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Is There Any Reason to Avoid the Traditional Probate Process?

By: Lin Morrisett January 9, 2020 no comments

Is There Any Reason to Avoid the Traditional Probate Process?

The short answer is no. The longer answer is “yes, but it gets complicated.”

The only reason to avoid probate is if the estate is so small that it would be less expensive to find ways to avoid probate than to actually go through the full process.

If the estate is small and simple, it may be able to be handled with a small estate affidavit.  This is a sworn statement by every person who inherits from the decedent, as well as at least two separate independent witnesses.  These persons must swear to a statement listing all of the known assets and debts that the deceased person had when they passed away.  The estate cannot have more than a homestead and exempt property, plus $75,000 in assets, and the non-exempt assets listed must exceed the estate’s liabilities, if any. This process is not preferred, and possibly not allowed when:  there are high debts, the family is not in agreement, the decedent owned real estate other than the house, a title company will not write a policy on the homestead, or for numerous other reasons.  

Another possible scenario where traditional probate can be avoided is when the decedent died while renting their residence, owned minimal possessions and had a bank account which doesn’t warrant pursuing with a court case.  In cases like this, it would not be worth the court’s time or the heirs’ money to utilize the formal probate process to divide the estate since there is essentially not enough to distribute to warrant opening the probate process. 

Small Estates and the Potential for Fraud

If someone approaches the court and claims to be the sole remaining child, and a couple of friends acknowledge their status in an affidavit, they likely will be approved to inherit the estate without going through the formal probate process. They can then sell the inherited property without anyone else signing on.  If another child later appears and challenges the sale, this could create a variety of legal complications, including liability for any title company that approved it.

Trusts Versus Probate

Creating a trust is another option.  A trust allows you to transfer your property to the trust and then your named beneficiaries can access it after your death, and others such as their children will receive it after your first named beneficiaries pass away. This way, nothing needs to transfer upon your death.

There are several reasons for creating these types of trusts.   If you have more than $11 million in assets, your heirs may be faced with a Federal Estate tax.  Transferring assets to a trust during your life may lower or eliminate those taxes by bringing your estate below that limit.  Similarly, several states have inheritance or estates taxes.  If you die owning real property in one of those states, a trust can save your family money by getting that property out of your estate so that it faces no such tax.  Texas has no Inheritance or Estate tax, so if you die with less than $11 million, a Trust set up in your lifetime is likely to save any money for your family.

Trusts can also be useful for people who are not experienced or proficient at managing money. For instance, if you expect to die soon but are not sure your 17-year-old child will manage their inheritance wisely, you can put it in a trust for future disbursements and management by others.

In Texas, if you have less than $11 million in assets, one of the greatest reasons for establishing a Trust simply isn’t true.  Various attorneys and estate planners charge $3,500 to $5,000 or more to offer clients the opportunity set up a trust “to avoid probate.”  This offer sounds appealing to people who are not sure how the probate process works and want to make sure their heirs get their inheritance.  However, the simple fact is that in most cases, probating a will is cheaper than setting up the trust, and carries none of the pitfalls, expenses and efforts of maintain the trust properly during the client’s life.

Advantages of the Probate Process

Probate is the safest process to handle an estate upon death. It legally confirms there has been an investigation to evaluate the Will.  It also affirms that everything seems on the up-and-up once a judge has ruled on it. Once a judge determines that the will is correct or that there was no will, that decision provides protection to everyone involved in the estate.

In the event there are multiple competing wills, a judge will enter an order ruling that the records and evidence have been evaluated and the court has made a decision as to which is the is the proper and correct Will.  The judge’s order tells the world that the Will which was chosen properly represents the intentions of the person who has passed away. 

The bottom line is that in the vast majority of cases, probating your Will is the easiest, cheapest, and best way for your heirs to make sure that your property is handled the way you wanted it to be handled. 

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