Alternatives to Probate Administration for Small Estates in Texas

There are times when the full administration of an estate does not make much sense. For example, what if there is only a couple of assets of the estate, such as a house and a bank account, both of which were solely in the name of the Decedent? The bank account only has about $1000 in it. Do you still have to open an administration of the estate for the sole purpose of collecting the bank account and transferring title to the homestead?

In Texas, there are two alternatives to the administration process; one where there was a Will, and one where the Decedent died intestate (i.e., without a Will). The first alternative is known as the collection of small estates upon affidavit, provided for in Texas Probate Code Sections 137 and 138.

If the Decedent had no Will, and the total value of the estate, not counting the value of the house and other exempt property, was less than $50,000, then you can file an affidavit with the probate court of proper jurisdiction (i.e., in the county where the Decedent was a resident), stating who the proper heirs of the estate would be, using the heirship rules of Texas Probate Code Section 38. Two disinterested witnesses have to swear to the heirship information contained in the affidavit. The small estate affidavit rout is very inexpensive (the filing cost in most counties is less than $75) and in many cases can be done without the involvement of an attorney.

Upon approval of the affidavit by the probate court, all persons or entities dealing with distributees of assets from the small estate are released to the same extent as if they dealt with a personal representative of the estate. Distributees can bring action to force delivery of the estate property and the distributees will be liable to any creditors or anyone else having a prior right to the property. You should note that this procedure does not transfer title to real property, except for a homestead. Thus, if the Decedent owned real property other than the homestead, and had no Will, probably your only alternative is to proceed with a determination of heirship proceeding.

A small estate affidavit usually works well with some assets, such as bank accounts, titles to automobiles, savings bonds and the homestead, but it is usually difficult, if not impossible, to use the affidavit to transfer title to publicly traded stocks and bonds, partnership accounts or brokerage accounts in general. Why? Because most publicly traded stocks and bonds are handled by transfer agents who are located in New York or Chicago, and the people working for these transfer agents rarely deal with small estate affidavits for the transfer of title. They are much more comfortable working with letters testamentary and usually will demand letters before they will transfer the title. With all the trouble it takes to get an order from the court ordering the transfer agent to transfer the stock or bond, you might be better off just going through the administration process to begin with.

What if the Decedent had a Will but few assets, or assets that do not require a lot of work in transferring—all the holder of the asset needs is an order from the court and perhaps a copy of the Will? If there is no need for an administration of the estate, then the Will can be probated as a muniment of title only, as provided in Texas Probate Code Sections 89A through 89C.

This procedure will only be allowed by the court when the applicant can show that (1) the estate has no unpaid debts, excluding debts secured by liens on real estate, and (2) there is no necessity for administration. The will must still be proved valid at a hearing before the court; however, no executor will be appointed. In probating a Will as a muniment of title, it is suggested you utilize an attorney because it is more complex than the simple filing of the small estate affidavit.

The effect of an order admitting a will to probate as a muniment of title is strong in that it is legal authority to all persons (1) owing any money to the deceased; (2) having custody of any property of the deceased; (3) acting as registrar or transfer agent of any evidence of interest, indebtedness, property, or right belonging to the estate; or (4) purchasing from or otherwise dealing with the estate, for payment or transfer to the person named in the will as entitled to receive the particular asset, without any administration. In other words, after the will is admitted to probate as a muniment of title, the beneficiaries of the decedent's estate become the owners of the property outright.

Again, if you are dealing with stocks and bonds, and a transfer agent will only accept letters testamentary rather than an order from a court certified that the beneficiaries in the Will are the only distributees of the estate, then you may not be able to utilize the muniment of title process. In addition, if there are numerous debts of the estate, an administration is the only alternative.

In any event, it is not necessary to create an administration in every instance in Texas, and for those estates with simple assets, the small estate affidavit or muniment of title route may be the way to go. Before pursuing those particular avenues, you should obviously consult with a reputable attorney who practices in this area to determine whether either of these options would be suitable for your situation.