In Texas, the community property system affects married couples’ rights to their marital property. But how do Texas’s community property laws affect your legal options when distributing your property and real estate through the estate planning process? Understanding the role of community property in estate planning in Texas can help you develop a legal plan tailored to your needs and goals.
Understanding Community Property Laws in Texas
The Texas community property system presumes that any property acquired by a married couple during their marriage becomes equally owned by the spouses, requiring the equal division of the property in the event of the couple’s divorce. A couple’s marital property can include real estate, investments, and retirement assets. However, couples can also own separate property not subject to division, including all property each spouse owned before their marriage and certain assets acquired during the marriage, such as inheritances or exclusive gifts.
How Community Property Laws Affect Estate Planning Decisions
Because each spouse in Texas has a one-half interest in marital property, deciding how to distribute marital property through an estate plan requires consideration of the effect of community property laws. In the absence of an estate plan, Texas’s intestate succession laws determine the disposition of a deceased spouse’s property. When a spouse has children from another relationship, that spouse’s half of the community property goes to those children. Otherwise, the surviving spouse inherits the deceased spouse’s community property. However, when a person leaves an estate plan, they can direct the disposition of their one-half interest in the marital property. Creating an estate plan with a will, trusts, and beneficiary designations can help people ensure their property interests pass to their preferred beneficiaries.
Special Considerations for Blended Families
Blended families in which one or both spouses have children from prior relationships may face unique considerations due to Texas’s community property system. When a spouse with children from a previous relationship passes away without an estate plan, their one-half interest in marital property will pass to their children. This rule can lead to unintended consequences and challenges, such as leaving a surviving spouse living in a home in which they have only a one-half interest, with their stepchildren owning the other half. Careful estate planning can avoid unintended consequences or emotional and financial challenges for the surviving members of a blended family.
Handling Separate Property in an Estate Plan
In the Texas community property system, each spouse has an exclusive interest in their separate property, including property owned before marriage, inheritances, or exclusive gifts. As a result, a spouse’s separate property will pass under intestate succession laws in the absence of a will, or according to the spouse’s estate plan. Spouses may need to organize documentation to prove the separate nature of various assets or demonstrate they have not commingled separate property with marital property.
Common Mistakes to Avoid
Some of the biggest mistakes that married individuals make when estate planning in the context of the Texas community property system include:
- Failing to update beneficiary designations, especially following a divorce or second marriage
- Assuming that all of one’s assets qualify as marital property
- Presuming that all community property will pass to a surviving spouse after one’s death
- Failing to plan for incapacity and the management of assets
Contact an Estate Planning Lawyer Today
When you have a spouse, Texas’s community property laws can affect your estate planning decisions. Contact Carroll Law Group, PLLC, today for a confidential consultation with an estate planning lawyer to learn more about how community property laws can affect your estate planning options and to get help crafting an estate plan that will achieve your legal and financial objectives.