Texas Probate Options for Intestate Estates

When a person passes away and does not have a will, the person is said to have died "intestate."  Their assets are subject to distribution in accordance with the intestacy laws of Texas.  The persons who are entitled to assets under intestacy law depends upon the family members of the decedent, primarily whether there is a surviving spouse, whether there are children of the decedent, and whether the surviving spouse is a parent of the children.

In order to distribute the assets accordingly, the Texas Probate Code offers three probate options: filing an affidavit of heirship, an heirship proceeding and application for letters of administration, or if the estate meets the requirements, a small estate affidavit. Which option applies with depend primarily on the assets and liabilities of the estate.

Affidavit of Heirship

An affidavit of heirship is primarily used in estates consisting of real property.  The affidavit is filled out by two disinterested witnesses and filed in the county in which the real property is located. The affidavit acts as evidence of chain of title to the property from the deceased person to his/her heirs. The problem with this procedure is the affidavit must be on file for 5 years before it is considered prima facie evidence that the information in the affidavit is true. So, if someone was to challenge title to the property or the affidavit within five years of the filing of the affidavit, the affidavit will not be conclusive as to the heirs entitled to the property.

Determintation of Heirship and Application for Administration

A determination of heirship and application for administration involves a judicial determination of the heirs through a court proceeding and sometimes a dependent administration of the estate. The conclusive nature of the judicial determination of the heirs of the estate is generally favored over the five year wait time of an affidavit of heirship. A determination of heirship can be used to transfer the estate assets through an order, or if an administration is needed (for example if there were bank or brokerage accounts and the banks refused to accept a determination of heirship and wanted letters of administration) an application for administration can be made and letters of administration would issue. If all the heirs are known and agree to an independent administrator, one may be appointed. If all the heirs do not agree, the administration would be dependent, which requires court permission for the administrator to act in most circumstances.  In cases where there is only one heir, an independent administration should be attainable. Even in an independent administration, this process is generally more expensive and time consuming than an affidavit of heirship or small estate affidavit.

Small Estate Affidavit

A small estate affidavit is used when a person dies without a will, the estate value is less than $50,000, excluding homestead and exempt property, there is no other real property other than the homestead, it has been 30 days since the decedent’s death, there is no probate pending, and there are two disinterested witnesses who file an affidavit of heirship. This is a simpler and cheaper option, if it is applicable. This procedure is not recommended if the estate has stocks, bank accounts or brokerage accounts as banks are less likely to accept a small estate affidavit. Transfer agents generally prefer letters of administration which are issued in a probate proceeding, specifically an application for administration mentioned above.

The above three procedures are only required when there are "probate assets" that need to be transferred.  If the only assets are "non-probate" such as life insurance proceeds payable directly to a beneficiary, payable on death accounts, property held as joint tenants with right of survivorship, trust assets, or other assets which pass automatically on death, then probate is not necessary.

It should also be noted, the above procedures may be used when the decedent left a will but it was not probated within the time required by Texas law.  Under Texas law, a will must be probated within 4 years of the decedent's date of death.  If it is not, generally the decedent's assets are distributed according to intestacy law, with a limited exception where the will may be able to be probated as muniment of title.  If muniment of title is not possible due to debts of the estate, or for other reasons, the above procedures may be used to distribute the decedent's assets under intestacy law.  

The Importance of LGBT Family and Estate Planning

Equal rights is something I have been passionate about for a long time, particularly the issue of same sex marriage. In many states, including Texas, same sex marriage is not recognized as a legal marriage. Prior to becoming a lawyer, I was fairly unaware of the breadth of consequences which accompany being unable to legally marry. Marriage offers several advantages and protections which many of us, including myself, take for granted. This article does not attempt to example all the protections marriage provides, but touches on some of the key topics which arise in family and estate planning.

The first thing that comes to my mind is the tax advantages of filing as a married couple. The worst tax filing status is filing individually. Without the ability to legally marry, the federal government prohibits LGBT families from filing taxes as "married." LGBT couples must file individually, or file as married (jointly or separately) and risk getting caught and penalized. For an interesting read on this topic, see the following link:
http://www.huffingtonpost.com/2012/03/14/income-taxes-gay-marriage_n_1333413.html

In Texas, married couples enjoy the right to inherit through intestacy law, protection through community property law, certain probate exemptions, priority for appointment as a surrogate decision-maker, guardian, or administrator for each other, and visitation and information rights during hospitalizations or other medical stays. There are no such protections for LGBT families, so they must be proactive in protecting themselves. For LGBT families, it is critical to implement a family and estate plan with accompanying documents because the default rules which protect married couples who fail to plan, do not protect LGBT couples. If an LGBT couple fails to plan, they will probably eventually face a dire, and potentially irreparable, situation upon death or incapacity.

Legally married couples generally do not have to take affirmative steps to establish parental rights regarding their children. Of course, part of this is related to biology. However, regardless of biological paternity, for legally married couples, under the Texas Family Code the husband is presumptively the father of any child born during the marriage. There is no presumption that a child born to an LGBT couple is a child of both parents. Thus, if one LGBT spouse gives birth to a child, it is critical to establish the rights of both parents through adoption.

An adoption by a married couple is generally conducted in one proceeding and is finalized with both parents adopting the child at once. Texas does not allow same-sex couples to finalize an adoption in a two parent adoption. For LGBT couples, one parent must adopt the child as single, then a second parent adoption must be initiated. If you are an LGBT couple with children or contemplating children, it is important to establish parental rights for both parents, not only to protect the child's rights to support and to inherit from both parents, but to preserve both parents legal rights to the child.

For all of the reasons I have discussed, and many more, it is critical for LGBT families to execute a comprehensive estate plan and establish parental right. I believe inevitably,same-sex marriage will be recognized by every state and the federal government. I look forward to the day everyone who desires to marry can enjoy the advantages and protections, and perhaps misery (I kid).

Texas Medicaid Estate Recovery Program and Probate

If a loved one is receiving Medicaid, hopefully prior to applying for benefits, they met with an attorney who could assist them in protecting as many assets as possible from a potential future Medicaid Estate Recovery Program (MERP) claim.  However, many times advanced planning is overlooked and Medicaid issues arise in the probate context.  When this happens, it is important to consult an attorney to attempt to protect the homestead or any remaining probate assets.

MERP Applicability and Process:  If a loved one applied for Medicaid benefits on or after March 1, 2005, for certain nursing or long term care services in Texas, it is important to be aware of MERP.

MERP allows the State of Texas to recover Medicaid funds spent on behalf of a recipient from the Estate of deceased recipient.  MERP only applies 1) to recipients age 55 or older, 2) who applied for benefits on or after March 1, 2005, and 3) who received certain long term care services, specifically including the cost of services, hospital care and prescriptions supported by Medicaid in a nursing facility, intermediate care facility for those with intellectual disability (including state supported living centers), Medicaid waiver programs, and community attendant services.  The State can only recover the amount expended in Medicaid benefits, nothing more.

Many people fear MERP will come and "take" assets or file a lien against assets of the Estate.  First, it should be noted that so far, MERP has only been applied to probate assets.  If an asset is non-probate, such as a payable on death account, life insurance proceeds paid to someone other than the probate estate, etc., said non-probate asset will not be subject to MERP.  Second, some assets are completely exempt from Medicaid recovery.  A complete list may be found here:  http://info.sos.state.tx.us/pls/pub/readtac$ext.ViewTAC?tac_view=5&ti=1&pt=15&ch=358&sch=C&div=2&rl=Y

MERP is not a lien statute, thus the State will not be able to "take" or lien assets without a judgment lien.  The State must file a claim in the Medicaid recipient's probate estate, if one has been opened.    A MERP claim is considered a class 7 probate claim.  Claims are classified and paid in priority of payment with class 1 claims paid first, and class 8 claims paid last.  A MERP claim is just above general unsecured claims, such as credit card bills. 

Exceptions:  The State will not file a MERP claim in every estate.  There are a variety of exceptions where the state will not seek to file a claim. 

Cost Effectiveness:  The state will not file a claim when it is not cost effective, specifically when:
     1)  the value of the estate is $10,000 or less;
     2)  the recoverable amount of Medicaid costs is $3,000 or less; or
     3)  the cost of selling the property would be equal to or exceed the property's value.

Certain Conditions:  The state will not file a claim when certain conditions exist:
     1)  a surviving spouse exists;
     2)  there is a surviving child or child under 21;
     3)  there is a surviving child(ren) who is blind, visually impaired or has low vision or is totally   disabled according to Social Security criteria; or
     4)  there is an unmarried adult child continuously residing in the recipient's homestead for at least one year prior to the recipient's death.

Undue Harship:  There is also an exception for undue hardship, where an undue hardship waiver must be filed with the Texas Health and Human Services Commission.  Undue hardship applies where:
     1)  the property of the estate has been the location of a family business, farm or ranch for a minimum of 12 months prior to the recipient's death, the property is the primary income producing asset of the heirs, must produce at lest 50% of the heirs' livelihood, and MERP recovery would result in the heirs losing primary income sources;
     2)  If the MERP claim was pursued the heirs/beneficiaries would become eligible for public assistance;
     3)  Receipt of the estate allows one or more heirs to discontinue public assistance;
     4)  the recipient received Medicaid as the result of being a crime victim; or
     5)  Other compelling reasons.

Homestead Hardship Waiver:  This waiver of MERP claims applies to the homestead when one or more lineal heirs have gross family income below 300 percent of the federal poverty level.  This generally only applies to the first $100,000 of the tax appraisal district value for the most recent tax year.

Deductions:  There are also deductions from the recovery for expenses, such as expenses associated with maintaining a homestead or expenses which allowed the recipient to remain in the home longer.  Examples include, real estate taxes, utility bills, insurance, home repairs, and home maintenance expenses such as lawn care.

How to Handle a MERP Claim:  When a loved one who received Medicaid benefits passes away, and there is a homestead or any other probate assets, it is essential to contact an estate planning and probate or elder lawyer.  Pursuant to the Texas Administrative Code there are several steps MERP must follow in order to preserve their claim.  If they fail to strictly follow even one step, they cannot recover the MERP claim.  A lawyer can request the Medicaid file, point out the flaws in MERP's claim and hopefully obtain a waiver.  Once a waiver is obtained, it relieves the Estate from the looming MERP claim and opens your probate options if the recipient left a will. 

Waiver of the MERP claim allows for the potential to probate a will as muniment of title.  If there is a will, one of the simplest probate procedures for transferring real property in Texas is muniment of title.  It is simpler and cheaper than an administration.  To use this procedure there must be a will, the estate should consist primarily of real property and there can be no outstanding debts.  A MERP claim is considered a debt, so this procedure cannot be used if there is an outstanding MERP claim.   If a waiver of the MERP claim is obtained (and the other criteria are met), the will may then be probated as muniment of title.

Obtaining a waiver is also important in an heirship proceeding and administration (no will was left) or an application for administration and letters testamentary (a will was left).  Applying for administration of the estate (whether there was a will or not), generally results in an appointment of an executor or administrator.  Once someone is appointed, that person has fiduciary duties.  If there is a MERP claim still hanging out there, that has not been waived and is properly presented to the estate, the executor or administrator will have a duty to pay the claim.  So, even if muniment of title is not available for reasons other than the MERP claim, it is still important to attempt to obtain a waiver of the MERP claim prior to initiating any probate proceeding.

As demonstrated by the information in this post, handling a MERP claim without legal counsel may result in complication of the probate process and unnecessarily paying a MERP claim.  If you receive a Notice of Intent to File a Claim or are aware there may be a claim, contact an estate planning and probate or elder law attorney.

What is Probate?

Many people are never exposed to probate until the death of a loved one.  Probate is a legal process by which a decedent's probate estate (or probate assets and debts) are administered through the courts, eventually resulting in payment of claims and distribution of the probate assets.  If the decedent left a Will, the Will is generally probated and guides the estate administration.  If the decedent did not leave a Will, the decedent has died "intestate" and distribution is guided by the Texas Probate Code regarding intestate succession.    

Any estate containing probate assets must go through probate.  Some estates avoid probate, either by eliminating "probate" assets and/or setting up a Living Trust.  Probate assets generally consist of individual assets, or those in the name of the decedent and without a payable on death designation, tenancy in common assets (or those without a right of survivorship designation) and beneficiary assets where the probate estate is named a beneficiary, the decedent failed to name a beneficiary or all the beneficiaries have predeceased the decedent.  Examples of probate assets include bank accounts (without a payable on death designation), real property, business interests, stocks, bond, notes and mortgages, personal property, automobiles, other vehicles, etc.  Non-probate assets pass through another operation of law.  Examples of non-probate assets include life insurance, pension benefits, profit sharing plans, annuities, jointly owned property with right of survivorship, trust assets and powers of appointment. 

There are various reasons people seek to avoid probate, primarily to maintain privacy regarding their assets, to limit the legal processes needed to distribute the estate, or to avoid multiple probates when they own real property in several states.

If a person only has "non-probate" assets, probate is not needed.  This is often accomplished by transferring all of the decedent's assets which would be probate assets to a Trustee of a Living Trust or Revocable Trust during the decedent's lifetime.  This process involves creating a Trust and titling all the trust assets in the name of the Trustee to hold said assets in Trust.  Any assets the decedent obtains after creating the Trust, must be titled in the Trustee's name to be held in Trust, otherwise they will be probate assets upon the death of the decedent and probate will be necessary to administer those omitted assets.

It is important to consult a probate and estate planning attorney if you are nominated as executor in a recently deceased loved one's will or trustee of a trust, as there are various types of probate, which may or may not be needed, depending on the probate and/or non-probate assets of the estate.  Many people have a difficult time distinguishing and separating a Probate Estate from a Trust Estate and thus the probate and non-probate assets.  An attorney can guide you to the proper process needed to ensure proper administration decedent's probate and/or trust estate.

Further, it should be noted that generally some, if not all, of the costs of administration are reimbursed to the executor or trustee by the estate.  As such, do not let fear of costs deter you from consulting an attorney regarding probate and estate administration.