Likely, very few of you reading this blog post have ever heard of the Texas “120-hour rule” as it pertains to estate planning. The rule, for being such an important one, is very vague. 120 hours could refer to just about anything. What we are going to do in today’s blog post from the Law Office of Bryan Fagan is discuss what the Texas 120-hour rule can mean for you and your family. By the end of our post, you will know a lot about this subject and can use this information however you see fit when it comes to estate planning for you and your family.
It is not easy to handle a legal matter after a loved one passes away. There are already so many considerations to keep in mind that it can feel overwhelming to have the responsibility of caring for your family, attending the funeral/burial of your loved one, and thinking about your loved one's estate. It can even seem crass to be concerned with financial things when your loved one has just recently passed, and your family is still grieving. With that said, knowing how to proceed can help you in multiple ways. You can be more confident about how to proceed if you are in charge of a loved one's estate. You would also be able to make changes to your estate plan, if necessary, once you learn some essential pieces of information about the Texas 120-hour rule. If you have never planned your estate previously this could also be the motivation that you need to get moving.
When you or a loved one die without a will it puts you and your family into a tough spot. For one, any autonomy that you all may have held onto after your passing or that of your spouse has been lost. A will allows the person who created the will to decide where his or her property ends up after he or she dies. An executor will be named to ensure that the property is disposed of according to the wishes of the testator (the person who creates the will). The testator can name as a beneficiary essentially whomever he or she wants as a recipient of the property. It can be a close relative, distant relative, friend, co-worker, church, or charity who receives property.
Dying without a will is a much more complicated situation for your family. Say you were to die without a will. Instead of the executor being able to pick up the will and read through who gets what in terms of your property, your estate must now go through the probate process. Probate allows a judge to make sure that creditors are first paid out of the corpus (body) of your estate before any person receives property. Your heirs will be determined- these are the people who can inherit property from you. For most people, your heirs will include a spouse, children, parents, or other close relatives. The judge follows the law on intestate distribution (distribution of property for a person who dies without a will) and that is that. Your estate and your family have little say so in the process. Not exactly what most people have in mind for their property after they pass away.
Without a doubt, you or a loved one should die with a will rather than die without one. This means that you need to take matters into your own hands if you have not completed your will. Tomorrow is not guaranteed, and you may not have all the time in the world to complete the steps necessary to build a wall. Therefore, use the time allotted to you and then be sure to contact the Law Office of Bryan Fagan. Our licensed estate planning attorneys can walk with you down the uncertain paths that come with drafting a will. If you are unsure about what to do but know where you need to go then contact our office. We can help you develop a plan, educate you on the law and then allow you to make decisions that are best for you and the people in your life.
On top of that, our team of attorneys is patient and understanding about the situation that you are in. Whether you are trying to create a will for yourself or need to sort through matters related to a loved one's passing, we are here for you. We don't waste time, but we also don't push our clients to do things that they are uncomfortable with or unprepared for. We will make sure that we educate you first before ever asking you to decide. Every person has a different comfort level when it comes to matters related to estate planning, We aim to put you at ease while getting the job done.
What does dying without a will mean on a practical level?
Dying without an estate plan means that your estate will go through the state of Texas. A probate court judge will apply the laws of intestate succession to your case. Rather than maintaining autonomy after your property through your estate, the laws of the State of Texas will come to apply Property of yours will be divided between your living family members such as your spouse, siblings, children, or even more distant relatives if you pass away without any close relatives who are living. As a last resort, your property would go to the state of Texas if no relatives can be located.
Bear in mind that we just provided you with a very general overview of the intestate distribution of property. The actual mechanics of determining heirs and then distributing property are typically more complicated than this. First, the probate court judge will need to determine if you are married and whether you have children. Heirs will need to be located if you were not married and did not have children who were alive at the time of your passing. In that case, a search will be conducted, and time will be spent locating these extended family members. This can take some time especially if distant relatives of yours live a great distance from Texas.
Another complex part of this discussion relates to distinguishing between separate and real property. Separate property is any property that you owned before getting married to your current spouse. Community property is, for the most part, property that you purchased during your current marriage. There are exceptions to this rule but in general, this is what community property is in Texas. If you were married at the time of your passing and have no children, then your spouse gets all your property if you die without a will. If you had children, then your spouse gets all of your community property and then 1/3 of your separate property. The rest of the property owned by you would go to your children. If you die with children but with no spouse then your children would inherit all of your estate, divided equally among them.
As we talked about earlier, dying without a spouse or children means that extended family enters the picture and then inherits property from you. Parents, grandparents, siblings, uncles, aunts, and cousins can all inherit property from you if you die without a will and also have no spouse or children. An interesting subplot is that children who believe that they are your child but are not legally yours can argue this point before a probate court. This could happen if a child was born to a woman that you were not married to and then never acknowledged paternity. Your putative child would need to present evidence that he or she is your child.
What assets will not be passed down via intestate succession laws?
If the property could have been passed down via a will, then it could also be passed down through intestate succession. Here are some types of property, on the other hand, which will not need to go through the intestate distribution process. If you own real property with another person who owns a right of survivorship, then this asset does not go through intestate distribution. An example of this is real estate that you own with a relative, sibling, or business partner. A family home does not get passed down via intestate distribution. If you are married, then your spouse would inherit a life estate in the property.
Your life insurance- whole, life, universal- does not have to go through probate whether you do or do not have a will. There are many reasons why you may want to consider purchasing life insurance. You may see life insurance as a type of investment into the long-term future of a child or grandchild. You may not have the disposable income to purchase an investment, but life insurance can be had for a reasonable cost and can substitute for the investment. The main downside to this idea is that you must die for your beneficiary to get their hands on the money.
Retirement funds like 401Ks and IRAs are terrific investment vehicles to become involved with on multiple fronts. First, depending on the type of retirement account that you become involved with you can invest with tax-free growth through Roth options. This has to do with your income primarily, and there are even "backdoor Roth" options for you to invest in a Roth IRA even if your income is above the threshold limit. However, you should speak with an experienced financial planner about this before committing your money to any investment.
On top of that, IRAs and 401Ks are like life insurance policies in that they do not have to go through the probate process. You can name a beneficiary within your retirement account so that your funds go to a certain person after you pass away. You may even be able to name secondary beneficiaries. Go online and look through the account that you have and there is likely a place to fill out your beneficiaries. If not, call your human resources manager if the account is a 401K or contact the brokerage firm for your IRA to see where to put your beneficiaries' name(s). This can save a lot of hassle and position yourself well when it comes to not having to go through probate on these accounts.
A simple method of saving is to have a bank account. Not because the interest rates are good on savings accounts necessarily but because it beats having your money in a coffee can buried in the backyard or keeping money under the box spring of your bed. Banks and credit unions also allow for you to have payable-on-death accounts which do exactly what you would think that they do in terms of paying another person upon your death the contents of your account. Whoever you name as the payable-on-death beneficiary would only need to provide a copy of a death certificate to the bank or credit union to be able to gain access to those funds. If you are a spouse, for example, who may need money to pay bills or the mortgage after your spouse passes (or vice versa) it is a good idea to talk with the bank or credit union about what their requirements are to have a valid payable on death account. Being able to access the money in that account in a timely fashion is critical, as well, to be able to take full advantage of one of these payable-on-death accounts.
A bit more on the 120-hour rule
The 120-hour rule is not something that comes up all that often. Frankly, it occurs in situations that are tragic and relate to accidents like if you and your spouse are both in a vehicle that is involved in a traffic accident. If one of you passes away in the accident itself and then the other passes away on the way to the hospital the 120-hour rule would apply. Had your spouse survived you by more than 120 hours then her estate would receive the traditional share of your property. However, since the 120-hour rule was not met then the property in your estate would be divided up equally among your children or other heirs per the intestacy laws of Texas.
This is all to say that having a will is the most important step that you can take in terms of your estate planning. Every adult should have a will- it's that simple. If you are in a position where you are needing to settle an estate for a person who died without a will then you need to submit paperwork to the probate court for the county where he or she resided. The primary document is an affidavit (sworn statement under oath) that states the person's assets and liabilities, the history of the family, and the names of any heirs that are known to you. The heirs should sign the affidavit in front of two witnesses. Small estates under $50,000 can usually be processed sooner using a small estate's affidavit.
When you have a situation involving estates larger than $50,000 then you run into a situation where the process becomes more complex. Someone in the life of the deceased person will need to apply to the court to become the estate administrator. The spouse of the deceased would be a logical person but sometimes he or she may not be in an emotional position to deal with that responsibility. It is difficult, to say the least, to lose a spouse. Handing the complexities of a probate case at that point may be asking too much. As a result, sometimes a child or more extended family member fulfills this duty.
The probate process for larger estates involves determining who that administrator will be and then figuring out heirs and creditor roles. Creditors of the deceased must be notified of the estate administration so that they can have an opportunity to have their debts fulfilled. Depending upon the size of the estate this may not be possible if debts are substantial. In any event, the property left over after creditors are paid would then be disbursed to the heirs based on the judge’s interpretation of the intestacy laws of Texas.
This overview provides a good introduction to the subject of the 120-hour and the consequences of not having a will when you pass away. However, if you want to learn even more if you have questions about the material in today's blog post, please do not hesitate to contact the attorneys with the Law Office of Bryan Fagan.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed estate planning attorneys offer free-of-charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas estate planning as well as what the consequences can be if a probate case is filed on behalf of a loved one.