Probate is a legal process that occurs after someone passes away. It involves the transfer of the deceased person's property to their heirs or beneficiaries. However, in Texas, there are some instances where probate may not be necessary. The primary reason why many people try to avoid probate is that the process is time-consuming and expensive.
Apart from the time-consuming and expensive nature, there are also other reasons why people avoid probate in Texas. For example, if the deceased person's estate is small, with a total value of less than $75,000, and they did not have any real estate, then their estate may be able to be distributed without going through probate.
Furthermore, the distribution of those assets might be possible without going through probate if the decedent had a valid will and assets held in a living trust or jointly owned property with the right of survivorship or both. However, probate is necessary in Texas if the deceased person's estate is more than $75,000 or had real estate solely in their name. Regardless of the situation, consulting with a qualified attorney, like most here at the Law Office of Bryan Fagan, to determine whether probate is necessary in a specific case.
Why Would You Want to Avoid Probate?
While probate is crucial in ensuring that a person's assets get shared according to their wishes, many people choose to avoid probate in Texas. Here are a few reasons why:
Probate can be Time-consuming
One of the primary reasons people choose to avoid probate in Texas is that it can be time-consuming. The probate process typically takes several months to a year or more to complete, depending on the complexity of the estate. The estate’s assets are constrained during this period, and the beneficiaries may access them, which presents a problem if they depend on the properties for their financial security.
Probate can be Expensive
Another reason people may choose to avoid probate in Texas is it can be expensive. The probate process typically involves court fees, attorney fees, and other administrative costs. These fees can add up quickly, reducing the amount of assets ultimately distributed to beneficiaries.
The probate process is a matter of public record, meaning anyone can access information about the deceased person's assets and liabilities. This lack of privacy can disturb many people, particularly those who value their privacy and want to keep their financial affairs confidential.
Avoiding Creditor Claims
Another reason people may avoid probate in Texas is to avoid creditor claims. During the probate process, creditors can make claims against the estate. These claims can reduce the amount of assets ultimately distributed to beneficiaries. By avoiding probate, it may be possible to minimize the risk of creditor claims and ensure that assets are distributed to beneficiaries as intended.
Strategies to Avoid Probate in Texas
Establish a Living Trust
Establishing a living trust is one of the most effective ways to avoid probate in Texas. A living trust is a legal document that allows you to transfer ownership of your assets to a trust while you are still alive. When you pass away, your assets will share according to the terms of the trust, which means that they will bypass the probate process.
There are several steps necessary to establish a living trust in Texas. It is also required to name a trustee to manage the trust and allocate the assets to your beneficiaries after you pass away. The living trust avoids the need for probate because the assets belong to the trust, not you. Instead, the successor trustee will distribute the assets to your beneficiaries according to the terms of the trust.
Joint Ownership with Right of Survivorship
Another way to avoid probate in Texas is to hold property in joint ownership with the right of survivorship. As a result, the property immediately passes to the surviving owner upon the first owner’s death. This strategy exists for assets with the power to have shared ownership, such as real estate, bank accounts, etc.
It is crucial to include the other owner's name in the ownership documents and wording stating that the property will pass to the survivor upon the death of one owner to establish joint ownership with the right of survivorship in Texas. When one owner dies, the surviving owner or owners has to provide proof of the deceased’s death to the relevant financial institutions or government agencies, along with the necessary paperwork to transfer ownership. Transferring ownership involves filing an affidavit of heirship or a small estate affidavit, a simplified form of probate available for estates worth less than $75,000.
Payable-on-Death (POD) and Transfer-on-Death (TOD) Accounts
Payable-on-Death (POD) and Transfer-on-Death (TOD) accounts are financial accounts that allow the account owner to name a beneficiary who will receive the account's balance when the account owner passes away. These accounts include bank accounts, retirement accounts, and investment accounts.
Under Texas law, a POD or TOD account does not go through probate. Instead, when the account owner passes away, the account's balance automatically transfers to the named beneficiary outside the probate process. To establish a POD or TOD account in Texas, the account owner must contact their financial institution and complete the appropriate paperwork. The account owner has to name the beneficiary and specify the sharing of the account balance.
It is important to note that the beneficiary designation on a POD or TOD account supersedes any instructions in the account owner's will or trust. It is also necessary to guarantee the beneficiary designation on a POD or TOD account is updated and accurately reflects the owner's wishes. By naming a beneficiary on the account, the owner can ensure that the account's balance transfers directly to the intended beneficiary without court intervention.
Gifts and Beneficiary Designations
You can also avoid probate in Texas by making gifts during your lifetime and naming beneficiaries on your life insurance policies and other financial accounts. By making these gifts and designations, you can ensure that your assets pass directly to your intended beneficiaries without going through probate.
To make a gift or designation in Texas, contact your financial institution or insurance company and complete the appropriate paperwork. Naming your beneficiary and specifying how to share the asset or policy proceeds is also required.
Small Estate Affidavit
In Texas, a small estate affidavit is a legal document used to transfer property to the rightful heirs of a deceased person without the need for probate. A small estate affidavit is usable if the total value of the decedent's estate is less than $75,000 (excluding the value of the homestead). The small estate affidavit must contain a list of the decedent's assets, obligations, and signatures by the decedent's legitimate heirs. The affidavit must also include that the decedent's debts have been paid or settled.
Once the small estate affidavit is signed and notarized, it goes to the person or institution holding the decedent's assets, such as a bank or brokerage firm. The affidavit must include a certified copy of the decedent's death certificate. If accepted, the assets will transfer to the decedent's heirs without probate. However, it is essential to note that the small estate affidavit is only effective for specific properties, such as bank accounts, stocks, and real estate.
In conclusion, probate can be time-consuming and expensive and lead to disputes between family members. Fortunately, there are several alternatives to probate in Texas that can help simplify the process and make it more efficient. However, before deciding to skip the probate process, it is critical to consult with an experienced estate planning attorney to determine which alternative to probate is best suited to your circumstances.
Is probate mandatory in Texas?
Probate is not always mandatory in Texas, but it depends on the circumstances of the case. It is important to note that the probate laws in Texas can be complex and vary depending on the situation. If you are unsure whether probate is necessary, it is best to consult with an experienced Texas probate attorney.
What happens if you don't probate in Texas?
Depending on the case, if you do not probate in Texas, the deceased person's assets may not be appropriately distributed to their heirs or beneficiaries, leading to disputes among family members or other interested parties over who is entitled to the property. Additionally, probate is necessary to address and guarantee that any outstanding issues, such as unpaid taxes or creditor claims, are properly resolved if the deceased person retained any outstanding debts or obligations.
Does Texas require a lawyer to probate a will?
In Texas, it is not required by law for an executor or personal representative to hire a lawyer to probate a will. However, it is helpful, as the probate process can be complex and involve various legal requirements and procedures.
How long does probate take in Texas?
The length of time it takes to complete probate in Texas can vary depending on several factors, including the complexity of the estate, the presence of any disputes among beneficiaries, and the workload of the probate court. Overall, the time it takes to complete probate in Texas can range from several months to several years, depending on the case.
Can a house be sold while in probate in Texas?
In Texas, it is possible to sell a house while it is in probate, but there are specific procedures that must be followed. The executor will need to provide the court with an appraisal of the property, a proposed sales agreement, and a plan for the distribution of the proceeds from the sale. The court will then review the petition and either approve or deny the sale.