Myth: I don’t need a will. Everything will go to my spouse when I die.
One of the main misconceptions I hear from clients is that they don’t think they need a will because everything is going to go to their spouse when they die anyway. The truth is, that may not be the case. If you don’t have a will, then the laws of your state (known as the intestacy rules) determine where your property goes. The intestacy rules are complicated and vary greatly from state to state. This blog post it meant to be a brief introduction to the Texas intestacy rules, not legal advice. You should consult with your attorney about your particular situation. For simplicity this article will discuss what happens to your property if you are married with children and die without a will.
First, in Texas the law divides property into two types: separate property and community property. Each type of property is treated differently. Generally, separate property is property you acquired before your marriage. Community property begins the day you get married. Anything that is acquired during marriage is presumed to be community property, no matter whose name it is in. While separate property and community property can seem simple at first there are many, many rules and exceptions to the rules that can complicate characterization of property. For example, if you bought your home at 30 and got married at 32 the house may be separate property, but it may also be community property if your spouse moves in and begins paying the mortgage and bills with you. This is commonly referred to as comingling. A lot of couples who have been married for a significant amount of time don’t worry about separate property because they’ve been together so long they think everything is community property. That’s another common misconception. We can still acquire separate property during marriage. For example, when you inherit property from a loved one or receive a gift from another person, even your spouse, that is considered separate property whether you’ve been married a day or two years. And to top it all off, prenuptial and postnuptial agreements can also come into the picture and change everything.
Next, it’s important to understand how your two types of property are divided between your spouse and children after you pass.
Your children receive 2/3 of your separate property. It doesn’t matter if you share all your children with your surviving spouse or not, all your children will equally divide 2/3 of your separate property and your spouse will only receive 1/3 of it. That means that when your father passed away and left you $300,000, if you don’t have a will, your spouse will get $100,000 after you pass, and your four kids will get $50,000 each. This can be surprising to clients who expect their spouses to get everything. It can also be difficult when the surviving spouse has expensive medical or housing needs and is relying on being left their spouse’s entire estate. This rule applies to money and real estate. If you own real estate outright before you get married (and this is common for second or third marriages), then your surviving spouse retains a life-estate in 1/3 of the property meaning when you pass, your children own 2/3 of your house and your spouse owns 1/3 of your house. This can get complicated quickly.
If you only share children with your surviving spouse, then 100% of your community property will pass to your spouse. This rule is why most clients think all their property passes to their spouse when they die. However, the 100% rule only applies to community property and only applies if neither you nor your surviving spouse have children outside your marriage. If either of you have children outside the marriage, then ½ your community property passes to your children and the remaining ½ passes to your spouse. This can mean that upon losing a loved one, a widow can soon no longer afford to live in her home. It can mean that even though you and your spouse have been married for 20 years, when you pass all that money you worked hard at saving together has to be divided between your kids.
It is vital that all families, and especially blended families, prepare their wills and even consider setting up a trust. There is no scenario where a blended family escapes heart ache, court costs, and stress when a parent passes away.
Visit with your attorney to make sure your spouse is being left enough resources to live comfortably after you are gone. Your attorney can explain where your property is going when you pass and together you can determine where you want it to go. The best way to love your family well after you die is to plan your estate and do the work for them.