Glossary of Terms:

This list may never be complete. Hopefully, it will make my use of legal jargon more understandable whether on this website or in consultation with me.

Ad Valorem Taxation.  Ad valorem is Latin for “according to value” and refers to property taxes. In Texas, non-business personal property (motor vehicles, furniture, etc.) is not taxed, only real property, as assessed by the applicable appraisal district where the property is located, e.g. Harris County Appraisal District  (HCAD), and Galveston County Appraisal District (GCAD). Each has a website where information is available and is searchable. The assessed value and exemptions are determined as of January 1st and does not change during the calendar year, even if ownership changes or improvements are made altered or removed. For example, if a lot is vacant (unimproved) on January 1st and is valued at $10,000, and if it was possible, and for sake of emphasis, a house was built on the lot on January 2nd, increasing the property value to $150,000 the assessment for tax purposes would remain $10,000 until January 1st of the next year. Exemptions available to individuals that my be claimed to reduce taxes include homestead, disability and age 65 or older. If one spouse qualifies for the over 65 exemption and dies and if the surviving spouse is at least 55, the exemption continues.

Ancillary Documents.  Also called “advanced directives,” the term is used to describe estate planning documents which are ancillary to planning by Will or Trust. They include Texas Statutory Durable Power of Attorney (for financial matters), Medical Power of Attorney, HIPAA Release and Authorization, Directive to Physicians and Family or Surrogates, Declaration of Guardian in the Event of Later Incapacity or Need of a Guardian, Appointment of an Agent to Control Disposition of Remains, and Do Not Resuscitate (DNR) orders.

Cohabitation & Common Law Marriage.  Very few states recognize common law (informal) marriage and Texas is one. A common law marriage is created either by (a) filing an affidavit with the county clerk declaring the marriage and (b) when the following elements come together:  (1) there is an agreement (a writing is not required) between the parties to be presently married; (2) the parties hold themselves out (represent) as spouses; and (3) they are living together in Texas when the first two elements exist. There is no common law divorce! It is important that persons cohabiting clarify their situation and protect their rights. The extensive Texas Family Code, which protects the rights of married persons, does not apply to unmarried persons. A Cohabitation Agreement should be considered at the outset to declare no intent to be currently married, to identify the property of each person, the responsibilities of each for expenses and what happens if the relationship terminates.

Community Property is all property acquired by a married person during marriage except by gift or inheritance. Property brought into the marriage is separate property. Texas is one of only a few states that use the community property system, which is derived from Spanish law. Most states use the “common law” system. The legal presumption in Texas is that all property belonging to a married person is community. The burden of proof is on the person wanting to establish an item of property is separate property. Classification of property as community or separate is determined when the property is acquired. This is called the “inception of title doctrine”. Proper classification may be important in dissolution of marriage by divorce, in determining the rightful heir, for management rights and for liability for debts. Community property may be converted to separate property and separate property may be converted to community property by written agreement between the spouses.

Cyberproperty.  See Digital Property.

Declaration of Guardian in the Event of Incapacity or Need of a Guardian.  There are two types of guardians, one for the person and one for the person’s estate. This document applies only to adults, unlike  designation of guardian for a minor. By statute, there is a list of those persons who may be appointed (by a court) to serve as your guardian. In order of priority, they are a spouse, an adult child, and then other relatives. Co-guardians may only be appointed if they are married to each other. Also, an institutional guardian may be appointed. Appointment and Designation are not the same. You may designate a person to serve as your guardian if one becomes necessary, but only a proper court may appoint a guardian, and only if such appointment is satisfactorily proven to be necessary. The court must honor your choice in the Declaration of Guardian unless proven to be a choice not in your best interest.

Deeds (types). A deed is the title to land and there are several types including, General Warranty Deed, General Warranty Deed With Vendor’s Lien, Special Warranty Deed, Gift Deed, Deed with Retained Life Estate, and Deed of Life Estate, which are the most common. A deed is the owner’s title document, similar to a motor vehicle certificate of title. However, unlike a car title which must be transferred to the next owner, a new deed is required for each change of ownership. There are exceptions for transfers by court order, e.g. probate of a Will. Further, a deed should be filed for record in the County Clerk’s Office of the county where the land is located. If so recorded, the original is no longer needed except for information because a certified copy of the recorded deed may be obtained if needed. A so-called Quitclaim Deed (not really a deed, but a release of claim) is a document used to “quit” a possible owner’s (perhaps an heir) interest in the property.

Deed of Trust.  This document is often confused with a title deed (see above), but is not a title document. It is the term used to describe the typical mortgage loan document in Texas. Its primary purpose is to allow the secured lender to foreclose at auction the lien if the terms of the loan are not satisfied. A lien is a claim or charge against a debtor’s property to secure a debt.

Digital Property.  Property such as passwords, accounts on the Internet, twitter, facebook, etc.

Directive to Physicians & Family or Surrogates.  Affectionately called the “pull the plug” document, it declares your directions regarding the use of life support procedures under two statutorily defined, but different, conditions. You may state whether you want life support to be withheld or not to be withheld.

Easement.  An easement is the right of a person to use the real property of another for a specified purpose, e.g. right-of-way for ingress and egress (going in or out), utility installation and maintenance, etc. In a residential subdivision, it is common for there to be an underground (and sometimes an overhead) easement along the rear property line. The land owner maintains ownership of the surface subject to the rights of the easement holder and may use the surface in any manner as long as that use does not interfere with the easement rights.

Encroachment.  An encroachment exists when the surface owner places a surface improvement or in some manner uses the land of a neighbor or an easement, e.g. fence, building slab or driveway, swimming pool apron, etc.

Estate, Gift & Generation Skipping Transfer Taxes.  These are all taxes assessed by federal law and collected by the Internal Revenue Service. Texas does not assess or collect these types of taxes.

Estate Tax — A tax assessed when property is transferred by reason of the owner’s death (the decedent’s estate) in excess of the allowed exemption. All property passing from a deceased spouse to a surviving spouse is exempt from estate tax. The same is true for gifts to charities. Other transfers are taxed if the total exceeds $5,250,000. This is the current (2013) exemption and is indexed annually for inflation. The current estate tax rate is 45%.

Gift Tax — Gifts (any transfer of property without receiving compensation (consideration) equal to the fair market value of the property being transferred in an amount of $14,000 (current 2013, and indexed for inflation in increments of $1,000) to any one person in a single calendar year are not taxable and do not have to be reported to the IRS. You may make as many of these gifts in calendar year you desire without limit as long as each gift is to a different person. For example, in year 2013, you may give your daughter a gift of $14,000 (or multiple gifts not exceeding that amount), or you may give your daughter and her husband each $14,000 (a total of $28,000) without incurring a gift tax or having to report the gifts to the IRS. If a gift (or total gifts) made in any one year to any one person exceeds the exempt amount, a federal gift tax return must be filed with the IRS by April 15th of the following year to report the excess amount. Payment of the gift tax is the responsibility of the donor (giver) and not the recipient.

Generation Skipping Transfer (“GST”) Tax — If you transfer property to a person who is a member of a generation two or more generations younger than you, e.g. a grandchild, a great-grandchild, etc., that gift is defined in the Internal Revenue Code as a “skip transfer” and is subject to a GST tax. Further, an unrelated person who is 37 ½ years or more younger than you is defined as a “skip person”. Such transfers are also skip transfers and are subject to the GST tax.

Eviction is the process of involuntarily removing a person (a tenant) whose right to posses a property  has terminated. Jurisdiction of eviction suites lies only in the Justice Court in the Precinct in which the property is located. The rules of procedure provide that either party (landlord or tenant) may represent themselves and an attorney is not required. However, be mindful that the monetary jurisdictional limit of the Justice Court (amount that may be awarded to the winner) is $10,000.

Executor/Administrator.  An executor is a person, either natural (human) or corporate (a bank or trust company) appointed under the terms of a probated Will to represent and to settle a decedent’s estate. An administrator is a person who has been appointed by a court to administer (settle) a decedent’s estate when there is either no Will or no qualified person designated in a probated Will to serve as executor. Another term used to describe an executor or administrator of a decedent’s estate is personal representative.

Exempt Property is property that may not be taken from a debtor by a creditor to satisfy (pay) a lawful debt. The list of exempt property in Texas is very generous and includes the homestead, specified personal property, life insurance (both the cash value and the proceeds payable on death), annuities, IRAs, Roth IRAs 401ks, etc.

Foreclosure.  Foreclosure is a legal process (either under court order, a judicial foreclosure, or by a power of sale granted by the terms of a contract or other document, e.g. Mechanic’s and Materialman’s Lien Contract or a Deed of Trust or by reason of a default in payment of ad valorem taxes. In Texas, foreclosure sales (auctions) are held only on the first Tuesday of each month, even if that day is a legal holiday, e.g. July 4th. The place of sale is determined and published by the County Commissioners and must be accurately stated in the Notice of Foreclosure which must be sent to the debtor via U. S. Mail, Certified or Registered, not less than 21 days prior to the sale date.  Sales are conducted between the hours of 10 a.m. and 4 p.m. and a three-hour period during which the specific sale will be conducted must be stated in the notice.

HIPAA is the acronym for the 1996 Federal Health Insurance Portability and Accountability Act. The act does not permit access to or releasing of your medical information without your consent and authorization. This means that if your medical agent is called upon to make a decision on your behalf, that agent may not be able to obtain enough information about your medical condition and prescribed or needed treatment to make a decision. For may years, Texas chose not to enforce HIPAA and many who have an older Medical Power of Attorney have not given a HIPAA release and authorization. Check your documents to determine if you need one.

Home Equity Loan.  The rules for making home equity loans are found in the Texas Constitution and Property Code. The rules are quite extensive and protective of the borrower. This type of loan is borrowing against the equity value of the homestead previously prohibited except for very limited reasons, e.g. purchase money, home improvements, etc.

Homestead.  Texas has the most liberal laws protecting the family homestead. The law is stated both in the Texas Constitution and in the Texas Property Code. There are two kinds of homestead: rural and urban. You can have one, but not both and only one in Texas. The rural homestead can consist of up to 200 acres (tracts do not have to be contiguous) for a family or 100 acres for single person. The urban homestead for either a family or a single person may contain up to 10 acres of contiguous land. The place of dwelling of the homestead claimant must be located on the property. The urban homestead may also be a place for conducting the business of the claimant. There is no value limit on a Texas homestead. The maximum size of an urban homestead for exemption regarding ad valorem taxation is 20 acres.

Independent Executor, Administrator, Personal Representative.  An “independent” executor, administrator, personal representative is one who is authorized (after appointment and qualification) to settle the decedent’s estate (pay debts, claims, taxes, & administration expenses) and to distribute the remaining property to the rightful owners (heirs, beneficiaries, distributees), without (or with minimal) oversight, control, or approval of a court. Dependent means the opposite.

Landlord – Tenant Law.  This is the law (both common law and statutory) which determines the rights and responsibilities of landlords and tenants. Prior to the mid-1990s, most Texas law was derived from the English Common Law and was more protective of the rights of the landlord than of the tenant. Then the Texas Legislature began to change the Texas Property Code to make it more even-handed, but did not stop there. It is now most protective of the tenant. Let the landlord beware!

Life Estate.  A life estate (legal life estate or estate for life) is a type of real property ownership, the length of which terminates upon a designated person’s death. The owner of the life estate owns the property (and its use and control) until death or until another designated person’s death. Often used to avoid probate when the last parent dies, the parent grants or conveys a property (perhaps the parent’s home) to a child (or children), but retains a life estate (use until the parent’s death). At parent’s or other designated person’s death, the subject property belongs to the child without any requirement other than proof of the parent’s death by Death Certificate. There are too many variations of the use of life estates to present here.

Medical Power of Attorney.  If, and only if, you become unable to make medical care decisions for your self, this document designates one or more persons (either successively, jointly, severally, or whomever is readily available) to make those decisions for you. [See HIPAA above.]

Minors, contracts by.  Is a contract entered into by a minor enforceable? It depends. If the contract  is for food, clothing, shelter, or medical services, it probably is. In any event, it is not void and may be ratified by the maker upon attaining the age of majority (18). Further, the disabilities of minority may be removed upon petition to and an order by a proper court.

Multi-party Accounts.  A Texas statute authorizes for several types of multi-party accounts including: joint, joint with right of survivorship (JTWROS), convenience, pay-on-death (POD) and transfer-on-death (TOD). Often, spouses have an account in both of their names and either is authorized to make withdrawals without the consent of the other. Upon the death, the survivor becomes sole owner of the account without probate or delay except the time it takes to obtain a Death Certificate to present to the financial institution. Pay-on-Death and Transfer-on-Death are contractual provisions similar to designating a beneficiary of a life insurance policy. A “convenience signer” is one who has no ownership in the account, but is authorized to make withdrawals. Not all banks allow this type of account and prefer, instead, the use of a special or limited power of attorney created by use of their proprietary form.

Personal Property.  This is all property not land or attached improvements.

Premarital Agreement.  It is often advisable for persons about to be married to enter into an agreement regarding the property aspects of their intended marriage. Such agreements are called premarital agreements, prenuptial agreements or prenupts. In addition to identifying property owned by each party and existing debt, there are important issues including the rights of a non-owner spouse in an existing home of the other spouse, and whether income earned during the marriage will be characterized as community property (the legal presumption) or as separate property of the earner. Such earnings include, wages, rent, interest, etc. If a premarital agreement has not been made, a post-marital agreement is possible.

Probate.  Derived from the Latin probatum, to prove, probate has several meanings, but in the context of a decedent’s estate, means the process of settling the estate, i.e. payment of debts and claims, identification of assets, heirs, beneficiaries, or distributees, and changing ownership of the decedent’s property. A Will is not effective (has not consequence) until two events occur: the maker of the Will dies and the Will has been sanctioned (probated) by a proper court. It is not always necessary to probate a Will. Under the right circumstances, a family settlement agreement and/or affidavits of heirship may suffice to establish resulting ownership of the descendent’s property. Deadline for probating a Will: Except under limited circumstances, a Will must be filed with the proper court for probate not later that four years from a person’s death. Lost Will: What if the decedent’s original (signed) Will cannot be found? A Will which cannot be produced in court (presumed “lost”) may be probated if the judge is satisfied concerning four issues: (1) a diligent search for the Will has been made; (2) why it cannot be found (A Will that cannot be found is not presumed lost but it is presumed that the maker revoked it by destruction.); (3) where and by whom it was last seen; and (4) its contents through the sworn testimony by a person who read the Will.

Property is all property, both real and personal.

Property Agreements are often useful when there is no premarital or cohabitation agreement and are used to identify the property of each spouse or cohabitant.

QTIP is an acronym for “Qualified Terminable Interest Property” under the Federal Tax Code regarding estate taxation and it refers to a special type of trust for a surviving spouse.

Qualified Income Trust (QIT). If a person otherwise qualified to receive Medicaid benefits, but for excessive income, may still qualify if a QIT (also called a “Miller Trust”) is established to receive the amount of income in excess of the qualifying amount.

Quitclaim.  See “Deeds” above.

Real Property, also called real estate, land and landed property, means land and all permanent improvements thereon.

Reverse Mortgage.  This is a type of loan controlled by the Texas Constitution and Texas Property Code, only available to a homeowner (or spouse) age 62 or older. The term “reverse means that the lender pays the borrower over time instead of vice versa for a typical loan. The loan is not repayable until the  borrower has died, transfers the property or has been absent from the property for longer than 12 consecutive months without prior written approval from the lender (This may include a move to a nursing home or to live with a relative).  The primary purpose of this type of loan is to allow an elderly homeowner to retain his or her home for use and also to obtain the built up equity value for his or her use. Coupled with the homeowner’s right to defer (not pay when assessed) the ad valorem taxes, great benefit is extended to an owner with limited income or other resources. Be very careful here and obtain advice from a knowledgeable attorney. The hype you hear on TV by celebrities is often either misleading or incomplete in this attorney’s opinion. “Government insured” only means that the government will step in to assure that the borrower receives the full amount of the loan if the lender fails. “No credit check required” is absurd because the borrower is not required to repay the loan in a timely manner. Consider that you are borrowing against an asset which will pass to someone at your death (children, maybe) and the debt will be attached. The amount you borrowed was not the full market value of your home, but if the lender is not paid, the home will be lost by foreclosure. While there is no personal liability of the recipient, they may lose the property for a debt less than value. Reverse mortgages may be beneficial and appropriate under the right circumstances, but only if the property owner fully understands the terms. Reverse mortgages were originally intended to pay the borrowed amount to the home owner in monthly installments, but some will pay the entire amount of the loan in one sum. What happens when the money is gone?

Self-proving Will.  A Will may be made “self-proving” in many states by adding a statutory affidavit executed by the maker and witnesses. In Texas, the affidavit must be executed during the lifetime of the maker and the witnesses. Unless contested, the witnesses to a self-proving Will are not required to testify at the probate hearing.

Special Needs Trust (SNT).  A Special Needs Trust is used to make a gift or bequest to a person who is receiving or where there is an expectation that they will eventually qualify and receive governmental benefits due to a disability. If the gifted or bequeathed property is put into a SNT, it may used to supplement the financial needs of the beneficiary without disqualify the beneficiary from those benefits.

Testate/Intestate.  A person who dies with a valid Will, dies testate. A person who dies without a valid Will, dies intestate.

Texas Statutory Durable Power of Attorney.  This is a document created under or incorporating by reference the provisions of the Texas Durable Power of Attorney Act and appointing one or more agents to act in the stead of the principal (maker). It may be a general power of attorney or a specific, special or limited power. A general power is broad and may include every act that the principal may do. A specific, special or limited power only authorizes the agent to do or take certain acts, e.g sell a car, a tract of land, etc. Durable means that the power of attorney will not be revoked by the principal’s disability or incapacity. A power of attorney may become effective either upon signing or upon the disability or incapacity of the principal, but is automatically revoked by the death of the principal.

Trust.  A trust is an entity or process whereby property is placed under the control and management  of a trustee for the benefit of one or more beneficiaries. There are many types of trusts, e.g. living or inter vivos (one created during the maker’s grantor’s, settlor’s, trustor’s lifetime); testamentary (one created under the terms of a probated Will); grantor (self-settled) (one where the maker and the beneficiary are the same); and others, specifically for minors or charities. A trust may be either revocable & amendable during the maker’s lifetime or irrevocable & non-amendable. There is also a type called Totten Trust which is simply created by designating your self as trustee for another person.  Example: Establishing a bank savings account for a child or grandchild under your name as trustee for grandchild’s name. The person or persons for whose benefit the trusts is created is call the beneficiary. Trusts may continue until the beneficiary’s death or until the beneficiary reaches a specified age, or attains a specified goal or milestone (college degree, etc.). Testamentary trusts allow the maker to continue control over assets beyond the grave and may continue for multiple generations. However, most states prohibit perpetual trust and have enacted a law called the Rule Against Perpetuities which specifies a termination date based upon the lives of the persons and descendants for whom the trust was created.

Types of Wills recognized in Texas: formal & holographic

A formal Will is one that is either printed or typed.

A holographic Will is one that is wholly in the handwriting (or printing) of the maker.

The execution (signing) of a formal Will must be witnessed by two qualified witnesses. No witnesses are required to make a holographic Will valid. There is no requirement that the signing of a either type of Will be acknowledged or sworn to a Notary Public.

TUTMA.  An acronym for the Texas Uniform Transfers to Minors Act, previously known as TUGMA (Texas Uniform Gifts to Minors Act). Both provide for the creation of a statutory custodianship of money or securities held by a custodian (similar to a trustee) for the benefit of another. A TUTMA account continues until the beneficiary reaches age 21 and a TUGMA account until the beneficiary reaches age 18. At the specified age, the custodianship terminates and the remaining account assets are distributed to the beneficiary. The account is easily established by invoking the statute, but the statutory provisions (such as the termination age) may not be modified.

Unified Credit.  The federal tax credit or exemption is “unified” meaning that you may use it to avoid tax on a transfer made at death, by lifetime gift and/or skip transfers. As you report such transfers made during your lifetime, the IRS subtracts the taxable amount for your unified credit. Then, after your death, the unused portion is available to exempt property from estate and GST taxes.

Verbal Agreements.  Get it in writing!! Verbal agreements are often disputed and difficult to prove. There was a time when a handshake was enough, but no longer with our mobile society where personal honor doesn’t mean s much. Some agreements are required by law to be in writing, e.g. a lease for a term longer than one year, a deed, etc. Partnership agreements and other contracts are often verbal, but the provisions are seldom remembered the same by all parties.

Will.  A Will (often called “Last Will and Testament”) is a document stating the maker’s desires and directions regarding the after-death settlement of his or her estate. Contrary to the use of the term living will to describe the Directive to Physicians and Family or Surrogates [see above] directing the use or withholding of life support, a Will is a “testamentary” statement that takes effect after the maker’s death while the Directive is a “living” document and terminates upon the maker’s death. The term “Will” is all that is necessary to describe the document. “Last” may only be meaningful until another Will is made. Will and Testament are archaic, derived from the English law, one disposing of landed property and the other disposing of personal property. In modern usage, Will and Testament are redundant and just using either is sufficient. Also, stating “being of sound and disposing mind and memory” is useless. Would you really know if your weren’t?

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