The ABCs of Probate
By Virginia Hammerle & Rob Morris, Hammerle Finley Law Firm, Denton LIVING WELL Magazine
A wise old lawyer once said, “In criminal law, you deal with the worst of people on their best behavior. In probate law, you deal with the best of people on their worst behavior.”
So true…Like the family members who left the funeral early so they could ransack the deceased’s house; The trusted caregiver who wrote herself into the will; The widow (after less than six weeks of marriage) who took the newly departed’s entire 401K and left his three adult children out in the cold, thanks to the fine print in a federal law.
That’s why it pays to know about Texas Probate. Probate is the court-administered method of paying debts and handing out assets after someone dies. It’s an easy and inexpensive procedure, if the deceased left a duly executed, well-drafted Texas will that was signed while he had legal capacity.
A will names an executor, who will be responsible for administering the estate. In a run-of-the-mill probate case, an application is filed with the court (a probate court if the county has one –– Denton, Collin Tarrant and Dallas counties all have probate courts). Citation is sent to the beneficiaries and posted for the world to see. The court has a hearing, the will is admitted to probate, the executor posts a bond (if the will didn’t waive it), the court clerk issues “letters testamentary” that gives the executor the written power to handle assets and pay debts, and the executor files an inventory. After paying the debts, the executor disburses the assets and everyone goes happily down the road.
That’s called an independent administration. It can get even easier. If there are no debts, then the will can be filed as a Muniment of Title. That requires an application, notice, a hearing, and an order. The order operates to legally transfer title of assets. No administration is necessary.
On the other end of the legal spectrum are the cases in which there is no will, there is a contested will, or there are unruly relatives. If the executor thinks there will be a run on the assets before the will can be probated, then he can get an emergency restraining order to keep the status quo in place, and everyone else out of the place. Anyone violating the restraining order risks being found in contempt and fined or imprisoned or both.
If the will is suspect, then any heir or beneficiary can file a will contest, or submit a prior will for probate. A will contest is an expensive, often prolonged proceeding where the health, mental status and relationships of the deceased are examined to determine if someone unduly influenced him or if he was without legal capacity when he signed the will.
If there is no will, any heir or creditor of the estate can file to create a dependent administration. This requires the court to appoint an executor, and then the executor has to get court approval before paying any debt or transferring any asset. This is a very costly and labor-intensive process.
Under a 2011 change in the law, if there is no will, then the court can appoint an independent administrator only if the applicant files a proceeding to determine heirship first, and all of the heirs then agree. The court will have to appoint an attorney to represent the unknown heirs. This is another reason to have a will; the new requirement for heirship determination more than doubles the cost of probate on a no-will estate.
An important point –– probate only deals with assets that actually go through the estate. It’s important to know which way an asset falls. A 401(k) usually has a designated beneficiary, and bypasses the estate. If the owner of the 401(k) wants to designate someone other than his spouse, the spouse has to sign a waiver. The example at the beginning is from an actual Supreme Court case. When the man’s wife died, he changed his 401(k) to make his three children the beneficiaries. Then, the man remarried. He died six weeks later. His new wife, now his widow, claimed his entire 401(k). The Supreme Court agreed she should get it, because the 401(k) was an employment benefit and was governed by ERISA, a Federal law that required spousal waiver. Other assets that usually don’t go through the estate are life insurance, IRAs, and bank accounts with a designated survivor.
There are other reasons to have a well drafted will like minimizing estate taxes, setting up trusts and guardians for minors, and making charitable gifts. Don’t leave it to the heirs, judge and the IRS to handle your estate.
Hammerle Finley Law Firm may be reached at 940-383-9300 or visit their website at www.hammerle.com.