While it can be somber to think about our own mortality, I assure you that talking about death won’t kill you! In fact, for married couples, having an estate plan in place can help prevent some pretty disastrous results at the death of your spouse.
Harry is a dentist. He has been married to Wilma for fifteen years and all of their property is community property. Harry is 60 and Wilma is 47. Harry and Wilma have never had kids of their own, but Wilma’s two by a prior marriage, Dotty and Sam, are now grown. And Harry says, “thank goodness,” because Sam has turned out to be quite the handful. Sam has been running with a bad crowd and has been thrown out of school. He is 17. Dotty is 24. She dropped out of college during sophomore year to get married. She is now divorced and has two kids, ages 3 and 5. Wilma gives her money and babysits often.
What happens to Harry if Wilma passes away without a will? When a married parent dies without a will in Texas, one-half of the total community estate goes to the decedent’s children and one half goes to the surviving spouse, unless all of the deceased’s children are also children of the surviving spouse. This comes as a surprise to most people; the surviving spouse inherits NOTHING from the deceased. The children of the deceased take the entire one-half interest of the deceased to split among them. The surviving spouse is left with the one-half interest in the community that he or she already owned.
This is no longer true, however, if the children are both Harry and Wilma’s children. In this case, the surviving spouse will receive all of the community property. If the children are Wilma’s but not Harry’s children, then Wilma’s share of the community will go to the children.
When Wilma died without a will, Harry took one-half of the homestead, Dotty and Sam each received one-quarter interest in the homestead. However, only Harry and Sam are entitled to occupy the homestead because the surviving spouse and any children living in the home when the owner died receive a homestead interest under Texas law.
Any other real estate, including vacation, investment, or business property would be divided between Wilma’s children and Harry. Personal property, such as the furnishings, boats, cars, jewelry, china, and silver would all be divided between Wilma’s children and Harry. Stocks, bonds, and cash deposits, whether in Harry’s name or Wilma’s, or both names, would go one-half to Harry and one-quarter to both Dotty and Sam.
Normally, Harry would receive the checking account, which is usually set up as a survivorship account, any insurance naming him as beneficiary, and Wilma’s IRA (if she named him the beneficiary).
Assets which Harry will have to split with the children include the cash value of insurance on HIS life and HIS dental business.
Wilma’s separate property (property owned before marriage, gifts, and inheritances) is handled differently. Separate personal property, such as china, silver, and jewelry is divided one-third to Harry and two-thirds among the children. Harry would also receive a life estate in any separate real estate, with the children taking the remainder. This division is true whether or not the children belong to Wilma alone or to both Harry and Wilma.
Wilma, like most married people, wished to leave her estate to her spouse and to her children. Harry, like most married people, expected to receive most of his spouse’s estate upon her death. However, the community property laws give all of the decedent’s community property to his or her descendants. Often this results in the surviving spouse having insufficient funds for his or her support. Wilma certainly wished to leave something to her children, but she probably did not want them to receive a large sum until they were older and wiser. She certainly did not intend to completely exclude her husband.
Wilma could have provided for her husband and children by leaving a will. Harry could have insured that he would have sufficient funds for his retirement years by insisting that Wilma have a will. Wilma, of course, should have the same guarantees by making sure that Harry has a will.
Do these examples leave you questioning your own situation? Call Skeen Law Firm today at 210-202-1141 to get wills made for you and your spouse. You can’t afford to wait!
I recently got a call from John who was concerned about his mother, Susan. She had been forgetting to pay her bills and had recently suffered a bad fall. John realized that his mother would increasingly need his help in the coming days and months, yet he had no legal authority to do so. John wanted to know if I could help his mother get a Durable Power of Attorney in place. I told John that it may be too late.
I recently had a client, Mary, whose husband passed away ten years ago in San Antonio, Texas. Afterwards, she suffered from enormous grief, spiraled into depression, and rarely left her home. The fog had just recently lifted and Mary realized she needed to turn her attention to settling her husband’s affairs. Her husband had a validly executed Texas will, and she wanted to know if I could help her probate that will. Unfortunately, I told her that in Texas, a person’s Will’s “expires” four years after they pass away. She was shocked! She really had no idea about that law, like so many people I speak to.
Fortunately, through sound estate planning, it is possible to address medical treatment and financial affairs in the event of incapacity. In Texas, this is done through an advance directive, health care power of attorney, and financial power of attorney.
I often get calls from people asking me about Incapacity Planning documents, and when they might be useful. In creating an estate plan, you should not only put documents in place that deal with what will happen to your property after you die, but also documents that will apply while you are still alive but are unable to make your own choices. When a person is no longer capable of making choices, the law says such a person is incapacitated. An incapacity plan, therefore, is a collection of documents that you can make in preparation for this possibility.
Trusts are used in estate planning for various purposes, including: to provide tax reduction benefits, to hold property for a person until he or she is mature enough to manage it, to hold property for distribution only for specific purposes, to protect property from the claims of a beneficiary’s creditor, to protect property from the claims of an estranged spouse of a beneficiary, to provide for the management of property with distributions for a beneficiary’s long term support, and for any other reason that the grantor desires. The trust agreement drafter writes the agreement with the grantor’s intentions in mind.
Trusts can also be revocable and irrevocable. A revocable trust is a trust which the grantor (the person who creates the trust) can amend, cancel or revoke at any time. An irrevocable trust cannot be cancelled, revoked or even amended after it is made. Since testamentary trusts are not created until the grantor has died, they are irrevocable upon the grantor’s death. Prior to the grantor’s death, they have not gone into effect, so the grantor could change his Will or Revocable Living Trust to change the provisions of a testamentary trust or to eliminate it completely. For example, the grantor could change his Will to provide “I leave $50,000 to John to hold for the benefit of my niece, Nancy, to be held until she is 25 years old.” Under the change, John cannot use the money to pay for Nancy’s education, and he must turn over all the trust assets to Nancy when she reaches 25 years of age.
I get phone calls and emails each week from people in Bexar County who are grieving the death of a family member. They’re often confused and overwhelmed about what to do next.