Monday, December 21, 2009

What is probate and should I fear it?

Probate is the legal procedure for making sure a will is followed, or if there is no will, making sure Oregon law is followed in the distribution of property that belonged to a dead person. Wills give directions to the court about how an estate should be administered and how the property should be distributed, but it is the court that makes it happen. Probate is the broad term for that process.

In probate the property that belonged to the dead person is  called the "estate." The dead guy is called "the decedent."

The most important parts of a will when it comes time for probate will be (1) who is named to be the administrator of the will; (2) whether a bond is required; and (3) who gets what. If there is no will, a family member will have to step up to administer the will, a bond will be required and Orgeon law will determine who gets what property. In most cases, it goes to the decedent's children in equal shares. The people who get the property when there is no will are called "heirs."

Once you have the original will or are sure there is no will, a lawyer writes what is called a petition asking that someone be appointed personal representative of the estate and that a bond amount, if necessary, be set. The filing fee for the petition depends upon the value of the estate. In Multnomah County the current filing fee for an estate having between $100,000 and $500,000--a common range for a person who owned a house at death--is $457.00. The cost of the bond depends upon how much money is in the estate.

If the petition is in order, the court will appoint a personal representative who becomes--for legal purposes--the decedent. The personal representative must then gather together all property that belonged to the decedent, pay all debts owed by the decedent, and thereafter distribute the remaining property to the heirs or the persons named in the will. It is not a fun job, and nobody enjoys doing it.

Within sixty days of being appointed the personal representative must provide the court with an inventory of all property in the estate. During the four months that follow the appointment the personal representative must search out and pay the debts that the decedent owed when he died. The four months also allows the personal representative to do those things necessary to distribute the property to the people named in the will. This might mean evicting cousin Mildred, who has been living free in the house for twenty years, and thereafter selling the home so that the proceeds can be divided among the children of the decedent. It might mean selling cars or closing a business.

After the petition is filed, the lawyer sends a copy of it with a special notice to all the people named in the will and all the heirs that would have gotten property had there been no will. This allows any of them to challenge the will on the grounds that the will was executed when grandpa was incompetent or it was signed while grandpa had a gun to his head.

If at the end of the four months, no one has challenged the will and all the debts of the decedent have been paid, then it is time to distribute the property to the heirs or the persons named in the will. At that time the lawyer writes another petition asking the court to approve the distribution. If all goes smoothly, the judge approves the distribution, the property is transferred to the people mentioned in the will, and the case is closed.

The personal representative is entitled to be paid from the estate an amount equal to slightly more than two percent of the value of the estate. Attorney fees tend to run between $2,500 and $5,000. That includes writing all the papers for the court, keeping an eye on the debts, making sure the estate property is properly sold, and overseeing the final distribution.  If someone contests the will or other problems arise the attorney fees can be much more. The attorney fees, like the fees to the personal representative, are paid from the funds held by the estate.

A lot of people are concerned with avoiding probate. Some want to avoid the expense. Others want to avoid having their estate documents become a public record. One way to avoid probate is to die without a lot of money. If you die owning very little, there are alternatives to probate that allow the property to be transferred with fewer and simpler court filings. Another way is to own property in a way that does not make it part of your "estate." An "estate plan" may use joint ownership, beneficiary designations, and other legal devices that make probate unnecessary.

A popular way of avoiding probate is by putting your property in a revocable trust. Probate avoidance trusts are too complex to be discussed here, but they do work. The advantage to a trust is that it avoids probate. The disadvantage is that it is more expensive to establish, and it will be administered without the direction of the probate staff in your local county. If you have good and competent relatives who can take care of things without supervision, avoiding the courthouse is a good thing. If your relatives are not so diligent, the lack of supervision is a bad thing. And if your relatives are the litigious types who like to bicker, no legal plan will prevent them from dragging the whole thing into court anyway.

1 comment:

  1. So what if someone dies and leaves no assets? All they have in the bank is $200 and $1000 in tax returns. Do we still need to go to court for that? Or this amount is so little that does not need probabe. The decedent was single and had only one adult child.