New Tool To Avoid Probate; Is A Will Really Necessary?

The word on the street is that there is a new tool to avoid probate and a Will is no longer necessary. Is this true?

The Texas legislature has seen fit to join about half of the other states in providing an alternative to probating a Will to transfer real property. This became effective September 2015. You can now pass ownership in your real property to a beneficiary upon your death without the necessity of probate, pursuant to a properly recorded "Transfer on Death Deed" (TOD). This is not a Will. What are the pros and cons? Favorably, under currently law, when real property passes pursuant to a TOD, it is excluded from Medicaid estate recovery. Also, since the title does not pass until death, usually, the execution of a TOD deed has no tax consequences, including gift tax. Further, the beneficiary should get the "stepped up basis" (date of death value) in the real property.

Does this mean you don’t need a Will? No. Even if you have set up your other assets to pass to desired beneficiaries you still need a Will in case one or all of the beneficiaries predecease you. The statute mandates, if a beneficiary dies before you or within 5 days of your death, the interest lapses. In other words, if the beneficiary does not survive you to take the property and no alternate beneficiary is named, the transfer is ineffective.

Are there circumstances when a TOD is not the appropriate method to transfer title to real property? What is required to make it effective? Is it revocable? Does it affect property tax exemptions? Can you still get a loan secured by the property or sell the property?

For the answers to these questions or more about a Transfer on Death Deed other estate planning tools, call us.