Imagine what might happen if you were to suddenly die, or your spouse were to unexpectedly die? You think about a will from time to time, putting it off perhaps, but consider the effect of not making this important decision to plan for the inevitable.
Unexpected Turn of Events
Laura Doe, age 54, was tired. “I’m going to bed early tonight,” she told her husband John. They had been happily married for 14 years. John was sitting in his recliner watching Sports Center on TV. It wasn’t unusual for him to fall asleep watching TV and never come to bed.
She got up the next morning and quietly got ready to go to work. As she was walking past him, she noticed something didn’t look right. As she walked closer and tried to wake him, she frantically tried to cram her heart back down into her chest where it belonged. John had died in his sleep without warning. He had been the picture of health, worked outside, not over weight, didn’t smoke, no health problems, never went to the doctor. What a nightmare you say and it is. You’ll really think ‘nightmare’ when you hear about his estate.
John didn’t have a will. Further, he didn’t have any life insurance. Self employed, he had a lot of debt, including equipment loans for his business, car loans and some moderate credit card balances. Laura works in a low paying job and knows virtually nothing about John’s business.
The Plot Thickens
John owned their house before they got married so it is his separate property. Most of his net worth is tied up in the house, which is worth several hundred thousand dollars. The remaining mortagage balance is $125,000 with a payment of $1,000 per month. He has a savings account of approximately $20,000. John has a teen age daughter from his first marriage. John’s first wife remarried a wealthy husband who adores John’s daughter so she has pretty much everything she needs. She lives in California on the coast. John might have seen her once per year for the last several years. She decides to hire an attorney to represent her interests in John’s estate.
Because John died without a will, the Texas heirship statutes will control who inherits his property.
Because John died without a will, the Texas heirship statutes will control who inherits his property. Regarding his personal property (cash, personal effects, brokerage accounts, equipment, autos, etc., his wife and daughter will each inherit half. However, there is no equity in his equipment and autos because the loans are about equal to the fair market value of the equipment securing the loans. The cash will quickly be eaten up by the funeral bill, appraisal fees, attorney fees, monthly debt payments, credit card payoffs and other expenses.
Because John died without a will, his daughter’s attorney can ask for John’s estate to pay his attorney fees and the judge will probably allow the request. Of course, the estate’s attorney will be paid out of the estate. Property taxes are due on the house. Within a month of John’s death, the equipment loans, car payments, house payment and credit cards are all one month overdue, meaning two payments are due. Oh, and by the way, John is still paying child support to his exwife regarding his daughter. Before any inheritance can be distributed to Laura or John’s daughter, even the unsecured credit cards balances must be paid off.
Because the house was John’s separate property, John’s daughter will inherit two thirds of the house. Laura will only inherit the right to live in the house but the daughter inherits the entire house as soon as Laura dies or moves out of the house. However, in order to live in the house, someone has to pay the monthly mortgage of $1000. Laura only earns $20,000 per year. The property taxes on the house are $6,000 per year. Homeowner’s insurance also must be paid. Living in the house is not an option for Laura because she simply can’t afford it.
Laura would have inherited half of the cash but all of the cash is used up. So when all the dust settles, Laura gets nothing from John’s estate and his daughter inherits the house worth several hundred thousand dollars.This article was written by Craig W. Watson, Attorney