In far too many instances, people make false assumptions about estate planning that have a snowball effect. They think that something that they heard is etched in stone, and they proceed with that understanding. In some cases, the original premise was simply off-base.
This enters the picture when it comes to probate. You may have heard that an estate must pass through probate, and it is expensive but there is no way around it. This is based on some truth that is distorted, and we will provide clarity in this post.
Administration of a Simple Will
If you use a will to state your final wishes, you name an executor in the document to administer the estate after your death. The probate court will provide supervision during the estate process under these circumstances.
Probate Expenses
With regard to expenses, one of the major functions of probate is to give creditors an opportunity to seek payment before the assets that comprise the estate are distributed. The executor will open an estate bank account so they can pay valid claims while the estate is being probated.
The executor is devoting time and effort to the administration process, so they are entitled to payment. When you draw up your will, you can set an amount that the estate will pay the executor. If this matter is not addressed, the court will refer to the statutes.
Under Title 58 §58-527 of the Oklahoma Statutes, the compensation is based on the value of the estate. The executor is entitled to five percent for the first $5000 in estate value, and it drops to four percent for the next $5000. For the portion of an estate that exceeds $6000, the rate is 2.5 percent.
In addition to the executor’s remuneration, there will be court fees. The executor will sometimes engage an attorney to assist during the process, and there will be legal fees under these circumstances. Final debts must be paid, including taxes, and an accountant may be called upon as well.
Bond fees will also be part of the equation. The executor has to post a bond, and this will typically come out of the estate.
At the end of the day, the ultimate purpose of the administration process is to get assets into the hands of the inheritors. This will often require appraisals of liquidation of property, and there are fees associated with these services.
The Overlooked Detail
A lot of folks that are concerned about probate costs never consider the fact that probate can be avoided. This can be done if you use a living trust instead of a simple will as the centerpiece of your estate plan.
You would not lose control of the assets, because you would be the trustee while you are alive and well. The trust would be revocable, so you can change your mind and revoke the trust at any time. If you want to change the terms, you are free to do so.
When you are drawing up the trust agreement, you name a successor trustee to manage the trust after your death. You can also give the successor the power to administer the trust in the event of your incapacity.
After your passing, the trustee will follow instructions that you recorded in the trust declaration. Assets will be distributed to the beneficiaries according to your wishes, and there would be no need for a costly probate process.
Schedule a Consultation Today!
We can help you understand all of your options so you can make fully informed decisions. If you are ready to get started, you can set up an appointment at our Oklahoma City estate planning office by calling us at 405-843-6100. There is also a contact form on this site you can use if you would rather send us a message.
- Understanding IRA Inheritance Planning: Key Considerations - September 14, 2023
- Irrevocable Trust Decanting Provides Flexibility - September 12, 2023
- Inheritance Planning Solution for a Spendthrift Heir - September 7, 2023
