Texas Estate Planning

Texas is a community-property state, which Jeff considers when he designs and drafts your wills and trusts. 

Community property laws vary by state. For example, Texas is a community property state, while Oklahoma and  Florida are separate property states.

An example of an unfortunate and unexpected consequence of people not doing estate planning in Texas occurs with community property real estate.  In Texas, people commonly buy their marital home as a married couple.  When one spouse dies, the surviving spouse is often shocked to find out that they only own a one-half interest in the house with their spouse's children from a previous marriage who own the other half. 

Property in Texas can be either community property or separate property. Generally, property someone acquires before marriage is separate property and property someone acquires during the marriage is community property.

The rules regarding the inheritance of community property and separate property depend on many factors including 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

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

Many lawyers tell Texas residents that probate is more manageable in Texas than in other states. While this may be true, I rarely meet clients who tell me that they want their family to go to probate court and have their estate subject to court supervision.

Probate is an invitation to creditors to file claims. An example is when a spouse dies; the surviving spouse may contact banks about credit card debt.  The bank will tell the surviving spouse that they are not responsible for their spouse's debts.  However, once a probate proceeding is initiated, the creditors will come forward and aggressively try to collect on a debt.

Texas Community Property and Asset Protection

Planning is essential. A common occurrence is that a couple in a second marriage who have children from a previous marriage will buy the family house together as community property, believing that the surviving spouse will own the home on the first spouse's death. However, the surviving spouse will discover that she only owns one-half of the house.

The surviving spouse cannot sell the family home without the consent of her spouse's children.  When she sells the family house,  her spouse's children are entitled to one-half of the sale proceeds.

Not only is this law unfair to the surviving spouse, but it is also unfair to her spouse's children. Her spouse's children do not have any rights to the house until the surviving spouse either vacates the family home or dies. But yet her spouse's children are responsible for paying one-half of the mortgage principal.

It may be worse if the surviving spouse solely owned the family house. Then, her spouse's children are responsible for paying the entire monthly principal payment on a mortgage even though they cannot live in the house.

Under community property laws, an innocent spouse may be liable for her spouse's debts. If a couple jointly manages community property, the entire property is subject to seizure by the other spouse's creditors. Community property managed by the debtor spouse is also subject to attack 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 (family home)
  • 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 exceptions for super creditors such as the IRS and children under child support laws.  Federal bankruptcy judges also have additional powers regarding homesteads.

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