Probate

There are many types of Probate procedures. These procedures vary considerably in each state. Texas has more than one kind of procedure, although not all probate procedures are available to all estates.

We will be publishing a four-part series on the different types here in Texas. In this article we will discuss the Small Estate Affidavit Procedure, which is one probate procedure available if someone passed away without a will.

For most probate procedures, some level of court involvement is necessary. In urban areas, the Texas legislature has established specialized “probate courts” to undertake this task. In counties without large urban centers, probate is handled by county courts at law, which also handle other types of cases.

Small Estate Affidavit Procedure

This type of procedure may be used where the “probate” estate is made up of property not exceeding a maximum value set by state law and can only be used if the Decedent did not have a will. This maximum under Texas law is now currently $75,000, excluding the value of the decedent’s homestead and certain exempt assets. The small estate affidavit will not work to transfer title to real estate other than the decedent’s home and cannot transfer the decedent’s home to someone other than the surviving spouse or minor or incapacitated minor. Under the affidavit procedure, no Will is filed for probate, and no executor is appointed. The person settling the estate, usually the surviving spouse or next of kin, signs a legal form known as an affidavit stating such things as:

The affidavit must be sworn to by two disinterested witnesses and by all adult distributees.

Disinterested witness means a “witness who is not a spouse, child, parent, sibling, grandchild, grandparent, or guardian of or other adult who exhibited special care and concern for the individual who makes, amends, revokes, or refuses to make an anatomical gift”.

Costs

Because the probate court is not involved in overseeing the process of administration, the costs of using the affidavit procedure are low The lack of court involvement may result in faster settlement. Parties receiving the affidavit are required to transfer the decedent’s property to the designated person or persons. As indicated above, however, the affidavit procedure is not effective to transfer title to real property other than the decedent’s homestead to anyone but the surviving spouse or a minor or incapacitated child/children. If the decedent owned real property other than his or her homestead, had a homestead but was not survived by a surviving spouse and/or minor or incapacitated children, or owned non-exempt assets with a value more than $75,000, another probate procedure must be used.

We hope you found this article valuable and will continue to follow as we share more information on these types of subjects. Please reach out to Heirloom Legal, PLLC if you feel that we could assist you with any of the legal matters discussed in this article. Heirloom Legal, PLLC is ready to assist you with your estate planning, probate and business’ legal needs.

Heirloom Legal, PLLC presents the information in this article for general education purposes only. Although this article discusses legal issues, it is not legal advice. The law and the content may have changed since this article was written, and Heirloom Legal, PLLC makes no warranty or guarantee about the continuing accuracy of the information presented. Use of this article does not create an attorney-client relationship, and Heirloom Legal, PLLC does not represent you unless and until we are expressly retained in writing.

If a loved one has appointed you to be their Independent Executor/Executrix in the event of their death do you know what that really means? It can be confusing and a little scary but here are some things to keep in mind.

What is an Independent Executor?

First things first, what IS an Independent Executor? An executor is appointed in the will of a decedent (the person who passed away), to administer their estate. Generally, if the decedent died without a valid will, the term ‘administrator’ is used. When the court appoints an independent executor, the court issues “letters testamentary” to the appointed person. In the case of an administrator, the court issues “letters of administration”. Either type of letters tells third parties that the executor or administrator has been authorized by the court to administer the affairs of the decedent.

Your general duties as an Independent Executor (or Administrator) include: collect all assets, pay off any debts of the deceased, and to distribute the estate assets according to the Will or according to your state’s law.

How to Become Qualified as an Independent Executor/Administrator

You must become qualified in both of the following was in order to become an Independent Executor/Administrator:

Take an oath with the Court: this must be done within 20 days from the date the court signed the order appointing you as Independent Executor.
File any bonds that may be required by the court

Once the above has been completed, you will then receive Letters Testamentary or Letters of Administration. These are the proof that you are an authorized person to act on behalf of the estate. You will need to present these letters to persons holding the assets of the estate so that they know you are the representative of the estate. Once you have collected all of the assets you must then notify creditors.

How to Put a Notice Out to Creditors

By law you are required to publish a notice to creditors in a newspaper printed in the county where the Decedent was a resident of at the time of their passing. The notice must be filed with the court within 30 days of receiving Letters Testamentary (or Letters of Administration).

In addition, you must give notice to all known secured creditors. A secured creditor holds a claim secured by a deed of trust, mortgage or some other lien on a property. You must file this notice with the court within 60 days of receiving Letters Testamentary. There is also a process to deal with unsecured creditors but you’ll need to discuss those options with your attorney.

How to Notify Beneficiaries

If there is a beneficiary named in the Will, you must give them notice within 60 days of the date the Will was probated. Within 90 days you must file an affidavit or certificate with the court to confirm notice was given to said beneficiary.

Other Duties

You must also submit an Inventory (or an Affidavit in Lieu of Inventory to the court if the requirements are met), file taxes for the estate, and in certain cases you have the ability to sell estate property to pay estate expenses. Once all of the duties have been completed, you may close the estate.

When a loved one passes the last thing you want to do is worry about the estate and probate process, however, there are a quite few items you need to know about.

Let’s start with talking about the legal considerations and other important items to keep in mind.

If you were assigned as the Power of Attorney while your loved one was still living, the POA is no longer valid. This means if you were in charge of paying the person’s bills, you should stop paying these bills.

Second, if your family member made arrangements for his or her funeral in advance, their instructions are most likely legally binding under state law and thus the family may be obligated to comply with them.

Next, if any of your loved one’s property or money did not pass automatically to an individual by designation, that money or property must be handled through the probate process. This means that no money or property can be distributed to anyone without involvement of the probate court. If there is a possibility that any of your family members may want to disclaim or refuse to accept any money or property they will inherit, it is important to not take any action that would be considered an acceptance of the inheritance. For example, if you or another family member are listed as a beneficiary of the life insurance but would rather the share go to the next beneficiary in line, you(or whomever is the beneficiary) should not complete any paperwork or reject any checks involving the life insurance policy. There may be tax consequences if you accept the money and then choose to give it to a different beneficiary.

Finally, you nor your other family members, should prematurely distribute any of the deceased individual’s property or funds. The executor of the will or trustee of a trust are the only individuals allowed to distribute the deceased individual’s money or property and must pay all debts and taxes before transferring any funds or property to the beneficiaries.

If some time is likely to pass before burial, for example, if there will be a delay prior to a special ceremony and burial in a veteran’s cemetery, you should make arrangements with a funeral home to store the deceased loved one until the service.

After your loved one passes away, their death should be registered with the local or state vital records office, which can then issue official death certificates. A state-licensed funeral director or coroner typically prepares and files the death certificate with the state. A death certificate is often required to claim life insurance benefits, close bank accounts, transfer titles, and take are of other matters connected to the estate. It is recommended to obtain ten original certified death certificates.

You and your family members should determine which one of the deceased’s accounts contains cash that can be accessed for the beneficiaries’ needs and other expenses. The last thing you want is for an item to be repossessed or the electricity turned off due to non-payment.

If the deceased had pets or other animals, care should immediately be arranged for them. The will or trust may name the person your loved one has chosen to care for them, but if there was no will or trust, you and your family members may need to arrange for someone to look after the animals until a caretake can be determined.

If the deceased owned a home, you should walk around the home to make sure any points of entry are locked and that there are no maintenance issues that need to be addressed. The police department should also be notified that the home will be vacant so police can patrol the area more frequently.

On this same note, any vehicles owned by the deceased should also be locked. No one should drive the car and the odometer should be checked to determine the milage at the time your loved one passed away. If the car is parked on the street or in a driveway, you should notify the police to keep a closer eye on it. Insurance on the car should also be maintained.

Lawn care and general home maintenance will need to continue to ensure that the house does not become a target for thieves. Also to prevent any problems that may arise as a result of very high or very low temperatures, it is important to continue to heat and cool the home. In addition, if the home is vacant during cold winter months, a faucet should be turned on or cabinet doors opened to prevent pipes from freezing and bursting.

In some areas, a higher tax rate is applied to vacant homes, so in those areas it is important to notify the city if the home is vacant and part of an administration.

Next, you will want to make sure any subscriptions or other monthly services are canceled, and if applicable, request a refund.

You should also find all of the deceased’s insurance policies. The homeowner’s insurance company should be contacted to confirm that there is coverage for fire, flood and/or other needed items as part of the homeowner’s insurance policy. In addition, you should locate the deceased family member’s life insurance policies, which may have been issued by alumni associations, travel clubs, credit card companies, trade associations, etc. You need to locate all bank statements, checkbooks, canceled checks, and at least the past three years of income tax returns.

Lastly, while gathering the needed personal records, check to see if there are any documents reflecting debts owed to the deceased individual. You should contact those individuals to collect the amounts owed.

If you have any questions or need help with the estate and probate process, please do not hesitate to contact Heirloom Legal. You can reach us by calling us at 281-508-2228 or by filling out our form on the Contact page.

What is a step-up in basis and how does it work? In this article we will discuss what a step-up in basis is, how it benefits you and what is and is not covered.

What is a Step-Up Basis and How Does it Work?

A step-up in basis refers to the adjustment in the cost basis of an inherited asset to its fair market value on the date of the decedent’s death. Cost basis, more commonly the price paid for an asset, is what determines the taxes owed, if any, when the asset is sold.

Step-up in basis, or a stepped-up basis, is what happens when the price of an inherited asset on the date of the decedent’s death is above its original purchase price. The tax code allows for the increasing of the cost basis to the higher price, decreasing the capital gains taxes owed if the asset is sold later.

The step-up in basis provision applies to financial assets like stocks, bonds and mutual funds as well as real estate and other tangible property.

Of course, if the price of an asset has declined from that paid by the owner’s date of death, the asset’s cost basis would step down instead of stepping up for heirs.

In practice, most cost basis adjustments after death are steps up, not steps down. This is because financial assets passed on to heirs are often long-term holdings, while financial assets and real estate tend to have positive long-term rates of return.

How Does a Person Benefit From a Step-Up in Basis?

With a step-up in basis, capital gain taxes are calculated on the appreciation in value of the asset from the date of their loved one’s death instead of when the asset was first acquired. Additionally, the tax is only assessed when a beneficiary decides to do something with the inherited asset (such as sell it). This protects the asset’s value, helps keep property and other assets, such as businesses, within families, and allows for unhindered transfers of wealth. In most cases, if a beneficiary inherits an asset and sells it immediately, they will owe no capital gains tax.

How Is Step-Up in Basis Treated Differently in Community Property States?

In community property states, such as Texas, (and for assets in community property trusts) the surviving spouse receives a step-up in basis for community property for any community property assets they receive. In the majority of states without community property provisions, jointly-owned property such as stock in a joint brokerage account would receive only half the step-up in cost basis compared with the same account in a community property state after the death of a spouse.

What is Not Covered by a Step-Up Basis?

Some assets will not get a step in basis at the death of the owner. Retirement assets held in IRAs and 401k’s do not get a step up. The money that is withdrawn from these accounts is subject to regular income tax. Assets that are held in a Bypass or Credit Trust after the death of a first spouse, will pass to the beneficiaries without a step up. All such assets did receive a step up in basis after the first spouse’s death, but, because they are held in an irrevocable trust after that death, will not receive a second step up at the second spouse’s death.

If you still have questions or need any assistance with step-up basis, contact the lawyers at Heirloom Legal and schedule your appointment today.