A good Texas Last Will and Testament will accomplish many things in your Houston estate plan. It will dispose of all of your probate property by leaving it to the beneficiary you name in your Will; it will provide for an independent administration to reduce the time and cost involved in administering your estate; and it will name guardians for your minor children if need be. However, your Texas Will won’t necessarily dispose of all your assets, so it is important that you realize what assets won’t pass under your Will.
Jointly Owned Property. As discussed in this article from the American Bar Association, property that is owned as Joint Tenants with Right of Survivorship (JTWROS) does not pass under your Will. Rather, JTWROS property passes to the surviving joint tenant(s). It is common for people to have bank accounts that are titled as JTWROS, such as when an older parent names a child as a joint tenant on an account so that the child can write checks for the parent if needed. While this can be a convenient arrangement, it could cause problems with your estate plan. When you die, the child who is a joint tenant on the account will receive the money in the account, to the exclusion of any other children or other beneficiaries you may have named in your Will. The same is true for “Pay on Death” (POD) accounts that pay to a named beneficiary when the primary account holder dies. For this reason, it is generally not a good idea to have JTWROS or POD accounts with large sums of money in them. A better approach might be simply to add another person as an authorized signer on the account so he or she can write checks on the account without having any ownership of the funds.
Insurance, Retirement Plans, Annuities. These types of assets have beneficiary designations forms that name who will receive the proceeds or plan assets when you die. It is extremely important that you regularly review your beneficiary designation forms to ensure that they are coordinated with the rest of your Texas estate plan. The tax and other consequences of naming certain beneficiaries will vary depending on the type of asset, so it is important that you work with your financial advisor and estate planning attorney to ensure that your beneficiary designation forms are completed properly. For example, naming your estate as the beneficiary of a life insurance policy or retirement plan will cause the assets to pass under your Will, but it will also cause the assets to become subject to the claims of your estate’s creditor’s, and it could have severe negative income tax implications.
Property in Trusts. Property in a revocable or irrevocable trust will generally pass outside of your probate estate. So, if you have a properly funded revocable living trust, then there should be no need for a probate administration for your estate. However, even if you have a revocable living trust, you should still have a Will that takes any property inadvertently left out of the trust and puts it in the trust after you die (this is known as a “pour-over will”). Additionally, if you are the beneficiary of an irrevocable trust, this property will usually pass outside of your probate estate as well.