This month’s installment is a re-run of articles published in earlier months, except for the portions dealing with real estate sales made during a probate, and the portions dealing with waiving final accounts in probate. This article comprises the seminar notes I will be using at the NBI Seminar in Tulsa on April 27, 2000 (if you are interested in attending the seminar, or the one held in Oklahoma City on April 28, please call National Business Institute at 715-835-7909 – the title of the seminar is “Key Issues in Estate Planning and Probate”) – I will be one of several speakers at the seminar. FYI, I have not reproduced the Civil Bench Book for this month’s article; it is too long, and if you want to reference it, go to the courthouse and look at the judge’s copy.
Selected Issues in Probate
I. Types of Probate Administration
A. Estates of Nonresidents
B. Settling the Small Estate and Summary Procedures
i. Traditional Summary Administration
ii. Expedited Summary Administration
C. Probate by the Surviving Spouse
II. Duties of the Personal Representative: Tax and Other Aspects of Probate
A. Tax Checklists
B. Fiduciary’s Duties After Testator’s Death
C. Inventories, Claims, Selling Real Estate, Final Accounts
I. Types of Probate Administration
There are several forms of probate administration in Oklahoma: regular probate, summary administration, ancillary probate, and probate by a surviving spouse. This article discusses all of these types of administration.
A. Estates of Nonresidents
1. Title to property in this state and owned by a nonresident may be passed under such nonresident’s will upon the filing of a petition with the following duly certified documents from the domiciliary probate procedure attached:
b. Order admitting the will to probate;
c. Order distributing the estate and determining the heirs; or
d. Duly certified copy of the order appointing the Personal Representative and order distributing the estate if decedent died intestate.
2. Petition shall be in writing and signed containing:
a. Jurisdictional facts;
b. Statement that the Personal Representative agrees to act or renounces the letters or if it is necessary for a Personal Representative to be appointed;
c. If necessary, a statement, if the domiciliary Personal Representative renounces his right, that the Personal Representative may waive such right in favor of a resident of this state;
d. Names, ages, and residences of all heirs, devisees and legatees as far as known;
e. Description of the probable value and character of the property subject to the jurisdiction of the court;
f. Name and address of the person for whom letters are prayed.
3. Court shall order:
a. Hearing within 20 days or more after the filing of the petition;
b. Notice by publication one time not less than 20 days prior to the date of hearing;
c. Notice by mail to all devisees, heirs and legatees not less than 20 days prior to hearing.
4. If no objection is filed to the petition or if the objection is withdrawn or has having no merit, the court shall order distribution in accordance with the documents from the domiciliary estate on or before the hearing date.
5. If an objection if filed, the court shall determine if the objection has merit and appoint the Personal Representative; proceedings shall be conducted in accordance with Title 58.
6. If the domiciliary proceeding is not complete, the petition may be filed without attaching the order of distribution; and in such event:
a. Court may appoint a representative at hearing to administer the estate in accord with laws of this state.
b. Court may find the petitioner has requested no action be taken until the domiciliary estate is closed and a certified copy of the order of distribution is filed; upon filing, a hearing shall be held in not less than 20 days with notice to heirs as above (58 O.S. Sec. 677)
B. Settling the Small Estate and Summary Procedures
Small estates are part of the probate process, but can be dealt with under a “summary administration” procedure – for purposes of this outline, summary administration will be treated as either “traditional” or “expedited”. To qualify for the traditional procedure, the value of the probate estate must not exceed $60,000; summary administration will be briefly outlined herein, but reference should also be made to the Civil Benchbook, which gives a checklist for summary administration.
i. Traditional Summary Administration
1. Court may order the executor or administrator to inventory the estate and may appoint appraisers if it appears the value of all property in the estate does not exceed $60,000.
2. If the inventory shows the estate does not exceed $60,000 and upon application of the executor or administrator, court shall dispense with regular probate and order:
a. Notice to creditors;
c. Final accounting;
d. Determination of heirship;
e. Distribution and discharge.
3. Notice to creditors and notice of hearing upon the accounting, which may be in one notice, shall be:
a. Published for 2 consecutive weeks in a newspaper of general circulation in the county; or if none,
b. Posted in 3 public places in the county, one of which shall be the county courthouse;
c. Mailed to all interested persons at their last-known address.
4. Notice of hearing upon the accounting shall:
a. Set forth the date by which final accounting and petition for distribution will be filed which shall be at least 5 days before the order allowing final accounting, determination of heirs and distribution;
b. Be made at least 10 days before hearing.
5. Hearing shall be held at least 35 days after first publication of the above notices.
6. Court shall:
a. Take proof of payment of:
1) Funeral expenses;
2) Expenses of last sickness;
4) Allowed claims;
b. Issue an order allowing final accounting, determination of heirship and distribution;
c. Discharge the executor or administrator and the sureties on their bonds. (58 O.S. Sec. 241)
ii. Expedited Summary Administration
“How to Avoid Probate” is a very popular seminar topic. Our society emphasizes the importance of taking charge of our lives, and the thought that a person might eliminate a court procedure is, of course, very appealing. Though Oklahoma has not abolished its historical probate procedures, the legislature has adopted an improved summary administration process, which will not eliminate probate entirely, but will reduce both time and expense. Perhaps someone will do a seminar on “how to avoid the historical part of the probate process.” This part of the outline will hopefully introduce a portion of that topic.
An exhaustive article on the subject has been written in the Oklahoma Bar Journal, Volume 7 No.30, “Oklahoma’s New Summary Probate Act; Reducing the Time and Expense of Probate”, by Donald F. Heath, Jr. If you have access to that publication, I would certainly recommend reading the article.
There were several purposes in enacting the legislation, not the least of which was to give Oklahoma a tool similar to that in other states, which basically reduces the paper work involved in a probate procedure. The Oklahoma legislation will hopefully reduce the expense of probate, for those estates which qualify for the summary procedure. Hopefully, the expenses of probate will be reduced to a range of $900 to $1200 dollars, plus court costs and publication fees (which ought to be less than $250).
Let me first state what the new procedure offers: First, From a time factor, a probate can be concluded within 65 days of the initial pleadings. Second, there is only one probate hearing held, which is advantageous to all parties.
To make this procedure work, there are several things that must be done. First, the size of the estate must be less than $175,000. Second, all heirs must consent to the procedure. Third, the Oklahoma Tax Commission must issue the Tax Release by the time of the Final Account, (which is the first court hearing on all of these issues). And finally, there must be lots of coordination between the probate judge, the court clerk, and the attorney handling the estate – for the timing on these cases is somewhat critical.
Lets look at it backwards: In Oklahoma, a probate estate cannot be closed until a tax release has been granted by the Oklahoma Tax Commission (58 O.S. §635). It takes 5 to 8 weeks to get a tax release from the Oklahoma Tax Commission, for non-taxable estates. If the new Summary Administration procedure has been started, the Order Approving Final Account cannot be entered until the tax release has been granted.
The Final Account must be filed at least 20 days before the “Final” hearing is held, and must be filed at least five days after the last date creditors has to present claims. Under these circumstances, the time within which creditors can make a claim is reduced from 60 days to 30 days.
The Notice to Creditors is combined with Notice of the Petition for Summary Administration.
Technically, when a petition for summary administration is filed, together with the required consents, the probate can be concluded within 55 days, under the statutory scheme. If the tax release has not been granted by the Oklahoma Tax Commission, then the final account cannot be approved. Furthermore, if there are objections to the procedure, the court will have to determine whether summary administration can be granted. The timing of the hearing will, of course, depend upon when Notice of the Combined Hearing is published in a newspaper. Since probate courts usually only convene once a week, there will be some juggling of all schedules, to insure that at the “final” hearing, summary administration is granted and a final decree entered at that time.
No one likes probate, especially in what is regarded as a small estate. Though Oklahoma’s new procedure gives us a major advance, compared to what we had before, we still do not have the streamlined procedures permitted in Texas, nor the summary administration procedures available in Missouri (which can be prepared without lawyer assistance in most counties). I’m certain if I were familiar with other states, I would find other places that would give us a more streamlined procedure than we have. Having said all that, I am nonetheless thankful that we have a better procedure than before. Progress is being made.
Oklahoma Statutes Title 58 Section245.
A. A petition for summary administration may be filed by any person interested in an estate that meets one of the following conditions:
1. The value of the estate is less than or equal to One Hundred Seventy-five Thousand Dollars ($175,000.00);
2. The decedent has been deceased for more than five (5) years; or
3. The decedent resided in another jurisdiction at the time of death.
B. The petition shall set forth the following:
1. A statement of the interest of the petitioner;
2. The name, age and date of death of the decedent, and the county and state of the decedent's domicile at the time of death;
3. If the decedent died testate, the original or certified copy of the will of the decedent shall be attached to the petition, together with a statement that:
a. the petitioner, to the best of the knowledge of the petitioner, believes the will to have been validly executed, and
b. after the exercise of due diligence, the petitioner is unaware of any instrument revoking the will, and that the petitioner believes that the instrument attached to the application is the decedent's last will;
4. Whether the will attached to the petition has been admitted to probate in any other jurisdiction;
5. If the decedent died intestate, the petitioner shall state that the petitioner has diligently searched for and failed to find a will;
6. The names, ages and last-known addresses of the administrators, executors, nonpetitioning conominees, heirs, legatees and devisees of the decedent, so far as known to the petitioner;
7. The names and last-known addresses of all known creditors of the decedent. The petitioner shall state that the petitioner has exercised due diligence in determining the identities, last-known addresses and claims of the decedent's creditors;
8. The probable value and character of the property of the estate and the legal description of all real property owned by the decedent in Oklahoma;
9. Whether an application or petition for the appointment of a Personal Representative is pending or has been granted in any jurisdiction; and
10. A statement of the relief requested, which may include a prayer for the court to admit the will, if any, to probate, to appoint the person requested in the petition as Personal Representative, to determine the heirs, devisees and legatees of the decedent, to approve the final account, to distribute the property of the estate and to discharge the Personal Representative.
C. The petition shall be verified by the petitioner or signed by the attorney for the petitioner.
D. The court, without a hearing, shall issue letters of special administration to the person requested in the petition if the petition is in proper form and:
1. The proposed Personal Representative is named as Personal Representative in the will;
2. The proposed Personal Representative has prior right to appointment; or
3. The petition is accompanied by a waiver of all persons entitled to letters testamentary and all persons with a prior right of appointment.
The special administrator shall have the powers set forth in subsection A of Section 215 of Title 58 of the Oklahoma Statutes. The court, in its discretion, may require a bond.
A. Upon the filing of the petition, the court shall dispense with the regular estate proceedings prescribed by law and the court shall order notice to creditors and issue an order for hearing upon the petition for admission of the will, if any, to probate, the petition for summary administration, the final accounting, and the petition for determination of heirship, distribution and discharge. However, nothing in this section shall affect the lien upon any property for any estate or transfer tax which may be due upon the estate of the decedent.
B. Notice of the petition, notice to creditors, and notice of final accounting, determination of heirship, distribution and discharge shall be published once each week for two (2) consecutive weeks in a newspaper that is authorized by law to publish legal notices and that is published in the county where the petition is filed. If no newspaper authorized by law to publish legal notices is published in the county, the notice shall be posted in three public places in the county, one of which shall be the county courthouse. Notice to creditors and notice of hearing upon the petition for summary administration and the final accounting, determination of heirship, and distribution and discharge shall be combined into one notice, referred to as a "combined notice". The combined notice shall be mailed to creditors of the decedent as provided in Section 331 and 331.1 of Title 58 of the Oklahoma Statutes. The combined notice shall be mailed to all persons interested in the estate of the decedent at their respective last-known addresses not less than thirty (30) days prior to the date of the hearing. The notice shall set forth a date by which the final account and petition for distribution will be filed. The date of the filing shall follow the presentment date by at least five (5) days and shall precede by at least twenty (20) days the hearing on the order allowing final accounting, determination of heirs, legatees and devisees, if any, distribution and discharge.
C. The combined notice shall set forth the following:
1. The name, address, and date of death of the decedent;
2. The name and address of the petitioner;
3. The total value of the estate of the decedent as set forth in the petition;
4. The time and place of the hearing;
5. That the person receiving the notice must file objections to the petition at least ten (10) days before the hearing and send a copy to the petitioner or that person will be deemed to have waived any objections to the petition;
6. That if an objection is filed at least ten (10) days before the hearing, the court will determine at the hearing whether the will attached to the petition shall be admitted to probate, whether summary proceedings are appropriate and, if so, whether the estate will be distributed and to whom the estate will be distributed; and
7. The claim of any creditor not shown in the petition will be barred unless the claim is presented to the Personal Representative on or before a date certain at least thirty (30) days following the filing of the combined notice.
D. The matter shall be set for hearing not less than forty-five (45) days following the first publication of notice to creditors or combined notice.
E. If there is a defect in notice or in the form of the petition or if objections are filed, or for other good cause shown, the hearing may be postponed to a date certain.
A. At the hearing, the court shall hear objections from all persons who timely filed objections. If the court determines that summary proceedings are appropriate, the court may, after proof of payment of funeral expenses, expenses of last sickness and of administration and allowed claims, issue an order approving the petition for summary administration, finding that the will has been proved as required by law, admitting the will attached to the petition to probate, allowing the final accounting, determining heirship and the legatees and devisees, if any, of the decedent, distributing the property of the estate and discharging the Personal Representative and surety or sureties on the Personal Representative's bond, or defer such discharge if in the discretion of the court such deferral is necessary or desirable.
B. The order of the court shall have the same force and effect as a final decree or order rendered in any other proceeding provided in this title for distribution of the estate of a decedent. A certified copy of the order or a notice of the order as set forth in Section 711 of Title 58 of the Oklahoma Statutes shall be filed and recorded in the records of the county clerk in any county where real property in which the decedent had any right, title, or interest is located.
C. Probate by the Surviving Spouse
A surviving spouse may administer the decedent’s estate, without representation by a lawyer, using the following procedures, briefly outlined herein, by reference to the Civil Benchbook, which gives a checklist for the duties of the surviving spouse:
1. Surviving spouse may file a written verified petition, with the will attached, alleging:
a. That decedent died a resident of Oklahoma, leaving a will which gives the estate to and appoints as executor the surviving spouse;
b. Date and place of death.
c. That petitioner is the surviving spouse and consents to serving as executor;
d. Names, relationship, ages and addresses of petitioner, heirs, contingent legatees and devisees;
e. Nature and estimated value of the estate to the best of petitioners knowledge (58 O. S. Supp. 1979, Sec. Sec. 1101, 1102).
2. Court shall set a time, place and date for hearing 10-30 days after the petition is filed with notice as provided by law for such petitions (58 O.S. Sup. 1979, Sec. 1103).
3. Will shall be admitted to probate and the spouse appointed executor without bond (unless the will provides otherwise) upon:
a. Proof of notice;
b. Proof of will;
c. Failure to contest the will or appointment (58 O. S. Supp. 1988 Sec. 1104).
4. As executor the spouse shall:
a. Give notice to creditors;
b. Make and return to court a true inventory and appraisement of the estate (except the spouse alone may appraise the value at fair market value);
c. Prepare all returns and reports required by law and all taxes;
d. Carry out all other duties of an executor as in other estate proceedings (58 O.S. Supp. 1988, Sec. 1104).
5. Spouse shall prepare and file a final account including only a description of income and expenditures and petition the court to:
a. Approve final account;
b. Determine the names and identities of the heirs and that the surviving spouse is the sole legatee;
c. Order distribution to the spouse of remaining assets;
d. Discharge spouse and any sureties on the bond from further duties and liabilities (58 O.S. Supp. 1979, Sec. 1105),
6. Court shall set the hearing 10-30 days after the petition and account are filed with notice:
a. By mail to heirs and contingent legatees whose names and addresses are known 10 days before hearing;
b. By publication one time in a newspaper in the county 10 days before hearing (58 O. S. Supp. 1979, Sec. 1106).
II. Duties of the Personal Representative: Tax and Other Aspects of Probate
A. Tax Checklists
Sometimes it is “good” to have a checklist of things to do, especially when you are the Personal Representative of a will or the successor trustee of a trust, where the settlor has died. For hypothetical purposes, we will assume your Aunt Clara has died, and you want to know about all of your responsibilities as the fiduciary for the estate.
Let’s begin the process by applying for a taxpayer identification number for the estate (if there is a probate) or for the trust estate or possibly for both. The application form is made on an SS-4, which can be obtained from the IRS, or downloaded from the government forms internet site (http://www.irs.ustreas.gov). Next, let’s locate last year’s income tax returns, and perhaps hire the accountant who prepared the return to do some or all of the tax returns. Finally, let’s wait until mid-February, after the year of Aunt Clara’s death, so that all of the 1099’s will be sent to her (or sent to us, if we remember to submit a change of address card to the post office).
While we are waiting, we ought to make a list of what Aunt Clara owned, and submit life insurance claims (be sure to ask the insurance company to give you a Form 712, for use in filing the estate tax returns). If she owned something that needs appraising (such as real estate, family businesses, closely held stock, etc.), we ought to get an appraisal from someone who is qualified to do that sort of work.
Now let’s go down the list of various tax return issues that should be considered:
Federal estate tax return
1. Is one required?
2. Can we file the return in a timely manner, i.e., 9 months after date of death, or do we need an extension (use Form 4768 for an extension)?
3. Should we use an alternate valuation date? (i.e., six months after date of death)
4. Do we need to fund any by-pass trust within 6 months of the date of death? In that regard, have we received a taxpayer identification number for the by-pass trust, which will now be irrevocable?
5. Is there a QTIP trust involved, and if so, do we need a taxpayer identification number for that trust?
6. Are there charitable beneficiaries of the estate, and if so, can (or should) IRD (income in respect of a decedent) property be allocated to that charity?
7. Should a gift to an heir be disclaimed? If so, it needs to be disclaimed pursuant to applicable federal and state laws.
8. When the federal estate tax return was filed, was there a request for an early audit and discharge from personal liability (IRC §2204) made by the fiduciary filing the return?
9. If funds are not available to pay the estate taxes, does the estate qualify under §6166 to pay the tax over time (5-year deferral with 10-year installment payment election)? Does the estate have "reasonable cause" for deferring payment of the estate tax (IRC §§6075(a), 6151, 6161)?
10. Are there any Treasury “flower” bonds available to pay for the estate taxes?
11. Are there any foreign death taxes payable by the estate?
12. Among the assets of the estate, are there any farms or other closely held businesses, which might qualify for additional exemptions?
13. Are any generation-skipping transfer taxes due at the decedent's death?
14. Are any gift tax returns remaining to be filed?
15. If the estate is the beneficiary of a remainder interest, which will not occur for an indefinite period of time, should the estate request an extension of time to pay the tax on that interest?
Estate's income tax
1. Is there any income producing property or after-death income which will require the filing of a Form 1041?
2. Should the estate file for an extension of time to file the Form 1041?
3. Should the estate use a fiscal or calendar year?
4. Will administration expenses and losses be claimed as income tax deductions or estate tax deductions?
5. Will the estate redeem any corporate stock?
6. Will the estate have to make quarterly income tax deposits?
7. If the estate is subject to ancillary administration in another state, will a fiduciary income tax return be required for that state?
1. Is a Form 1040 required to be filed?
2. If there is a surviving spouse, should a joint return be filed?
3. Did the surviving spouse file a Form 1040 without the executor’s consent?
4. Did the decedent own any unused tax credits?
5. Who is entitled to keep the tax refund, the surviving spouse or the executor (should a Form 1310 be filed)? Conversely, if there are taxes to pay, who pays for them, the estate or the spouse?
6. Who will pay the income taxes, the executor or the surviving spouse?
7. If there are any unpaid medical expenses, they can be deducted on the estate tax return or the income tax return (providing the estate pays the expenses within a year of death)
Other Things to Consider
1. A Form 56 is used to notify the IRS of the existence of a fiduciary relationship (and the termination of a fiduciary relationship).
2. In most instances, the executor will need the addresses and taxpayer identification numbers of the beneficiaries of the estate.
3. The executor will need letters of appointment, as an exhibit, to attach to the decedent’s Form 1040.
4. Will the estate have to file 1099’s for professionals it has used during the course of the estate administration?
5. If a beneficiary of the estate is a nonresident alien, will the estate have to withhold income taxes?
B. Fiduciary’s Duties After Testator’s Death
Whenever a person signs a will, the question is sometimes asked after the signing has been concluded, “what happens after I die?” Though that question will be answered in part, in this seminar, let me cover some specific issues.
If the Personal Representative (even though not appointed) has access to a camcorder, it isn’t a bad idea to video tape the contents of the residence of the decedent. If there is a theft, due to an empty house, the tape will be of great assistance in preparing a proof of claim for the insurance company. Related to this issue is continued fire insurance coverage. Most casualty insurance companies do not want to insure a home without someone living there, so arrangements might have to be made, to have friends or relatives spend the weekends in the empty house, until the home is either sold or conveyed to the heirs.
Although the Oklahoma Tax Commission must still release the Safe Deposit Box, it is no longer necessary that it be inventoried (6 O.S. §1308). Each financial institution should also be notified of the death, so that the banks can put in motion a request for release of the account (on occasion, the Oklahoma Tax Commission will place a hold of 10% on the balance of the account, because the OTC wants the Personal Representative to file an estate tax return, and the 10% hold will not be released until the return is filed, audited, the tax paid, and a formal release issued by the OTC). Some banks require original death certificates, as formal notification of death, but most don’t. In most instances, there is probably no need for a Personal Representative to have more than 3 or 4 death certificates. A copy of the death certificate ought to be recorded with the County Clerk, so that if duplicate certified copies are required, you can obtain them from the County Clerk for $2 each.
Vested beneficiaries ought to be given a copy of the will.
There will usually be assets not subject to probate, and in that regard, the beneficiary of the life insurance policies should file the death claim as soon as possible. Each insurance company will need an original (or certified) copy of the death certificate. Similarly, claims should be made by the beneficiaries of the IRAs, §401(k) plans, etc., but the beneficiary should not accept payments under these plans until the income tax consequences to the beneficiary are known. The beneficiary will have to pay income taxes (which is in addition to estate tax) for distribution received under these plans; it is advisable to consult with an accountant in that regard. Rather than take a lump-sum settlement, which might place the recipient in a 39.6% income tax bracket, there may be other settlement options available (a surviving spouse is usually granted the privilege of rolling over IRA benefits, but this settlement option is not available to children or other beneficiaries; charities which are designated as beneficiaries will not pay income taxes on IRAs they may receive).
An Oklahoma Estate Tax return must be filed within 9 months of the date of death (68 O.S. §806), even if the beneficiary of the estate is a surviving spouse, and even if there is no tax to pay. The estate tax will include all property owned by the decedent, all property transferred 3 years before the decedent’s death, IRAs, and many other things you might not ordinarily think of. If the estate plan was designed around an A/B tax sheltered trust, where a unified credit trust is created on the death of the first Settlor, there may be some Oklahoma Tax to pay at the first death. If the value of the estate exceeds the sum of $675,000 (for 2000), a Federal Estate Tax return will have to be filed, and as a parenthetical note, if a by-pass trust is to be created, it ought to be funded with part of the trust assets within six months after the date of death (and a federal taxpayer identification number will have to be obtained for the bypass trust). The Personal Representative ought to hire an accountant or lawyer to assist with the filing of these returns.
The Personal Representative should pay all of the valid debts of the decedent from trust assets. However, in most instances insurance proceeds or retirement funds should not be used to pay for these debts.
Whenever distribution of the estate is made, the recipient of the property being distributed should sign a receipt (and probate records of this nature should be kept for 5 years after the estate has been closed, but it is better if the probate records are never destroyed). Distribution will be made either in kind or by check – and the value of what is distributed will be based on the distribution date, not the date of death. However, for income tax purposes, the tax basis for capital gains purposes will be the date of death value, or the alternate valuation date (which is six months after date of death), as shown on the federal estate tax return.
Except for IRA, §401(k) distributions, and similar property interests, beneficiaries will not pay income taxes on their inheritances.
And finally, the beneficiaries of the estate ought to meet with a financial consultant, before running out to buy a 52” TV or a Lexus. As I have stated many, many times, an inheritance ought to be viewed as if it were a herd of Guernsey cattle – the cows ought to be milked, the milk sold and income enjoyed, but the herd should not be sold for barbeque meat. We live in a capitalistic society, and we can increase our net worth through wise investments, not through buying frivolous household items.
C. Inventories, Claims, Selling Real Estate, Final Accounts
I have attached to this outline the “Oklahoma Civil Benchbook”, which has not been revised since the mid-1980’s. Since that time, there have been some revisions to the probate law, but most of the matters dealt with in the Benchbook are still good law and provide a great resource for the traditional issues dealt with in probate. For example, under §20.21, item 3, (page B-21) the statutory reference to the inventory is given. Claims against the estate are dealt with in item 4 of §20.21 (page B-21). For this reason, this outline will not cover in any further detail matters dealing with inventories, and claims against the estate.
Inventories. There are a couple of things that ought to be said about inventories. First, the court is permitted, under 58 O.S. §281, to relieve the Personal Representative of the requirement of filing an inventory. Since the values for tax purposes are set forth in the estate tax return, and for all intents and purposes, are the “reliable” values, I question whether it is always necessary to have an appraisal of the probate assets owned by the decedent. I found it more expeditious to request the court to relieve the Personal Representative of the requirement to file an inventory – as a practical matter, the inventory items will be fully described in the final account (or at least ought to be) – namely, property owned by the decedent at the time of death, additions to the estate by way of income, deductions from the estate by way of paying creditors, last illnesses, Personal Representative fee, attorney’s fee, and the like – and a balance available for distribution to the heirs, with a list of which heirs receive which property. Since the “inventory” of what the decedent owned is described (or ought to be described) in the final account, I think the parties ought to waive the inventory. It is simply one less thing to do.
Real Estate Sales. During the administration of the estate, if real estate must be sold, it can be sold without going through the very complicated procedure outlined in the Civil Benchbook, §20.40 – 20.42 (page B-23 – B-27). The technique we have been using lately is a request to sell the real estate, under 58 O.S. §239. That statute provides:
A. After the appointment of the Personal Representative, and, provided that a determination of the identities of the heirs, devisees and legatees of the decedent has been made pursuant to the provisions of Section 240 of this title, and upon the filing of a petition or application, the petition to be accompanied by acknowledged, written consents by all heirs, devisees and legatees, other than contingent devisees and legatees, and persons authorized to act on behalf of any heir, devisee or legatee under any legal disability, the court may enter an order:
1. Authorizing the Personal Representative to sell, grant, lease, mortgage or encumber any real or personal property including mineral interests, and to execute and issue deeds, leases, bills of sale, notes, mortgages, easements and other documents of conveyance, without further judicial authorization or a return of sale or confirmation of such sale or transaction. Any sale or transaction so authorized shall pass title to the purchaser without being confirmed by the court, notwithstanding any statutory provision to the contrary; or
2. Waiving the filing of any accounting specified in the consents of the persons herein named, or waiving the necessity for presentation to the court for approval of any such accounting.
B. Waivers or consents may be withdrawn at any time and thereafter all acts shall be in accordance with regular statutory procedures. A withdrawal of a waiver or consent shall be effected by filing a written statement of withdrawal with the court clerk and by serving a certified copy on the Personal Representative or the attorney for the Personal Representative by certified mail.
C. Notwithstanding the foregoing, if the petition or application is filed after three (3) months from the date of admission of the will to probate, and no appeal of the admission of the will is pending nor has any contest to admission of the will to probate been filed after admission of the will to probate, and if the will contains a residuary disposition clause, then the consents of heirs who are neither devisees or legatees shall not be required.
Under §239, there is no requirement to hold a confirmation hearing after the property has been sold. As you probably know, even if a power of sale is given to the executor under the terms of a will, and the real estate is sold, the statutes require the executor to have the sale “confirmed”, which might undermine the sale itself. It is always a bit unnerving to explain to a client that though real estate may be sold in the probate process, that if the sale is not confirmed by the court, because a higher bidder shows up, that the buyer will go away empty handed. Note that under §239, the court can order sale of real estate, and after the sale order has been filed of record (it doesn’t have to be published in a newspaper, nor is there any waiting period between the time of the petition to sell is filed, and the order is entered), the parties are given the sort of liberty needed in entering into a real estate sale and consummating the sale without further Court approval.
The culprit in the real estate sales procedure is 58 O.S. §426, which requires the court to confirm any sale made by the Personal Representative. That section states:
“Except when a sale is made pursuant to Section 239 of this title, the executor or administrator, after making any sale of real property, must file a sworn return of his proceedings in the court. The court must fix the day for the hearing of such return, and give at least ten (10) days' notice thereof by one publication in a newspaper in each county in which any part of the real property sold is situated and in the county where the order was made, and by mailing a copy of said notice to all heirs, legatees and devisees of the decedent whose addresses are known, which notice must briefly describe the real property sold, the sum for which it was sold and the name of the purchaser, and must refer to the return for further particulars. Upon the hearing, the court must examine the return and witnesses in relation to the same, and if the proceedings were unfair, or the sum bid disproportionate to the value, and if it appears that a sum exceeding such bid at least ten percent (10%), exclusive of the expenses of a new sale, may be obtained, the court may vacate the sale and direct another to be had, of which notice must be given, and the sale in all respects conducted as if no previous sale had taken place; if an offer of ten percent (10%) more in amount than that named in the return be made to the court in writing, by a responsible person, it is in the discretion of the court to accept such offer and confirm the sale to such person or to order a new sale”.
Thus, even if the executor is given the power to sell the real estate, under the terms of the will, the sale, must nonetheless be confirmed by the Court, under the above section. See 58 O.S. §462 which deals with powers of sale contained in a will:
When property is directed or authorized by the will to be sold or dealt with in any other manner by the executor, the executor may sell or otherwise deal with any property of the estate without the order of the court on such basis and on such terms as the executor may determine; but the executor must make return of such sales as in other cases, unless the sale is made pursuant to Section 239 of this title. If directions are given in the will as to mode of selling, or the particular property to be sold, such directions must observed. No title passes unless the sale is confirmed by the court, except if the sale was made pursuant to Section 239 of this title, then no confirmation of the sale by the court is necessary”.
To avoid this additional trip to the Courthouse, to have the sale confirmed, I always try to have real estate sold under §239. Now, having said that, let me back up one step. One of the requirements of §239 is that the heirs of the estate must consent to the sale, if the sale occurs within the first three months after the will has been admitted to probate. In addition, the Court must determine the heirs before a §239 sale can be made. When a Petition to Admit the Will to Probate is filed, or if the decedent died intestate and the Court is asked to appoint a Personal Representative, I always petition the court to determine heirship at the initial hearing.
Final Accounts. Finally, let me conclude this portion of the outline with a discussion on Final Accounts. Under the statute cited in §20.44 of the Oklahoma Civil Benchbook (page B-27), which you may review, at your leisure, all of the statutes on final accounts. The question must be asked, however, can the court order distribution of the estate, without holding a hearing or a Final Account, if the heirs agree the final account can be waived? Though I have been successful in persuading judges in certain counties that the estate can be distributed, without a final account, and that no hearing on the final account is needed, my success rate has not been 100%.
Because of my firm conviction that an heir of an estate can waive not only contractual, but also statutory rights, I believe a Final Account can be waived, and the estate distributed without the necessity of having a hearing on that issue. Section 239, cited above, states that a final account can be waived.
The benefit of waiving a final account, waiving the filing of the inventory, and waiving a hearing on a final account, is very simple to understand: after the tax release has been issued by the OTC and the time period has expired for filing creditors claims, the estate can be closed quickly and economically. There will be no further delays, no necessity of closing the estate through the traditional summary administration, and the parties will save publication costs. By waiving inventories and final accounts, the parties have all but eliminated the stigma associated with probate, i.e., extra expense and delay. If Oklahoma Courts permitted such a procedure on a uniform basis, then our procedures would create the same favorable procedures which are prevalent in Texas.
Why would anyone oppose this technique? Perhaps the local newspapers would object, since they would not be paid the extra publication fees. And the parties would forfeit their right to attend another court hearing (humor intended by that remark).
Here are the reasons why I believe Final Accounts can be waived. Let me begin by referring to the statutes in question. Under 59 O.S. §631, the statutes provide that distribution of the estate may be made without having a hearing on the issue:
“Upon the final settlement of the accounts of the executor, or administrator, or at any subsequent time, upon the application of the executor or administrator, or of any heir, legatee or devisee, the Court must proceed to distribute the residue of the estate in the hands of the executor or administrator ….”
The statute is silent on the requirement of holding a hearing. Thus, to begin the distribution process, it would appear that the executor or an heir must file an application for distribution of the state. Once an application has been made, the Court’s duty is mandatory: the statute requires the Court to distribute the estate.
However, the statute undoubtedly presupposes that several things have already been done (such as, obtaining a release from the Oklahoma Tax Commission). Let’s go through the list of things that must be done before an estate can be closed:
Determination of Heirship. The Court must have determined who the heirs are. Under 58 O.S. §240(d), the Court’s determination of heirship, which can be made at the initial hearing when the will is admitted to probate, “shall not establish proportional interest of any person entitled to receive any distribution of assets or property from the estate”. But if the heirs consent to their respective distribution of the estate, then the Court’s initial determination of heirship becomes the law of the case, and is a final determination.
Waivers and Consents Must Be Filed. All parties must be in agreement as to final distribution, and file waivers and consents to the distribution the estate, as well as waivers as to the filing of an inventory (which is permitted under 58 O.S. §281), and as to the accountings (which is permitted under 58 O.S. §281 and 58 O.S. §239). In a very real sense, the parties are asking the Court to approve a consent decree.
Any objections to Determination of Heirship or Will Contests? If all parties consent to the determination of heirship, then the Court’s determination of heirship at the beginning of the case, would become the “final” determination of heirship, when the Order of Distribution is entered. The earlier determination of heirship is, in effect, the “law of the case” (which limits the parties’ ability to contest earlier Court rulings at a later date).
Creditors Issues. The Court must be satisfied that all creditors have been paid. When the parties ask for distribution of the estate and waiver of the final account, the parties ought to attach creditors’ receipts to their request.
Inventory. If an inventory has not been filed, then the Court should, upon consent by the parties, order a waiver of the filing of the inventory.
Tax release. The estate cannot be closed until the tax release has been issued by the Oklahoma Tax Commission (58 O.S. §635).
Twenty Days Lapse Time and Waiver of Hearing. Under 58 O.S. §553, the request for distribution must be on file for 20 days, before the Court can approve the request:
“Every account for the final settlement and petition for distribution of an estate shall stand for hearing at a date to be fixed by the court, not less than 20 days after the filing thereof; and notice of such hearing shall be given by mailing written or printed copies of the notice of such hearing to the heirs, legatees and devisees whose addresses are known . . . ”
Though this section requires a “hearing”, 58 O.S. §239 permits the Court to relieve the parties of filing a final account. If the statutes are specific on this issue, as they are, then there ought not be a hearing held on an account which has been waived by the parties. In addition, Oklahoma Courts have permitted parties to procure Court orders without being present at a hearing. The most common example would be in a divorce proceeding, when one of the parties waives his or her right to attend a hearing. See Raczynski vs. Raczynski, 558 P2d 425 (Okl. App., 1976), where the Appellate Court accepted the fact that the wife has “signed a waiver of hearing notice” (¶2, 1976 OK CIV APP 50). In those cases, however, one of the parties actually attends some sort of hearing, when the judge signs an agreed upon order.
Court orders are more commonly signed when the parties enter into a consent decree, and these orders are made without the necessity of holding a hearing on the consent decree. For example, in a foreclosure case, the Court approves consent decrees where the parties have agreed to the terms of the order. Though it may seem redundant to cite it, the Supreme Court in Matter of Faulkner, 504 P2d 875 (Okl., 1972), which is a probate case, noted in ¶18 that “the entry of a consent decree like the decree of August 6, 1970 has long been recognized in this jurisdiction as an appropriate procedure for the adjudication of the settlement of a justiciable controversy.” With this accepted practice, one must ask, why would any District Court judge not permit the parties in a probate case to enter a consent decree?
At least two district judges have stated that the parties cannot enter into a consent decree if the statutory procedure is not followed. However, the Oklahoma Supreme Court permitted final distribution in an estate where the statutory procedure was not been followed. In Porter vs. Oklahoma Bacone College Trust, 346 P2d 335 (1959), there were admitted defects in the proceedings relating to final distribution, but the Supreme Court, speaking through Justice Berry, concluded that the parties waived these procedural defects.
Court Costs. Obviously, a case should not be closed if Court costs are owed. The Court Clerk’s office could determine that matter.
With waivers signed by the interested parties in the Court file, the issue becomes, is there any statutory reason for having a hearing on final distribution? Perhaps 58 O.S. §691, discharge of the Personal Representative, might be cited as one final obstacle. However, even under that section, it would appear that once the Court is satisfied that all property of the estate has been administered, the Court “must make a judgment or decree discharging him from all liability to be incurred thereafter”.
In summary, the probate statutes contemplate that:
a. The heirs can request distribution at any time – such a request would mandate (at least under the Bacone case) distribution of the estate.
b. Though there are certain “constitutional rights” which cannot be waived, i.e. a Miranda warning, or waiver of an illegal or void contract, such as agreeing not to compete, 15 O.S. §217-219, Oklahoma Courts allow parties to waive certain of their rights.
c. What the Supreme Court permitted in the Bacone case was distribution of the estate, even though the statutory procedure had not been followed.
Thus, all things considered, if there are no parties left to complain, and all of the statutory issues on creditors’ claims, tax releases and the like have been resolved, the Court is permitted to approve a consent decree on waiving any right to a hearing on distribution.
Above article: ©2000 James H. Beauchamp
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