Texas Increases Allowances for Surviving Spouse and Children

Hooray for modern times! As part of the new Texas Estates Code, the Texas Legislature finally got around to increasing various exemptions and allowances for surviving family members.

Section 102.004 of the Texas Estates Code clarifies that the homestead of a decedent who is survived by a spouse or a minor child is not liable for the payment of any debts of the deceased’s estate, other than certain debts which may be secured by that homestead under the Texas Constitution – essentially, purchase money or home equity liens, ad valorem property taxes, certain materialmen’s liens, an owelty of partition, or a reverse mortgage.

Effective January 1, 2014, Chapter 353 of the Texas Estates Code sets new amounts for certain allowances that may be claimed by a surviving spouse or certain children of the deceased, prior to payment of any creditor’s claims.

Under Section 353.053, in place of a homestead under Section 102.004 (for persons who lease or otherwise do not have a suitable homestead), qualified survivors can request that the probate court set aside an allowance up to $45,000 – previously, the maximum allowance in place of the homestead was $15,000. 

In lieu of any exempt personal property, the survivors can also request the probate court set aside an allowance up to $30,000 – the previous cap on this allowance was $5,000. 

These two allowances are in addition to the “family allowance” that may be requested under Section 353.102 of the Texas Estates Code for the maintenance of the surviving spouse, minor children, and any adult incapacitated children for one year from the date of the decedent’s death. 

Effectively, the Texas Legislature now permits qualified survivors to set aside up to $75,000 (versus the previous $20,000), as well as a “family allowance” when necessary, to help provide for their care without the fear of such funds being seized by the deceased’s creditors. 

By: Cynthia W. Veidt, cindy@lpvlaw.com

Do You Need a Will to Transfer Your Bank Account?

Probably not, but it certainly wouldn’t hurt to have one anyway.

Also, the funds in your account may not transfer to the people you think should receive that money. You should check your account agreement and ask your bank to answer any questions about where your funds will go once you have passed away.

When you die, your will can only distribute the assets that you, yourself, own. Your account agreement contains provisions that govern the extent to which any funds held in a particular bank account actually belong to you – as opposed to any other people who are also “account holders” or “authorized users,” or whatever language your financial institution may employ these days.

There are an elaborate number of different types of bank accounts - joint accounts, multi-party accounts, pay on death accounts, accounts held for the benefit of one person by another person (sometimes called a “trust account”), convenience accounts, accounts with rights of survivorship – the list can be confusing and I have found that most people don’t really know what type of bank accounts they actually have. In fact, most have never read their account agreement and didn’t keep a copy for their records.

Most likely, your account agreement also contains a “beneficiary” designation. You probably filled this out (or left it blank) on the day that you opened your bank account without even thinking about it. That named “beneficiary” is contractually entitled to receive the remaining funds in your account, directly from your financial institution, even if your will says something different. 

Basically, your last will and testament only transfers property that has not been dealt with through a separate agreement signed during your lifetime. Property such as life insurance proceeds, bank accounts, investment accounts, and similar funds almost always have a “beneficiary designation” that dictates who will receive those funds after your death, whether or not your will has been admitted to probate.

Always, always, always read the fine print when dealing with a financial institution, keep a copy of your account agreements, and double-check your beneficiary designations.

By: Cynthia W. Veidt, cindy@lpvlaw.com

Do You Know Who Gets Your Property If You Die Without a Will?

Well, you may think that you do. And most of you are probably wrong. At least under Texas law.

Recently, I overheard a well-educated financial expert tell his clients that they didn’t need to have a will, because Texas is a community property state and the surviving spouse will inherit everything, anyway.

After figuratively beating my head against a wall for the next five minute, I decided to revisit this misunderstood topic on our Blog instead.

Everyone needs a will – here are a few reasons why:

First, don’t assume you’ll have a surviving spouse. Married couples could both die during an accident, or within 30 days of each other, or after a divorce - any number of unfortunate circumstances may result in the law failing to recognize a “surviving spouse.”

Second, your surviving spouse does not automatically inherit everything you own. Other family members, particularly children (whether they are also children of your surviving spouse or not), will also inherit certain types of property under Texas law. Add in children from a prior relationship, and your surviving spouse may receive an unpleasant surprise.

Third, not everything you own is legally characterized as “community property” just because you happen to be married. And separate property is treated differently under Texas laws than community property.

Fourth, Texas’ statutes governing the distribution of your property if you die without a will (called being “intestate”) are very confusing. The Travis County Probate Court has a color-coded pie chart that helps demonstrate this complexity quite nicely: http://www.co.travis.tx.us/probate/pdfs/DnD_diagrams.pdf.  

Fifth, your bank accounts and other investments may not pass by beneficiary designation or a right-of-survivorship clause, which means a probate court will need to enter a judgment determining the identity and inheritance rights of your legal heirs. That process will hold up access to your funds at a time when they are most necessary for your surviving family members. 

Why risk an unwanted result, when you can simply prepare a will that clearly tells everyone how to handle your property after you pass away? 

By: Cynthia W. Veidt, cindy@lpvlaw.com

Austin Lawyer Tip: The Most Important Words in Your Will

There are two fairly simple things that you can do before you die to help ease the financial burden of your passing on your family. One is to buy a good amount of life insurance. The other is to prepare a simple Will that uses the phrase, “I appoint Mary Smith as my independent executor, to serve without bond.” (Of course, replacing “Mary Smith” with your own choice.)

This very simple phrase will allow your family to probate your estate using the process known in Texas as an “independent administration,” and will further allow your executor to avoid the necessity of obtaining a substantial cash or surety bond before the court can legally recognize his or her authority to act on behalf of your estate. Both matters will help save a substantial amount of administrative costs and attorneys’ fees, which would otherwise be deducted from your estate before it is passed to your beneficiaries, while helping to expedite the transfer of title to your property from your estate to your beneficiaries. (See our related BLOG topic briefly describing an “independent administration.”)

If, for whatever reason, the deceased’s Will does not contain this phrase or words of similar effect, or if the deceased failed to prepare a Will, all is not lost. So long as all of the deceased’s heirs agree, the probate court can appoint an executor or administrator to act independently of the court and/or can waive the requirement for the executor or administrator to post a bond. Obviously, however, it will not always be possible to obtain the agreement of every single heir, perhaps due to family disagreements or difficulty in locating or communicating with an heir. For this reason, we recommend that you review your current Will to ensure that you are taking full advantage of this important phrase or, if you do not have a Will, that you consider preparing a simple Will in the near future.