Survivorship accounts: Holmes v. Beatty expressly overturned

(This is one of a series of posts about 2011 legislation.)

Holmes v. Beatty, 290 S.W.3d 852 (Tex. 2009), caused shockwaves in the probate and estate planning community for two reasons:

• First, and most importantly, the Supreme Court relaxed the standards for creating rights of survivorship with respect to community property, holding that a "joint tenancy" or " JT TEN" designation on an account is sufficient to create rights of survivorship in community property under Section 452 of the Texas Probate Code.
• Second, the Supreme Court held that stock certificates issued from a community property with right of survivorship brokerage account continue to be survivorship property even though the the certificates themselves do not meet the requirements for survivorship agreements.

SB 1198 overturns Holmes on the first of these points.  It adds this sentence to Section 452: "A survivorship agreement will not be inferred from the mere fact that the account is a joint account or that the account is designated JT TEN, Joint Tenancy, joint, or other similar abbreviation." Parallel language is added to Section 439, which governs non-community property multi-party accounts. SB 1198 specifically states that the bill is intended to overturn the ruling of the Texas Supreme Court in Holmes v. Beatty.

These changes were intended to bring Section 452 – regarding community property with right of survivorship accounts – in line with Section 439 and the principles established by the Texas Supreme Court in Stauffer v. Henderson,801 S.W.2d 858 (Tex. 1990). Those principles apply to community property with right of survivorship accounts notwithstanding the slight differences in language between Sections 439 and 452.

The bill is silent on the other significant holding in Holmes, so stock certificates issued out of community property with right of survivorship accounts may continue to be survivorship property, at least to the extent described in Holmes.

Sections affected:  Probate Code Sections 439 and 452.

Will unsworn declarations invade probate practice?

(This is one of a series of posts about 2011 legislation.)

Because of HB 3674, which flew under the radar in 2011, arguably it is no longer necessary to have a notary in most cases were a sworn statement or affidavit is made.  The statute amends Section 132.001 of the Civil Practice and Remedies Code – which previously only dealt with unsworn statements by inmates – to provide that an “unsworn declaration may be used in lieu of a written sworn declaration, verification, certification, oath, or affidavit required by statute or required by a rule, order, or requirement adopted by law.”  The unsworn declaration must be in writing and subscribed by the person making the declaration as true under penalty of perjury.  A specifc form of non-notarized jurat must be used.  There are exceptions for an oath of office or an oath required to be taken before a specified official other than a notary public. The bill becomes effective September 1, 2011, and applies to unsworn declarations made on or after that date.

Is a will containing an unsworn declaration self-proved as required by Section 59 of the Probate Code?  Probably not.  For one thing, the testator and each witness would have to make an unsworn declaration, not just the testator.  For another, a court is likely to find that the use of an unsworn declaration is not “in form and contents substantially” as required by Section 59.  Also, since the consequences of a court’s refusal to accept an unsworn declaration on a will is that it is not self-proved (rather than that it is not entitled to probate), it is hard to imagine anyone appealing a decision of a court refusing to accept it.

Sworn statements are permitted or required at least 70 times in the decedents’ estates portion of the Probate Code.  (The author grew tired of counting before getting to guardianships.)  With some of these statutes, it may be appropriate to permit someone to make an unsworn declaration under penalty of perjury rather than a notarized statement.  In others, it clearly is a bad idea.

Time will tell if probate judges will permit the use of these declarations.  In the meantime, the simple, worry-free answer for a probate practitioner is to use notarized sworn statements and affidavits.

New will-signing procedure: the testator and witnesses need sign only once

(This is one of a series of posts about 2011 legislation.)

Under prior law, in order to make a will self-proved, the testator and each witness had to sign the will twice – once on the will itself and once on the self-proving affidavit.  SB 1198 amends Section 59 of the Texas Probate Code to permit combining the execution of the will with the signing of the self-proving affidavit so that the testator and witnesses only have to sign once.  The statute includes the appropriate language to include in the will if the one-signature method is desired.

The one-signature method is optional.  Testators still may use the two-signature method.

The change to Section 59 corresponds with changes to Sections 677A and 679 made in 2009 which adopted a one-signature method for declarations of guardian.  Other changes in 2009 made it possible to use a notary public in lieu of witnesses on medical powers of attorney and on directives to physicians and family or surrogates.  As a result of the 2009 and 2011 changes, attorneys may greatly streamline the document signing ceremony:

• The statutory durable power of attorney, medical power of attorney and directive to physicians or family and surrogates may be executed before a notary public, and no witnesses are required.
• The will, the declaration of guardian for minor children and the declaration of guardian in the event of later incapacity require two witnesses, but the testator/declarant and the witnesses need sign only once.

The new will-signing method becomes available on September 1, 2011.

Probate inventory may be kept private

This is one of a series of posts about 2011 legislation.

The 2011 legislative change that is likely to have the biggest impact on Texas probate lawyers is SB 1198’s amendment to Section 250 of the Probate Code permitting independent executors to file an affidavit in lieu of an inventory, appraisement and list of claims if there are no unpaid debts, except for secured debts, taxes and administration expenses, at the time the inventory is due.  The public disclosure of information in the inventory is unpopular with clients and drives some Texans to use a living trust-based plan when a will otherwise would suffice.

Here are the particulars of the change:

• Only independent executors and independent administrators are permitted to file an affidavit in lieu of an inventory. Dependent administrators must file a public inventory.
• The affidavit may be used if there are no unpaid estate debts, other than secured debts, taxes and administration expenses, at the time the inventory is due.  If the independent executor can pay all unsecured debts between the date he or she qualifies and the due date of the inventory, the independent executor can avoid the public disclosure of inventory information.
• The change does not mean that it no longer is necessary to prepare an inventory.  The independent executor still must prepare a verified, full and detailed inventory and deliver it to each estate beneficiary.
• Any person interested in the estate – specifically including a possible heir of the decedent or a beneficiary named in a prior will – is entitled to receive a copy of the inventory on request.  The independent executor is protected from liability to the estate or its beneficiaries if he or she provides a copy of the inventory to a person the independent executor believes in good faith “may be” a person interested in the estate.  If the independent executor refuses to give a person a copy of the inventory, he or she may apply to the court to compel the independent executor to do so.

The change to Section 250 necessitates changes to a number of related sections. An independent executor may be removed if he or she fails to file an inventory or the affidavit in lieu of an inventory (Section 149C).  Successor independent executors also may file an affidavit in lieu of an inventory (Section 227). If additional property or claims are discovered, the independent executor either must file a supplemental inventory or a supplemental affidavit in lieu of an inventory (Section 256). The setting apart of exempt property (Section 271), the setting of the family allowance (Section 286) and the sale of property to raise funds for the family allowance (Section 293) are tied to the filing of the inventory or an affidavit in lieu of an inventory.

While Section 250 permits the independent executor to choose to file an inventory or an affidavit in lieu of an inventory, beneficiaries may believe that the independent executor has breached his or her duties if (a) he or she fails to use the affidavit in lieu of an inventory if the estate is eligible to do so and (b) he or she fails to quickly pay the decedent’s unsecured debts (if it is possible to do so) in order to make the estate eligible for the affidavit in lieu of inventory. It may be hard for the independent executor to justify making an unnecessary public disclosure of asset information.

This change should make will-based plans more popular.  Clients still may wish to use living trusts for other reasons (out-of-state real property, disability planning or fear of a will contest, for example), but they may not have to forego a will-based plan merely to avoid a public disclosure of information.

An affidavit in lieu of an inventory may be used for the estates of decedents dying on or after September 1, 2011.  For persons who died before September 1, 2011, an inventory must be filed, even if the inventory is filed after September 1, 2011.

Significant changes to Section 128A notices to beneficiaries

This is one of a series of posts about 2011 legislation.

The 2007 amendment to Probate Code Section 128A caused much grumbling among probate lawyers.  It required the personal representative of a testate decedent to send certified mail notices to (or obtain waivers from) all beneficiaries named in the will.  The 2007 changes were a rush job to address concerns expressed in the Legislature over a sensational case in Travis County in which an independent executor was accused of misappropriating estate funds without ever telling the estate beneficiaries that he was the executor and that they had an interest in the estate.  Because it was a rush job, 2007’s Section 128A was rough around the edges and went further than has proven to be necessary.

SB 1198 amends Section 128A to make the rules about notices to beneficiaries much easier to meet.  Here are the key changes:

• The notice does not have to be given to a beneficiary who is receiving $2,000 or less worth of property or who has received all gifts to which he or she is entitled within 60 days of the order admitting the will to probate.
• The notice or waiver need not include a copy of the will and the order admitting it to probate if it includes a written summary of the gifts to the beneficiary under the will, the court in which the will was admitted to probate, the docket number assigned to the estate, the date the will was admitted to probate and, if different, the date the court appointed the personal representative.
• The personal representative does not need to notify a beneficiary of a trust whose right to receive income distributions is at the sole discretion of the trustee if the trustee has given the notice to an ancestor of the beneficiary and there is no apparent conflict of interest between the ancestor and the beneficiary.  This change may offer some help in the case of trusts permitting distributions to all of a person’s descendants, but it will not help if the distribution standard is based on the health, education, maintenance and support needs of the beneficiary, since this is not a wholly discretionary standard.

SB 1198 clarifies that notices are not required if the will is probated as a muniment of title and that notices are not required to a person whose interest arises on the occurrence of a contingency which has not occurred.

The changes made by SB 1198 apply to the estate of a decedent dying on or after September 1, 2011.  The old law must be followed for persons dying before that date.