Probate will be necessary when a person dies and leaves property that has not been transferred by trust, joint ownership, the right of survivorship, or direct payments to beneficiaries. For example, if an insurance policy or retirement account hasn’t been transferred in one of the above-mentioned ways prior to death, then it will be distributed through probate. Probate is a process wherein the court legally recognizes a person’s death and oversees the payments for the deceased person’s debts to creditors, and the distribution of assets to their heirs. At its core, probate is about protecting the creditors’ interests and representing creditors to the estate. There are three types of probate under Texas law; dependent administration, independent administration, and transfer as a Muniment of Title, the last of which is a process that’s unique to Texas.
What Factors Set The Stage For Probate To Occur?
Probate most commonly occurs after someone has passed away and their family members want to divide their assets, change a deed to a home, take out a loan, transfer the title of a car, etc. By way of example, a bank may want to see letters of administration from the probate process prior to releasing funds, bank accounts might get frozen, especially if there was not a payable-on-death (POD) statement done.
Does All Of The Deceased Person’s Property Have To Go Through The Probate Process In Texas?
Not all property has to go through the probate process in Texas. For instance, life insurance can be passed by a beneficiary designation. When purchasing life insurance, part of the paperwork will involve naming the beneficiary, which is the person who will receive the proceeds of that life insurance policy. When someone opens a checking or savings account, there will be a payable-on-death (POD) designation. Once the person who is designated to receive the funds presents the death certificate, the bank will typically pay that person what they are owed. Retirement accounts can work in a similar way. Each of these are contract-based transactions, e.g. contractually, someone has been designated to receive the funds in the account upon the death of the account owner.
The Transfer-On-Death Deed (TODD) in Texas is a simple way to transfer real estate to someone after you die. Similarly, Texas allows Transfer-On-Death registration on things like automobiles boats, and the like. A Ladybird Deed is another option, which is a little bit different than a TODD. In summary, not everything has to pass through probate. However, if a person has not specified beneficiaries and payable-on-death designations prior to their death, then their assets will inevitably end up in the probate process.
What Are The Options For Avoiding Probate In Texas?
To avoid the probate process in Texas, a living trust should be created. These types of trusts are especially helpful if clients hold property outside of Texas. Clients should place all of the assets they wish to have managed by a trustee into the living trust. That trustee will be tasked with distributing the assets in the trust to the heirs and beneficiaries. The trustee will also have the authority to manage, change title to, and/or sell the property that is in the trust. Just about anything can be placed in a trust, including houses and vehicles, and, as an added advantage, the assets in a trust will not be listed in a probate proceeding, a very public probate proceeding.
If you own property with someone else, probate can also be avoided through joint ownership with the right of survivorship. In this instance, the surviving owner automatically owns the property when the other owner dies. Two forms of joint ownership exist in Texas, joint tenancy and survivorship community property.
Payable-on-death designations can prevent the need for bank account funds to go through probate.
For real estate, transfer-on-death deeds can be used. For smaller estates, a small estate affidavit can be used. Courts may be very particular about small estate affidavits. Some Texas Courts have very stringent rules regarding these forms of simplified probate and require the applicant to follow those rules to the letter. I recently helped a client with a small estate affidavit, and the courts required that we be more specific about the bank account assets being transferred under the simple guise of a small estate affidavit. There are definitely ways to avoid probate, but they must be executed properly or else the assets could fall back into the probate pot.
Is Probate A Costly Affair In Texas?
Probate can be costly in Texas. While the costs to file an application for probate differ from county to county, they typically range from $300 to $500; however, this is just the minimum amount owed to the courts to oversee a proceeding. The complexity of the estate will dictate the professional costs. For example, a complex estate would could require not just attorney fees, but assessor fees as well. A large estate that owes any taxes would also require tax professional fees. Depending on the case, probate can be rather expensive.
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