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Probate

Wednesday, July 30, 2014

Alternatives for Formal Probate - Part 3: Family Settlement Agreement

This is the third blog in a three-part series that describes alternatives available in Texas when a full, formal probate either isn't possible or necessary.  Today, we'll discuss the "Family Settlement Agreement."

The Family Settlement Agreement is an agreement among all persons entitled to a portion of the decedent's estate (i.e. the "distributees") about how the estate will be divided.  A Family Settlement Agreement is available for use whether or not the decedent died intestate (i.e. without a Will) or having left a Will. 

An often-asked question is how can persons forge an agreement that is contrary to the decedent's intention as expressed in the Will?  A contrary outcome is made possible by two tenets of law.  First, it is the policy of the State of Texas to encourage resolution of disputes through means that avoid litigation.  Second, and when a Will exists, the Estates Code Section 101.001 provides that the decedent's estate vests immediately in the Will's distributees-- subject to payment of valid debts.  It is this immediate vesting of title that provides the authority for the distributees to craft their own agreement that might alter the Will (and avoid litigation).

This blog post will not attempt a full description of the process for creating a Family Settlement Agreement.  The reality is that the process can change based on the players and interests involved.  For our purposes, it will be sufficient to note that anyone having a property interest in the estate is a necessary party to the Family Settlement Agreement.  It's also important to note two entities that have no standing to object to a Family Settlement Agreement: (1) a Will's Executor, since he or she has no property interest in the estate; and, (2) the decedent's Creditors, as long as payment of their claims is unaffected by the agreement.  Beyond those quick notes, a qualified probate attorney can advise on the potential benefits and pitfalls of the Family Settlement Agreement alternative.

Author Jim Cramp is the founder and principal attorney at the Cramp Law Firm. The Cramp Law Firm provides a spectrum of family-related legal services in the greater San Antonio Region.

 


Sunday, July 20, 2014

Formal Probate Alternatives - Part 2: Small Estate Affidavit

This is the second blog in a three-part series that describes alternatives available in Texas when a full, formal probate either isn't possible or necessary.  Today, we'll discuss the "Small Estate Affidavit."

The Small Estate Affidavit may used by the heirs of the decedent's estate who are entitled to a share of the decedent's property (i.e. the "distributees") under Texas laws of intestacy.  The laws of intestacy prescribe the order in which descendants (e.g. children and grandchildren), ancestors (e.g. parents and grandparents) and/or other relatives (e.g. brothers, sisters, nieces and nephews, and cousins) share in distribution of the decedent's property when there was no valid Will.

When approved, the Small Estate Affidavit permits distribution of the property directly to the heirs without need for appointment of a Personal Representative to administer the estate. Other requirements that must be met before a Small Estate Affidavit can be used include:

  1. At least 30 days have elapsed since the decedent's death;
  2. No petition for appointment of a Personal Representative is pending or has been granted; and,
  3. The value of the estate's assets, excluding the decedent's homestead and exempt property, does not exceed $50,000.

The Small Estate Affidavit filed with the court must contain sworn statements by two disinterested witnesses and all distributees (i.e. persons who will take property) that list:

  1. All estate property and debts;
  2. The names and address of each distributee; and,
  3. Relevant marital and family history that proves each distributee's right to received property.

Once approved and signed by the court, the distributees must provide a copy of the Small Estate Affidavit to each person who owes money to the estate (i.e. borrowers) or has custody of property off the estate (i.e. banks holding the decedent's money).  Prior to distributing the decedent's property, the distributes must also ensure the decedent's valid debts get paid by liquidating assets other than an exempt homestead and any exempt personal property.

When title to the homestead will transfer, the Small Estate Affidavit can be recorded in the deed records of the county in which the decedent's homestead is located. Then, any bona fide purchaser of the homestead is entitled to rely upon the Small Estate Affidavit to take ownership free and clear from future claims of any potential undisclosed heirs.  A bona fide purchaser of the homestead, however, remains liable to any lawful creditors who were not paid by the distributees prior to distribution of the decedent's property.

Altogether, there a several advantages and potential pitfalls to using a Small Estate Affidavit.  A qualified probate attorney can advise whether use of a Small Estate Affidavit, rather than some other alternative to a full, formal probate, fits your circumstances.

Author Jim Cramp is the founder and principal attorney at the Cramp Law Firm. The Cramp Law Firm provides a spectrum of family-related legal services in the greater San Antonio Region.


Thursday, July 10, 2014

Formal Probate Alternatives - Part 1: Proceeding to Declare Heirship

This blog post is the first in a three-part series that describes alternatives in Texas when a full, formal probate either isn't possible or necessary. Today, we'll discuss a "Proceeding to Declare Heirship."  There two main scenarios in which a Proceeding to Declare Heirship becomes necessary are:

  1. The decedent died "intestate," meaning without having left a valid Will; and,
  2. The decedent's Will was not probated within four years after death (in which case the Will no longer is valid).

An application can be filed with the court by an heir, guardian, creditor or other interested person.  The application includes four important categories of information:

  1. A description of the decedent's marital and family history (i.e. the known heirs, who must be served with notice of the proceeding);
  2. A description of the decedent's separate and community property, including both real property (e.g. house/land) and personal property (e.g. cars, furnishings, money);
  3. A listing of the percentage of the decedent's separate and community property, both real and personal, that each known heir will receive (assuming no unknown heirs are identified) with the percentages determined by Texas law; and,
  4. Identification of at least two credible, disinterested witnesses who can testify to the decedent's marital and family history; a disinterested witness can be a long-time friend or family member, but they must be someone who will not "take" property as a result of the proceeding.

Next, an Attorney Ad Litem must be appointed by the court to represent the interests of potential "unknown heirs."  The Attorney Ad Litem will interview the disinterested witnesses and perhaps other persons who have the similar knowledge before filing a report with the court.  If no previously unknown heirs are discovered during the Attorney Ad Litem's investigation, the next step is the heirship hearing in court.

The Application for a Proceeding to Declare Heirship may or may not need to be accompanied by an Application for Independent Administration.  Whether an Independent Administration (meaning, a probate adminstration largely free of court supervision) is necessary will depend on the nature and extent of the decedent's property and debts. An example of when an application for Independent Administration might not be required is when the only issue is resolving title to real property.  In those cases, the Proceeding to Declare Heirship can take as little as two to three months, depending on everyone's schedule, including the court's. A qualified probate attorney will be able to advise you after discussing the specific facts of your situation.

Author Jim Cramp is the founder and principal attorney at the Cramp Law Firm. The Cramp Law Firm provides a spectrum of family-related legal services in the greater San Antonio Region.


Friday, June 6, 2014

Non-Probate Assets and Will-Making

Many people believe that upon making a Will, they now have an up-to-date plan for distribution of all property after death.  That's true--but only for assets that the Will actually controls.

A Will only controls "probate" assets.  A Will does not control "non-probate" assets.  Non-probate assets are assets that transfer after the owner's death according to the laws of contract, such as a valid survivorship or beneficiary designation. 

An example of a survivorship designation is a jointly owned bank account with "right of survivorship."  Upon proof of death, the surviving joint owner gains title to the whole account without regard for what the deceased owner's Will might say.  An example of a beneficiary designation is life insurance.  Upon proof of death, the company pays the policy amount to the named beneficiary. 

But that's not the end of the story.  It is possible for what are normally "non-probate" assets to become probate assets.  This transformation would occur under the following non-exhaustive list of circumstances: (1) the deceased's estate is named as beneficiary (i.e. John Smith's life insurance policy names "The Estate of John Smith" as beneficiary); (2) all primary and alternate beneficiaries predecease the insured;or, (3) a joint account has no right of survivorship provision and no pay-on-death designation.

The moral of the story is that updating your estate plan involves more than just updating your Will.  It is wise to review the status of probate and non-probate assets in order to make deliberate choices.  Either bring certain non-probate assets under the control of your Will or validate/update the applicable survivorship or beneficiary designations so your intent will be met.

Author Jim Cramp is the founder and principal attorney at the Cramp Law Firm.  The Cramp Law Firm provides a spectrum of family-related legal services in the greater San Antonio Region.


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