Up in the Heir – The Risks of Dying without a Will

There are some decisions most of us are OK delegating. What happens to your assets upon death is not one of those casual concerns. Chances are, everyone reading this has strong opinions about who will receive their hard-earned money and property. Unfortunately, your opinions won’t matter if you die without a Will – a situation known as “intestate” in the legal profession.

A Surprisingly Common Situation

According to a recent Caring.com study, as many as two-thirds of Americans do not have a Will. Actually, that’s not quite accurate – if you don’t have your own Will, the state where you live already has one “written” for you. And you probably won’t like it.

For example, the accounts of anyone dying intestate are often frozen, since after the owner’s death only a court can legally authorize transactions in the name of the deceased (by appointing an executor). To be appointed as an executor in Texas, one must follow these procedures (assuming there is a valid, written Will naming an Independent Executor, properly executed):

• File an application for probate of the Will in the appropriate jurisdiction with the appropriate forms and pay the appropriate fees.
• If the original Will is not available (but a copy or handwritten will is being probated), obtain and report the names and addresses of everyone who might be considered a potential heir.
• Use local media to publish the Notice of Creditors – this notifies creditors that the clock is running if they have claims.
• File an inventory and appraisement of the assets of the Estate on date of death.
• Notify all beneficiaries named in the Will in writing that you are petitioning the Court to be executor.
• Attend the court hearing in person or via teleconference (court and county dependent) where your application to serve as executor will be determined. If the Will has been properly prepared and executed, you are not otherwise disqualified from serving, and it is not contested, appointment of the executor is the norm.

Not a Slam-Dunk

Assuming the Court appoints the applicant as the Executor, the county clerk (or a similarly named official) will issue Letters of Administration giving the named person the authority to transact for the deceased. Keep in mind, more than one person can petition the court, although this is not usually done if the Will is properly prepared and names an Executor. Even in a modestly sized family it’s easy to imagine how this could become contentious, although contesting a valid, written Will naming an Independent Executor is rare. The entire process, from the time of appointment of the Independent Executor until the final documents are prepared and any funds disbursed, takes approximately 6-8 months in Texas.

One Size Does Not Fit All

If there is no Will or the Will has not been properly prepared, state procedures for intestacy were created. Although the state has the best of intentions, intestacy procedures will not likely address all family situations. This procedure, called an Administration of the Estate, may require some or all of the following:

• Texas law requires an accounting of community versus personal property.
• Siblings of the deceased are not likely to inherit anything unless they are sole survivors.
• Children of the deceased are unlikely to inherit anything if there is a living spouse and that spouse is their parent.
• Step-children of the deceased are also not likely to inherit anything unless they are not the children of the spouse; if not the children of the spouse, they may be awarded an interest in the assets of the Estate, including any real estate. If you are the surviving spouse, you could potentially own the house you live in with your step-children!
• Custody of any minor children may be up the court to decide (they would appoint a guardian for the children and a conservator to oversee related assets). This may be decided by a family court if there is a dispute over whether a biological parent or a step-parent would have custody.
• If both parents pass simultaneously the Court may appoint a state agency as child guardian, such as CPS, if there is no relative willing to step in.
• There is generally no way for the Court to direct part of the estate to charities.
• The Court will divide an estate equally among children (even if one or more is special needs), if they are the sole survivors and there is no surviving spouse or other pertinent relatives.
• The Court will not create trusts so minor children won’t blow all the money when they turn 18.

You get the idea. There are also rather complicated rules concerning the disposition of assets depending on the type (community or personal) of property, the decedent’s marital status before death, and whether the children are from the most recent marriage.

Some Good News

The problems with intestacy are significant, but there is some good news. Certain accounts and property can pass automatically to a surviving spouse depending on information recorded at the time of purchase or account opening.  Some of the items below are NOT probate assets and the Court will not have jurisdiction over them unless there is no beneficiary named on the accounts:

• Non-probate: Retirement accounts (via beneficiary designation)
• Non-probate: Life insurance proceeds (via beneficiary designation)
• Non-probate: Funds such as Merrill Lynch, Fidelity, IRA’s, etc. (via beneficiary designation)
• Probate (unless a joint account or a POD has been signed): Savings and other bank accounts
• Probate: Real estate (by type of ownership)
• Probate: Other physical property (like vehicles – by type of ownership)

These types of assets can pass to heirs outside of probate as long as ownership is joint and/or the beneficiary(s) are listed with account custodians. But if there is no will, isn’t there a good chance beneficiary and account ownership information aren’t current either?

Take the Time Now

Some decisions in life should not be left to chance. Parents have strong opinions on what should happen to their assets in passing. Also, emotions can run high during such a transition, and no wants to create a family fight if it can be easily avoided. To be certain your wishes are executed swiftly and with the least expense of money and energy, have a will prepared and check all accounts and other property for current ownership information. If you have any questions on wills or would like more information, please feel free to contact the Essex Firm for an in-person or virtual consultation.