May

5

2022

Advance Care Planning Tools To Help Avoid Probate

Posted by: Adair M. Buckner

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Advance care planning with probate-alternative documents can avoid the need for probate in many cases. Even if the deceased person had a Will, probate may not be necessary if these steps are taken prior to death, and there are no other assets that have not been disposed of by such advance planning. 

These are key advance care planning steps:

  1. A Transfer on Death Deed or "Lady Bird Deed" for any real estate or mineral interests owned (at least for Texas property)
  2. Beneficiary designations for payable on death instructions on retirement accounts, bank accounts, life insurance, brokerage accounts, and the like 
  3. A Trust arrangement

1. A Transfer On Death Deed Or "Lady Bird Deed"

Texas law allows real estate or mineral interests to be transferred to the desired beneficiaries automatically on the death of the owners by either of these two types of deeds. The Transfer on Death Deed is a statutory form the Texas legislature approved which has limitations on the ability of the owners to transfer the property during their lifetimes without the consent of the "remaindermen", or those persons who would receive the property on the death of the owners. 

The "Lady Bird Deed" does not require that consent and gives the owners very broad power to deal with the property during their lifetimes. These are handy tools to eliminate the need for probate where the primary assets are real estate or mineral interests in Texas. For property in other states, your attorney would need to determine if that state has similar Transfer on Death Deed provisions. Many states do.

Upon the death of the surviving owner, all that is needed to transfer the property to the beneficiaries is filing an affidavit in the county real property records reflecting the death of the prior owner, reference to the filing information for the Transfer on Death or Lady Bird Deed, and stating that there are no outstanding debts of the estate.

To learn more about these two deeds and the other benefits they provide, see this blog.

2. Beneficiary Designations On Life Insurance, Bank Accounts, Brokerage Accounts, And The Like

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A great many assets held by most people can be transferred on death to the desired beneficiaries by making a beneficiary designation or specifying to whom they are payable on death ("POD" designation). This includes:

  • Life insurance
  • Retirement plans, which are frequently a large part of a person's estate
  • Bank accounts
  • Certificates of deposits
  • Brokerage accounts
  • Stocks and bonds

I recommend that primary and secondary beneficiaries be named so that if the primary beneficiaries predecease the owner, probate will not be necessary for the asset to pass to the next level of desired recipients.

I have seen many instances where naming a secondary beneficiary was overlooked, probate was required to pass the asset, and the ultimate beneficiaries were not those the owner intended. Simple planning at the front end could have avoided this unpleasant result.

3. A Trust Arrangement

A revocable or irrevocable trust set up by the owner is an excellent tool to avoid probate. Property in the trust will pass according to the terms of the trust upon the death of one of the settlors (persons who drew up the trust), without probate. 

The trick, however, is to be sure that all of your assets have been placed in the trust prior to your death. If property was not placed in the trust prior to death, probate will be necessary for it to pass. To avoid this, I recommend a "Pour-Over Will" be drawn up at the same time as the trust agreement. 

A "Pour-Over Will" is a Will that provides that any assets not placed in the trust during the owner's lifetime will "pour over" into the established trust. If assets are not placed in the trust during the owner's lifetime, the probate of the Pour-Over Will will be necessary. Thus, the purpose of drawing up a trust to avoid probate is defeated. So, it is very important to keep up with placing property in your trust as it is acquired.

Many people like the privacy a trust provides for the transfer of assets on death because it does not ever have to be made a public record, in contrast to a Will, which does have to be filed at the county courthouse. There are many other possible benefits of having a trust in your estate planning package, as discussed in this blog.

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Estate planning and probate are different for each state. Get an attorney in the state you live in to help you implement these probate-avoidance tools. If you would like to discuss estate planning for the state of Texas, including these tools, contact Adair M. Buckner for a free initial consultation*.

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*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)

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