Will Substitutes

Will Substitutes

Nonprobate substitutes for a will that include life insurance, POD bank accounts, TOD securities accounts, pension and retirement accounts, and revocable inter vivos trusts

Term Life Insurance

Contract that obligates the insurance company to pay the named beneficiary if the insured dies within the policy’s term; less expensive than permanent insurance because no saving feature or cash surrender value. Passes outside of probate as the contract has beneficiary designation.

Whole Life Insurance

Contract that obligates the insurance company to pay the named beneficiary when the insured dies; policy eventually becomes paid up/endowed, after which no further premiums are owed. Passes outside of probate as the contract has beneficiary designation.

Have courts applied will subsidiary laws to will substitutes?

Courts have declined to pull them in completely, but some will look to them for guidance. Courts typically look at statutes to see if they apply.

Defined Benefit Plan

A type of retirement plan that is also known as a pension. DB plan is paid in the form of an annuity or joint & survivor annuity that provides a specified monthly benefit at retirement based on factors such as salary and years of service. ERISA also preempts state laws for statutes related to retirement plans.

Defined Contribution Plan

A type of retirement plan, usually 401(k), where the “back end” benefits are not fixed and are based on the contributions an employer and employee contribute to the plan. Upon retirement, the individual/employee has a right to control the funds and distributions. Remainder passes outside of probate to designed beneficiaries. DC plans are favored by private employers.

IRA

Similar to DC plan but subject to contract between the account holder and custodial institution. Common among self-employed individuals. Remainder passes outside of probate to designated beneficiaries. IRAs are common, include rollover from other plans.

Does Texas Recognize POD?

Yes

Does Texas recognize TOD?

Yes

Lady Bird Deed

It is an enhanced TOD deed that expressly preserves the right of the grantor to convey it and create other interests without the consent of the transfer beneficiary

UPC 6-101 (1990, rev. 1998) Nonprobate TOD

A provision for a nonprobate transfer on death in an insurance policy, contract of employment, bond, mortgage, promissory note, certificated or uncertificated security, account agreement, custodial agreement, deposit agreement, compensation plan, pension plan, individual retirement plan, employee benefit plan, trust, conveyance, deed of gift, marital property agreement, or other written instrument of a similar nature is nontestamentary…