When you serve as personal representative for an estate going through probate in Texas, one of your duties is to ensure the creditors of the estate get paid. This is done with probate assets. However, not all assets are included in probate.
Property which is exempt from probate typically skips the probate process altogether. This means a probate court does not get involved with this property at all.
Rather, the property is transferred to an heir or beneficiary through a deed or written contract. Common examples of property exempt from probate include any assets with designated beneficiaries, living trusts or jointly owned real estate with a right of survivorship.
How exempt assets avoid probate
Retirement accounts, IRA’s or bank accounts can be set up to have a payable-on-death clause, meaning that the balance automatically gets transferred to the designated beneficiary upon the account holder’s death.
Assets held in a living trust are handled the same way. Upon the trust holder’s death, the proceeds are transferred directly to the named beneficiary.
Individuals who jointly own property can sign a right of survivorship agreement. When one of the joint owners dies, the other owner automatically inherits the property.
Real estate with a life estate deed can also avoid probate. Texas is one of several states that allows lady bird deeds. This is a deed that allows a property owner to live in the property, with someone else holding partial ownership. Upon the owner’s death, the person with partial ownership receives full ownership.
Non-probate assets may not always be protected
Although non-probate assets avoid probate, if an estate has more debts than assets, non-probate assets may need to be used to cover the debt.
It is important to learn the rules surrounding property exempt from probate. Knowing these rules can help you protect your family member or loved one’s property so it is rightfully transferred to heirs and beneficiaries.
