Should I Set Up My Estate to Avoid Probate?

Probate in Texas, compared to other states, particularly New York, California, and even Florida, is not as expensive and time consuming as one would think, IF you have a properly drafted Will with an independent executor.  Most estates will have some sort of probate involved with the process of transferring assets.

Let's take a step back and say what probate is.  Probate comes from a Latin word meaning "to prove."  With a Will, the applicant is offering a document to prove that it is the Last Will and Testament.  Without a Will, one has to prove who the heirs are.  A Will has no legal effect until the testator dies (yes, there is a statute that says that) and until the Will is admitted to probate.  That does not mean a Will must be probated.  There are two types of assets: probate assets and non-probate assets.

Probate assets are those that pass through the Will, or if there is no Will, then through the intestacy laws.  Probate assets include stocks, bonds, bank accounts, privately held company stock and businesses, real estate, vehicles, and other tangible assets.  Non-probate assets include life insurance and retirement accounts; each of these allow for the designation of a beneficiary for those assets.  Further, almost any probate asset can be made into a non-probate assets.  For example, stocks in an account and money in the bank can have payable on death beneficiaries or joint tenants with rights of survivorship.  Even real estate can get transferred by a transfer on death deed or a life estate deed.  Finally, a person can create a revocable living trust and transfer assets to it.  Any assets titled in the trust at death do not need to go through probate.

Now, should you arrange your estate to avoid probate?  For most of my clients, the answer is no.  For some clients, I do create living trusts and transfer the probate assets to it.  Who are these clients?

(1) Elderly clients who have no one to manage their affairs upon incapacity
(2) High net worth clients with assets and business to manage--beneficiaries should not have to wait until a court appoints an executor to manage these assets.
(3) Clients with real estate held out of state.
(4) Clients who want privacy in the administration of their estate.  Trust assets need not get reported on a probate inventory.

Of course, with the best of plans of men, invariably, a person with a living trust plan will have an asset not held in the trust at death.  To transfer that asset, what is required?  Probate!