PROBATE: The process of giving your will life, after your death.
What is Probate?
Probate is the process of a court recognizing an individual’s Last Will and Testament as valid. Ideally, the named executor will provide an original Will to an attorney. That attorney will then proceed with setting a court hearing to begin the probate process. If a Will is not probated, it is as if the Will does not exist.
There are so few things in life that are worth their weight in gold, but a well-drafted Will is one of them. After the death of a loved one, the focus should be on comforting the bereaved family, not spent in confusion trying to determine if a Will exists.
A well-drafted Will should seamlessly transfer assets from the deceased individual to the beneficiaries.
Pitfalls to watch out for:
Without a Will, or even in instances with a poorly or improperly drafted Will, the individuals you want to inherit may not inherit. Many people assume that their spouse will automatically inherit everything upon their death. This is not always the case. In families where the children of the deceased are not the children of the surviving spouse, the surviving spouse will be required to split any assets with the deceased person’s surviving children. This could be especially problematic if the deceased and the surviving spouse owned more than one piece of real estate but had little cash, “land rich but cash poor.” In a case like this, the surviving spouse would likely be forced to sell off real estate to settle the estate with the surviving children of the deceased.
A Will drafted without estate planning can result in tax consequences for the family. Many times, there are tax implications of dying land-rich but cash poor. If the value of the deceased person’s estate reaches certain levels, his or her estate could be subject to estate tax. In 2024, estate tax will be 18% to a whopping 40% of everything over the estate tax limit at one’s death. The estate tax limit changes annually, but if someone owns land at their death, and if that land is valued high enough, the surviving heirs might find themselves writing a giant check to the IRS before any of the assets are distributed. If someone dies with land but no cash, the surviving heirs might be forced to sell properties in order to settle an IRS bill before anything would be distributed.
“I won’t have a taxable estate. I just don’t own that much.” When someone dies, the Internal Revenue Service looks at that person’s “estate” as a giant pot full of everything that has their name on it. So, naturally, the IRS will throw the value of someone’s real estate into that pot, along with the value of their bank accounts, cars, personal valuables (from clothing to coin collections), CDs, savings accounts, retirement, and so on. The value of any life insurance proceeds is also thrown into this pot. There is a common misconception that “life insurance avoids probate and isn’t taxable.” Life insurance does avoid probate, but here’s the catch: While life insurance is not taxable for income tax purposes, it IS taxable for estate tax purposes. So, the value of the life insurance policy will be thrown into that pot along with everything else. The total value of all the assets collected will determine if estate tax is owed or not. Estate tax is not always avoidable, but in most instances, if it cannot be avoided, it can be minimized with proper estate planning.
“My spouse and I need to do Wills; we just don’t agree on who should have custody of our children if something were to happen to us.” Before I delve into the details of this one, let me reiterate a basic law in Texas: If ever guardians for your children are needed and you haven’t designated anyone, the state of Texas will pick for you. Isn’t that a scary thought! Ideally, you and your spouse should agree on who will become the guardians of your children. However, it is not necessary for you both to agree. Your Last Will and Testament must reflect your wishes alone, not your spouse’s wishes. Your spouse may put his or her wishes in his or her own Last Will and Testament. A Will is a very personalized document, and it needs to reflect you and you alone.
Why not just use the pre-printed Will forms? Can’t I just type up my own Will?
Be careful. States differ regarding pre-printed or “fill in the blank” style legal documents. In Texas, they are technically invalid, although some courts will recognize them. A typed-written Will has stringent rules when submitted to probate in Texas. Unless every requirement stated by the Texas Estates Code has been followed and met, a typed-written Last Will and Testament will not be valid in Texas. All the more reason why it is worth the money to pay an attorney to draft one for you. It’s also important to remember pre-printed forms usually do not include estate planning or language covering any assets acquired in the future.
What about a hand-written Will?
Yes, these are valid in Texas; however, they must be entirely hand-written. The bigger problem with hand-written Wills involves important language being inadvertently excluded. For example, someone may take the time to write a Will and leave their assets to those they choose. They may fail to put in “catch-all” language to cover anything they may have forgotten to list or may not know they own. They may fail to include language relating to the acquisition of future assets. Recently, there was a Will written by a woman stating that she gave away her “royalties” on an oil and gas property, but she didn’t give away the property itself. She failed to have any “catch-all” language in her Will to designate where this property should go. She intended her niece to receive the oil and gas property and the money it was generating, but that’s not what she wrote. Without the necessary language, Texas law determined her estranged daughter inherited the property instead of the niece.
Whatever proper planning and drafting might cost on the front end, it is well worth it on the back end. Lack of planning will likely create problems.
If you are alive and can have a lucid moment, it is not too late to execute a Will. This is true even if you are currently in a nursing home or hospital.
Your family will thank you.