Why Everyone Needs a Will
E.
Scot Dixon
Everyone should have a Will. Your
Will generally covers the disposition of your property at death by making specific gifts of cash
or property, directing the division and distribution of the remainder of your estate, designating
the person who is to carry out your wishes (the Executor), and setting forth trust provisions if
a trust will be established to hold property for a child (or grandchild) or in order to protect
property from a beneficiary’s financial reverses, divorce, incompetency, and similar
provisions. A Will can also include a provision
naming a guardian (called the “guardian of the person”) for minor children.
Inheritance
Laws.
Many people are under the impression that a Will is unnecessary
because the inheritance laws of the State of Texas will direct their property where they want it
to go. In such cases, people are often surprised to
find out who will actually inherit their property at their death.
For
example, people often assume that if they are married when they die, all of their
property just goes directly to their spouse. Right?
Wrong.
If you
are married when you die and part of your estate consists of what is called separate
property (generally defined as property you owned before you were married along with property you
received via a will or inheritance from someone else), here is how that portion of your estate
passes if you die without a Will, according to Section 38 of the Probate Code:
(i)
your separate personal (i.e., non real estate) property goes 2/3 to your children or other
descendants and 1/3 to your spouse. If you die
without any living descendants, your separate personal property all goes to your spouse.
(ii)
as to your separate real estate (e.g., your home, rental property, country property,
etc.), your spouse receives what is called a “life estate” (meaning he or she can use
the property during his or her lifetime, but does not “own” it) in 1/3 of your real property,
with the remainder going to your children or other descendants.
If you die without leaving any living descendants, then ? of your separate real property
goes to your spouse outright, and
the other half goes to your other relatives (e.g., parents and siblings), if you have any
surviving!
Now,
if you are married when you die and part of your estate consists of community
property (generally being property you and your spouse acquire during your marriage, regardless
of in whose name the property is titled), this property may also not pass as you might expect or
wish. Remember that generally each spouse owns ? of
the community property in the marriage. Without a
Will, your community property will pass as follows according to Section 45 of the Probate Code:
(i)
If you die without having any living descendants, or if all your living descendants
are also the descendants of your surviving spouse, then your ? of the community estate passes to
your spouse.
(ii)
However, if you have any children or descendants from prior marriages,
then all of your ? of the community property goes to your descendants (both yours from prior
marriages and those with your current spouse), skipping your spouse entirely (with the spouse
being left with only his or her ? share of the community estate).
The
spouse is not totally out in the cold, however. If, for example, your homestead passes to someone other than your spouse, Texas
law gives the surviving spouse the right to live in the homestead until his or her death, but the
spouse must provide for the upkeep of the homestead, pay taxes on it, and the like.
Again, keep in mind that the spouse does not “own” the homestead, which makes a big
difference. For example, the spouse cannot sell the
homestead, nor can he or she abandon or move out of the homestead without losing these rights.
Advantages
of a Will
This Will is the most basic part of the estate planning process, and
it is generally necessary to review the following information:
(a)
your assets (for example, a financial statement);
(b)
your family situation (including names and ages of children, whether a parent or other
individual is supported, and the like); and
(c)
the nature of your property - whether it is separate or community property, and the type
of property, whether it is real estate, securities, property held in joint tenancy with right of
survivorship, life insurance, pension benefits, etc.
A
Formal Plan
The advantage of a Will versus simply letting the laws of the state
determine how your property passes is that, after you have met with an attorney and reviewed this
information, you generally outline a plan for dividing and distributing all of your property, and
decide whether trusts will be established for certain individuals.
For
example, if a minor child inherits property from you under the laws of the State, the child is
legally prohibited from getting access to that property (whatever it may be) while still a minor.
As a result, an adult who is called the “guardian of the estate” has to be appointed
to administer the property on behalf of the minor child. The
Probate Court appoints the guardian in a legal proceeding, and as you can easily imagine, getting
a guardian appointed and administering a guardianship (which must be with Court supervision) can
be an expensive and time consuming process. Also,
the guardian has the discretion to administer the property in accordance with what he or she
thinks is best (within certain limits), but which may not necessarily be in accordance with your
wishes (and since you left no Will, it is possible that no one really knows what your wishes
were). Next, a guardianship for a minor terminates
when the child reaches 18, which means that the child has full access to his or her property at
that time. Most people are not comfortable giving a
beneficiary any significant amount of money or property at such a young age.
If you
have a Will, you can leave property to minor beneficiaries in a trust.
This Trust can generally outline a plan for dividing and distributing all of your
property. The property would be administered by a Trustee whom you would designate in your
Will (rather than a court-appointed guardian), and the Property would be administered and
distributed in accordance with instructions you spell out in your Will.
For example, perhaps you only want the Trust property to be used for the education of the
beneficiary, or perhaps you want the property to be held in trust until the beneficiary reaches
30 or 40. It is all up to you, but unless you
specify these things in your Will, you will basically have no say as to what happens to this
property.
Reduced
Estate Administration Expenses.
Having a Will can greatly reduce the costs of administering your
estate. In your Will, you can (and most Wills do)
provide for what is called an “independent administration” which is an administration that
is, for the most part, unsupervised by the Probate Court. In
an independent administration, your Executor can deal with your Estate without having to
constantly get permission from the court to perform certain acts, such as paying bills and
selling assets to provide liquidity. Without an
independent administration, the Probate Court plays a much greater role in your Estate, and at a
much higher cost.
Scot Dixon
is currently an Associate with the Business Planning and Tax practice group in the Houston office
of Haynes and Boone, LLP. Mr. Dixon is a 1990 graduate of Rice University and a 1993
graduate of the University of Texas School of Law.
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