The probate question I get asked the most often is whether a client should use a living trust to avoid probate. In many states the answer is an unqualified “yes.” In Texas, the answer is “it depends, but probably not.”
A living trust is a revocable trust to which the client will transfer his or her assets during life. Since the trust owns the assets and not the client, there are no assets to probate at the client’s death. Typically, a living trust is more expensive to complete than the drafting of a will, since the client will have to pay for the lawyer to draft conveyance documents to transfer the assets to the trust. Of course, the cost of probate is avoided when the client dies.
Probate in many states can be a slow and expensive process. Some states set fees for the court and attorneys, and most states require court approval of most executor actions during the probate process. Texas is somewhat unique in that it has probate system that is largely independent of court approval. Typically, the only trip to probate court the executor will make is the hearing to prove up the will and become appointed as the independent executor. The executor will have to file various notices and prepare an inventory of the estate’s assets, but will not have to seek approval from the judge to proceed with his or her duties.
Historically, one advantage of the living trust, even in Texas, is privacy concerns. Probate proceedings are public record, and the executor has to prepare an inventory listing the assets of the estate which is filed in the probate proceeding. A few years ago, however, Texas probate law was changed to allow the executor to file an affidavit in lieu of the inventory if the executor has paid off all unsecured debts of the estate. The executor still has to prepare the inventory, but does not have to file it.
It should be noted that while a Texas resident need not worry too much about avoiding probate in Texas, he or she should make sure probate is avoided in other states if property is owned there. For example, a Texas resident may have a vacation home in Colorado, and an ancillary probate in Colorado would be required to transfer ownership of the Colorado property to loved ones. Ancillary probate can be avoided by transferring the Colorado to a trust or limited liability company.