Owning property is a good thing. You can use the property during your lifetime and then pass the property on to whomever you choose after you have passed it on via a will. This is information that almost all knows from a young age. Whether we follow through on the lesson and create the will and do everything we need to protect our property and our potential beneficiaries is another matter entirely. I know that it is easier to talk someone into planning a vacation than it is to talk them into planning a will even though the vacation is more work.
One of the great benefits of estate planning done well is that you can minimize the need for an estate or will to go through the probate process. Probate court is where a probate judge will see to it that your will is executed properly as far as beneficiaries getting the correct property. However, first creditors must be paid out of the corpus (body) of your estate. Only then can your executor follow through with your wishes in the will with whatever property is left.
Or, if you die without awill, a judge can follow through with a similar process for your estate. This means naming an administrator to notify potential heirs and creditors of your passing. The creditors get first dibs on the property in your estate and then the heirs can collect whatever is left. Heirs get property based on the laws of intestate distribution. The judge will tell the administrator how to divide this property. This means that there is no room for your church, a charity, or anyone or anything else to get property from your estate. If that is what you would have wanted, I suppose you should have created a will when you had the chance.
However, if you want to be able to have your family, executor, and beneficiaries avoid having to see you will go through probate then many options can be chosen from as far as your will is concerned. In today's blog post from the Law Office of Bryan Fagan, we are going to discuss what those options are and what you can do to minimize the likelihood that your will or your estate will need to go through the probate process.
If you have any questions about this sort of material and don't know where to begin, then please contact the Law Office of Bryan Fagan. Our licensed estate planning attorneys are here to help you no matter what your level of knowledge is or what stage of the process you find yourself in. A free-of-charge consultation is available six days a week in person, over the phone, and via video. A consultation like this is important so that you can establish your base of knowledge so that you can make better decisions for yourself and ultimately for your family.
How is a property defined in Texas?
Another thing about probate is that when we talk about probate in this blog post, we should do so with the thought that probate is ultimately undertaken to transfer the title of the property that you own to another person. The way that this can be done is multifaceted. What we want to try and accomplish today is to go through several ways that title to property can be transferred without first having to go through a probate case.
When it comes to this property that you own, there are two basic types: personal property and real property. When we talk about personal property, we mean things that you own like a couch, a ring, your truck, clothes, and your retirement savings account. These things can be valuable or not. However, sometimes the least valuable item you own could mean the most to you. If you owned your grandfather’s Bible then that may be most the valuable item in your collection of “stuff” even though it is not worth very much money. This is the part about estate planning that is so personal, and why I think the term “personal property” is appropriate when you talk about items like this in probate and estate planning scenarios.
Real property relates to land as well as land that has structures built on it like buildings. A home is a good example of real property. Raw land that you plan to build something on is also an example of real property. For most people, the only real property that you own at the time of your divorce will be the family home that you live in. However, some people also own rental homes, oil and gas interests, etc. Real property ownership typically means that you have a greater amount of wealth than other people, but it will also mean that you have a more complex estate that may need to be accounted for in your estate planning.
In Texas, the property that you own will either be classified as community property or separate property. Separate property is any property that you own as an unmarried person or property that you owned before getting married. You can acquire property during your marriage by gift or inheritance and that property would still be classified as your separate property despite being married. Depending upon your marital status and age at the time of your death you may own very little separate property or most of the property that you own may be properly classified as separate property.
On the other hand, all other property that you own at the time of your passing other than the separate property is known as community property. If you passed away while married, then all of the property that you acquired during your marriage is considered to be community property with a few exceptions.
When you add up all the community property that you own and all the separate property that you own you get your estate. Your community estate is all the property that you own along with your spouse. You own half of the community estate, and your spouse owns the other half of the community estate.
What happens if you die without a will?
If you die without a will then the laws of the State of Texas will determine how your property is divided up. This is one of the great benefits of having a will when you die- you get to determine how your property is divided and to whom it is divided. When you die without a will there is a consideration for what you would have wanted to see happen when it comes to property division. Rather, a judge will apply the law in Texas on who gets what based on your circumstances and the heirs that exist for your family.
If you are married at the time of your passing and have no will then the law in Texas will send all your community property to your spouse if you have no children or other descendants. Descendants are people in your family that you are related to like siblings, children, parents, aunts, and uncles. If you do have children but all those children are also children of your surviving spouse, then your surviving spouse would still get all your community property. Having children who are not the child of the surviving spouse means that those children would get half of your community property along with your surviving spouse.
What happens if you die with a will?
Having a valid will changes how your estate will be handled at the time of your passing. Your will needs to be admitted probating to transfer title to some of the property that you own. In the county where you died or lived the executor of your will needs to apply to admit your will to probate. Once the application is accepted then the probate court judge would need to determine that the will is valid. A valid will allows your executor to act upon your wishes as stated in the will. On the other hand, an invalid will creates a situation where it would be as if you had not created a will in the first place. The laws of Texas as far as property distribution would be gone in effect for your case.
What is an example of a method to utilize to bypass probate if you own real estate?
A Transfer on Death Deed allows you as the owner of real estate to name a beneficiary who would receive that property described in the deed once you have passed away. This is a simple way to avoid the time and expense of the probate process. The beneficiary would be able to receive the property immediately after your death. This is a great benefit for someone who could stand to benefit from gaining ownership of the property quickly.
How do premarital agreements impact a will?
When it comes to estate planning and marital planning a premarital property agreement is one of the most underrated and frankly underutilized tools in a person’s toolbox. I think part of the reason why this is the case is due to the thought that premarital agreements are for rich people, greedy people, or celebrities. If you are just a “regular” person then a primatial agreement probably isn’t for you, right? Wrong. A premarital agreement can benefit a wide range of people and can act as a kind of premarital counseling.
If you are in the planning stages of getting married, then you may want to make sure that you and your fiancé are on the same page when it comes to your finances. This can be a difficult series of questions to ask your significant other. Some people just aren't very comfortable bringing up subjects like this. However, I think that learning about the financial situation of your fiancé is very important before you get married. In the old days, people did not live together before marriage. This is no longer the case. If you are sharing a home with another person then it would make sense to share your financial information at least in terms of your assets, debts, income, financial goals, and financial concerns. Not being willing to do this is a sign that you and your fiancé may have some room for growth in your relationship. At least bringing up this subject will determine how receptive your fiancé is to the subject of talking about personal finances. I am not saying that you need to immediately jump into talk about premarital agreements but that is something that you can eventually engage in if you feel a level of comfort.
When it comes to a premarital property agreement as a way of estate planning this is a possibility if you don't also have a will. For legal purposes, if there is a conflict between your will and the premarital property agreement then the terms of the will are going to be the document that controls. For instance, let's say that you and your fiancé create a premarital property agreement that states certain properties will remain separate property after you get married. However, you then create a will that states the opposite- that the property will become community property. What this means is that the will controls the property would be considered community property. This is not a situation that would come up frequently given that the community property/separate property distinction does not apply as much with a will. However, if you do not have a will then the premarital agreement would go into effect even if the laws on intestacy/community property contradict what is included in the premarital property agreement.
Payable on death accounts
When it comes to creating a bank or other accounts that will transfer automatically this is something that you should consider in your end-of-life planning. Payable-on-death accounts are not joint accounts that you would share with a spouse, for example. Rather, a payable-on-death account is something that you would create with another adult that you trust. That person would become the owner of your account once you pass away though he or she would have no access to your account during your life. You can set up this kind of account at your bank with a checking or savings account. An individual retirement account (IRA) is also that type of account.
Life insurance- good idea, bad idea, or somewhere in between?
When it comes to end-of-life planning one of the tools that have become more popular in recent years is life insurance. Specifically, term life insurance has increased in popularity. Term life insurance allows you to pick a period for the policy to last for, an amount of insurance to pay for and then you are assigned a yearly premium to pay for that life insurance. The insurance has no cash value, no investment options within it, or anything like that. However, the premiums tend to be lower than other types of life insurance. Once you die, the named beneficiary of the policy would be able to send in a copy of your death certificate and the policy would pay its face value to that beneficiary.
Whole life insurance is another option for life insurance. Whole life insurance pays money when you die but also has a cash value during your lifetime. Many variations of whole life insurance involve investments and things of that nature. You should speak with an experienced financial planner to determine which type of insurance is for you, if any. Life insurance is important for you to have while you are still building wealth. For example, if your spouse would not able to pay the bills, keep her head above water and plan for her future with the salary she has and the wealth you have built up then life insurance is necessary. On the other hand, if your wealth is low but nobody else counts on your income to live then you probably don't need life insurance other than to leave to someone as a death benefit.
Life insurance policies do not go through probate. You do not need to specify any details about your life insurance in your will. That process will go according to the terms of the life insurance policy. These are valuable issues to walk through, that which we have discussed in today’s blog post. If you have any questions about the material that we have discussed, please be sure to reach out to one of our experienced estate planning attorneys today.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today's blog post, 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 estate planning and to figure out the next steps you need to take in your estate planning circumstances.