Leaving Real Estate Property to Your Heirs
This is just a general discussion considering the options of how to leave real estate to your heirs. For legal advice, please consult a qualified attorney.
There are two options: 1) Use a will to designate who gets the property when you are deceased, or 2) Use a living trust. Which is the better choice?
Using a Will
A will usually needs to go through a probate process. This process allows the court to supervise the distribution of the assets according to the deceased person’s will. In Texas, the probate process is not as complex as other states. It likely can be completed in about three months, unless the will is contested.
A will may be contested when there is a dispute about its legitimacy or the terms the will contains. Things that may cause problems are if the will is not updated on a regular basis so it does not reflect the assets the person had when they died. Families can sometimes get very vicious when fighting over assets of a family member who died.
Certain kinds of property do not have to go through the probate process in Texas. A properly constructed will simply states who gets the property and the ownership immediately transfers to the person named in the will.
The kinds of property that do not need to go through probate include:
• Automobiles (some, but not all Texas counties permit this)
• Books
• Clothing
• Electronics
• Furniture
• IRA accounts
• Jewelry
• Joint bank accounts
• Life insurance
• Pension benefits
• Personal items
• Retirement plans
Notice that real estate is conspicuously missing from this list.
Living Trusts
Living Trusts are a special type of legal entity that allows the trustee to control assets while he or she is alive and then pass the control of the assets to another trustee upon death. Living trusts come in two types, which are: 1) A revocable trust that can be changed or even canceled at any time before death, and 2) An irrevocable trust, which cannot be changed after it is formed.
There may be tax and liability issues involved in selecting between these two forms, so consult with professional advisers about your particular situation.
Living trusts do not go through probate and they are much harder to challenge than a will, especially if they were formed properly and the legal records have been maintained correctly for many years. Failure to maintain the proper legal documents can cause problems.
Living trusts give more privacy regarding the transfer of assets because the transfer is a private transaction and not part of public court records. Living trusts are beneficial for Texans that own property in other states where the probate process is more complex. Living trusts work for mental incapacitation as well as death. A new trustee can take over managing financial affairs while a person is still alive, if that person becomes mentally disabled.
Summary
The legal cost in Texas for going through the probate process is about the same as creating a living trust document. Living trust costs are paid upon creation. Probate costs are paid from the estate after death. For many that own real estate using a living trust is beneficial.