One of the most common questions I get during initial consultations for estate planning is, “how do I avoid probate?” But to understand how to avoid probate, it is important to under what probate is.
Probate is the administration of a person’s estate through the court where the property is distributed by way of the person’s will (testate) or if they did not have a will (intestate), to that person’s heirs according to the Texas Estates Code.
Having a will does not mean someone’s estate can avoid probate. In fact, a will must go through probate if there are probate assets to account for in a court pleading. To probate a will, the last will and testament are filed with the court and a representative(s) is appointed to gather the deceased’s assets and take care of any outstanding debts or taxes. Once this is done, the personal representative can then distribute the decedent’s assets to the beneficiaries/heirs.
Probate assets are assets that pass under the provisions of someone’s will (testate) or by the Texas Estates Code if they do not have a will (intestate). Non-probate assets are assets that pass by way of a contract or a beneficiary designation. Some examples of non-probate assets are life insurance, payable on death bank accounts, revocable transfer on death deeds.
Probate can be costly, time-consuming, and complicated. It requires the hiring of a Texas licensed attorney, most likely a court hearing, and the filing of court documents. While this process is not always complicated or time-consuming, it can be if there are any issues that pop up along the way. But if you can set up your estate to completely avoid probate, then you can significantly reduce the chances of headaches and confusion along with reducing costs to administer the estate. Avoiding probate means that your assets pass directly to your beneficiaries without the involvement of a probate court.
To avoid probate, we must classify all of your assets as non-probate assets. We will still draft a will as a backup in case an asset is later acquired that is not set up as a non-probate asset. The will simply mirror everything just in case. Below are some of the ways we recommend in avoiding probate:
Property that is contractually owned jointly with rights of survivorship is a non-probate asset. Joint tenants with rights of survivorship means that the property will pass to the remaining surviving owners upon another owner’s death without the need of probate.
If the entity holding the asset allows a beneficiary designation, the listing of beneficiaries makes that asset a non-probate asset. Common examples of beneficiary designations include life insurance, retirement accounts, annuities, and IRAs. The funds associated with those beneficiary designations automatically pass to the beneficiaries without the necessity of probate.
In Texas, a bank account holder can add a “payable-on-death” (POD) designation to the account for savings accounts or certificates of deposit. A beneficiary listed on a POD account does not have access to the account or rights to the money until the primary account holder dies. If the primary account holder spends all of the bank account’s money, there is no recourse for the beneficiary.
Texas recently changed the legislature to allow for Revocable Transfer on Death Deeds where a deed is filed with the local property records that lists to whom the property shall go upon the owner’s death. The deed must be filed while the individual is alive for it to be valid upon death.
The Texas Department of Motor Vehicles also allows an owner or joint owners to designate a beneficiary to whom interest in the more vehicle transfers upon the owner’s death or last surviving owner. Like transfer on death designations, the listed beneficiary does not have any right to the vehicle until the owner dies.
No. While Texas is a community property state, it does not have rights of survivorship absent a designation as discussed above. This means that the marital home or bank accounts do not automatically pass to the surviving spouse absent a beneficiary designation or some other documented instrument.
If you or someone you know is interested in learning more
about avoiding probate and would like to speak with one of our experienced
estate planning and probate attorneys, contact us at the Oxner Legha Law Firm
by calling 346-327-9500.