The Herald Banner, Greenville, TX

Opinion

October 23, 2012

Will distribution creates many questions

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My husband’s will was drafted by a small-town attorney in Oklahoma in 1982 before we retired to Hunt County. I took it to a local attorney in Rockwall the other day, but he said it did not need to be updated because it met all Texas legal requirements. I am worried because his will cuts out two of his kids — who are my stepchildren. I heard that under Texas law if you don’t leave at least $1 to each kid the then they can fight the will and waste the estate on attorney fees. Is that true? — J.S., Royse City

No, but this is an extremely common misconception. I hear this question in more than half of the will drafting sessions I hold in my office, and have written about this issue several times in the past.

Texas law does not require any gift to your biological, adopted or stepchildren.  Attorneys began including a one-dollar gift years ago to ensure that the children “cut out” of the will could not claim their parents forgot them due to dementia or other issues like mind-altering medications.

While leaving your children $1 may not be necessary, that conventional reasoning does have validity. It keeps the issue of whether a beneficiary was “remembered” from becoming a “fact issue,” which makes it easier and cheaper to defend a will contest. However, it also may do little more than hurt the beneficiaries’ feelings and scar their memory of you or your husband. In fact, I have had clients who are so embittered by the $1 gift that they choose to fight probate of a will they otherwise would not have opposed.

My husband and I have wills that don’t list two pieces of property — a car and a $100,000 CD in our bank. We want those items to go to our youngest child who is 18 since the others are established and have jobs. Our wills divide our estates equally among four children, so we are trying to figure out how to address the situation. Should we get new wills or just add her name to the title and signature card as an owner? — Christy, Greenville

This question actually raises several extremely complicated issues that I do not have space to answer. Some of the answers will depend on who is elected this November because the tax changes coming in 2013 will affect how this “pre-death distribution” is viewed under the Tax Code. However, in short, there is no perfect answer that will guarantee your daughter gets all of the CD or gets the car tax-free.

Due to space limitation, I will answer the CD question, and will attempt to answer the car question in a later column. Simply adding your daughter’s name to yours on the CD documents at the bank will likely not result in your daughter’s receipt of the full CD.

First, your other children could have a right to the money if your daughter claimed during probate that it was a “gift.” Under Texas law, a gift is not complete unless the donor’s intention was to completely rid himself of all title, dominion or control over the money at the time of the transfer.

In other words, your continued control of the CD is evidence enough that it was not a gift, and it would not all go to your daughter upon your deaths.

Second, your daughter could still have problems even if she claims the CD is a joint account with right of survivorship. Unless there is some specific agreement in writing setting up this relationship, your daughter’s testimony — or even your banker’s testimony — will not be admissible to show a right of survivorship.

The Texas Probate Code requires a written agreement, and your daughter may well lose a portion of the CD funds to her siblings.

This may be surprising because many people assume all joint accounts simply revert to the joint account holders upon the death. Unfortunately, “community property” accounts among spouses are treated very differently from parent-offspring accounts.

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