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There are many different types of trusts.  Some trusts – called revocable living trusts – help avoid probate. Some trusts hold funds for a child until they reach a certain age or even for their lifetime.  Special needs trust protect a person’s eligibility for certain public benefits. Our attorneys understand all of the legal aspects of trusts, from assisting you in the creation of a trust to funding trusts to representing trustees who are responsible for managing trust assets.

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What is a Revocable Living Trust?  Can I avoid probate?


Revocable Living Trusts are a commonly used estate planning tool. The primary reasons most people choose a Revocable Living Trust are to avoid probate and to provide for backup management of assets in the event of incapacity. However, a Revocable Living Trust is not always necessary. Once you understand the advantages and disadvantages of a Revocable Living Trust, you can decide if it is appropriate for you.


A Revocable Living Trust is an estate planning document that allows your assets to be managed and distributed in the manner you desire, both during your lifetime and upon death. It is referred to as a 'living' trust because it is established during lifetime and, in most cases, goes into effect immediately. It is a 'revocable' trust because you are free to revoke or amend the trust at any time as your circumstances change.


A Revocable Living Trust is created during your lifetime, and your assets are placed in the Trust while you are alive. You can name yourself as trustee of the Trust. This means that you can manage your own income and assets much the same as you have always done, and file individual tax returns like before. You can revoke or amend the Trust at any time, and the terms of the Trust are set entirely by you.

If you want help in managing your assets now, even though you still have mental capacity, the trust document allows you to name a trustee or co-trustee to handle the Trust. Further, you have an opportunity to appoint someone to serve as your trustee or co-trustee and then see if he or she handles things responsibly and according to your wishes. If you are dissatisfied with the way your trustee or co-trustee handles your Trust, you can take over as trustee yourself, name a new trustee, modify the powers you have given to the trustee, or revoke the Trust altogether.


In the Revocable Living Trust, you can specify under what circumstances a successor trustee takes over management of the Trust. This is usually when the person who created the Trust becomes incapacitated. You can spell out in the Trust how incapacity must be established. Typically, a determination of incapacity requires one or two letters from a physician. Once incapacity is established, the successor trustee, who has been named by you in the Trust, can take over management of the assets.

A Revocable Living Trust avoids the need for a court order establishing a conservatorship if at some time in the future you become unable to manage your own financial affairs, either temporarily or permanently. While naming an agent in a Power of Attorney for Finances can often accomplish this, Powers of Attorney are not as reliably recognized by financial institutions.


The Revocable Living Trust is flexible and can be tailored to your specific needs, desires, and financial resources. This includes the ability to make provisions for care and comfort. Specific instructions about care and comfort are particularly important when the successor trustee is an institution (bank or trust company), or when a family member is very busy or geographically remote. Examples of personal issues that can be included in your trust document are:

• Specifying that you prefer to be cared for at home (even if the cost of such care would be significantly greater than the cost of nursing or other long-term care);

• Authorizing the trustee to provide additional services and care monitoring if you become hospitalized or require placement in a long-term care facility; and

• The continuance of contributions to your Church or charitable organizations.



Your successor trustee will have the authority to take over management of the Trust and follow your instructions as spelled out in the Trust. Assets that are owned by the Trust will avoid probate entirely, which, in turn, can avoid significant costs and delays at your death. People with real property in more than one state can avoid multiple probates with the use of a Trust.

Another advantage of a Trust is that your financial affairs are kept completely private. A Trust eliminates the need for a court proceeding, and other than tax returns, there is no public record.


Spouses with large estates can incorporate a tax savings plan to eliminate or minimize estate taxes. A tax savings plan can also be incorporated into Wills, but in most cases, this ultimately requires a probate when each spouse dies. Therefore, use of a Joint Revocable Living Trust or separate Revocable Living Trusts for each spouse will avoid two probates instead of one.


In addition to the Revocable Living Trust, you will need a Pourover Will and Powers of Attorney for Finances. Also, typically the attorney who assists you will prepare deeds to transfer real property to the Trust and provide an Advance Directive for Health Care.


Your successor trustee should be someone who is trustworthy, responsible with investments, good with paperwork, and preferably a good communicator. This can be an adult child, other relative, friend, or professional fiduciary.


A Revocable Living Trust is not the best option for every situation. It typically costs $800 to $1,200 more for a Trust package than a comparable Will package. It may not be necessary to incur this additional cost for people who are younger, healthy, and do not have large estates. However, some people in these circumstances still choose a Trust because they want to make things easier for their families in the event of an untimely death.

There is more paperwork involved in finalizing a Revocable Living Trust than a Will because title to most of the assets is transferred into the Trust. Some people find this cumbersome and confusing.

In short, a Revocable Living Trust, while often very helpful and cost-effective, is not always necessary. An experienced attorney can help you decide if it meets your individual needs.


How Do I Plan For My Minor Children?


You select a trustee to manage and control the trust for the benefit of your children (the beneficiaries). The trustee follows your directions, using the assets for the beneficiaries. You should choose someone who is financially responsible and knows your children´s needs. If you have no trust for minors, your family will have to go to court to have a conservator appointed and you won’t get to choose who manages the money for your



In a Will or Revocable Living Trust you can also nominate a guardian to care for your minor children if both parents die. A guardian has the power and responsibility of a parent and makes decisions about the children´s upbringing such as schooling, religious training, and medical treatment. The nomination of a guardian does not guarantee that this person will be appointed. However, it lets the court know your wishes, and Oregon law requires the court to carefully consider your named preferences.


Parents of a disabled child have special planning concerns. The two most common planning tools for a child with a disability are (a) Discretionary Support Trusts to provide financial assistance and supervision and (b) Special Needs Trusts to ensure the continued eligibility for government programs such as SSI or Medicaid. Click here for more information. You can also nominate a Guardian for your disabled child.


How Is My Trust Managed After My Death?


A Trust is a legal entity that is created to hold title to property for one or more persons. There are many different kinds of trusts:

•    You can create a trust that takes effect while you´re alive, known as Living Trust. This kind of Trust generally avoids the need for probate. You can make your Living Trust revocable, which means that you can change or terminate it any time during your life. Or, you can create an Irrevocable Trust, which can never be altered or have assets withdrawn, even in an emergency.


•    You can also create a trust through your Will, which takes effect after you die. This is known as a Testamentary Trust. This type of Trust requires a probate process.


At your death, the successor trustee manages the trust assets according to your specific instructions in the Trust. The successor trustee has the same kinds of duties that an executor would have in probating a Will. He or she pays all of your remaining debts, including any taxes, and then distributes the remaining assets to your beneficiaries. Distributing from your Trust does not require court supervision, and is therefore more simple and private than probate. Often the trustee can use certified copies of the Death Certificate and the Trust Agreement to begin managing assets right away, instead of waiting for a court order as required in probate.

If you own any assets that are not titled in the name of the Trust when you die, a probate may be necessary. 


The Trust continues as long as there are assets to manage. This depends on the terms you choose and the circumstances of your beneficiaries. If you instruct your trustee to distribute all assets immediately after your death, then the Trust will terminate as soon as your debts are paid and the distributions are made. If you have minor children or disabled beneficiaries, or if you wish to restrict access to funds for a certain number of years, then the Trust will continue to operate for as long as you specify.


A properly drafted and funded Trust will avoid probate as to assets titled in the Trust. However, probate will be necessary to transfer any assets that were not transferred to the Trust unless those non-trust assets are jointly held with another person or have payable on death beneficiary designations. If a probate is necessary your 'Pourover Will' will be submitted to the court, and then the probate assets will 'pour over' into your Trust and be distributed according to your trust instructions. If you do not have a Will, then the laws of intestate succession will apply to the non-trust assets.


Expenses associated with trusts fall in two stages:

The initial drafting stage is usually more complex than that of a standard Will. Your lawyer can draft a document for you with almost any kind of conditions to guide, dictate, or limit the use of trust funds. Once you decide on the terms of your Trust and the accompanying documents, a responsible attorney will also give you direction on the funding process as needed. An improperly funded Trust can render it completely ineffective.


The second stage involves administering the Trust after you pass away. This process is simpler than probate, and usually the savings will more than offset your initial investment in creating the Trust. For example, there will not be any court filing fees and there is no requirement to pay to publish any legal notices. However, your successor trustee will probably benefit from having an attorney review the trust terms and discuss the trustee´s responsibilities. The trustee may wish to have additional assistance throughout the administration process, depending on the size, complexity, and number of beneficiaries of the Trust.

Most trusts also pay a fee to the successor trustee. Tax preparer fees are also necessary, and will vary depending on the size, complexity, and number of beneficiaries of the Trust. Sometimes trusts also have appraisal fees and/or insurance premiums for real or personal property, as well as postage and/or shipping costs.


For the typical Living Trust, income taxation continues to work the same way, as if you still owned the assets outright. This is true during your lifetime, and also after you pass away, during the period of trust administration. Generally, there are three types of taxes that a trust estate may have to pay:

• Taxes on income earned before the person died;
• Taxes on income earned after death and before assets are distributed; and
• Estate and Inheritance Taxes on the total value of assets owned by the person at death.


How Can I Plan For Possible Incapacity In The Future?


When is a spouse, parent, or loved one no longer able to make decisions for himself or herself?

Legally, the issue is one of capacity. Oregon law defines 'incapacitated' as:

'a condition in which a person´s ability to receive and evaluate information effectively or communicate decisions is impaired to such an extent that the person presently lacks the capacity to meet the essential requirement for the person´s physical health or safety or to manage that person´s financial resources.'


Manage financial resources, means 'those actions necessary to obtain, administer and dispose of real and personal property, intangible property, business property, benefits and income.'

'Incapacitated' persons who are unable to make decisions about their health and safety may require a court-appointed guardian. An inability to manage financial resources may require the appointment of a conservator.

In both instances, the rights and the decision-making abilities of the person are substantially reduced.


A person does not necessarily lack capacity just because he or she is making bad decisions. We all have the right to make bad decisions. One US Supreme Court Justice called it the 'right to folly.' The legal issue, therefore, is not whether a person has made the wrong decision, but the capacity of the person making the decision.

For example, bouncing a few checks is not necessarily evidence of incapacity. On the other hand, overdrafts for the past few months, together with an increased history of unpaid bills, misplaced funds, unexplained gifts, a susceptibility to influence, and related problems may be evidence of an 'inability to manage financial resources.'

Whether a person has the capacity to perform a particular act is examined as of the time of the act. Even if several signs point to mental incompetence, it is possible for a person to have 'lucid intervals' during which he or she has the required capacity to enter into a contract or sign a Will or Trust.

Unfortunately, many people believe that a medical diagnosis of dementia (such as Alzheimer´s Disease) is the same thing as a legal finding of incapacity. This is not true. Until a court legally determines that the individual is incapacitated, that person retains the right to make his or her own decisions, including the right to refuse assistance, placement, and medical treatment.


There are several tools used to plan for incapacity:

1. General Durable Power of Attorney. A Power of Attorney is a legal instrument used to delegate legal authority to another. The Power of Attorney gives legal authority to another person to make property, financial, and other legal decisions for you. You can give very broad or very limited legal authority. The Power of Attorney is frequently used to help in the event of a person´s illness or disability, or in legal transactions where the person cannot be present to sign necessary legal documents.

2. Revocable Living Trust. The Revocable Living Trust is an excellent way to plan for decision-making if you become incapacitated. The trust appoints a decision-maker (successor trustee) to manage your assets in case of your incapacity. The trust document can incorporate specific instructions about how funds will be used if you become incapacitated.

3. Representative Payee. Representative Payee status can also be arranged to manage government benefits (such as Social Security). Follow this link for more information:

4. Advance Directive. Advance Directives are documents you can sign regarding your wishes about health care decisions and medical treatments given in advance of an incapacitating illness. An Advance Directive then gives direction to your family and physician about what decisions you would want made. Advance Directives are used when you cannot communicate your medical decisions for yourself.

5. Declaration for Mental Health Treatment. Another document utilized in Oregon is the Declaration for Mental Health Treatment. This document allows someone, in advance, to select a representative to make mental health treatment decisions, and/or to give specific directions regarding future mental health treatment.

6. Physicians Order for Life Sustaining Treatment. The Physicians Order For Life-Sustaining Treatment is an order signed by the doctor at the direction of the ill individual, or his or her health care representative or guardian. The POLST is a tool to implement the ill individual´s desires regarding life-sustaining measures.


I Have A Family Member Who Experiences A Disability.  What Is A Special Needs Trust?


A Special Needs Trust is a planning tool to benefit people who receive government benefits. This type of trust preserves eligibility for government benefits and establishes a separate fund that can pay for things over and above basic needs that improve the beneficiary´s quality of life.


Often a person with a disability receives public benefits. There are several government programs that provide people with disabilities with help. This help may take the form of cash, medical assistance, housing, or food. Many of these programs, such as Supplemental Security Income (SSI) and Medicaid, have financial eligibility requirements.

Most public benefits programs have a resource requirement that limits the amount of assets a person can own and still be eligible for the program. There are certain assets that do not count, such as a house in which the beneficiary lives and one car. For most programs, the limit for assets that are not excluded is $2,000.

Similarly, if someone has monthly income that is too high, it may affect eligibility for benefits. The income eligibility limits vary among the programs.

With a Special Needs Trust, the assets can be given to the trustee of the trust, to be used for special needs. In some circumstances, income can be directed to the trustee as well.


Special needs include any goods and services that are not food or shelter. 'Supplemental needs' is another term for special needs. As a result of a rule change in 2005, clothing can now be treated as a special need.

Special needs include, but are not limited to, the following: clothing; transportation, such as car expenses or bus pass; telephone; education; cable television; private rehabilitative services; occupational or physical therapy; private case management; medical services for which there are no other funds available; health insurance premiums; dental care; medication and supplements; psychological support services; companion care; respite care; durable medical equipment; massage; recreation and vacation; entertainment; computer equipment and services; personal care items and services.      


The most common way for a Trust to be written is to limit expenditures to items that are not food and shelter. This strict distribution standard has been proven to work for most, if not all, types of public benefits programs that limit the resources a person may own.

In some situations a more flexible standard, often called the hybrid distribution standard, can be included in the Trust. This allows the trustee to pay for food and shelter in certain limited circumstances. If a distribution is made for basic needs there are usually consequences, such as a reduction in government assistance, but in some cases the overall benefit is worth it. The hybrid standard is more flexible than the strict distribution standard but is not always desirable. Be sure to get advice from a knowledgeable attorney before deciding to include this authority in a Special Needs Trust.


Distributions from a Special Needs Trust are paid at the discretion of the trustee. It is important that the trustee directly pay the person or business providing the special need. The beneficiary is ordinarily not given cash with which to make an allowed purchase. This is because the cash could be used to purchase a prohibited item, such as a meal or item of clothing. Receipt of the cash must be reported to the government agency providing assistance, and benefits may be reduced or eliminated for a period of time. To avoid this, the trustee should pay directly for the item requested.


A trustee can be a private person, such as a relative of the beneficiary. Alternatively, a professional trustee can be named, such as a financial institution or small business that offers fiduciary services in the local community. In some cases, both a relative of the beneficiary and a professional fiduciary are named as co-trustees.

Choosing the trustee for a Special Needs Trust is an important decision. The trustee will have an ongoing relationship with the beneficiary, and it is paramount that the trustee be sensitive to the beneficiary´s needs and takes the time to understand the beneficiary´s unique situation. The trustee must also exercise good judgment when making distributions and be knowledgeable about the impact of distributions on the beneficiary´s public benefits. In addition, the trustee must be a prudent investor and good with record keeping and paperwork. Being a trustee is not an easy job!


Special Needs Trusts are often created by third parties wishing to give assets to the beneficiary without jeopardizing public benefits. The most common examples of this are Special Needs Trusts created by parents or grandparents for a child who has a disability. Mechanisms used by third parties to create and fund a Special Needs Trust are described below under Trusts Created by Parents, Grandparents, and Other Third Parties.

A recipient of public benefits may have assets of his or her own. In some cases it is possible to transfer the beneficiary´s own funds into a Special Needs Trust and keep public benefits. This type of Trust is described below under Trusts Created With the Assets of the Beneficiary.


A parent or other third party may set up a Special Needs Trust in several ways. The three most common ways are described below.

1. By Will: A person may create a Trust in his or her Will for the benefit of someone on public benefits. The rules for the Trust are written in the Will, but the Trust does not take effect until the person making the Will dies. The Special Needs Trust can specify who will receive any remaining assets in the Trust at the death of the beneficiary.

2. Through a Revocable Living Trust: It is also possible to establish a Special Needs Trust for someone on public benefits in a Revocable Living Trust, to take effect only when the person making the Revocable Living Trust dies. An exception is that a Special Needs Trust for a spouse should be established in a Will, and not in a Revocable Living Trust.

3. Through an Irrevocable Living Trust: Sometimes it is advantageous to set up an Irrevocable Living Trust with special needs provisions and transfer assets to it while the donor, such as a parent or grandparent, is alive.This way, if one or more people want to donate to a fund for the beneficiary by making lifetime gifts, a Special Needs Trust is in place to receive those gifts. In fact, the existence of an active Special Needs Trust often serves as an inducement to relatives and friends to make lifetime donations.

Also, relatives and friends can name the existing Special Needs Trust as a beneficiary in their own Wills. This encourages bequests that might not otherwise be made because the person making the bequest does not have to be concerned about the effect of the gift on government benefits.


A person who receives government benefits may have assets of his or her own that will jeopardize eligibility. For example, the person may sell a house that was an excluded asset and now have countable assets in excess of $2,000. As another example, he or she may receive an inheritance directly because a parent who died did not create a Special Needs Trust in his or her Will. As a third example, the person may have been injured in an accident and be receiving a settlement or award to compensate him or her for an injury.

1. Payback Trust Exception: There are rules that make it disadvantageous for people who are 65 years or older to create Special Needs Trusts in these situations if it will benefit themselves. However, for people who are under 65 years old, there is an exception that allows them to have a Special Needs Trust. This type of Trust is often called a 'Payback Trust' or 'Under 65 Disability Trust.'

2. Requirements for a Payback Trust: There are four requirements for this type of Trust to qualify under the special exception described below:

     a. The Payback Trust must be established by a parent, grandparent, court, or conservator.

     b. The beneficiary must be disabled as defined in the Social Security Act. If the beneficiary is receiving Social Security Disability Income(SSDI)           or Supplemental Security Income (SSI), then this requirement is automatically met. If not, then the beneficiary will have to prove the                       nature and extent of disability.

     c. The beneficiary must be under 65 at the time the assets are being put into the Payback Trust.

     d. At the beneficiary´s death, the remaining Payback Trust balance, if any, must be given to any Medicaid agency that provided assistance to             the beneficiary


3. Steps to Establish a Payback Trust: The steps to set up a Payback Trust will depend on the circumstances, such as whether a parent or grandparent is available to participate in the process, and whether the beneficiary has capacity to make decisions. If the beneficiary does not have the capacity to make decisions, then a court will be involved to approve the Payback Trust. If not, then in some cases a court is not required.

4. Personal Injury Settlements and Awards: In cases involving a personal injury, there are special issues that should be considered prior to trial or settlement of the case. If the case is resolved without addressing these issues, it can result in later complications and a loss of public benefits, particularly when a structured settlement is involved. Fortunately, with a little pre-planning, often a person receiving a settlement that is not in itself sufficient for lifetime needs can preserve public benefits so that the settlement funds can be used to maximize his or her quality of life. In these cases, legal advice should be sought from lawyers who have expertise in this area of the law.


How Can I Qualify For Medicaid If My Income Is Too High? What Is An Income Cap Trust? 



An Income Cap Trust is a special type of trust designed to meet the income limit for Medicaid eligibility. If an applicant has more than 300% of the SSI standard in monthly income, he or she does not automatically qualify for Medicaid benefits for long-term care. The income limit is currently $2,349 per month (2020 figure). An applicant with gross monthly income above that amount needs an Income Cap Trust in order to receive Medicaid for long-term care.

Once an applicant qualifies for Medicaid, thus becoming a Medicaid recipient, all of the recipient’s income is deposited monthly into a new account and disbursed according to a Medicaid approved budget. At the recipient’s death, the remaining money in the account is paid to the State of Oregon.


An Income Cap Trust is needed if the applicant’s gross monthly income exceeds $2,349 per month. Because certain deductions, such as taxes and health insurance, are withheld from the recipient’s gross monthly income before the income check is written or directly deposited, the recipient may not actually receive $2,349 per month. Keep in mind, therefore, that it is the amount of gross monthly income, the income before deductions, that must be below $2,349 in order to avoid the need for an Income Cap Trust.


The trustee may make the following types of payments from the Income Cap Trust:

1. Personal Needs Allowance/Maintenance Standard:

     a. For residents in nursing homes, the allowance is $64.11 per month.

     b. For residents in an assisted living facility, foster home, or in their own home, the allowance is $175 per month. In addition, recipients in                 these types of living situations must pay a minimum room and board amount for their care, which is currently $608 per month. This                       amount is raised each year, in the summer.


2. Administrative Costs: The amount of $50 per month is available to pay for costs associated with administering the Income Cap Trust. These costs can include bank fees, check charges, postage, mileage, etc. The trustee may pay himself or herself the balance of the $50 as a fee for working on the trust. Therefore, a total of $50 per month is available for all of the monthly expenses of the Income Cap Trust, including the trustee fee.

3. Community Spouse Allowance:

     a. A special formula is calculated to determine how much of the Medicaid recipient’s income may be paid as a monthly allowance to the                     spouse who is not on Medicaid (the “Community Spouse”).

     b. In some limited circumstances, a court order may be obtained to increase the monthly allowance to the Community Spouse.


4. Health Insurance Premiums:

     a. Deductions for health insurance for the Medicaid recipient and his or her spouse may be paid from the Income Cap Trust.

     b. These premiums may be deducted from a pension, but they may also be paid by check – each situation is different, but all premiums are               payable from the Income Cap Trust.


5. Burial Plan: The cost of a pre-paid burial plan may be paid from the Income Cap Trust, up to a maximum cost of $5,000.

6. Other Incurred Medical Expenses:

     a. If the Medicaid recipient has medical bills that were incurred in the three months prior to the approval of the application, the portion of the             bill not covered by insurance can be paid from the Income Cap Trust.

     b. Also, any medical cost or medical equipment costs that become necessary and recommended by a doctor when the recipient is on                         Medicaid may be paid from the Income Cap Trust, provided the Medicaid caseworker approves the expense.


7. Other Reserves: There may be other appropriate deductions, depending on the case. A lawyer well trained in Income Cap Trusts will be able to identify those deductions.

8. Patient Liability: The money left after making the payments set forth in items 1 through 7 above is the amount to be paid to the care facility. Any remaining amounts owed to the care facility for charges relating to recipient’s care are paid by Medicaid.


The Income Cap Trust is created and managed by a trustee who deposits the Medicaid recipient’s income into a new bank account established in the name of the Income Cap Trust. The trustee also writes checks on the Income Cap Trust account each month, which checks are written according to a budget prepared by an attorney and approved by the Medicaid caseworker. The budget must meet the requirements listed in the previous section. All distributions from the Income Cap Trust must be verified in writing in order to be allowed. Once the budget is approved, the trustee is given a copy, generally with instructions from the attorney.


Usually, the trustee will pay the last bills owing from the Income Cap Trust. Soon after the recipient’s death, the State will contact the trustee and request repayment of the balance the Income Cap Trust account, if any. If there is any money left in the Income Cap Trust account at recipient’s death, that money is owed to the State. Once the Income Cap Trust account is empty, the trustee should close the account.

DISCLAIMER: The information contained in this document is based on Oregon law and is subject to change. It should be used for general purposes only and should not
be construed as specific legal advice by Fitzwater Meyer Hollis & Marmion, LLP or its attorneys. Neither this website nor use of its information creates an attorney client relationship. If you have specific legal questions, consult with your own attorney or call us for an appointment.


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