Oklahoma Probate Guide

Probate is a legal process critical to administering an estate. It involves the legal validation of any wills the estate has, as well as settling debts and distributing its assets. Equally true but less known by many, probate has significant implications for inheritance and estate taxes that can reduce the value of an estate.

Understanding this impact on these taxes and adopting a proactive strategy to mitigate them is key to managing these and all of the related issues you may experience when trying to preserve the value of an estate. Estate planning attorney Terrell Monks of Oklahoma Estate Attorneys, PLLC. in Edmond, OK, has written this article to help you to this end.

Understanding Probate And Its Role In Asset Distribution

Probate is designed to ensure that a deceased person’s assets are distributed according to their wishes. If their wishes aren’t recorded in a legally compliant way, then they will be distributed in accordance with Oklahoma state law. This process includes several steps, including:

• Validating the will
• Inventorying and valuing the estate’s assets
• Paying off any outstanding debts and taxes
• Distributing the remaining assets to beneficiaries

The trade-off of this legal oversight and protection that probate brings is how expensive and time-consuming it can be. More than this, it is a public process, such that financial details that would otherwise be private will become publicly disclosed.

The Relationship Between Probate And Estate Taxes

Estate taxes kick in when an estate transfers an asset from the estate to a beneficiary. Under current federal law, the federal estate tax applies to estates that exceed a certain value threshold. This figure is adjusted for inflation on a periodic basis, but as of 2024, the federal estate tax exemption is $13.61 million per person. What this means is that estates valued less than this amount are not subject to federal estate taxes.

Federal estate taxes aren’t the only form of estate tax out there, however. Oklahoma does not have a state estate tax, but other state taxes may apply in your situation and cause you to have to pay inheritance tax. This is especially true if you received a gift from a loved one in another state, namely Iowa, Kentucky, Nebraska, New Jersey, or Pennsylvania. The amount you are liable for is based on the value of what you inherit and your relationship to the deceased. Given how niche and complicated this can be, it’s wise to seek the help of a skilled probate lawyer.

Probate can impact the value of an estate in several ways, including:

Valuation

All assets an estate has must be valued as part of determining the value of the overall estate in the probate process. This extends to:

• Real estate
• Investments
• Personal property
• Other assets

Taxes are calculated based on the estate’s total value, so correctly determining the valuation is truly critical. Assets that significantly appreciate in value after the death of the owner can dramatically increase the tax burden the estate is subject to. Given the complexities here, working with a procedure of probate lawyer is highly advisable.

Deductions

On the other hand, estates can be eligible for deductions that reduce the taxable estate value. These include funeral expenses, debts owed at the time of death, and administrative costs associated with managing the estate. To take advantage of these deductions, be sure to maintain proper and thorough documentation of these expenses.

Other Impacts

Inheritance taxes, as we briefly mentioned earlier, can apply even in situations that ight not seem like they would be subject to inheritance taxes. Beneficiaries who receive assets are responsible for paying these taxes, not the estate itself. Both the relationship the beneficiary had with the deceased, as well as the value of the inheritance, affect the amount of tax they are liable for.

Minimizing Estate Taxes And Probate Costs

Effective estate planning can steer you clear of the impacts of probate. Reaching out to a professional such as a wills attorney will go far in putting you in the best position possible. Still, consider these strategies if you want to mitigate your exposure to probate:

Establishing A Trust

Trusts are incredibly powerful tools for managing estate taxes and avoiding probate. Irrevocable trusts remove assets from the taxable estate and thus reduce an estate’s estate tax liability. What specific trust is best for you in your situation is a question best posed to a skilled trust attorney, however.

Leveraging Life Insurance

Life insurance policies can provide you with funds necessary to cover estate taxes and other expenses you may encounter. Some life insurance trusts can even exclude the policy’s death benefit from the taxable estate.

Being proactive is a sure way to help minimize your liability to the probate process and ensure your loved ones can receive your assets with as little hassle as possible. These strategies, with the help of a reliable and experienced lawyer, will position you and your loved ones to navigate probate with ease.