larby24, Author at Skeen Law

What is an Overview of the Probate Process in Texas?

If you have an individual you trust to handle your estate, you can name that person your “Independent Executor” in your Last Will and Testament. An Independent Executor acts independently of the probate court. Once you pass away, your Will is filed for probate and approximately two weeks later, a hearing can be set. Under oath, your Executor or member of your family states a) the facts concerning your death; b) your residence; c) your family situation; d) the filed document is your Will and has not been revoked; and e) the Executor is qualified to serve.

Your Independent Executor signs an oath stating that he/she will perform his/her duties properly. Your Independent Executor never goes to court again; no further hearings are required. The only other required action required is that your Independent Executor must notify the heirs of the estate and prepare an Inventory of your assets which are subject to probate. The Inventory can either be filed of record or given to all heirs of the estate. Assets such as retirement plans and life insurance policies with a beneficiary designated pass directly to the beneficiary and are not part of your probate assets. The cost for probate in Texas is $3,000 to $5,000. The cost has increased in recent years due to the addition of a provision requiring notice be given to all beneficiaries of an estate. This amount does not include costs related to the administration of an estate, transferring title, funding the trust, or preparation of tax returns.

The probate hearing usually takes place about a month after filing the Will with the court. This time frame assumes there is no Will contest. Texas statute requires that the Will be on file until the Monday after the lapse of ten days. In Bexar County the available dates for the probate hearing are about 3-4 weeks after the Will is filed for probate. Depending on the court’s docket the hearing may be further delayed. However, with a Revocable Living Trust in place, the successor Trustee can begin to act immediately.

A Checklist for Survivors

Losing a loved one is among the most heartbreaking experiences we must face in our lifetime. When an event like this occurs, you understandably have a lot on your mind. Notifying other friends and family members, taking care of funeral arrangements, and trying to cope with your own grief can all feel overwhelming. Add in the additional strain of taking care of the deceased’s affairs, and you may not know where to even begin. The following is a basic checklist for Texans that will help you organize and track the various items that need your attention immediately following the passing of your loved one.

Immediately following the death, you should:

1. Contact the funeral home to take your loved one into their care.
2. Contact your minister.
3. Alert immediate family members and close friends.
4. If the deceased had any dependents, arrange for their immediate care.
5. If the deceased had any pets, arrange for their immediate care.
6. If employed, contact the deceased’s employer.
7. Alert the Successor Trustee of your loved one’s Trust.
8. Notify religious, fraternal, and civic organizations that of which your loved one was a member.
9. Remove valuables from the deceased’s home, secure the residence, and take steps to make the home appear to be occupied (for example, use lamp timers).
10. Arrange for the disposal of any perishables left in the deceased’s home, such as food, refrigerated items, and be sure to take out the trash.
11. Locate the loved one’s important documents:

a. Trust
b. Birth Certificate
c. Social Security Card
d. Marriage License
e. Military Discharge Papers (DD-214)
f. Deed to burial property
g. Copy of funeral prearrangements
h. Life insurance policies

12. Compile the following information that the funeral home will need in order to finalize the death certificate:

a. Deceased’s first, middle, and last name
b. Deceased’s Maiden name (If applicable)
c. Deceased’s home address
d. Deceased’s Social Security Number
e. Deceased’s Date of Birth
f. Deceased’s Age
g. Deceased’s Gender
h. Race/Ethnicity
i. Marital Status
j. Spouse’s first and last name
k. Deceased’s highest level of education attained
l. Deceased’s occupation
m. Deceased’s Father’s Name

i. Birth City
ii. Birth State

n. Deceased’s Mother’s Name

i. Birth City
ii. Birth State

13. If your loved one was a Veteran:

a. Entered service date
b. Entered service place
c. Service number
d. Separated from service date
e. Separated from service place
f. Grade, rank, or rating
g. Organization and branch of service

14. Obtain at least 12 copies of the certified Death Certificate.
15. Alert the Post Office to forward the deceased’s mail.

Within One Month of the Death, You Should:

1. If the deceased’s home is unoccupied, cancel unnecessary home services, such as newspaper delivery, cable service, etc.
2. Contact the Social Security Administration and other government offices that may have been making payments to the deceased. If the decedent was your spouse, inquire about eligibility for new benefits.
3. If your loved one was a Veteran, inquire about benefits that you may be entitled to through the VA.
4. File claims with life insurance companies.
5. Cancel deceased’s prescriptions.
6. Contact the Department of Motor Vehicles to cancel deceased’s drivers license and transfer titled of all registered vehicles.
7. Contact the deceased’s employer, if applicable. Inquire about any 401(k), pension, or company benefits that the survivors may be entitled to.
8. If death was accidental, verify whether benefits are available of existing insurance policies.
9. Check for any life insurance benefits available through existing credit card or loan accounts.
10. File any outstanding claims for health insurance or Medicare.
11. Obtain copies of deceased’s outstanding bills.
12. Update your estate planning documents
13. Update your beneficiaries on life insurance, IRA, and 401(k) accounts
14. Send thank you letters for flowers, donations, food, and kindness. Also remember to thank pall bearers.
15. Meet with an accountant to discuss the deceased’s final tax return and any estate taxes that are applicable.
16. Organize and distribute deceased’s personal belongings in accordance with their letters of instruction.
17. Notify the Register of Voters.
18. Notify all three credit reporting agencies and obtain a copy of their credit report.

Working with an experienced probate attorney through this process can help you navigate these unfamiliar waters so that you have more time to care for yourself. A lot of time can be saved and frustration prevented by calling an attorney early on. Moreover, if your loved one had a Will, an attorney may be required to represent the estate in Bexar County Probate Court. If your loved one has recently passed and you’d like professional help for your family, contact Skeen Law today for a free consultation at 210-202-1141 or info@skeenlawfirm.com.

What Happens If I Die Without A Will?

If you die without a will in Texas, you are said to have died “intestate.” In Texas, property is characterized as separate or community. Separate property is that which is owned before marriage or acquired during marriage by gift or inheritance. Damages awarded during marriage from a personal injury lawsuit, except damages representing the loss of earning capacity, also are separate property. Community property is all property, other than separate property, which is acquired by either spouse during marriage. Thus, there can be separate real property, separate personal property, community real property and community personal property. When a person dies without a will, the law determines who are the heirs, and assets are disposed of according to whether they are community or separate property.

Distribution of Community Property

Community property, whether real or personal, is distributed in this manner:

1.If the decedent is survived by a spouse and children (or descendants of deceased children):

• If all surviving children and descendants of the deceased spouse are also children or descendants of the surviving spouse, all of the community property passes to the surviving spouse.

• If any surviving child or descendant of the deceased spouse is not also a child or descendant of the surviving spouse, the deceased spouse’s one-half of the community property passes to his or her children (and the descendants of any deceased child), and the surviving spouse retains the one-half of the community property he or she owned prior to the other spouse’s death. However, the surviving spouse has the right under Texas law to use and occupy the homestead during his or her life and may have the right to use or own certain items of personal property that are exempt from creditors’ claims.

2.If the decedent is survived by a spouse but not by any children or descendants, all of the community property passes to the surviving spouse.

3.If the decedent is not survived by a spouse, all property is separate property because the community estate terminates at the death of the first spouse. The following section discusses the intestate distribution of separate property.

Distribution of Separate Property

The distribution of separate property of a person who dies without a will depends on whether it is real or personal property. Separate property is distributed in this manner:

1.If the decedent is survived by a spouse and children (or descendants of deceased children), then subject to the surviving spouse’s rights with respect to the homestead and exempt personal property:

• Separate personal property passes one-third to the spouse and two-thirds to the children (and the descendants of deceased children).

• Separate real property passes to the children (and the descendants of deceased children) subject to a life estate in one-third of the property in favor of the surviving spouse. This means that the surviving spouse is entitled to use one-third of the real property during his or her lifetime, and upon his or her death, the children (or descendants) will have full title to the separate real property of the decedent.

2.If the decedent is survived by a spouse but not by any children or descendants, then subject to the surviving spouse’s rights with respect to the homestead and exempt personal property:

• All separate personal property passes to the spouse.

• Separate real property passes one-half to the spouse and one-half to the decedent’s parents or collateral relatives, such as brothers and sisters or their descendants. If no parents, brothers, sisters, or their descendants survive, then all separate real property passes to the surviving spouse.

3.If only children or their descendants survive, all separate personal and real property passes to the children or their descendants.

4.If both parents survive, but not the spouse or children or children’s descendants, all separate personal and real property passes one-half to each parent.

5.If only one parent and brothers or sisters survive, separate personal and real property passes one-half to the surviving parent and the remaining one-half is divided equally among the brothers and sisters or their descendants. However, if no brothers or sisters or their descendants survive, then all separate property passes to the surviving parent.

6.If no spouse, children or children’s descendants, or parents of the decedent survive, all separate property is divided equally among the decedent’s brothers and sisters or their descendants.

7.If none of the above relatives survive, then all separate property passes generally to the decedent’s grandparents. If no grandparents survive, the law provides for distribution of separate property to more distant relatives.

After the reviewing the rules above to see how your community and separate property would be distributed if you died without a will, would the persons you desire to receive your property actually receive it? If the answer to that question is no, or if you need help applying these rules to your situation, be sure to contact an experienced Estate Planning Attorney.

Why do I need an Estate Plan?

An estate plan is not just a Will and the issues are not just tax issues. Estate planning encompasses every aspect of your life–financial, personal, family–the most private areas for people. Each facet is relevant and infused with the complexity and richness of your life.

Living without an estate plan has two disadvantages. If you have an estate in excess of the Federal Estate Tax exemption, then your Will must include certain tax planning. The exemption has increased dramatically in the last twenty years but, unfortunately, the amount of the exemption which will be in effect in the future remains uncertain. For additional wealth transfer, your Will is one of the least important estate planning documents in your estate. Estate planning is essential to ensure wealth transfer. Estate planning can save millions of dollars in taxes. In some circumstances, including estates of all sizes, planning can eliminate all estate taxes. Effective estate planning for wealth transfer purposes is best implemented over time. In addition, planning that can be put in place beginning at age 50 is far different from planning instituted at age 90.

Equally important are the refinements made to your plan that only you can determine. Clients revise their plan several years after implementation because they have new ideas and objectives which they want reflected in their estate plan. They consider what they want to accomplish during their lives, the kind of person they want to be remembered as, and the kind of people they want to help their children become. The process that begins with the first Will a client signs continues as they consider the legacy they want to leave.

Estate planning is not just a monetary tool. What do you want to give your children? Is it a million dollars? Is it self esteem? Do you want to give your children fish or teach them how to fish? A friend of mine has significant wealth. However, the most valuable gift he consistently gives his family and close friends is his time, advice and counsel in teaching them “to fish.” Wealth and self esteem are clearly not mutually exclusive. Wealth can be used to take advantage of opportunities, to educate or to provide for the personal needs of your children. Wealth can be used to provide “extras” for your children at certain times in their life; when they have small children, in order to facilitate the purchase of a home or start a business, provide income for a housekeeper in times of stress, etc. My clients have taught me that “thoughtless” money usually does not facilitate the desired goal. However, intentional giving can be invaluable. Intentional giving can be anything: money, time, attitude. Small amounts of money given or used intentionally can have a ripple effect far greater than a large amount given thoughtlessly. Formulating the legacy you wish to leave your family is an essential part of an effective estate plan.

Clients formulate their estate plan which then becomes part of their life. They tell me actions they have taken and conversations they have had with their children. They have made changes in the way they handle things, the things they do, the words they say and the money they give. These changes are subtle. Frequently, my clients are not aware of the changes until we meet again to review their plan. This process is enriching to the family, and frankly, to me. I have learned an enormous amount and have been enriched immeasurably by my clients sharing their insights into the estate planning process.

What Is The Marital Deduction And How Can I Use It?

The marital deduction is one of the most powerful estate planning tools. Any assets passing to a surviving spouse pass tax free at the time the first spouse dies, as long as the surviving spouse is a U.S. citizen. Therefore, if you and your spouse are willing to pass all of your assets to the survivor, no federal estate tax will be due on the first spouse’s death.

There is no limitation on the value of the property that can qualify for the marital deduction. By transferring sufficient assets to the surviving spouse in the proper manner, estate tax liability upon the first spouse’s death can be completely avoided.

At first view, the estate tax marital deduction may seem to be a government giveaway. It is not.
The advantage afforded is not the total avoidance of estate tax on the transferred property but, rather, the deferral of such tax. Estate tax must be paid on the death of the surviving spouse.

The obvious advantage of deferring the estate tax liability is that the surviving spouse will have the use of the tax dollars that would otherwise have been paid to satisfy the tax liability of the first spouse’s estate. The deferral of tax liability also postpones the possible need to sell off assets that the surviving spouse might wish to preserve in order to obtain funds to satisfy the tax liability.

But this doesn’t always solve your estate tax problem. First, if the surviving spouse does not remarry, that spouse will not be able to take advantage of the marital deduction when he or she dies. Thus, the assets transferred from the first spouse could be subject to tax in the survivor’s estate, depending on when the surviving spouse dies. Second, from a personal perspective, you may not want your spouse to pass all assets to a second spouse even if it would save estate taxes.

Coordination with the Unified Credit

Your estate planning attorney should coordinate the estate tax marital deduction with the unified credit, which is $5,490,000 for decedents who died in 2017. The unified credit against the federal estate tax allows an individual to pass a certain amount of assets free from estate tax liability regardless of the identity of the recipients. The unified credit adjusts every year for inflation. In a will or trust, the amount allowed to pass tax-free is normally transferred under what is known as a “credit shelter” or “by-pass” trust. Then, the transfer under the marital deduction rules is made so as to prevent the taxation of the remaining assets.

In conclusion, in the case of a married couple at risk of a hefty estate tax bill, estate planning must take into account the marital deduction rules and the associated tax savings. Given the complex nature of the many rules involved, you should always seek the guidance of a qualified attorney for any estate planning needs.

Should I Have a Will or Living Trust?

You have two basic choices for transferring your assets on your death: the will, which is the standard method, and the living trust, which is rapidly growing in popularity. If you die without either a will or a living trust, Texas controls the disposition of your property. And settling your estate likely will be more troublesome — and more costly. The primary difference between a will and a living trust is that assets placed in your living trust avoid probate at your death. Neither the will nor the living trust document, in and of itself, reduces estate taxes — though both can be drafted to do this. Whether a will or a living trust is better for you depends on many personal factors. Let’s take a closer look at each vehicle.

Wills

If you choose just a will, your estate will have to go through probate. Probate is a court-supervised process to protect the rights of creditors and beneficiaries and to ensure the orderly and timely transfer of assets. The probate process has six steps:

1. Notification of interested parties. Most states require disclosure of the estate’s approximate value as well as the names and addresses of interested parties. These include all beneficiaries named in the will, natural heirs and creditors.
2. Appointment of an executor. If you haven’t named an executor, the court will appoint one to oversee the estate’s liquidation and distribution.
3. Accumulation of assets. Essentially, all assets you owned or controlled at the time of your death need to be accounted for.
4. Payment of claims. The type and length of notice required to establish a deadline for creditors to file their claims vary by state. If a creditor does not file its claim on time, the claim generally is barred.
5. Filing of tax returns. This includes final income and estate taxes.
6. Distribution of residuary estate. After the estate has paid debts and taxes, the executor can distribute the remaining assets to the beneficiaries and close the estate.

A will can be advantageous because it provides standardized procedures and court supervision. Also, the creditor claims limitation period is often shorter than for a living trust.

Living Trusts

Because probate is time-consuming, potentially expensive and public, avoiding probate is a common estate planning goal. A living trust (also referred to as a revocable trust, declaration of trust or inter vivos trust) acts as a will substitute, providing instructions for the management of your assets on your death and, if funded, during your life. You will still also need to have a short will, often referred to as a “pour over” will.

How does a living trust work? You transfer assets into a trust for your own benefit during your lifetime. You can serve as trustee or select a professional trustee. You completely avoid probate only if all of your assets are in the living trust when you die, or your assets are held in a manner that allows them to pass automatically by operation of law (for example, a joint bank account). The pour over will can specify how assets you didn’t transfer to your living trust during your life will be transferred at death.

Essentially, you retain the same control you had before you established the trust. Whether or not you serve as trustee, you retain the right to revoke the trust and appoint and remove trustees. If you name a professional trustee to manage trust assets, you can require the trustee to consult with you before buying or selling assets. The trust does not need to file an income tax return until after you die. Instead, you pay the tax on any income the trust earns as if you had never created the trust.

A living trust offers additional benefits. First, unlike probate, your assets are not exposed to public record. Besides keeping your affairs private, this makes it more difficult for anyone to challenge the disposition of your estate. Second, a living trust can serve as a vehicle for managing your financial assets if you become mentally incapacitated or disabled. A properly drawn living trust avoids embarrassing guardianship proceedings and related costs, and it offers greater protection and control than a durable power of attorney because the trustee can manage trust assets for your benefit.

Who should draw up your will or living trust?

A lawyer! Don’t try to do it yourself. Estate law is much too complicated. You should seek competent legal advice before finalizing your estate plan. While you may want to use your financial advisor to formulate your estate plan, wills and trusts are legal documents. Only an attorney who specializes in estate matters should draft them.

Preserve Both Estate Tax Exemptions with Portability

Since assets in an estate equal to the exemption amount are exempt from estate taxes ($5.49 million per person for decedents dying in 2017), a married couple can use their exemptions to avoid tax on up to double the exemption amount ($10.98 million). An effective way to maximize the advantages of the exemption is to use Portability.

In simple terms, portability of the federal estate tax exemption between married couples means that if the first spouse dies and the value of the estate does not require the use all of the deceased spouse’s federal exemption from estate taxes, then the amount of the exemption that was not used for the deceased spouse’s estate may be transferred to the surviving spouse’s exemption so that he or she can use the deceased spouse’s unused exemption plus his or her own exemption when the surviving spouse later dies.

Let’s look at an example without the use of Portability: Mr. and Mrs. Jones have a combined estate of $12 million. At Mr. Jones’ death in 2017, all of his assets pass to Mrs. Jones — tax free because of the marital deduction. Mr. Jones’ taxable estate is zero. Shortly thereafter, and still in 2017, Mrs. Jones dies, leaving a $12 million dollar estate. The first $5.49 million is exempt from estate tax, but the remaining $6.51 million is subject to $2,604,000 in taxes.

The problem? Mr. and Mrs. Jones took advantage of the exemption in only one estate.

Let’s look at an example where Portability is used: Assume Mr. and Mrs. Jones have a net worth of $12,000,000. Mr. Jones dies first and the federal estate tax exemption is $5,490,000 on the date of Mr. Jones’ death, and portability of the estate tax exemption between spouses is in effect:

As above, when Mr. Jones dies his estate will not need to use any of his $5,490,000 estate tax exemption since all of the assets are jointly titled and the unlimited marital deduction allows for the automatic transfer of Mr. Jones’ share of the joint assets to Mrs. Jones by right of survivorship and without incurring any federal estate taxes. Assume that at the time of Ms. Jones’ later death the federal estate tax exemption is still $5,490,000, the estate tax rate is 40%, and Sue’s estate is still worth $12,000,000.

Enter portability of the estate tax exemption – Using the concept of portability of the estate tax exemption between spouses, under these facts Mr. Jones’ unused $5,490,000 estate tax exemption will be added to Mrs. Jones’ $5,490,000 exemption, in turn giving Mrs. Jones a $10,980,000 exemption. Since Mrs. Jones has “inherited” Mr. Jones’ unused estate tax exemption and she can pass on $10,980,000 free from federal estate taxes at the time of her death, Mrs. Jones’ $12,000,000 estate will owe $408,000.

$12,000,000 estate – $10,980,000 exemption = $1.02 taxable estate
$1.02 taxable estate x 40% estate tax rate = $400,000

Thus, portability of the estate tax exemption will save the heirs of Bob and Sue about $2,190,000 in estate taxes.
If you’re considering using Portability to minimize or reduce federal estate taxes after your death, be sure to work with an experienced Estate Planning Attorney.

How Do I Select A Guardian For My Children?

If you have minor children, perhaps the most important element of your estate plan doesn’t involve your assets. Rather, it involves who will be your children’s guardian. Of course, the well-being of your children is your priority, but there are some financial issues to consider:

• Will the guardian be capable of managing your children’s assets?
• Will the guardian be financially strong? If not, consider compensation.
• Will the guardian’s home accommodate your children?
• How will the guardian determine your children’s living costs?

If you prefer, you can name separate guardians for your child and his or her assets. Taking the time to name a guardian or guardians now ensures your children will be cared for as you wish if you die while they are still minors.

How do I choose an executor or trustee?

Whether you choose a will or a living trust, you also need to select someone to administer the disposition of your estate — an executor or personal representative and, if you have a living trust, a trustee. An individual, such as a family member, a friend or a professional advisor, or an institution, such as a bank or trust company, can serve in these capacities. Many people name both an individual and an institution to leverage their collective expertise.

What does the executor or personal representative do? He or she serves after your death and has several major responsibilities, including:

• Administering your estate and distributing the assets to your beneficiaries,
• Making certain tax decisions,
• Paying any estate debts or expenses,
• Ensuring all life insurance and retirement plan benefits are received, and
• Filing the necessary tax returns and paying the appropriate federal and state taxes.

Whatever your choice, make sure the executor, personal representative or trustee is willing to serve. Also consider paying a reasonable fee for the services. The job isn’t easy, and not everyone will want or accept the responsibility. Provide for an alternate in case your first choice is unable or unwilling to perform. Naming a spouse, child or other relative to act as executor is common, and he or she certainly can hire any professional assistance needed.
Finally, make sure the executor, personal representative or trustee doesn’t have a conflict of interest. For example, think twice about choosing an individual who owns part of your business, a second spouse or children from a prior marriage. A co-owner’s personal goals regarding the business may differ from those of your family, and the desires of a stepparent and stepchildren may conflict.

The Unseen Dangers of Giving your House to your Kids Today

I recently met with a couple in my office from Fair Oaks Ranch, Texas. They have three children and they want as few assets as possible to be frozen and tied up in the probate process upon their death. They were considering transferring their home, and all of their other real estate, to their children right now, so that their children would not have to go through probate. I told them that there are several important tax consequences to consider when donating assets to your heirs while you are alive.

1. Depending on the size of your gifts, you could trigger the 40% estate tax.

2. Depending on the value of your real estate at the time of your death, you could leave your children with a hefty tax bill.

3. You may not qualify for Medicaid benefits if you go into the nursing home.

Transferring your assets to your heirs as gifts during your lifetime can affect the tax on your estate and the tax owed by your heirs. Make sure to work with an estate planning attorney with an excellent working knowledge of the practical effects of the property laws, trust code, Medicaid eligibility manual, and the tax code. If you have specific questions regarding these issues, contact me at (210)202-1141 or register for an upcoming educational seminar on my website.