Probate

Preplanning to avoid probate

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There are several things you can do now while you are alive to prevent your loved ones from having to probate.  This is especially important if you are married and your spouse will be your sole beneficiary.  This is not to say you should not have a will.  Everyone should have a will just in case some asset comes up that we didn’t plan for properly or in the event you die accidentally and litigation ensues.

  1. Name Beneficiaries – you can name your beneficiary on various types of accounts, including bank accounts, life insurance, retirement accounts, and investment accounts.  Review these accounts every few years to ensure they have the beneficiary of your choosing.
  2. Joint Tenants with Right of Survivorship – when you purchase a house ask the title company have the deed read “joint with right of survivorship” which transfers the house to your spouse immediately upon death.  If you already own your house, you and your spouse can execute a new deed that makes the ownership “joint with right of survivorship” so that the house is automatically transferred upon death.
  3. Living Trust – while this may seem to be the most straight forward approach, only an attorney can tell you if you really need one.  Many people get living trusts and never properly fund them so probate turns out to be necessary anyways.  Also a living trust does not protect you from liability as many people think it does.
  4. Transfer on Death Deed – this document is a new statutory document created by the Texas Legislator to help protect your real estate.  While this document is a deed, hand-with-pen-over-blank-checkboxes-in-a-form_573x300.jpgit is not a traditional deed, in that it does not immediately transfer ownership to your beneficiary but allows you to instead retain all ownership rights.  Upon your death the real estate automatically transfers ownership to your named beneficiaries. These types of deeds are used mostly by people wanting to transfer their home to their children or grandchildren upon their death.

For more ideas and ways to plan so your family can avoid probate court contact your attorney!  Remember that “an ounce of prevention is worth a pound of cure”.

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Ways to avoid formal probate. Losing a spouse doesn’t necessarily mean probate court!

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After losing their spouse, many people don’t contact an probate attorney because they believe that everything just goes to them immediately.  But this way of thinking may cause more harm down the road.  Nothing in life is absolute except death and taxes, so at least consult an attorney to make sure there is nothing you should do or to find out what your time limits are with regards to probate.  Here are a few cases where waiting caused more problems:

  1. Jane Doe dies and her husband Don doesn’t probate her will.  Four years pass, and then Don Doe dies.  Since Jane’s will was not probated within the 4 year statutes the only alternative is to probate as “muniment of title” to clear title to the house or dreamstimesmall_13989596.jpgcars.  In this case there is no formal probate of Jane’s estate which may create problems with certain asset at financial institutions and may force the beneficiaries to pay all debts prior to probating.
  2. Jane Doe dies and her will isn’t probated because her husband, Don Doe, doesn’t want to waste his money.  Years later  Don learns that there are assets in both of their names that need to be probated.  Jane’s will can not be probated after 4 years because Don is the one at fault for not probating.  Don goes to an attorney and finds out that since Jane had children from a prior marriage, they take her 1/2 instead of him.
  3. Sarah Jones dies and she does not have a will.  Four years pass, and Mike Jones tries to sell their house.  Just prior to closing on the house, Mike finds out that the house is still in both his and Sarah’s name.  Mike contacts an attorney to probate and must wait more than 30 days to get the probate finalized, so he loses the sale on the house.

As you can see there are many different situations that warrant consulting an attorney to ensure probate is not necessary after the death of a loved one.  While there are many different reasons that may take you into probate court, there are ways to avoid probate court such as:

When there is a will:

Muniment of Title – while this process requires you to file in probate court, you are not opening a formal administration so once the court signs an order you are done with the probate court.  So if you find that all the deceased person’s unsecured debts are paid and you just need to transfer title to the assets, have your attorney probate the will as a “muniment of title” which transfers title only and does not open a formal estate.

When there is no will:

Affidavit of Heirship – when there is no will, there is an informal process of having an “affidavit of heirship” prepared by an attorney and filed in the county real property records.  This is not a costly process and it will benefit the parties in the long run.  Don’t try to do one yourself, as mistakes will end up costing more in the long run. Do this now rather than later because witnesses may die, move away, not remember, etc.  This document will clear up title to property and vehicles so that the parties can move forward in life and not be held back when trying to sell such assets.

Determination of Heirship – This process is similar to the Affidavit of Heirship above, but it involves going to the probate court, having them appoint an attorney ad litem to verify the heirship information and signing an order on who the heirs are in an estate.  This process may be required of certain financial institutions that do not want to rely upon a “Affidavit of Heirship” and who may want the Judge to make a formal finding.

Small Estate Affidavit – This process is for very small estates under $75,000.00 (not counting exempt assets) or when trying to transfer the decedent’s homestead to their spouse.  The form is prepared and filed with the probate court.  The judge will then approve the Small Estate Affidavit to allow the transfer of assets to occur.  Keep in mind that this form will not transfer title to real property (other than the homestead), so if there is no spouse (so no homestead) or other rental real estate then this form won’t work.

 

SURVIVING SPOUSE’S HOMESTEAD RIGHTS

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house
On the death of the husband or wife, leaving a spouse surviving, the homestead shall descend and vest in like manner as other real property of the deceased.” TX PROB CODE § 283. Also, the surviving spouse is entitled to retain a constitutional survivor’s homestead right for life or for so long as the survivor elects to use the homestead. This right is not affected by the deceased spouse conveying the property to a third party through their will.

Here are a few questions which are regularly asked with regards to surviving spouse’s homestead rights:

1. Can the deceased spouse’s administrator force the sale of the house?
Constitutional rights protect a homestead against forced sale and partition so long as the surviving spouse chooses to use and occupy the homestead. TX PROB. CODE § 284.

2. Does the surviving spouses rights end when move out of the property? Have they abandoned their homestead rights?

The surviving spouse’s right to occupy or use the homestead for life or for so long as the surviving spouse chooses to do so.   It is not required that the surviving spouse continuously reside in the property to be considered as using it.

3. Who is responsible for maintenance on the property?
The surviving spouse will be responsible for making repairs and generally maintaining the property, but the duty to repair does not go so far as to require that the property be maintained in the same condition that existed when the homestead right was originally established.

4. Who is responsible for the mortgage on the property?
The spouse is responsible for the mortgage interest and the heirs/beneficiaries is responsible for the mortgage principal. A purchase money lien is not subject to the homestead exemption, thus the property could be foreclosed upon default. TX PROP CODE § 41.001(b)(1).

5. Who is responsible for the insurance premiums on the property?
The surviving spouse is not responsible to insure the property against loss. Even if the surviving spouse did insure the property, the insurance proceeds upon fire or damage would be made to the surviving spouse and not to the heirs/beneficiaries. The heirs/beneficiaries (children) would be responsible to carry insurance on the property to preserve their asset.

6. Who is responsible for paying the taxes on the property? The heirs/beneficiaries are usually responsible for all tax payments, however, if the spouse or minor children retain a homestead right then they would be responsible for the property taxes.  The homestead is not exempt from forced sale to pay delinquent taxes.  TX PROP CODE § 41.001(b)(2).

Disclaimer: The content of this article is provided for informational purposes only and does not constitute legal advice.

Does a Transfer on Death deed interfere with spouse’s homestead right?

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I was recently asked a specific question as to how the Transfer on Death deed affects the spouses homestead rights.

Example: A party is married and they execute a transfer on death deed to their children on their separate property which is their homestead.

The deed would not displace the spouse at death because the homestead right is attached to the separate property and community property. Therefore, while the children might own the property upon their parent’s death, the spouse has the right to live in the house.

 

Estate Planning advise from Warren Buffett!

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Blum

Marvin Blum (pictured on the far left) generated quite a bit of media coverage this past weekend when he posed a question to Warren Buffett at the Berkshire Hathaway annual meeting, where an estimated 35,000 shareholders gather each year in Omaha. Marvin’s question and a summary of Warren Buffett’s comments are below.

“I’m an estate planning lawyer, and it’s interesting as we wrap up today to ponder that the baby boomer generation is about to pass along the greatest transfer of wealth in history. I can design plans that eliminate estate tax and pass down great amounts of wealth to the next generation, but many of my clients come to me and say they want a plan like Warren Buffett’s, leaving their kids enough so they can do anything, but not so much that they can do nothing. Now they ask me, and I am asking you, ‘How much is that, and how do you keep from ruining your kids?'”

The following is a brief summary of Mr. Buffett’s insightful response:

• I think that more of our kids are ruined by the behavior of their parents than by the amount of the inheritance.
• I rewrite my will every five or six years.
• When your children are old enough (mid-thirties or thereabouts), you should explain your estate plan to them – It’s crazy for them to read the will for the first time after you’re dead.
• If your child is named as executor, your child should understand how to carry out his or her obligations that are embodied in the will before I sign that will, and we should talk it over.
• Rather than creating a dynasty of sorts, if you’re very wealthy, the money can have far more utility to society than to create a situation where your kids don’t have to do anything in life except call a trust officer once a year and tell him how much money they want.
• If you’re going to leave each of your children different mixes of assets, you want to make sure your definition of equality is understood by the children.

Marvin’s question drew immediate attention in the news media with coverage in The Wall Street Journal, The New York Times, The Washington Post, Bloomberg Business Week, The World-Herald, and commentary from these sources was syndicated and reprinted globally by many other outlets.

Article was provided by the Blum Firm, P.C.

Who makes the funeral decisions?

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In Texas, if the Decedent did not leave any written instructions, then the Texas Health & Safety Code authorizes the following persons, in the priority listed, to control disposition, including cremation. They also bear liability to pay the reasonable cost of burial, from their own funds if the estate does not have adequate funds. They are:

1) The surviving spouse;

2) Any one of the surviving adult children;

3) Either one of the decedent’s surviving parents;

 4) Any one of the decedent’s surviving adult siblings; or

5) Any other adult who would inherit under the intestacy laws.

However, if the Decedent left instructions, they get top priority!  Legally, a person may provide funeral directions in the following:

1)       a Will;

2)       a pre-arranged funeral; or

3)       a written instrument signed and acknowledged by that person.

If the directions are in the Will, then for the limited purpose of handling the funeral there is no need that the Will first be probated. The person authorized to control the disposition must promptly carry out the directions to the extent that they are affordable to the estate or the Agent. If that alleged Will is later denied probate or is declared invalid, the funeral directions remain valid to the extent they were acted on in good faith. Again, probate of the Will is not required – just the appearance of a document that purports to be the Will and is acted on in good faith.

The directions might also be in a legal document called an “Appointment of Agent to Control Disposition of Remains.” It is essentially a power of attorney, but it takes effect at the moment of death, contrary to typical powers of attorney that cease at the moment of death.  That Appointment document may include very explicit and legally binding instructions, including the requirement of cremation or a traditional funeral. It must be signed by the principal (and acknowledged before a notary) and it must be signed by the agent. When the agent signs it, the agent is also agreeing to pay for the funeral if the estate’s funds prove inadequate.

Keep in mind that the funeral home can legally refuse to accept the Decedent’s remains or to conduct the funeral or cremation until it receives a court order or other suitable confirmation that the dispute has been resolved. So don’t put your family through the fuss of deciding what your burial plan will be, prepare ahead of time!

Protecting assets from MERP

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How can I protect my house from Medicaid Estate Recovery Program (MERP) after my death?

Medicaid imposes stringent limits on income and assets of recipients, consistent with its mission to provide a health care safety net for the poor and for those whose personal resources are insufficient to pay the full cost of care. Many times assistance is provided to those who own homes, because the home is an exempt assets when determining qualification for the program. The Medicaid Estate Recovery Program reclaims funds paid on your behalf and during your life for assisted living costs. The State of Texas expects to be repaid at the time of your death from any assets you may own.

States are prohibited from making estate recoveries:

-During the lifetime of the surviving spouse (no matter where he or she lives). -From a surviving child who is under age 21, or is blind or permanently disabled (according to the SSI/Medicaid definition of “disability”), no matter where he or she lives. -In the case of the former home of the recipient, when a sibling with an equity interest in the home has lived in the home for at least 1 year immediately before the deceased Medicaid recipient was institutionalized and has lawfully resided in the home continuously since the date of the recipient’s admission. -In the case of the former home of the recipient, when an adult child has lived in the home for at least 2 years immediately before the deceased Medicaid recipient was institutionalized, has lived there continuously since that time, and can establish to the satisfaction of the State that he or she provided care that may have delayed the recipient’s admission to the nursing home or other medical institution.

If you believe that you will one day need assisted living assistance, you may want to take actions to preserve your assets now. The Medicaid program has a 5 year look back period, which means they look at all gifts or transfers that have occurred for the 5 years prior to qualifying for Medicaid. If you gave something away or transferred it to an irrevocable trust then they pull it back into your estate and you may not qualify for Medicaid.