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.
Probate Proceedings: A look at the different types
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:
- 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.
- 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.
- Small Estate Administration
- A layperson may institute a Small Estate Administration provided the value of the estate falls below a certain level. Each Texas county sets the maximum estate value for Small Estate Administration. In Travis and Williamson Counties, the current ceiling is $50,000. The original Last Will, if any, a death certificate, and a paid funeral bill must be filed with the probate division.
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.