Texas has a little-known estate planning technique available to spouses – the Community Property Survivorship Agreement.
Here is how it works: both spouses sign a written agreement that all or part of their community property becomes the property of the surviving spouse upon the death of a spouse. When the first spouse dies, the other spouse automatically becomes owner of the community property.
Sound simple? It has not always been that way in Texas, which is a community property state. It took a constitutional amendment to make this type of agreement possible.
Why, then, does no one talk about using a Community Property Survivorship Agreement in place of a will or a trust?
Because of the fine print in the statute.
Community Property Survivorship Agreement Requirements
The Community Property Survivorship Agreement requirements are set out in Chapter 112 of the Texas Estates Code. It requires a written agreement, signed by both spouses, that, hopefully, contains at least one of these phrases: “with right of survivorship,” “will become the property of the survivor,” “will vest in and belong to the surviving spouse,” and “shall pass to the surviving spouse.” Those magic words are not required but are certainly recommended.
The agreement can apply to all or just some of the community property. When the first spouse dies, legal title in that community property simply vests in the surviving spouse. A Community Property Survivorship Agreement is effective on its own, without the benefit of a court order stating it is valid.
However, try telling that to the banks and title companies. They are notoriously hesitant about accepting an agreement that a court has not ruled valid. Thus, the statute sets out a procedure for the surviving spouse to get a court ruling.
First, the spouse files an application in the county where the deceased spouse resided at the time of his or her death. Second, the spouse files the original agreement with the court clerk. Third, the spouse has a citation posted.
Fourth, the court holds a hearing. The surviving spouse must prove that the other spouse is dead, that the agreement was properly executed and was not revoked, and that the signatures on the agreement are valid. Finally, if the court believes the evidence, the court enters an order ruling the agreement is valid.
That sounds a lot like a probate procedure for a will, doesn’t it?
It is this drawback that makes people hesitant to use a Community Property Survivorship Agreement. Perhaps if this type of agreement was more prevalent, third parties would be more likely to accept it without a court order.
A Community Property Survivorship Agreement is a contract between the spouses. It can contain more terms than just the survivorship provision, such as appointing one of the spouses with the power to manage, control and dispose of the community property during their lifetimes.
If the agreement is silent on the issue of revocation, then it can be revoked by either spouse. That revocation must be in writing, signed by the revoking spouse, and delivered to the other spouse. However, the couple can agree that it takes both to revoke the agreement.
Because it is only an agreement and not a will, the transfer of the ownership of the community property to the surviving spouse is not considered a “testamentary” transfer. That has a cascading effect on the applicability of other laws that involve testamentary transfers.
Like many other types of estate planning documents, the Community Property Survivorship Agreement can serve a useful purpose.
Hammerle Finley Can Help With Your Estate Planning Needs
If you’re ready to start creating an estate plan or have questions about your estate planning options, schedule a consultation with an attorney at Hammerle Finley to discuss what is right for you.
Virginia Hammerle is an attorney with Hammerle Finley Law Firm. She is entering her 40th year in the practice of law. She is Board Certified in Civil Trial Law by the Texas Board of Legal specialization. Contact legaltalktexas@hammerle.com to receive her firm’s newsletter.
