Probate

What is Probate?

Types of Probate Proceedings

Comparison of Last Wills, Trusts

Estate Taxes

Post-Mortem Planning

What is Probate?

Probate refers to the legal process by which a decedent's assets are distributed to heirs according to the terms of the Last Will, and Texas Statutes. According to Texas law, only assets titled in the decedent's name are probated. Assets titled in the name of a trust, jointly held assets, or accounts naming a beneficiary, are not probated.

It is a common misconception that assets are probated only if they are part of a taxable estate. In fact, all assets titled solely in the name of the decedent are probated if there is no designated beneficiary on an account or policy, regardless of whether the estate is taxable.

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Types of Probate Proceedings

Depending on a variety of factors, Texas probate proceedings vary in their length and expense. There are several kinds of probate procedures, depending upon the nature of the decedent's assets and the total dollar value of the assets. Following is a brief description of the three basic types of Texas probate proceedings through which the elder law/estate planning attorneys at The Greening Law Firm, P.C. guide clients:

1. Formal Administration

The Last Will is admitted to probate and Letters of Administration are issued.

Creditors are served with the Notice to Creditors. The Creditor may in turn file a Statement of Claim.

Beneficiaries are served with a Notice of Administration alerting them that they may challenge the venue or the Last Will.

Formal Administration also allows for a Petition to Determine Homestead which is necessary if the decedent was on Medicaid and owns real property, as their home, or if there are other creditors from which the home requires protection.

2. Summary Administration

Summary Administration is allowable when one of the following criteria are met:

Assets in the gross estate are less than $75,000, and the petitioner swears that there are no creditors, or has made prior provisions for the payment of creditors.

or

The decedent has been dead for two or more years.

This type of probate results in an Order of Summary Administration ordering that all assets be delivered to the beneficiaries. One must be careful that all assets are included, because once the Order of Summary Administration has been signed, it is generally not possible to reopen the proceeding.

3. Small Estate Administration

A layperson may institute a Small Estate Administration without the assistance of an attorney provided the value of the estate falls below a certain level. Each Texas county sets the maximum estate value for Small Estate Administration. In _____ County, the current ceiling is $____,000. The original Last Will, if any, a death certificate, and a paid funeral bill must be filed with the probate division.

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Last Wills and Trusts: A Comparison

While a Last Will may be the most appropriate estate planning instrument for some people, others seek alternative planning through revocable trusts or irrevocable trusts, in order to prevent their estates from going through probate. They do so to minimize the inconvenience and expense to loved ones, and to keep their dispositions private.

Unlike a Last Will, a trust that is properly written and properly funded does not have to be filed with the probate court, and remains private and confidential after death. Nonetheless, a trust must still be administered in compliance with the terms of the trust and Texas Statutes. A revocable trust is not immune to challenges by heirs, but less likely to be challenged because it is not a public document.

A trust does not avoid estate tax returns and possibly taxation. However, a properly drafted and legally sound trust can make maximum use of the unified credit to which each individual is entitled by federal law. Note that the gross estate consists not only of trust assets, but also other assets such as jointly held property, accounts designating a beneficiary, life insurance, annuities, etc.

The lawyers of The Greening Law Firm, P.C. can help you explore the best estate planning choices for yourself and your family. Also see Estate Planning page

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Estate Taxes

Depending upon the gross value of the estate, federal estate tax may be due. The gross estate includes trust assets, assets held in the decedent's name, jointly held property, accounts designating a beneficiary, life insurance, annuities, etc. The estate tax return (IRS form 706) is due 9 months after death.

For a schedule of applicable exclusion, gift and estate tax rates, see the Tax Reconciliation Act of 2001 on the Legal Updates Page.

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Post-Mortem Planning

Family members commonly believe that their deceased loved one properly planned because the decedent had a Last Will, had created and funded a trust, or had designated certain individuals as beneficiaries. However, the mere fact that assets are earmarked for distribution in a particular way, does not mean that those arrangements are the best strategy for the survivors. Sometimes the decedent's plans can actually have a negative impact on the family with regard to estate taxes and/or Texas Medicaid planning strategies for the surviving spouse.

Fortunately, if this occurs, there are methods available that may be used to rectify the situation and create more favorable tax consequences for the surviving family members. Seeking the advice of a qualified elder law attorney before receiving these assets is always wise.

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