Money, money, money. When you and I die we would like our families to be able to focus on one another, their memories of us, and how to remember us and our lives soon. We don’t want our families to have to worry about money primarily. Unfortunately, if you don’t have a will set up for yourself then you are going to cost your family the opportunity to be thinking mainly about your life and passing rather than stress and money when you die. This is not a hypothetical discussion. You and I (and everyone we know for that matter) will pass away. The key is what position will your family be in when the time comes.
How do trusts figure into this discussion?
If you have set up a living trust to avoid your executor having to put your will through probate once you pass away, then you should know that you can hold a bank account in the name of the trust. After you pass away whoever is chosen as your successor trustee can then take over. He or she will oversee the process of having the funds transferred to the beneficiary whom you named in your trust document. It will not be necessary to go through probate at that point.
To transfer the bank account to your trust you will need to contact the bank and tell them what you want to do. You will likely need to fill out some paperwork and submit the forms back to them. Then the bank will go and update its records and from that point forward the account will be in the name of your trust instead of you as an individual. Every bank or credit union has its methods for transferring a bank account into the name of your trust so you should check with them to make sure there aren’t any additional steps that you need to go through.
What if it is not clear what your intentions were in your will?
If you and your spouse open up a bank account together there is no doubt that you intended to own the account together so that if one of you passes away the other would become the owner of the account. This is called a right of survivorship account and is common in all states. Let’s consider a situation where a loved one of yours opens a bank account and adds a younger relative to the account as a co-signer. The question that most would have regarding this arrangement is whether your loved one intended to have this person become the owner of the account after he or she passes away or if the other person was added just for convenience’s sake. It may be easier to have a younger person help balance the checkbook or even write checks to pay bills.
In other circumstances, you may see your loved one add this other person’s name to their account so that after he or she passes away the second person will quickly be able to access funds to use on a funeral or other end-of-life situations. The problem that can come up in this situation is that unless your loved one has a will there is nothing telling anyone what your loved one’s wishes are. From a legal perspective if that person’s name is on the account, then he owns the contents of it. A will would need to be in place to supersede this position. Your loved one may have had a completely different viewpoint on how the money should be used but if he died without a will then nobody will ever be able to know the true wishes that your loved one had. The younger relative of yours would be able to spend the money however he or she would like to. It is not likely that you or any other relative would be successful in attempting to challenge this arrangement if there is no will in place. This is one of the most significant benefits of having a will in Texas.
How do you close someone’s bank account after they pass away?
Closing a bank account may be the last thing that you are thinking about when a loved one passes away. However, it is still an important step to take care of when tying up loose ends. What you want to avoid is a situation where you think that you have done everything to help that person’s estate establish some closure only to find out that there are more steps left to do. While none of these steps will be incredibly interesting, they are nonetheless crucial to performing end up life due diligence.
Proof of death (usually a death certificate) will need to be provided to the bank or credit union whenever it is ready. This can sometimes take a few weeks to a few months depending upon the circumstances of their passing. You will need to prove to the bank or credit union who you are as either the executor of the will or the administrator of the person’s estate if he or she passed away without a will. At that time, the bank or credit union will freeze the account so that no money can be deposited or withdrawn.
Next, you will need to as that the funds be released by the orders of the court and/or the provisions contained in the will. Generally speaking, the more money that is contained in the will means that it will take somewhat longer for this to occur. Likewise, if the account contains very little money then it will likely not take that long at all. As an executor, you can use this time to give some warning and advance notice to beneficiaries who may be waiting patiently (or not that patiently) on having property distributed to them once the probate process is complete.
Avoiding probate altogether
It does not have to be difficult or time-consuming to avoid going through the probate process. There are a few straightforward tips that you can utilize to not go through what otherwise may be a time-consuming and costly endeavor. Probably the most common method of how to prevent having to go through probate is through a revocable trust. A revocable living trust was invented to allow people like you to avoid probate. The trust and whatever is contained within it is not part of the probate estate and thus would not need to go through probate.
The reason why the trust is not contained in your probate estate is that the trustee of the living trust owns the property and not you. The trustee would, after your death, quickly transfer the property contained in the trust to whomever you left the property to friends, family or anyone else for that matter. The trust document spells out what your wishes are. All the trustee at that point must do is distribute the property according to the trust document at the time of your death. In this way, the trust document operates a lot like a will.
Payable on death accounts is another method and go-around for the probate process. We have discussed payable on death accounts on other blog posts but I think it bears repeating just how effective these accounts are and how simple they are to create. Your bank or credit union account can be converted into a payable on death account very easily. The same goes for any retirement accounts. These accounts and the changes that you made would go into effect only after you pass away. Before the date of your passing, you would control the money and the transactions within the accounts just as you had before converting them to payable on death accounts.
Once you do pass away, however, the money will go directly to your beneficiary without having to go through probate first period this is a great benefit to all involved because it is faster and easier for your estate. Not only that, but it allows your beneficiary to be able to get access to the money much faster than had they had to wait for it to be approved through probate. If you are uncomfortable with creating these types of accounts on your own you may choose to talk with a representative of your bank either in person or over the phone. These folks can walk you through the process of creating a payable on death account and can send you the paperwork and confirmations to make sure that you know that everything is in place.
As I mentioned a moment ago the same process could go into place for any retirement accounts that you own. This means your retirement account, as well as your 401K, can be designated as payable on death accounts. You usually set up these accounts very early after setting up the 401K or IRA. one of the most important aspects to setting up this type of accounts is making sure that they are accurate based upon your current circumstances. For instance, many people will list their spouse as their beneficiary should they pass away. This makes a great deal of sense. However, if you get a divorce or have a spouse pass away before you then you need to update your beneficiary immediately. The last thing you want is to find yourself in a position where your ex-spouse inherits a great deal of money from you. There is no real way for you to correct this mistake without incurring a great deal of heartache and last to your estate.
There are many types of joint ownership of assets that provide you with a simple and quick way to avoid probate whenever you or your joint owner were to pass away. The ownership documents or title forms would allow you to disclose how you want to own the property or hold title. Explicitly stating that you would want to avoid probate through a real estate deed can be enough to cause that document to not have to go through probate when you or your co-owner pass away. This would allow the other person to immediately begin to act as the sole owner of the property after the other passes away.
A joint tenancy with the right of survivorship is one of the most common ways to structure joint ownership of the property to allow for the asset to avoid probate. Property owned in a joint tenancy would automatically pass to the other person without probate. Next, tenancy by the entire T is a method that can be utilized to avoid probate. Finally, you should also consider that in a community property state like Texas then Community property ownership automatically has with it a ride of survivorship.
To be in a better position to know what is best for you and your circumstances I would recommend reaching out to experienced probate or estate planning attorney with the Law Office of Bryan Fagan. Our attorneys can talk to you about basic information and a free-of-charge consultation. If you choose to move forward with one of our lawyers, we can help you to write or rewrite a will and to structure estate planning and end-of-life processes so that you can avoid probate and save as much money and time as possible.
How do gifts figure into end-of-life planning?
when it comes to gifting property, you can do so in a way that helps you to avoid going through probate. Simply put, if you do not own property at the time of your passing then there is no way for the property to have to go through probate. Many people would prefer not to have to go through the process of estate planning or even drafting the will and prefer to just give the property away before their passing away. For example, if you own multiple residences but have no use for them at the end of your life you can simply choose to gift them before your passing. While you can avoid probate costs by doing so you need to keep in mind that gift tax implications are depending on the size and the nature of the gift.
What is the benefit of avoiding probate?
So far in today’s blog post, we have been discussing avoiding probate like it is something that everybody knows about. However, I do not want to assume that everyone out there necessarily understands why it may be desirable to avoid probate. After all: aren’t the attorneys with our law office probate attorneys? Wouldn’t it be in our best interest to encourage people to go through probate and thus give ourselves the possibility of having a new client or two high risks?
In short, there are two main problems with having to go through probate in an end-of-life scenario. The first is that the property that is contained in a will or a person’s estate like your own can be tied up in the probate process for months if not years. While a probate process typically takes less than a year there are circumstances where that general rule can be pushed to its limit. While the property is held in probate the intended beneficiaries under a will or heirs of a deceased person cannot receive the property.
Additionally, the probate process is expensive. There are attorney’s fees, court costs, and things of that nature that can eat up the estate value. If you want to make sure that as much of your probate estate is maintained as possible you should simply avoid going to probate. The other thing I will note about the probate process is that it is an administrative situation where there is no conflict, no parties arguing with one another, and no adversarial process. You need to file some paperwork, attend a hearing or two and have the probate court judge and their staff review the contents of an estate or a will. A probate case rarely calls for any type of lawyering that you see in a normal adverse aerial case. You will be hiring our law office or another attorney’s office to draft the paperwork and keep track of filing deadlines. There are some other technicalities involved in the probate process that can be difficult for a non-attorney to handle. However, hiring an attorney to do your will or do state planning does involve lawyering and can be a sophisticated way to avoid the probate process and help your family and estate retain as much money and property as possible at the time of your passing.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed estate planning law attorneys offer free of charge consultation six days a week in person, over the phone, and vehicle. These consultations are a great way for you to learn more about the world of Texas probate and estate planning law. Additionally, you can learn more about how your family circumstances may be impacted by the filing of a will or the involvement of a probate court.