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The question I get asked most often is, “What happens to my property when I die if I don’t have a will?”  Unfortunately, that is not always a clear cut answer.  While the states have attempted to make the distribution of assets as fair as possible, many are surprised with the answers I give.  The most common misconception among members of blended families is that all property does not automatically pass to the surviving spouse upon the death of the first spouse.  I have seen this realization strike fear into the faces of spouses as they begin to contemplate that losing a spouse will often cause more than just emotional loss, but also financial.

To understand Texas’ laws of descent and distribution, we must first explore the two major categories of property in Texas:  community property and separate property.  Separate property is property that a party owned before marriage, and property acquired during the marriage by gift or inheritance.  Community property is simply all property acquired by either or both spouses during marriage other than by gift or inheritance.  For example, all earnings either from work or investments are community property as is the home or car you buy together.

This characterization becomes increasingly important to families who are blended together with children from previous relationships.  Let’s use an example of a fictional couple, Bob and Sally Smith.  Bob has two children from a previous relationship, Bill and Susan.  Sally has no children previously, but Bob and Sally have three children together: Jack, Jill, and Jenny.  Bob and Sally have been married 29 years and all their children are grown.  If Bob dies intestate, meaning without a will, how will his property be distributed?

First, we will look at the property owned at the time of Bill’s death.  He owned the home that they still live in before they got married.  They purchased a vacation condo in South Padre together a few years ago.  Bob had $20,000.00 is mutual funds when they got married, and that investment has grown to $220,000.00.  Sally owned no property when she and Bob married.  They own two cars and a boat.

The home they live in is still considered Bob’s separate property even though they have lived in it for nearly thirty years.  Upon Bob’s death, Sally gains 1/3 life estate in the property, while 2/3 passes to the 5 children in equal shares.  The life estate means she can live in and enjoy ownership during her lifetime, but the home will ultimately pass to the five children.

The condominium was purchased during the marriage and is therefore community property.  However, this does not mean that it all passes immediately to Sally.  Because Bob has children from a prior relationship, Sally will end up owning only 75% of the condo.  The 50% she owned to begin with plus one-half of Bob’s interest.  The other one-half of Bob’s interest will pass to all 5 children equally.  Again, this means 6 people now have an ownership interest in the condo that Sally and Bob bought together.  Sally’s rights concerning the condo are limited.

The cars will be split in the same way as the condo with Sally retaining her 50% share and gaining one-half of Bob’s share.  This leaves her owning a 75% interest in the cars.

The mutual fund account that started out as $20,000.00, but has grown to $220,000.00 is next.  The initial $20,000.00 is still considered the separate property of Bob and therefore is split 1/3 to Sally and 2/3 to be divided equally among the 5 children.  The $200,000.00 of growth is considered community property and is split 1/2 or $100,000.00 to Sally and 1/2 or $100,000.00 in equal shares to the 5 children.

In summary, Sally has lost her husband of 29 years and is now also having to give up property that they had accumulated together.  2/3 of her home, 2/3 of their condo, 1/4 of their personal property, and approximately 106,000.00 has passed at Bob’s death directly to his children.  This may not leave Sally with what she needs to continue taking care of her in the lifestyle she has become accustomed to.

The bottom line is this.  Everyone needs a will.  Don’t let the government decide how to take care of those you love the most.

photo credit: edanley

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