Alternatives to Probate

The word “probate” often comes to mind when we think about the disposition of our property at death.  So, what exactly is probate?  Probate is the formal court process for clearing title to property and transferring a decedent’s assets to the decedent’s devisees or heirs at death.  During the probate proceeding, assets are collected, debts are paid, disputes over the decedent’s estate are settled, and title to property is transferred.  While probate is an effective method to achieve these objectives, probate can be a long, expensive, and cumbersome process.  Below is several estate planning techniques to avoid probate of certain assets.

Jointly Held Property

If a decedent holds property jointly with another person, either as tenants by the entirety (available for married couples) or with rights of survivorship, title to the property immediately vests in the survivor at the time of the decedent’s death.  Real property, vehicles, and bank accounts are examples of property that can pass outside of probate if owned jointly.

Property with Beneficiary Designations

Many types of property can pass by beneficiary designation, including but not limited to real property, securities, life insurance proceeds, annuity payments, retirement accounts, pay on death (POD) accounts, and transfer on death (TOD) accounts.  Upon the death of the decedent the named beneficiary becomes the owner of the property.  If no beneficiary designation is made, the property will likely become a part of the decedent’s estate and will be subject to probate.

Bank Accounts with Value of Less Than $25,000

Under Oregon law, if the decedent is the sole owner of a bank account with a value of less than $25,000, and the total deposits in all bank accounts in Oregon amount to less than $25,000, a simple affidavit may be submitted to the bank to claim the funds.  Most banks require that their own affidavit be used, which can be obtained at a branch office.  Oregon law establishes priority as to who may claim the funds (spouse, children, etc.). One caution to relying on an affidavit to avoid probate: the bank is not required to pay the funds as requested and may require a probate or small estate affidavit.

Trust Property

A trust is a separate legal entity that survives the decedent.  Property that a decedent transfers to a trust prior to his or her death is therefore not subject to probate.  As a result, a trust is the most common means to avoid probate.  There are situations, however, where a trust may not be the best probate avoidance tool given an individual’s particular set of circumstances and the nature of the individual’s assets.  In these situations, the other alternatives to probate discussed above may be advisable.

Small Estate Proceedings

In Oregon, a small estate affidavit is an expedited probate proceeding for estates with a gross value of under $275,000, and with with no more than $75,000 of that amount attributable to personal property and no more than $200,000 attributable to real property.  The affiant (similar to a personal representative) is responsible for taking control of the property of the estate, providing notice to heirs, devisees, and creditors, paying expenses of the estate, and distributing the property of the estate.  While this proceeding sounds very similar to a “full” probate, the administrative requirements are far less, thus making the process much quicker and less expensive.

With proper estate planning, property that would normally be subject to probate can be transferred outside of probate, saving you and your family time, money, and more.  Of course, there are exceptions to each of the methods described above and circumstances under which these methods would not be advisable.  Be sure to speak with your estate planning attorney to determine the best way in which to protect and transfer your assets at your death – a little bit of planning can go a long way!