Estate Planning/Probate

Living Trusts

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April 26  |  Estate Planning/Probate  |   Tim Stanley

“MOM LEFT EVERYTHING TO ME IN A LIVING TRUST, SO I DON’T HAVE TO GO THROUGH PROBATE.” OH, REALLY?

     We frequently deal with clients who have put their estates into a “living trust” 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. 

     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 “living trust,” which an attorney told her would avoid the trouble and expense of probate. It didn’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 didn’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 (“testamentary trusts”) that have been probated, thereby proving whom the property passes to upon the decedent’s death. I explained to my client that the living trust did not pass title to her mother’s estate upon death, meaning she legally had nothing and couldn’t sell the house. We had to file an heirship proceeding and what is known as an “independent administration” in order to accomplish her mother’s wishes – all of which was considerably more expensive and far more time-consuming than probating a will.

     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 “avoid probate,” the truth is that living trusts simply do not work that way in Texas. That’s what wills are for, so be sure you have a will, and that it is up to date.

The Missing Will

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March 31  |  Estate Planning/Probate  |   Dermot Rigg

A client recently contacted me and asked me to handle the estate of a cousin who had passed away several months earlier. The decedent evidently had a will – but no one could find it. Because there was no will to probate, I recommended that the decedent’s three children file an heirship proceeding and appoint my client – or someone else that they trusted – to be independent administrator of the estate. When a person dies without a will, an independent administration under the Texas Probate Code is relatively inexpensive, but it depends upon all the heirs agreeing on this type of proceeding. However, one of the decedent’s children would not agree to an independent administration. The only alternative was a court-supervised administration, but no one wanted to take on the burden and expense of serving as the court-appointed administrator of this small estate. Everything is now in limbo, with bills piling up and no one to take care of the decedent’s property. Eventually, the property will be foreclosed upon for non-payment of taxes, and each of this gentleman’s three children will lose one third of their inheritance.

There are several lessons to be learned from this story:

You need a will. Have a professionally prepared will that leaves your estate to the people you want to inherit from you. Don’t try to do this yourself; even lawyers who don’t specialize in probate and estate work can mess them up.

Keep your will in a safe place. A safety deposit box is best, but a secure place in your home will do if people you trust know where it is.

Don’t keep your will a secret. By all accounts, the decedent was very business like, and had his affairs in order. Unfortunately, he was also very secretive, and those he loved and wanted to give his estate to didn’t know if he actually had a will, or what was in it. Let someone you trust – preferably a family member – know about your will, or at least where it is kept. You should also have copies available, since a copy of a will can be admitted to probate in Texas under some circumstances.