Creating a Probate-Proof Estate Plan

Probate avoidance is a common goal voiced among estate planning clients.  The concern over probate is warranted, given that probate is expensive, confusing, and stressful.  Navigating a probate is made even more difficult when undertaken by those who are grieving the loss of a loved one.  This article addresses what probate is, a common misconception regarding estate planning and probate, and how probate can be avoided in Oregon.

What is Probate?

Probate is a court proceeding by which the estate of a deceased person is settled.  Every probate includes the court’s appointment of a personal representative (the person in charge of the estate), the identification and payment of creditors of the decedent, and, upon the probate’s conclusion, the distribution of the remaining assets to the decedent’s beneficiaries.  Generally, a probate takes six to twelve months to complete, but it will never be less than four months in duration.  This is a very general and simple description of an Oregon probate; in truth, probate involves strict notice requirements, court filings and deadlines.  Because of its complexity, the personal representative is wise to retain the services of an experienced probate attorney to assist with the probate process. 

Having a Will Does Not Avoid Probate

Many people mistakenly believe that by having a will, his or her estate will not be subject to probate.  This is not true.  A will instead serves as an instruction guide to the judge, telling him or her who you want to be in charge (i.e. act as personal representative), and where you want your remaining assets to go (i.e. your beneficiaries and/or charities).  If you die without a will and your assets must pass through probate, Oregon intestacy laws will instruct as to who are the beneficiaries of your estate.  Referred to as your heirs, these people are your next of kin.

That said, everyone should have a will or a trust.  While there are multiple ways to avoid probate, in the event probate is necessary, the court should know your intentions.  This is especially important if you want to disinherit a person who qualifies as your heir under Oregon law, or if you want all or some of your assets to go to charity.

Ways to Avoid Probate

Oregon law provides for a variety of ways you can avoid probate, and include the following:

  • Revocable Trust:  Also called a Living Trust, a revocable trust operates similar to a will, but avoids probate.  A revocable trust can own almost any type of property, including real property, investment accounts, and bank accounts.  In order to create a revocable trust, you need to work with an experienced estate planning attorney, who will assist you in deciding who will be your trustee when you die and/or if you become incapacitated, and who your beneficiaries will be after you die.  Your attorney will also assist you in making sure your revocable trust is properly funded once it has been signed –a crucial step to avoiding probate.
  • Tenancy by the Entirety and Joint Tenancy with Rights of Survivorship:  Tenancy by the Entirety is ownership that occurs between spouses, by which the surviving spouse inherits the deceased spouse’s interest in the property.  Joint Tenancy is a form of co-ownership by which the surviving owner of the property inherits the deceased owner’s interest in the property.   (Importantly, survivorship language must be included in a real property deed for the joint owner who is not a spouse to inherit the other owner’s interest in the event of the latter’s death.) 
  • Payable-on-Death Designation (“POD”) for Bank Accounts:  Oregon allows for bank consumers to name beneficiaries who will inherit the assets held in his or her bank accounts upon his or her death.  A POD beneficiary has no right to your money until you die, at which point your beneficiary can claim the money from the bank, without the need for a probate.
  • Transfer-on-Death Designation (“TOD”) Registration for Securities: Similar to a POD, a TOD allows you to name the beneficiary of your investment account or individually owned stock.
  • Transfer-on-Death Deed for Real Property:  Oregon allows the transfer of real estate upon death by the proper execution and recording of what is called a transfer on death deed.  While the deed is recorded upon its execution, it does not take effect until you die and it can be revoked at any time before death.  After you die, the beneficiary named in your transfer on death deed inherits the property outside of probate.  The Transfer on Death Deed includes an 18 months creditor claim period which can delay the sale of real property.

Keep in mind that not all of these options will be appropriate for every estate.  An experienced estate planning attorney will help you prepare an estate plan that both avoids probate and meets your goals.

Article by Lindsay Gardner

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