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

Texas Intestate Succession: Married With Children

What happens to my property if I die without a will while married, and I also have children or other living descendants?

In Texas, the probate code makes different assumptions about how you would have wanted to distribute your community property versus your separate property, and then makes further assumptions based on whether your surviving spouse is also the parent of all of your children.  

For your separate personal property, your surviving spouse will receive one-third, and your surviving children (or their descendants) will share equally in the remaining two-thirds.

If you owned separate real property (real estate that was not part of the community property estate with your surviving spouse) – your surviving spouse will only inherit a one-third life estate in that property, and your surviving children (or their descendants) will take the remaining two-thirds.  Essentially, your surviving spouse will have the right to use and occupy her one-third share in that property only during her lifetime; once she dies, that “life estate” will go away, and your surviving children (or their descendants) will own all of your separate real property.

For your one-half share of any community property, your surviving spouse would inherit all of your share but only if she is also the parent of all of your surviving children (or the descendants of any deceased children).  If you had any children with someone other than your surviving spouse, she will inherit none of your one-half interest in the community property.  Instead, all of your community property interest would be divided equally among your surviving children (or their descendants).   However, your surviving spouse will always retain her one-half share in the community property estate.  

Since this situation only happens if you die without a valid will, you can avoid these results by simply making a will.  

There is a very good explanation with pie charts of the foregoing here: http://www.co.travis.tx.us/probate/pdfs/DnD_diagrams.pdf.

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

Do Adopted Children and Stepchildren Inherit Property in Texas when there is No Will?

When a person dies without a will in Texas, inheritance and distribution of that person’s property is determined by Texas law. Generally, property is inherited by relatives and depends on how closely the relative was related. Families with adopted and/or stepchildren need to consider who will inherit if a family member dies without a will.

A stepchild that is not legally adopted by the stepparent will not inherit from the stepparent if that stepparent dies without a will. This is because an un-adopted stepchild is not considered to be legally related to that stepparent. This result is often not what was wished or intended by a stepparent who raised a stepchild. For a stepchild to inherit from a stepparent, the stepparent should either adopt the child, or prepare a will with instructions that the stepchild should inherit.

An adopted child can inherit property when an adoptive parent dies without a will. An adopted child is treated the same as a natural born child. A child who is adopted as a minor can also inherit property from his or her natural parents, but an adult who is adopted may not inherit from his or her natural parents.

Natural parents cannot inherit from an adopted child or adult if the adopted person dies without a will. This can be important if an adopted child seeks out the identity of his or her natural parents and rekindles the relationship.

Blog by Austin Attorney Sarah F. Berry

Living Trust Scams

Beware of Living Trust Scams

Many con artists are targeting older Texans with a variety of false claims to sell unnecessary Living Trusts. Not only do these Living Trusts fail to accomplish the goals being advertised, they can often result in increased costs and exposure of your assets to creditors or taxes.

Some of their false claims are:

• Living Trusts will avoid estate/inheritance taxes. Unless you and your spouse’s combined assets are greater than $1 Million, your property will NOT be subject to federal or state inheritance or estate taxes. If they are within the taxable range, a well-prepared estate plan (including a tax-planned will), can achieve the same effect as a Living Trust, for a lower costs without unintended consequences mentioned below.
• Living Trusts will protect your assets from creditors. Actually, this claim is simply a lie. Assets in a Living Trusts are subject to the claims of your creditors before and after your death. There are several legitimate ways to maximize the protections afforded under Texas law to debtors, but these should always be discussed with a licensed attorney and/or a certified public accountant.
• Living Trusts will avoid the excessive time and expense of probate. There are a variety of ways to reduce the necessity for probate and simplify the probate process in Texas. It cannot be repeated enough – probate is NOT an “evil” process; probate is the legal method for passing clear title to your heirs by discharging your existing debts in an orderly fashion and providing your heirs with legal exceptions designed to protect your exempt assets from certain creditors. In fact, the failure to probate your estate through one of Texas’ simplified methods could result in increased costs to your heirs, because it can lead to conflicting claims to your property, often years after you have passed.
• Living Trusts help you qualify for public benefits. Again, this claim is simply wrong. Assets in a Living Trust are included in calculating your ability to qualify for public assistance, including nursing home Medicaid benefits.

Although most do not need one, certain people can benefit from a Living Trust; however, that Living Trust must be tailored to meet the requirements of Texas law. Before responding to an advertisement or salesperson concerning any Living Trust, ALWAYS consult with a licensed attorney with experience in estate planning and probate law, as well as an accountant, banker or financial advisor whom you trust. Don’t make an immediate decision. Any legitimate company or salesperson will understand that you need to take some time and seek professional advice before making important decisions concerning your finances. If you feel pressured, it’s probably a scam!!