1. Terminology

  1. Decedent - The person who passed away.
  2. Intestate - Dying without a will.
  3. Testate - Dying with a will.
  4. Heir - Someone who inherits property when there is no will.
  5. Devise - A gift made by a will.
  6. Devisee -  The person who receives a gift made by a will.
  7. Testator/Testatrix - The person who creates a will.

2. How to File

You must petition the probate court to admit any will to probate and to appoint you as the personal representative.  The petition contains some basic background information of the decedent and this information is described in ORS 113.035 -Petition for appointment of personal representative and probate of will.  Where to file for probate depends on which County the decedent lived, died or owned property.


2.1 What if there is no Will?

If there is no will, the Oregon Laws of Intestate succession will control who will inherit.  I have diagrammed a few of the common scenarios for What Happens if You Die Without a Will in Oregon.  

The petition for an intestate estate is slightly different than for testate estate.  The personal representative is not nominated by the will but instead is named by ORS 113.085 - Preference in Appointing Personal Representative.  Typically, when there is no will, the surviving spouse or children will serve as the Personal Representative.

In the Portland Metro Counties (Multnomah, Washington and Clackamas), there is a strong preference to not to have co-personal representatives for estates and it is generally advised that one person declines to serve rather than having multiple personal representatives.

When there is no will, the probate court will generally require a probate bond to protect heirs and creditors.  


2.2 What if there is a Will?

If there is a will, you petition the court to appoint to prove the will and to appoint the personal representative nominated in will.  In Oregon, it is a common practice for the will to waive bond.  

You can learn more about wills and who can make a will by reading our article, Basics of Estate Planning Part 1. What is a will?


2.3 Small Estates

You can settle a small and simple estate in Oregon with an affidavit of claiming successor. (ORS 114.515)  Estates that are eligible for a administration by affidavit are those that have probate assets:

  • Less than $200,000 worth of real estate
  • Less than $75,000 worth of personal property
  • Less than $275,000 worth of combined value

Similar to the probate petition, the small estate affidavit requires that the claiming successor to state some of the decedent's personal information, list the heirs of the decedent, describe the fair market value of any property as well as other items.

The affidavit may not be filed until 30 days after the death of the decedent. 

Often estates that are modest or that are made mostly of non-probate property will be settled by affidavit.  Similar to a personal representative in a typical probate proceeding, the affiant has the ability to administer the probate property.  Unlike the typical probate estate, the affiant has less oversight from the court.

For the simplest estates, you can check with the county court websites for Free Small Estate Affidavits.


3. Personal Representative

The personal representative is the person appointed by the court to serve as a fiduciary of the decedent's estate.  The preference for a personal representative is the person nominated by the will or, typically, the next of kin.  

Some Oregon counties require a newly appointed personal representative to attend a fiduciary education class.  


3.1 Duties of a Personal Representative

Once you are appointed a personal representative you will have certain fiduciary duties to the estate of the decedent.  ORS 114.265 explains the general duties of the personal representative.  

A personal representative is a fiduciary who is under a general duty to and shall collect the income from property of the estate in the possession of the personal representative and preserve, settle and distribute the estate in accordance with the terms of the will and ORS chapters 111, 112, 113, 114, 115, 116 and 117 as expeditiously and with as little sacrifice of value as is reasonable under the circumstances.

I've written a full article on the Duties of an Oregon Personal Representative.  That article along with Oregon Personal Representative Checklist will provide you with a good overview of the what you need to do as a personal representative.


3.2 Removing a Personal Representative

Occasionally a personal representative will have to be removed from managing the estate.  Often times this happens when the personal representative becomes sick or is otherwise incapable of performing their duties.  Less commonly, the personal representative has neglected the estate's property or stolen estate funds.  

In all of these situations any interested party or the court may petition the court for the removal of the personal representative.  ORS 113.195 describes the process for the Removal of Personal Representative.


3.3 Managing Estate Assets

Preserving and maintaining estate assets is often the most difficult job of a personal representative.  Along with the duties described in 3. 1 Duties of the Personal Representative, the personal representative has the right and shall take possession and control of the estate.  

ORS 114.225 Possession and Decedents Estate
A personal representative has a right to and shall take possession and control of the estate of the decedent, but the personal representative is not required to take possession of or be accountable for property in the possession of an heir or devisee unless in the opinion of the personal representative possession by the personal representative is reasonably required for purposes of administration

Bank accounts, retirement accounts and other financial accounts should be identified and monitored.  The personal representative should monitor the decedent's mail and go through the decedent's residence to find information about the estate.  If the decedent owned or operated a business, the personal representative must review the business's records.

Many times the primary asset of the estate is the family home.  Oftentimes the home will remain vacant until it can be sold.  Most insurance policies will not cover vacant homes.  Vacant home insurance can be costly but it is a must.  The policy will protect both the estate from loss and the personal representative from any potential liability from a vandalized home.


4. Probate Bonds

Most Oregon Courts will require the personal representative to post a bond unless the bond was waived by the will.  The courts require bonds in order to protect heirs, devisees and creditors of the estate.  

I've written an article about Probate Bonds that explains in more detail when a bond is necessary. 


5. Steps of Probate

Probate can take as little as 5 months but often is closer to 9 month process.  I've highlighted the main steps of the process.

  1. Appointment of the Personal Representative.  The Executor of the will or any interested party may petition for the appointment of a Personal Representative and the probate of the will. 
  2. Proving the Will.  This is the process of convincing the court that will is authentic.  ORS 113.055
  3. Notification of Heirs and known parties.  As part of the process, the PR must file a list of names of potential heirs and other interested parties and mail notice to them.  The PR has 30 days after appointment to file proof with the court that these parties received notice or were mailed. ORS 113.145 and ORS 113.035 (8) and (9)
  4. Inventory and Assessment of the Estate.  Within 60 days of appointment, the PR must file with the court an inventory and estimates of cash value for the property of the estate.  ORS 113.165
  5. Notification of Unknown interested parties.  Legal Notice must be published in a local newspaper for 3 consecutive weeks.  ORS 113.155(1)
  6. Filing of Claims against the Estate.  Creditors have 30 days after notice is mailed to them to file a claim against the estate.  Otherwise, other claims against the estate must be filed 4 months after the publication in the newspaper.  Those claims which were not filed on time could potentially be barred.  ORS 115
  7. Filing of Tax Returns and payment of any taxes. 
  8. File for approval of final accounts.  The PR must maintain and provide an accounting to the court before the distribution of assets of the estate. ORS 116.083(3)
  9. Court Approval.  Assets are distributed to the heirs and interested parties.  ORS 116.113

5.1 Notice Requirements

After the personal representative is appointed by the court, several parties must be notified of the probate.

  • Heirs and Devisees.  These are the people who are named in the will or would have inherited through intestate succession.
  • Interested parties.  This is a term described in the statutes and is generally someone who alleges an interest in a will that the decedent made or promised to make.
  • Oregon Health Authority Estate Administration Unit.  The State of Oregon may have paid some benefits to the decedent and those benefits may be eligible for recoupment.
  • Public Notice.  This is the notice you will see in the local papers stating that probate has started.
  • Known Creditors.  The personal representative has a duty to search for creditors of the estate and provide them with notice of the probate proceedings.

5.2 Inventory

The personal representative is required to file an inventory with the court within 60 days of their appointment.  The inventory will list the cash values of the property as of the date of death.  (ORS 113.165 Filing Inventory and Evaluation.)  You may have to hire an appraiser to determine the cash value for the inventory.

Sometimes assets are found after the initial inventory has been filed.  In those instances, a supplemental inventory will be filed with the courts. 


5.3 Searching for Claims

The personal representative is required to make a search for claims against the estate during the three months after appointment.  After this search period, the personal representative has 30 days to provide notice to anyone that has a claim or potential claim against the estate.  

Once those steps are completed, the personal representative will file a compliance with the court regarding the search for claims. (ORS 115.003 Personal Representative to Make Diligent Search for Claimants)


6. Settling Claims

One of the duties of the personal representative is to settle and manage any claims against the estate.  Common claims are from credit card companies and hospitals but can be for any debt, liability or obligation created by the decedent during their lifetime.

Most of the time the process is fairly straight forward.  The decedent has a credit card bill of a few hundred dollars; the credit card company presents a claim; and, the personal representative pays it as an allowable claim.  Other times a claim may be for hundreds of thousands and the personal representative and their attorney will spend much more time managing the claim.


6.1 Presentation of Claims

There are special rules and forms spelled in ORS 115.005 for Presentation of Claims.  

Claims are barred if is not presented before four months after the first publication of notice to interested persons or 30 days after a notice was deliver to the claimant.  

The form of the claim presented to the personal representative must be:

  1. In writing.
  2. Describe the nature and the amount thereof, if ascertainable.
  3. State the names and addresses of the claimant and, if any, the attorney of the claimant. 

6.2 Allowance or Disallowance

Once a claim is presented, the personal representative must decide whether to allow or disallow the claim.  To allow the claim, personal representative doesn't have to do anything but wait 60 days.

To disallow a claim, the personal representative needs to mail a notice of disallowance of the claim to the claimant and to the claimants attorney.  The notice of disallowance must inform the claimant that the claim has not been allowed and that it will be barred unless, within 30 days, the claimant:

  1. Requests a summary determination with the probate court; or
  2. Commence a separate action in any court that has jurisdiction.

The personal representative may also compromise a claim against the estate.

 


6.3 Priority of Payments for Insolvent Estates

Sometimes the estate doesn't have the assets to pay all of its debts.  In those cases, the personal representative will pay the claims in the following order:

ORS 115.125 Order of payment of expenses and claims

If the applicable assets of the estate are insufficient to pay all expenses and claims in full, the personal representative shall make payment in the following order:
(a)Support of spouse and children, subject to the limitations imposed by ORS 114.065 (Limitations on support).
(b)Expenses of administration.
(c)Expenses of a plain and decent funeral and disposition of the remains of the decedent.
(d)Debts and taxes with preference under federal law.
(e)Reasonable and necessary medical and hospital expenses of the last illness of the decedent, including compensation of persons attending the decedent.
(f)Taxes with preference under the laws of this state that are due and payable while possession of the estate of the decedent is retained by the personal representative.
(g)Debts owed employees of the decedent for labor performed within 90 days immediately preceding the date of death of the decedent.
(h)Child support arrearages.
(i)The claim of the Department of Veterans Affairs under ORS 406.100 (Claims against estate by department), including a claim the waiver of which was retracted by the Director of Veterans Affairs under ORS 406.110 (Waiver of claims).
(j)The claim of the Department of Human Services or the Oregon Health Authority for the amount of the states monthly contribution to the federal government to defray the costs of outpatient prescription drug coverage provided to a person who is eligible for Medicare Part D prescription drug coverage and who receives benefits under the state medical assistance program or Title XIX of the Social Security Act.
(k)The claim of the Department of Human Services or the Oregon Health Authority for the net amount of assistance paid to or for the decedent, in the following order:
(A)Public assistance, as defined in ORS 411.010 (Definitions), and medical assistance, as defined in ORS 414.025 (Definitions for ORS chapters 411, 413 and 414), funded entirely by moneys from the General Fund; and
(B)Public assistance, as defined in ORS 411.010 (Definitions), and medical assistance, as defined in ORS 414.025 (Definitions for ORS chapters 411, 413 and 414), that may be recovered from an estate under ORS 416.350 (Recovery of medical assistance), funded by a combination of state and federal funds.
(L)The claim of the Department of Human Services or the Oregon Health Authority for the care and maintenance of the decedent at a state institution, as provided in ORS 179.610 (Definitions for ORS 179.610 to 179.770) to 179.770 (Rules).
(m)The claim of the Department of Corrections for care and maintenance of any decedent who was at a state institution to the extent provided in ORS 179.610 (Definitions for ORS 179.610 to 179.770) to 179.770 (Rules).
(n)All other claims against the estate.
(2)If the applicable assets of the estate are insufficient to pay in full all expenses or claims of any one class specified in subsection (1) of this section, each expense or claim of that class shall be paid only in proportion to the amount thereof. 

7. Special Circumstances

The most common special circumstances are when the person who passed away had a spouse and dependent children and the will did not make provisions for their well being.  


7.1 Elective Share for Surviving Spouse

The Oregon Elective Share law prevents the surviving spouse from being disinherited.  The decedent must have lived in Oregon at the time of their death.  The amount of the elective share is based sliding scale form 5% to 33% determined by the number of years you were married.  The surviving spouse must claim the elective share within 9 months of the commencement of the probate proceedings. 


7.2 Support for surviving spouse and dependents

The probate court has the ability to set aside a portion or all of the decedent's estate in order to support the spouse and children's welfare.  ORS 114.005 through 114.085 provide the basis for providing the support.  You have to petition the court for support.  Your petition needs to include a

"description of property, other than property of the estate, available for the support of the spouse and children, and an estimate of the expenses anticipated for their support. If the petitioner is the personal representative, the petition shall also include, so far as known, a statement of the nature and estimated value of the property of the estate and of the nature and estimated amount of claims, taxes and expenses of administration."

Temporary support may be allowed while the petition is under review.  There are many other limitations on the nature and amount of support that are available.


8. Will Contests

A will contest is a court proceeding that claims that a will is invalid.  The most common claims that a will is invalid are based on Undue Influence, Lack of Capacity, and Execution Formalities.  

It is also important to remember that the decedent was under no obligation to leave you anything in their will.  A competent person can leave their property to whomever they chose.  


8.1 Undue Influence

Undue influence is difficult to define but the courts have describe it as "the testator is induced by various means to execute an instrument which, although his, in outward form, is in reality not his will, but the will of another person which is substituted for that of testator.’” In re Reddaway’s Estate

The Reddaway case further describes 7 factors which are used to determine if there has been undue influence.  They are:

  1. Procurement.  The beneficiary of the will participates in the preparation of the will.
  2. Lack of independent advice.  The duty of a beneficiary who participates in the preparation of a will and who occupies a confidential or fiduciary relationship to the testator to see that the testator receives independent and disinterested advice
  3. Secrecy and haste.  The testator is being isolated from family members or others who would otherwise receive gifts under the will.
  4. Change in attitude.  Unexplained change in the donor's attitude toward those for whom he had previously expressed affection is evidence of improper influence.
  5. Change in plan.  The "variance" between the testator's first will and a later will was regarded as a "suspicious circumstance" may justify an inference of undue influence.
  6. Unnatural and unjust gift.  This is a gift that is different than what one would ordinarily expect.
  7. Susceptibility to influence.  The physical and mental condition of the donor is regarded as a factor of importance in determining whether a disposition of property was the result of undue influence.

8.2 Lack of Testamentary Capacity

Any person who is 18 years of age or older or who has been lawfully married or who has been emancipated, and who is of sound mind, may make a will.  Having a sound mind is referred to has possessing testamentary capacity.  Testamentary capacity is the ability to understand what you are doing when creating a will.

The tests for testamentary capacity are (In Re Estate of Hill):

  1. that at the time of making the will, the testator comprehends the nature of the act in which he is then engaged;
  2. that he knows the nature and extent of the property which makes up his estate and concerning which he intends to make testamentary disposition;
  3. that he has in mind the persons who are, should or might be the objects of his bounty;
  4. that he is cognizant of the scope and reach of the provisions of the instrument.

Or, in plain English, the person making the will must:

  1. Understand the names and relationships of family members.
  2. Have a general idea of their property
  3. Understand what a will or trust does.
  4. Understand which person inherits what property.

 


8.2 Execution Formalities

ORS 112.235 requires that several formalities be followed in order for a will to be validly executed.  

Broadly speaking, the formalities are:

  1. The will must be signed by the testator.
  2. The signature must be witnessed by two people.

People sometimes complain about the execution but I like to think of the execution formalities of will as a quality control.  


9. Taxes

The personal representative is responsible for paying the decedent's final year taxes, any Oregon or Federal Estate taxes and a fiduciary income tax for any income earned by the estate while it was open.


9.1 Income Taxes

Depending on the amount of income that the decedent earned during the last year of their life, the personal representative may have to file an income tax return for the decedent.  This tax return, typically an IRS form 1040 and Oregon form 40, is for the last calendar year of the decedent's life up to the date of death.   These returns must be filed and any taxes paid before you can distribute the estate to the heirs.


9.2 Oregon Estate Taxes

If the estate has more than $1 Million in assets, you will have to file an Oregon Estate Tax Return Form OR706.  The Oregon Estate Tax return must be filed and any taxes paid before the estate can be distributed.  

The Oregon Estate Tax rates are:

Taxable Estate Equal to or more than: Taxable Estate less than: Tax rate on Taxable Estate amount more than column 1
$1,000,000 $1,500,000 $0 + 10%
1,500,000 2,500,000 50,000 + 10.25%
2,500,000 3,500,000 152,500 + 10.5%
3,500,000 4,500,000 267,500 + 11%
4,500,000 5,500,000 367,500 + 11.5%
5,500,000 6,500,000 482,500 + 12%
6,500,000 7,500,000 602,500 + 13%
7,500,000 8,500,000 732,500 + 14%
8,500,000 9,500,000 872,500 + 15%
9,500,000 1,022,500 + 16%

9.3 Federal Estate Taxes

The Federal Estate Tax is a tax on property transferred at death.  The Federal Estate Tax exemption is $5.45 Million in 2016 and $5.49 Million in 2017.  IRS Form 706 is required to filed within 9 months of the decedents's death if the estate has a gross value and prior taxable gifts more than the exemptions.  


9.4 Fiduciary Income Taxes

You may have to file a return based on the income or loss that estate had during the course of administration.  The form used is IRS Form 1041.  The return covers from the date of death through the distribution.  

For income tax purposes, the decedent's estate is a "pass through" entity.  For this reason, Schedule K-1 is used to notify the beneficiaries of the amounts to be included on their income tax returns.

Oregon Department of Revenue has similar requirements for tax returns on the Oregon From 41.


10. Expenses of Administration

These are the expenses that were incurred during the administration of the estate.  These are commonly the costs of preparing a home for sale, insuring a vacant home, costs of tax preparation as well as the personal representative and attorney fees.  The two expenses that must be approved by the probate judge are the Personal Representative Fee and the Attorney Fee.  


10.1 Personal Representative Fee

The personal representative is entitled to receive compensation for the services provided during the administration of the estate.  ORS 116.173 defines the compensation that the personal representative is entitled to $1,630 plus 2% for every dollar over $50,000.  The personal representative is also entitled to 1% of non-probate property. 

I've written more about the Compensation of Personal Representative in Oregon.  I cover additional compensation that the personal may be entitled to and special provisions in the decedent's will in that article.


10.2 Attorney Fees

The fees that the personal representative's attorney charges must be approved by the court.  The judge will review the attorney's fee statement for reasonableness.  Any interested party can object to the attorney's fees.

The personal representative's attorney cannot receive fees from the estate without court approval.  In re Altstatt (897 P. 2d 1164) is the most widely cited case in Oregon regarding discipline of attorneys who take money from estates without court approval. 


10.3 Other Administrative Expenses

Normally the personal representative will reserve a portion of the estate in order to pay for the preparation of the fiduciary income taxes and for any attorney costs required to close the estate.


11. Final Accounting and Distributions


11.1 Verified Statements

When all the creditors have been paid in full, and the distributees (heirs and devisees) have consented to it, the personal representative may file a verified statement in lieu of a final accounting.  

The verified statement must include (ORS 116.083):

  1. The period of time covered in the statement.
  2. A statement that all creditors have been paid in full (except those requiring court approval.)
  3. A declaration under penalty of perjury.

I find for the majority of probates that a verified statement makes the most sense.  The verified statement is typically much easier and cheaper to prepare.


11.2 Distributions

Once the court approves the final accounting or verified statement, the personal representative can make the distributions according to the will or be the laws of intestate succession if there is no will.  Distributions must be made as ordered by the general judgment entered by the judge. 


11.3 Receipts

The personal representative will be discharged until distribution receipts have been filed with the court.  Your probate attorney will prepare the receipts to be provided to the heirs when the distributions are made.  The receipts will describe the property and must be signed and returned to the personal representative.


12. Final Judgement, Closing of the Estate and Discharge of the Personal Representative

Upon the filing of receipts, the court will enter a supplemental judgment discharging the personal representative and closing the estate.  In the vast majority of probates this is the end of the administration.


13. Reopening of an Estate

Occasionally an estate has to be reopened:

  1. if other property is discovered;
  2. if any necessary act remains unperformed; or, 
  3. for any other proper cause appearing to the court.

The reopened administration goes largely the same as the original probate but barred claims may not be reasserted. 


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