While I was in Houston over the Holidays, I read an article in the Houston Chronicle that illustrates the unintended consequences of not having a will.

It was about a man named Timothy Cole, whose father had not been a part of his life since he was seven years old. Timothy Cole died in the Texas Prison System. He had been convicted of a rape he didn’t commit. Despite the fact that the actual rapist confessed 1995, and the victim admitted that she mistakenly identified him, he remained in prison until 1999, when he died at the age of 39 of an asthma attack.

Convinced of his innocence, Timothy Cole’s mother and siblings, through the Innocence Project of Texas worked tirelessly to clear his name. On February 6, 2009, he was posthumously cleared of any wrongdoing and his record was expunged.

As compensation for his wrongful imprisonment, his estate was awarded over $1 million. That’s when Timothy Cole’s deadbeat dad reappeared. You see, it appears that Timothy Cole did not have a will, which means that his estate will pass according to the Texas intestacy statutes.

According to these intestacy rules, if a single person dies without a will in Texas, his estate will pass equally to his parents if both are living, as in this case. So Timothy Cole’s dad, despite having not been a part of his son’s life for 32 years, stands to inherit more than half a million dollars from his estate. I doubt Timothy Cole would have wanted that.

You can read “Poster Child of a Deadbeat Dad” by following the link.

No related posts.

I have written before that in the case of intestacy, the characterization of property as separate or community dictates how and to whom it is distributed.  It also affects which property you can dispose of in a Will at your death.

But how does one distinguish between which property is community and separate? The following is an explanation of how property is characterized in Texas.

Characterization of Property

In Texas, all property is classified as community or separate property depending on when and how it was acquired.

Property acquired before a marriage and during the marriage by gift, devise or descent is separate property, while property acquired during a marriage is presumed to be community property, except if acquired by gift, devise or descent, unless you agree otherwise (I’ll explain in a future post).

Property retains the classification as separate or community regardless of whether it is converted to cash or back again. So for example, if you sell a home that was your separate property, the proceeds from that home will be separate even though you sold the property while you were married. Or if you receive an inheritance while you are married, the inheritance would be separate property.

However, if you want to retain the separate nature of that property, it’s important that you don’t commingle the property with community property. Otherwise it may be difficult to “trace” the property in a way that proves that it is separate property.

Distinguishing Between Community Property and Separate Property

The following property is classified as community property:

• Income either spouse earns during the marriage
• Property purchased with income earned during the marriage
• Dividends, interest, and capital gain earned on community property
• Dividends and interest earned on either spouse’s separate property during the marriage

Separate property includes any of the following:

• Income earned by either spouse before the marriage
• Capital gain on separate property, such as appreciated stock
• Any property acquired by gift or inheritance
• Personal injury damages for an physical injury sustained, even while married (except for lost wages which are community property)

So for example, if you owned a condominium before you were married, and rented the condominium out after you were married, the rental income would be community property. However, if you were to sell the condominium after you were married, the proceeds of the sale would be separate, assuming you don’t commingle the proceeds with separate property in a way that makes them untraceable.

Can Property Be Separate and Community at the Same Time?

It’s possible for property to be characterized as both separate and community. For example, suppose you purchase a home during your marriage for $200,000 and use the proceeds from the sale of separate property to put down a down payment of $50,000, 25 percent of your home would be your separate property. However, if you make mortgage payments out of income earned during your marriage, a portion of the home would be owned by the community.

The distinction between separate and community property can get a bit confusing at times but is very important in determining how property is distributed at death.

Related posts:

1. Can I Transfer Property in Texas With a Foreign Will?

I read an article by Don McNay recently, which highlights the complexities, expense and unwanted results that can arise in cases of intestacy.

McNay is a financial columnist and advisor and explains that he tells anyone who comes in his door to get a will so that they can control how their assets are disposed of in the event of their death. But his mother and sister unfortunately didn’t take his advice, and the result was disastrous.

His mother died first, leaving him and his sister as her heirs. But because his sister was unemployed, he paid his mother’s funeral expenses, outstanding bills and mortgage, with the understanding that when the estate settled he would be reimbursed.

Unfortunately, the agreement was not reduced to writing, which was not a problem until his sister died unexpectedly, leaving a minor daughter and adult son. Things got even more complicated when his sister’s estranged husband came out of the woodwork. Although his sister had told him she had obtained a divorce, no formal divorce proceedings had taken place, so she was still legally married.

His sister’s husband started probate proceedings and asked to be named administrator of his sister’s estate.  Since his mom’s estate hadn’t settled, the husband was also named co-administrator of his mother’s estate. Also, because his sister had a minor child, a guardian ad litem also had to approve any decisions related to his mother’s estate.

McCay writes:

“The arguing back and forth caused a riff in the family over very little money. By the time the lawyers and other expenses (I got back the money I advanced) were paid, my share of my mother’s estate was a small sum and my sister’s estate received the same.

A bill from an attorney came in after Mom’s estate had settled. I was so tired of dealing with everything that I paid it myself rather than reopening the estate. Thus, I lost money on the overall process.”

He explains that the process of settling the estate was expensive, time-consuming, and resulted in his sister’s estranged husband getting half of his sister’s estate, something neither his mother nor his sister would have wanted.

“People may think that wills and attorneys are expensive. In the overall scheme of things, they really aren’t. I gladly would have paid ten times the average cost for my mother and sister to have had wills. And everyone (but my brother-in-law and the attorneys) would have come out way ahead.”

You can read My Story: Why People Need Wills by clicking here.

No related posts.

From the time we’re children reading Cinderella, we hear stories of strained relationships between stepchildren and their stepparents. So much so that stories of positive relationships often take us aback.

But loving relationships are common. For example, I know a stepmother who bonded so much with her stepdaughter that she continues to have visitation privileges even though she and her husband are now divorced. And I recently worked with a client who continued to have such strong relationship with a stepson that he wanted to provide for that child in his Will, even though he was now divorced from the child’s mother and remarried.

By making a Will, stepparents can ensure that their stepchildren inherit from their estates. But unless the stepparent has legally adopted the stepchild, the lack of a biological relationship will preclude a stepchild from inheriting by virtue of the Texas intestacy statutes.

If you have a great relationship with your stepchild and want him or her to inherit a portion of your estate, you need a Will.

No related posts.

Dwight D. Eisenhower once said that “America is best described by one word: Freedom.” His quote basically sums up what makes America unique.

We Americans relish our freedoms. We want to live how we like and spend our hard-earned money on what we want. And we resist when the government tries to interfere with our lives. However, less than half of all Americans have even the most basic estate planning documents. As a result, they voluntarily give up their freedom to decide what will happen to their assets when they die.

The law gives you the freedom to decide how and to whom your assets are distributed when you die by making a will. But if you die without a will, your assets will be distributed according to a statutory formula that doesn’t take into account your wishes and unique circumstances.

Below is a summary of the way the assets of those who die without a will in Texas are distributed.

Intestate Distribution For Single People With No Children

If a you are single and die without a will in Texas, the Texas Probate Code dictates that your assets will be distributed as follows:

1. Your estate will pass equally to your parents, if both are living. If only one parent is alive, and you don’t have any brothers or sisters, then your entire estate will pass to your surviving parent.
2. However, if you do have siblings, or descendants of siblings (nieces and nephews), then your surviving parent would receive only half of the estate, and the remaining one half would be divided among your siblings or their descendants.
3. All of your estate would pass to your siblings or their descendents if you have no surviving parents.
4. If you have no surviving descendants, parents, siblings, or descendants of siblings, then the estate is divided into two halves, with one half passing to relatives on your mother’s side of the family, and the other one half passing to relatives on your father’s side.
5. If one side of the family has completely died out, the entire estate would pass to the surviving side of the family.
6. On rare occasions, when an unmarried person dies without any surviving heir, his estate will pass to the State of Texas.

Perhaps you have a close friend who you would have wanted to share in your estate. That would not be possible without a will.

Intestate Distribution for Those Who Die Unmarried with Children

If you are single and have children, then all your property will pass to your descendants. If your descendants are of the same degree of relationship, (meaning, for example, that all are your children or all are your grandchildren), then the assets will be divided equally between them.

However, if your descendants are of different degrees of relationship, (meaning some of your children predecease you, leaving children or grandchildren of their own), then the younger generation would only be entitled only to the share the older generation would have received had he or she survived.

Intestate Distribution for Those Who Die While Married

Many people may assume that if they are married and die without a will in Texas, their surviving spouse will inherit their entire estate. This is not always the case. How their property is divided depends on whether it is characterized as community property or separate property.

Community Property

All property acquired during a marriage is presumed to be community property. Under Texas laws, if you are married and are survived by a spouse and children, then:

1. Your surviving spouse will inherit all your community property if all your children are also the children of your surviving spouse;
2. Otherwise, all your one-half interest in the community estate will pass to your children, with your spouse keeping only his or her one-half interest.

If you do not have any children, then your surviving spouse will inherit all of your community property.

Separate Property

If your property is characterized as separate property, the distribution scheme is different:

1. If you are survived a spouse and children, your surviving spouse is entitled to one third of your separate personal property and only a life estate (the right to use the property until his or her death) in one-third of your separate real property. The rest would be inherited outright by the children of the deceased spouse.
2. If you are married but have no children or other descendants, your surviving spouse would be entitled to all the separate personal property. But if you have surviving parents and siblings, the surviving spouse would only be entitled to one-half of the separate real property with the other half passing to the parents, siblings or descendants of siblings in a manner set forth by the statutes.

If you want the freedom to decide how and to whom your property will be distributed when you die, you need a will.

Related posts:

1. The Complexities of Intestacy in Texas
2. The Complexities of Intestacy for Blended Families in Texas