Fill Out Your Beneficiary Forms Carefully

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

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

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

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

Is your pet prepared?

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

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

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

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

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

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