Texas Probate

What is an Owelty Deed or Lien?

An owelty of partition is an instrument used to allow one co-owner of property to buy the interest of the other co-owners while using 100% of the interests as collateral for a loan to acquire the property.  Common examples are in the situation of divorces, probates and division of co-owned assets by people who are not partners.

In Texas there are limited ways to create an encumbrance (a lien or mortgage) against real property that is a person’s homestead.  The most common ways to create such an encumbrance are for purchase money loans, or for home improvements loans.  And while home equity loans are allowed in Texas, equity loans can be made only up to 80% of the value of the real property.  These restrictions come into play when a person tries to buy out a co-owner of real property, and finance that purchase through a Lender.  While a purchase money lien or mortgage would attach to the interest being purchased, it would not attach to the interest the person already owns.  Most lenders would not want to loan money and accept a mortgage against anything other than 100% of the property.

That is where the owelty deed or owelty lien comes into play.  In 1995, the Texas Constitution was amended to specifically designate an owelty of partition as one of the permitted encumbrances on a Texas homestead.  For an owelty of partition to properly be ordered, the owners must be co-tenants.  If the court vests title in one party and divests the other, they are no longer co-tenants and no owelty of partition can be ordered.  A court-imposed lien does not extend to the interest already owned by the acquiring party.  Only an owelty lien can reach that interest.

If you have any questions about owelty of partition, or jointly owned real property, call the Law Office of Gregory A. Ross, PC at 940-692-7800, or email us at info@gregoryrosspc.com

Do You Know the Difference Between an Heir and a Beneficiary?

The term heir is used within a last will and testament and trusts to designate family members entitled to inheritance property. When decedents do not execute a Will or transfer property to a trust their estate is deemed ‘intestate’ and must be settled according to state probate law.

Direct lineage heir refers to blood relatives such as parents, siblings, and children, as well as the decedent’s spouse. Heirs can also include cousins, aunts and uncles. Individuals who are not directly related to the decedent are referred to as beneficiaries.

Decedents can bequeath inheritance property to whomever they desire. If the estate is considered intestate, property normally transfers only to direct lineage heirs. If a Will or trust is in place, property is gifted according to directives provided in the document.

Heirs can be named as beneficiaries on bank accounts, life insurance policies, financial portfolios, retirement accounts, and certain types of titled property such as real estate. Although somewhat confusing, heirs can be beneficiaries, but beneficiaries are not always heirs.

The last will and testament is one of the most important elements of estate planning. Wills are used to bequeath property, appoint an estate administrator, establish guardianship for minor children, and provide directives regarding burial preferences. Wills are also an important element of establishing a trust. Without a Will, distribution of assets is determined by state probate law.

Unless a trust is established, all estates must undergo the probate process. Probate is required to settle outstanding debts, transfer property to heirs and beneficiaries, notify government entities regarding the decedent’s death, pay estate taxes, and file a final tax return.

Estates with a valid Will are referred to as ‘testate’ estates. Those without a Will are ‘intestate’ estates. Testate estates normally pass through probate more quickly than intestate estates. The time required to settle probate estates depends on the type of inheritance property involved, court caseload, and family dynamics.

If heirs agree to the terms of the Will, the probate process can usually be completed within a few months. The average time-frame to settle intestate estates is 6 to 9 months. If claims are submitted against the estate, probate can be prolonged for several months. When family members disagree over distribution of assets or if an heir contests the Will, probate can be suspended for a year or longer.

Wills can also be used to disinherit a direct lineage heir. While most people do not want to write a person out of their Will, there are instances that warrant this decision. It is best to work with a probate attorney to ensure the disinheritance clause is compliant with state law and to minimize the potential for the disinherited heir to contest the Will.

When a Will is contested, the probate process is prolonged as the court determines who is rightfully entitled to inheritance property. Contesting a Will can be very detrimental to the estate; particularly if estate value is less than $100,000.

Strategies exist which can minimize the time required to settle estates. It is best to work with a professional estate planner to ensure property is protected and to ease transfer of inheritance assets.

Beneficiaries can be assigned to checking and savings accounts by filling out ‘Payable on Death’ forms where funds are held. Account holders can bequeath funds to as many beneficiaries as they desire. Heirs cannot access bank accounts until they present the death certificate, photo I.D, and validated ‘date of death’ forms provided by the estate executor.

Beneficiaries can also be assigned to financial portfolios and retirement accounts by assigning ‘Transfer on Death’ beneficiaries. Heirs can elect to transfer accounts into their own name to avoid inheritance tax, or accept lump sum cash which may be subject to taxation.

Titled property can be gifted to heirs by assigning beneficiaries via the property title. Each state has different requirements for bequeathing titled property. Some require obtaining a joint title, while others allow designation of beneficiaries. To ensure property is distributed according to your wishes, consult with a probate lawyer or estate planner to determine proper protocol.

Engaging in estate planning is one of the greatest gifts anyone can leave their loved ones. It is important to update Wills when major changes occur. These might include opening or closing a business; buying or selling real estate; or when a designated heir dies or an heir is born.