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The Effects of Divorce on Wills and Estate Plans in Texas

Here is a guide to the legal effects of divorce on Wills, Trust instruments, and financial accounts in Texas.

Wills and Divorce in Texas.  When a person’s marriage is dissolved by divorce, the former spouse cannot receive any payments, benefits or inherit property from that person’s will unless it expressly states otherwise. Not only is the former spouse not allowed to take any benefits or serve in a fiduciary role with regard to the estate, but neither can a relative of the former spouse do so, unless the relative is also a relative of the testator.

Trust Instruments and Divorce in Texas.  A person can create a trust through provisions in a will. However, if that person’s marriage is dissolved by divorce, Texas law will operate as if the former spouse has disclaimed his or her interest in the trust. The divorce cancels the former spouse’s right to receive any property from the trust, to act as trustee, or to be appointed in any other fiduciary capacity. However, this rule applies only to trusts created in a will, and not to trusts created during one’s lifetime.

Divorce on P.O.D. and Multiple-party accounts.  If a deceased individual has established a “pay on death”, multiple-party account, or any other beneficiary designation during a marriage that ends in divorce, the beneficiary designation of the former spouse, as well as of relatives of the former spouse who are not a relative of the decedent, are no longer effective.

Exceptions to the Rule. Some exceptions to the general rules occur under the following circumstances:

  1. The Court’s divorce decree so orders.
  2. Express terms in a trust instrument grant rights regardless of divorce.
  3. An express provision of a pre-nup or post-nup relates to the division of the marriage estate.
  4. The decedent reaffirms the survivorship agreement in writing.
  5. There are express provisions in joint trust documents.
  6. The former spouse is re-designated as the P.O.D. payee or beneficiary after a divorce.

This article brushes the surface of the many estate planning issues that can occur after a divorce in Texas. Be sure to review your estate planning documents yearly and seek the counsel of an attorney when there has been a major life event, such as marriage, birth, death, changes in investment accounts, property changes, or divorce.


Elaine Price practices in the areas of probate, heirship, and guardianship proceedings. Ms. Price is a graduate of the Thurgood Marshall School of Law and holds a Bachelor of Arts in political science from Prarie View A&M. Elaine was formerly with the law office of Rhonda Hunter.

Estate Planning & Elderlaw | Dallas, TX

Capacity to sign

Estate Planning | Farrow-Gillespie & Heath | Dallas, TXDifferent legal actions require different levels of mental capacity to be valid.  For example, the level of mental capacity required to sign a will, referred to as “testamentary capacity,” is lower than the level of capacity required to sign a contract, called “contractual capacity.” The various standards are discussed below.

Capacity to Sign a Will – Testamentary Capacity

To have testamentary capacity, the will signer must satisfy five requirements.  First, the signer must understand the business in which they are engaged.  Second, the signer must understand the effects of making a will.  Third, the signer must understand the general nature and extent of their own property.  Fourth, the signer must know to whom their property should pass or is likely to pass.  And fifth, the signer must be able to collect all of this information in their mind at once and understand the how it all connects.  They also must not suffer from an “insane delusion” that affects the will, nor be under undue influence from an outside party.

A person signing a will may do so during a lucid interval (sometimes also known as a “moment of clarity”), which is a time of mental capacity that is both preceded and followed by periods of mental incapacity.  As long as the signing occurs during this lucid interval, the person has capacity to execute the document at issue.

Testamentary capacity must be proven only if the will is challenged by someone during the probate process.  The party seeking to uphold the will (the will proponent) is the party who must prove that the testator did, in fact, have capacity at the time of the will signing.  To guard against claims to the contrary, the estate planning attorney should be certain that the testator has capacity at signing, and should not allow someone with questionable capacity to execute a will.

Capacity for Other Legal Arrangements

In contrast to testamentary capacity, the standard for legally signing other documents is generally higher.

Contractual Capacity

Contractual capacity is the mental capacity required to validly execute a contract.  Contractual capacity requires that the contracting person appreciates the effects of the act of signing the contract, and understands the nature and consequences of signing the contract as well as the business that they are conducting.

Power of Attorney

Although not entirely clear under Texas law, proper execution of a power of attorney probably requires contractual capacity.  The reason is that the POA is valid during the signer’s lifetime and can have a profound effect on business and financial transactions.

Donative Capacity

Donative capacity, or the capacity to make a gift, is an elusive concept in Texas, but other states require something that appears to be higher than contractual capacity. Common requirements are that the donor of the gift must understand the nature and purpose of the gift, the kind and amount of property given, who is a reasonable recipient of the gift, and the effect the gift will have on the donor.  Some states go so far as to require that the donor understand that the gift is irrevocable and that it will reduce the donor’s own assets.

Health Care Decisions

The capacity required to make health care decisions is more than mere mental capacity.  Patients must give “informed consent” to all health care procedures, which requires that the patient be competent and that the consent be given voluntarily.  The consent is informed when the health care provider gives the patient the information the patient needs to make the right choice.

The Effect of a Lack of Capacity

If a person does not meet the requisite mental capacity requirements when he or she enters into a legal arrangement, the arrangement and its supporting documents are generally void and unenforceable.  Third parties can challenge these documents if they believed the person lacked capacity when the documents were signed.  For a will, that means bringing a contest during the probate process.

Read More:
  • Michael H. Wald, The Ethics of Capacity, 77 Tex. B.J. 975 (2014).
  • Rudersdorf v. Bowers, 112 SW2d 784, 789 (Tex. Civ. App.—Galveston, 1938).
  • Tieken v. Midwestern State Univ., 912 SW2d 878, 882 (Tex. App.—Fort Worth, 1995).

Catherine Parsley was an intern at Farrow-Gillespie Heath Witter, LLP in 2017.  Ms. Parsley is a law student at SMU Dedman School of Law in Dallas, Texas, where she is a staff editor of the SMU Law Review.  Catherine served as a judicial extern for Chief Justice Nathan L. Hecht, of the Supreme Court of Texas.  She holds a B.S. in communications studies, cum laude, from the University of Texas at Austin.


Christian Kelso | Farrow-GIllespie & Heath LLP | Dallas, TXChristian Kelso is a Senior Associate at Farrow-Gillespie Heath Witter, LLP.  He practices in the areas of estate planning, wealth preservation and transfer, probate, tax, and transactional corporate law.  He earned a J.D. and LL.M. in taxation from SMU Dedman School of Law. Mr. Kelso has written and presented on numerous topics, including a recent webinar sponsored by the State Bar of Texas, entitled “Caregiver Do’s and Don’ts.”

Estate Planning & Elderlaw | Dallas, TX

Power of Attorney Restrictions

A person (“agent”) holding a power of attorney for another person (the “principal”) must act with the utmost degree of loyalty to the principal.  The agent must avoid being involved in any transaction which benefits, or even which potentially benefits, the agent.

That rule of law was enforced once again by the Texas courts in Jordan v. Lyles, No. 12-13-0035-CV, 2015 WL 393791 (Tex. App.–Tyler 2015, no pet. h.).

In that case, the agent used her power of attorney to place a significant portion of the principal’s money into pay-on-death accounts naming the agent as the beneficiary.  At the principal’s death, the principal’s other heirs sued the agent for breach of fiduciary duty for moving the money and receiving it at the principal’s death.  A Tyler jury found in favor of the heirs, and held the agent liable for breach of fiduciary duty and tortious interference with inheritance rights. The appellate court affirmed the jury’s verdict.

The moral to agents is this: If you conduct or participate in a transaction for the principal that benefits you personally, obtain bulletproof evidence that the principal instructed you to do so.  If the principal has lost capacity, it is too late; and unless you obtain the advance approval of all beneficiaries under the principal’s will (or all heirs at law if the principal has no will or has a questionable will), you simply may not do anything with the principal’s property during the remainder of the principal’s lifetime that would be to your benefit.

Estate Planning & Elderlaw | Dallas, TX

Basic Estate Planning Documents

We prepare the following basic estate planning documents at an affordable fixed fee:

  1. Last Will and Testament, validly prepared and executed under Texas law
  2. Statutory Durable Power of Attorney
  3. Medical Power of Attorney
  4. HIPAA Authorization
  5. Directive to Physicians (often called a Living Will)
  6. Appointment of Guardian for Minor Children
  7. Designation of Guardian Before Need Arises
  8. Burial Instructions

Even if an estate is not large enough to be subject to the Federal Estate Tax — and most are not — good estate planning enables a person to transfer his or her property at death in the fastest, easiest, least expensive manner possible. Good estate planning also enables a person to take advantage of the powers granted by the state of Texas to make healthcare choices and to plan appropriately for disability, whether temporary or permanent. Your loved ones will be grateful to you for leaving your affairs in order. Completing these estate planning documents can provide peace of mind for you and your family.

The Will

Every adult who has legal capacity has the authority to designate how his or her assets and liabilities will be distributed at the time of death. To protect that right, the state requires that a Will be properly executed to be considered valid. A valid Texas will can name an Independent Executor to serve without bond and with minimal court supervision. Probate is the legal process of proving the Will in court, settling the estate, and distributing the assets. In Texas the cost of probating a Will is very reasonable. Probate can be very expensive, however, if an individual has assets and dies without a valid Will. Executing a valid Texas Will can go a long way toward preserving your assets for the intended beneficiaries.

Statutory Durable Power of Attorney

The Texas Statutory Durable Power of Attorney is a document that allows you to designate someone to manage your financial affairs or transact business on your behalf in the event it should become necessary or convenient. The powers granted in the document can become effective immediately, or can be designated to become effective only if you become incapacitated. In either case, the powers will remain effective even after your incapacity – hence the use of the word “durable.” This document can be very powerful. The state of Texas has provided a statutory format to be used to help improve acceptance of the document by third parties. Without a Statutory Durable Power of Attorney, a Guardianship would likely be required to take over an incapacitated person’s financial affairs. Guardianships require continuing oversight by the Court, are very expensive, and open a person’s private business to public scrutiny. Having a Texas Statutory Durable Power of Attorney is the estate planning equivalent of a “stitch in time.”

Medical Power of Attorney

The Medical Power of Attorney allows you to designate the person who will make your healthcare decisions in the event you are unable to do so – and only in that event. This document is always important to have. It is particularly valuable where someone other than a spouse will be making those decisions, or when members of a family have differing views of what should happen. If you remember the case of Terry Schiavo in Florida, you should be aware that if she had only executed a Medical Power of Attorney – whether in favor of her husband or her parents – those parties would not have spent the 15 years and untold amounts of money they ultimately spent fighting in court over control of her healthcare decisions.

Directive to Physicians

The Directive to Physicians is sometimes called a Living Will. It allows an individual to decide in advance if he or she wishes to have artificial measures used to sustain life when the person is near death. Many people do not wish to be kept alive by means of artificial respirators or feeding tubes if they are not able to sustain life on their own. Without a Directive to Physicians the doctors involved may be required to use all measures available to sustain life. Proper execution of this document can help maintain a person’s dignity and preserve assets for loved ones. Most importantly, the document allows you to exert maximum control over what happens to you in the event you are unable to speak for yourself.

Designation of Guardian Before Need Arises

The Designation of Guardian Before Need Arises is a relatively new statutory document in the state of Texas. It allows you to designate in advance who your guardian will be should you ever need one – for example, in the event of a debilitating stroke, or an injury that results in incapacity (in which state individuals sometimes linger for many years). The document also allows you to disqualify certain individuals from ever becoming your guardian. This document can bring peace of mind to the maker, and can assist the court in making a proper guardianship designation if the need ever arises.

Appointment of Guardian for Minor Children

If you have minor children, and both you and their other parent die or become incapacitated, the children will need to be cared for by someone until they reach the age of majority. The Appointment of Guardian for Minor Children allows you to choose who that person should be – whether it is a family member or a friend. In the event you do not designate someone yourself before the need arises, your family members may dispute the matter; and in that case, a court of law would decide who will raise your children. You can avoid that possibility and maintain control over your children’s future by executing a Guardian appointment.

Burial Instructions

It is possible to designate a particular person to be in charge of decisions affecting burial and funeral arrangements; and once designated, that person can enforce the right to do so. Within the same document, you may specify your burial instructions.

Conclusion

The documents discussed above form the basic estate planning package. If the estate is large enough to be taxable, certain complex estate planning documents and techniques can minimize and in some cases eliminate the tax liability. For most of us, however, the bottom line is this: Good advance planning significantly eases the emotional and financial burden of disability and death on our loved ones.

For more information, or to make an estate planning appointment, please call 214-361-5600.

Farrow-Gillespie Heath Witter LLP | Dallas, TX

 

 

Estate Planning & Elderlaw | Dallas, TX

Do I Need a Will?

One of the most common misunderstandings about estate planning is the belief that it is only for the wealthy. Anyone who owns property of any kind has an estate. Basic estate planning is an important component of an organized and responsible life, whether or not your estate is large enough to be subject to federal estate taxes. If you own any property, or have minor children, you should have a Will. Estate planning includes more than just a Will, however. It includes planning for potential disability during your lifetime, designating trusted individuals as medical and/or financial agents with power of attorney, designating a guardian to take care of your minor children in the event both you and your spouse die or become incapacitated, and other critical decisions. For those reasons, we include an entire package of the basic estate planning documents with your Last Will and Testament.

See list of basic estate planning documents.

Many people (as much as half of the population) will experience a period of either physical or mental disability before their death. Lack of planning can make caring for a disabled individual expensive and inconvenient for the caregiver. Good planning preserves a person’s dignity, as well as his or her assets, which can be used for the person’s care and can be preserved to the full extent possible for the next generation. Your loved ones will be grateful to you for having your affairs in order.