Most people think that they should use a will as an asset transfer vehicle. Unfortunately, many of them do not think about the estate administration phase. The executor that is named in the document will complete the hands-on tasks, and the probate court will provide supervision.
It is important to have a basic understanding of the probate process when you are planning your estate. In this post, we will take a look at some of the exceptions to the rule with regard to the necessity of probate.
Simple Small Estate Affidavit
An affidavit is a document that is signed under oath. For estates valued at $50,000 or less, minus liens and other encumbrances, an out-of-court affidavit procedure can potentially be used to claim an estate.
When an affidavit is used, it is presented to the institution that is holding the property in question. If everything is in order, it will be released, and the probate process will not be necessary. To be clear, this is a type of transfer that would be subject to probate if the assets were more valuable.
There is also a simplified probate process in Oklahoma for relatively small estates. It is potentially available for estates that are valued at $200,000 or less. In addition to this scenario, it can be used if the decedent has been dead for more than 5 years. It may also be used if the decedent lived in another state at the time of their passing.
The request for this simplified probate procedure must be filed with the court, and there is certain prescribed information that must be included. You can review the Oklahoma Statutes to get all the details.
Other Probate-Free Transfers
There are some other transfers that take place outside of probate. One of them is the payable on death account. You can open up an account like this at a bank or brokerage. When you do so, you add a beneficiary who will inherit the remainder after your passing.
They will not have access to the assets while you are living. This can seem like a reasonable estate planning solution, but there are drawbacks, limitations, and potential problems.
Property held in joint tenancy will pass outside probate. This is the condition of joint ownership. For example, let’s say that you own your own home and you want to leave it to your only son. You can change the paperwork to create a joint tenancy.
Your son would inherit the entirety of the property after your passing, and the probate court would not be involved. This can sound great on the surface, but there is a major risk involved.
Under these circumstances, your son would own half of the property immediately after you change the ownership documents. As a result, if he is sued, or if he runs into tax troubles, his portion of the property would be available to creditors seeking satisfaction.
Life insurance proceeds are distributed to the beneficiaries outside of probate. When a 401(k) is being transferred to a beneficiary, there is no probate court involvement.
Revocable Living Trust
There are some inherent drawbacks that go along with the probate process. It will typically take about 8 months at a minimum, and no inheritances are distributed until the estate has been closed. Expenses consume a portion of the estate, and the records are available to interested parties.
These negatives can be avoided if you use a revocable living trust instead of a simple will as your estate plan centerpiece. You would be the trustee while you are living, and you name a trustee to succeed you after your death.
When the time comes, the trustee would be able to distribute assets to the beneficiaries in accordance with your wishes outside of probate. This is one of the benefits, but there are others we will look at in a future post.
Schedule a Consultation!
Our doors are open if you would like to work with an Oklahoma City estate planning lawyer to put a plan in place. You can call us at 405-843-6100 to schedule a consultation, or you can use our contact form to send us a message.
After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.