Probate is the legal process where a court of law establishes the validity of a decedent’s will. The probate process includes the appointment of an administrator, receivership, ad litem, and accounting & inventory of the decedent’s belongings, paying off the decedent’s debt, and distributing the estate’s assets. Among other reasons, the advantages of probate include:

1. expediting creditors’ claims, 

2. court decides the outcome for contested matters, 

3. reduce expenses that would accrue outside of court, 

4. provide an opportunity for beneficiaries, and 

5. heirs to be heard.  

However, there are several reasons one would want to opt-out of probate. The disadvantages to probate are 

1. The length of time to close out a probate case, 

2. Probate can be expensive, especially when contested or a dependent administrator is appointed, and 

3. The probate process is public record and accessible to anyone to see the estate’s assets and liabilities. 

You may prefer a trust to satisfy specific anonymity needs. However, an alternative to trusts, and to avoid probate are 8 ways to transfer your assets to beneficiaries: 

1. Pay on Death (POD) Bank Account – Most banks have a POD form for you to fill out and submit to the bank. Upon your death, the bank requires proof of death, mainly a death certificate and beneficiary’s identification are satisfactory. On the form, you provide the beneficiary’s information. The beneficiary will receive all remaining funds in your account. Beneficiaries under a POD, do not have rights to your account unless stipulated. You are allowed to change beneficiaries at any time. The bank account may be temporarily frozen at the time of your death or by court order, especially if federal levies the estate tax and sufficient funds are paid for IRS taxes. Texas does not have an estate tax. Every bank may have different policies. Ask your bank if notification to the beneficiary is required as part of the procedure for POD. Generally, more than one designated beneficiary is allowed.

2. Transfer of Death Vehicle Registration – Texas allows vehicles to transfer to your designated beneficiary. The Department of Motor Vehicles provides a ‘Beneficiary Designation for Motor Vehicle’ form. This designation will not transfer ownership during your life or affect the interest or right of a secured or unsecured creditor or future creditor. If you file this form with the Department of Motor Vehicles, a will won’t supersede the ‘Beneficiary Designation for Motor Vehicle’ form. Once the form is filled out, it must be filed with an application for Texas Title and/or registration, fees paid, and valid ownership evidence to a county tax assessor-collector’s office before your (owner’s) death. Beneficiaries must survive the owner by 120 hours and title application is submitted no later than 180th day after the owner’s death. Beneficiaries can decline interest in the vehicle. After death, if the beneficiary accepts the vehicle, he/she is also accepting any liens on the vehicle. Similar to the owner filing the transfer of death vehicle registration, the beneficiary must also file a title application, pay the fees, provide a death certificate, and provide identification.  Here is the link to ‘Beneficiary Designation for Motor Vehicle’ form: https://www.txdmv.gov/sites/default/files/form_files/VTR-121.pdf 

3. Transfer on Death Deed (TODD) for Real Estate – TODD allows owners to keep ownership rights during his/her lifetime and allows owners to transfer ownership of the real property to the beneficiary after the owner’s death without a probate court’s involvement. TODD should explicitly state that title to real property will not transfer to the beneficiary until the original owner’s death.  TODD should also include the beneficiar(ies) name, legal description of the property, dated, signed, notarized, and recorded in the real property records where the property is located. After death, proof by death certificate and an affidavit of death must also be signed, notarized, and recorded. At any time prior to your death, you may terminate TODD or redesignate the beneficiary or beneficiaries. See our article on TODD vs. Lady Bird Deed for more information. Attorneys at Walter & Truong PLLC can draft and record the Transfer on Death Deed on your behalf. To speak to our attorneys, click here.

4. Tenancy in Common & Joint Tenancy – Two common concurrent ownership in Texas are joint tenancies and tenancies in common. These concurrent ownerships are similar but have distinctions with significant effects of inheritance. 

A tenancy in common occurs when two or more parties jointly hold an interest in the property. Concurrent ownership undivided interest and right to possess the property. This is the default Texas rule and is presumed if no explicit written language is stated in the deed. Each owner has the right to sell, devise, lease, or transfer their interest in the property. When an owner dies, his/her share will pass through a will or, if the concurrent owner dies intestate (without a will) the default under Texas Intestate estate code. 

On the other hand, joint tenancy contains languages of a right of survivorship. Right of survivorship means when the concurrent owner dies, the surviving owner(s) automatically inherit the decedent’s share. Property does not pass through probate. 

Both concurrent ownership can be used for personal property, but are commonly used for real estate. To avoid probate, the deed must explicitly state the right of survivorship language.

Joint Tenancy is not for everyone. Once concurrent ownership is formed, it’s difficult to revert back to you. If you change your mind, you don’t have the right to freely take back the property. Another issue with joint tenancy is that you may need authorization for all concurrent owners to take out a mortgage, sell or transfer the property, etc. In the event that concurrent owner(s) are incapacitated, a court-appointed guardian will make the decisions for that person. Other reasons for not using joint tenancy include gift tax for amounts exceeding $15,000.00 and miss stepped up tax breaks for spouses who become concurrent owners of a spouse’s prior separate property. The IRS allows a surviving spouse to get a “stepped up tax basis” only half of a decedent’s property instead of the full property if the property becomes joint tenancy. 

5. Community Property – In Texas, 100% of community property automatically transfers to the surviving spouse except when the decedent has children outside of the marriage aka stepchildren. Then community property is shared with stepchildren.  To learn more about the Texas default rule for intestate succession for heirs, click here.

6. Community Property Survivorship Agreement – Under the Texas Estate Code Section 112 spouses may enter into an agreement at any time between themselves to designate the surviving spouse of the deceased spouse that all or part of separate property becomes community property. Texas requires specific language in the agreement to be enforceable. It must include the following:
   1. Be in writing
   2. Signed by both spouses
   3. The phrase: “with right of surviving”, “will become the property of the survivor”, “will vest in and belong to the surviving spouse”, or “shall pass to the surviving spouse.”

Texas Estate Code Section 112.052(d) states that a survivorship agreement may not be inferred from the mere fact that an account is a joint account or that an account is designated as JT TEN, Joint Tenancy, or joint, or with other similar languages. 

Further, Community Property Survivorship Agreement can be revoked by adding revocation terms to the agreement. If no revocation terms exist in the agreement, the default rule is that a revocation agreement must be in writing, signed by both spouses, or signed by one spouse and delivered to the other spouse. Specific property can be revoked. According to Texas Estate Code 112.054, a community property survivorship agreement may be revoked with respect to specific property subject to the agreement by the disposition of the property by one or both spouses if the disposition is not inconsistent with specific terms of the agreement and applicable law.

7. Life Insurance – Life insurance is a contract between you, the policyholder, and the insurance company. You pay the premiums during your lifetime in exchange for a lump sum payment to your named beneficiary. The beneficiary will receive the money after your death and may use that money for any purpose. This type of contract does not involve probate and the proceeds go directly to the beneficiary. There are a couple of exceptions for probate involvement such as when the estate is named as the beneficiary. This is done so the estate can pay off debts and taxes. This is suggested under specific circumstances and is not common

Another uncommon scenario is when the financial institution that provides the life insurance may need to show cause for not properly providing the payment to the beneficiary. 

There are two primary types of life insurance, term life, and permanent life. Term life is a certain duration of your life while a permanent life covers your entire life.

8. Gift – The first $15,000 you give per person as a gift is exempt from federal gift tax. This amount may change per IRS requirements. See https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax for more details.

When you give a gift to someone, that gift is separate property, meaning it belongs to the person to whom it is given and is not shared with another person such as a spouse. There are no requirements to document gift giving (but it is suggested that you keep a written record of it in the event of a dispute in the future), however, once you give that item away generally, you cannot take it back. The exception is some items that require documentation in themselves such as transferring stocks & bonds, royalty, land, car, or boat for proof of ownership. These title transfers should be filed in the correct agency or entity in order to be documented. 

To learn more about probate and other transfer strategies, schedule a consultation with an Integrity Law Group PLLC attorney today. 

After getting a property under contract, the buyer has an opportunity to “look under the hood” and negotiate with the seller before fully committing to their purchase. Many people are aware of the option period, which allows the buyer to conduct a physical inspection of the house and check for major capital expenditure issues such as HVAC, roof, plumbing, etc. Few buyers know that in addition to that option period, they also have a period where they can review the title commitment and make an objection to the title insurance policy coverage. 

A title company’s main responsibility is to ensure that the seller is the owner of the property and has the right to sell the property so that the buyer is receiving “clean title” to the property. A title company will usually check for recorded liens, verify the seller’s marital status and check for other encumbrances on the property. As a result of the title company’s search, they will produce an initial title commitment. 

To understand what a title objection letter is, one must first understand the process of getting  title insurance. Typically there are  three stages in title diligence for buyers or lenders; 1) the title commitment, 2) objection letter, and 3) title insurance policy.

Prior to obtaining a title insurance policy, under a purchase agreement, the buyer or lender may seek maximum coverage to secure the loan or value of the property. The title company will provide a title commitment with policy coverage, coverage exceptions, and curatives required. During the time to review title commitment, the buyer or lender may provide the title objection letter to dispute or negotiate the terms and conditions of the coverage exceptions.

Generally, the commitment is broken down into separate schedules. Schedule A states the basic information – the who, what, where and how. Schedule B states the exceptions to coverage, Schedule C states the items that need to be taken care of prior to closing (essentially a to-do list) and Schedule D is a disclosure. The objection letter will usually reference Schedules B and C.

Title objection letters should be specific and are used for various reasons such as objection to an encumbrance to the property. This includes objecting to expired, not applicable, or unenforceable easement, leases, subordinate liens, tax assessments, access, mineral interest, restrictive covenants, or schedule B modification.

Objection letters are also to dispute the area and boundary lines (survey), whether there’s a shortage, overlap of improvements, or encroachments, to name a few.

The objection letter is usually directed towards the buyer (if the given by lender), or to the seller (if given by buyer) and a copy must be provided  to the title/escrow company. The parties to the transaction are responsible for performing any curative matters.  

Some exceptions in Schedule B and C of the title commitment can be eliminated but ensure that it’s not overlooked prior to closing. However, many exceptions to title are correct or meritorious but can be addressed by performing curatives. If certain encumbrances or exceptions cannot be covered, the commitment and/or survey will identify and provide full disclosure so that parties are making an informed decision with the transaction.

At times, there are problems which the seller cannot cure, and therefore closing cannot happen. In the event of a major problem, buyers should confirm the terms of the agreement to find out if they can receive their earnest money back. However, if the parties wish to continue to pursue the transaction and close, it is important to have a real estate attorney review the title commitment and propose options to clear title.

If you need an attorney to review your title commitment, or to learn more, contact Integrity Law Group PLLC.

Whether you are purchasing your first home or the next real estate deal, closings can be a nerve racking process. There are a lot of factors that come into play in order to successfully close on a property. We have created a checklist for you to ensure your closing goes as smoothly as possible. 

We broke down the closing process into three stages: pre-closing, closing and post-closing. 

Pre-Closing 

1. The Contract 

If you are the buyer and your offer was accepted by the seller, you will enter into a contract. Generally, your real estate agent will prepare the contract. If it is a residential property, agents typically use the TREC one to four residential contract. Your agent will also prepare the appropriate addendums. Be sure to thoroughly review the contract to ensure you understand all the terms. If there is something you do not understand, ask your agent for clarification, or, have a real estate attorney review the contract for you. 

2. The Inspection 

Follow the terms of your contract and calendar your deadline for due diligence. Generally, the contract will outline your time frame for your option period. An option period is a specific timeframe that both parties agree to in which the buyer can terminate the contract for any reason without risking their earnest money. This time frame is crucial because it allows for you to perform your due diligence on the property before fully committing to the contract. You can order a property inspection report which will show you any concerns or issues with the property. 

3. Lending 

Provide a copy of the contract to your lender so they have the material terms of the agreement. After the inspection is completed, you may discuss negotiation tactics with your real estate agent if there are concerns with the property. Make sure that your lender has copies of all amendments to the agreement if you agree to a different sales price or concessions/reductions are made. Then, contact your lender to ensure an appraisal for the property is ordered and scheduled. 

4. Insurance and Title 

Shop around for home insurance companies that best suit your needs and select the insurance company that provides the amount of coverage for your home owner’s insurance policy. You may also need to send a copy of this information to your lender. Additionally, you will most likely need title insurance. The title company that was designated in your contract will provide you with a title commitment to start. Be sure to review the commitment, survey and abstract within the timeframe as stated in the contract. If you have questions about title be sure to contact a real estate attorney to review the commitment on your behalf. The attorney may spot issues and recommend an objection letter. To learn more about objection letters, read our article here. 

5. Financing

To calculate how much you can afford for a property, the general rule of thumb is 30% of your gross monthly income on home related expenses. Take into consideration the mortgage, taxes, insurance, HOA fees, and cash reserves for home repairs or replacements. Also take into consideration other expenses unrelated to the property to understand your debt to income ratio. Financing should generally be done before purchasing a home, however, sometimes your finances or sale transactions change, then you should reevaluate your budget.

6. Final Walk Through 

The day before or day of closing, go to the property. The final walk through gives you the opportunity to inspect the property before the official sale. During this time, inspect any agreed repairs, inspect all appliances, check whether all doors and windows are secured, working properly, or to your satisfaction, belongings of the seller are completely removed, check for signs of mold, check electricity and outlets, and inspect the exterior & backyard. 

Closing 

1. The Parties 

First, know who all the important parties are. At closing, you will likely meet at your title company’s office and a title agent will be present. Prior to your closing make sure to ask your title agent what you need to bring on the day of closing and what needs to be completed prior to closing. For example, most title agents will request that you bring a valid form of identification such as your driver’s license. 

2. Funding

You will also be required to bring your down payment at closing. Make sure to confirm

with the title agent if you need to bring certified funds or wire the funds beforehand and how far in advance the funds must be wired. Wire fraud is serious so be sure to double check the wiring information before you send the money. If you are uncertain if the instructions are legitimate, contact your escrow officer. 

Consider whether you want your real estate agent or an attorney present with you at closing to review the documents with you. If you are bringing additional parties, be sure to account for additional time for discussions amongst everyone. 

3. Important Closing Documents 

Prior to your closing, you should set aside time to review all your documents to ensure the information is correct. Double check the names, address, loan amount, other contact information, etc A few important documents include: 

1. The closing disclosure, 
2. The deed of trust, 
3. The note, and 
4. The warranty deed. 

Post-Closing 

1. Access 

After closing you should receive all keys, access codes, garage openers, etc. to your new property. If feasible, we recommend that you change all the locks on the property (if this was not previously completed). This ensures that you are the only people with access to the property. 

2. Utilities 

If you haven’t already set up utilities, then connect your water, gas, electricity, and Wi-Fi. Typically, we suggest that you complete this prior to closing to ensure you have service by the time you close to avoid any periods of no service. 

3. Homestead Exemptions 

If this is your primary residence, then apply for the homestead property tax exemption and any other exemptions that you qualify for. You can usually find the forms on the county website where the property is located. Confirm that all change of ownership documents with the county appraisal districts are  updated to reflect your information. 

4. Important Documents 

Lastly, make an electronic copy of your closing documents and store the copy you  receive from closing in a safe place.