In my estate planning practice and in my estate administration practice I am asked the same questions: “What is probate?” and, “Why does it have to take so long?”
Usually when people tell me they want to avoid probate, they mean that they want to avoid having their estate administered through a court process, whether or not the person has a will. The exact definition of probate is not that important. Essentially, the administration of a probate estate (if there is a will) or intestate estate (if there is not a will) is the legal process for gathering a deceased individual’s property; paying off the deceased individual’s creditors; and passing any remaining assets to the individual’s heirs (if there is no will) or to his devisees or beneficiaries (if there is a will).
The process is more appropriately called estate administration, but since people tend to consider both of these processes as probate, I will continue to use that term throughout this post. The probate process generally consists of three time periods: (1) commencement; (2) administration; and, (3) closing. Rather than one long post, I will break this post up starting with commencement and events leading up to commencement.
1. What property makes up my probate estate?
Before discussing commencement it’s important to figure what makes up a probate estate. Any property that is owned by the decedent on the date of his death and that does not automatically transfer to a named individual will be included in your probate estate. For example a bank account with payable on death beneficiary will pass automatically to the named beneficiary, without probate. Additionally, property owned by a trust created by the decedent will not be a part of the decedent’s probate estate since the decedent did not technically own the property at the time of his death.
Common probate property includes real property, stocks and bonds, vehicles, bank and brokerage accounts, and various items of personal property. Retirement accounts and life insurance generally are not probate property since they typically have named beneficiaries. However, if a beneficiary is not named, or dies before the owner/insured, then the owner/insured’s estate is typically the default beneficiary.
2. Is full blown probate necessary?
Full blown probate proceedings may be unnecessary if: you have a small enough estate when you pass away; you only own assets that have payable on death designations or are owned jointly with survivorship rights; or, you have transferred your property to a trust.
In Oregon, if a decedent’s estate consists of real property valued under $200,000.00 and personal property valued under $75,000.00 then small estate proceedings may be used to transfer the decedent’s property to his heirs or beneficiaries, if he has will. The process is relatively easy and much less expensive and time consuming than a full probate. An attorney is probably necessary to ensure that the various statutes are followed. People often ask me, “Can I use a small estate affidavit if my dad’s house is valued at $300,000.00 but it has a $150,000.00 loan encumbering it?” The answer is no because the limits are based on gross values, not net values. Since the gross value of the real property is in excess of $200,000.00, probate is necessary.
Husbands and wives frequently own their homes, bank accounts and other property as “husband and wife”, so when the first spouse dies, the surviving spouse will be the sole owner of the property. No probate is necessary. When the wife dies probate probably will be necessary to transfer the property to her kids or other named beneficiaries.
As another example, assume that after husband died wife transferred her house to a revocable living trust. She maintained a brokerage account with $78,000.00 in her name with her children as the payable on death beneficiaries. She also had a savings account with $5,000.00 that she forgot about and never transferred to her trust but that account does not have a payable on death beneficiary.
When she dies, can her children utilize the small estate process? The answer is yes. Although her overall estate consists of personal property over $75,000.00 the amount subject to probate is well under that threshold since the brokerage account transfers directly to the named beneficiaries and her house is owned by her trust.
Small estate proceedings will need to be utilized to transfer the savings account to the wife’s heirs but a full blown probate is avoided.
3. Probate is necessary; what’s next?
Assume that wife had a will and her daughter is named as personal representative. She will be responsible for administering her mother’s probate estate. Her father passed away a few years ago and the daughter has two brothers.
At this point she may have a vague understanding of her mother’s estate and has searched for a will, trust and other estate planning documents. If she’s lucky, her mother followed her attorney’s advice and placed the original documents in a safe or safe deposit box.
Since probate is a complicated and confusing process, daughter will need an attorney to help her navigate the probate waters. She can use any attorney that she feels comfortable with.
At her initial appointment with her attorney she will bring the will, her mother’s death certificate, various documents identifying her mother’s property, and her siblings’ contact information. She may also bring in information concerning any creditors of her mother’s estate (credit card companies, unpaid medical providers, and etcetera). Based on the information provided, the attorney will draft a petition for probate or a petition for administration of an intestate estate depending on whether or not a will exists.
Generally, the individual named as personal representative in the will petitions the court to administer the estate. What happens if a will does not exist, or the personal representative does not want to serve and there’s no named successor? The court gives preference to a surviving spouse, then a child or the nearest next of kin.
If there is no surviving spouse and no next of kin, then, in the event the state has provided public assistance to the decedent, the Director of Human Services or Director of Oregon Health Authority may appoint an attorney to serve as personal representative if the decedent does not have a surviving spouse or next of kin. The Department of Veteran Affairs falls next in line; followed up by any other person. These are merely statutory preferences. The individual still needs to qualify as personal representative.
4. The petition is filed, what happens next?
The petition is essentially a request to the court to admit the will filed along with the petition for probate and to appoint the individual named in the petition as personal representative. Notice of filing the petition will have to be given to various government entitles, to the decedent’s heirs, to the beneficiaries named in the will, and other interested persons. These individuals will have the opportunity to object to the appointment of the personal representative and to request future pleadings from the attorney representing the personal representative.
The next post will discuss what happens once the petition has been filed and the initial steps associated with administering Oregon estates. As with all of the posts on our blog, these posts are informational only and the circumstances surrounding your case or legal matter are unique. These posts do not constitute legal advice and should in no way be relied upon without consulting with a licensed legal professional.