When an individual dies in Texas, the resources that were previously their personal assets become the property of their estate. Those assets often need to pass through probate court. In many cases, the courts may need to oversee the probate process to ensure that a personal representative distributes them in accordance with someone’s wishes and Texas law.
Testators who put together estate plans often focus primarily on what they would like to leave for specific family members. They may fail to consider concerns that could diminish what their loved ones inherit. There are several types of obligations that usually take priority over someone’s written estate plan.
Personal debts
The financial obligations someone has to other parties do not simply evaporate when they die. Instead, they become the responsibility of their estate. The personal representative of a Texas estate may need to send notice to known creditors and must publish notice for other parties that may have an interest in someone’s estate. It is usually only after someone fulfills all the testator’s financial obligations that they can proceed to distribute assets among their beneficiaries. Student loans, credit card debt and even hospital bills can all consume a portion of an individual’s legacy.
Taxes
Texas does not levy an estate tax the way that a few other states do. However, those with very large estates could still be subject to federal estate tax if they do not plan ahead before they die. The current threshold for federal state taxes in 2023 is $12,920,000. Nevertheless, estates do not have to be worth that much to have other tax obligations. For example, there could be income tax or capital gain tax due depending on what happens with someone’s personal resources. The sale of estate property can trigger taxes that reduce what beneficiaries receive.
Probate expenses
Probate oversight is necessary for many estates with valuable property, including real estate. Even if someone plans very carefully to minimize probate requirements, their loved ones might take issue with their estate plan, which could lead to probate litigation. The representative of the estate will typically need to use estate resources to cover those costs before they distribute anything to family members or other named beneficiaries. Those who take the time to create a plan that minimizes tax risks, addresses personal debts and reduces the amount of probate court oversight required can maximize the inheritance of their loved ones.
Identifying concerns that can reduce someone’s final legacy can help testators become more knowledgeable about how they can leave more of their resources for their loved ones when they die. Seeking legal guidance as proactively as possible is generally a good way to get started.