Ways to Save Your Family Money, Time and Hassle

Texas probate laws are in place to make sure your estate is fairly distributed upon your death, but there are ways to avoid probate that can save your family money, time and hassle.

“Probate court proceedings (when a deceased person’s assets are transferred to the people who inherit them) can be long, costly, and confusing. It’s no wonder so many people take steps to spare their families the hassle,” explains legal publisher NOLO. 

The Schwab Center for Financial Research says that while the probate process is well-meaning, it also is time-consuming, slow, and uncomfortably public.

“Fortunately, there are ways to avoid probate and lay the groundwork to make sure the “settling up” after you pass on is a civil and relatively efficient process for your loved ones,” says Austin Jarvis, director of estate, trust, and high-net-worth tax at the Schwab Center for Financial Research.

Living trusts, joint ownership with rights of survivorship, transfer of death designations, and designating beneficiaries on accounts and policies are all methods to help avoid probate.

Before we look closer at these ways to avoid probate, we need to understand what probate is in the Lone Star State, what is considered “property” in Texas, and why having a will in place will not help your estate avoid probate.

What is Probate in Texas?

Probate in Texas is a court-supervised legal process that occurs after a person’s death to settle their estate and distribute assets to rightful heirs and beneficiaries. 

The non-profit TexasLawHelp.org says to think of the word “probate” as meaning “transfer of title.”

The primary purposes of probate are:

• To validate the deceased person’s will, if one exists
• To appoint an executor or administrator to manage the estate
• To identify and inventory the deceased person’s assets
• To pay off any debts and taxes owed by the estate
• To distribute the remaining assets to heirs or beneficiaries

There are three main types of probate administration in Texas:

• Independent Administration: This is the most common type, used in about 80 percent of cases, according to Empathy.com. It requires minimal court supervision and is generally quicker and less expensive.
  
  
• Dependent Administration: This type involves more court oversight and is typically used when there is no will or when there are disputes among beneficiaries.
  
  
• Muniment of Title: This is a simplified form of probate used when there are no debts against the estate other than those secured by real property. It can often be completed within 30 days.

One other type of probate administration is by “Small Estate Affidavit” which can be used in Texas to settle estates that are under $75,000 in non-homestead estate property.

The probate process in Texas must be initiated within four years of the person’s death.

If there is a will, the executor named in the will typically files an application to begin probate in the county where the deceased person lived. If there is no will, the court will appoint an administrator to manage the estate.

What is Property in Texas?

Since probate is essentially about transferring the title of property after someone has died, we need an understanding of what property is in Texas.

In Texas, property is defined as any matter or thing capable of private ownership. There are two basic types of property recognized in Texas law: real property and personal property.

Real property in Texas refers to:

• Land
• Improvements on that land (e.g., buildings, structures, fixtures)
• Mines or quarries
• Minerals in place
• Standing timber
• Estates or interests in any of the above (excluding mortgages or deeds of trust)

Real property is essentially immovable and includes anything permanently attached to the land. This can include:

• Single-family homes
• Multifamily residential buildings
• Commercial and industrial structures
• Farmland and ranches
• Vacant lots and tracts of land

Personal Property in Texas refers to any property that is not real property. It includes movable items and intangible assets. Personal property can be further divided into two categories:

• Tangible Personal Property: Physical items that can be seen, touched, or moved, such as:
  • Vehicles
  • Furniture
  • Jewelry
  • Equipment and machinery
  • Inventory

• Intangible Personal Property: Non-physical assets that represent value, such as:
  • Stocks and bonds
  • Intellectual property (patents, copyrights, trademarks)
  • Bank accounts
  • Insurance policies

Bottom line: real property is fixed and not movable, while personal property is not fixed and is movable.

Why Avoid Probate in Texas?

There are several compelling reasons why you might want to avoid probate in Texas:

• Time and Delays: Probate can be a time-consuming process. In Texas, the average probate period typically takes 6 to 12 months to complete, and in complex cases, it can extend even longer.
  
  Smart Asset says: ”Some cases can take considerably longer, such as those with larger estates, multiple properties or beneficiaries and cases where no will exists. Contested wills, disputes among heirs or issues related to creditor claims can add months, or even years, to the process. Additionally, courts in high-demand areas may experience backlogs, which can also contribute to longer delays.

• Costs: Probate can be expensive, potentially reducing the value of the estate. Costs associated with probate include:
  • Attorney fees
  • Executor fees
  • Court costs
  • Appraisal fees

• Privacy Concerns: Texans take pride in their privacy, and probate proceedings are a matter of public record. This means that details about your estate, your beneficiaries, assets, and other personal information is available to the public.

Finally, avoiding probate through methods like living trusts, joint ownership, or beneficiary designations can provide a smoother, more controlled transfer of assets to your loved ones without court intervention.

But Wait, Won’t My Will Avoid Probate in Texas?

It is a common misconception that having a will in place will help your estate avoid probate. While a will is an important legal document, it will not help your estate avoid probate for several reasons:

• Legal validation: A will must be proven valid in court before it can be executed. The probate process is necessary to authenticate the will and confirm its legitimacy.
  

• Asset transfer: Even with a valid will, probate is required to legally transfer ownership of certain assets, particularly those solely owned by the deceased and lacking beneficiary designations.
  
  
• Executor appointment: Probate is needed to officially appoint and empower the executor named in the will to carry out its provisions.
  
  
• Debt settlement: The probate process allows for the identification and settlement of any outstanding debts or taxes owed by the estate.
  
  
• Asset inventory: Probate provides a formal process for inventorying the deceased’s assets, which is necessary for proper distribution.

It’s important to note that while having a will won’t avoid probate, it can simplify the process compared to dying intestate (without a will). To truly avoid probate, additional estate planning strategies such as living trusts, joint ownership with rights of survivorship, or transfer-on-death designations may be necessary.

4 Effective Ways to Avoid Probate in Texas

There are four effective ways to avoid probate in Texas:

• Living Trusts: A revocable living trust is a powerful tool for avoiding probate in Texas. It will help your estate avoid probate by transferring ownership of your assets into a trust and upon death they are immediately distributed to your beneficiaries according to your instruction. Here’s how it works:
  • You (the grantor) transfer assets like real estate, accounts, and investments into the trust.
  • You designate beneficiaries who will inherit the trust assets when you pass away.
  • You name a trustee (often yourself initially) to manage the assets according to the trust terms.
  • Upon your death, the trustee distributes assets directly to beneficiaries, bypassing probate.

Living trusts offer privacy and allow you to outline detailed distribution wishes.

• Joint Ownership with Rights of Survivorship: Joint ownership with rights of survivorship allows property to pass automatically to the surviving owner(s) without going through probate. In Texas:
  • For married couples, community property with rights of survivorship can be established through a written agreement.
  • For non-spouses, joint tenancy with rights of survivorship must be explicitly stated in the property deed or agreement.
  • When one owner dies, their share automatically transfers to the surviving owner(s) without probate.

This method is particularly useful for real estate and bank accounts shared between spouses or partners.

• Transfer on Death Designations: Transfer on Death (TOD) designations allow assets to pass directly to named beneficiaries upon the owner’s death, avoiding probate. In Texas:
  • Real estate can be transferred using a Transfer on Death Deed (TODD).
  • Vehicles can be transferred using a Beneficiary Designation of a Motor Vehicle form.
  • TOD designations can also be used for brokerage accounts and securities.

TODs are simple to set up and allow you to retain full control of the asset during your lifetime.

• Designating Beneficiaries on Accounts and Policies: Many financial accounts and insurance policies allow you to designate beneficiaries who will receive the assets upon your death, bypassing probate. This includes:
  • Life insurance policies
  • Retirement accounts (IRAs, 401(k)s, etc.)
  • Bank accounts (made Payable on Death)
  • Investment accounts

To set this up, simply request a beneficiary designation form from your account provider or insurance company and submit it once completed.

By utilizing these four methods, you can significantly reduce or eliminate the need for probate in Texas, saving time, money, and potential stress for your heirs.

At B Sloan Law we understand that every single family and estate plan is unique.

Contact B Sloan Law today for guidance and expertise on estate planning and probate administration in The Woodlands area, just north of Houston in Montgomery County.