Conceptually, granting someone a Power of Attorney is rather simple.  Let us take a simple situation.  You are about to travel out of town.  While out of town you want to make sure that if anything comes up someone will be able act on your behalf.  Your son lives nearby and he is a responsible young adult.  The simplest way to accomplish this goal is to grant your son a Power of Attorney over your affairs while you are gone.  If you grant your son a Power of Attorney, your son will be legally known as your “agent” or “Attorney-in-Fact.”  He will be able to act on your behalf to the extent you grant him the authority.

Power of Attorney’s are that simple.  The person granting the authority under a Power of Attorney is called the principal.  The person acting on the principals behalf is called the agent.  In the above scenario Parent was the principal and Son was the agent.  The agent’s authority derives from the powers granted in the Power of Attorney.

Power of Attorney’s do not last forever.  Let me say that again, Power of Attorney’s do not last forever.  A Power of Attorney will expire 1) when revoked, 2) by the terms of the Power of Attorney, 3) incapacity unless it is a durable power of attorney (discussed below), and 4) on the death of the Principal.   I have talked to numerous people who have indicated — “Well, my Dad passed away last December but I have a power of attorney.”  The authority under the power of attorney ceased when Dad passed away.  In other words, the agent can no longer act on behalf of Dad.  A different set of legal tools would be required to take care of Dad’s estate.  (See the Will/Probate and Estate Planning Section).

I indicated that a Power of Attorney “expires” on the incapacity of the principal.  This is the default rule/law.  A principal can execute what is called a “Durable Power of Attorney.”  This is a special type of power of attorney that allows the agent to act on the principals behalf, even if the principal is incapacitated.  Why is this important?  Well, if you do not have a durable power of attorney and you become incapacitated, the law, judges, and attorneys will decide who will make decisions for you.

Powers of Attorney are common tools in estate planning and other legal transactions.  They are flexible and powerful legal documents.  As the principal, you can give as much authority to your agent for almost any duration during your life or you can grant you agent the authority to act on your behalf in a very narrow way for a very limited period of time.

I was at the office today and on one of my listserv’s there has been a long discussion on online wills, legal self help online services (e.g. LegalZoom.com) and the like.  I hesitated to mention the issue on our blog because, well, they are sorda a competitor.  I then thought about it more and, No, they are not really a competitor.  In fact, as one attorney on the listserv put it

I make more money off of holographic [handwritten] wills and online wills than I do my everyday estate planning business.

Why would the attorney make more money off of these services?  Because these services are “cookie” cutter services.    They are generic forms.

Legal issues are not cookie cutter!  Do you have the exact same issue as your neighbor?  Your brother?  Or another relative?  You make the same amount of money as they do?  Are you married?  Are you the same age?  Do you have the same number of kids?  Are you going to retire at the same time?  Do you all have the same value house?  Do you have the same skills related to the managment of money or stress related to life decisions?

There are numerous questions that need to be asked and evaluated.  Yes!! Evaluated to determine the best course of action.

In one of the conversations an attorney by the name of Mike recounted this joke:

…there is an old joke about the patient who was outraged at the $100,000 invoice from his surgeon for heart surgery and asked for a breakdown of the charges. The doctor’s reply was

1. Performing heart surgery – $10,000

2. Knowing where to cut – $90,000

The following blog discusses this issue in a little more depth — http://ricksblog.lawelderlaw.com/self-help-legal-switcheroo/

I am equally confident that most people do not realize that in the state of Texas a will is not effective if it is not probated.  In other words, just because Mom gave the home to brother in her will, if the will is not probated, then that provision is ineffectual.  Texas Probate Code Section 94 speaks to this provision specifically:

Except as hereinafter provided with respect to foreign wills, no will shall be effectual for the purpose of proving title to, or the right to the possession of, any real or personal property disposed of by will, until such will has been admitted to probate.

So that will that has been sitting on the cabinet “declaring” the home was given to you by Mom is not effective unless the has been probated in the state of Texas or the foreign will provisions of the Texas Probate Code apply.

If you and/or you family members decide they wish to probate the will, don’t sit on that decision too long.  Generally speaking, a will must be probated within in four (4) years of the death of the testator.  There is an exception to this four year rule but I will leave that for a later discussion.

Bottom Line:  A will must be probated to be effective and, generally speaking, the will must be admitted to probate within four (4) years of the death of your loved one.

The post was not speaking on the broader question on whether once one disinherits a child in their will, whether that disinheritance can be challenged.  The simple answer to that question is “yes” it might be challegned in probate.  For that matter, a disinheritance acheived through a provision in a trust may be challegned as well.

The point is that a person may disinherit a child; however, just because you disinheirit a child, does not prevent that child from challenging such disinheritance when you pass away.  The child will not challenge the actual disinheritance but rather challenge it in other ways.  For example, he/she may say you were unduely influenced in making a change in your will.  He/She may attempt to show your were coerced in some way.

I will write later on In Terrorem Clauses as a way to potentially mitigate those challenges.

I decided to talk briefly about Affidavit of Herishps (hereinafter Affidavit) and the effective use here in Texas.  In our practice, we often come across these documents when reviewing title.  We have prepared them in certain circumstances.  Primarily, the property most “impacted” by this document is real property.  As with most things in life, the document is neither good nor is it bad.  It is an added tool in primarily in Texas Probate and Real Property transaction.  It has its appropriate place and has a long history of being used in Texas.

What is an Affidavit of Heirship?  An Affidavit of Heirship is ‘a statement of facts concerning the family history, genealogy, marital status or the identity of heirs of a decedent.’ (1)  The Texas Probate Code identifies the section as “Recorded Instruments As Prima Facie Evidence.”  In short an Affidavit of Heriship is an affidavit which a person files in the county records outlining the decedents family history and the identity of heirs.  Probate Code Section 52 outlines the statutory basis but the use of the affidavit has been in use in Texas for a long time prior.  (Commentary by in Texas Probate Code Annotated and Annotated by Professor Stanley M. Johnson discusses the history an impact. 2008 Edition).

Using this type of affidavit puts “the world” on notice of a decadent’s family history.  When filed in the county clerk’s records, it evidences the change in title of real property.  Notice I say “evidence” the change in title.  The affidavit does not “pass title.”  It is not a conveying document.  The “passing” of title occurs as an operation of law, by some other proceeding or document.  This is a minor but important distinction because others will look to the law or documents other determine ownership and use the affidavit for the facts in that determination.

Companies, title companies, title examiners, and others may use the affidavit in determining the appropriate heirs and who has an interest in property.  I say “may” because a person is not required to rely on the affidavit.  It is not an order by a court and it is often times sworn to by an interested party (e.g. the person who stands to gain by the declarations in the affidavit.)   He/she stands to take an interest in the property and he/she is the one making the affidavit.  Further, if it was recently filed it is less likely to be relied on.  In fact, the “statutory” presumption of prima facie evidence is not assumed until after five (5) years.  (2).   If the decadent left a will and and he/she passed away in the last four years, the affidavit may not be relied on because the heirs under the will may still probate the will.

My experience in the reliance on the affidavit to transfer title to real property has been mixed.  It has varied between title companies.  Most of the title companies I have encountered have, at minimum, the affiant (the one making the declaration) and at least two witnesses, one of which who is interested.  You will notice that this is not a statutory requirement.  This is purely a requirement by the title company.  I have heard from colleagues who have encountered title companies who require the affiant and all the heirs sign the affidavit.  Other companies have required the affidavit to  be at least 10 years old.

With all the uncertainty of whether others will rely on the affidavit, why use it?  Well, for one it is inexpensive to produce and allows one to evidence a change in title.  If there are not a lot of assets of the decedent and the primary asset is marital community homestead, an affidavit of heirship may be the way to go.  If there are children outside the marriage, contentious family affairs, or a large estate, (to name a few) then the use of an affidavit of heirship to assist in clearing the decedent’s interest is probably not the best method.  If you are selling your home or about to purchase a home and an affidavit of heirship is being proposed to clear the interest of a person in the chain of title to the property, you probably want to consider your options.  At minimum, I would contact the title company your plan on using to insure your title and verify what they will require prior to insuring title to the property.  Even better would be to contact an attorney to discuss your options.

The use of non-statutory and statutory affidavit of heirships have been used to evidence a change in title for real property throughout Texas history.  There are times when using Affidavit of Heirships makes since.  There are times when they do not make since.

Sec. 52. RECORDED INSTRUMENTS AS PRIMA FACIE EVIDENCE.  (a) A statement of facts concerning the family history, genealogy, marital status, or the identity of the heirs of a decedent shall be received in a proceeding to declare heirship, or in a suit involving title to real or personal property, as prima facie evidence of the facts therein stated, if the statement is contained in either an affidavit or any other instrument legally executed and acknowledged or sworn to before, and certified by, an officer authorized to take acknowledgments or oaths as applicable, or any judgment of a court of record, and if the affidavit or instrument has been of record for five years or more in the deed records of any county in this state in which such real or personal property is located at the time the suit is instituted, or in the deed records of any county of this state in which the decedent had his domicile or fixed place of residence at the time of his death. If there is any error in the statement of facts in such recorded affidavit or instrument, the true facts may be proved by anyone interested in the proceeding in which said affidavit or instrument is offered in evidence.

(b) An affidavit of facts concerning the identity of heirs of a decedent as to an interest in real property that is filed in a proceeding or suit described by Subsection (a) of this section may be in the form described by Section 52A of this code.

(c) An affidavit of facts concerning the identity of heirs of a decedent does not affect the rights of an omitted heir or a creditor of the decedent as otherwise provided by law. This statute shall be cumulative of all other statutes on the same subject, and shall not be construed as abrogating any right to present evidence or to rely on an affidavit of facts conferred by any other statute or rule of law.

Texas Probate Code Section 52

Sec. 52A. FORM OF AFFIDAVIT OF FACTS CONCERNING IDENTITY OF HEIRS.  An affidavit of facts concerning the identity of heirs of a decedent may be in substantially the following form:

AFFIDAVIT OF FACTS CONCERNING THE IDENTITY OF HEIRS

Before me, the undersigned authority, on this day personally appeared __________ (“Affiant”) (insert name of affiant) who, being first duly sworn, upon his/her oath states:

1. My name is __________ (insert name of affiant), and I live at __________ (insert address of affiant’s residence). I am personally familiar with the family and marital history of __________ (“Decedent”) (insert name of decedent), and I have personal knowledge of the facts stated in this affidavit.

2. I knew decedent from __________ (insert date) until __________ (insert date). Decedent died on __________ (insert date of death). Decedent’s place of death was __________ (insert place of death). At the time of decedent’s death, decedent’s residence was __________ (insert address of decedent’s residence).

3. Decedent’s marital history was as follows: __________ (insert marital history and, if decedent’s spouse is deceased, insert date and place of spouse’s death).

4. Decedent had the following children: __________ (insert name, birth date, name of other parent, and current address of child or date of death of child and descendants of deceased child, as applicable, for each child).

5. Decedent did not have or adopt any other children and did not take any other children into decedent’s home or raise any other children, except: __________ (insert name of child or names of children, or state “none”).

6. (Include if decedent was not survived by descendants.) Decedent’s mother was: __________ (insert name, birth date, and current address or date of death of mother, as applicable).

7. (Include if decedent was not survived by descendants.) Decedent’s father was: __________ (insert name, birth date, and current address or date of death of father, as applicable).

8. (Include if decedent was not survived by descendants or by both mother and father.) Decedent had the following siblings: __________ (insert name, birth date, and current address or date of death of each sibling and parents of each sibling and descendants of each deceased sibling, as applicable, or state “none”).

9. (Optional.) The following persons have knowledge regarding the decedent, the identity of decedent’s children, if any, parents, or siblings, if any: __________ (insert names of persons with knowledge, or state “none”).

10. Decedent died without leaving a written will. (Modify statement if decedent left a written will.)

11. There has been no administration of decedent’s estate. (Modify statement if there has been administration of decedent’s estate.)

12. Decedent left no debts that are unpaid, except: __________ (insert list of debts, or state “none”).

13. There are no unpaid estate or inheritance taxes, except: __________ (insert list of unpaid taxes, or state “none”).

14. To the best of my knowledge, decedent owned an interest in the following real property: __________ (insert list of real property in which decedent owned an interest, or state “none”).

15. (Optional.) The following were the heirs of decedent: __________ (insert names of heirs).

16. (Insert additional information as appropriate, such as size of the decedent’s estate.)

Signed this ___ day of __________, ____.

_________________________________

(signature of affiant)

State of __________

County of __________

Sworn to and subscribed to before me on __________ (date) by __________ (insert name of affiant).

_________________________________

(signature of notarial officer)

(Seal, if any, of notary) __________

(printed name)

My commission expires: __________

In Texas, a person who is competent to make a will can provide in the will language to disinherit an heir. (2)  In other words, Texas Law does not prohibit a person from specifically stating a person is not to take under a will.

Sec. 58. INTERESTS WHICH MAY PASS UNDER A WILL.  (a) Every person competent to make a last will and testament may thereby devise and bequeath all the estate, right, title, and interest in property the person has at the time of the person’s death, subject to the limitations prescribed by law.

(b) A person who makes a last will and testament may:

(1) disinherit an heir; and

(2) direct the disposition of property or an interest passing under the will or by intestacy.

.

.

.

Texas Probate Code Section 58

So how does one determine the character of property?  As a starting point, understand this blog post does not attempt to answer every question related to determining the character of property.  There are numerous factors that determine whether property is classified as community property or separate property.  This discussion is intended to provide the “guidepost” or the starting point.

Let us start out with a few definitions:

Community Property:

Community property consists of the property, other than separate property, acquired by either spouse during marriage. Texas Statutes Family Code Section 3.002

Separate Property

Sec. 3.001.  SEPARATE PROPERTY.  A spouse’s separate property consists of:

(1)  the property owned or claimed by the spouse before marriage;

(2)  the property acquired by the spouse during marriage by gift, devise, or descent; and

(3)  the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.  Texas Statutes Family Code Section 3.001

Ok, that gets us to a starting point.  There is one other rule that needs to be stated — it is the “Rule of Inception.” (1)  The Rule of Inception basically states the character of property is determined at the time the property is acquired.  For example, if a person acquires property when they are single but then a year later marries, the character of the property would be considered “separate property.”  This is because the property was acquired acquired prior to his marriage.  The marriage did not affect the character of the property.  The Rule of Inception is the first place to start in determining the character of property.

Now consider the same scenario where a husband acquires property, say a home, prior to getting married.  He later marries.  The couple then expends community assets to fixing and reparing the home.  Does this change the character of the property from “separate property” to “community property”?  No.  Look back at the Rule of Inception.  The Rule of Inception determines the character of the property.  The husband purchased the home when he was single.  Therefore, the property is considered separate property.  If the couple later divorces, it is possible for the wife to make a claim of economic contribution; however, that does not change the character of the property.   Texas law provides a forumla on how to determine the amount of economic contribution. (2)  This calulation is beyond the scope of this post.

There is a presumption that property acquired during the marriage is community property.  (3)  Which means that the default rule is that property acquired during the marriage is community.  It is only the default rule though.  This default rule can be overcome by showing by clear and convincing evidence that the property is their separate property.  One common way to show this is specifically stating on the transfer document that it is being acquired as his/her separate property.

What about a husband who inherits property from his deceased mother?  He is married at the time he acquired the property.  This is the husband’s separate property.  The property was a devise/descent from his mother.  Property acquired by a spouse during marriage by gift, devise, or descent is his/her separate property.

Recap:  Property acquired prior to marriage is considered separate property.  Property acquired during a marriage is presumed to be community property unless it is acquired by gift, devise, descent, or recovery for personal injuries sustained during the marriage (except loss of earnings capacity).

It is important to characterize property because the law treats the character of the property differently.  In divorce, community property is subject to just and right division.  At death, the law of descent  and distribution or intestate laws  (e.g. the laws governng the disposition of property when there is no will) treat community property and separate property differently.

Think back to the time you and your now ex-spouse went to the family lawyer.  The two of you decided to give each other everything in case one of you died.  Now the two of you have divorced.  If you pass away without changing your will, does the divorce impact the provisions in the will?  Well, the Texas Legislature has made a default rule for you.  If after making a will you get divorced and pass away, the Texas courts will treat your ex-spouse as if she had predeceased you.  In other words, your ex-spouse will not take under the will.  In 2007 the Texas Legislature amended the statute to also include relatives of the ex-spouse who are not related to the testator (the person who wrote the will and died).

Take note:  This is the Texas rule.  There have been exceptions made and should be considered.  One clear exception is in certain Federal ERISA plans.  Since it falls under federal laws, the federal laws apply and the divorce does not ‘nullify’ the beneficiary.  In other words, if your ex-spouse is the name on that beneficiary card he/she may take those benefits despite your divorce.

Why leave all these questions up in the air?  There is an easy solution — change your beneficiaries and update your will when major changes occur in  your life.  And yes, a divorce would qualify as a major change in your life.

Texas Probate Code Section 69

Sec. 69.  WILL PROVISIONS MADE BEFORE DISSOLUTION OF MARRIAGE.  (a)  In this section, “relative” means an individual who is related to another individual by consanguinity or affinity, as determined under Sections 573.022 and 573.024, Government Code, respectively.

(b)  If, after making a will, the testator’s marriage is dissolved, whether by divorce, annulment, or a declaration that the marriage is void, all provisions in the will, including all fiduciary appointments, shall be read as if the former spouse and each relative of the former spouse who is not a relative of the testator failed to survive the testator, unless the will expressly provides otherwise.

(c)  A person whose marriage to the decedent has been dissolved, whether by divorce, annulment, or a declaration that the marriage is void, is not a surviving spouse unless, by virtue of a subsequent marriage, the person is married to the decedent at the time of death and the subsequent marriage is not declared void under Section 47A of this code.

Acts 1955, 54th Leg., p. 88, ch. 55, eff. Jan. 1, 1956. Amended by Acts 1979, 66th Leg., p. 1746, ch. 713, Sec. 12, eff. Aug. 27, 1979; Acts 1995, 74th Leg., ch. 642, Sec. 2, eff. Sept. 1, 1995; Acts 1997, 75th Leg., ch. 1302, Sec. 5, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 1170, Sec. 4.02, eff. September 1, 2007.

Texas State Statutes, Probate Section 69

As with most things in life, their is a time and place for everything.  The process of Estate Planning is the process of planning how your assets will be handled throughout your life and after you pass away.  At times, Estate Planners will recommend placing your assets in vehicles called “non-testamentary assets” or “non-probate assets.”  A non-testamentary asset is an asset which is not disposed of by will.  Texas Probate Code Section 454 speaks to this issue precisely:

Transfers at death resulting from agreements made in accordance with this part of the code are effective by reason of the agreement involved and are not testamentary transfers.  Such transfers are not subject to the provisions of this code applicable to testamentary transfers except as expressly provided otherwise in this code.

Some “non-testamentary” or “non-probate” assets include insurance policies, payable on death accounts, and trust to mention a few.  The Texas Probate Code states non-testamentary assets are controlled by the agreement not the will.

If the asset is not a non-probate asset (forgive me for the double negative) then it is a probate asset.  A probate asset is an asset which a will can dispose of.  In essence, it is all assets which are considered non-testamentary assets.

There are good reasons to “place” assets in non-testamentary “vehicles.”  There are also good reasons not to place them in non-testamentary vehicles.

A valid will can practically dispose of a persons assets just a easily and just as definitively as the agreement related to the non-probate asset.

Instead of thinking of “Probate” as that seven letter word and being a bad thing, one should consider probate as another tool in addressing ones estate.   Over time I will speak to the some of the advantages and the disadvantages.

Conceptually, granting someone a Power of Attorney is rather simple.  Let us take a simple situation.  You are about to travel out of town.  While out of town you want to make sure that if anything comes up someone will be able act on your behalf.  Your son lives nearby and he is a responsible young adult.  The simplest way to accomplish this goal is to grant your son a Power of Attorney over your affairs while you are gone.  If you grant your son a Power of Attorney, your son will be legally known as your “agent” or “Attorney-in-Fact.”  He will be able to act on your behalf to the extent you grant him the authority.

Power of Attorney’s are that simple.  The person granting the authority under a Power of Attorney is called the principal.  The person acting on the principals behalf is called the agent.  In the above scenario Parent was the principal and Son was the agent.  The agent’s authority derives from the powers granted in the Power of Attorney.

Power of Attorney’s do not last forever.  Let me say that again, Power of Attorney’s do not last forever.  A Power of Attorney will expire 1) when revoked, 2) by the terms of the Power of Attorney, 3) incapacity unless it is a durable power of attorney (discussed below), and 4) on the death of the Principal.   I have talked to numerous people who have indicated — “Well, my Dad passed away last December but I have a power of attorney.”  The authority under the power of attorney ceased when Dad passed away.  In other words, the agent can no longer act on behalf of Dad.  A different set of legal tools would be required to take care of Dad’s estate.  (See the Will/Probate and Estate Planning Section).

I indicated that a Power of Attorney “expires” on the incapacity of the principal.  This is the default rule/law.  A principal can execute what is called a “Durable Power of Attorney.”  This is a special type of power of attorney that allows the agent to act on the principals behalf, even if the principal is incapacitated.  Why is this important?  Well, if you do not have a durable power of attorney and you become incapacitated, the law, judges, and attorneys will decide who will make decisions for you.

Powers of Attorney are common tools in estate planning and other legal transactions.  They are flexible and powerful legal documents.  As the principal, you can give as much authority to your agent for almost any duration during your life or you can grant you agent the authority to act on your behalf in a very narrow way for a very limited period of time.