Wills/Probate
1.Q: What is the purpose of a Will?
A: A Will is a legal document which states how your assets are distributed at your death. A valid Will avoids many of the problems that may arise from dying without a Will and allows a person to leave property to the beneficiaries he or she desires.
For example, you may designate the individual(s) who will care for minor children. You may also set up a trust, a method by which property is held by one party (the trustee) for the benefit of another (the beneficiary).
2. Q: Can a will be modified or changed?
A: A Will can be modified at any time, but is generally only changed due to major life changes such as a change in heirs, moving to a different state, or marital status. Changes can be accomplished with a document called a codicil, or by revoking the Will and having a new one drafted. Codicils must be executed with the same formalities of a will, i.e. two witnesses and a notary.
3. Q: Do the deceased person?s assets automatically pass to the surviving spouse and/or children?
A. No. Even though the heirs have possession of the assets, it is probable that they do not have "marketable" title to the deceased person's assets. Marketable title is achieved in probate. For example, institutions like banks, stockbrokers, and title companies generally require Letters Testamentary from the Executor named in a Will before those institutions will release large sums of money to beneficiaries or allow the sale of real estate. The Executor has no official power until the Court has admitted the Will to probate, and the Executor has taken an Oath.
The "Executor" in a will is generally the surviving spouse, and the surviving spouse is also generally the "beneficiary". The Executor and beneficiary can be the same person, and generally are. Children can also be an Executor and a beneficiary.
4. Q: If a person dies without a Will, who inherits the assets?
A: If a person dies without a will (or "intestate") who the heirs are must be determined in two probate court proceedings called Dependent Administration and an Heirship Determination. Legal fees for these Proceedings can easily be $10,000 instead of the usual $2,000 legal fees for probate if the decedent had a Will.
During those Heirship Proceedings, if the deceased person had one marriage, the judge should award 100% of the assets to his or her spouse. If the spouse from that one marriage has died, the assts would go to the children. However, if the deceased person was in their second marriage, the law gives the children by the first marriage 1/2, 1/3 and 2/3 of all assets, depending on whether the assets are real estate or personal property, community or separate property. The second spouse receives 1/2, 2/3 or 1/3 of the assets.
If you make a valid will, it prevents the law from determining who will receive your assets.
5. Q: Is a handwritten Will or a Will generated from a software program valid?
A: Yes, however the probate after the person dies is generally more complicated, therefore more expensive. The Judge is who has the legal authority to interpret the Will. The Judge is expecting very specific legal terminology which allows him or her to not be liable for monitoring the Executor or for the Executor's mistakes. People, who write their own Wills, inadvertently write provisions which cloud, complicate or taint the other provisions of the Will, or people do not have the Will correctly witnessed or notarized. Further, many people who draft their own Wills delete provisions in the form that are needed to reduce the costs of probate. For example, is the executor independent or is a bond required?
6. Q: Who is involved with the execution of the Will other than the person making the Will?
A: Two witnesses not related to the person making the Will or receiving any assets from the Will, and a notary public. All people should be in the same room, at the same time and see everyone sign. Further, the witnesses need to swear to certain facts such as the capacity of the person signing the will, the circumstances, and other facts contained in a self proving affidavit which should be part of the Will.
7. Q: Will my heirs have to pay estate taxes?
A: The question has two answers depending on who the heirs are.
a.) If the spouse is the heir, the spouse will rarely have to pay estate taxes for assets he or she inherited from their spouse. The concept is that the spouse accumulated community property while married and should not pay estate taxes on those assets.
b.) If the children are the heirs and the total assets they inherit, including life insurance and 401(k) exceed $2 million; the children will owe estate taxes of approximately 49% of accounts over the $2 million in the year 2008.
In the year 2011, the estate tax amount will change, but that law has not been passed yet. Mere rumors and speculations are that the amount of assets for which taxes will be imposed will likely stay near $2 million. The concept behind taxing children is that they did not earn the money. Inherited assets for the children are ?free?; therefore, the IRS wants a portion of the inheritance and achieves it through the 49% estate tax rate.
8. Q: What is probate?
A: After a person dies, probate procedures prove the validity of the Will appoint the Executor, and gives the Executor named in the Will legal authority over the assets. Thereafter, the Executor pays off debts and taxes of the estate, and distributes property as designated in the Will. The court will generally follow the provisions in the Last Will and Testament.
The validity of the will must be proved in a court and occur within 4 years after the death of the testator.
Some people think having a will avoids probate. This is not the case. A Will is used in probate to determine who receives what property, who is appointed guardian to any minor children and who is the Executor.
If an estate includes real estate or minor children, a formal probate action in court is generally required.
9. Q: How long does probate take and are assets frozen during that probate?
A: With a valid Will, Texas has one of the shortest probate processes. The entire process can be finished in four months, during which the assets are rarely frozen.
During the probate process, the Executor should be able in the first 30 days to access funds to pay all re-occurring expenses like house and car payments and utilities, as well as funeral expenses and medical bills.
10. Q: What is involved in probate?
A: Probate of a valid will is approximately 10 steps. The first step is to hire an attorney (not required) to file an Application to probate the Will, attach the original Will and check it into the court system. Another step is the hearing in court where the Executor is sworn in. I drive my executor to the probate Court to make the trip effortless for him or her.
Another step is that within four months, the Executor files the Inventory. The Inventory consists of the major assets like the house, bank accounts and autos. The Inventory is generally the last document filed.
11. Q: When and how are assets distributed?
A: If the executor was named in the will and has been formally appointed by the judge, the executor has the legal power to transfer title of all of the assets to the beneficiaries named in the will. For example, in approximately four months after beginning probate, the executor can write checks on the checking account in unlimited amounts to the beneficiaries, transfer stocks and bonds, sign the car title to the beneficiary, and execute the new warranty deed on the house to show title in the name of the beneficiaries listed in the Will.