Texas Estate Planning

Community property laws vary by state with some states such as Texas being community property state and Florida being a non-community property state. However community property can retain its status if people move from a community property state to a non-community property state. 

People in Texas commonly own their homestead as a married couple. They are often shocked at the first death to find out that they are own the house with the spouse’s children. Property in Texas can be community property and separate property. Generally, property someone owns before marriage is separate property and property acquired during marriage is community property. The rules regarding community property and separate property depends on whether your spouse’s children are yours.

Please click to look at the graphics explaining how separate and community property are disposed of at death. 

Texas Probate

Texas is a state with no income tax but it does have high property and sales taxes.

Every state has rules regarding inheritance, wills, trusts and probate. While a will or trust done in another state may be valid in Texas it may not deal with Texas laws and rules which may supersede provisions in the will. Texas is a community property state with its own brand of community property law which differs from California. Your out-of-state may not deal with Texas issues and may cause unexpected complications.

While many lawyers will tell Texas residents, that probate is easier in Texas than in other states, I rarely meet clients who tell me that they want their will to go to probate and having their estate subject to court supervision.

Probate is an invitation to creditors to file claims. Often when a spouse dies, the surviving spouse contacts credit card companies, which will tell the surviving spouse not to worry because the account is in the deceased spouse’s name and they will write off the debt.  However once a probate is open the creditors will come forward and forget what they told the spouse. They will aggressively try to collect on a debt that they written off.

With an integrated plan, your family does not need to subject your estate to the courts. 

Texas Community Property and Asset Protection

Planning is very important because of the Texas community property laws. A common occurrence is that a couple who are in a second marriage with children from a previous marriage will buy a house thinking that the surviving spouse will own the house. One spouse dies and the surviving spouse finds out that she only owns one-half of the house. I have heard colleagues say it is okay because the surviving spouse has the right to live in the house for the rest of her life.  But the surviving spouse is trapped and if she moves out and sells the house the husband’s children get one half of the proceeds.

Not only is this homestead arrangement unfair to the surviving spouse, it is unfair to the decedent’s children. They do not have any rights to the house until the surviving spouse either leaves the house or dies. But yet the decedent’s children are responsible for paying one-half of the mortgage principal of the house was community property. If the house totally belongs to the decedent then the children are stuck paying the entire monthly principal payment.

Under community property system, an innocent spouse can be liable for her spouse’s debts. If a couple jointly manages community, property that property is subject to seizure by creditors. Community property managed by the debtor spouse is also subject to seizure by creditors.

In Texas the following properties are exempt from creditors:

  • Personal property valued at $60,000 for a family or $30,000 for an individual
  • Homestead
  • Cemetery plots
  • Current wages for personal services
  • Unpaid commissions for personal services up to $15,000 for a family and $7,500 for a single adult
  • Alimony, child support and spousal maintenance.
  • Insurance and annuity benefits
  • Retirement plans

The list is not all of the properties subject to creditor protection and does not list when there are exceptions for super creditors such as the IRS and children under child support laws.  Federal bankruptcy judges also have additional powers regarding homesteads.

Schedule Your Appointment