Advance Care Planning Tools To Help Avoid Probate

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 or 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 in the state 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 the consent of the "remaindermen" or beneficiaries 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.

If one of these types of deeds has been drawn up and recorded, the process of transfer to the intended beneficiaries is very simple. 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
• Referencing the filing information for the Transfer on Death or Lady Bird Deed
• 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

Another probate avoidance tool is the designation of beneficiaries on the asset. Many assets held 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 then was required to pass the asset, and the ultimate beneficiaries may not have been those the owner intended. State law of intestate succession will determine who the beneficiaries are if this happens. 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 may be another tool to avoid probate. Property in the trust will pass according to the terms of the trust upon the death of one or both 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 any 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. The unfortunate reality is that, if assets are not placed in the trust during the owner's lifetime, probate 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 must be filed with the county clerk. 

There are many other possible benefits of having a trust in your estate planning package, as discussed in this blog.

Estate planning and probate are different for each state. Get an attorney in the state in which you live 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.)

** This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal, or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.