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Independent and Dependent Probate Administration, and Alternatives

| Apr 15, 2021 | Uncategorized |

When you hear discussions of the probate process, you may cringe and have an idea that probating a will, or going through an estate administration if someone dies intestate (without a will), should be avoided at any cost. Fortunately for those of us who live in Texas, the probate process is not nearly as onerous as it may be in other states. Thus, while there may be situations to seek out an alternative to the probate process, it is certainly not a goal that exists for every estate. Indeed, in many circumstances, going through the probate process or an estate administration may well be the cheapest and most efficient way to settle an estate.

“Probate” refers to the series of legal procedures by which a state government attempts to see that the debts, taxes, and expenses of its deceased residents and persons owning certain types of property in that state will be paid and that the remaining assets will be distributed to the rightful heirs or beneficiaries. These procedures are overseen by a particular court in the county in which the decedent lived, usually known as the “probate court” in Texas but sometimes called by other names in other states or Texas counties lacking a probate court.

The description of the probate process included in this memorandum is intended to give you a general idea of what you are likely to encounter, although you should keep in mind that the specific procedures vary considerably from state to state and even from county to county. It is also possible that probate will not be required in your case, or that a simplified probate procedure can be used.

INDEPENDENT vs. DEPENDENT ADMINISTRATION OF A TEXAS ESTATE
Texas probate estates are settled in two ways. In a dependent administration, the executor or representative must get court approval for most actions and report regularly to the probate judge. In an independent administration, the executor/representative is given more authority and autonomy to carry out his or her duties.

From the perspective of the executor, independent administration is preferable to being “micromanaged” by the court. It is generally quicker, with fewer hassles and court appearances. However, there may be statutory reasons or practical reasons for a client to want or a judge to dictate dependent administration.

The essential difference is the level of oversight by the probate court. An independent administrator is not closely supervised by the court and does not need preapproval for transactions such as selling property. With this freedom comes a high level of responsibility. It is very important to work closely with an attorney to avoid costly mistakes or breach of fiduciary duty.

In Texas, the court can grant independent administration if:

  • The deceased specified it in his or her will, or
  • The will did not indicate but all beneficiaries agree to an independent administrator.

Should a person die without a will, the estate is divided according to the Texas laws of intestacy and the court defaults to a dependent administration. The judge may also require dependent administration (or override independent administration) if there is a concern that the executor is not competent or trustworthy.

The costs of independent administration are significantly less, and the process is less time consuming. Clients who are desirous of creating a will or estate plan should opt for language in their will that provides for independent administration of the Texas probate estate.

There are a number of alternatives to probate that may be available in certain situations. This memorandum will also highlight the most common probate alternatives.

Muniment of Title
An estate planning attorney may sometimes refer to a muniment of title as “express lane probate.” It is not necessarily an alternative to probate, but a different, simpler approach to the probate process. This option may be ideal in circumstances where a person owned limited property, such as a house or one tract of land, and where there is no debt other than that secured by a real estate note and lien. Importantly, a valid will is required in order to utilize probate as a muniment of title.

The probate of a will as muniment of title is governed by the Texas Estates Code Chapter 257. Essentially, a muniment of title transfers title to property as directed by the decedent’s will without having an administration, meaning there are no Letters Testamentary issued by the court and no Executor or Administrator appointed. In order to qualify for a probate as muniment of title, a court must determine that a valid will exists and should be admitted to probate, and either (1) the estate does not owe any unpaid debt, other than any debt secured by a real estate lien or (2) there is another reason that there is no necessity for administration of the estate. See Texas Estates Code Section 257.001.

An application for the probate of a will as a muniment of title which includes a number of required details must be submitted to the probate court. See Texas Estates Code Section 257.051. Once an Order admitting a will to probate as a muniment of title is granted, this is sufficient authority for persons to purchase, or otherwise transfer assets in accordance with the will.

Small Estate Affidavit
When a person dies intestate with an estate value of less than $75,000 (excluding the homestead and exempt personal property), a small estate affidavit may be a valid alternative to probate. This can be a useful option for persons who die intestate with the majority of their estate consisting of their homestead and non-probate assets like transfer on death accounts or other accounts with designated beneficiaries. Importantly, the small estate affidavit is only an option if the homestead is the only real property owned by the decedent and the property is to be inherited only by the decedent’s spouse or minor children. These requirements make the situations in which the small estate affidavit can be used fairly limited.

The small estate affidavit will allow the person’s estate to be distributed without the appointment of a personal representative. Small estate affidavits are governed by Texas Estates Code Chapter 205.

In order to qualify to utilize a small estate affidavit, the following requirements must be met:

(1) 30 days have passed since the death;
(2) No petition for the appointment of personal representative has been filed or granted;
(3) The value of the estate assets, excluding the homestead and other exempt personal property, on the date of the affidavit do not exceed $75,000;
(4) The affidavit setting forth family members, estate assets, known liabilities, and distributees of the estate;
(5) The judge approves the affidavit; and
(6) The distributees (people receiving assets) comply with the statute.

Importantly, note that the value of the estate is determined not on the date of death as is usually the case, but the date of the affidavit being executed. Additionally, the $75,000 asset limit does not include the person’s homestead, exempt property, or non-probate assets (such as retirement accounts or other accounts that will pass via contract to designated beneficiaries rather than by probate). For rural land, the homestead may be up to 200 acres per family or 100 acres per single person. See Texas Property Code Section 41.002. Personal property up to $50,000 per single person or $100,000 per family that will be used for the use and benefit of the decedent’s spouse, minor children, unmarried adult children, or incapacitated children is excluded from the estate value calculation. See Texas Property Code Section 42.001. There are a number of types of property that may be included under the definition of personal property including home furnishings, farm or ranch vehicles and implements, tools and equipment used in a trade or profession, jewelry, two firearms, and specific numbers of various species of livestock. For more details, see Texas Property Code Section 42.002. Lastly, keep in mind that non-probate assets are not counted toward the estate value, so were a person to have beneficiary designations or transfer on death accounts for all financial accounts, these would not be included when determining the value of the estate with regard to the $75,000 limit.

One important limitation is that the only real property that may be transferred pursuant to a small estate affidavit is the decedent’s homestead. See Texas Estates Code Section 205.006. That transfer may only be made to the decedent’s spouse or minor children; if anyone else is to receive an interest in the homestead, a small estate affidavit is not a viable option. See Texas Estates Code Section 353.051.

Affidavit of Heirship
An affidavit of heirship may be an option in both situations where the person died with a will or died without a will (“intestate”). The affidavit of heirship is essentially the sworn statement of someone with knowledge regarding the surviving relatives of and property owned by the decedent. This is not an option where there may be unknown heirs. It may be useful in situations where real property is the only asset. These affidavits will likely not be options for estates with bank accounts or other financial assets as financial institutions are unlikely to recognize the affidavit of heirship since it is not prosecuted in or filed in the probate court.

Affidavits of heirship are not based on statutory authority, but there is a statutory form for drafting an affidavit of heirship found in the Texas Estates Code Section 203.002. The form essentially identifies the person executing the affidavit, the deceased, the relationship between the two, and then sets forth the family members of the decedent including spouse, children, parents, siblings and any property owned by the decedent. The affidavit is filed with the County Clerk to be filed in the property records, rather than with the probate court. The affidavit may be executed by anyone with knowledge of the facts set forth in the affidavit, but depending on circumstances, there may be situations where a disinterested person to execute the affidavit may be necessary. For example, title companies often require that two disinterested persons execute the affidavit.

Deeds Transferring Property Outside of the Probate Procedures
I also want to mention that there are deed options that would result in the transfer of property outside of the probate process. These include Transfer on Death Deeds, Life Estate Deeds, and Lady Bird Deeds (a/k/a Enhanced Life Estate Deeds). Each of these deeds must be executed before the death of the owner and will result in automatic transfer without the need for probate once the death does occur.

More Particulars For Each Alternative

Small Estate Affidavit
The Small Estate Affidavit is a process that avoids formal probate of a will but must meet certain requirements in order to be used. To be eligible for the administration process, the value of the estate must be $75,000 or less, not including exempt property.

With this method, an heir must file the small estate affidavit with the probate court clerk. After the probate court accepts the affidavit, the judge signs an order approving it, and then the affidavit can be used to distribute the estate to the heirs. For more on this process, contact our probate attorneys.

In Texas, a Small Estate Affidavit can be used as an affordable and efficient means to transfer property to a deceased person’s heirs. It is an alternative to Probate.

In order to use a Small Estate Affidavit in Texas, certain requirements must be met. If any of the requirement are not met, then a different probate procedure must be used.

Requirements:
The decedent (legal term for deceased person) died without a Will

  • The decedent left less than $75,000 in property (not including homestead property and exempt property)
  • The assets are worth more than the debts.
    • When calculating the value of the debts and the assets, do not consider any mortgages or debts secured by exempt property as debts, and do not consider homestead and exempt property as assets.
  • The only real property owned by the decedent was decedent’s homestead property, and the real property will be inherited only by person(s) homesteading with the decedent at the time decedent died—decedent’s surviving spouse and minor child(ren) who resided on property with decedent.
  • All of the heirs and their locations are known, and all of the heirs will sign the Small Estate Affidavit (or someone with legal authority will sign on their behalf).
  • There is no pending application for appointment of a personal representative and no personal representative has been appointed by a court.
  • No administration of the decedent’s estate is needed.

Benefits of Small Estate Affidavit:

  • No court appearance needed generally. Judges normally sign and approve it in chambers.
  • Quick turnaround. Signed in a few weeks after filing.
  • Simplified process. Draft application, file application, judge approves and signs Small Estate
    Affidavit.

Limitations of Small Estate Affidavit:

  • Strict compliance with the requirements above. If any one requirement is not met, the Small Estate Affidavit cannot be used.
  • No Personal Representative (also called executor or administrator) will be appointed.
  • Since this is a Texas-specific procedure, some out-of-state financial institutions may be reluctant to easily comply.

If you’d like to read more about the law on Small Estate Affidavits, please see:

  • Texas Estates Code Chapter 205 on the Small Estate Affidavit; and
  • Texas Estates Code Chapter 201 on Decent and Distribution, the legal term for how property passes to heirs when there is no Will.

Judicial Determination of Heirship
When someone dies without leaving a will, the court can conduct a formal Determination of Heirship. During this process, a party will file an application with the court and the court will then appoint an independent attorney to locate and represent any unknown heirs. After the attorney’s investigation, the court will require a hearing where two disinterested witnesses must testify as to the information in the application.

This judicial process can be costly and time-consuming. However, when it’s complete, the court’s declaration will provide clarity as to who is entitled to a share of the decedent’s estate.

Muniment of Title
The Muniment of Title procedure is best used when there is a will and the estate has few assets. The procedure allows the will to be considered as a proof of title to pass property to beneficiaries. Like Small Estate Affidavit, it avoids full probate proceedings, but the process still requires interaction with the probate court.

There are specific requirements for a Muniment of Title to be granted:

(1) There must be a valid Last Will and Testament of the deceased, which must be proven in court.
(2) The deceased had no unpaid debts unless the debts are secured by real estate.
(3) There is no need for administration; no appointment of an executor.
(4) Medicaid does not have a claim for benefits applied for or received after March 1, 2005.
(5) The applicant has presented the Will to the court within 4 years of the decedent’s death or can prove that he/she is not in default. This may require notice to be given to all beneficiaries named in the Will.

Probate as Muniment of Title only is a uniquely Texas probate procedure. We often tell clients that this is the first and last time they will ever hear that word, muniment. Muniment essentially means “evidence of”. The process of probating a Will as muniment of title just means we are using the Will as evidence of title. Probate as muniment of title is a viable option in some cases, but not for others.

  • File an application to probate the Will as Muniment of Title only.
  • File the original Will with the clerk.
    • Note: we can probate a copy, but it will be more burdensome than the original.
  • Judge will have a hearing to determine the validity of the Will and admit the Will. The process is generally finished here.
    • If there is real property in other counties, then certified copies of the Order Admitting the Will to Probate and the Will will need to be filed in the real property records of the other counties.
  • The decedent (legal term for deceased person) must have left a Will.
  • There can be no debts other than those secured by real property.
  • If the decedent received Medicaid (NOT Medicare) benefits, you would have to settle those claims prior to a probate as Muniment of Title.
  • No administration of the decedent’s estate is needed.
  • One of the fastest ways to complete probate, generally can complete from start to finish in about 6 weeks in Dallas County.
  • Simplified process compared to “regular” Texas probate.
  • Cheaper than most other forms of Texas probate.
  • Ideal situation when assets are simple and there are a few beneficiaries.
  • Strict compliance with the requirements above.
  • No Personal Representative (also called executor or administrator) will be appointed.
  • Since this is a Texas-specific procedure, some out-of-state financial institutions may be reluctant to easily comply.

If you need any help with any of these probate procedures or alternatives please contact us to assist you.”

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