Letter to Friends and Clients
The document below is a letter to our best friends and clients
explaining the general process of probating a Will in Texas. It
is intended to provide information for clients so that they gain
an understanding the process of probate as it relates to preparing
estate planning documents. Generally speaking, this document addresses
issues associated with an intermediate or complex estate in an Independent
Administration including funding of a trust or bypass trust and
the filing of IRS Form 706. We discuss an Independent Administration
here for several reasons. First, an Independent Administration is
among the least costly of all available probate procedures in Texas.
Next, it requires the least amount of Court supervision. Finally,
it is the most commonly used procedure in Texas. Many other proper
probate procedures may be used in other estates such as Probate
as a Muniment of Title.
Dear Friends and Clients:
The general process for probate in Texas is simple and, in context
to the size of any certain estate, is not costly. In this letter,
we outline and discuss each major step of an Independent Administration
and include a basic description of what needs to happen at each
step. Additionally, this letter provides a basic treatment of estate
taxes and bypass trusts. However, this document does not discuss
alternative procedures, will
contests, litigation, and procedures that may be employed to
obtain a Will from a safe deposit box or from another person.
During any major illness and certainly after your death, your spouse,
close friend, child or other person named as an Executor in your
Will should hire a Lawyer. Hiring a lawyer will save valuable time
and money. Your Executor should avoid wasting your time with any
sort of self-help or what may be commonly referred to as pro se
representation – purchasing self-help forms, scanning and
re-printing forms, or copying forms from the internet. Even in cases
where an Executor successfully files paperwork and sets a hearing
to probate the Will with the clerk of court, most judges simply
refuse to entertain such a proposal. Some judges even regard it
as the unauthorized
practice of law and will require a knowledgeable lawyer to complete
paperwork, set hearings, and present evidence, motions, and orders.
Even with lawyers, judges, and other authors warning about pro
se practice, we see it routinely attempted as we sit with our clients
in the courtroom. We have seen people approach the judge’s
bench and be turned away. Additionally, family members or heirs
have tapped me on the shoulder and asked did they have to have a
lawyer? The only thing that I can do at this point is say when the
clerk or judge calls your name or case, briefly explain your situation.
Except for rare and limited circumstances, judges do not allow the
probate of a Will without a lawyer – all of the paperwork
and filing fees, travel, and other works completed by your executor
may be in waste. Sometimes, the entire procedure to this point must
be repeated. Simply, let your Executor know – do not use any
form of self-help!
Hiring an experienced lawyer is the key to the smooth and cost
effective probate of a Will. A knowledgeable lawyer can talk with
your executor and explain the process required to probate a Will
and administer an estate. If your Will creates a Bypass trust or
other Trusts to implement a tax plan, manage property of your children,
or for other reasons consideration should be given to the attorney’s
experience handling trusts. An experienced lawyer will guide your
Executor through the steps that are required in the probate process.
Because the process starts with a Will, your Executor will need
to know where your original Will is stored and have access to it.
If your executor does not have access to a safe deposit box where
the Will is stored, the lawyer can help him have the Will deposited
with the Court. This process begins with the attorney preparing
and filing a
Motion and Order to open a safe deposit box and have important
instruments found there delivered to the Court. This is a fairly
simple process, and we have been successful in filing and obtaining
an Order and inspecting the contents of a safe deposit box all during
the course of the same day. Because the court order delivered to
a bank requires the bank to send a Will directly to the court, your
lawyer should ask the bank to make a photocopy of the Will without
removing any staples or manuscript covers.
While many Wills are stored in safe deposit boxes, the executor’s
knowledge of the location of your original Will cannot be overemphasized.
Not only can the lack of such knowledge result in unnecessary and
costly searches, but there should be only one original! If, by some
chance, the attorney or any other self-help procedure used to prepare
the Will allowed it to be executed in multiple originals, each original
must be located and filed with the Court. Many professionals such
as you are accustomed to executing business contracts in what are
legally referred to as “multiple counterparts” for convenience
and so that each party to the contract receives an original. We
routinely prepare documents for our business clients in this manner.
However, A Will is not a business contract and should not be executed
in multiple originals. Any lawyer or self-help source that suggests
executing multiple originals of a Will should not be followed. The
failure to file all originals of a Will can result in a ruling by
the court that denies probate of the Will.
After obtaining the Will, your executor will need to deliver it
to his attorney and provide a few basic background facts to prepare
papers with the court. In the event that the executor delivers an
original to the attorney, he should receive a Receipt.
Most of these facts should be well within your executor’s
knowledge or available from documents such as an original Death
Certificate. The attorney will use this information and any applicable
documents to prepare an Application
for Probate and Issuance of Letters Testamentary, which must
be filed with the court along with all originals of the Will. This
Application can normally be completed on two pages and describes
certain facts about you, your Will, and your estate.
After preparing the Application and discussing it with your Executor,
the Attorney will file it or cause it to be filed with a court of
competent jurisdiction. A court of competent jurisdiction means
the correct or proper court. Generally speaking, this court is the
probate court or county court that hears probate matters in the
county where you were residing when you passed away. When the Application
is filed it must be accompanied with a Filing Fee, which, in the
Harris County Probate Courts, is currently $158 for an Independent
Administration. The Clerk will provide a filing
receipt which shows the court docket number, fees paid, and
provides a return date for the Notice and Citation. After completing
the filing receipt, the Clerk sends the Application other county
staff who prepare a Notice and Citation. The Notice and Citation
will be posted in a special location at the courthouse and returned
to the Clerk after the return date or about 10 days following the
filing date. After the Notice and Citation have been posted for
slightly more than a 10-day mandatory waiting period, your executor’s
lawyer will set a hearing to have the Will admitted to Probate and
to have a named person in your Will appointed as executor of your
estate. Your attorney in the interim should notify your Executor
of the hearing date and prepare him for what will happen at the
hearing.
After preparing for the hearing, your Executor goes to court. At
the hearing, the lawyer will ask your Executor questions under oath
and in front of the Judge’s bench. Near the end of the hearing,
the Attorney will present an Order
to the Judge. That day or very near thereafter, the judge will sign
the Order and your Will is admitted to probate and the Executor
is appointed. To avoid delays and extra costs, immediately following
the hearing, your attorney should also have the executor take and
sign an Oath
before the clerk. In addition to signing the Oath, the Executor
will sign a document often referred to as “Proof
of Facts” containing his testimony. Immediately upon leaving
the court room, the Lawyer should take the executor to the Clerk
of Courts Probate Department and order Letters
Testamentary, which are normally mailed within the week. Once
the Executor receives Letters Testamentary, he may proceed with
collecting the assets of the Estate.
Many deadlines run from the date of the hearing where your Executor
was appointed by the court to serve in this important fiduciary
capacity. First, within 30 days after your executor qualifies, her
lawyer will prepare a statutorily required Notice
to Creditors and arrange for it to be published in a paper of
general circulation in the manner prescribed by law. This important
notice is designed to let your creditors know where they can file
claims to recover money they may be owed. Regardless of whether
there are actually any creditors, this notice must be published!
Even if no creditors respond to this notice, your Executor may desire
to send a “permissive notice” to creditors that will
serve to bar them from ever otherwise attempting to collect money
from your heirs or your estate and its beneficiaries.
At this point, the true administration of your estate begins with
locating, identifying, and valuing all of the assets of your Estate.
Locating and identifying assets can be the most time consuming and
costly part of the process of administering an estate. Because of
the innate difficulty in determining all of your assets we have
prepared a free estate
planning document in Microsoft® Word that you may download
and edit to detail all of this information. As a general rule, the
more well-organized your assets are, the easier it is for the lawyer
and your Executor to complete the process.
Up to the point where your executor receives Letters Testamentary,
the lawyer will have been responsible for most of the work. With
the Letters Testamentary, a transition may be necessary especially
in estates that only required a basic
level of planning. However, the executor may desire that the
attorney continues to assist with the search to determine the nature
and size of your estate and assists your Executor in the administration.
If so, your Executor should be assured of the tasks that he wishes
the Attorney to complete and that the lowest cost staff is used
to complete these tasks. If you have a well-prepared record and
supporting documents for the assets and liabilities of your Estate,
the process will be simplified and save your estate a great deal
of administration time and expense.
With all of your assets identified and valued, your executor and
his lawyer will complete the final paperwork that must be file with
the Court in an Independent Administration. This final step is the
filing of an Inventory,
Appraisement, and List of Claims (“Inventory”) of
your estate. Most lawyers regard the filing of the Inventory as
the final step in an Independent Administration. The Inventory must
be filed within 90 days of the date that your Executor qualified.
In complex estates or estates where there is no compilation or organization
of property as would otherwise be listed in an estate records template
more than 90 days may be required. Additionally, if your estate
is valued near or over the applicable exemption equivalent, the
inventory should be completed on the applicable schedules of IRS
Form 706. This method of preparing the Inventory should prevent
any confusion or transposing of values for taxation purposes. If
so, your executor’s lawyer should file a motion with the Court
for an extension
of time to file the Inventory. When the lawyer files the Inventory,
he will present an Order to the Judge for approval of the Inventory.
When the Judge signs the Order, the Executor, generally, does not
need any other court approval for the administration of the property
of your estate. If the Inventory seems complex, don’t worry;
it is not as detailed as you may think. It is simply a listing all
of the assets that passed under your Will. The inventory may not
include everything you own at death for several reasons. First,
Inventories do not include any real property located outside of
Texas. Second, unlike property passing under your Will, some property
such as bank accounts, life insurance proceeds, annuities, retirement
plans, and IRA’s may pass by a governing contract or beneficiary
designation.
After the Inventory is filed, the judge will sign an Order
filed as part of the Inventory. Generally, from this point forward
nothing requires court approval, provided that your Will contained
a provision
for the creation of an Independent Administration. Upon the
approval of the Inventory, the dependent nature of the administration
is terminated and your Executor has the power to deal directly with
the property listed on the Inventory.
When your Inventory is filed, your Executor should know the extent
and value of your gross estate for estate tax purposes. An estate
tax return may have to be filled and certain properties may need
to be appraised. No matter what, if your estate exceeds the equivalent
exemption amount, currently $2 million in 2006, your Executor will
be required to file a federal estate tax return nine months of your
death, unless an extension
of the time to file and/or pay is granted. Should your Executor
fail to file a return and pay the taxes, he can be personally liable.
Appreciating that death tax rates are currently about 50% of the
amount over the applicable exemption amount, you can see the benefit
of using the tools to reduce the value of assets and remove assets
from your estate that we outline in basic,
intermediate, and complex estate planning to avoid these taxes.
Many issues can impact the size of your estate and the need to
file an IRS Form 706. Common examples include changes in the applicable
law and life insurance proceeds. Currently, the estate tax exemption
equivalent is $2 million for the year 2006 and increases thereafter,
but reverts back to $1 million in 2011. With regard to life insurance,
unless you have created an Irrevocable Life Insurance Trust, significant
life insurance proceeds may be included in your estate that may
cause it to be taxable.
In 2006, because your estate presumably consists of only half of
your and your spouse’s combined assets, an estate tax return
would not be required unless together, you have assets exceeding
$4 million. Special rules apply in calculating the size of the estate
and the manner in which property is held may have a dramatic effect
on the size of an estate and lead to unintended tax consequences.
Nonetheless, if the value of your gross estate exceeds the applicable
exemption amount an estate tax return must be filed even if no estate
taxes are owed by your estate. Additionally, your Executor may be
required to file income tax returns for your estate.
If your Will creates a bypass trust to avoid or minimize the impact
of estate taxes, your executor, his CPA and financial advisors,
along with his lawyer, will need to determine which properties to
place in trust. To protect the estate, your Executor, and to document
the transactions of the estate for use in any IRS audit, we prepare
an Estate Closing Memorandum, Estate Distribution Agreements, Partition
Agreements, and Funding Schedules for Trusts. Assuming that you
and your spouse only own community property, one-half of the value
at your death would be available to fund the Trust, subject to deductions
for expenses and administration, and non-testamentary transfers
that occur as a result of other contracts and beneficiary designations.
Rarely is it necessary or desirable to divide ownership of all property
between the Trustee and your surviving spouse to fund trusts. Instead,
as a general rule, it is often more desirable to have certain items
producing income or having other tax benefits solely owned by your
surviving spouse and growth assets placed in the trust to the extent
that this is possible. As final note, the process of funding the
bypass trust can be a bit time-consuming and most certainly requires
competent financial advice.
With regard to personal items or personal effects including art,
jewelry, clothes, and things such as automobiles are concerned,
they will be distributed as provided in your Will or as provided
in a memorandum allowed by your Will. Often, we provide for complex
estates that the Testator, person preparing the Will, may draft
a separate Memorandum to dispose of these types of personal property
including any precatory wishes with regard to that property. If
your Memorandum includes precatory wishes or desires, your Executor
will decide the extent to which these wishes should be carried out.
In summary, this document has explained the process required for
Independent Administration of your estate. For practical purposes
it has outlined that your Will was admitted to probate and other
documents were filed with the Court such as an Inventory, and based
upon other requirements your trusts were funded and a Estate Tax
Return was filed. According to your Will, your surviving spouse
or other persons designated in your Will receive the property that
you have gifted to them. If your Will established a Bypass trust,
it will have been funded and your surviving spouse will receive
income and principal, pursuant to the terms of the trust.
We hope that you find this information clear, concise, helpful
and not overbearing with technical complexity. If you have questions
or require additional information, please contact
us at 713-861-8300.
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