What is probate? Should you avoid probate? If so, how?
Probate is the process where, after a person dies, a court proceeding is filed, and the court enters an order transferring the deceased person’s (the decedent’s) property to the decedent’s heirs. If the decedent had a valid will, the court will likely transfer the property to whomever was named in the will. If the decedent did not have a will, he is deemed to have died intestate, and the court should transfer the property to persons whom the Oklahoma state legislature has determined are your heirs, according to the Oklahoma Intestate Succession Statute.
Should you avoid probate?
Many people are afraid of probate. There are a number of unscrupulous promoters who will tell you horror stories of probate, and will play on your fears to attempt you to use their services to avoid probate. Unfortunately, some of these services offered by these promoters are as costly and cumbersome (or more so) than probate.
Each person has different needs, according to their own financial condition, and family situation. In the world of estate planning, it is impossible to make a “one size fits all” approach. To determine what is best for your estate, it is best to consult a qualified attorney or financial planner.
What follows is general advice, and a brief of overview of the advantages and disadvantages of various types of estate planning tools.
One disadvantage of probate, is the cost, in time and money. You have to pay a filing fee to file a probate action in court (in Bartlesville, that filing fee is currently $214.14). You’ll also likely need the services of a lawyer. For the simplest type of probate case, that is not contested by anyone, your legal fees will probably run in the range of $3,000 to $5,000, or more. A simple probate case will probably also take six months to a year between the filing of the case and the final distribution. If the estate is more complex, or if the probate is contested (that is, if someone appears in court and argues against the way you want to manage and distribute the estate) your fees for attorneys, and other professionals, may be much higher. A complex probate case, or a contested probate case, will also take longer.
For more information on how long probate cases can take (including a statistical breakdown of the time it took to complete all probate cases filed between January through March, 2017) click here.
For further information on the costs of probate, click here.
A further disadvantage of probate, is, the case is filed in court, which means that every document filed in the case will be visible to anyone who asks to see it. Many counties in Oklahoma (including Washington County) post probate documents on the internet now. If there is someone (for example, an estranged relative) whom you do not want to know about how your estate is distributed, it may be best to avoid probate. However, depending on your estate, some of the probate substitutes may be equally, or more, costly and time-consuming. Some of the probate substitutes also result in disclosing your personal affairs to the public. So, it is not always beneficial to avoid probate.
But, you almost always want to avoid a contested probate; in addition to the financial cost, a contested probate case will divide your family, take several years, and destroy you emotionally. The best way to avoid a contested probate is to have a qualified attorney plan your estate and draft your will; many contested probates occur because a will was poorly drafted. You should not draft a will yourself.
How to avoid probate
· Gifts made during your lifetime
A simple way to avoid probate, is to transfer the property to someone, while you are still alive. They already own your property before your death, and the property does not have to go through probate.
· Joint Tenancy
You can place property in joint tenancy with right of survivorship. You transfer the property so that it is owned jointly by yourself, and by another person or persons. In the transfer document, you insert language stating that the property is in joint tenancy, and that when you die, the other person(s) have the right of survivorship, and own the property outright. Then, when you die the other person(s) need only to present proof of your death, and they own the property.
A disadvantage of this type of transfer, is, the other person(s) have an ownership interest in the property before you die. You cannot sell the property without the consent of the other owner(s). If you think that you may want to sell the property before you die, and the other owner(s) may object, joint tenancy is probably not the best option for you.
You also cannot revoke a joint tenancy transfer, without the consent of the other owner(s).
To find out more about joint tenancy with right of survivorship, click here.
· Transfer on death deed
In Oklahoma, if you own an interest in land, you may transfer this land by signing a transfer on death deed and filing the deed in the office of the county clerk of the county where the land is located. If you do this, the property will be transferred to another person at the moment of your death. However, the recipient of the property has no ownership interest in the property before you die. At any time before your death, you may revoke a transfer on death deed. Click here to see the form of a transfer on death deed, that is valid in Oklahoma. Click here for more information on transfer on death deeds, and how to create them.
· Contractual arrangements
There are a number of contractual arrangements you can make (for example, through life insurance plans, annuities, and employee retirement benefits) than can provide for your property being distributed outside of probate. To see if any of these contracts are available to you, contact your insurance company, bank, financial advisor, or plan administrator.
· Trusts
“The trust is a device … under which property is held by one or more persons for the benefit of others, the management powers and the beneficial interests being separated. The one who holds the property is referred to as the trustee. That person usually has legal title to the property interests held in the trust, and as to third parties is considered the owner of the trust property for most purposes. A person for whose benefit the property is held is a beneficiary.”[1]
There is an almost limitless variety of options, for you to create a trust. If property is held in trust, the property will pass outside of probate. If a trust stays out of court, the trust will remain confidential. One type of trust that is particularly attractive for avoiding probate, is known as a Dacey trust. In a Dacey trust, you create a trust, and you name yourself as both the trustee and the beneficiary. You then write language in the trust that says that upon your death, someone else will become the trustee and the beneficiary. The property then passes to the new beneficiary, at the time of your death, without going through probate. You can revoke a Dacey trust any time before your death. For more information about using trusts for estate planning, click here.