â€œMOM LEFT EVERYTHING TO ME IN A LIVING TRUST, SO I DONâ€™T HAVE TO GO THROUGH PROBATE.â€ OH, REALLY?
Â Â Â Â We frequently deal with clients who have put their estates into a â€œliving trustâ€ in order to avoid probate. While living trusts may be useful for people with large estates and income tax issues, they are a bad idea for most people. Worse yet, they often do NOT avoid probate.Â
Â Â Â Â Some years ago I represented a client who was an only child. Her mother died, leaving an estate valued at $250,000, approximately half of which was in her home, and the other half in a car and certificates of deposit. The mother wanted her estate to go to her daughter, but she did not have a will. Instead, she executed an elaborate package of documents which centered around a â€œliving trust,â€ which an attorney told her would avoid the trouble and expense of probate. It didnâ€™t. First of all, the mother had not executed the deed to her house transferring the house to the trust, nor had she transferred title to her car or her certificates of deposit to the trust. Second, it didnâ€™t matter whether she had put the house in trust or not, because the living trust in this case was not a document that transferred title to the daughter upon death. Third, title companies do not like dealing with trusts that attempt to pass title to real property unless they are in wills (â€œtestamentary trustsâ€) that have been probated, thereby proving whom the property passes to upon the decedentâ€™s death. I explained to my client that the living trust did not pass title to her motherâ€™s estate upon death, meaning she legally had nothing and couldnâ€™t sell the house. We had to file an heirship proceeding and what is known as an â€œindependent administrationâ€ in order to accomplish her motherâ€™s wishes – all of which was considerably more expensive and far more time-consuming than probating a will.
Â Â Â Â The probate process in Texas is relatively quick and inexpensive for small and medium-sized estates. Although some attorneys and financial planners claim that living trusts can â€œavoid probate,â€ the truth is that living trusts simply do not work that way in Texas. Thatâ€™s what wills are for, so be sure you have a will, and that it is up to date.