Blogs from January, 2021

Now that I have your attention. Did you know that there are instances where a surviving spouse does not inherit from their deceased spouse? Finding out that the surviving spouse doesn’t inherit everything is difficult and often unbelievable because so many people falsely believe that everything is automatically owned by the surviving spouse. 

There are several reasons why a surviving spouse does not automatically inherit everything. Three major reason are that: 

1. There is no requirement in Texas that you leave your half of the community estate to your surviving spouse; 
2. If you die without a Will, ownership is proven through laws of intestacy which requires a legal process; and 
3. If you die with a Will (married or not), your Will does not get legal effect until it is probated (Latin for proved) in a legal process. (see Texas Estates Code 256.001, “a Will is not effective to prove title to, or the right of possession of, any property disposed of by the Will until the Will is admitted to probate.”)

The spouse wrote a Last Will and Testament leaving their half of the community estate to someone else.

It is very important that Texans understand that when you are married in Texas, each spouse owns one-half of the community estate without restrictions. This means that each spouse has a right to direct their half of the property to someone other than their spouse if they choose to do so. The result is that some surviving spouses find out that their husband or wife wrote a Will leaving their half of the property to someone other than the surviving spouse. 

The spouse has no or ineffective estate planning documents and/or has separate children from the surviving spouse.

When a spouse dies with no Will, Trust, or other estate documents directing the disposition of their estate, or when the documents that they did leave are outdated or unclear, there is a greater possibility of a contesting party successfully taking some or all the deceased spouse’s estate. Some examples include creditors making claims against the deceased spouse’s one-half of community property and other family and friends successfully claiming inheritance rights or other rights to assets. Even when such claims are unsuccessful sometimes the cost of defense is so high that the surviving spouse has little to nothing to inherit as the result.

As hard as it is to believe — If a married person dies without a Last Will and Testament or other estate documents directing their assets at death and that person has children separate from their current spouse, Texas law states that one-half of the community property goes to the deceased spouse’s separate children.

The surviving spouse must complete the probate process – nothing is “automatic”.

Surviving spouses are often surprised to learn they must complete the probate process to obtain 100% ownership of estate assets and/or distribute assets according to the directions left in the decedent’s Will. Often, surviving spouses overlook this necessity until they go to sell a jointly owned asset such as a home, close a bank account, move investments monies or other asset related activities. 

The best course of action is to locate a trusted probate attorney and begin the probate process as soon as reasonably and emotionally possible. The longer a surviving spouse waits to open a probate case the more expensive and time consuming it can be.  Completing a probate after the loss of a spouse maybe the last thing one wants to do but doing so saves children and loved ones the increased time and cost associated with probating TWO Wills at the time of the second spouse’s passing.

If you are married and want to ensure that your spouse inherits some or all estate assets or avoids the probate process in total, the good news is you can take steps to make sure that happens! Planning with an up-to-date and effective estate plan is the best way to ensure that your wishes are met. Explore different estate planning options by contacting us for a free consultation with one of our attorneys. 

Tax rates and paying taxes seem to consume our minds for very good reason – the U.S. Tax Code is complicated. A common area of confusion for some small business owners surrounds the topic of an “L.L.C. (Limited Liability Corporation) versus an S Corp”. Many people, to their detriment, use these terms interchangeably. THESE TERMS ARE NOT ONE AND THE SAME. 

An L.L.C. is a formal business structure that, when used correctly, provides protection for the business owner’s personal assets by separating personal and business activities. An S Corp is a type of tax classification that can be used by both corporations and LLCs and has the potential to save some business owners money while positioning their business for growth.

Corporations are normally taxed at the corporate entity level, but an S Corporation is not. S Corporations instead elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. This pass-through means that all financial considerations are assessed at the individual income tax rates of shareholders and a benefit is that the S Corporation can therefore avoid double taxation on corporate income.

To qualify as an S Corporation, the company must not have more than 100 shareholders, must be a US company, must be meet certain shareholder qualifications and cannot be what is considered an ‘ineligible corporation’ under the law. If the company meets all the requirements, the corporation must submit Form 2553 no more than two months and 15 days after the beginning of the tax year the S Corp election is going take effect (IRC 1362(b)).

The S Corporation election may be of great benefit if you are considering starting a small business, or perhaps are already a shareholder in one. However, it is important to know your options and carefully consider how to best structure your entity. 

Do you own a small business? Do you have questions on how best to structure your business or how to plan for business continuity in times of incapacity or death? Give us a call (972) 945-1610 or comment below.

Do you own your house?

This may sound like a silly question, but in my experience many people do not know the answer to this question. Some people think ownership is based on what is shown in the tax records at the central appraisal district for their county; others believe the bank holds the ownership; and still others (usually surviving friends or family of a deceased person) assume that because they may have been paying the mortgage or property taxes personally that they own the home in question. The list of what I’ve heard on this topic goes on and on. 

Property law is complex and with so many different entities and legal documents and processes involved in purchasing a home, it can be very confusing to sort out which record officially indicates ownership of the property. This blog will not attempt to explain all the complexities of property law. That would take months of law school! Recently, I found the property law books that I studied in law school and the introductory book to property law was 1,202 pages long – don’t worry I will spare you 1,200+ pages of information. 

Bottom line: official ownership of your house is based on a conveyance made in writing, often known as a deed. If you want to know who owns a piece of property, you need to find the deed. 

How do you find the deed? The formal way to provide notice to the world regarding who owns property in Texas is to properly execute a deed and file it with the County Clerk in the county where the property is located. To find the deed for a property, you should search in the County Clerk’s deed record.

So, how do you know if you own your house? You have a properly executed deed that names you or you as trustee of your living trust as the grantee of the property. Ownership of a home is based on what a properly executed deed says. Documents such as mortgage papers, appraisal district records, and all other sources referencing ownership are not the formal ownership records. As such, there are many instances where those secondary sources may be incorrect, and the proof of ownership will be proven through the deed record.

Do you have property sale, purchase, or ownership questions? Contact us today!