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Texas Estate Planning, Divorce and Protecting Assets

People are often reluctant to talk or think about the inevitable, and estate planning involves that very thing. The experience in our office is that, most of our clients, are glad once they put a plan in place for their estate should something happen to them.

Having an estate plan, ensures that you have provided for your children and others who are close to you in the event they have to go on without you. I believe that this is an important decision that needs to be made while going through a divorce and often overlooked. We have had clients who chose to ignore this while going through a divorce and as fate would have it they passed away and their ex got everything.

Here is a list of the instruments that make up the typical estate plan:

  1. Life Insurance
  2. Last Will and Testament
  3. Inter vivos Trust (also known as a Living Trust)
  4. Durable Power of Attorney
  5. Medical Power of Attorney
  6. Living Will or Medical Directive
  7. Funeral or Memorial Instructions
  8. List of Accounts and Documents

You may prepare to modify your estate plan during the divorce. Many Texas counties, have Standing Orders that apply immediately upon the filing of a suit for divorce or a suit affecting the parent child relationship.

Most standing orders prevent the parties from transferring assets, selling or encumbering property, whether separate property or community property, changing the beneficiary designation on any life insurance policy or affecting the cash value of a life insurance policy.

However, since many of these standing orders were put in place Texas Estates Code Ann. § 253.001 was passed making it so that Texas Courts may not make orders prohibiting a person from executing a new will or a codicil to an existing will.

A Few Thoughts While Your Divorce Is Pending

When you are married, avoiding estate planning might not be as big of a deal because most things automatically go to your spouse under Texas laws of intestate succession. Many times, estate planning concerns often limited to what happens if both parents are deceased in some tragic event, such as an automobile accident in which neither spouse survives.

In Texas if you inherit property or money before your divorce is finalized, then such an inheritance is your separate property and is not subject to division in the divorce.

However, how is your property distributed if you do not have a Will in Texas and you do not survive your divorce being finalized? However, without a will all your assets community or separate may go directly to your “surviving spouse” under Texas’s laws of intestate succession.

Another thing you should think about is that your surviving spouse would be first in line to seek probate appointment as the Personal Representative of your intestate estate. This would also be true for you should your spouse die without a Will before the divorce is final.

Testate and Intestate Succession

When a person dies with a Will, then he or she is said to have died “testate.” The enforceable terms of the Will control the appointment of an Executor, the administration of the decedent’s testate estate, and the distribution to the devisees named in the Will.

By contrast, when a person dies without a Will, he or she is said to have died “intestate.” Texas’s laws of intestate succession apply to the administration of the decedent’s intestate estate and control the distribution of assets to the heirs at law. In other words, Texas’s intestate laws determine exactly who the heirs at law are or will be.

What Happens to Your Estate Plan after a Divorce?

Chapter 123 of the Estates Code addresses the dissolution of marriage with regard to wills and certain nontestamentary transfers. Specifically, section 123.001 of the Estates Code provides that:

“If, after the testator makes a will, the testator's marriage is dissolved by divorce, annulment, or a declaration that the marriage is void, all provisions in the will, including all fiduciary appointments, shall be read as if the former spouse and each relative of the former spouse who is not a relative of the testator failed to survive the testator, unless the will expressly provides otherwise.”

While not a provision of the Estates Code, the Texas Health and Safety Code section 166.155 (a)(3) makes similar provisions for the revocation of Medical Powers of Attorney, which are revoked by “the divorce of the principal and spouse, if the spouse is the principal's agent, unless the medical power of attorney provides otherwise.

Section 9.302 of the Family Code makes nearly identical provisions with regards to retirement benefits and other financial plans, and states, in part:

(a) If a decree of divorce or annulment is rendered after a spouse, acting in the capacity of a participant, annuitant, or account holder, has designated the other spouse as a beneficiary under an individual retirement account, employee stock option plan, stock option, or other form of savings, bonus, profit-sharing, or other employer plan or financial plan of an employee or a participant in force at the time of rendition, the designating provision in the plan in favor of the other former spouse is not effective unless:

  1. the decree designates the other former spouse as the beneficiary;
  2. the designating former spouse redesignates the other former spouse as the beneficiary after rendition of the decree; or
  3. the other former spouse is designated to receive the proceeds or benefits in trust for, on behalf of, or for the benefit of a child or dependent of either former spouse.

Life Insurance

Life insurance is an important component of one’s essential estate plan, especially when there are children who will need support.

You may be ordered or agree to continue or acquire a life insurance policy after a divorce when:

  1. When spousal maintenance or
  2. child support is part of your divorce decree.

You can read more about this topic in my blog article “Texas Divorce and Child Support - Life Insurance Obligations.”

You can also read about the importance of making sure life insurance is redesignated after a divorce or specifically designated in a divorce decree in my blog article “$300 Divorce Cost a Man $100,000 in Texas.

Term Life Insurance

Term life insurance policies provide coverage of the life of the primary insured for a specific length of time. In a divorce on the inventory and appraisement There is no equity or cash value so they would be listed as having a value of 0 on the inventory.

Generally, you purchase term life insurance protection for 10 year terms up to 30 year terms. Many policies are guaranteed renewable to age 90 and some companies offering policies to age 95.

Whole Life Insurance

A whole life insurance policy is a long-term approach to insuring a life. A whole life policy will provide coverage over the course of the insured’s lifetime at a set premium.

A whole life policy may include an investment aspect whereby a policy’s cash value grows at a guaranteed rate. The policyholder can borrow against the policy’s cash value. In a divorce on the inventory appraisement you may have to include a value for the policy.

You Can Not Take It with You

A traditional Last Will and Testament is a written reflection of the testator’s testamentary intent. It provides for the for yow you would like your things distributed at your death. of

A Will can set age restrictions, set up testamentary trusts, name an executor and successor to your executor, nominate guardians, and more

Creating Your Last Will and Testament.

When a lawyer says we are going to “probate the Will,” this means that the Last Will and Testament will be submitted to a probate court and administered.

Probate involves:

  1. carrying out the last wishes of the testator
  2. paying off creditors and taxes, and
  3. distributing the property to those named in the Will as devisees, or beneficiaries.
  4. The executor, is appointed in the Will and, if he or she accepts the appointment, carries out the testator’s wishes.

The executor’s duties include:

  1. inventory and appraisement,
  2. notification to creditors and heirs,
  3. estate administration,
  4. paying estate obligations, and so on, until the probate process is complete and the estate is closed.

Often, the executor is a family member. There is no requirement that the executor have any particular education, knowledge, certification, or background.

Even in the best of circumstances, the executor is under a lot of pressure because of family relationships. Often times if this is the first time the executor has been involved in any probate proceedings, it can be very foreign and challenging.

Holographic Wills

Holographic Will, if done properly are valid in Texas. However, you should be think twice before you rely on a holographic Will for your estate plan. They are easy to mess up and even If the Will is found to be valid, extrinsic evidence may be needed to determine the terms of such an informal Will.

For a Holographic Will to be found valid in Texas:

  1. A will written wholly in the testator’s handwriting
  2. is not required to be attested by subscribing witnesses.
  3. In all other respects, holographic wills must satisfy the requirements for valid wills generally.
  4. The law regarding the requirement of the testator’s signature on an attested will applies equally to holographic wills, including the rule that the signature need not necessarily appear at the end of the will
  5. Unlike certain other American jurisdictions, there is no requirement that a holographic will under Texas law be dated.
  6. The holographic will must also satisfy the other general requirements of a will (i.e., that it be written with testamentary intent, and that the testator have testamentary capacity).

A holographic will may be made self-proved at any time during the testator’s lifetime by “an affidavit” by the testator that:

  1. the instrument is his last will,
  2. (2) he has not revoked the will,
  3. (3) he was of sound mind, and
  4. at the time of execution he satisfied the status and age requirement of Estates Code section 251.001.

Self-Proved Wills

Most wills in Texas are “self-proved.” A will that is “self-proved” is easier to admit to probate following the testator’s death. If a will is not “self-proved” and only has the signature of the testator and two witnesses, then when it comes time to probate the will one of the two witnesses will need to attend the probate hearing and provide testimony that the will was executed with all of the necessary formalities.

There are two methods of making a wills “self-proved” in Texas:

  1. Affidavit or
  2. New Streamlined Method

Affidavit Method

Under the affidavit method:

  1. after the testator and witnesses sign the will itself,
  2. they can then sign an affidavit before a notary swearing to the fact that they all executed the will with the necessary formalities.
  3. If this affidavit is attached to the will when it is offered for probate, no “prove-up witness” is required in the absence of a will contest.

The major problem with this method is that because there were two different places for the testator and witnesses to sign, it is possible for one or more of them to sign in one place, but forget to sign in the other.

New Streamlined Method

Now, Section 251.1045 of the Texas Estates Code contains a combination “attestation and self-proving” clause, so that the testator and witnesses need only sign a Texas will in one location. To be effective, the language in the will must be in “substantial compliance” with the specific language set out in this statute. We recommend copying this clause exactly to avoid any potential complications.

Also, this single signature option is only effective for wills executed on or after January 1, 2014; please check your current will to make sure that it fully complies with the previous statutes concerning “self-proving” language and signatures.

Reciprocal Wills

Each individual desiring a Will should have their own. During the course of ar marriage it is not uncommon for a married couple to make reciprocal Wills. These wills typically are:

  1. Drafted around the same time and
  2. Have dispositive provisions were mirror images of each other.

If your Will was written, signed, and witnessed after your marriage, then your spouse was probably the person named as your first choice to act as the executor of your testate estate following your death.

Your spouse was probably also named as the primary devisee, or beneficiary. Given that you are in the process of a divorce, you may wish to change your Will in that regard.

If you decide to amend your existing Will, then you can do so by either:

  1. Adding a codicil (Will amendment) or
  2. Creating a completely new Will, however, which revokes all of your prior Wills and codicils.

Trusts and Young Beneficiaries

Parents sometimes struggle with the decision over what age a beneficiary should be before receiving control over inherited property. Unless your estate plan provides for a different result, an 18-year-old beneficiary will be given their inheritance because he or she is an adult and an adult under Texas law can handle their own money as they wish.

This may not bother you if the amount of money is $10,000, an amount that might buy a decent used car. However, depending on your 18-year-old you might not think they are quite ready to handle a larger sum maybe $100,000 or more.

Many parents realize their young adult child is inexperienced with money. One of the things that parent does when this is the case is set up an estate plan that ensures the young adult beneficiary does not get all the money at once.

One way to do this is to place the assets or funds in trust on behalf of the young beneficiary. The trust instrument has specific instructions covering when and how the trust funds will be distributed.

One such restriction can require that the young beneficiary wait, and hopefully mature, before getting control of all the money placed in trust. The trust can state that the trustee will exercise control of the trust funds on behalf of the beneficiary until he or she reaches the age such as 25..

Preparing an estate plan while your divorce is pending may seem overwhelming. You may be tempted to put if off until everything has quieted down after the divorce, until the kids are back to school, and so on.

It is better to be proactive in planning for the future and making sure your children are protected now. Take the time to give us a call so you can get the legal advice you need.


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Law Office of Bryan Fagan, PLLC | Houston, Texas Divorce Lawyers

The Law Office of Bryan Fagan, PLLC routinely handles matters that affect children and families. If you have questions regarding divorce, it's important to speak with one of our Houston, TX Divorce Lawyers right away to protect your rights.

Our divorce lawyers in Houston TX are skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact Law Office of Bryan Fagan, PLLC by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan, PLLC handles Divorce cases in Houston, Texas, Cypress, Klein, Humble, Kingwood, Tomball, The Woodlands, the FM 1960 area, or surrounding areas, including Harris County, Montgomery County, Liberty County, Chambers County, Galveston County, Brazoria County, Fort Bend County and Waller County.

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