When someone dies in Texas, their estate must go through a legal process known as probate to be administered. This article will explain how to know when it is necessary to probate an estate. It will also discuss the simplified probate process for estates that don't meet the requirements or needs for full probate.
What is probate and what does it involve?
Probate is the legal process through which the estate of a deceased person is administered - that is transferred to the heirs or beneficiaries of the deceased person. (More information about what probate is can be found here.) It includes verifying the will, paying any debts and taxes owed by the estate, and distributing what remains to the beneficiaries listed in the will. In some cases, probate is not necessary-the estate can be administered through a simplified probate process. However, there are some situations where probate is required, such as when the estate includes certain types of property or when there are disputes among the heirs.
When is probate necessary?
In Texas, when a person dies, whether or not their estate has to go through probate depends on several factors. Some of those factors include:
- what types of assets they held and how (whether it was in their own name or in the name of a trust, for example);
- whether the asset is a beneficiary-designated asset (such as an insurance policy or retirement account, for example);
- whether the person was married or not;
- whether the person had children or not and if so, with whom they had those children.
How are the assets held?
If an asset is held in the deceased individual's name, then that asset will have to go through some sort of probate process. Normally, we see assets such as a bank account, house, car, or business that are held in the person's name. Even if they are not the only person's name on the asset. For example, if a husband and wife both have their name on the deed to property and then the husband dies, the wife does not automatically become the owner of the house. There must be a form of probate when the husband dies, but if not when the wife tries to sell the property later on, or if she never does and her heirs and beneficiaries try to after she dies, there will be issues.
However, if that same house is in the name of a trust, then when the husband dies, the trust, rather than the probate process, controls. Likely the wife is the beneficiary and probate is unneeded - at least for that asset. Trusts are great tools for avoiding probate, but it doesn't guarantee the estate won't have to avoid probate if something unexpected comes up or if assets were left outside of the trust.
What are beneficiary-designated assets?
In Texas, beneficiary-designated assets are assets that pass automatically to a designated beneficiary when the owner dies. This includes assets like life insurance policies, retirement accounts, bank accounts (through payable on death - POD - designations or joint tenants with right of survivor accounts), and investment accounts (through transfer on death - TOD - designations). It is also possible to set up real property with beneficiary designations through Transfer on Death Deeds or Lady Bird Deeds (and in certain circumstances a right of survivorship deed). Relatively recently, Texas established a special car title that allows for beneficiary designations.
When the owner of a beneficiary-designated asset dies, the asset will pass to the designated beneficiary according to the terms of the account or policy. If there is no designated beneficiary, the asset will pass to the estate, and probate would become necessary.
When setting up beneficiary designations while you are alive, you must be because they take precedence over whatever is in the will. That is, if the will says everything goes to Bobby, but the beneficiary designation says that asset goes to Sue, then Sue gets that asset and Bobby gets everything else. Sometimes that is what is intended, but often it is not. So it is important if setting these up, the beneficiary designations are done as a thought-through, comprehensive estate plan.
Another issue with beneficiary designation assets when planning is what happens if the beneficiary predeceases the owner of the account. It is possible to list contingent beneficiaries, but often the owner would want that to go to grandchildren who might still be minors. Also, if the beneficiary is disabled and receiving government benefits, the money they inherit through the beneficiary designation might cause them to lose their government benefits. So comprehensive planning is necessary.
Why does it matter if the deceased person was married, or had children, or not?
If the deceased person was married, then the surviving spouse has certain rights, even if the will names everything to go to another person. If there was no will, then the surviving spouse may or may not inherit all or part of the deceased spouse's assets depending on whether the assets are separate property (basically in Texas separate property is property acquired prior to marriage or property that was gifted or inherited during marriage, or by agreement during marriage) or community property (basically all property acquired during marriage). In addition to whether the property is separate or community, it also depends on if the property is real property (i.e. dirt) or personal property (anything else you can own). Each variation means a different person would inherit a different amount.
As you can see, it can get pretty complicated.
The simplified probate process
For estates that don't meet the requirements for full probate, other techniques can be used, such as a muniment of title, proceeding to determine heirship, small estate affidavit, or affidavit of heirship.
A muniment of title is like a full probate, but doesn't have all the requirements of notice to creditors or filing an inventory that the full probate has. It also does not grant letters testamentary. But it is simpler than a full probate and can be used when there is a will and no debt, except mortgage debt on real property. This can be used when there are no disputes among the heirs and all assets are titled in the name of the deceased.
A proceeding to determine heirship is similar to full probate but is used when there is no will and there are disputes among the heirs, or if there is no will, a small estate affidavit or affidavit of heirship won't work and we just need to appoint an administrator to handle assets owned by the deceased person. This is a court proceeding in which the judge will determine who the rightful heirs are.
A small estate affidavit can be used when there is no will and the value of the estate is less than a certain amount (currently $75,000). This affidavit must be filed with the county clerk and is used to transfer ownership of certain types of property, such as bank accounts and vehicles. An affidavit of heirship can be used to transfer ownership of land and other real property. This affidavit must be signed by two disinterested witnesses and filed with the county clerk.
You can find more information here on these alternative procedures.
Probating an estate can be a complicated process, especially if the deceased person was married or had children. There are several different methods that can be used to probate an estate, depending on the circumstances. It's best to consult with an attorney who is experienced in probate law. If you need any help in Texas, give us a call at 214-292-4225.