What Happens to my Property When I Die?By: Thomas Hall
What happens to my property when I die?
You have two choices. 1. Plan for an orderly disposition of everything your own – your estate. Or 2. Fail to plan. The horror stories in the news about the probate process usually involve people who did not plan their affairs. These people have an estate plan which can be called the “No Plan” estate plan. Under the “No Plan” estate plan, the State and Federal governments and the Courts step in to make decisions for you.
The government plan includes the federal and state laws and court cases including:
- the state intestacy statute determines who receives your assets at death, and if there is no one to receive it, the State takes title, and
- tax laws, including estate taxes, that determine how much of your assets, if any, will be paid to the government.
This “No Plan” estate plan is the most expensive plan for you and your loved ones, and usually produces the most disastrous results.
The good news is that it is relatively easy to implement a comprehensive estate plan. Thoughtful estate planning allows you to protect your property and provide for your loved ones. You can transfer your property with an much or as little control as they may need and as you desire, and in ways which protect their inheritance from creditors and predators, while saving every possible administrative expense, transfer cost, tax dollar, attorney fee and court cost you can.
If you are creating an estate plan to transfer your land and other assets, you have three main choices: 1. Use a will. Or 2. Use a revocable trust. Or 3. Create a business entity and design a succession strategy including provisions for the transfer of ownership at death. Often these three work together to produce the best result for the control and distribution of your land.
A well-drafted will names an executor to administer your estate and carry out your wishes, names a guardian for any minor children, provides a comprehensive scheme to distribute your personal property and your land, and sometimes creates trusts to hold property for the benefit of loved ones. To distribute the property the will must usually be admitted to probate court in the County where you live or own land. In Texas you can minimize the costs associated with probate by providing for independent administration of your estate. Although wills can be contested in court, it is difficult to overturn a properly drafted will that establishes your intention for the distribution of your property.
Alternatively, you can create a revocable trust while you are alive, place your property in the trust before you die, and avoid the probate process entirely at death. You can be the trustee of your trust while you are alive to maintain control of the trust and your property. You can change, amend or revoke the trust entirely as you see fit. At death, a successor trustee you name steps in to manage the trust assets and make distributions according to your instructions. The trustee is bound by law to follow your exact instructions. The time, trouble and expense of probate can be avoided, although a revocable trust can be more challenging to manage while you are alive.
If your land is owned in a business entity, then the way the ownership interest in the limited partnership or limited liability company is transferred controls what happens to the land. Company agreements often include buy-sell provisions and limitations on the transfer of ownership interest to keep land in the family. If the decedent’s share of a business interest is sold at death then the proceeds can be controlled by the will or trust.
Regardless of whether you use a will or trust to manage and distribute your property, or coordinate these with a business entity, it is better to plan than to plan to fail.
Read more here by Thomas Hall.