FAQs

Estate Planning

What is an Estate? Do I have one?

Yes, you have an estate. Your estate is the property you own in your individual name when you die.

What is Estate Planning?

Estate Planning is the act of determining what happens to your estate after you’re gone. An estate plan can be a simple two-page will or an intricate web of multiple trusts.

When is the right time for me to think about estate planning?

You should think about estate planning after any major life-changing event:  marriage, divorce, the birth of a child, or change in employment.  Perhaps you have received a substantial inheritance, won the lottery, or signed your first professional sports contract.  You should also review your estate plan if it has been more than seven years since you last revised your plan.

When should you change your estate plan?

After a divorce or marriage, the birth of children or grandchildren, relocation, or a change in financial circumstances. If there has been a change in your family, there should be a change in your plan.  Also, revise your documents when there is a change in the tax laws.

Who should have an estate plan, will or trust?

Only those people who want their wishes, not someone else’s wishes, to control.  There is an unfortunate, widespread misconception that only the wealthy need an Estate Plan. In fact, an Estate Plan is for anyone who wishes to provide for his or her survivors. If you pass away without a will or other Estate Plan, the laws of the state take over, and these laws may not reflect your wishes or provide for the ones you love.  Moreover, an estate plan provides for circumstances before you die and may save you thousands of dollars.  People only die once, but they are often sick or hospitalized more than once during their life.  Proper estate plans can help you get through the legal issues that occur with those sicknesses.

Why is it important to use an estate planning professional to draft a will?

Estate planning documents are only as good as the assistance, advice and instruction you receive with them. An estate planning professional will be able to ensure your assets are titled correctly, trusts are properly managed, and that your will adequately communicates your wishes.

When is it too late to draft a new will or other estate planning document?

To draft a will, you must have testamentary capacity.  In other words, you must have the ability to understand what it means to create a will, what property you own, who would naturally be your beneficiaries, and the terms of the document.  You need to demonstrate these abilities when you sign. You can be elderly and you can be sick, but as long as you have capacity and there is no undue influence placed on you, you can draft a new estate plan.

Probate

What is “Probate”?

Probate is the legal process in which a court supervises the distribution of assets and payment of debts left by a deceased person. “Probate” comes from the Latin word probare “to prove.”  During the “Probate” process, the Personal Representative proves a number of things, e.g., the validity of your will, your ownership of property, your family members, etc.  During the probate process, the Personal Representative will handle all aspects of the assets and debts of the deceased person, until the case is closed and the assets distributed to their rightful recipients.

When is a “Probate” needed?

Put simply, probate is generally needed when you die leaving property titled in your own name, regardless whether you have a will.

Yet, probate is not always necessary. When a loved one dies and has property titled solely in that party’s name, such as a home or bank account, then a “Probate” is likely to be necessary. If the deceased person owned only minimal personal property for which there was no title evidencing ownership, or if the assets owned by the deceased person were co-owned with another person such that they transfer automatically to that co-owner, then a “Probate” is not likely to be necessary.

(If the decedent were a licensed professional, however, probate is highly recommended, even if the assets were owned as noted above.)

Can I file the “Probate” anywhere I want?

The “Probate” must be filed in a county in which the deceased person lived, died, or owned property. Since most persons have a bank account, and since most banks have branches in every county in the state, the “Probate” generally can be filed in a county convenient to the Personal Representative.

Is there a deadline to file a Probate?

No. A full Probate may be filed at any time after the person dies. It may be filed the day the person dies. While there is no deadline to file a Probate, most attorneys believe it is best to file a Probate as soon after the person's death as the Personal Representative is comfortable moving forward with the financial aspects of the estate. In most Probates, that is well before the Personal Representative has completed the grieving process.

What happens during the “Probate” process?

The estate is opened. This means that a Petition is filed with the court. If the deceased person left a will, the initial step in the probate process is to have the will admitted as being valid (the courts call this having the will “proved”) and the person nominated in the will appointed as the Personal Representative (which used to be “Executor.”)  If the deceased person did not leave a will, then the first step will be the opening of an estate and the appointment of an Administrator (like a Personal Representative, but for cases with no will). This person is usually the closest heir of the deceased person. Regardless which process applies, the court will appoint a person to act on behalf of the estate.

Once a Personal Representative or Administrator is appointed, a notice to creditors is published in a local newspaper. This public notice tells any creditors or persons with a claim against the estate that they have four months to bring any claim against the estate for debts the deceased person owes them. At this time, the Personal Representative also gives written notice to all known and possible creditors, as well as to the heirs of the deceased person and the people named in the will.

Upon appointment, the Personal Represent identifies the assets of the estate and their values, and an Inventory is prepared and filed with the court.

The Personal Representative pays the debts of the deceased person. It is the law of the State of Oregon that creditors must be repaid from the estate before the remaining estate assets can be distributed to the rightful beneficiaries. The Personal Representative must complete and file a document labeled an “Affidavit of Compliance Respecting Search for Claims and Notice to Claimants,” verifying for the court that the Personal Representative has searched to determine what creditors exist, and then paid them.

Most of the time, after four months have passed since the publishing of a notice in the newspaper, the Personal Representative can consider closing the estate. To close the estate, the personal representative must account for all that has transpired since the estate was opened.  Anyone who will receive estate assets—unpaid creditors and heirs or beneficiaries—get a copy of the accounting.  A full-blown accounting is exhaustive in detail, what assets came in, what expenses there were, what income if any the estate earned, and how the remaining estate is distributed to each beneficiary

Often, if there are no creditors with unpaid bills, few beneficiaries, and no issues, I recommend a simplified accounting, a “Verified Statement in Lieu of Final Account,” which is signed by the Personal Representative and all parties who are entitled to receive the estate assets, asking the court to distribute the estate assets without the need of a full accounting.  Using a verified statement saves attorney time (and therefore money) and it saves time by waiving judicial review (thus shortening the time to distribution).

Regardless which accounting method is used, after court approval of the account and payment of all unpaid probate expenses, the deceased person’s assets are distributed to the people named in the will or, if the person died without a will, to the heirs of the deceased person. These people sign and return Receipts verifying that they received their money, which Receipts are filed with the court, and the estate is closed.

How long does Probate take?

Six months minimum.  While I recently completed one Probate in just over six and one-half months, most probates take at least nine to twelve months from the date the Petition is filed to complete. To complete it in six months, however, there must be no unusual or extraordinary problems [such as problems with creditors, disagreement among beneficiaries, or delays in liquidating assets (such as a delay in selling a home)], all beneficiaries must agree to waive the Final Account, and all beneficiaries must cooperate and respond in a timely manner.

Do I need a lawyer?

Let me preface my answer with you will want a lawyer.  Do you need a lawyer?  In Multnomah County and Clackamas County, unless you can prove your competence to represent yourself, you must retain counsel per local rule.

Why would you want a lawyer?  While the “Probate” process is not complex for an experienced “Probate” attorney, it is cumbersome and not readily understood by non-lawyers, resulting in too many errors and problems with persons who try to act as Personal Representative in a “Probate” without the benefit of an attorney.

Does the Personal Representative need to obtain a Federal Taxpayer Identification Number for an estate?

In most probates, it is necessary to obtain a Federal Taxpayer Identification Number (EIN). The primary reason for this necessity is that the Personal Representative must keep all estate money separate in an estate bank account. Banks will not open an estate bank account without the estate having a separate EIN. An EIN is also necessary when an estate will be selling real property (such as the home of the deceased) or investment assets (such as stocks, mutual funds or bonds owned by the deceased). Further, if it is necessary for the Personal Representative to file a Fiduciary Income Tax Return, the tax return must be filed using the EIN for the estate.

When and why do I need an accountant in a probate?

I recommend that you hire an account or tax return preparer.  As personal representative, you are personally liable for mistakes.  That means your assets, not the estate’s assets, may be used to pay the tax bill.  If you hire an accountant, you are not as likely to make a mistake.  If there is a mistake, you have a defense (you relied upon a professional) and you have another pocket to pay damages from.  The several hundred dollars you pay will bring you peace of mind.

What are the costs involved?

That depends on the particular facts of each “Probate.” Classic examples of costs one can expect to incur in a “Probate” are:

  1. Probate filing fee: Oregon has a state-wide filing fee system. As such, the filing fee for any probate filed in any county of the state of Oregon will be the same, regardless of in which county the probate is filed. The filing fee will be an amount determined by a sliding scale based on the "gross value of the estate." The gross value of the estate takes into account the value of all probate assets, but does not allow for the deduction of any debts owed by the estate. For example, if the sole asset of the estate is a home worth $400,000, but there is a $375,000 mortgage owed on the home, the gross value of the estate is $400,000, not $25,000.

As of October 2, 2018, filing fees of a probate case filed in Oregon are:

i: If the gross value of the estate is less than $50,000, the filing fee is $265;

ii: If the gross value of the estate is more than $50,000, but less than $1,000,000, the filing fee is $558;

iii: If the gross value of the estate is more than $1,000,000, but less than $10,000,000, the filing fee is $832; and

iv: If the gross value of the estate is more than $10,000,000, the filing fee is $1,109.

  1. Publication of notice to creditors: This cost will depend on which newspaper you use to publish. The newspaper I use currently charges $130.00 to publish.
  2. Accountant fees: This depends so much on how the accountant is used that it is impossible to specify an amount here. I would expect a range from a few hundred dollars to several hundred dollars.
  3. Appraisal fees: If the deceased person owned real property (land and/or buildings) that is not going to be sold to a third person as part of the probate process, an appraisal may be necessary to establish the value of the real property. My experience is that the cost of an appraisal of residential real property is usually around $700. The cost of an appraisal of commercial real property is likely to be quite a bit higher than this, probably $2,500 to $3,000 at a minimum.
  4. Personal Representative fees: The Personal Representative is entitled to a fee from the estate based on the gross value of the estate. Some Personal Representatives take this fee, while some do not. The fee is $1,630.00, plus two percent (2%) of the gross value of the estate in excess of $50,000. By way of example, an estate consisting of probate assets with a gross value of $500,000 would result in a Personal Representative's fee of $10,630 [$1,630 + (.02 X $450,000, which is $9,000)]. In addition, the Personal Representative is entitled to a Personal Representative's Fee of one percent (1.0%) on any non-probate assets. Classic examples of non-probate assets are retirement accounts with named beneficiaries and bank accounts that are either jointly owned or have a "payable on death" or "transfer on death" designation. The court has discretion to award Personal Representative Fees in excess of the amount determined by this formula if the Personal Representative applies for them. As stated in the applicable statute, "...further compensation as is just and reasonable may be allowed by the court for any extraordinary and unusual services not ordinarily required of a personal representative in the performance of duties as a personal representative." (See ORS 116.173).
  5. Attorney’s fees: As with accountant fees, this depends upon what services are requested and provided that it is impossible to specify an amount here.
  6. Bond premium: An Administrator in an estate without a will must obtain a bond. The purpose of the bond is to compensate the heirs of the estate if the Administrator misuses estate assets. The cost of this bond depends entirely on the value of the assets of the estate.
Does the Personal Representative have to wait until the probate is closed to sell the assets?

No. Unless a particular asset will be retained by one or more of the beneficiaries, the Personal Representative can, and should, start liquidating the assets immediately. By the end of the case the estate should consist of those assets a beneficiary will keep and an estate bank account with money in it. (See ORS 114.305)

Does the Personal Representative need the court's permission to sell real property?

No, unless the sale of the home was restricted by a Judgment of the court. (See ORS 114.325)

Can the Personal Representative distribute assets to the beneficiaries before the Probate is closed?

Generally, no. Assets may not be given to beneficiaries until the court has signed a Judgment allowing distribution. In most cases that Judgment is the Judgment Approving Final Account which is filed near the end of the Probate. Sometimes in Probates that are going to take a long time to close the Personal Representative will apply to the court for authority to make a partial distribution. So long as the four months have passed after publishing in the newspaper and there are sufficient assets to cover any known creditors, the court usually will sign a Judgment allowing a partial distribution.

Can the Personal Representative pay bills during the Probate without express court authority?

So long as the estate has enough money to pay all the bills of the decedent and all costs of administration, the Personal Representative can, and should, use the money in the estate to pay the bills of the estate as they are incurred. The exception to this is the fees incurred by the attorney in representing the Personal Representative. The attorney's fees charged for representing the Personal Representative must be approved by the court before the Personal Representative may use estate money to pay these fees.

When does the Personal Representative have to obtain a bond?

While the court can require a bond for any Personal Representative, it generally will waive the bond requirement when the decedent left a Will specifying that no bond is required, when the estate has only one beneficiary, or when all beneficiaries sign a bond waiver request. In the absence of one of these exceptions, however, the court is likely to require that the Personal Representative obtain a bond. (See ORS 113.105)

Will more taxes be owed because there is a “Probate”?

No. This is a common, but mistaken question. The amount of taxes owed by an estate depends on the value of the estate, and not the process used to transfer the estate to third persons upon the death of the property owner.

What responsibility does the Personal Representative have to determine if the decedent filed required state and/or federal tax returns for tax years prior to the decedent's death?

The Personal Representative has a fiduciary duty to make a diligent search for all creditors of the decedent. In the case of debts due for prior tax filings (whether taxes were filed or not), this likely involves having an accountant contact the taxing entity (generally the IRS and the Oregon Department of Revenue) to have "transcripts" run. Another way to determine if all necessary tax returns were filed for all necessary tax years is to contact the accountant used by the decedent during the decedent's lifetime, if the identity of that accountant can be determined. This is important because failure to do so could make the Personal Representative personally liable for unpaid taxes, interest, and/or penalties that could have been paid out of estate assets, but were not.

What responsibility does the Personal Representative have to determine if state and/or federal tax returns must be filed on behalf of the decedent for the current tax year?

The Personal Representative has a fiduciary duty to make a diligent search for all creditors of the decedent. This includes the duty to determine if the decedent must file tax returns for the tax year of the decedent's death and filing those returns if they are due. This likely involves the services of an accountant. This is important because failure to do so could make the Personal Representative personally liable for unpaid taxes, interest, and/or penalties that could have been paid out of estate assets, but were not.

When must a Personal Representative file a Fiduciary Tax Return for an estate?

As of 2017, a Fiduciary Income Tax Return must be filed by the Personal Representative on behalf of the estate of the decedent any time the estate has net taxable income or gross income in excess of $600.00 between the date of death of the decedent and the closing of the probate (or, in the case of probates lasting more than a year, any tax year of the estate). The most common instance in my practice that this occurs is when the Personal Representative sells real property owned by the decedent. In most cases the sale proceeds are not taxable, but the taxing authorities will tax them unless the necessary tax return is filed showing the sale does not result in a taxable gain. The necessary tax return is a Fiduciary Income Tax Return. A less common, but not uncommon fact scenario giving rise to the need to file a Fiduciary Income Tax Return is if the decedent had dividends on an investment account, bank interest, and/or income from an on-going rental, farm and/or business after the decedent's death but before closing the probate. Amounts received for any of these could lead to the requirement that a Fiduciary Income Tax Return is filed.

When must a Personal Representative file an Oregon Estate Transfer Tax Return (OR-706)?

An Oregon Estate Transfer Tax Return (OR-706) is the formal name given by the State of Oregon to what people often call an Inheritance Tax Return. As of 2017, an Oregon Estate Transfer Tax Return must be filed by the Personal Representative any time the decedent's total assets (gross estate) located everywhere (not just in Oregon) are one million dollars ($1,000,000.00) or more in value.  Note that all of the decedent's assets are included when determining if this tax return must be filed, even if they are not included as part of the probate estate.

What is the time deadline for the Personal Representative to file an Oregon Estate Transfer Tax Return (OR-706)?

As of 2017, and unless the deadline is extended by the Oregon Department of Revenue, the Oregon Estate Transfer Tax Return must be filed within nine (9) months of the decedent's date of death. If more time to file is needed, the Personal Representative should file Federal Form 4768 for a six-month extension. This does not extend the due date for any payments that would be required as of the nine (9) month deadline. While an application can be made for an extension of time to pay, such extensions are granted only under special circumstances identified in Oregon Administrative Rule 150-118-0150.

Are the beneficiaries of an estate required to provide their social security numbers to the Personal Representative?

Sometimes, but not always. In instances where the Personal Representative must file a Fiduciary Tax Return and/or an Oregon Estate Transfer Tax Return (OR-706), there are likely tax reporting duties which require that the Personal Representative provide to the accountant for the estate the social security numbers for the beneficiaries of the estate. In those instances the beneficiaries must provide their social security numbers to the Personal Representative.

Does the state keep a person's assets when that person dies without a will?

No. When a person dies without a will, the person is said to die "intestate." Oregon, like most states, has what are titled "laws of intestate succession." While most attorneys do not consider them to be a good substitute for a will, these statutes specify a distribution scheme that is objectively reasonable and likely to resemble the distribution scheme set forth by someone in a simple will. See "To Whom Do the Estate Assets Pass When a Person Dies Without a Will," below.

To Whom Do the Estate Assets Pass When a Person Dies Without a Will?

As stated above, when a person dies without a will, the person is said to die "intestate." In that instance, Oregon's laws of intestate succession specify who is entitled to the decedent's estate (the "next of kin"). If the decedent died with close living relatives, such as a spouse and/or children, application of the intestate succession statutes can be relatively simple. If the decedent did not have any close living relatives, determination as to who qualifies as the "next of kin" can be complex and require going back to the decedent's grandparents, then working down through the "lineal descendants" of the grandparents. Set forth below is an outline summarizing the laws of intestate succession at its most-common levels:

  1. If the decedent died with a spouse and no children (living or deceased), the entire intestate estate passes to the spouse. See ORS 112.035.
  2. If the decedent died with a spouse and children, but all the decedent's children (regardless whether each child is living or deceased) are also the legal children of the spouse, the entire intestate estate passes to the spouse. See ORS 112.025(1).
  3. If the decedent died with a spouse and children, but one or more of the children of the decedent (whether living or deceased) are not the legal children of the spouse, one-half (1/2) of the net intestate estate passes to the surviving spouse and one-half (1/2) of the net intestate estate passes in equal shares to each child of the decedent, even if that child is also the child of the surviving spouse. If any child of the decedent predeceases the decedent, that child's share passes to that child's lineal descendants by right of representation. See ORS 112.045(1).
  4. If the decedent died without leaving a spouse and without leaving any children or lineal descendants of the decedent's children, to the surviving parents of the decedent. See ORS 112.045(2).
  5. If the decedent died without leaving a spouse, without leaving any children or lineal descendants of the decedent's children, and without any surviving parents, then the estate would pass to the decedent's brothers and/or sisters, with the lineal descendants of any brother and/or sister who predeceased the decedent taking a share by right of representation. See ORS 112.045(3).
What are the rights of adopted persons under the laws of intestate succession?

Generally, a person who has been adopted is treated by the laws of intestate succession the same as a natural child of the adopting parents [See ORS 112.175(1)] and is no longer treated as a child of that person's natural parents for purposes of intestate succession. [See ORS 112.175(2)] The primary exception to this rule is that an adopted person will continue to be treated as the child of a deceased parent if the adopted person is adopted by the surviving parent's new spouse or registered domestic partner after the death of the first parent. See ORS 112.175 (2)(b).

What is a "small estate" proceeding?

Oregon allows a simplified process for small estates that would otherwise require a full probate. If an estate fits in this category, the cost and time for distributing the estate assets is greatly reduced. The procedure involves filing a document called an "Affidavit of Claiming Successor." This simplified process is available if the estate’s personal property is valued at no more than $75,000.00 and real property is valued at no more than $200,000.00, for a total aggregate estate value of no more than $275,000.00. Real property includes land and buildings or structures placed on land, such as houses, commercial buildings, and/or agricultural buildings. Clients often mistakenly believe that “value” means “equity.” “Value” as used in the small estate statute means the fair market value of the real property. By way of example, if there is a home worth $295,000.00, but there is a loan or other mortgage against the home in the amount of $200,000.00, the “value” is $295,000.00, but the “equity” is only $95,000.00. A small estate is not an option under this example. Personal property includes all other property, such as cars, boats, clothing, stocks, bonds and personal items.

Is there a deadline to file a Small Estate Affidavit?

A Small Estate Affidavit may not be filed until at least thirty (30) days after a person dies. [See ORS 114.515(3)]. Otherwise, a Small Estate Affidavit may be filed any time after a person dies. As with full Probates, most attorneys believe it is best to file a Small Estate Affidavit as soon after the person's death as the person filing the Small Estate Affidavit is comfortable with.

How long does the Small Estate Affidavit process take?

In most small estates there is little or no work for the attorney to do after the Small Estate Affidavit is filed. As such, it is a common misnomer for people to believe that the small estate process is complete upon filing. It is not. A closer review of the Small Estate statutes reveals that creditors have four (4) months to file claims or file a full probate, among other rights (See ORS 114.505-ORS 114.560). In my experience these rights are seldom asserted. Regardless, the fact that these rights do not expire until the passage of four (4) months necessarily means that the small estate process is not complete until four (4) months after the Small Estate Affidavit is filed, and then only if nobody asserts one of the rights enumerated in the statutes.

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