Texas law requires wills to enter probate within four years of a person’s death. If you die intestate (without a will), there is a good chance your loved ones will not receive property according to your wishes. When a person dies intestate the probate laws in Texas determine how your estate is handled.
The steps required by law to probate a case can be confusing and many feel overwhelmed. Let’s try to make things easier by taking a look at how Texas handles a probate case.
Probate Laws in Texas
Probate is the process of recognizing a person’s death and closing up their estate. The estate is everything the person owned at the time of death. This includes personal property, real estate, cash, retirement accounts, investments, and life insurance policies.
Texas law requires an inventory of all estate assets. The deceased person’s debts are then paid before the distribution of assets. If there isn’t enough cash to pay the debts, the judge may require the executor to sell assets to pay debts. After payment of debts, the remainder will be distributed according to the deceased wishes.
The good news is Texas does not impose a state inheritance or estate tax. The state repealed its inheritance tax beginning September 1, 2015. This means those who are to receive your assets will not pay taxes for their inheritance.
Assets Not Subject to Probate
When the deceased has life insurance policies that name beneficiaries, those pass directly to the beneficiary without probate. The same is true of retirement accounts that have named beneficiaries.
If the deceased owned property in joint tenancy with rights of survivorship or community property with rights of survivorship, that property does not pass through probate. The other joint owner becomes the sole owner of the property.
Assets that are in a trust are not part of the estate. The trustee named in the trust will distribute those assets to the named beneficiaries.
Opening Estate
Texas requires that someone go into the probate court and fill out an application to open the estate. That person will need to provide basic information such as the date of death and the deceased person’s address. They will also need to identify any heirs and provide a copy of the will.
The county clerk will then post a notice at the courthouse informing the public that someone has filed an application for probate. After a two week period has passed, a hearing will take place before a probate judge.
Texas law requires wills to meet certain criteria. The probate judge will determine if the will is valid. If the will does not meet state requirements the judge may declare it invalid.
If the will is valid and admitted into probate, the judge will determine if the named executor meets requirements to serve in that capacity.
Appointing Executor
Once the judge determines the executor meets the necessary qualifications, the court issues the executor letters testamentary. The executor uses the letters to handle the deceased person’s financial matters.
Executors designated in a will are normally appointed as independent executors. This means they do not need the court’s permission to take steps needed in settling the estate.
This includes paying creditors and selling estate assets. They also are not required to post a bond.
If the deceased person did not have a will, the judge will appoint someone to serve as executor. In this situation, Texas probate is “dependent,” meaning supervised by the court. The executor will need the court’s permission before taking any step in the probate process.
The court can create an independent administration in accordance with the Texas probate law section 145. If there is a dispute over a will, the court will review the evidence and hear testimony.
The judge may then set aside the will and an earlier will may take effect. There is also a possibility that the distribution of the estate will now take place according to Texas’ intestate laws.
Executor Responsibilities
The executor is responsible for gathering all estate taxes, safeguarding property, paying debts, and distributing assets. This includes going through all the decedent’s papers to identify all financial accounts, if the decedent is due money, and if there are bills needing payment. They must also inventory all assets and file an inventory with the court within 90 days of the date of appointment.
The executor must notify all creditors of the person’s death. The executor sends out a Notice to Creditors, which identifies the executor and provides their address (or the attorney’s address).
The letter includes a deadline for creditors to file a claim against the estate. The notice is also published in the newspaper.
Texas probate law includes two classes of creditors. First is the payment of legal fees for any attorney the executor has retained for representation on the estate. Creditors receive payment next.
If the estate does not have enough cash, the executor must sell estate assets to generate enough funds to pay the bills. Selling assets can be tricky because beneficiaries may want to inherit the assets designated for sale. That is where this estate attorney can help determine which assets to sell so that all beneficiaries receive fair treatment.
Before the distribution of assets, the executor will need to verify whether there are state and federal taxes to pay from the estate. Before filing any estate-based tax returns the executor will need to apply for an employer identification number.
The final step the executor must take is to distribute the assets according to the will. This may require the executor to sell additional assets so beneficiaries can receive money.
Intestate Wills Effect on Real Property Distribution
Texas probate laws determine what happens to a house when a person dies without a will. There are numerous factors that play into how real and personal property is divided. The example below shows the importance of having a will.
If a person dies intestate all community property will go to the surviving spouse if all children are joint. If one or more of the children are not from the surviving spouse, then Texas will award all community property to the children.
The State will also divide separate property between the deceased’s spouse and children, with 2/3 awarded to the children and the remaining 1/3 to the spouse. Separate real property is divided in the same manner, and once the surviving spouse dies the real property transfers to the children.
The Good News
Probate laws in Texas apply to everyone in general, but there is no real concern for people who die with a valid will in place. It is only when a person dies without a will that the state distributes the person’s assets according to the state law.
If you do not have a will or your will is outdated, now is the time to talk to a Texas estate attorney. They will guide you on protecting your assets so they are distributed according to your wishes.