What can you do to avoid expensive probate costs when there are very few assets or very little money in the deceased person’s estate? In Texas, there are a variety of methods to help these “small estates.”
The Texas Probate Code recognizes an expedited probate process called “Small Estate Administration,” when the deceased died without a Will, a condition lawyers call “intestate.” This procedure is available when the total value of the deceased’s assets, excluding the value of his or her residence and other exempt property, does not exceed $50,000.00. (For a discussion of exempt and non-exempt property under Texas law, please see Cary & Lippincott’s Collection Blog – http://carylippincott.blogspot.com/). For most individuals, the residence is their most valuable asset. By taking the residence (and a few other fairly common items, such as a motor vehicle, IRAs, and 401(k)s out of these calculations, many persons in the middle income class bracket will qualify to probate their estate as a small estate affidavit. However, a small estate affidavit may not be the best method for transferring title of certain types of assets from the deceased to his or her heirs. These assets typically include items such as stocks in publicly-traded companies, brokerage accounts, and partnership interests. You should always contact the person or entity acting as transfer agent for such assets to determine whether they will accept a small estate affidavit before initiating this type of probate procedure.
Additionally, if the deceased dies with a Will, but owned few assets, the Texas Probate Code recognizes a procedure known as the “Muniment of Title.” In essence, the Will is filed in connection with the affidavits of persons with knowledge of the deceased’s financial affairs and family relationships. Once approved by the Probate Court, the Will itself is filed as a public record and acts as the instrument authorizing the transfer of title from the deceased to his or her beneficiaries.
Finally, Texas permits a procedure known as the “Affidavit of Heirship.” This process does not involve filing anything in the Probate Court, but merely filing certain affidavits in the public records of any counties in which the deceased owned property. Extreme caution should be used when considering this process, however, because it does not pass title to the deceased’s property “free and clear” of alleged debts or encumbrances, will likely not be recognized as a valid transfer of title for most assets by entities such as banks and title companies, and may lead to future problems which actually increase the costs of probate or other methods to obtain clear title. Always consult with a probate lawyer before considering the use of an Affidavit of Heirship.
Friday, May 1, 2009
Monday, April 20, 2009
When should I probate a will?
Generally, a will should be probated as soon as possible. In Texas, the law requires that a will be offered for probate within four years of the date of death. (Texas Probate Code § 73). Under limited circumstances, a will can be offered for probate if the person offering it is not at fault for failing to present it within the four year period.
Tuesday, January 27, 2009
Texas Probate Administration and the Estate Inventory
In part, the probate administration of an estate involves gathering the assets of the person who died. Part of this process includes preparing an “Inventory, Appraisement, and List of Claims” to be filed by the estate’s representative (also called the “executor” or “administrator”) no later than the 90th day after the court has entered the order appointing that representative.
The “inventory” portion must list all items of property that belonged to the person who died (called the “Decedent”). It must identify all real estate located in the State of Texas, oil & gas leases, bank accounts, brokerage accounts, stocks/bonds, retirement accounts, life insurance policies (but only if made payable to the estate, rather than a specific beneficiary), cars, boats and other vehicles, fine jewelry, fine art, antiques, household furnishings, and every other item of personal property – including clothing and personal effects. Some categories can be grouped together for ease of reference, but it is best to identify each item of significant value separately. Finally, the list should describe whether the item was part of the Decedent’s separate property or community property (which may be hard to understand without legal advice).
The “appraisement” portion means that the estate’s representative must assign a value to each item of property listed in the inventory. Although the representative is not required to hire professional appraisers (unless ordered to do so by the Court), he or she must try to ascertain the fair value of each item and not merely make a wild guess. He should review property tax appraisals, vehicle buyers’ guide (such as Kelly Blue Book or Edmund’s), invoices or receipts from recent purchases, and similar references. For particularly difficult-to-value items, such as fine art or an ownership interest in a business, he should consider hiring an accountant or appraiser. The fees for these consultants may be paid from the estate (as “administrative costs”).
The “list of claims” portion of this document does not mean the claims that creditors, heirs or beneficiaries may have against the Decedent’s property. Instead, it is a list of claims that the Decedent may have had against others for debts owed or property kept by third parties. For example, if the Decedent died in an accident, his estate may have a “claim” against an insurance carrier or another person for medical expenses or wrongful death.
The Inventory, Appraisement and List of Claims is one of the most important documents filed in any probate proceeding. Because few people have had experience with preparing such legal documents, because the method for apportioning property between separate and community can be difficult to grasp, and because the method for valuation may be complex, the representative should always work with an attorney (and may wish to work with other professionals) in preparing this document.
The “inventory” portion must list all items of property that belonged to the person who died (called the “Decedent”). It must identify all real estate located in the State of Texas, oil & gas leases, bank accounts, brokerage accounts, stocks/bonds, retirement accounts, life insurance policies (but only if made payable to the estate, rather than a specific beneficiary), cars, boats and other vehicles, fine jewelry, fine art, antiques, household furnishings, and every other item of personal property – including clothing and personal effects. Some categories can be grouped together for ease of reference, but it is best to identify each item of significant value separately. Finally, the list should describe whether the item was part of the Decedent’s separate property or community property (which may be hard to understand without legal advice).
The “appraisement” portion means that the estate’s representative must assign a value to each item of property listed in the inventory. Although the representative is not required to hire professional appraisers (unless ordered to do so by the Court), he or she must try to ascertain the fair value of each item and not merely make a wild guess. He should review property tax appraisals, vehicle buyers’ guide (such as Kelly Blue Book or Edmund’s), invoices or receipts from recent purchases, and similar references. For particularly difficult-to-value items, such as fine art or an ownership interest in a business, he should consider hiring an accountant or appraiser. The fees for these consultants may be paid from the estate (as “administrative costs”).
The “list of claims” portion of this document does not mean the claims that creditors, heirs or beneficiaries may have against the Decedent’s property. Instead, it is a list of claims that the Decedent may have had against others for debts owed or property kept by third parties. For example, if the Decedent died in an accident, his estate may have a “claim” against an insurance carrier or another person for medical expenses or wrongful death.
The Inventory, Appraisement and List of Claims is one of the most important documents filed in any probate proceeding. Because few people have had experience with preparing such legal documents, because the method for apportioning property between separate and community can be difficult to grasp, and because the method for valuation may be complex, the representative should always work with an attorney (and may wish to work with other professionals) in preparing this document.
Notices to Beneficiaries By Executors Under Texas Wills
When someone dies with a will (the “Decedent”) in the State of Texas, the representative of his estate (also called the “executor” or “administrator”) must give notice of the probate proceeding to every beneficiary under that will, which includes the following information:
• The name and address of the beneficiary to whom the notice is given;
• The Decedent's name;
• That the Decedent's will has been admitted to probate;
• That the beneficiary to whom the notice is given has been named as a beneficiary in the will;
• The estate representative's name and contact information; and
• Attach a copy of the will admitted to probate, as well as the court’s order admitting the will to probate.
A beneficiary is any “person, entity, state, governmental agency of the state, charitable organization, or trust entitled to receive real or personal property under the terms of a Decedent's will.”
The notice is required by Texas Probate Code § 128A. It must be sent by registered or certified mail, return receipt requested, no later than the 60th day after the order admitting the Decedent’s will to probate, unless: (a) the beneficiary has signed a “waiver” that acknowledges receipt of a copy of the Decedent’s will and specifically waives the right to receive notice under Section 128A; or (b) the beneficiary has entered an appearance in the probate action prior to the date of the order admitting the Decedent’s will to probate. However, most Texas courts will not require this statutory notice when there is only one beneficiary under the Decedent’s will and that beneficiary is also the estate’s representatives.
Notice under Section 128A is required in all proceedings related to a Decedent’s will, including actions admitting the will to probate only as a “muniment of title.”
The estate’s representative must also file an affidavit with the probate court no later than the 90th day after the Decedent’s will is admitted to probate which states that he or she complied with the provisions of Section 128A.
• The name and address of the beneficiary to whom the notice is given;
• The Decedent's name;
• That the Decedent's will has been admitted to probate;
• That the beneficiary to whom the notice is given has been named as a beneficiary in the will;
• The estate representative's name and contact information; and
• Attach a copy of the will admitted to probate, as well as the court’s order admitting the will to probate.
A beneficiary is any “person, entity, state, governmental agency of the state, charitable organization, or trust entitled to receive real or personal property under the terms of a Decedent's will.”
The notice is required by Texas Probate Code § 128A. It must be sent by registered or certified mail, return receipt requested, no later than the 60th day after the order admitting the Decedent’s will to probate, unless: (a) the beneficiary has signed a “waiver” that acknowledges receipt of a copy of the Decedent’s will and specifically waives the right to receive notice under Section 128A; or (b) the beneficiary has entered an appearance in the probate action prior to the date of the order admitting the Decedent’s will to probate. However, most Texas courts will not require this statutory notice when there is only one beneficiary under the Decedent’s will and that beneficiary is also the estate’s representatives.
Notice under Section 128A is required in all proceedings related to a Decedent’s will, including actions admitting the will to probate only as a “muniment of title.”
The estate’s representative must also file an affidavit with the probate court no later than the 90th day after the Decedent’s will is admitted to probate which states that he or she complied with the provisions of Section 128A.
Monday, December 29, 2008
Life Insurance & Divorce
Changing beneficiary designations on life insurance polices after major life events, like divorce or re-marriage, is often overlooked or forgotten. What happens if you forget to change your beneficiary after a divorce and your first spouse is still listed when you die? Will your ex-spouse receive the life insurance proceeds? In short, the answer is no. After divorce, the designation naming your ex-spouse is no longer effective. If you have an alternate beneficiary named in the policy, the life insurance proceeds will be paid to the alternate. If no alternate was named, the insurance proceeds are payable to your estate and will be distributed according to your will or the statutory intestacy rules depending on whether or not you have a will.
What if you want your ex-spouse to receive the insurance proceeds upon your death? This can be specified in the divorce decree or you can re-designate your ex-spouse as beneficiary after the divorce is final.
Texas Family Code § 9.301
What if you want your ex-spouse to receive the insurance proceeds upon your death? This can be specified in the divorce decree or you can re-designate your ex-spouse as beneficiary after the divorce is final.
Texas Family Code § 9.301
Monday, December 15, 2008
Travis County Probate Court Website
There is lots of helpful information about the probate process on the Travis County Probate Court website.
http://www.co.travis.tx.us/probate/default.asp
http://www.co.travis.tx.us/probate/default.asp
Thursday, September 4, 2008
Living Trust Scams
Beware of Living Trust Scams
Many con artists are targeting older Texans with a variety of false claims to sell unnecessary Living Trusts. Not only do these Living Trusts fail to accomplish the goals being advertised, they can often result in increased costs and exposure of your assets to creditors or taxes.
Some of their false claims are:
• Living Trusts will avoid estate/inheritance taxes. Unless you and your spouse’s combined assets are greater than $1 Million, your property will NOT be subject to federal or state inheritance or estate taxes. If they are within the taxable range, a well-prepared estate plan (including a tax-planned will), can achieve the same effect as a Living Trust, for a lower costs without unintended consequences mentioned below.
• Living Trusts will protect your assets from creditors. Actually, this claim is simply a lie. Assets in a Living Trusts are subject to the claims of your creditors before and after your death. There are several legitimate ways to maximize the protections afforded under Texas law to debtors, but these should always be discussed with a licensed attorney and/or a certified public accountant.
• Living Trusts will avoid the excessive time and expense of probate. There are a variety of ways to reduce the necessity for probate and simplify the probate process in Texas. It cannot be repeated enough – probate is NOT an “evil” process; probate is the legal method for passing clear title to your heirs by discharging your existing debts in an orderly fashion and providing your heirs with legal exceptions designed to protect your exempt assets from certain creditors. In fact, the failure to probate your estate through one of Texas’ simplified methods could result in increased costs to your heirs, because it can lead to conflicting claims to your property, often years after you have passed.
• Living Trusts help you qualify for public benefits. Again, this claim is simply wrong. Assets in a Living Trust are included in calculating your ability to qualify for public assistance, including nursing home Medicaid benefits.
Although most do not need one, certain people can benefit from a Living Trust; however, that Living Trust must be tailored to meet the requirements of Texas law. Before responding to an advertisement or salesperson concerning any Living Trust, ALWAYS consult with a licensed attorney with experience in estate planning and probate law, as well as an accountant, banker or financial advisor whom you trust. Don’t make an immediate decision. Any legitimate company or salesperson will understand that you need to take some time and seek professional advice before making important decisions concerning your finances. If you feel pressured, it’s probably a scam!!
Many con artists are targeting older Texans with a variety of false claims to sell unnecessary Living Trusts. Not only do these Living Trusts fail to accomplish the goals being advertised, they can often result in increased costs and exposure of your assets to creditors or taxes.
Some of their false claims are:
• Living Trusts will avoid estate/inheritance taxes. Unless you and your spouse’s combined assets are greater than $1 Million, your property will NOT be subject to federal or state inheritance or estate taxes. If they are within the taxable range, a well-prepared estate plan (including a tax-planned will), can achieve the same effect as a Living Trust, for a lower costs without unintended consequences mentioned below.
• Living Trusts will protect your assets from creditors. Actually, this claim is simply a lie. Assets in a Living Trusts are subject to the claims of your creditors before and after your death. There are several legitimate ways to maximize the protections afforded under Texas law to debtors, but these should always be discussed with a licensed attorney and/or a certified public accountant.
• Living Trusts will avoid the excessive time and expense of probate. There are a variety of ways to reduce the necessity for probate and simplify the probate process in Texas. It cannot be repeated enough – probate is NOT an “evil” process; probate is the legal method for passing clear title to your heirs by discharging your existing debts in an orderly fashion and providing your heirs with legal exceptions designed to protect your exempt assets from certain creditors. In fact, the failure to probate your estate through one of Texas’ simplified methods could result in increased costs to your heirs, because it can lead to conflicting claims to your property, often years after you have passed.
• Living Trusts help you qualify for public benefits. Again, this claim is simply wrong. Assets in a Living Trust are included in calculating your ability to qualify for public assistance, including nursing home Medicaid benefits.
Although most do not need one, certain people can benefit from a Living Trust; however, that Living Trust must be tailored to meet the requirements of Texas law. Before responding to an advertisement or salesperson concerning any Living Trust, ALWAYS consult with a licensed attorney with experience in estate planning and probate law, as well as an accountant, banker or financial advisor whom you trust. Don’t make an immediate decision. Any legitimate company or salesperson will understand that you need to take some time and seek professional advice before making important decisions concerning your finances. If you feel pressured, it’s probably a scam!!
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