After someone dies, the property that used to be theirs becomes the property of their estate. Either Texas state probate laws or someone’s will determines who inherits which assets from an estate. Whether someone dies without an estate plan or with very thorough documents on record, they likely assume that family members or chosen beneficiaries should receive the vast majority of their property after their passing. Yet, people sometimes fail to account for challenges that can diminish the overall value of their estate after their passing.
All three of the issues below could significantly reduce how much property transfers to someone’s beneficiaries after their death.
Probate conflict
Typically, family members want to respect and uphold someone’s last wishes as outlined in their estate planning paperwork. However, sometimes beneficiaries and family members end up fighting over someone’s property after they die. Other times, they may want to remove the personal representative of the estate or question the legitimacy of estate planning paperwork. Litigation can cost tens of thousands of dollars and can significantly reduce how much someone’s beneficiaries ultimately receive from their estate.
Personal debts
Someone’s financial obligations don’t disappear when they die. Their estate must take responsibility for their debts just as it takes control of their property. Before beneficiaries receive estate resources, the personal representative must first communicate with creditors and settle valid debts. The more money someone owes when they die, the greater the impact those debts may have on what their loved ones inherit.
Taxes
Texas does not assess an estate tax, but there are still other taxes that could reduce what people inherit after someone dies. There is the federal estate tax, which applies to multi-million-dollar estates worth more than $13.61 million. There might also be income taxes due on behalf of the decedent. Other times, the estate itself could owe income taxes if the decedent left instructions to sell off or liquidate some of their property. The personal representative of the estate typically means to handle those tax obligations before distributing anything to beneficiaries.
Learning about the probate complications that can reduce the size of an estate can benefit those administering an estate and those hoping to inherit from one who need to know what to expect, as well as those crafting their estate plans who want to mitigate these risks.