Probate Case Study - Selling the Family Ranch

Adapted from real cases. Names changed to protect the innocent.

"Do you mean to tell me, Katie Scarlett O'Hara, that Tara, that land doesn't mean anything to you? Why, land is the only thing in the world worth workin' for, worth fightin' for, worth dyin' for because its the only thing that lasts." - Gerald O'Hara, Gone With the Wind.

Standard blog disclaimer:

1. Blog post for discussion purposes to discuss the general rules in Texas. We hope to be helpful!

2. There are almost always exceptions to the general rules that we cannot cover in a blog post. Please consult with an attorney for advice for your specific situation.

Facts of the case:

1. Mom and Dad bought the Texas family ranch while married.

2. Dad died first.

3. No probate was done for Dad.

4. Dad's Will says everything goes to Mom, 100%.

5. Mom died afterwards.

6. No probate was done for Mom.

7. Mom's Will says everything goes to Dad, otherwise to Scarlett, 100%

8. The ranch was owned by Mom and Dad free and clear - no mortgage.

Questions:

1. Who owns the ranch and why?

2. Can Scarlett sign for the sale of the ranch?

Our experience in Travis County, Texas:

Scarlett will hire a realtor to sell the land. The realtor will find a buyer for the land.

The problem comes up at closing. The vast majority of buyers borrow money to buy land. A typical part of a mortgage application is for the bank to hire a title company to run a title check on the land to ensure Scarlett has signing authority for the land.

The title company will check the Travis County deed records and see that the most recent deed for the ranch shows Mom and Dad as the owners of the land.

Title company: "I see the land is in the name of Mom and Dad. You're not Mom and Dad. Where are they? Why do you have authority to sign for them?"

Scarlett will show Mom and Dad's Wills and death certificates to the title company.

I will bet you dollars to donuts that the title company will NOT accept Mom and Dad's Wills as proof that Mom and Dad's ownership of the ranch passed to Scarlett.

Reasons:

1. From the title company's point of view, Scarlett is just a stranger off the street,

2. The title company works for the mortgage company and buyer, not Scarlett, the seller,

3. If the Wills for Mom and Dad are fakes (think fancy modern color printers and convincing signature forgeries), the title company is potentially on the hook for the FULL VALUE of the ranch.
   

Most title companies will not stick their neck out for Scarlett in this case because the potential downside of owing the full value of the ranch is enormous compared to the typical title insurance fee of a few thousand dollars.

The typical title company will conclude:

1. The house is owned 50% in Dad's estate

2. The house is owned 50% in Mom's estate

3. Reason - the default rule in Texas is that property acquired during marriage is the community property of the spouses; in our case 50% Dad, 50% Mom.

How can Scarlett get the title company to accept Mom and Dad's Wills as valid so she can get signing authority for the ranch?

The title company will likely ask that you get a judge to sign a court order declaring Mom and Dad's Wills valid to transfer Mom and Dad's interest in the house to Scarlett.

This is the probate process - getting a court to declare a Will is valid and appointing an Executor (e.g., Scarlett) with signing authority to carry out the instructions in the Will.

The title company (may) also accept Affidavits of Heirship to transfer ownership of the house out of Mom and Dad's name to Scarlett. However, Affidavits of Heirship are a whole other can of worms and call for their own separate blog post!

Wait, doesn't community property automatically pass to the surviving spouse? Doesn't Dad's 50% community property interest in the house automatically pass to Mom when he died?

We have heard this several times from clients. In the context of real estate it is a half truth. Remember what we said about exceptions to the general rule at the top of the blog post?!

Example: under the Texas Estates Code, if Dad died WITHOUT a Will, was married to Mom when he died, and his only children were ALSO children of Mom, then under the default distribution rules his community property interest in the house is due to pass to Mom.

HOWEVER. Notice how many conditions that involves. First, look at how many conditions have to be true for Dad's interest in the house to flow to Mom, not to mention that you have to PROVE those conditions are true with a judge's signed order (Determination of Heirship) or Affidavits of Heirship.

Second, there are a LOT of situations where Dad's interest in the house does NOT pass to Mom including but not limited to his half of the house being separate property or where Dad has his own children from a prior marriage.

Can I Transfer Dad's Half of the House to Mom By Filing a Death Certification with the Travis County Appraisal District (TCAD)?

The death certification is a Travis County Appraisal District record for property tax purposes. As a courtesy they will list the ranch under the surviving spouse's sole name and send property tax bills as directed by the surviving spouse.

The death certification is NOT a valid deed executed by Dad's duly appointed Executor and is not effective to transfer ownership of real estate.

Can Scarlett Use Mom and Dad's Property Power of Attorney to Sign for the Ranch?

No. The Texas property power of attorney (also called a Statutory Durable Power of Attorney) ceases to be effective once Mom and Dad die.

The Texas Estates Code's statutory form includes: "An event that terminates this power of attorney or your authority to act under this power of attorney includes: (1) the principal's death."

Chris, This is More Involved Than I Expected.

Please don't shoot the messenger! I promise I'm trying to be helpful.

Is There a Way To Avoid These Probate Problems?

While Mom and Dad are alive you can typically prevent necessity of the probate court process with tools such as (a) Living Trusts and (b) Transfer on Death deeds. However, those are big topics that call for their own blog posts.

What To Expect Next?

We hope this has been helpful! If you need help with probate, wills, or estate planning please don't hesitate to call or email our office!