Estate Planning and Texas Homestead Protections
November 25, 2014
How Stepchildren may Affect your Houston Estate Plan
November 27, 2014
If you are a Texas resident and own real estate outside of Texas, you may not be aware that after you die some sort of ancillary probate proceeding will be required in order to administer that part of your estate which consists of your out-of-state property. This proceeding will be in addition to whatever is required to administer your estate in Texas. However, there are a few ways you may be able to avoid the additional costs and hassle of ancillary probate in another state.
1. The property could be owned by a trust. By placing the property in a trust, you no longer own the property individually, and the property will no longer be a probate asset subject to probate proceedings in Texas or any other state. The trust will contain terms which specify who will inherit the property, and the trustee of the trust will be responsible for transferring the property to the beneficiary. If you choose, the property can be kept inside the trust for the benefit of family or loved ones, and thus be protected from lawsuits and other creditors of you beneficiaries after you die. If the property is kept in a revocable trust with your other assets as part of your overall estate plan, it may be possible to avoid probate proceedings altogether, including those in Texas. You can read more about Texas revocable living trusts here.
2. The property could be owned by a business entity. If you form a Texas limited liability (LLC) for family limited partnership (FLP), the property can be transferred to the LLC or FLP, while you maintain ownership of the business interests. When you die, the business interests pass according to your will or trust arrangement, while the entity continues to own the property. This type of approach often makes sense if you have an LLC or FLP that you have created as part of an overall estate plan. However, there are additional annual filings that may need to be prepared annually for these types of entities, such as Texas franchise tax returns and federal income tax returns, so you should speak with a Houston estate planning attorney prior to forming an entity to hold your property.
3. You could retitle the property using a ladybird deed or enhanced life estate deed. If these types of deeds are available in the state where the property is located, it may help you avoid probate in another state. These deeds function somewhat like beneficiary designations because the property passes immediately upon your death to the person(s) named in the deed, without a need for probate.
