Blogs :: Ways to Avoid Probate
You can keep assets out of Probate if you name beneficiaries for Life Insurance policies and Retirement Funds with the financial institution. Checking and Savings Accounts are also outside of Probate if you have a Payable on Death (POD) notation on them. These forms can be obtained at your bank. When a person dies and his or her financial accounts have a beneficiary name, the beneficiary will, in most cases, need to file a death certificate with the financial institution and they will receive the assets.
Living Trusts will keep assets out of Probate. A living trust is a legal device used for the management of property. In a trust, legal title to the property -- the right to manage the property -- is held by one person, called a trustee, while another person, called the beneficiary, has the beneficial right to the use and enjoyment of the property. A living trust is a trust created while the creator is living (compared to a testamentary trust, which is created at or after the creator's death under the terms of his or her will). A living trust may be revocable -- changeable by the creator prior to his or her death -- or irrevocable -- unchangeable by the creator. When most people speak of a "living trusts", they mean a revocable trust created during the creator's lifetime for the management and disposition of all, or substantially all, of the creator's property.
Right of Survivorship on Property: The “right of survivorship” is the power that a successor(s) of a deceased person has to acquire the property of that person upon his or her death. The “right of survivorship” decides what happens to a piece of property after one of its owners passes away. The “right of survivorship” arises in properties with joint tenancy, or properties that two or more parties own together. When one party dies, the right of survivorship determines the fate of the piece of real estate. This document is very helpful when you and your spouse's names are both on the deed to your home. Since Texas is a community property state, when one spouse dies, you will need to go through probate to change title on your spouse's fifty percent (50%) of the house ownership in order to obtain clear title. This can be time-consuming and expensive in Probate Court. The Right of Survivorship document allows this transfer to happen without going through Probate.
Other Ways to Keep Property out of Probate
Transfer on Death Deeds (TODD) and Lady Bird Deeds are two documents that will keep assets out of Probate at your death.
Transfer on Death Deed: A TODD is a non-testamentary instrument (meaning outside of the Will) to transfer an individual's interest in real property to one or more beneficiaries effective at the transferor's death. A TODD is statutory in nature.
If a designated beneficiary predeceases the transferor but is a descendant of the transferor or the transferor's parents, the descendants of the designated beneficiary who survive the transferor by 120 hours will take the designated beneficiary's share of the real property. That is to say that if you leave your home to your son and your son dies before you do, his share will automatically go to his children instead of 100% then going to your son.
A TODD cannot transfer real property with any warranty of title even if the deed states that it does.
A TODD is revocable, and the grantor can sell or do anything with the property prior to death.
TODD has to be registered with the county clerk's office prior to death. A Will may not revoke or supersede a TODD.
Divorce does not change a TODD deed beneficiary designation. Whereas a Will considers a divorce spouse as if he or she died.
If the estate is near or insolvent, then under the TODD there is a two (2) year time limit that creditors can come after the estate which can cause problems if you beneficiaries are trying the sell the real property after your death.
If you are expecting to receive Medicaid later, the TODD helps with this and keeps the real property from Medicaid payback.
If a transferor uses a TODD to deed his or her home to stepchildren and their spouses who subsequently divorce, the TODD is still effective to the Ex-spouse or stepchildren unless the transferor revokes it.
Lady Bird Deed: Lady Bird Deeds are not statutory in nature. These deeds are also known as enhanced life estates deeds or revocable life estates deeds and transfer the grantor's interest but retain a life estate with the ability to occupy and use the property for the grantor's lifetime with no liability for waste and retain the ability to sell, convey, lease or mortgage the property without the consent of the remainder beneficiaries and without sharing the proceeds.
In a LBD the grantor retains the right to take the property back, sell it, take out a mortgage, cancel the remainder, and keep all proceeds from the property.
The LBD has the ability to convey property in several different situations verses the TODD
The LBD can add certain provisions whereas the TODD cannot
The LBD does not have an anti-lapse statute such as the TODD. What this means is that if a mother leaves her property to her two children through LBD and one child predeceases her, the other child will own one hundred percent of the real property and the deceased child's children will own nothing.