Ad litem fees and attorneys' fees in guardianships: who pays?

Who should pay attorney ad litem fees, guardian ad litem fees, the applicant's attorneys' fees and other costs when someone applies for the creation of a guardianship? Three bills now pending in the Texas Legislature take different approaches.

Jane Nelson, Author of SB 220Under Section 665A of the Texas Probate Code, the proposed ward's estate is charged with attorney ad litem fees, guardian ad litem fees and other costs -- whether or not the application for appointment of a guardian is successful -- unless his or her estate is insufficient to pay those fees and costs, in which case the county bears the expense. 

Under Section 665B, if a guardianship or management trust is created, the court may order that any applicant's attorneys' fees be paid from the ward's estate, or from the county treasury, if the court finds that the applicant acting in good faith and for just cause.

Is it fair that the ward's or the proposed ward's estate is required to pay the costs of the attorney ad litem or guardian ad litem? Are there times when another party should have to bear those expenses? Should the county treasury be stuck with ad litem fees and costs and the applicant's attorneys' fees if the proposed ward's estate is insufficient to pay them? 

Chris Harris, Author of SB 286SB 286 would add this sentence to Section 665A: "The court may allocate attorney's fees taxed as costs under this section among the parties as the court finds is fair and just." This bill, authored by Sen. Chris Harris (R-Arlington), would allow the judge to make another party pay the costs of attorneys ad litem, guardians ad litem, interpreters, etc., if it is "fair and just" to do so. Section 665B is amended to permit the applicant's attorneys' fees to be allocated among the parties to the guardianship proceeding "as the court finds is fair and just," so long as a guardianship or management trust is created. SB 286 also requires ad litem fees under Section 665A and the applicant's attorneys' fees under Section 665B to be set in an amount which is "fair and just."

SB 220 takes a similar approach.  This bill, authored by Sen. Jane Nelson (R-Flower Mound), amends Section 665A to permit the court to "allocate amounts taxed as costs under this section among the parties as the court finds is just and equitable." It provides that, if the proposed ward's estate is unable to pay "the costs allocated to the proposed ward," the county is responsible for those costs. SB 220 also amends Section 665B to permit the applicant's attorneys' fees to be "allocated as the court finds is just and equitable," so long as the court creates a guardianship or management trust. 

Surely if it is "fair and just" to allocate costs and fees to a party under SB 286, it also will be "just and equitable" to do so under SB 220. Perhaps the bills could be reconciled so that costs and fees are allocated if it is "fair, just and equitable" to do so.

Will Hartnett, Author of HB 1325HB 1325 gives the court less authority to charge others with ad litem fees. This bill, authored by Rep. Will Hartnett (R-Dallas), would add subsection (b) to Section 665A: "If the proposed ward's assets are insufficient to pay for the cost of an attorney ad litem appointed under this chapter, the court may order the applicant in the guardianship proceeding to pay that cost." A similar change to Section 669 would provide the same treatment for guardian ad litem fees.

HB 1325 would allow the court to relieve the county treasury of the obligation to pay an attorney ad litem or guardian ad litem if the proposed ward's estate was unable to bear that cost. It would not permit assessing these costs against the applicant or other parties if the proposed ward's estate is able to bear them. The authority of the court to assess costs and the applicant's attorney's fees in SB 220 and SB 286 does not depend on whether or not the proposed ward is unable to pay those costs and fees.

Some judges have wanted the power to assess costs and fees in guardianships against litigants whose conduct demonstrates that they should bear them. SB 220 and SB 286 give them that authority. HB 1325 does not.

REPTL bills would make changes to trusts, guardianships and powers of attorney

Rep. Will Hartnett (R-Dallas) filed three bills supported by the Real Estate, Probate and Trust Law Section of the State Bar of Texas Friday.

The most significant is HB 1858, which is a new Durable Power of Attorney Act for Texas.  It would replace the current statutory durable power of attorney form for a new form with a disclosure statement and places for the principal to specify if he wants the agent to be able to create, revoke amend trusts; make gifts; create or change rights of survivorship; create or change beneficiary designations; and waive the principal's right to be a beneficiary of a joint and survivor annuity.  Most of the changes are based on the new Uniform Power of Attorney Act adopted by the National Conference of Commissioners on Uniform State Laws in 2006.  It replaced the old Uniform Durable Power of Attorney Act upon which Texas's current power of attorney statutes are based.  The new act is more specific about the agent's duties and responsibilities.

Will Hartnett, Author of HB 1835, HB 1837 and HB 1858HB 1837 would make numerous changes to Texas's guardianship statutes, including replacing the current 5% of income, 5% of disbursements method of determining guardianship compensation with a "reasonable compensation" standard. It also would permit a person with a physical disability only eligible to apply for the creation of a guardianship management trust (867 Trust).

HB 1835 makes mostly minor and technical changes to the Texas Trust Code. One change of significance to persons handling estates of 2010 decedents is an extension of the 9-month deadline for disclaimers to match the one in the 2010 tax act.

Jose Rodriguez, Author of SB 1192, SB 1196, SB 1197 and SB 1198Another REPTL bill -- making changes affecting decedents' estates -- is expected but has not yet been filed.

Update: On March 2, 2011, Rep. Hartnett filed HB 2046, which is REPTL's decedent's estates bill. Sen. Jose Rodriquez (D-El Paso), filed identical REPTL bills in the Senate on March 4, 2011:

• SB 1192 -- REPTL power of attorney bill.
• SB 1196 -- REPTL guardianship bill.
• SB 1197 -- REPTL trust bill.
• SB 1198 -- REPTL decedents' estates bill.

Bill may codify "fraud on the community," at least in divorces

Rep. Senfronia Thompson (D-Houston) filed HB 908, which would add Section 7.009 to the Texas Family Code to define "fraud on the community" and require courts hearing suits for dissolution of a marriage to factor it into property divisions.  Even though it appears to apply only to suits for dissolution of a marriage, the bill interests probate lawyers because the concepts may bleed over into decedents' estates.

Senfronia Thompson, Author of HB 908Currently "fraud on the community" is an equitable concept developed in case law.  HB 908 defines fraud on the community to mean "improper conduct by a spouse to the detriment of the community estate."  It specifically includes a spouse "wrongfully conveying property out of the community estate," "wasting community funds or property" and "failing to provide an accounting of money transferred from the community estate."

This would broadly define the concept, at least as it applies in divorce cases. The bill provides that, before dividing the community estate in a divorce, the trier of fact must determine whether a spouse has committed fraud on the community.  It would appear to require this determination even if no one alleges fraud on the community.

If the trier of fact determines that a spouse has committed fraud on the community, the court is required to calculate the value by which the community estate was depleted as a result of the fraud on the community, determine the amount of the "reconstituted estate" (defined to mean the total amount of money that would have been in the community estate if the fraud on the community had not occurred), divide the value of the reconstituted estate between the parties, and award to the spouse that committed fraud on the community that portion of the estate that the spouse depleted. 

Chris Harris, Author of SB 817The bill says it applies to pending and future divorce cases.  However, the existence of the statute -- particularly the definition -- might influence fraud on the community claims in probate estates.

The bill has not yet been referred to committee.

Update:  Sen. Chris Harris (R-Arlington) has filed SB 817, which is the companion bill to HB 908.

 

Michael Jackson's estate is working its way out of debt

Although singer Michael Jackson was more than $400 million in debt when he died, his executors report that his estate has generated more than $310 million since his death and that they have used $159 million to pay down the debt, according to a story in The Christian Science Monitor.

The information comes from an accounting filed by executors John Branca and John McClain reporting transactions through December 31, 2010. The Monitor quotes from the accounting: "Although there remain unresolved creditor claims, pending litigation and additional challenging business, tax and legal issues, and the estate is not yet in a condition to be closed, the executors have made substantial progress in reducing the estate's debt."

To see the docket sheet for this complex probate proceeding, go to the probate court's web site, click on the "Case Summary" link in the left column, and then enter "BP117321" in the Case Number field. To see Michael Jackson's 5-page will, click here.

Steve Akers' Heckerling Musings (2011)

Steve AkersSteve Akers of Bessemer Trust has published his summary of discussions and presentations at the 45th Annual Philip E. Heckerling Institute on Estate Planning held in January 2011. It is hard to imagine anyone more qualified to report on such an event than Steve. The 96-page paper goes beyond a mere summary to include general discussions of the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010 and its implications on estate planning.

Steve's summary is available here and on Bessemer's website.

Among the many topics covered is the possible clawback tax on gifts made in 2011 and 2012 if the tax-free amount is reduced in later years. Steve also summarizes the planning suggestions of prominent tax practitioners as well as their predictions about what will happen in 2012.