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3 obligations that reduce what beneficiaries may inherit after probate

On Behalf of | Dec 7, 2023 | Probate |

Most heirs and beneficiaries have to wait to receive an inheritance after a loved one passes away. Unless someone will receive an account through a transfer-on-death designation or assets distributed by a trust, resources typically need to pass through probate court before someone obtains actual ownership of them.

The probate process has a way of significantly reducing how much beneficiaries receive. There are multiple obligations that can arise during probate proceedings and reduce the overall value of an estate. Beneficiaries may ultimately receive far less of an inheritance than they expected.

Personal debts

Texas law is very clear that personal financial obligations persist even after someone dies. The personal representative of a Texas estate will need to notify known creditors about someone’s death by sending them letters. They usually also have to publish notice of probate proceedings in a local newspaper. Before beneficiaries receive inherited property, the personal representative will first need to use estate resources to pay all outstanding debts owed by the decedent. Credit card balances, student loans and even medical debt can consume tens of thousands of dollars of estate property.

Tax responsibilities

There are several different types of taxes that can reduce the value of an estate. The best-known tax obligation would probably be estate taxes. Although Texas does not collect an estate tax, the federal government does. Those with multi-million-dollar estates must plan ahead of time or risk a sizable portion of their property going toward estate taxes after their death. The decedents may also have income tax obligations that the estate will need to cover. Finally, there might also be capital gains taxes if people sell inherited property and receive proceeds from those sales.

Probate expenses

The cost to complete the estate administration process could consume thousands of dollars of estate resources. If there are conflicts among the beneficiaries or challenges against the personal representative, then the estate may require far more time in probate court than the average estate would. Probate court costs, including attorney fees, take precedence over the right of heirs and selected beneficiaries to inherit from a Texas estate.

Those who understand that the resources left behind when someone dies do not automatically pass to their beneficiaries – unless they are transferred into a trust or subject to another approach that isn’t subject to probate – may be less prone to disappointment if their inheritance is lower because of a testator’s obligations.

Ultimately, learning about what to expect from the probate process may benefit those expecting to inherit and also those trying to maximize the legacy they leave for others.