A well thought out and comprehensive estate plan can help you accomplish a wide variety of inter-connected goals. One of your primary goals is likely to ensure that your loved ones are financially secure if something happens to you. A related goal is avoiding probate because the longer your estate spend in probate the longer your loved ones have to wait to receive the assets you left for them. Avoiding probate, however, is also a complicated goal. To help you better understand by avoiding probate is important and how your estate might be able to avoid probate, the estate planning attorneys at The Mendel Law Firm, L.P provide answers to some frequently asked questions about avoiding probate. If you have additional questions or concerns, please feel free to contact our office to schedule an appointment.
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Most people leave behind an estate when they die. That estate consists of all assets, both tangible and intangible, as well as both real and personal property, owned by the decedent at the time of death. Probate is the name given to the legal process that eventually transfers those assets to the new owners. Probate also serves additional functions, such as :
- Making sure that all estate assets are identified, located, and valued
- Authenticating the decedent’s Last Will and Testament
- Litigating any challenges to the Will
- Notifying beneficiaries and/or heirs
- Notifying creditors
- Reviewing creditor claims and paying approved claims
- Calculating and paying any gift and estate taxes due
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Most estates must go through some type of probate; however, the estate may not be required to go through formal probate. Like most states, the State of Texas does have a small estate alternative to formal probate. For estates that qualify, a Small Estate Affidavit may be used in lieu of formal probate to transfer estate assets.
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If the decedent died without leaving behind a Will, the estate is an “intestate” estate. Fundamentally, probating a testate estate is the same as probating an intestate estate in that the basic goals of the probate process remain the same. There are, however, a few important practical and procedural differences. In the State of Texas, when the decedent left behind an intestate estate the court must appoint a “Personal Representative” to oversee the probate of the estate. In addition, if the decedent left behind an intestate estate, the Texas intestate succession laws dictate how the estate assets are distributed.
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There are several reasons why avoiding probate is such a common estate planning goal. One reason is the amount of time it takes to get through the probate process. In the State of Texas, creditors have four months from the date of publication of the notice of probate to file claims against the estate. Consequently, it takes a minimum of about six months to probate even a relative modest estate. More complex estates can easily take more than a year to probate, meaning beneficiaries must wait that long to receive their inheritance. Another reason to avoid probate is the cost. Along with expenses, everyone involved in the probate process is entitled to a fee which can ultimately diminish the value of the estate that is passed down at the end of probate. Finally, probate is a very public process. Once the decedent’s Will is submitted for probate, it becomes public and may be viewed by anyone.
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A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also called a Maker, Grantor, or Trustor who transfers property to a Trustee chosen by the Settlor. The Trustee holds that property for the trust beneficiaries. The beneficiary of a trust can be an individual, an entity (such as a charity or political organization), or even the family pet. Assets held by a trust are considered non-probate assets. Many people choose to use a trust to distribute the majority of their estate assets because as non-probate assets they can be transferred to the intended beneficiaries immediately after the Settlor’s death or at any time thereafter.
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One of the most effectives strategies for avoiding probate is to convert as many estate assets as possible into non-probate assets. As the name implies, assets that are considered “non-probate” assets bypass the probate process altogether and can be distributed immediately to the intended beneficiary. Along with trust assets, common examples of non-probate assets include:
- Certain types of jointly held property (usually when held with “rights of survivorship”)
- Proceeds of a life insurance policy
- Retirement accounts
- Accounts designated as “payable on death (POD)” or “transfer on death (TOD)”
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Texas is unusual in that you are actually required, in most cases, to be represented by an attorney if you are the Executor or Personal Representative of an estate. Texas requires this because as the Executor/PR you are almost always representing the interests of people other than yourself.
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