Texas law makes it clear that identifying probate property is a duty. It has to be done and the personal representative has to do it. But there are no set rules for how to identify property that the decedent owned or had an interest in. At a minimum, one must review the financial records that are available to identify assets and make reasonable inquiries with third parties that may know about the decedent’s assets.
To understand what property is probate property, it is helpful to start by considering what property is non-probate property. The principal types of nonprobate property includes property passing by contract, passing by survivorship, held in trust, and community property.
Life Insurance & Retirement Accounts
Property passing by contract includes life insurance proceeds, IRAs, and employee benefit plan proceeds, such as the proceeds from life insurance policies or amounts held in pension, profit-sharing, or employee retirement plans. These assets and payments are non-probate property that pass outside probate to the persons named by the decedent in the appropriate beneficiary designations. These assets may be probate property if there is no beneficiary designation or the designation is not valid. It should also be noted that a life insurance policy that has a cash surrender value and insures the surviving spouse is also probate property.
Even though insurance proceeds paid on account of the life of the decedent are typically non-probate property, the personal representative may handle the collection of the proceeds for the beneficiary or have to assist the beneficiary in collecting the proceeds. The beneficiary should get a Form 712 from the insurance company. This form will indicate who the beneficiary of the policy is and the amount of the value of the policy. This helps the personal representative confirm that the policy is in fact non-probate property.
Joint Bank, Brokerage, and Real Estate
Property held as joint tenants with a right of survivorship or pay-on-death account designations are non-probate property. This includes bank and brokerage accounts. It can also include real estate if the decedent executed a transfer-on-death deed.
Property held in trust is also non-probate property. This feature of trusts is one of the primary reasons for establishing trusts. The terms of the trust dictate how the property is handled. State law or a will do not.
Non-probate property also includes most community property that is solely managed by a surviving spouse.
We’ll address community and separate property in more detail later. Suffice it to say for now that this property is owned in equal undivided shares with the surviving spouse. Thus, one half of the property is non-probate property and one half is probate property. The personal representative is to continue to manage community property that the decedent managed during his lifetime and jointly managed property. The surviving spouse continues to manage the community property she managed during her lifetime.
Property that is not non-probate property is generally probate property. As you can see from the description of non-probate property above, it is possible that there is no probate property remaining after non-probate property is accounted for. This is often the case if the decedent executed a trust and transferred all or most of his property to the trust during his lifetime. Probate may not be necessary in these cases. But it is likely that there are some assets that would justify a probate, such as a house or other property that was not transferred to the trust.
With this background, we can now consider some general rules for handling the decedent’s property. Click here to continue reading. >>>>
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