Under the Texas laws of inheritance, ownership of a decedent’s property vests in either (1) the beneficiaries named in the decedent’s will or (2) if there is no will, then the decedent’s heirs as determined by the Texas laws of intestacy.
However, even though the heirs and beneficiaries are entitled to the decedent’s property, the estate usually has to be “administered” first (there are exceptions, particularly with very small estates, where administration is not required by law). The word “administered” may sound fancy, but it’s actually the term used to describe the process of settling the decedent’s affairs and distributing property to his or her beneficiaries. If the decedent left a will, he or she will probably have named an executor in the will to administer the estate. If there is no will, the court will appoint an administrator to do the same thing. The first duties involved in settling a decedent’s affairs include paying off any legitimate debts he or she may have had, paying any taxes, and collecting any money or property that was owed to the decedent.
Next comes the good part, and for most estates, the final part of the administration process – distributing the property. So how exactly does the transfer work? If a decedent left specific bequests to his or her beneficiaries, then the answer is straight-forward – you simply give the bequeathed property to the recipient. For example, a will might state “I leave $150,000 to my daughter A and all the rest of my property to my son B.” In this case, the administrator of the estate would simply write a check from the estate bank account to daughter A for $150,000. For whatever is left, the decedent would simply transfer it to son B. In the case of the transfer to son B, if there is money in the estate, then the administrator would write a check to son B for what is remaining. If there is a house or vehicle left over, then the administrator would sign over title. If there are personal items or household furnishings left over, then the administrator would transfer them by calling son B, and saying “Hey, come over and get this stuff”. The administrator should be sure to obtain a signed receipt for each item transferred.
However, suppose the decedent’s will says “I leave all my property in equal shares to my daughter A and my son B.” Also suppose the estate consists of $300,000, a house, a vehicle, and $20,000 worth of household furnishings. How is the estate administrator supposed to distribute this property so each beneficiary gets a 50% share? Many wills devise property in exactly this manner – as a percentage interest in the estate, rather than by way of specific gifts. In addition, if a person dies without a will, then the intestacy laws only give his or her heirs the right to inherit a percentage interest in the estate. They do not provide for specific gifts. Under these circumstances, there are three methods of distribution that are commonly seen in Texas probate administrations. They are:
Distribution by Agreement
Generally considered the most desirable form of distribution, the distribution by agreement method permits the administrator to divide and distribute the estate property in accordance with the agreed upon desires of the beneficiaries. For example, daughter A and son B may agree to a plan by which she receives the $300,000 in cash along with the vehicle and he receives the house along with all the household furnishings. This may not be an exact 50-50 split in terms of dollar value. However, as long as all the beneficiaries and the administrator agree, the split is close enough and the beneficiaries will be legally bound by their agreement.
Sell All Property and Distribute Proceeds
This method is one of the most common methods of dividing and transferring estate property to heirs and beneficiaries. This method is straight-forward. The administrator can simply sell all the assets in the estate and make a pro rata distribution of the cash. For example, two heirs would each receive 50% of the proceeds. Three heirs would each get 1/3rdof the proceeds. Going back to our hypothetical, the administrator would sell the house, the vehicle, and all the household furnishings. The house would probably be sold through a realtor, the vehicle would likely be sold to a pre-owned car dealership or through a classified ad in the newspaper, and the household furnishings would probably be sold either through an auction or an in-home sale. After all the estate property is sold, the administrator would then give 50% of the cash to daughter A and 50% to son B. Even though this method is one of the simplest and straight-forward methods of distribution, it isn’t ideal if the estate property has sentimental value to the beneficiaries because all the estate property is sold. The administrator may give the beneficiaries the opportunity to buy the property, but isn’t legally required to. However, if the beneficiaries do not agree on a distribution plan, the probate court will most likely order this method of transfer.
Make Undivided Distribution
Unless the decedent’s will provides otherwise, the administrator can also distribute undivided shares of real estate and other titled assets to the beneficiaries, with the expectation that those inheriting them will work out a partition on their own, in a manner unrelated to the probate proceeding. After the estate administration is complete, the beneficiaries are free to petition a court to partition the property, but they don’t have to. They may prefer to continue holding the property as joint owners. Many people don’t realize this, but it is quite common for persons to own a percentage interest in property, rather than full ownership. For example, most married couples often own their house this way – as joint owners. However, in general, being a joint owner is a voluntary status and no one is required to be a joint owner. A joint owner can always petition a court for a partition of the property. If the property is capable of being divided (like rural land), then the court will literally divide the property. If the property isn’t capable of being divided (like a house or car), then the court will order that the property be sold and that the proceeds be split.
Transferring undivided shares is an uncommon method of distribution in most Texas probate administrations because beneficiaries generally don’t want to be joint owners of property. Rather than having to hire a lawyer themselves and petition the court for a partition, most beneficiaries prefer that the administrator simply divide and distribute the property so that they have full ownership of whatever assets they receive. However, there are certain estate assets for which the beneficiaries often don’t mind being joint owners, in which case this method is ideal. For example, if the decedent owned a business, the beneficiaries may not mind having their interests in the business be distributed in this manner. In these instances, this method of transfer is a fast and efficient method of transferring estate property to the beneficiaries.
If you are an estate administrator or a beneficiary of an estate in the Northwest Harris County area including Houston, Brenham, Hempstead, Tomball, or Cypress, Texas and you are interested in receiving legal advice or representation, then please contact the Law Offices of Joseph E. Seiler to schedule a free one-half hour strategy consultation. To schedule your free strategy session, please message us on our contact page or call us at (713) 343-1450.
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