Probate is the court procedure that allows for the administration of an estate. In a probate proceeding, the court oversees the processes of identifying the deceased person's property, paying any debts, paying taxes, identifying the proper heirs, and distributing the property to those heirs.
Most of the work is completed by a personal representative (usually a relative or friend who the deceased names in the will) or an administrator (when court-appointed), with the assistance of an attorney and often an accountant and an appraiser.
Not all of a deceased person's property is subject to the probate process. Life insurance that does not name the estate as beneficiary, retirement accounts, annuities, bank accounts with a Payable on Death designation, securities, property in trust, and joint tenancy property all pass directly to a proper beneficiary automatically, without any court involvement. A motor vehicle title may also specify a death beneficiary. These assets do pass outside of the probate estate but may still be counted for the taxable estate calculation.
Benefits of Probate
Probate does provide some important benefits. Most importantly, it provides protection by having court supervision over a deceased person's property. Once the probate creditor's claim period expires (generally four months after the executor is appointed), it is very difficult for creditors or others to claim any interest in the estate. For professionals who are subject to professional malpractice (such as doctors, accountants, or attorneys), probate may bar later lawsuits that would otherwise be difficult to defend without the help of the deceased person.
Probate has several drawbacks, which is why many people seek to avoid it. Formal probate takes at least six months to a year. Sometimes, probate can drag on for several years or, in extraordinarily rare situations, for decades. Second, probate can be expensive because of fees paid to the professionals and the personal representative. The larger the estate, the larger the expense of probate. It can cost up to $1,200 just to pay for court filing fees and publication costs.
The personal representatives fees are set by law: 7% of the first $1,000; 4% of the next $9,000; 3% of the next $40,000; 2% of the amount in excess of $50,000; and occasionally an extraordinary award will be made when there are unusually valuable services performed by the personal representative.
The probate is initiated when a Petition to Appoint the Personal Representative is filed with the probate court. A Notice to Creditors is published in a local newspaper to alert creditors that they have four months to file claims against the estate. The personal representative will also notify the post office, utilities, Social Security Administration, and banks of your death. A Notice to Heirs and Devisees, along with a copy of the will, is sent to those named in the will. The personal representative then takes an inventory of the assets. While the personal representative conducts business on behalf of the estate s/he must keep good records to account for activities such as income collected, payments made and assets distributed. After the four-month credit claim period ends, and debts have been paid, the personal representative can apply to the court for approval to distribute assets to beneficiaries.
The personal representative is responsible for paying taxes out of the estate, such as the decedent’s final income tax return (via a fiduciary return), the Federal Estate Tax Return, and the Oregon Inheritance Tax Return.
At Stahancyk, Kent & Hook, P.C., we will counsel you in how to protect your assets to ensure that your beneficiaries receive distributions as you intended and give you peace of mind that your wishes will be carried out during your lifetime and beyond. Click here for new client information.
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