Probate is the process in which the court validates a will and distributes the deceased’s property according to the terms of their will. While probate is the default process in many situations, there are ways to avoid this lengthy and potentially costly process. In fact, one of the primary purposes of a Houston estate plan is to avoid probate.
Assets that are mentioned in a will are typically passed on to those named in the will. However, certain classes of assets are referred to as non-probate property. Non-probate property consists of those assets that will automatically pass on to the beneficiary at the time of the owner’s death. There are several types of non-probate property.
Jointly Held Property
Assets that have multiple owners, or signers, are considered non-probate property. This is because, at the time of one owner’s passing, the co-owner will automatically become the sole owner of the asset. For example, if Husband has a joint bank account with Wife, when Husband passes away, the account assets will all become Wife’s sole property.
Real estate is often jointly owned. However, owners must be listed as joint tenants with the right of survivorship to avoid the probate process. If real estate is held as tenants in common, the deceased owner’s interest will be included in their estate and must go through the probate process.
Life Insurance
Insurance may not commonly be thought of as an “asset”; however, a life insurance policy is an important asset when it comes to estate planning. When someone who has a life insurance policy passes away, the proceeds of that policy will pass directly to the named beneficiaries without needing to go through the probate process. However, to achieve this benefit, the insured must specify that the proceed are payable either to another individual or to a trust.
Retirement Accounts
Often, an employee retirement plan allows the employee to arrange for the payment of benefits to certain named beneficiaries if they die before they retire. After retirement, an employee can designate either an individual or a trust as the beneficiary. By law, an employee’s spouse must be named as the beneficiary, unless the spouse signs a waiver, consenting to another beneficiary.
Trusts
Trusts are one of the most important estate planning tools available. A trust refers to a three-part relationship whereby the grantor, or person who sets up the trust, entrusts property to a trustee for the ultimate benefit of the beneficiaries. Trusts have various purposes, including estate tax reduction and the ability to maintain control of assets after one’s death. However, trusts are complex instruments, and families interested in creating a trust should consult with a dedicated estate planning attorney.
Have You Created a Houston Estate Plan?
If you are in the process of creating an estate plan, or it has been years since you last updated your plans, reach out to the dedicated Houston estate planning attorneys at McCulloch & Miller, PLLC. We have over 35 years of experience helping families plan for their financial future while providing for generations to come. To learn more, and to schedule a consultation, call 713-333-8900 today.