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Tips & Techniques To Avoid Probate In Texas

By James

Everyone does not accumulate a fortune to pass along to their beneficiaries upon their death. However everyone, rich or poor should have an estate plan. Even if there are only a few thousand dollars' worth of assets, It is critical to utilize the basic elements of estate planning in order to ease the burden of having assets tied up in probate for a prolonged period of time after you're gone.  In recent years, there have been many news and research reports across the United States that have touted a multitude of reasons for attempting to avoid the probate process. It is reported that the process is costly, time-consuming and frustrating. Probate is generally easy to avoid yet many people fail to accomplish this task. Although, probate court proceedings in Texas may be simpler than in most other states, in most cases steps should be taken to avoid them. Here are some effective options that can be utilized to avoid probate in Texas:

Utilizing Life Estates

Another technique that may be used to avoid probate is using life estates. A life estate is a unique form of ownership allowed in the state of Texas whereby one person known as the life tenant, maintains exclusive possession and use of the property for the duration of their life. That person can nominate another person known as the remainder-man who will receive ownership of the property immediately upon the death of the life tenant. This method of transferring property avoid the probate process. Let’s suppose an old man owns some real estate or a home that he wants his son to inherit when he passes away. He can deed the property to his son and retain a life estate. The old man would become the life tenant, his son would be the remainder-man. When the old man passes away, his son automatically receives title to the property without undergoing probate.

Utilizing Living Trusts

Another process that may be utilized but is a little bit more complex is using living trusts to avoid the probate process. A living trust is implemented while the owner of the property is still alive as opposed to a testamentary trust which is implemented through a will at the time of the owner’s death.  A trust, similarly to a corporation acts as a separate legal entity that continues to operate after a person’s death.  However, unlike a corporation it does not have an unlimited life in Texas. The normal life of a revocable living trust is generally 21 years in the state of Texas. It may be referred to as the rule against perpetuity.

In a living trust, the property owner or the settlor conveys all property to the trust. The person who has been appointed as trustee of the trust holds legal title and manages the affairs of the property for the benefit of the settlor or any other designated beneficiaries. Upon death of the settlor, the trust may or may not be terminated depending on the terms outlined in the trust instrument.  Either way probate is not required because the settlor owns no property at the time of their death.  All the property belongs to the trust and the settlor must make sure to transfer all their property to the trust before their death otherwise probate will occur on the property outside of the trust.

Having said all that it is important to note that trusts face the highest federal income tax rate and substantial annual administrative costs may be charged.

Bequeathing Spousal Community Property

An ingenious method to avoid probate in Texas originates from a Nov. 3, 1987 amendment to the Texas Constitution. This particular amendment permits spouses to stipulate that all or part of their community property belongs to the survivor when the first spouse dies. The property is automatically passed without the need for probate. The Texas Probate Code elaborates on this process in much more detail. However, the creation of the spousal right of survivorship, as it is typically called has many problems associated with it. The first is that only community property can be used in this regard. 

Secondly, federal gift and estate taxes can become applicable when the second spouse dies and that can pose a problem for the heirs.  In Texas, every person is afforded a lifetime exemption the value of which varies frequently but is typically around $1 million or more. This amount is considered to be free and clear of gift and estate taxes. However, once a person’s estate exceeds this amount, the excess amount is subject to a progressive tax and unless the surviving spouse can reduce the combined estates to less than the lifetime exemption before their death, a severe tax problem may be encountered by the heirs.

Utilizing An Affidavit Of Heirship

Another technique that is commonly used to avoid probate is the drafting and filing of an affidavit of heirship when someone dies without a will or in legal terms intestate.  This particular technique can be considered as more of an afterthought than a preplanned strategy. When the property owner passes, the designated heirs do not administer the deceased’s estate but rather file an affidavit of heirship which is executed and sworn to by a knowledgeable person or persons. This affidavit among other things discloses the deceased’s:

  1. Relationship to the affiant and the affiant’s name,
  2. Birth and death dates,
  3. Marital history,
  4. History of surviving heirs,
  5. History of residency
  6. Inventory of the estate.

Although this looks simple enough, there are some drawbacks associated with using this particular technique. As per Texas statutes, the affidavit does not take effect until it has been of record for five years. Title companies do however generally rely on the affidavit immediately once it is filed on record if the estate is relatively small in size and/or value.

Using A Durable Power Of Attorney

The final option that we will discuss to avoid probate in Texas is similar to the affidavit of heirship. It cannot be considered as a planned strategy but can be best described as seizing the moment when the opportunity presents itself.  A durable power of attorney is one of the basic documents drafted and signed during the commission of an estate plan. The parties involved in the estate plan; typically spouses grant the other with the power to manage the affairs of the other party should he or she become incapacitated or incompetent in any way. Therefore, the judicial appointment of a guardian is avoided.

If one spouse should become incompetent or comatose the surviving spouse can use the durable power of attorney to remove all the property from the other’s estate before their death. Probate is never needed when an individual dies and they don’t own any property. For specific advice pertaining to the matter of probate, an experienced law firm such as The Jones Law Firm should be consulted.

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