Going to your bank can save you from a probate court

12 Oct, 2018

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Individuals and even estate planners are trying hard to avoid probate court. Even those who need wills shall have a large percentage of their assets transferred, pursuant to beneficiary designations in account agreements at banks and credit unions, in IRA’s and other qualified retirement plans, and through life insurance policies, all through their trusted financial institution instead of a probate court. [Related topic: Probate attorney]

In fact, if you add a trust, even a wider range of assets can be transferred outside the probate courts, which means that financial institutions are called upon to help a customer determine what type of account to use and, after the death of the customer, review legal documents and carry out the transfer instructions.


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Further, more people are using simplified probate tools to avoid a formal probate. Small estates affidavit are used in Texas when a person dies without a will and has $75,000 or less in personal assets, not including the homestead. If there is a will and there are no unpaid debts or a need for administration, the will can be admitted to probate under a unique Texas proceeding known as a “muniment of title.” Under these procedures, no representative of the estate is appointed and banks may be presented with a court certified copy of an affidavit for small estates or an order admitting a will to probate as a muniment of title.

The financial institution may be called upon to review the documents and pay the funds in an account. These procedures are currently authorized by statute but may become more widely used. Even before the death of a customer, financial institutions may be involved with estate issues of their customers, helping make the expensive and burdensome process of a court-supervised guardianship more streamlined.

A power of attorney (“POA”) is often used as an estate planning tool to avoid guardianships, and it may vary from state to state. However many statutes are modelled after the Uniform Power of Attorney Act of 2006 which promotes the acceptance of POA’s. Nevertheless, banks may refuse a POA on the grounds listed in the statute and only within strict time limits.

Against these new powers, a financial institution must weigh the potential for elder abuse. A family member may try to improperly influence the testamentary decisions of a parent or other relative. Persons without children or heirs may become the targets of fraud schemes.

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