When Estate Administration is Necessary (and how to avoid it)

When a loved one passes away, especially if they owned a home, many families are surprised to learn they can’t immediately put the house on the market. Even if everyone agrees on what should happen, heirs typically can’t sell inherited property without first going through estate administration.

What Is Estate Administration?

Everyone has an estate. Regardless of value or assets, an estate is the aggregate of all material possessions a person leaves behind upon death. Estate administration is the legal process whereby a person is appointed by a court to stand in the shoes of the deceased person to settle an estate. Known as a personal representative this appointee is charged with gathering, managing, and distributing assets of the estate, as well settling creditor claims against the estate while pursuing any claims that the estate may have against others. If a person dies with a will, the person representative is known as an executor; if the person dies without a will, the personal representative is known as an administrator. Regardless of the title of the personal representative, the probate process includes:

• Identifying and valuing assets
• Paying off debts and taxes
• Pursuing claims of the estate again third parties
• Distributing what remains to heirs or beneficiaries

When is it Necessary?

Whether a person dies with or without a will, the transfer of title to property is not automatic and an administration of the estate may be necessary if:

• The person died with two of more debts that are not secured by liens on real property
• There are minors who inherit from a deceased person’s estate
• There are people indebted to the estate and those claims need to be pursued
• The deceased person owned a business and there is a need to keep the business running or wrap the business up and distribute assets
• The deceased person owned stock certificates requiring re-title

Without a will, Texas intestacy laws determine who inherits and even with a will, if there is a contest, a court may need to appoint a temporary administrator to handle the estate until the contest is resolved.

The Probate Process

If there’s a will, it must be filed with the probate court along with an application requesting that it be probated. If there is no will, it will be necessary to file an application to determine the heirs in addition to having someone appointed asadministrator.
If a will is admitted to probate, the court will issue letters testamentary to the executor, and in the case of a person who died without a will, letters of administration will be issued to an administrator if the court grants the application.

Texas provides for independent administration, which allows the personal representative to administer the estate free from court supervision, which can amount to considerable savings in legal fees and costs of court. You can name an independent executor in your will, or all beneficiaries or heirs if there is no will, can agree to the executor or administrator serving independently.

When a personal representative is appointed, to protect the estate assets, the court will generally require them to get a bond, which is set by the court based on the value of the estate assets. When there is an independent administration, no bond is required. Upon the approval of a bond (in the case of a dependent administration) or the filing of an oath (in the case of an independent administration), the personal representative is considered to have “qualified” and can administer the estate. In administering a deceased person’s estate, the personal representative is empowered to deal with claims of creditors of the estate, pursuing claims against debtors of the estate, transferring title to estate assets, and selling estate assets.

How do you avoid probate?

Even though administration is the default method of settling a deceased person’s estate, Texas does provide other probate alternatives:

• Small Estate Affidavit: Allows you to transfer assets of someone who dies without a will if the aggregate value of the nonexempt assets is less than $75,000 and the known debts do not exceed the value of the assets. Title to real property can only be transferred if the homestead is the only real property and there is a surviving spouse or minor children. This process must be approved by a judge.
• Affidavit of Heirship: An affidavit stating the family and marital history of a deceased person that is then recorded in the real property records. This is a non-judicial way to transfer title to real property to the heirs of a person who dies without a will. The affidavit is not reviewed by a judge, but it is good evidence of title after it has been recorded for at least five years.
• Transfer on Death Deed: This is a deed executed during the lifetime of the owner of real property granting the property to another person, but to take place only upon the death of the grantor. It must be recorded in the real property records while the grantor is still alive and can be revoked in writing. Upon the death of the grantor, title passes automatically to the grantee outside of probate, who then files an affidavit of death to give notice that title has transferred.
• Pay on Death or Right of Survivorship Designations: To transfer financial accounts without going through probate, a person can name a beneficiary to receive the assets in the account upon presentation of a death certificate. If an account is jointly owned by multiple people with a right of survivorship the survivor of them becomes the sole owner of the account and those moneys do not pass through probate.