This column first appeared in the San Antonio Express News on November 20, 2017.
When a person dies, they might have a Will, might have other plans like a Trust, or may have done no planning at all.
If there is no planning, the person is said to have died “intestate” and Texas law decides who inherits any assets. Further, there may have to be a complex legal proceeding to decide exactly which individuals should be granted status as heirs under the law. Lots of questions are left unanswered, and may have to be answered in court.
If there is a Will, it answers many questions like: Who are the heirs? Who will be Executor? Must the heirs be protected with a fiduciary bond? How are the creditors to be paid? Which heir gets which asset and in what amount? What if an heir has already died, etc.? Everyone should have a Will to answer those questions, even if the assets are minimal. The Will might be probated, but it will be far simpler than if the person had died intestate.
There is no global answer to “must a Will always go to court for probate?” The answer always depends on the circumstances, on what assets exist, and on what other arrangements may supersede the Will.
Survivorship Rights (use with caution)
For instance, if an individual dies with a Will, has no real estate, and all the bank accounts are set up with survivorship rights, there is likely no need for probate. The survivorship rights are the legal method used to transfer ownership of the accounts, so there is no need to offer the Will for probate.
Be aware, though, that survivorship rights can backfire. Say you have three children and want them to inherit equally, and make a Will to that effect. Then, worried about incapacity, you add your trusted daughter to your bank accounts to give her access. The bank does not clearly inform you that the accounts have survivorship rights. When you die, all the accounts belong to that one daughter in contradiction to your Will. This can cause family conflict, or may trigger unnecessary taxes for that daughter. Be cautious that your survivorship arrangements do not contradict your Will.
Revocable Living Trust
A Revocable Living Trust is another arrangement that may supersede the Will. The person who establishes the Trust works with a qualified estate planning attorney, identifying the Trust’s manager (Trustee) and the Trust’s Beneficiaries. Then, all assets are transferred so that the Trust owns them (except for specific items like IRA accounts, which are typically left outside the Trust because a) transferring them would have negative tax consequences, and b) they are already set up to avoid probate.)
Even when a Trust exists, it must be backed-up with a Will. The Will typically states that any asset which is still owned individually is devised to the Trustee of the Trust so it can be distributed to the Beneficiaries named in the Trust. If, at the time of death, all assets are already owned by the Trust then the Will does not go to probate. But if, at the time of death, some asset has fallen through the cracks, the Will catches it and moves it into the Trust.
For example: Gene set up a Trust and carefully transferred all his assets into the name of the Trust. Eventually Gene became ill, and the successor Trustee he chose began to manage the Trust and take care of Gene’s finances. Right before Gene died, his brother died and left an inheritance to Gene. The Trustee was not even aware of the inheritance prior to Gene’s death, and the brother’s estate documents required the inheritance be paid to Gene. In order to receive the inheritance, Gene’s Will had to be probated. His Executor was able to claim the inheritance, and per the terms of Gene’s Will transferred the inheritance into Gene’s Trust. Now the Trustee had control, and could use the inheritance to pay Gene’s taxes and debts, and to fulfill Gene’s wishes by distributing the remainder to his Beneficiaries.
Planning to avoid probate is a great goal, but changing circumstances must be taken into account. A Will is the best foundation document to have in order to provide a safety net for all the other plans. Visit your qualified estate planning attorney to prepare your plan and contingency plans. Your heirs will thank you!
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.