What is the Texas probate system like?
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When a person dies and leaves property that has not been transferred to another person by way of a trust, joint ownership with a right of survivorship, or direct payments to beneficiaries (such as from insurance policies or retirement accounts), the property will be distributed through probate.
Role of Texas Probate Court
Probate is the process in which a court oversees the payment of a deceased person’s debts and the distribution of his or her assets. The court’s role is to facilitate this process and protect, when necessary, the interests of all creditors and beneficiaries of the estate. The role of the Texas probate court and all persons hired by the court to facilitate this process is known as probate administration.
In the larger counties in Texas, one or more courts are set aside exclusively to do Texas probates and these are called Texas probate courts. In smaller counties, where there isn’t enough probate work to occupy a court full time, one or more of the county courts will handle probate matters. A Texas probate proceeding is overseen by a probate judge. The degree of supervision the judge exercises in each case depends on several factors.
Dependent and Independent Administration in Texas Probate Courts
Texas probate courts use both dependent and independent administration. Dependent administration is called that because the process is dependent on the Texas probate judge’s approval. In a dependent administration the probate judge will appoint an Administrator who will submit periodic reports to the court and will seek the judge’s approval before taking any action. The necessity of writing reports and seeking judicial approval drives the costs of probate administration up substantially.
Depending on the size of the estate, it can cost thousands of dollars more to go through dependent administration. The purpose of dependent administration is to protect the rights of the beneficiaries, the people who will receive the assets. Unfortunately, it often uses up much of the estate in administrative costs that would have gone to the beneficiaries.
Independent administration is administration of an estate independent of the probate judge. In this situation, the court appoints an Administrator who submits an inventory of all assets and a list of people who owe money to the estate. After the inventory is filed, the administration of the estate continues without the probate judge’s approval. More than 80% of the estates probated in Texas are independently administered.
Provisions in Wills
Texas law allows a testator (a person writing a will) to include a provision in the will for independent administration of the estate upon his or her death. The language for this provision is found at Section 145 of the Texas Probate Code. This code section also tells how to ask for an independent administration in different kinds of cases.
The person who died and whose estate is being probated may have written a will or may have died without a will. If there is a will, it usually must be produced in a Texas probate court within four years of the death along with a certified copy of the death certificate. If there is no will, then the death certificate will be produced.
Dealing with Assets in the Texas Probate System
The Administrator who has been appointed by the probate court will produce a list of all assets in the estate with their value at the time of death along with a list of all money owed to the estate. If the estate qualifies for independent administration, the judge will not be involved further. If the estate requires a dependent administration, then every step of the distribution process has to be approved by the probate judge
If estate taxes are due, a final tax return must be filed and the taxes paid before the estate can be distributed. Over 90% of all estates are exempt from federal estate taxes. Under current federal tax law, estates with a value of less than $2 million are exempt from estate taxes (meaning estate taxes are not owed). In 2009 the exempt amount will increase to $3.5 million. The estate tax will be repealed in 2010 and then be reinstated in 2011 with an exempt amount of $1 million.
You should be aware that Congress can and does frequently change the tax laws. If you have a large estate, it’s a good idea to check with an experienced estate planning or probate attorney regularly to make sure your estate planning is up to date. If no taxes are due on an estate, probate can often be completed in 3–6 months. If taxes must be filed, it can take longer before the tax return is approved.
What if the Owner of an Estate Dies Intestate?
When all the debts and taxes have been paid, the assets left in the probate estate will be distributed under the provisions of the will. A person who dies without a will is said to die intestate. In this situation the property will be distributed according to provisions of Texas law. Texas law requires estates to be distributed to the closest family members, if there are any. If a person is married or has children, the assets will be distributed to the spouse and children. If unmarried and without children, the assets will be distributed to other close relatives like parents and siblings.
The main disadvantage of dying intestate is that the deceased doesn’t get to decide who will receive his or her property. If the property is intended for close family members, this might not be a problem. Unfortunately, there is another problem that arises. Intestate estates almost always end up being probated through a dependent administration and much of the assets of the estate that could have gone to family members will be used to pay for probate costs. It is possible to avoid a dependent administration in an intestate estate, but you will likely need the help of a Texas probate attorney. Many intestate estates still end up in dependent administration.
Exceptions to Texas Probate Laws
There are a few Texas laws that allow probate estates to be distributed with little probate administration. For example, there are special rules for qualifying small estates that can exclude them from full administration. There are also provisions for determining who is entitled to receive property from the estate, without full probate administration. In some cases, a will can be recognized as a document that passes title to assets without administration. Consult a Texas estate planning lawyer if one of these might apply to your case.
What about Non-Probate Estate Assets?
Though it takes several months to probate an estate, beneficiaries don’t have to be left without funds while an estate is being probated. Certain assets are not distributed during probate, but are transferred in some other way. These assets are called the non-probate estate. These can include insurance policies, IRAs, KEOGHs, pensions, profit sharing, and 401(k) plans. These assets are transferred directly from the company or bank holding them to the beneficiary who is named in the policy or account documents.
Non-probate estates also include property owned in joint tenancy with a right of survivorship. These pass directly to the survivor if the documents are prepared properly. Assets in trusts, such as a Living trust, are not part of the probate estate, but are distributed according to the provisions of the trust document. Money may be transferred at death with Transfer on death (TOD) or Payable on Death (POD) bank accounts. None of these assets are part of the probate estate and should not be listed as assets in a Texas probate court.