Separate Property vs. Community Property

The Texas Family Code defines separate property as:

- property owned or claimed by the spouse before marriage;

- property acquired by the spouse during marriage by gift, devise, or descent; and

- the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.

In essence, all other property acquired by one or both spouses during marriage is considered community property. This includes income earned on separate property during the marriage. The Texas Family Code states that “property possessed by either spouse during or on dissolution of marriage is presumed to be community property.” In a divorce, clear and convincing evidence as to why property should be considered separate is required to establish separate property designations.

If you need a Texas Family Lawyer, contact Peterson Law Group.

What is an attorney ad litem?

The term ad litem simply means “for the suit”. An attorney ad litem may be appointed or assigned in family law cases or probate cases where representation is deemed necessary by a judge. While the Texas Family Code does not specifically define the role, the Texas Probate Code provides a definition that is generally accepted in family law cases:

An attorney ad litem is an attorney who is appointed by a court to present on behalf of an incapacitated person.

In family law cases, judges will recommend the appointment of an attorney ad litem when doing so is deemed to be in the best interest of the child (or any party) with regard to the child’s interests in the case at hand.

In any probate proceeding, a judge may appoint an attorney ad litem to represent the interests of a person with a legal disability, a person who is a nonresident and cannot be present, an unborn person, or an unknown heir.

In either area of law, the role of an attorney ad litem is that of advocate for his client.

If you need a Texas Family Lawyer or a Texas Probate Lawyer, contact Peterson Law Group.

How is an LLC different from an LLP?

A Limited Liability Company (LLC) is a hybrid organization that takes aspects of corporations and combines them with the framework of a partnership. The owners of an LLC benefit from the ability to choose to be taxed at the company level, much like a corporation, or using pass-through taxation, as found in partnerships. An LLC generally has the management flexibility of a partnership as well. In Texas, this organizational structure may be owned by a sole individual or by a group. Either way, members have limited personal liability for the actions of the LLC.

A Limited Liability Partnership (LLP), on the other hand, cannot be considered a separate taxable entity, and therefore is restricted to pass-through income taxation. An LLP is essentially a General Partnership in which each partner is not liable for certain acts of other partners. Each partner is, however, directly impacted by any profits or losses that the LLP encounters. If one partner obligates the LLP to a debt, be it to creditors, landlords, lenders, etc. each partner can, to some extent, be held personally responsible.

If you are considering forming a business in Texas, contact Peterson Law Group.

What assets do and do not pass under a will?

In Texas, assets that commonly pass under a testator’s will include:

• Real property, both surface rights and mineral interests.

• Bank and brokerage accounts, Certificates of Deposit, stocks, and bonds (depending on whether there is a beneficiary designation).

• One-half of any Individual Retirement Accounts which are considered community property owned by the testator’s spouse.

• Tangible personal property, both titled and untitled.

• Royalties generated from intellectual property.

• Money owed to the testator at the time of his/her death.

Assets that generally do not pass under a will in Texas include:

• Life insurance.

• Some employer provided retirement plans in which the testator is the participant.

• Employer provided retirement plans in which the testator’s spouse is the participant.

• Individual retirement accounts owned solely by the testator.

• Property owned in a trust of which the testator is a beneficiary.

There are instances where some of the assets described above may be passed under a will. One common example occurs when the estate or will executor is named as the beneficiary for one or more of the assets listed.

If you need a Texas Wills, Trust & Estate Planning Lawyer, contact Peterson Law Group.

If you need a will, check out our estate planning questionnaire.

If you need to start a probate, check out our probate questionnaire.

What is a “Bypass Trust” in a will?

A bypass trust is an estate planning tool employed by married couples who wish to take advantage of both of their estate tax exemptions, thereby saving hundreds of thousands of dollars in federal estate taxes. While the federal estate tax is currently non-existent, it is safe to assume that the rate of taxation will soon return to familiar percentages. Planning for this, it behooves married persons to consider establishing a will that allows them to pass on as much of their estate as possible to their loved ones.

In a simple will, all property passes to the surviving spouse when one party dies. This scenario qualifies for the marital deduction; however, once the surviving spouse passes away, they have only one estate tax exemption to apply to property passed to the couple’s children. A bypass trust, also known as a credit shelter trust or an A/B trust, allows a married couple to use both of their estate tax exemptions.

The way a bypass trust allows married couples to avoid federal estate taxes is by leaving the exemption amount available upon the first spouse’s death to a trust that provides the surviving spouse with a lifetime income. Once the surviving spouse passes away, the remaining funds in the trust will then be distributed among the couple’s children. This trust, if properly created and maintained, is not subject to the federal estate tax because the surviving spouse cannot be deemed the owner of the trust.

If you need a Texas Wills, Trust, and Estate Planning Attorney, contact Peterson Law Group.

What is the Medicaid Estate Recovery Program?

If a person (age 55 or older as of March 1, 2005) of limited income received healthcare services through the government program Medicaid, the state of Texas has the right to ask for money back from their estate once they die. The Medicaid Estate Recovery Program (MERP) facilitates that reimbursement.

The MERP applies only to some of the long-term Medicaid services, like nursing home care, extended in-home services, and prescription drugs supported by Medicaid. It is important realize that the MERP will only file a claim on a person’s estate if doing so is cost effective. The MERP will not file a claim when:

- the value of the estate is less than $10,000;

- there is a spouse who is still alive;

- there is a child under 21 years of age;

- there is a child of any age who is blind or permanently and totally disabled;

- there is an unmarried adult child who lived in the person’s home for at least one year before the Medicaid recipient died;

- the amount of recoverable Medicaid costs are $3,000 or less; or

- the cost of selling the property would be more than or equal to the value of the property.

The state of Texas will also not ask for monetary reimbursement if doing so would cause an undue hardship for the deceased person’s heirs. In order to be granted an undue hardship request, the person’s heirs must ask for it, and provide documentation that proves the hardship. Some scenarios that MERP recognizes as undue hardships occur when:

- the estate property was a family business, farm, or ranch for at least 12 months prior to the Medicaid recipient’s death, and this property is the main source of income for their heirs;

- the estate property produces at least 50% of the heir’s livelihood;

- recovery by the state would affect the property and result in heirs losing their primary source of income; or

- the estate’s beneficiaries would be eligible for public or medical assistance if a recovery claim is collected.

- Other compelling reasons may exist.

More detailed information about the Medicaid Estate Recovery Program can be found at the Texas Department of Aging and Disability Services (DADS) website.

If you need a Texas Estate Planning Lawyer, contact Peterson Law Group.

Identity Theft

Identity theft occurs when your personal information, such as your name, social security number, credit card number, etc., is stolen and used without your knowledge. Theft of identity is a dangerous thing, potentially ruining your bank account, credit score, and reputation.

In order to protect from identity theft, it is helpful to be aware of some of the ways it can occur. The Federal Trade Commission lists the top five most common ways that identity theft happens:

1. “Dumpster Diving” to find any documents that have personal information on them.

2. “Skimming” by stealing credit/debit card numbers when processing your purchases.

3. “Phishing” by pretending to be financial institutions or companies and sending you spam e-mail or pop-up messages enticing you to reveal your personal information.

4. “Changing Your Address” by simply going to the post office and filling out a change of address form in your name. The thieves will then have access to all of your mail, including your bills and bank statements.

5. “Old-Fashioned Stealing” by stealing wallets, purses, mail, new checks, tax information, or even personal records from employers. They may also try to bribe employers who have access to your personal records.

Having your identity stolen is scary. In order to avoid identity theft, here are some key tips from the FTC:

- Shred financial documents and paperwork with personal information before you discard them.

- Protect your Social Security Number. Don’t carry it in your wallet or purse, and don’t give it out unless absolutely necessary.

- Don’t give out personal information on the phone, through the mail, or over the internet unless you know exactly who you’re dealing with.

- Never click on links sent to unsolicited e-mails and use firewalls and anti-virus protection on your computer.

- Don’t use obvious passwords like your name, date of birth, etc.

- Keep your personal information in a secure place at home.

If you need a Texas Lawyer, contact Peterson Law Group.