Thomas and Kathryn married in 1972. Kathryn had a son, Douglas, from a prior marriage. Thomas also had a son, Harry, from a prior marriage.
Thomas and Kathryn amassed about $10 million, all of it community property, during their marriage. The money was held in various brokerage accounts, with names like “JTWROS”, “Joint Account With Right of Survivorship”, “JT TEN” and “TJ TEN-as joint tenancy with right of survivorship and not as tenancy in common”.
In 1999, Kathryn died. Her son, Douglas, was named the executor of her estate. Nine months later Thomas died. His son, Harry, was named the executor of his estate.
Not surprisingly, Douglas and Harry sued each other. Douglas claimed that 1⁄2 of the accounts belonged in Kathryn’s estate, because the accounts were community property at the time Kathryn died. Harry countered that all of the accounts belonged in Thomas’ estate, because the accounts were held under “joint tenancy” ( a joint tenancy carries with it a right of survivorship, which operates like an automatic inheritance.)
The case made it to the Texas Supreme Court. Here is where it became really interesting.
Back in the day (1961 to be exact), the Texas Supreme Court had declared that it was unconstitutional for a spouse to hold community property with a right of survivorship. The only way for a husband and wife to create any kind of right of survivorship in their property was to partition their community property into separate property, and then execute a survivorship agreement for that separate property. This laborious process became known as the “Texas Two-Step.” And that was the law until 1987, when Texas voters approved a constitutional amendment that authorized rights of survivorship in community property. It took another two years for the legislature to pass a law that put the amendment into action.
The Court, in Holmes v. Beatty, a 2009 decision, held that the accounts were Joint Tenancy because of the way they were styled. Thus, all of the accounts carried a right of survivorship. Thomas became the sole owner of the accounts when Kathryn died, and the entire $10 million went to his estate.
Was that what Kathryn and Thomas had intended? Probably not.
Do you know how your accounts are styled?
Hammerle Finley– Give us a call– we can help.
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Virginia Hammerle is a Board Certified Civil Trial Attorney by the Texas Board of Legal Specialization and an
Accredited Estate Planner by the National Association of Estate Planners & Councils. She can be contacted at
legaltalktexas@hammerle.com. The information contained in this article is general information only and does not constitute legal advice
