REPTL decedents' estates bill is worth a closer look

HB 2046 would make key changes affecting every estate planning and probate lawyer in Texas.

Rep. Will Hartnett (R-Dallas) filed HB 2046 Wednesday. This bill makes numerous changes to the Texas Probate Code that are supported by the Real Estate, Probate and Trust Law Section of the State Bar of Texas.

Signing wills just once

Among the highlights of HB 2046 is a new way to handle will executions in Texas. Current law requires the testator and two witnesses to sign the will and then, if the will is self-proved, to separately sign the self-proving affidavit.  HB 2046 amends Section 59 to provide the option of having the testator and witnesses sign a combined will and self-proving affidavit so that each only has to sign once. This is a holdover change from 2009. The 2009 bill failed to pass because of a legislative logjam at the end of the session.

This change, along with others made in 2009 regarding the execution of declarations of guardian, medical powers of attorney and directives to physicians, should speed up document signings. Old foagies who like the current two-signature method may continue to use it.

Independent administration changes

Another holdover from 2009 are changes to independent administration. REPTL proposed these changes to clarify Texas's independent administration statutes in anticipation of their inclusion in the new Estates Code which takes effect January 1, 2014. If HB 2046 passes, these changes would take effect September 1, 2011, and be carried forward into the Estates Code.

The proposed independent administration changes will be covered in a separate post.

No need to file an inventory

Living trust proponents frequently tout the increased privacy of those plans over will-based plans since in a will-based plan an inventory must be filed with the court.  HB 2046 would change this for independent administrations in cases where there are no unpaid debts, except for secured debts, taxes and administration expenses. In that case, the independent executor could file an affidavit in lieu of an inventory. The affidavit must state that the independent executor has provided each beneficiary with a "verified, full, and detailed inventory." 

The changes to Section 250 would not do away with the requirement of preparing an inventory; it would do away with the filing of the inventory in some cases.  Interestingly, under current law the personal representative is not required to provide a beneficiary with a copy of the inventory, although doing so is good practice. The new law would require delivery of a copy in order to avoid the filing requirement.

As filed, it appears that dependent administrators also could file an affidavit in lieu of filing an inventory. A change is in the works to limit this procedure to independent administrations, for obvious reasons.

Overruling Holmes v. Beatty

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.

Will Hartnett, Author of HB 2046HB 2046 overturns Holmes on the first of these points.  It would add 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. HB 2046 specifically states that the bill is intended to overturn the ruling of the Texas Supreme Court in Holmes v. Beatty. 

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.

Reasonable compensation for executors

Jose Rodriguez, Author of SB 1198The bill also would change the default basis for compensation of personal representatives of decedents' estates. Currently compensation is based on 5% of all sums received in cash plus 5% of all sums paid out in cash, subject to the limitations stated in Section 241. HB 2046 would replace this with a "reasonable compensation" standard. HB 1837 makes a similar change for guardianships. 

Update: On March 4, 2011, Sen. Jose Rodriquez (D-El Paso), filed SB 1198 as REPTL's decedent's estates bill in the Senate. 

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.