economic relations.” Allen, 328 Or at 288.
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The elements of the tort of intentional interference with economic relations are as follows: (1) “[T]he existence of a professional or business relationship (which could include, e.g., a contract or a prospective economic advantage)”; (2) “[I]ntentional interference with that relationship or advantage”; (3) “[B]y a third party”; (4) “[A]ccomplished through improper means or for an improper purpose”; (5) “[A] causal effect between the interference and the harm to the relationship or prospective advantage”; and (6) “[D]amages.” Allen, 328 Or at 281. To be actionable, the interference must come about through improper motives or improper means, and improper means include “violence, threats or other intimidation, deceit or misrepresentation, bribery, unfounded litigation, defamation, or disparaging falsehood.” Allen, 328 Or at 285–286. Any of these improper means might be present in a will contest. In Church v. Woods, 190 Or App 112, 118, 77 P3d 1150 (2003), an elder abuse case, the court reasoned that undue influence can also constitute an improper means, allowing an argument in Allen-type cases that undue influence alone might supply the improper means element. In Butcher v. McClain, 244 Or App 316, 260 P3d 611 (2011), the plaintiffs alleged interference with economic relations. The plaintiffs were disinherited by a subsequent will and they did not discover the new will until the decedent’s death. The appellate court reversed the lower court’s ruling by finding that the damages accrued upon the decedent’s death and, therefore, the statute of limitations started to accrue then rather than when the will was executed. Butcher, 244 Or App at 324.
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COMMENT: A prospective litigant should consider carefully whether a jury trial would help or hurt the cause of action, and whether the elements of the tort can be proved. For further discussion of the tort of intentional interference with economic relations, see 2 TORTS ch 25 (Oregon CLE 2006).
§15.3 WRONGFUL DEATH CLAIMS AND PROCEDURES; SURVIVORSHIP OF CAUSES OF ACTION §15.3-1 Introduction Actions for wrongful death are authorized by ORS 30.010– 30.100. The action must be brought by the personal representative of the decedent, who brings the action for the benefit of the decedent’s surviving spouse, children, stepchildren, parents, and stepparents, or other intestate heirs under ORS 30.020(1); or for the devisees under the will pursuant to ORS 30.075. Typically, but not necessarily, ORS 30.075 is the applicable statute when a person is injured and subsequently dies of a cause that is unrelated to the injury. See Roe v. Pierce, 102 Or App 152, 157, 794 P2d 4 (1990), vacated on other grounds, 313 Or 228 (1992) (the court rejected the argument that “ORS 30.075 applies only in cases where the injured person died of causes unrelated to those for which a claim can be made under ORS 30.020”). Under ORS 30.075, causes of action arising out of injuries to a person do not abate upon the injured person’s death. An action for wrongful death must be commenced within three years after the injury causing the decedent’s death is discovered or reasonably should have been discovered. ORS 30.020(1). The statute also sets forth other time limitations on the commencement of an action. See §15.3-4. See generally 2 TORTS §§29.2–29.8 (Oregon CLE 2006). Oregon law does not recognize other claims that are, essentially, wrongful death claims, unless they are brought pursuant to ORS 30.010–30.100. For example, a child cannot bring a separate action for emotional distress and loss of parental consortium. Horwell by Penater v. Oregon Episcopal Sch., 100 Or App 571, 574–575, 787 P2d 502
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(1990) (a minor child’s action for negligent infliction of emotional distress and loss of parental consortium, alleging that her parent died due to the defendant’s negligence, was in substance a wrongful death action and thus had to meet requirements of the wrongful death statute); Simons v. Beard, 188 Or App 370, 373–374, 72 P3d 96 (2003) (a mother cannot recover for emotional distress for the death of viable fetus, but she can recover for emotional distress associated with her own injuries and impact in the birthing process). §15.3-2 Victim’s Personal Representative §15.3-2(a) Appointment When a person’s death is caused by the wrongful act or omission of another, or when a person dies while a tort action is pending (whether or not the tort caused the death), the decedent’s personal representative may maintain an action against the wrongdoer if the decedent, had he or she survived, could have maintained an action against the wrongdoer for injuries. ORS 30.020(1), 30.075. The personal representative is an officer of the court representing the interests of several groups of survivors: (1) The decedent’s surviving spouse, surviving children and stepchildren (minors or adults), and surviving parents and stepparents, ORS 30.020(1); (2) Persons who, under the laws of intestate succession, would be entitled to inherit the decedent’s personal property, ORS 30.020(1); and
NOTE: Parents have a right to recover damages whether or not they would inherit personal property under the laws of intestate succession, and even if the decedent has a spouse and children. Rake v. Boise Cascade Corp., 43 Or App 767, 770, 604 P2d 421 (1979). (3) If the action is brought under ORS 30.075, the beneficiaries of the action are those who take under the decedent’s will, see Roe v. Pierce, 102 Or App 152, 156, 794 P2d 4 (1990), vacated on other grounds, 313 Or 228 (1992).
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Actions under ORS 30.075 are not limited to those in which the tort did not cause the decedent’s death, and that statute also contemplates actions in which the defendant’s wrongful act eventually results in the decedent’s death. See Roe, 102 Or App at 156; see also ORS 30.075(3). Only a personal representative may bring an action for wrongful death. ORS 30.020(1); Brown v. Hackney, 228 Or App 441, 449, 208 P3d 988 (2009); Ross v. Robinson, 169 Or 293, 304–305, 124 P2d 918 (1942). A personal representative in a wrongful death claim is appointed pursuant to ORS chapter 113. “Any interested person or executor named in the will may petition for the appointment of a personal representative.” ORS 113.035. See §§5.2-2(a) to 5.2-2(b). After the petition for the appointment of a personal representative is filed, the court is to “appoint a qualified person it finds suitable as personal representative, giving preference” in the order set forth in ORS 113.085. See In re Roedler’s Estate, 110 Or 147, 151, 222 P 301 (1924). Although the person who is appointed personal representative may be the person nominated under the decedent’s will to serve, the proceeds from the wrongful death action may or may not pass pursuant to the terms of the will. See Roe, 102 Or App at 156. The primary reason to petition for admission of the will and to appoint the person nominated in the will as the personal representative is to avoid the requirement of a bond when the language of the will waives the bond. See chapter 5. The personal representative is authorized to “[p]rosecute claims of the decedent including those for personal injury or wrongful death.” ORS 114.305(20). See also ORS 30.070.
PRACTICE TIP: In the absence of a will, the court may follow the preference statute, ORS 113.085, and appoint any one of a number of persons. The result may be a race to the courthouse for appointment when some family members believe that the loss is theirs alone and try to exclude other family members from any recovery, particularly in view of the different potential beneficiaries under ORS 30.020 and 30.075. The lawyer should
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give careful thought to selecting the best plaintiff to serve as personal representative and deciding which statute to use, ORS 30.020 or ORS 30.075. See Roe, 102 Or App at 156. §15.3-2(b) Petition for Appointment “Any interested person or executor named in the will may petition for the appointment of a personal representative.” ORS 113.035. The petition for appointment of a personal representative in a wrongful death claim must be carefully drafted. If the wrongful death action is the only asset in the estate, the petition should so state and indicate “value unknown.” In such a case, an estate is not administered per se. Publication of notice to creditors (see §§2.5-1, 5.2-8, 7.3-2(a), 9.3-3), inventory (see §§7.4-1 to 7.4-5), tax releases (see chapter 7), and annual accountings (see chapter 11) are not required in most counties. See ORS 30.030(5). The personal representative must comply with the requirements for accounting and closing the estate under ORS chapter 166. Including any other assets in the estate, however, triggers the full administrative process. §15.3-2(c) Award and Settlement The personal representative in a wrongful death action may seek and be awarded five different types of damages: (1) Expenses incurred for services rendered to the decedent, including charges for doctor, hospital, nursing or medical services, and burial and memorial services, ORS 30.020(2)(a); (2) Damages that would compensate the decedent for disability, pain, suffering, and loss of income between the time of injury and the date of death, ORS 30.020(2)(b); (3) Compensatory damages for pecuniary loss to the decedent’s estate, ORS 30.020(2)(c); (4) Just, fair, and reasonable compensation for the decedent’s spouse, children, stepchildren, parents, and stepparents “for pecuniary loss and for loss society, companionship and services of the decedent,” ORS 30.020(2)(d) (note that parents are included in the group of people entitled to share in a damages award for wrongful death); and
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(5) Punitive damages (separately stated in a finding or verdict) that “the decedent would have been entitled to recover from the wrongdoer if the decedent had lived,” ORS 30.020(2)(e). Damages for emotional distress suffered by the persons who survive the decedent are not recoverable in a wrongful death case. Simons v. Beard, 188 Or App 370, 373–374, 72 P3d 96 (2003) (a mother could not recover for emotional distress for the death of her viable fetus, but she could recover for emotional distress associated with her own injuries and impact in the birthing process); Demars v. Erde, 55 Or App 863, 866–867, 640 P2d 635 (1982). The personal representative probably may pursue only the damages that the decedent would have been able to pursue had he or she lived, along with a normal loss-of-consortium claim and attorney fees. ORS 30.075. The personal representative cannot pursue attorney fees if the injuries sued for caused the decedent’s death. ORS 30.075(3). After the decision in Roe v. Pierce, 102 Or App 152, 794 P2d 4 (1990), vacated on other grounds, 313 Or 228 (1992), it is not clear whether the plaintiff can pursue a claim for loss of consortium only for the time period between the tort and the decedent’s death under ORS 30.075. If an action for wrongful death is brought under ORS 30.020, recovery of damages for disability, pain, suffering, and loss of income between the time of the decedent’s injury and the time of his or her death can be recovered only in the wrongful death action. ORS 30.075(3). See generally 1 DAMAGES §§13.1–13.30 (Oregon CLE 1998 & Supp 2007). With the approval of the court, the personal representative has the authority to settle a claim with no notice requirement to other interested persons. ORS 30.070; Matter of White’s Estate, 289 Or 13, 19, 609 P2d 365 (1980); see ORS 114.305(20). See Forms 15-1 and 15-2. Although the statute “does not require notice to the beneficiaries or grant them a right to intervene in the proceeding to approve the settlement, . . . [t]hey may be heard as a matter of right regarding allocation of the proceeds.” Matter of White’s Estate, 41 Or App 439, 444, 599 P2d 1147 (1979), aff’d, 289 Or 13 (1980).
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On the settlement or recovery of the judgment, the personal representative must distribute the damages as prescribed in ORS 30.030 if the personal representative brought the action under ORS 30.020. ORS 30.030(1). The personal representative must pay or reimburse costs, expenses, and fees incurred in prosecuting or enforcing the claim, action, or judgment. ORS 30.030(2). Payment or reimbursement also must be made for the reasonable charges incurred for doctor, hospital, nursing or other medical services, and burial and memorial services rendered for the decedent. ORS 30.020(3). §15.3-3 Distribution of Wrongful Death Proceeds §15.3-3(a) In General The careful probate lawyer in a wrongful death claim appears before (or files appropriate documents with) the court, has the settlement approved, represents in detail to the court the charges prescribed in ORS 30.030(2)–(3) (see §15.3-2(c)), and asks the court to order that those charges be paid. See Form 15-3. At this point, the personal representative is in possession of a given amount of money for distribution. According to the practice in each jurisdiction, the personal representative may be required to post a corporate surety bond in the amount of the proceeds, or may have the court order that the proceeds be deposited in an interest-bearing account not to be withdrawn except on further order of the court. If the proceeds are placed in an interest-bearing account, the interest must be apportioned on distribution. The interest earned is taxable income to the estate and the personal representative must file a tax return and apportion the tax appropriately among the beneficiaries’ shares. When the beneficiaries agree completely on the apportionment of the proceeds, the personal representative may have all the beneficiaries consent to or join in the petition for distribution, which is then presented to the court. See Forms 15-4, 15-5, and 15-6. If the beneficiaries do not agree, the personal representative should file a petition proposing a scheme of distribution, and notify the beneficiaries of it.
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§15.3-3(b) Compensating Decedent’s Family The portion of the wrongful death damages intended to justly, fairly, and reasonably compensate the decedent’s surviving spouse, children, stepchildren, parents, and stepparents for pecuniary loss and loss of society, companionship, and services must be distributed as follows: (1) In accordance with each person’s loss as determined by agreement, ORS 30.020(2)(d), 30.030(4); or (2) By the probate court in the case of a settlement and absent agreement among the beneficiaries, ORS 30.040; or (3) As determined by the trial judge if the judgment for the plaintiff is given and absent agreement by the beneficiaries, ORS 30.050. Any remaining damages pass pursuant to the laws of intestate succession, but no damages are subject to taxes or claims against the decedent’s estate. ORS 30.030(5). If the matter proceeds to trial, the probate court takes evidence from each of the persons asserting an interest in the proceeds on the issues of pecuniary loss and loss of society, companionship, and services. See Matter of White’s Estate, 41 Or App 439, 444, 599 P2d 1147 (1979), aff’d, 289 Or 13 (1980).
PRACTICE TIP: Special problems arise when the beneficiaries disagree about the apportionment of the wrongful death proceeds. One problem is the personal representative’s potential conflict of interest. The personal representative’s lawyer must exercise great caution to ensure that he or she does not provide representation for any other members of the group. §15.3-3(c) Minors as Recipients of Proceeds Problems may arise when members of the class receiving the proceeds from a wrongful death action are minors, in which case most courts will require the appointment of a lawyer to represent the minors’ interests. In some counties, the court makes that appointment on its own motion when a large amount of money is involved. If the amount of 15-29 2012 Revision
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money that accrues to a minor’s benefit exceeds $10,000, a conservator must be appointed. See ORS 126.700. Although ORS 126.700 allows for payment of less than $10,000 to a natural parent or guardian, many insurance companies require that the release be executed by a conservator to protect the company against liability once the minor reaches the age of majority. If payment to a minor from a settlement agreement or pursuant to a judgment exceeds $25,000, a conservator must be appointed. See ORS 126.725(1)(b). Without a conservator, problems arise if the minor alleges that he or she never received the money or the benefit of it from the guardian. The court either can continue the conservatorship until the minor reaches the age of 18, or can allow the conservator to distribute the funds to a parent as trustee pursuant to ORS 126.700, after which the conservatorship is closed. See GUARDIANSHIPS, CONSERVATORSHIPS, AND TRANSFERS TO MINORS (OSB Legal Pubs 2009). An early New York case, In re Kaiser’s Estate, 198 Misc 582, 100 NYS2d 218, 220 (Sur 1950), applied a formula to determine the allocation of the wrongful death proceeds with regard to pecuniary loss. The decedent was survived by a spouse and a one-year-old child. Given the decedent’s life expectancy of 25.27 years at the time of death, the court used as the numerator the years of dependency of the beneficiary, and as the denominator the years of dependency plus the life expectancy of the decedent. This fraction multiplied by the net proceeds determined the child’s share. §15.3-4 Statutes of Limitations An action for wrongful death must “be commenced within three years after the injury causing the death of the decedent is discovered or reasonably should have been discovered.” ORS 30.020(1). In any case, an action may not be commenced later than the earlier of the following: (1) Three years after the decedent’s death, ORS 30.020(1)(a); or (2) “The longest of any other period for commencing an action under a statute of ultimate repose that applies to the act or omission causing the injury, including but not limited to the statutes of ultimate 15-30 2012 Revision
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repose provided for in ORS 12.110(4), 12.115, 12.135, 12.137 and 30.905,” ORS 30.020(1)(b). An action under ORS 30.075, if commenced before the decedent’s death, must comply with time limits of ORS 12.110; if not commenced before death, the action must be commenced by the personal representative within three years of the injury. ORS 30.075(1). The wrongful death statute of limitations controls over the medical malpractice statute of limitations in ORS 12.110(4). Baxter v. Zeller, 42 Or App 873, 877, 601 P2d 902 (1979). But see Kambury v. DaimlerChrysler Corp., 334 Or 367, 374, 50 P3d 1163 (2002) (“the product liability statute of limitations is the more specific statute and must control over the more general wrongful death statute of limitations”). Furthermore, ORS 30.020 contains no tolling procedure for any delay in the appointment of a personal representative. Eldridge v. Eastmoreland Gen. Hosp., 307 Or 500, 505, 769 P2d 775 (1989); Korbut v. Eastman Kodak Co., 100 Or App 649, 650, 787 P2d 896 (1990) (the action was dismissed when the personal representative was appointed more than two years after the decedent’s death, and brought a medical malpractice action against several defendants more than three years after the injury that caused the death but within two years of discovery of the cause of injury). The statute of limitations for wrongful death actions against public bodies is governed by ORS 30.275. See Housen v. Morse Bros., Inc., 32 Or App 491, 493, 574 P2d 361 (1978) (an action against a public body must be “commenced within two years after the occurrence giving rise to the right”). The statute of limitations in products liability cases is governed by Oregon’s Product’s Liability Act, ORS 30.900–30.928. Thompson v. Communications Tech., Inc. (CTI), 877 F.2d 27, 28 (9th Cir. 1989). The statute of limitations for products liability actions arising out of injury from breast implants is governed by ORS 30.908. All statutes of limitations imposed under ORS chapter 115 “apply to actions brought in the name of the state, or brought in the name of any county or public corporation, and to actions brought for the benefit 15-31 2012 Revision
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of the state or for the benefit of any county or public corporation.” ORS 115.008. §15.3-5 Attorney Fees and Personal Representative Fees A cause of action arising out of injuries to a person does not abate on the person’s death. ORS 30.075(1). Attorney fees are allowed to the prevailing plaintiff in ORS 30.075 claims. ORS 30.075(2). Attorney fees are not allowed, however, if the injury actually results in the death of the person. ORS 30.075(3). Fees to personal representatives should take into account a wrongful death recovery. In Brown v. Hackney, 228 Or App 441, 448– 449, 208 P3d 988 (2009), the court of appeals concluded that the phrase “whole estate” under ORS 116.173 included the wrongful death settlement for purposes of calculating the personal representative’s fee. §15.3-6 Jury Instructions UCJI Nos. 21.01, 21.03, 21.04, and 21.05 (relating to comparative negligence) may help the lawyer in structuring the proof required to realize the damages claimed and promote a proper allocation of the award received. §15.3-7 Tortfeasor’s Personal Representative §15.3-7(a) Effect of Tortfeasor’s Death The death of a wrongdoer does not abate the plaintiff’s wrongful death claim for relief. The claim of the plaintiff’s personal representative continues against the personal representative of the wrongdoer’s estate, with the exception that punitive damages will not lie. ORS 30.080. §15.3-7(b) Parties When a wrongdoer dies after the commencement of an action for injuries or wrongful death, the court, upon motion of the plaintiff or the plaintiff’s personal representative, “shall cause to be substituted as defendant the personal representative of the wrongdoer, and the action shall continue against such personal representative.” ORS 30.100.
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When a wrongdoer is deceased when the action is filed, the action must be brought against the personal representative of the wrongdoer’s estate. Worthington v. Estate of Davis, 250 Or App 755, 764, ___ P3d ___ (2012); Ramirez v. Lembcke, 191 Or App 70, 76, 80 P3d 510 (2003) (the court has no jurisdiction over a deceased wrongdoer). See ORS 30.080. If the plaintiff filed an action against a deceased wrongdoer, the plaintiff must then file an amended or supplemental complaint to name the personal representative of the wrongdoer’s estate as the defendant. Ramirez, 191 Or App at 76; Worthington, 250 Or App at 764. It is not proper or sufficient for the plaintiff to simply have a personal representative appointed for the wrongdoer and then continue the case against the decedent personally. Ramirez, 191 Or App at 76–77 (the case was dismissed for want of personal jurisdiction because the plaintiff named only the decedent as the defendant). §15.3-7(c) Petition for Appointment If no estate is initiated for the deceased wrongdoer within 60 days of the wrongdoer’s death, the plaintiff may petition the court to appoint an administrator. ORS 30.090.
PRACTICE TIP: If the plaintiff must secure the appointment of a personal representative to have a party defendant, the plaintiff may allege in the petition that the plaintiff is seeking the appointment under ORS 30.090; this procedure restricts the scope of the proceeding to the wrongful death action alone. By securing this appointment, the tortfeasor’s personal representative has not volunteered to probate any assets requiring administration that belong to the decedent wrongdoer.
PRACTICE TIP: Obtaining the appointment of a personal representative for a tortfeasor occasionally occurs when the decedent wrongdoer owned nothing that required probate administration, and the family members simply do not wish to be involved in the lawsuit. A lawyer often finds another lawyer who is willing to be appointed for the purpose of tendering the defense to the insurance company. Most lawyers give notice, either formally or informally, to the relatives of the deceased wrongdoer of their
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intent to proceed in this fashion. Occasionally a family member will then come forward and serve. On tendering the defense to the insurance carrier, the personal representative in this situation often chooses to resign and allow the insurance company, as the real party in interest, to request appointment of a successor personal representative. A lawyer probably should avoid appointing one of his or her own staff members to serve as personal representative. §15.3-8 Closing the Estate When a plaintiff’s estate consists of assets requiring probate administration as well as a claim for wrongful death, all of the steps of administration can be completed and distribution of those assets can be made before the wrongful death action is resolved. See ORS 116.013. The estate must not be closed, however, whether the personal representative is the plaintiff or the defendant, because the personal representative continues to be a party in the pending proceeding. Once the wrongful death action is concluded, the estate may be closed when receipts are filed evidencing the distribution of the proceeds. ORS 116.213. In Haugh v. Kilmer, 71 Or App 345, 692 P2d 631 (1984), the decedent was survived only by his parents. Before the appointment of a personal representative for the decedent, the parents obtained a settlement from the defendants and released them from further liability. A subsequently appointed personal representative filed an action for wrongful death against the defendants. The trial court granted the defendants’ motion for summary judgment on the ground that the parents’ release barred the action. The court of appeals affirmed because all interested parties of a single class had joined in the settlement.
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