Probate, Estate and Trust Administration
If You Fail to Avoid Probate, Retain a Professional to Help Through the Long, Costly, Complicated Process
What is Oregon Probate?
Things can be quite emotional and stressful when someone you love dies. During your time of grief, you have to pick up the pieces, get the deceased’s affairs in order, and deal with creditors, heirs, and the taxing authorities. In Oregon, the Personal Representative accomplishes all these tasks by filing a lawsuit in the Probate Court.
In its simplest form, Probate is a lawsuit filed by the Personal Representative of the deceased’s estate. During the Probate, the Court will validate the Will, and the Personal Representative will complete an inventory of assets, secure all property, notify all creditors of the deceased, collect any amounts due the deceased, approve or challenge claims filed by creditors or heirs, calculate and pay all taxes due, pay administrative expenses, and if anything is left over distribute it to the heirs.
When Do You Have To Go Through Probate?
There are three situations where Probate is necessary or suggested in Oregon. First, if you loved one failed to plan and his or her estate is “intestate”, then it is handled by the Probate Court. The Court will use the State of Oregon’s plan for handling your loved one’s estate. Second, if your loved one had a Last Will and Testament, the estate must go through Probate. The difference from “intestate Probate” and Will Probate, is that with a Will you have elected your Personal Representative and your property will be distributed in the manner you have selected. Third, is with a Trust. While Trust planning is generally private and does not require Court intervention, some Trustees prefer to use the Probate process to clear creditor claims against the Trust. If a Trustee uses the Probate process for creditor claims it reduces the time for creditors to assert their claims to 120 days rather than what is sometimes years.
Three Good Reasons to Avoid Probate
Taxes are not a reason to avoid Probate. While the use of a Trust often makes it easier to accomplish tax minimization, any form of planned asset transfer at death can be designed to minimize taxes. A Last Will and Testament, a Trust, a Pay on Death Account, a Joint Account , a Beneficiary Designation or distribution by Probate, all allow for tax planning. What then are the reasons for avoiding Probate?
Probate is a court process open to the public. Everyone is entitled to set in open court and observe the proceedings or look at the court file. Third parties are able to know what assets you have, who you owe money to, and how much you are leaving to specific individuals. Predators, creditors and scam artist will all be contacting any heirs receiving significant sums. What you leave behind may be gone in 60 days.
Probate is a lengthy process. Depending what State you are in, or even what County you are in, can result in a vastly different length of Probate. Usually one goal when a new Probate case arrives for the firm, is to move quickly with the goal of completing it in one year. Some are shorter and some are longer. In addition, your Personal Representative will be devoting a significant amount of time and energy to estate administration during the year or so of Probate.
I have heard people accuse lawyers of drafting Wills instead of a Trust so that they can make a lot more money when a person dies and they are charging hourly fees to handle the Probate. Of course that is not true. However, what is true is that Probate is an expensive process. Plan on 2-7% of the estate value as a rough estimate of what it will cost. If an estate is going through Probate the following costs will be incurred:
- Court filing fees;
- Attorney fees;
- Appraiser fees;
- Cost of sending notices to creditors, heirs and other claimants;
- Potentially cost of an estate sale;
- Cost of a bond for the Personal Representative;
- Administrative expenses;
- Litigation costs for any claims by creditors that are challenged; and
- Litigation costs for any challenges by heirs to the Will.
When you are doing your estate planning you have a choice between Will planning which result in Probate, and Trust planning which will likely not result in any Court involvement and certainly not a full drawn out Probate process. The cost of drafting a Will plan is usually less than the cost of a Trust plan. The initial cost difference should be weighed against the higher cost for Will planning that requires Probate at the time of death.
Unlike a Last Will and Testament which is effective upon death, a Trust is a living document that is effective during life and at the time of death. Assets are placed into the Trust at the time it is created and at death, the successor Trustee continues to manage the Trust assets and transfer assets per your instructions which have been made a part of the Trust document.
During your lifetime, the Trustee manages assets placed into the Trust per instructions in the Trust document. Usually a husband and wife are co-trustees, and the Trust is revocable during the grantor’s lifetime. After the death of the grantor, the Trust becomes irrevocable, and depending on the language of the Trust, may be split into multiple Trust’s, or assets may be transferred directly to individuals.
At the time of death, the successor trustee will transfer assets as directed in the Trust agreement. There is no mandatory court intervention, and assets will be under a Trustee’s control the day before death and the day after death. No year long process, public display, or high Probate costs are necessary.
How is Your Trust Managed?
Your trust will contain provisions naming a Trustee, the person who will manage trust assets and provides for administration and reporting. It will also include specific instructions to the Trustee on what he or she can do to manage the Trust. For example, it may require the Trustee to make payments for the health, education, maintenance and support of one or more Trust beneficiaries. It may direct the Trustee to diversify all investments, to convert non-income producing assets into income producing assets, or make gifts.
The person acting as a Trustee of a Trust has a legal obligation called fiduciary duties. As a fiduciary, the Trustee is held to a higher standard of care requiring actions that might be reasonable in other circumstances, but not up to the higher standard for a fiduciary.
If You Have Been Named a Trustee, What Do You Do?
Here are some of the common actions you must take to satisfy your fiduciary duty as a Trustee:
- Receive all trust income;
- Pay all trust expenses;
- Maintain accounting records and summarize the records in a statement at least quarterly;
- Prepare or hire a CPA to prepare the Oregon and federal Trust tax returns each year and pay all taxes due;
- Provide the required Oregon Trust Code annual reports to the designated beneficiaries;
- Maintain and reconcile the trust bank account;
- Manage or hire a financial adviser to manage all trust assets in accordance with the Trust guidelines; and
- Consider request for distributions allowed by the Trust agreement;
Oregon Probate –Personal Representative
If you are the personal representative of an Oregon Probate estate you have fiduciary responsibilities just like a trustee has for a Trust. You are held to the identical standard that a trustee is held to for a Trust. You are a fiduciary and your actions will be reviewed by the Probate Court. Some of the actions that the Probate Court will review and approve are:
- Resolving any ambiguities in the Will;
- Hearing challenges to creditor claims and deciding whether the claims are valid and the amount of each claim;
- Review and approval of any proposed disposition of property to beneficiaries;
- Approval of the sale of any estate assets;
- Approval of appraisals of assets to be included in the estate;
- Approval of Probate attorney fees; and
- Issuing an Order of Distribution.
Can You Refuse to be the Personal Representative of the Estate?
Yes. Acting as a Personal Representative is time consuming, hard work, and it can be emotional when dealing with creditors and heirs. For some people, it is just too much time to take from their busy lives. Just because the deceased person named you as his or her Personal Representative, you do not have to accept the position. Hopefully, you have had this discussion with the deceased when he or she prepared their Will and they were aware of your desire to serve or not serve. Sometimes, even though you say you do not want to serve, they name you anyway. Remember, a Personal Representative has a fiduciary duty, and you do not want to accept the position if you cannot devote adequate time or if you feel you do not have adequate skills to meet the fiduciary standard.
An Oregon Probate and Trust Attorney that Comes to You
I know how busy most Oregon and Washington residents are with their daily lives. Now that someone has passed, they have many additional things to take care of and may be committing to a very time consuming job as a Personal Representative of the deceased’s estate. I try to accommodate my clients’ schedules and make using a lawyer as pleasant as possible under the circumstances. To accomplish this goal, I meet with clients at a convenient location- their home, office, retirement facility, local coffee shop- where they are comfortable and relaxed. I also will accept evening and week-end appointments to meet my client’s schedule.
If You Have Been Appointed as a Personal Representative or Trustee, Pick Up the Phone and Call for a Free Consultation
If I were not a lawyer, I would not want to try fulfill my fiduciary duties as a personal representative of an Oregon estate or the trustee or successor trustee of a trust without the assistance an attorney who practices in Probate and trust administration. In the long run, by hiring an attorney you will probably save time, stress, emotion, and money. Whether it is Probate or Trust duties, if you live near Portland Oregon or Salem Oregon give me, Russ Pike, a call at 503.888.0952 and schedule your free initial consultation.