Have you recently lost a loved one? What are the next steps?

Texas has simplified the probate process that allows certain executors to serve independently of the Court’s supervision.  This allows the probate process to move quickly and efficiently in a process called independent administration.

How does an Executor become “independent”?

An executor can be independent if — 1) the Decedent left a Will in which he specifically states that his executor should be independent, or 2) if the Decedent died without a Will or his Will did not allow for the independent executor, all of the heirs or beneficiaries under the Will can agree to allow the Executor to serve as the Independent Executor.

What are the Benefits of an Independent administration?

The independent executor does not have to post a bond and does not have to obtain the Court’s approval prior to undertaking the duties.

What are the responsibilities of the independent executor?

The independent executor’s responsibilities are 1) collect the assets, 2) pay off any debts, and 3) distribute the assets according to the Will or according to Texas law if the Decedent did not leave a Will.

As part of this process, the independent executor is also required to satisfy a couple of requirements to the Court — 1) to publish notice to potential creditors in a newspaper and 2) to file an inventory with the Court showing the assets of the estate.

When do I need to probate the will?

It is advisable to initiate the probate process as soon after someone’s death as possible, it must be done within 4 years of their death, or the process by which their estate is divided becomes much more complex.

When is the Independent administration not a good idea?

Estates with high debts may choose a dependent executor rather than an independent, simply because it may mean that the creditors have a harder time obtaining payment.

An executor may prefer to be dependent if fights among the heirs of the Estate are anticipated. In those situations, the executor may prefer to have the Court approve each and every action the administrator undertakes so that later disputes among the family members can be resolved through rulings by the Court rather than litigation against the executor.

 

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Who will the Court appoint as Guardian for your Children?

If you die without a Will that appoints a guardian for your children, it will be left up to the Court .  The Court will consider what is in the child’s best interest.  It may not be who you would want appointed as your child’s guardian.

There are certain people who are ineligible to be appointed as guardian according to the Texas Probate Code.  These include:

1.  A minor;
2.  People whose conduct is notoriously inappropriate;
3.  An incapacitated person;
4.  A person who is a party or whose parent is a party to a lawsuit concerning or affecting the welfare of the proposed ward;
5.  A person indebted to the ward unless the person pays the debt before appointment;
6.  A person asserting a claim adverse to the proposed ward or the proposed ward’s property, real or personal;
7.   person who because of inexperience, lack of education, or other good reason, is incapable of properly and prudently managing and controlling the ward or the ward’s estate;
8.  A person, institution, or corporation found unsuitable by the court;
9.  A person disqualified in a declaration made by the ward prior to incapacity.

NON-PROBATE ASSETS: Pass at death other than by will or intestacy

Only property owned by the decedent at death can be disposed of by a will.  A will cannot dispose of “nonprobate assets” assets which pass at death other than by will or intestacy.  The principal types of nonprobate assets include property passing by contract, property passing by survivorship, and property held in trust. Property passing by contract includes life insurance proceeds, IRAs, and employee benefit plan proceeds, such as the proceeds payable under a pension, profit-sharing, or employee retirement plan. These assets pass outside the will to the persons named by the decedent in the appropriate beneficiary designations.

It is IMPORTANT to periodically review the beneficiary designations with respect to these type of assets and to update them as necessary.  Property held by the decedent and another person as joint tenants with right of survivorship or in a pay on death account passes outside the will directly to the survivor.  Survivorship assets typically include certain types of bank accounts, certificates of deposit, stocks and bonds, and certain savings bonds issued by the United States Government, such as Series EE savings bonds.

Another category of property that passes outside of probate is property held in a trust for the benefit of the decedent. The trust may have been created by the decedent during his or her lifetime for property management purposes or by someone else, such as a parent of the decedent. Trust assets pass under the terms of the trust rather than under the terms of the decedent’s will. It is important to determine the extent of one’s nonprobate assets when planning the disposition of one’s property at death. If a substantial portion of the assets are nonprobate assets that do not pass under the will, even a well-drafted will may be insufficient to carry out the testator’s intent in disposing of his or her property.

DYING WITHOUT A WILL: How will your separate property be distributed?

The distribution of separate property of a person who dies without a will depends on whether it is real or personal property.

Separate property is distributed in this manner:

1. If the decedent is survived by a spouse and children (or descendants of deceased children), then subject to the surviving spouse’s rights with respect to the homestead and exempt personal property:

• Separate personal property passes one-third to the spouse and two-thirds to the children (and the descendants of deceased children).

• Separate real property passes to the children (and the descendants of deceased children) subject to a life estate in one-third of the property in favor of the surviving spouse.  This means that the surviving spouse is entitled to use one-third of the real property during his or her lifetime, and upon his or her death, the children (or descendants) will have full title to the separate real property of the decedent.

2. If the decedent is survived by a spouse but not by any children or descendants, then subject to the surviving spouse’s rights with respect to the homestead and exempt personal property:

• All separate personal property passes to the spouse.

• Separate real property passes one-half to the spouse and one-half to the decedent’s parents or collateral relatives, such as brothers and sisters or their descendants.

• If no parents, brothers, sisters, or their descendants survive, then all separate real property passes to the surviving spouse.

3. If only children or their descendants survive, all separate personal and real property passes to the children or their descendants.

4. If both parents survive, but not the spouse or children or children’s descendants, all separate personal and real property passes one-half to each parent.

5. If only one parent and brothers or sisters survive, separate personal and real property passes one-half to the surviving parent and the remaining one-half is divided equally among the brothers and sisters or their descendants. However, if no brothers or sisters or their descendants survive, then all separate property passes to the surviving parent.

6. If no spouse, children or children’s descendants, or parents of the decedent survive, all separate property is divided equally among the decedent’s brothers and sisters or their descendants.

7. If none of the above relatives survive, then all separate property passes generally to the decedent’s grandparents. If no grandparents survive, the law provides for distribution of separate property to more distant relatives. In Texas, no matter how remotely related one is to a person who dies without a will, potentially he or she is an heir at-law.   Notice that the decedent’s property passes to the State of Texas only if none of his or her heirs, including very remote heirs (such as uncles, aunts, or cousins), are living.  Indeed, the State rarely benefits from the estate of an intestate decedent.

Would the persons you desire to receive your property actually receive it?

PART 1: DYING WITHOUT A WILL – How will your community property be distributed?

Community property consists of the property, other than separate property, acquired by either spouse during marriage.  Community property, whether real or personal, is distributed in this following manner:

1. If the decedent is survived by a spouse and children (or descendants of deceased children):

• If all surviving children and descendants of the deceased spouse are also children or descendants of the surviving spouse, all of the community property passes to the surviving spouse.

• If any surviving child or descendant of the deceased spouse is not also a child or descendant of the surviving spouse, the deceased spouse’s one-half of the community property passes to his or her children (and the descendants of any deceased child), and the surviving spouse retains the one-half of the community property he or she owned prior to the other spouse’s death. However, the surviving spouse has the right under Texas law to use and occupy the homestead during his or her life and may have the right to use or own certain items of personal property that are exempt from creditors’ claims.

2. If the decedent is survived by a spouse but not by any children or descendants, all of the community property passes to the surviving spouse.

3. If the decedent is not survived by a spouse, all property is separate property because the community estate terminates at the death of the first spouse.

MY NEXT BLOG WILL BE ABOUT THE DISTRIBUTION OF SEPARATE PROPERTY. . .

Do you have a valid will that will ensure your wishes are accomplished?

Without a will, you have no choice as to who will administer your estate, who will be the guardian of your minor children and who will receive your property in what proportions or when.

To make a valid Will in Texas, you must have legal capacity, testamentary capacity, testamentary intent and certain formalities must be followed.  If a Will does not meet all of the requirements set forth by the statutes, it will be declared invalid, meaning that your estate could be distributed according to a statutory formula rather than the way you would have preferred.

5 Top Financial Things To Do For Second Marriage

1.  Full Disclosure

Before you get married, you and your fiancé should discuss all aspects of your financial situations with one another. On a piece of paper, write down your:

  • Credit History. Have you ever been late on payments, or had any judgments against you? Have you ever declared bankruptcy?
  • Debts. How much do you owe to credit cards? What other debts do you owe?
  • Assets. Include your annual earnings, the value of your home, cars, investments, and retirement plan funds.
  • Obligations under a previous divorce decree. Make sure your intended is aware of any child support or alimony payments you are required to make (including how much), as well as any disability, life, health or long-term care insurance that your settlement says you must keep in effect. You should also let your partner know if your ex-spouse has rights to any of your future retirement plan earnings.

When you’re done, exchange papers with your fiancé. Expect your answers to trigger discussion about who is responsible for debts incurred before the marriage, whether you will share assets earned by one of you, and how you will meet financial obligations from a previous marriage.

Your next step is to consider drafting a prenuptial agreement. A “prenup” is especially important if you 1) are bringing significant assets into the marriage, 2) expect to inherit a business or other assets in the future, or 3) have children from a previous marriage.

2.  Protecting Your Assets

Typically, those who remarry are older and wealthier than the first time they married. As such, you often have more interest in protecting assets you bring to the marriage. Many high-earners also are interested in protecting assets they’ll earn during the marriage. A prenuptial agreement will ensure that your assets will remain separate from your spouse’s, and that the spouse cannot claim a portion of your assets if you divorce.

3.  Protect Your Children

Prenuptial agreements also can be useful if you have children from a prior marriage and want to ensure that your assets pass to them when you die. Generally, unless your spouse specifically waives his or her right to the assets in a valid agreement, he or she may claim a portion of your estate when you die.

Take John, for instance. A successful internist, he was 45 years old when he married his second wife, Melanie. To protect his two children from a previous marriage, John established a trust and named the children as beneficiaries. That way, the $2 million in assets he’d earned before his second marriage would go to the children when he died and not to Melanie.

But John’s plan may be sabotaged if Melanie decides to sue for a share of the money when he dies. Virtually every state has a law that entitles a surviving spouse to a portion of the estate — even if your will or a trust says otherwise. If Melanie does not expressly waive her right to the money in a prenuptial agreement, John’s children could lose a third of their inheritance should she demand part of the money.

If you’re like most, however, you want to do both: to provide for your spouse and preserve assets for the kids. To do this, consider a Qualified Terminal Interest Property, or QTIP, Trust. This trust lets your surviving spouse enjoy access to the assets during his or her lifetime, but enables those assets to pass to your children upon the surviving spouse’s death.

4.  Inheritances and Other Assets

Most states consider inheritances the property of the heir. Just be sure you keep the money in a separate account, or it might be considered community property if you divorce. Generally, any income or other property acquired during the marriage will be deemed community property also.

5.  After the Wedding

Now that the wedding’s over, it is particularly important that you revisit your financial plan. You should review:

  • Insurance. Do you have enough? Now that a new family is counting on your income, you may need to increase your life and disability insurance. If you are in your 50s or older, you should also purchase long-term care insurance, because odds are high that you or your spouse may need such care in the future.
  • Beneficiaries. Have your beneficiaries changed? Too many newlyweds fail to update the beneficiaries of their life insurance policies, trusts, company retirement plans, and IRAs. If you’re not careful, you’ll leave money to your ex-spouse instead of your current spouse!
  • Wills. A new marriage virtually requires a new will.
  • Assets. Do you need a post-nuptial agreement? Do you need to add a waiver to your prenuptial agreement? Talk with a lawyer to find out.

No doubt, marriage can be one of the most emotionally rewarding choices you can make in your life. But don’t ignore the financial implications of your impending union. Proper planning can be key to your continued happiness.