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Answers To Your Oklahoma Probate Questions

Many people that we talk to do not fully understand probate or estate administration after the loss of a loved one. Here are some frequently asked questions along with answers from our attorneys:

What Is Probate?

Probate is the legal, court -administered process by which your assets are transferred after your death to your heirs. If you own real estate, such as your home, the deed to that property may be in your name alone. Legally, only you can sign a deed to transfer title to that property to someone else. However, when you die, who has the authority to convey that property?

Although you would assume that your spouse or children can do so, they have no legal authority unless and until they are appointed by a court. That is what the probate process involves.

Filing A Petition: First, if you have a Last Will and Testament, that instrument is filed with the court along with a legal document, known as a Petition, requesting that the instrument be accepted as your Last Will and Testament. Realize that you have the right to prepare a Last Will and Testament at any time. However, only the most recent document prepared while you are of sound mind can be accepted as your Last Will and Testament.

Notice To Your Heirs At Law: Before a hearing can be held on the petition, notice must be given to your Heirs at Law. Your heirs at law are the individuals who would be entitled to receive your estate if you died without a Will. In other words, they are the individuals who would receive your estate by Intestate Succession.

  • As an example: If you are married and have three children, but have a Will leaving your entire estate to your brother, notice of the petition for probate would have to be given to your spouse and children, even though you did not provide for them in your Will.
  • On the other hand: If your Will left everything to your spouse and children, there is no requirement that notice has to be given to your brother since he is not an heir at law.

Appointment Of A Personal Representative: Once a hearing is had on the Will and it is accepted as your Last Will and Testament, the Court appoints a Personal Representative who is either a person or entity named in your Will, or a person chosen by the Court.

Notice To Creditors: The Court then requires an inventory of your estate as well as the publication of a Notice to Creditors. This notice is in keeping with one of the other duties of probate - protection of creditors. Creditors with proper claims against your estate must be paid before any distribution can be made to your heirs. The notice gives the creditors a certain number of days (usually 60) in which to file claims against your estate. Any known creditors must be personally notified of their right to file claims, and any unknown creditors are notified by publication.

Filing Estate Tax Return And Allowances: During this same time period, an estate tax return is filed, if the estate is large enough to require a return. Also during this time, allowances can be paid to the surviving spouse or minor children of the deceased person to support them during the estate administration period.

Distribution: When the creditors' notice period expires, all claims are paid, the estate tax has been paid and/or the estate released, the estate is ready to be distributed. At that time, the personal representative asks the Court for permission to make distribution. The personal representative also files a final accounting to show the Court and the beneficiaries what income has been received and what expenses have been incurred. Assuming there are no objections, the Court authorizes the personal representative to distribute the estate and the case is closed.

As you might guess, this process is both time-consuming and expensive. The shortest probate process takes approximately six weeks to complete, but can take as long as a year or more. Obviously, contested cases may take much longer.

Court costs and publication expenses will cost approximately $400-$500 or more, and attorney's fees can range from $4,000 to much, much more. The personal representative is entitled to a statutory fee based on the value of the entire estate administered. That fee is 5% percent of the first $1,000, 4% percent of the next $5,000, and 2½% of everything above that.

Some lawyers still base their fee for conducting the probate on the same statutory schedule for the personal representative. However, attorney's fees can be much more or much less. Lawyers, as well as accountants or other professionals involved in the estate can receive extraordinary fees for their services, all of which can be approved by the Court.

The law also provides for sales procedures out of probate cases as well as options to waive accounting, inventory and other facets of the probate process. Keep in mind that probate is a public process. The probate records at the courthouse are available to anyone who wishes to see them.

If My Estate Is Less Than $600,000, Do I Still Need Probate After My Death?

Maybe. The value of your estate does not determine the need for probate; it is the character of the property that determines it. For example, you can have $5 million of real estate and it will not be subject to probate at your death if it is held in joint tenancy with your spouse. On the other hand, you can own a $2,000 lot that will be subject to probate if the deed is in your name alone. You can own a $500,000 Certificate of Deposit and it will not be subject to probate if it names a Pay on Death (POD) beneficiary, such as one of your children or grandchildren. However, your checking account could be subject to probate if it is in your name alone.

The reason the $600,000 figure has become so well known is that, from 1980 through 1997, $600,000 was the amount of the federal exemption from estate taxes. However, probate and estate taxes are two entirely different things. In each of the examples above, the assets which are not subject to probate ARE subject to estate taxes. Of course, if the entire estate is less than the current exemption amount of $5.45 million, there will be no estate taxes.

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How Can I Avoid The Need For Probate?

There are several ways to avoid probate. You can give away your entire estate. You can use joint tenancy to own your assets. You can list pay-on-death designations on certain assets. You can contractually name beneficiaries of certain assets, such as life insurance. You can use a Living Trust. Each of these types of ownership haves their advantages and disadvantages.

  • Giving away your entire estate: If you give away your estate, you also give away the control over it. If you give away your home, you cannot control who lives there. You cannot control if it is sold or mortgaged. On the other hand, if you do not own it, it is not subject to estate taxes in your estate and it cannot be reached by your creditors. There are certain time periods which must elapse before these benefits apply. Giving away your estate, although sometimes beneficial, is VERY risky and should only be done after thorough legal consultation and ONLY done with a beneficiary you completely trust. Even then, the beneficiary's own legal problems can affect the property given to him or her.
  • Joint Tenancy ownership: Joint tenancy has been called "the poor man's will" because it can and does effectively avoid probate on the death of the first joint tenant. However, if you and your spouse own property as joint tenants and both of you die together, the property held in joint tenancy is still subject to probate.
    • Joint tenancy property is also subject to estate taxes and may actually cause an increase in overall estate taxes since the property may be fully taxable in the estates of both joint tenants.
    • Joint tenancy property is reachable by the creditors of all joint tenants and owning property in joint tenancy will require all of the joint tenants (and their spouses, in some cases) to agree to the sale or encumbrance of the joint tenancy property.
    • Holding property in joint tenancy can cause an adverse income tax problem since the surviving joint tenant will not realize a stepped-up basis in the property when the first joint tenant dies.
      • For example, if your father owned real estate worth $50,000 which he purchased for $10,000 (his tax basis is $10,000) and he puts it in joint tenancy with you, then when you sell the property after his death you will have to pay capital gains taxes on the $40,000 of gain ($50,000 - $10,000 = $40,000). At a current federal capital gains rate of 23.3% percent, that would create a tax of $9.320. On the other hand, if the property was solely in your father's name (or in the name of his trust) and the property passed to you at his death, you would realize a stepped-up basis to $50,000 so that if you sold it for $50,000 or less, there would be no capital gains, thus saving the $9,320 tax.
  • Pay-on-Death Designations: This is possibly the easiest method of distribution. By executing documentation at your financial institution, you can designate a particular account or investment to pay on your death to a named beneficiary. Unfortunately, you cannot put restrictions on the use of the account after your death. Therefore, at your death, the particular account or investment becomes the property of your named beneficiary. If the beneficiary dies before you or with you, the asset may be part of the estate of the named beneficiary and possibly subject to probate.
  • Contractual Beneficiaries: This concept is most commonly used with life insurance. Your life insurance policy names a beneficiary to whom the policy proceeds are paid at your death. As with the pay-on-death designation, you usually cannot put restrictions on the distribution. Also, as with the pay-on-death designation, the death of the beneficiary still causes a probate situation for the asset involved.
  • Living Trust: Creating a living trust involves transferring all of your titled assets into the name of the trust. You can be the trustee of your trust and, in order to allow the trust to function after your death or incapacity, you can also list successor trustees to manage the trust for you and distribute your estate at your death.

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My Will Clearly States That Everything Goes Equally To My Children. Why Does My Will Need To Be Probated?

This is one of the biggest misconceptions of estate planning! Some people feel that as long as their will is self-explanatory, it does not need to be probated. By law, your Last Will and Testament is not effective UNTIL it is probated. It does not matter it if is clear and unambiguous. It does not matter if it you and your family fully and completely understand your wishes. Your assets titled in your name cannot legally pass to your heirs until the Court enters an Order showing that the assets pass to your heirs.

Here is an example: You own your home in your name and have a Will leaving your home to your two children. As you know, in order to sell your home during your lifetime, you would need to sign the deed to the new buyer. At your death, a buyer will not just accept a deed from your two children since no legal determination has been made that they are your only children, or that they are entitled to your home (you could have left it to your spouse, your brother, or your church, for instance).

Simply providing the buyer with a copy of your will does not solve the problem because there is no assurance the will is your last will and testament (you could have drafted another one later or the one provided might have been signed when you were incapacitated). Therefore, until a court of law has decreed that the will is your Last Will and Testament and that it does legally pass title to the real estate, your two children have no authority to execute a valid deed to the buyer.

As a result, no will is effective unless and until it is subject to a probate proceeding. It does not matter how inexpensive or elaborate the will is, it has to be probated to be effective.

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Are There Any Reasons Why I Would Not Want To Avoid Probate?

Yes, there are many reasons why you may want your estate to go through probate:

  • If you do not feel you can find a successor trustee who can properly distribute your estate the way you desire, you may want to require the monitoring of the distribution process by the Court.
  • If you feel that your children or other intended beneficiaries may argue and fight over the distribution of your estate, you may wish to have that distribution controlled by the Court.
  • If you are a high-liability professional who might have a lot of claims or liabilities against your estate, you may wish to have all future claims barred through the probate process.

Realize that the probate process is not necessarily a BAD thing! It is time-consuming and more expensive than careful estate planning. However, it is a means of using a disinterested third-party to control the distribution of your estate and to make sure your wishes are carried into full force and effect.

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Doesn't Joint Tenancy Avoid Probate?

Joint tenancy can avoid probate on the death of the FIRST joint tenant, but not on the death of the last joint tenant. Joint tenancy has been called the "poor man's will" since it can avoid probate and insure that property held in joint tenancy ends up in the hands of the last remaining joint tenant.

For example, if you wish to have your house pass to your child, you can put it in joint tenancy between you and your child. Then, at your death, the house would belong to the child. However, many people do not realize that if the child dies first, the value of the house is included in the child's estate for estate tax purposes. Also, if the child is subject to a judgment or lien, the judgment or lien creditor has an interest in the real property held in joint tenancy.

Finally, if you wish to sell the home held in joint tenancy, both your child and the child's spouse will have to sign the deed along with you. Although, in many instances, joint tenancy can be an effective probate alternative, there are sizeable risks that may make probate inappropriate for your use.

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