Articles Posted in Probate

Do you own a small business? Have you accounted for that business in your estate plan? If you have, this is a good first step in protecting your business in the long-term future. After you die, your small business might be subject to the probate process. As part of the estate planning process, it is important to understand what probate entails so that you can adequately protect the business that you have worked so hard to build.

What are the Pitfalls of Probate?

Importantly, probate can take several months from start to end. Therefore, if you leave your small business to go through probate, the business will likely suffer. While the probate process is pending, the business’s assets will likely freeze. In addition, it can be unclear who is supposed to take the reins of the business during this transitional time, and this can in turn cause irreparable harm to the business itself.

How Does a Small Business Owner Avoid Probate Altogether?

It is best, then, to try and avoid probate altogether with your small business. There are several key strategies that can help you achieve this goal:

  • Write a business succession plan: by taking the time to lay out a plan for your business in the event of your death, you can ensure a smooth transition after you are gone. A successful business succession plan requires buy-in from the person taking over your business, and it requires details about what that persons’ responsibilities will be.
  • Create a living trust: you can use a living trust to ensure continuity after you are gone. The trust helps your business avoid probate altogether, while simultaneously protecting the business’s assets from outside creditors.
  • Enter into a buy-sell agreement: you can also draft an agreement that, once properly executed, becomes legally binding and ensures the transfer of the owner’s business interest in the case of the owner’s death.

These are just a few ways that you can make sure your small business avoids probate when you are gone. Because life is full of the unexpected, we cannot emphasize enough how important it is to develop a thorough plan for your small business in case something unanticipated were to happen. By taking these important steps now, you can make sure your business succeeds in the long run.

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If you are the executor in charge of overseeing the probate process for a loved one’s estate, there are certain duties you must keep in mind. One of these duties is sorting through the decedent’s debts. While these debts can certainly elongate the probate process, there are nonetheless important to navigate with care and attention. If you fail to pay an executor’s debts during probate, there could be serious consequences down the line, and it could also prolong the probate process even more than is already necessary. On today’s blog, we cover how to handle undisclosed debts during probate.

The Executor’s Responsibility

As executor, it is your responsibility to sort through the decedent’s assets and take account of what that person left behind. You should conduct a thorough review of bank account statements, properties, life insurance policies, investments, and anything else that the decedent owned. Importantly, too, you must review the decedent’s debts in order to understand what that person owed and how many creditors might be seeking payment from the estate.

Known v. Unknown Debts

Some of these debts will be obvious, in that the decedent will have left notice of the debts and the creditor will be a known entity. You have a responsibility to inform these creditors of your loved one’s death and settle up what the decedent still owes. Other times, however, you might not be aware that a debt or judgment exists. After conducting a thorough review of the decedent’s estate, you have a duty to publish a notification in a local newspaper to let unknown creditors know about the death of your loved one. This way, if a creditor finds out that the person owing them money passed, they can take the necessary steps to identify themselves and then receive the payments they need.

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So many factors go into a person’s estate plan, including a thoughtful inventory of the planner’s assets and a careful decision about how to divide those assets up. At our firm, we sometimes encounter difficult probate disputes over a decedent’s collectibles and heirlooms. On today’s blog, we cover some basic tools you can implement to avoid probate disputes over priceless items.

Create a Detailed Estate Plan

Because a family’s collectibles and heirlooms can often include an emotional value as opposed to just a monetary value, it is best to include detailed instructions about how you want those items to be distributed. Your estate plan should go beyond a typical list of monetary assets and debts. You should write a thorough list of items that you know your heirs might want to inherit, and you should include instructions for exactly who gets which item.

Communicate with Your Loved Ones

It will work out for everyone’s benefit if your loved ones know what to expect when you pass. We always recommend communicating early and often about your collectibles and heirlooms so that your heirs can have a clear understanding of how the items will be passed down. This way, you can also grasp which heirs feel a specific tie to which specific items, and you can keep this in mind when you develop your estate plan.

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For many of our clients in Texas, oil and gas royalties are a part of economic success. How do these royalties play into an estate plan? How are they part of probate proceedings? On today’s blog, we discuss the basics that our clients need to know in relation to this industry; as always, with more specific questions, contact a Houston estate planning attorney you can trust.

Distribution of Royalties Without an Estate Plan

If a Texas landowner dies without an estate plan, and that landowner has the right to oil and gas royalties from the minerals on their property, the royalties will likely follow the rules of intestate succession. This means that the state of Texas will pass the royalties onto surviving heirs according to the state’s mandated family order.

If there is a surviving spouse, the royalties will go to that person. If there are children but no spouse, the assets will go to the children. If there is a spouse and there are children, the spouse will receive one-third of the royalties, while the children receive the other two-thirds of the royalties. The order of intestate succession can be further complicated when there are disputes among family members about who has the right to the royalties at issue.

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The death of a spouse can be challenging enough without having to consider legal implications. When one spouse dies, what happens with the couple’s community property? How does community property affect the probate process? Although these questions are difficult to think through, they are crucial to consider, and today’s blog covers some of the basics with regards to community property and Texas marital estates. As always, with more specific questions, contact a Houston estate planning attorney you can trust to give you advice tailored to your needs.

What Is Community Property?

Community property is property owned jointly by a married couple. In general, any property acquired during a couple’s marriage is community property. Both spouses have equal claim to marital property, even if only one spouse has the sole title to the property. The exception to the definition of marital property is any gift or inheritance. Gifts and inheritances are legally considered separate property in Texas.

Did the Spouse Die with or Without a Will?

If one spouse dies and that spouse had no will, the surviving spouse will usually keep his or her half of the community property, while the other half will go to the deceased spouse’s heirs. If the deceased spouse had no children, the surviving spouse will inherit the entire property. In order for community property to pass to the surviving spouse, that spouse must go through probate proceedings.

If one spouse dies and that spouse did have a will, the community property will pass on to the beneficiaries explicitly named in the estate planning documents. Again, the beneficiaries (whether the surviving spouse or someone else) must go through the appropriate probate channels to inherit.

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If you are left to handle a loved one’s estate after he or she dies, you will likely be looking to wrap everything up as efficiently as possible. The longer probate drags on, the more time and money it can end up costing everyone involved. As long-standing Houston estate planning attorneys, we are all too familiar with some of the common pitfalls that estate administrators face, and we know how to take steps to proactively avoid the pitfalls and the delays that accompany them.

Pitfall #1: Familial Disputes

As a will passes through probate, third parties have the opportunity to dispute the validity of the will. Oftentimes, a third party will argue that the decedent was not of sound mind while writing the will or that another person fraudulently influenced the decedent during the process. These disputes, in turn, can hold everything up and delay the probate process. To avoid this scenario, we recommend that anyone writing a will or estate plan communicate early and often with their family members and beneficiaries. By taking the time to ensure your loved ones are aware and understanding of your choices, you can minimize the chance of a dispute down the road. As an estate administrator, take the time to meet with family members early on in the process, and try to work out any potential disputes outside of the probate courts.

If you live outside of Texas but own property inside of Texas, your estate plan will likely be subject to the ancillary probate process. Ancillary probate is the legal process through which a non-state resident gets his estate plan (only as the plan relates.to in-state property) approved by a state probate court. For example, if you live in Colorado but have a vacation home in Texas, your estate administrator will have to use a Texas probable court in order to transfer the vacation home to a beneficiary when you die.

Ancillary Probate

Ancillary probate in Texas is relatively straightforward. It requires a probate application in Texas, typically filed at the same time as the regular probate application filed in the decedent’s state of residence. In our Colorado example, the decedent’s estate would go through probate in Colorado and, simultaneously, would go through ancillary probate in Texas for the vacation home.

The state of Texas requires ancillary probate for real property and business interests in Texas-based companies. Other types of asserts, whether bank accounts, investment accounts, or retirement accounts, stay in the decedent’s residential state. Importantly, the “residential state” is the individual’s home state at the time that he or she died.

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An affidavit of heirship is a legal document that formally lists the heirs to a decedent’s property. When does the affidavit of heirship come in handy? And what is the process for filing this kind of affidavit? On today’s blog, we talk through some benefits of the affidavit and provide the basic information you would need in order to move forward with the filing process.

Why Use an Affidavit of Heirship?

Importantly, a decedent’s loved ones can only use an affidavit of heirship if the decedent passed away without a will. The affidavit comes in handy because it allows an individual’s beneficiaries to bypass probate, which saves significant time and money. Instead of having to probate a decedent’s property, the heirs can instead submit this affidavit, which a) declares the decedent’s heirs to the court and b) evidences the transfer of ownership from the decedent to these heirs. An affidavit of heirship cannot be used to transfer money in the form of a bank account; it only comes into play when there is real property that needs to be transferred.

How to Use the Affidavit of Heirship

If your loved one died without a will and had real property to pass on, you might want to consider filing the affidavit of heirship. To use this affidavit to bypass probate, you should list the decedent’s heirs and assets on the document provided by the probate court. Then, all the heirs need to sign the affidavit in front of a notary public. The heirs should then submit the affidavit to both the court in the county where the decedent died and to the county where the decedent owned property. If and when the court approves the affidavit, the process is complete.

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At McCulloch & Miller, we specialize in probate and estate planning. As our clients know, most estates in Texas need to go through probate once the estate owner dies. For those clients with high-value estates, the probate process can be a bit lengthier and more complex. How should individuals with higher net worths prepare for probate? What should loved ones expect from the process? On today’s blog, we cover some of the basics that people with significant assets should consider as they think through their own probate processes.

Consideration 1: Length of Time for Probate

The more complex an estate, the longer probate can take. As a general rule in Texas, probate takes approximately six months from the date of filing. For high-value estates, however, expect a longer and more drawn-out process. The court might, for example, require additional time to review the decedent’s estate plan or to conduct appraisals so it can accurately value the property’s assets.

Consideration 2: Tax Liability

If you are a high net worth individual, your estate will likely be subject to taxes such as estate taxes and capital gains taxes. In order to prepare for this reality, we recommend that you consult with a Houston estate planning attorney as soon as possible; this attorney should be able to help you prepare your estate to guard against these taxes. You can, for example, put assets in a trust or pass along money to your heirs while you are still alive in order to avoid some of these tax liabilities.

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In an ideal situation, if you are left to handle a loved one’s affairs after they pass, you have your loved one’s detailed will or estate planning document at your disposal. Sometimes, however, individuals die without a will, and their heirs are left to navigate intestate probate in Texas. The word “intestate” literally means that a person dies without a will, and intestate probate is different from (and more complicated than) probating an estate that includes a will. On today’s blog, we review the basics of the intestate probate process for those who might need guidance as they handle their loved one’s affairs.

Step 1: Appoint an Administrator

Because the decedent will not have named an executor, it falls on the court to appoint an administrator for the estate. Typically, an attorney will notify the court that an individual has died, and that attorney will ask the court to appoint an administrator. The administrator will then be responsible for naming the possible beneficiaries of the decedent’s estate. Importantly, the court must issue Letters of Administration during this process; these letters detail the administrator’s authority to act on behalf of the decedent’s estate.

Step 2: Review the Estate

The administrator will need to take time to review the decedent’s assets and debts, including bank accounts, real property, investment accounts, and sentimental or valuable items. Once the administrator is armed with this information, he or she can determine how to administer the estate. In order to administer the relevant assets, the administrator will need to file an affidavit of heirship. This formal document lists the decedent’s heirs and the assets, and all heirs need to sign and notarize the document (along with two witnesses).

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