Texas Bar Journal • January 2024

Navigating the Minefield of Administration With a Surviving Spouse

A look at some of the hotspots in the process.

Written by Elizabeth Brenner

What do you get when you combine the accumulation of a lifetime of overlapping debts, expenses, and property, complicated family dynamics, legal complexities that normally arise in the context of divorce, and a grieving family? An estate administration marked with potential landmines for the personal representative. In addition to understanding the Texas Estates Code, an attorney must grasp portions of the Texas Family Code that address property characterization, reimbursement claims, and marital liabilities.

If the surviving spouse is the only devisee, the administration can be fairly straightforward; however, complications arise in administrations with devisees in addition to the surviving spouse. This article outlines various potential landmines in an estate administration with a surviving spouse and other heirs or beneficiaries.

TAKING POSSESSION OF ESTATE PROPERTY: DIVISION OF AUTHORITY BETWEEN SURVIVING SPOUSE AND PERSONAL REPRESENTATIVE
The surviving spouse may choose to retain control over management of certain estate property. Because it is not property of the estate, the surviving spouse has authority and control over his separate property. The surviving spouse also has authority over his sole management community property.¹ The sole management community property consists of property the surviving spouse would own if single, including his personal earnings, revenue from separate property, and recoveries from personal injuries.² If the surviving spouse retains possession of community property, he must deliver any other devisees’ interest upon partition of the community estate.³ Prior to delivering the property, he may deduct expenses and a reasonable commission for managing the property.⁴

A COMPLETE AND ACCURATE INVENTORY
The personal representative of the estate has the responsibility to prepare an accurate estate inventory which, among other things, classifies each item as separate or community property.⁵ In an intestate estate with a surviving spouse and other heirs, characterization impacts who will receive the property and how much the individual will receive;⁶ it can also impact from where claims are paid, including reimbursement claims of the surviving spouse and requested allowances. Thus, it is important to ensure that the personal representative prepares a complete inventory that correctly defines the character of property.

The personal representative should independently investigate the assets of the estate and the community or separate property character of each item on the inventory rather than deferring to information from a distributee, which can be self-serving. A few items to check when reviewing the inventory:

First, ensure the inventory includes community property of the estate in the possession of the surviving spouse. While the surviving spouse may retain possession of some community property, it nonetheless is part of the deceased spouse’s estate and, therefore, should be on the inventory. Reviewing past tax returns is a convenient way to ensure assets in possession of the surviving spouse are included in the estate inventory.

Second, does the inventory properly characterize estate assets? If the personal representative mischaracterizes property in the inventory, request that she amend the inventory and, if necessary, file an objection to the inventory.

Chapter 3 of the Texas Family Code addresses rights to marital property. Below are a few concepts related to property characterization issues that may arise in the administration context.

• All property is presumed community.⁷ Separate property is determined at the date of original acquisition of the property;⁸

• Just because an asset is in the name of one spouse does not make it his separate property. Texas follows the inception of title rule, so the manner in which title to property is held does not define the character of property^.9

• It is common for spouses to refinance property acquired by one spouse before the marriage—i.e. separate property—during the marriage. The refinance does not convert the property from separate to community. Mutations in the property do not change its character.¹⁰

• To change the character of the property from separate to community, the couple must follow the requirements under the Texas Family Code 4.203 while both spouses are living.¹¹ Accordingly, the couple must in writing and signed by the spouses identify the property being converted and specify the intention to convert the property to community property.¹²

EXEMPTIONS AND SET-ASIDES: BENEFITS FOR THE SURVIVING SPOUSE IN ESTATE ADMINISTRATION
The Texas Estates Code itemizes a robust set of benefits for the surviving spouse and other family members such as incapacitated children and minors. These benefits include each of the following:

• Exclusive use of the homestead by the surviving spouse for his or her lifetime and minor children, regardless of whether the homestead was the community or the separate property of the deceased spouse;¹³

• A family allowance for the surviving spouse, minor children, and incapacitated adult children in an amount necessary for maintenance for one year after decedent’s death. The personal representative must prioritize the family allowance before all claims but those related to funeral expenses and last illness;¹⁴ and

• The right to use of certain personal property¹⁵ during the course of the estate administration by minor children, the surviving spouse, incapacitated adult children, and certain unmarried adult children “remaining” with deceased spouse’s family.¹⁶

In addition, if any personal property that can be set apart for use of the surviving spouse is not part of the estate or if the estate does not have a homestead, the surviving spouse may be eligible for an allowance paid from the estate of up to $45,000 for the homestead and up to $30,000 for other exempt property.¹⁷

The benefits itemized under Chapter 353 can prove quite useful to a surviving spouse in offsetting a disinheritance or a nominal bequest. At the same time, if granted, the benefits can substantially diminish gifts intended for other beneficiaries.

DEBTS AND CLAIMS
The personal representative has the duty to determine the estate’s and surviving spouse’s responsibility for the debt of both spouses. This responsibility can largely be determined by referencing Texas Family Code 3.201 and 3.202. Effective September 1, 2023, the Texas Legislature clarified the decedent’s estate’s responsibility for the debts of the surviving spouse.¹⁸ Accordingly, the debts of the surviving spouse could be subject to payment from the following portions of the decedent’s estate: community property that was the surviving spouse’s sole management, property under joint management of both the decedent and survivor, the surviving spouse’s one-half interest in the decedent’s sole management community property.¹⁹

Funeral expenses must be charged to the decedent’s estate, not the community share of the surviving spouse.²⁰

A surviving spouse may be entitled to one or more reimbursement claims through the course of the administration. These claims include reimbursement to separate or the community marital estate for the use of funds to benefit another marital estate while the deceased spouse was alive. Reimbursement claims are covered under Chapter 3 of the Family Code.

PROTECTING THE SURVIVING SPOUSE’S COMMUNITY PROPERTY INTEREST
It is common for a spouse to leave his assets to children or other beneficiaries apart from the surviving spouse, including beneficiary designated assets such as an insurance policy or retirement benefit. If the gift encroaches on the surviving spouse ’s one-half interest in community property, it can give rise to a fraud on the community claim by the surviving spouse against the estate of the deceased spouse.

Spouses have a fiduciary duty to each other.²¹ A presumption of constructive fraud arises when a spouse disposes of the other spouse’s one-half interest in community property without the other spouse’s knowledge or consent.²² The decedent’s estate then has the burden to show the gift was fair to the surviving spouse. A fairness determination considers the following factors: 1) the size of the gift in relation to the total community estate; 2) the adequacy of the estate remaining to support the surviving spouse; 3) the relationship of the donor to the donee; and 4) whether special circumstances existed to justify the gift.²³ In circumstances in which the decedent’s estate does not have adequate resources to compensate the surviving spouse, the surviving spouse can seek recovery from the recipient of the gift.²⁴

This article covers a handful of hotspots in an administration process with a surviving spouse. Properly navigating these issues requires an adept knowledge of the relevant portions of the Texas Family Code and the Texas Estates Code.

ELIZABETH BRENNER is an attorney with Burns Anderson Jury & Brenner in Austin, where she practices probate and trust litigation, probate administration, and guardianship. She began her career in public interest work.