Intestate Succession – and the probate code

In this episode, John Ross and Lisa Shoalmire discuss what happens when someone passes away before having ever written a will. Who decides who gets what?

Episode Transcript
John
Welcome to Aging Insight, I'm your host John Ross, and im here with my co-host Lisa Shoalmire. We are elder law attorneys, and we're here on Aging Insight to provide you the kind of information you need so that you can avoid going to a nursing home if that's possible, avoid becoming a burden on your friends and family if that's possible, and avoid going broke in the process. We know that you're concerned about that sort of things, we know that it's possible for you to accomplish those goals, but we also know that the only way you can do it is with information, knowing what the future holds. Now, in past we've talked about lots of different stuff between powers of attorneys, and wills, and trusts, and all of this stuff relates to planning, planning for the future. Having some idea of what's going to happen, not only as you age but also when you die and how things are gonna to your friends, to your family, to those people around you. Now, despite all of that, there are some of you out there, and maybe it's you, maybe it's somebody you know, maybe it's your parent, maybe it's your spouse, maybe it's your aunt or uncle, who knows? But sometimes, people will pass away without having any planning in place. And often times, there's a lot of confusion about what happens to their stuff. Where does it go? Who gets what, and in what amount? And so what we're gonna be talking about today is what's called "intestate succession".
Lisa
And that's a big legal word for... And all it means is that the person passes away without a last will and testament. And John, one of the financial gurus that I pay a lot of attention to, his name is Dave Ramsey, he stated some statistics that say over 80%, 80% of people die without having a last will and testament.
John
Well, the funny thing about that, and one of the things that I often times talk to my clients about or I'll give speeches on, and I will tell everybody. So, I'm talking to you out there. Everybody out there has a will. And I know somebody's out there and you're watching and you're saying "No John, I don't have a will." No, you do. Everybody has a will. You either have the one you prepared, or you have the one that the legislature has provided for you. Like on a crime drama and they arrest somebody and they say "You have the right to remain silent," and "you have the right to an attorney," and all of that business. Well, when it comes to passing away, you have the right to make a will, but if you choose not to exercise that right, one will be provided for you. It's called the "probate code".
Lisa
Yeah, that's right. So both Arkansas and Texas have wills that they have written down in their probate codes and that is to cover the situation for an individual who passes away who did not exercise their own right to compose, and execute, and write their own will exactly to their liking. So, we have people out there who say "Well hey that's great. That's just not a worry or concern that I have to have since my beloved state of Texas or state of Arkansas has this will out there for me." But, the big deal here is the provisions that the state has for you, may not be the provisions that you want. And more importantly, especially in this day and time, if you have a situation where you have a blended family, or you have a child who because of their own histories with drug and alcohol abuse, or mental illness, or some of those things, you especially may not care for the provisions that the state of Texas and the state of Arkansas have come up for you for a will.
John
Yeah. Well, and before you ever even get to talking about who's going to get your stuff, there's a couple of things that you've got to understand first. The first thing is, is that, here we are in a city that is on the border of two states. And these two states have one big difference between them. Texas is a community property state and what that means is that if you're married and you're in Texas, some of the property you have is community property. Meaning that regardless of whether or not it's in your name or your spouses name, it's owned 50-50 by each of you, that's community property. But also in Texas, we might have separate property. Separate property is any property that's not community. Now, that might sound a little strange, but essentially what separate property is, is property that you acquired by gift. So if for example your parents gave you some land, that's your separate property.
John
Property that's acquired by inheritance, so if your parents died and you inherited property. And property acquired by personal injury, so if you received some proceeds from a lawsuit for example, that is also separate property. And then finally, the last type of separate property is property you owned prior to marriage. Now, that's in Texas where we have a difference between community property and separate property. But in Arkansas, Arkansas is a separate property state, so Lisa, we only have separate property in Arkansas.
Lisa
Well, Arkansas does have something that they call "marital property", and that marital property can also... The characterization of that marital property that you acquired during the marriage or that you have a deed to property that you and your husband bought during marriage in Arkansas, that can have some special provisions in Arkansas.
John
Right. And now, the first thing we've got to understand, if you're looking at your estate and you're saying, "Who's gonna get my stuff?" The first thing you've gotta figure out is whether or not it's community property or separate property, but that's not quite the end of the discussion there. The other thing we've gotta figure out is the nature of your family in all of this.
Lisa
Right, so this can get a little complicated. So, I think we'll take a little break and when we come back, we'll start talking about once we have figured out if we have separate property or community property, then we identify our family situation, and then we'll talk about the will that the state of Texas or the state of Arkansas has already written for you.
Lisa
Welcome back to Aging Insight. I'm Lisa Shoalmire and I'm here with my co-host, John Ross. And today, we are giving some particular attention to what happens if you die and you do not have a last will and testament that you have written and executed? And if you don't have that in place, what happens to your stuff? The first segment of today's show was about whether the characterization of your property is the property that you have at the time of your death, is it community property? Is it separate property? So, that's the first question, because once we put property in different categories, then the laws apply differently at your death to the two different categories of property. Next thing we need to figure out is what is your family composition? Are you that person who's been married to the same guy for 52 years and was never married to anyone else? And so essentially, pretty much everything you have is community property except for maybe a piece of land or two that you may have inherited from your own family.
Lisa
That's one composition of a family. Other family compositions could include a second marriage situation or more, a late life marriage, where maybe you lost that spouse that you'd had for years and years, but yet in late life, you found another companion. And you and this other person got married, and you both have children from your prior marriages. And as you can see, it can get complicated really fast. And the laws do take into account what type of family composition you have.
John
You can either have real estate, things like a house or land, or you can have personal property, and that would be things like stocks and bonds and cash, money in the bank, checking account, cars, RVs, basically anything that's not land or attached to land. And depending on the nature of your family, which state you live in, whether or not it's community property or separate property, and whether or not it's real estate or personal property, its ultimately gonna determine who gets your stuff. Now, if you think you're confused now, give it a couple of seconds.
Lisa
[chuckle] Well, this is starting to sound like an algebra equation where we have variable X which is the type of property, real or personal. We have variable Y, which is is it community or separate? And then we have variable Z here, about is this a long-time marriage, is this a second marriage or beyond... Sounds like a lot of different variables in play.
John
Right. Well, let's start off and let's talk about, for example, Texas. We'll start off with Texas and then we'll go to Arkansas. So in Texas, first of all, let's say that we have a married couple, husband and wife, and one of them has died. With a married couple, the first question is are all of their children children of that marriage? In other words, if we have this husband and wife, and they have kids, are all of their kids kids of both that husband and wife, or does one of them have kids from say another marriage?
Lisa
Well, and this is the situation like I always go back as a TV kid to June and Ward Cleaver in Wally and the Beav. We have a married couple, long-time married couple and two children of that marriage.
John
That's right.
Lisa
So that's one situation.
John
That's right. And in Texas, if all of your children are children of the marriage, then when one spouse dies, their community property, which if they've been married for a long time, probably everything they have is community property 'cause it was all acquired during the marriage. Then all of that community property passes to the surviving spouse.
Lisa
And that doesn't matter whether it's real property or personal property. It's all community property and it all passes to the surviving spouse. And that's the more traditional situation that we often think of when the situation happens.
John
Right, but you don't wanna just assume that everything you have is gonna pass to that surviving spouse because remember, this applies to community property. If you have separate property, separate property does not necessarily pass to the surviving spouse. Separate property is going to pass partially to the children and partially to the spouse. So, in this case, if it's real estate, the kids get two-thirds of it, and the spouse gets the right to occupy it for the other one-third as long as they're alive. So imagine if you had a rent house, and that rent house was paying $900 a month in income, then 600 of it would go to the kids for their 2/3, and 300 would go to the spouse as long as the spouse is alive. Now again, that can get very complicated very quickly.
Lisa
Well, then let's go ahead and complicate it then. So, let's say that this is a marriage situation where... Maybe this is the late-life marriage, a second or third marriage. We have children from previous relationships and marriages. So, does the state of Texas have a will for me if that's my situation?
John
Absolutely. And then in those cases, where you have a husband and wife, now the community property passes to the children. So, if you have 100% of the marital assets they're are community property, one spouse dies, their share goes to their children. Which... Imagine if they have two kids from their first marriage and one child with the current marriage, that means those three kids get one-half of the estate, and then the spouse keeps their half of the community property. And again, this can get very confusing very fast because of these rules.
Lisa
These complex situations... And in fact, I know the state of Texas, I have certainly flowcharts, where even lawyers and judges have to go to a flowchart and plug in the situation at hand and follow the flowchart through to see who gets what.
John
That's right. Now one interesting thing with Texas, some people will say, "Oh, well if I die without a will, the state of Texas will get my stuff." That's a misconception out there. In fact, under Texas law, somebody you're related to ultimately will inherit from you. Now, you might say, "Well, what if I don't have any kids? What if I don't have a spouse and I don't have any children?" Well, then, do you have any brothers or sisters? If not, did they have any children? If not, what about your parents? Did they have any brothers or sisters? Did they have children? And you just keep going down the branches of that family tree until ultimately you find a living, breathing human being. So under Texas law, there is no situation where the state inherits from you. Ultimately, some member of your family will inherit your estate, which is different than what a lot of people think about.
Lisa
Well, so, so far, John, I think I'm pretty convinced that this complicated system here, it might be just best to go ahead and draft that last will. [chuckle] But we need to take another little break, and when we come back, we'll talk about the state of Arkansas and how that may impact the situation.
John
Welcome back to Aging Insight. I'm John Ross and this is Lisa Shoalmire and we're talking today about what happens if you die without a will. What happens if you don't say who you want to get your stuff? And we've been talking about the fact that if you don't say who you want to get your stuff, then the law is gonna say for you. And we talked about that in Texas, it can get really complicated really fast depending upon whether or not it's community property or separate property. Or whether or not you have a spouse and all of your children are of that marriage or not. Maybe you have a stepchild, or maybe you brought a child into that marriage, it can get very confusing. Well, now we're gonna switch over to Arkansas. Well, again, we talked about the fact that Arkansas is a separate property state. So, there is no community property in Arkansas. If you die in Arkansas, if you're married, your property goes to your children. Period. It's not all that complicated, or at least, on its face it's not all that complicated.
John
So, the first part is, is if I had a house in my name, if I had a bank account in my name, and I die, whether I'm married. If I'm married, doesn't matter, my assets that are in my name are gonna go to my children. Now, if you go back a long time ago, there was a time back when women did not have the right to inherit property. Everything was very male-dominated situation in the laws. And so, because women could not inherit property, they could not own property, they had put some things in the laws to protect the surviving spouse since everything went to the adult male child. Well, since more modern times have gone and we've gotten away from these differences in the law between men and women, but some of these rules still apply. So, in Arkansas, if I were to die, everything would go to my kids, but my spouse is still protected. She gets what are called "dower and curtesy rights."
Lisa
Right. So these rights have to do with the... Almost like a life estate. A fractional share for that spouse's lifetime, and so essentially, what that does is, for instance, when it comes to a home, the surviving spouse, because they get that dower right or that curtesy right, they can actually occupy and live in that home for the rest of their life even though the legal ownership, the majority of the legal ownership, passes to your children at death.
John
Yeah. And so, imagine again, if a husband dies, everything goes to the kids, but the wife then has a right to elect. Now we get back to, what type of property is it? Is it real estate? If it's real estate, the wife gets a life estate in the home, and she gets a 1/3 interest for her life in any other real estate. So she gets to occupy the home. So, for example, if you had a husband out there who wanted his house to go to his kids, and he wanted his wife kicked out the very second he died, not that he would ever want that, but if he did, could not happen. The law does not allow that. That surviving spouse has a right to occupy the home for their lifetime. And receive 1/3 of the interest in any other real estate for their life.
John
Now, if it's personal property like money in the bank, that surviving spouse can claim 1/3 outright as theirs. And this actually brings up an interesting situation. In Arkansas, you can not disinherit your spouse. Even if you were to draft up a will and say, "I leave everything to my kids and I don't want my spouse to get any of my stuff." That spouse, in Arkansas, can still come in and claim a 1/3 interest in your personal property and a 1/3 life estate in any real estate that you have. And so, again, the laws are impacting, even when you do have a will, the laws can impact in these situations.
Lisa
Well, John, I've run across a couple situations, particularly in Arkansas, where a late life marriage, where a couple of seniors who maybe have lost their spouses, their longtime spouses, and maybe they find a companion, and they marry. Well, if they move into one of the homes, if they both had separate homes, but yet they move into one home, a lot of times, that new spouse doesn't ask all the right questions they need to ask about how is that home owned, who owns it? Because a lot of times, people are always improving their homes and adding construction or remodeling. So, a lot of times the new spouse may not realize that they're actually investing their money into an asset that has already passed to stepchildren that they don't really have much of a relationship with. [chuckle]
John
Right, yeah. So imagine, we'll take... There was a husband and wife, for example, and the wife died, and so the husband, who didn't own the house, he's got a life estate, he's got a right to live there, but the actual title of that house passed to his kids. Now, that husband re-marries to wife number two, and wife number two comes in and contributes her own funds to improving this house. Well, it's not his house, it's not the husband's house. She's actually making improvements to a house that's owned by those children. And it's possible because people didn't even know about all of these rules, that nobody even knew about this, not the husband, not the wife, maybe not even the kids, until later on down the road. So you can see, we talked about from the beginning, you can decide who you want to get your stuff or you can let the law decide who's gonna get your stuff. And if you let the law decide, you need to be very sure about what's gonna happen out there, because the end result of having these mixed ownerships, it's a recipe for disaster. If people start not getting along, if they mistrust each other, it can really go bad really fast.
Lisa
Well, and finally, the other thing is, if you let the state of Texas or the state of Arkansas write your will for you, the states are not taking into account if you have a disabled child, or you have special concerns about a spouse or a child, or you have a special relationship with a grandchild or a niece. So, it's always best just to do it and make your own will and not let the state do it for you.
John
Right, so now you know what happens if you die without a will, and hopefully that's encouraged you to get out there and make sure your stuff is taken care of. And we'll see you next time right here on Aging Insight.
Lisa
Bye bye.

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