Estate planning looks a little different in every state. For instance, many states do not allow handwritten wills at all, or else only allow them for active-duty members of the military. However, some states, including Texas, will sometimes allow handwritten (or holographic) wills under certain circumstances. This is merely one issue among many that can make estate planning more confusing, especially when moving from one state to another. Here are two of the most important concepts you should know about Texas property law: community property and the Texas homestead law.
One of the most important distinctions between Texas and many other states is the existence of community property, as opposed to common law property.
In most states, under common law, when someone gets married, any money they make or property they buy after that will still be considered their own property. If they wish to share their property with a spouse (e.g. sharing ownership of a house), the deed must name both spouses as grantees and the form of shared ownership (tenants in common, joint tenancy with right of survivorship, or tenancy by the entireties). Under joint tenancy and tenancy by the entireties, the death of one of the spouses vests complete ownership in the surviving spouse.
In Texas, however, under community property law, when someone gets married, they and their spouse are considered to have formed a ‘community.' Thereafter, any time that either spouse earns money (such as from a job), that money is considered community property that is owned by the “community” of which both spouses are members. Likewise, anything they buy with that money will also be considered community property, from a TV to a car to a house. There is a legal presumption that if property is acquired during the marriage it is community property. When one spouse dies or the couple divorces, the community comes to an end. When a spouse dies, each spouse is entitled to their half share of everything that was owned by the community. The half belonging to the deceased spouse is controlled by their will, if they have made one, meaning that if they leave their share of the community property to the surviving spouse, that spouse will fully own everything. On the other hand, if the deceased spouse does not have a will, depending on whether the deceased spouse had children, the surviving spouse will not necessarily inherit the deceased spouse's community property or separate property.
Another distinctive of Texas law that is useful to know for estate planning is the Texas homestead law. The homestead law protects the right to have a home and the ability to make a living. A person's homestead cannot be forcibly sold by most creditors except in a few narrowly-defined cases, such as foreclosure of a purchase money mortgage or certain home equity loans.
This concept may not initially seem relevant to estate planning, but it is extremely relevant when it comes time to probate a spouse's estate, especially if they have a will. If you and your spouse live together in a house, that house most likely serves as both you and your spouse's homestead. This means that you both have an absolute right to live in your house – and if you leave your house to someone else when you die (if you own the house as your separate property), the Texas Constitution give your spouse a right to live in the property for life rent-free, even if someone else is the legal owner (they may, however, be responsible for taxes, upkeep and maintenance of the property). Because of this, it is very important for couples who were married when one spouse already owned the family home to create their plans with this exemption in mind and reach conclusions about what to do with a homestead property together.
These two concepts of Texas law are vital for a proper understanding of Texas estate law, especially when it comes to married couples with even just a few assets, especially a house. There are ways to enter into agreements converting community property to separate property (or vice versa), and there are certain situations in which the homestead exemption will not apply, but in most cases, these two concepts are a key foundation for any married couple creating wills or trusts.