What Happens in a Property Transfer?

The death of a loved one can bring a great deal of stress and confusion into the survivor’s life.  What is to be done with the home, furnishings, financial accounts and pets?  Who is responsible and how does it get done?

When someone dies any property owned must be transferred to a new owner.  This transfer takes a variety of forms and which form depends in part on what the deceased owned.  Some property can be transferred with beneficiary statements.  While others require some legal step for the transfer to be complete.

When determining what proceedings are required the first question to ask is “Did the deceased have a will?”.  A will acts as the instruction manual for how the property owned at death should be transferred.  If there is no will, then the probate code provides the instruction manual.

The inquiry does not end here but returns to what type of property was owned.  If they own real estate, vehicles or other titled property, a legal proceeding will be required.  This may require a formal probate proceeding in the court or just an affidavit.  A probate lawyer can provide the necessary guidance as to which steps are required.

If they had financial or retirement accounts then beneficiary statements may be adequate.  Certain assets can be transferred with beneficiary statements and pass outside of the instructions of the will or the probate code.  Financial accounts are the most common asset to transfer this way.  When anyone opens a checking account, brokerage account, or IRA a beneficiary statement is completed directing that institution to pay the balance to a specific individual upon proof of death.  401ks and other retirement plans also require a beneficiary statement and can pass outside of the probate process.

To make the probate process as simple and smooth as possible for those you leave behind create an estate plan.  Review your will and powers of attorney periodically to ensure they still reflect your wishes.  Consult your financial institutions to check your beneficiary statements from time to time to ensure they still reflect your wishes.

Planning for Non-Traditional Families

While the need for proper estate planning is the same for both traditional and non-traditional families, some of the planning techniques used are different.  Same sex couples are not treated the same as traditional married couples for many purposes and while these differences in treatment present challenges, they are not insurmountable with proper planning.

Same sex couples, just like opposite sex couples, must have the four key documents.  The four documents include a will, a medical power of attorney, a durable power of attorney and a living will.  These documents are the foundation of any estate plan, whether for traditional or non-traditional families.

Non-traditional families must pay special attention to several key areas.  Who will make decisions for you if you are unable?  What are the tax implications of transfers now and at death?  When can beneficiary statements solve the problem?  Each of these questions is touched on below and will be covered in depth in a future blog post.

What can same sex or unmarried couples do if they want their partners, instead of their biological relatives, to make decisions on their behalf? This question frequently arises during medical emergencies.  Preparing before the emergency strikes will arm your partner or the person of your choosing with the tools necessary to ensure your wishes are honored.  A variety of planning techniques are available to meet the needs of your family.

Same sex and unmarried couples are treated differently for tax purposes.  They are not eligible for the marital deduction at the death of their partner.  They have no community property rights.  There is no tax protection for property transfers during life between partners.  There are planning tools available to help overcome these hurdles.

Finally, the importance of beneficiary designations cannot be stressed enough.  Properly completed beneficiary statements in various financial documents, including life insurance policies and retirement plans can aid in property transfer at death.  Beneficiary designations are critical and should be considered in conjunction with the entire estate plan.

Same sex and unmarried couples need to work with an attorney to develop an estate plan that anticipates challenges and delivers the intended results: to honor their relationship with their partner, ensure their partner can make decisions on their behalf if necessary, and to designate their intended beneficiaries.

Estate Planning for Pets

In some households pets are key members of the family and any estate plan that doesn’t address their needs would be found incomplete.  An important first step in this process is to discuss your desires with the person you wish to care for your animals after you are gone.  There are several questions you should ask yourself and discuss with the potential caregiver.

  • Will you care for my pets?
  • Is there a limit on the number or type of pets you will care for?
  • Can you manage the additional expense of the pet?

The simplest solution is to include a bequest in your will.  This allows you to leave your pet to another person you know will love and care for them after you are gone.  If you have a variety of pets you can leave their care to various individuals.  Leave the dogs to the dog lover and the reptile to the reptile lover.  If it is merely overwhelming in quantity then having discussed how many animals each person feels they can handle is the key to success.  If you wish the bequest can include a gift of money to help care for the animals.

You can create a pet trust during life or in your will.  You leave your pet and certain funds or property for the care of your pet to a “trustee”.  The trustee is responsible for the care of your pet.  In some cases the trustee manages the financial aspects while a different person is the actual animal caretaker.  A pet trust gives you a great deal of power by allowing you to specify exactly how your pet should be cared for in your absence.

There are a number of programs in place to care for pets after their owners have passed away.  Texas A & M University has the Stevenson Companion Animal Life-Care Center where pets are cared for in a home like environment.  All programs require a donation based on a variety of factors.

You should always have contingent plans for the care of your animals.  The person you have named may be willing but unable to care for your pet when the need arises.  The programs you have selected might no longer be in existence.  Be sure to select alternate caretakers to name in your will or trust documents.  This planning will ensure your pets are cared for in the manner you choose.

What Happens When You Die Without a Will?

As discussed previously a properly drafted will answers four key questions.

  • Who will manage your estate?
  • Where will your property go?
  • Who will care for your dependents?
  • Have your unique needs been met?

To help understand the impact of failing to have a will we review these questions looking from the perspective of the Jones family.  The Joneses decided the kids were old enough to leave with Grandma while they went away for the weekend.  After depositing the kids with Grandma they head out of town for a romantic getaway to celebrate their anniversary.  Before they made it out of the county they were sideswiped by an eighteen wheeler.  Both of the Joneses died instantly.

Who will manage your estate?

This person is the executor.  The executor is responsible for gathering all of your assets, paying all of your bills and distributing the remaining property to the proper people.  The person selected for this job should be someone you trust implicitly.  The Joneses knew which family member had a gambling problem and which was the most responsible.  However, the Joneses don’t have a will so a Judge and the State of Texas will make this decision for them.

Where will your property go?

These are your beneficiaries.  Most people who leave behind minor children would want their property used for the care of those children.  In some cases, a person leaves behind family heirlooms that are more meaningful to a particular family member.  With a will the Joneses could have identified those heirlooms that should go to a particular person.  The Joneses could have specified that their estate go to or be managed by the person who is caring for their dependents.  Since the Joneses don’t have a will a Judge and the State of Texas will make these decisions for them.

Who will care for your dependents?

This person is called a guardian.  The typical dependent is a minor child.  However, an adult disabled child, incapacitated spouse or any one you have assumed legal responsibility for is also a dependent. With a will you can identify the person you want to step into your shoes and care for your loved ones.  The Joneses know which family member is an alcoholic, whose parents are in the best health or if a close friend is better suited for the task.  Since the Joneses don’t have a will a Judge and the State of Texas will make this decision for them.

Have your unique needs been met?

A unique need is as varied as the human population.  This can include relatives not related by blood (step family) for whom there is no legal recognition but often a close emotional connection.  Perhaps it is a special needs child or incapacitated spouse who needs someone else to manage their financial affairs or it could be tax planning necessary for your estate.  The Joneses have the current common family structure.  Kids from each of their first marriages and one child from this marriage.  The Joneses could have taken steps to enable the children to be raised together or at least maintain contact upon their death. However, the Joneses don’t have a will so a Judge and the State of Texas will make this decision for them.

What does a will do for you?

It allows you to protect and provide for the loved ones you leave behind.  The Joneses knew it was important to have a will and had that on their to-do list.  Sadly that task while important never got done.  This is the impact of that decision on their loved ones.

Frequently Asked Questions About Estate Planning

What happens if someone dies without a Will?

When someone dies without a will the courts look to the probate code which are statutes addressing the estate of those who have passed both with and without a will.  The state statutes define who will be considered as an executor absent a will.  The statutes define who will inherit and include a complex formula for addressing both community and separate property and the complex family structures that may exist.  The statutes also address who will become guardians to minor children of the deceased. The court will monitor every step of this process which makes dying without a will an expensive proposition for the loved ones you leave behind.

What is community property?

Community property is property acquired during marriage. Community property is treated differently than separate property both during life and after death.  Separate property is any property acquired before marriage or during marriage as a gift or by inheritance.

What happens if you have a Will but it is lost or destroyed?

Procedures exist to admit a copy of a will for probate if you can prove it was not destroyed with the intent to revoke the will.  If there are no copies you must have testimony concerning the details of the will and how it came to be destroyed.  This testimony must remove all doubt that the will was destroyed with the intent to revoke the will.

Where should you keep your Will?

You should keep your will and other estate planning documents in a safe place and provide the location to the person named as executor.  If you have a firesafe in your home this is a good place to keep it.  You will need to provide a method of access to your executor.  If you prefer to keep your will in a safe deposit box, you need to list a family member or your executor as a person authorized to gain access.

All questions are answered based on general Texas law and should not be considered as legal advice in Texas or elsewhere.  If you have a legal dilemma you should seek the advice of an attorney in your jurisdiction who can advise you based on the facts of your specific situation.

What Can Happen to Children if Their Parents Die Without a Properly Drafted Will?

Many of us embrace the do it yourself (DIY) lifestyle.  Why pay someone to do something you are fully capable of doing yourself?  In many cases this is wise money management but it can be a disaster in the making.  Consider the plight of Jane’s children.

Jane received a medical diagnosis that ensured her premature death.  She left behind four children (4, 8, 12, 15), a life insurance policy and a modest estate.  She desperately wanted to protect her children so she bought a book and prepared a will.

The book allowed her to create a legal will with the proper witnesses.  She appointed her sister as the executor and left her estate and life insurance policy to be equally distributed to her four children.  The book didn’t explain or she didn’t understand that children under 18 can’t own or manage property.  So the life insurance proceeds which normally pay directly to the beneficiary will be subject to a probate proceeding.

A court appointed guardianship will be required to manage the funds left to the children and the associated fees will reduce the money available for their care.  This will also delay availability of the funds for the care of the children.  If she had created a trust for the care of her children, the life insurance would have been paid immediately to the trustee and would be available for their care.

Jane did not appoint a guardian for her children.  The father of the older three has been out of the picture for several years.  The youngest was the result of a brief affair but her father has been an occasional visitor in her life.  Now the children may be separated because the biological fathers will have first priority in the custody consideration.  Even if the fathers don’t step up she has not left clear direction for who she would want to raise them.  Should it be her sister?  Her parents? The children’s paternal grandparents? The possibilities are endless and will now be analyzed by a judge instead of Jane.  Appointing a guardian would have provided an easy avenue for the children to stay together if their respective fathers had agreed.

Each of us leaves a unique signature on the world when we pass and your will should be tailored to the needs of the situation you will leave behind.  A consultation with an attorney is a simple pain free process that will allow you to prepare a will that addresses your needs and provides clear direction for those you leave behind.

Four Documents Every Estate Plan Needs

The four documents that create the foundation of a good estate plan are a willmedical power of attorneydurable (financial) power of attorney and a living will.  Each of these documents provides protection for specific issues associated with death or incapacity.

A will details your wishes after you pass away. A will allows for a smooth transition for the loved ones you leave behind.  It will designate someone to take control of your estate, care for your dependents, distribute your property and make the transition as painless for your loved ones as possible.

A medical power of attorney appoints a person to make medical decisions if you are unable. A medical power of attorney can also include a list of specific procedures you do or do not want allowed.

A durable (financial) power of attorney appoints a person to make financial decisions if you are unable. This is a flexible document that can be used to give limited or unlimited power over your financial affairs.  It can become effective immediately or only if the named individual becomes incapacitated.

A living will express your wishes for end of life decisions and can appoint a person to make decisions if you are unable.  This document differs from a medical power of attorney because it is only effective if a doctor has determined you have a terminal or irreversible condition.

The requirements relating to the validity of each of these documents are found in state law.  As a result, an attorney should be consulted to ensure your documents are valid in your state of residence.  If you have a job that requires you to relocate regularly a trip to a local attorney should be on your to do list any time you move.

Executor’s Role in a Probate Proceeding

The executor’s role is to ensure that the terms of a persons will are followed or if no will exists to ensure the estate is transferred in compliance with state law.  There are several steps in this process.

  • Identify the assets.
  • Collect or otherwise take control of the assets.
  • Identify the debts.
  • Pay debts.
  • Distribute any remaining assets.

Identifying the assets is essentially determining what is owned and making a list of those items.  This will include property, personal possessions, cars, investments and cash.  Identifying the assets will also require a general determination of value.  For example, a Monet painting will be handled differently than a painting by an unknown artist.

Collecting or taking control of assets will mean a variety of things. Anyone holding an investment or financial account will need to be notified of the death and the name of the executor. Real property such as the home of the deceased will need to be identified and secured.  However, if the intended beneficiary is occupying the home physical possession may not be necessary.

Identifying the debts is a two step process.  You must first determine who is owed money then you must classify the debts so that they will be paid in the correct order.  The state has provided categories to classify debt.

Debts are paid in the order or priority mandated by the State. In some cases the estate may be unable to pay all the debts. If there are not sufficient assets the executor begins paying those debts with the highest priority and continues until as many debts as possible are paid.

Once the debts are paid the executor must distribute any remaining property.  If there is a will the executor must distribute the estate according to its terms.  If there is no will the state provides guidelines for distribution of the remaining property.

The executor plays a very important role and should be selected with care.  You obviously want someone trustworthy. You will also need to consider the nature of your estate. If you have complex business or financial issues that the executor must deal with you need to appoint a person who is competent to handle those issues.  The executor is often a family member or close friend but large estates are sometimes managed by a corporate executor.

Why do I need a Will?

No one likes to think about their own death which makes it hard to prepare for this inevitable occurrence. Having a will provides a guide for those you leave behind and helps ensure they will be protected.  Furthermore, if you don’t have a will the state has one for you and it may not fit your needs.  A properly drafted will provides peace of mind for those you leave behind.  A good will answers four questions.

  • Who will manage your estate?
  • Where will your property go?
  • Who will care for your dependents?
  • Have your unique needs been met?

The person who manages your estate is called the executor.  The executor is responsible for gathering all of your property and identifying your debts.  They are responsible for paying the debts and distributing the remaining property according to the terms of your will. Since this individual will be responsible for managing your estate, a very important job, you should choose someone that you trust absolutely.

Your property will go to the people you have designated in your will, also known as your beneficiaries. You may designate that a particular item, for instance a family heirloom, be left to a particular individual. Parents can make provisions for their minor children to help them grow into adulthood. You may even decide to leave money to charity or friends. The point is that a will allows you to make those decisions. If you do not have a will, you are leaving that decision to a judge and the Texas intestacy statutes handed down by our legislature – neither of which know you or your wishes.

In your will, you may leave instructions on who may serve as guardian for your dependents. A dependent is typically a minor child, but could also include a disabled adult child, incapacitated spouse or anyone for which you have assumed legal responsibility. You may also specifically list people who may NOT serve as guardian in the event that none of the guardians you choose are able to serve. Courts will generally take your wishes into consideration in the event that such guardian appointment is necessary.

Every one is different. Every situation is different. Creating a will is not a one-size-fits-all process. Blended families estranged family member, pets that are a member of the family, friends that are like family, family members with special needs are just a few examples of unique situations that may require additional planning. It is important that your will is tailored to meet the needs of your specific situation. Additionally, your will should be updated when you have life changes that alter your needs or when the law changes in a way that impacts your plan.

Texas probate judges are prepared to apply Texas law in determining how your loved ones are cared for after your passing.  Creating a will allows you to plan ahead to protect and provide for the loved ones you leave behind. Contact a qualified estate planning attorney so you can rest assured that you are your family are prepared for the future.