1. Introduction. Unless otherwise noted, all new legislation is now in force.
2. Probate Code
a. µ 5A(b); Jurisdiction, Appertaining or Incident To; (Judge's Amendment to Senate 506). The definition of "appertaining to" or "incident to" an estate was expanded to include all actions "filed against or on behalf of" a personal representative. This was an effective end run when the Judges encountered problems passing an amendment to § 5B (the transfer or "reach out and touch someone" statute). The primary effect of this legislation is increasing the matters statutory probate courts can transfer under §5B.
There is no similar change in guardianship jurisdiction.
Some commentators think the particular language may somehow limit its meaning to 5A and thus not expand the reach of 5B. Since this is Probate Judges' legislation, rest assured they will see it as expanding 5B.
b. µ 10B, Access To Decedent's Medical Records and Communications (SB 506). A decedent's medical records are available to a party in a will contest (or other proceeding in which the decedent's capacity is in issue).
Despite it being a procedural rule, this only applies to estates of person who die after its effective date (September 1, 1997)
c. µµ 36, 81 & 82, Social Security Numbers (SB 506) (Section Legislation).. Social security numbers are no longer required. However, the courts may still require them, but they will be kept as judicial records and not by the clerk. They will not be public.
d. µ 42: Family Code References (SB 506) (Section Legislation).. This corrects the references to the Family Code in the Probate Code.
e. µ 50(a)(b), Service on Persons <12 years of age in Heirship Proceeding (HB 3088). In heirship proceedings service on persons less than 12 years of age may be by service on their parent or guardian.
f. µ 58b, Bequests to Attorneys Void (SB 1176). This bill voids any bequest to an attorney who prepares or "supervises" the will.
It also says,
...a devise or bequest of property in a will to an heir or employee of the attorney who prepares or supervises the preparation of the will is void.
It does make an exception if the attorney or employee is related to the 2nd degree of consanguinity or affinity to the testator. According to Chapter 573 of the Government Code, grandfather and grandchild are related in the 2nd degree of consanguinity but great grandfather and great grandchild are 3rd degree. People are related by affinity if they are married (Tex. Govt Code §573.024. However, it sheds no light on measuring 2nd degree of affinity.
This new section also does not apply to bona fide purchasers for value from a devisee. This only applies to wills.
g. µ 69; Effect of Divorce (SB 506) (Section Legislation). § 69 voids any bequests or appointments in wills to former spouses. The amendment makes clear that this statute applies even when the will says that the contingent beneficiary takes if the spouse predeceased.
h. µ 89A-C, Muniment of Title (HB 2007). The changes, according to its sponsor, made no changes to muniment of title, it merely laid out more clearly how it works. The new µ89A is the pleading statute, µ89B is the proof statute and µ89C (which is verbatim the current µ89A) is the judgment statute. Unfortunately, as passed (it copied the provisions of µµ 81 & 88) it creates 2 potential problems:
i. The bill requires under 89A and 89B pleading and proof that the decedent has not been dead more than four years. This is a big problem. Quite often muniments of title are used to probate a will where the decedent has in fact been dead more than four years. This appears to eliminate that good function.
ii. The bill also appears to eliminate probating a will as a muniment of title for "other good cause." Currently you can probate a will as a muniment if there are no unpaid debts (other than those secured by real estate) or for "other good cause." The bill requires, again in 89A and 89B, pleading and proof that there are no unpaid debts.
Meanwhile, 89C tracks our current statute. It makes no reference or restriction about probating a will within 4 years as a muniment of title. Further, it specifically continues the reference to probating a will as a muniment of title for "other good cause."
The testimony at the hearings makes clear that this is a clarification of existing law and no changes were intended. While the language is unfortunate it is not intended to change the law that wills can still be probated, as muniments of title after 4 years under Probate Code Section 73. Likewise, a will can still be probated as a muniment of title for "other good cause."
i. µµ 108-115, Funds for Burial, Access to Personal Property in Rental Property & Spouse's Burial Rights (HB 2003). These provisions come from the former Informal Probate Chapter (The rest of the Informal Probate Chapter). This statute provides that without taking out an administration a person can:
i. Apply to the court to obtain the release of funds to pay funeral expenses and the attorneys fees associated with the application;
ii. Also, if the deceased had personal property in an apartment or other rental unit, a person can apply to have the property removed from the apartment;
iii. Finally, it moves the provisions that restrict a spouse's right to control burial arrangements when the spouse is involved in the death of their spouse.
j. µ 131A(b), Temporary Administrations (HB 2007). The old statute only required that the application reflect the requirements of Section 82. This amendment requires the pleading to reflect Section 81 if the decedent died testate.
k. µ 137(a), Small Estate Affidavits (HB 2007). Under the old statute a small estate affidavit need only set out the heirs of the decedent. However, there was no requirement that the affidavit set out sufficient facts to allow the court to verify the heirship conclusions. This amendment requires that the underlying facts must be set out.
l. µ 234(a)(6); Abandonment of Estate Property (SB506) (Section Legislation). Now a personal representative has authority to abandon (a trustee has long been able to abandon, Texas Trust Code §113.020) if it is burdensome or worthless.
m. µ146(b); Notice by Secured Claimants to Independent Personal Representatives (SB 506) (Section Legislation). Now a secured claimant may give notice of its election by any of the means set out in § 146(d).
n. µ 146(d); Notice by Creditors to Independent Personal Representatives (SB 506) (Section Legislation). This amendment sets out how creditors are to give notice to independent personal representatives. It applies to secured creditors under µ 146(b) and to unsecured creditors who are noticed under the permissive provisions µ 294(d).
As with µ 294(d) it states that any unsecured claimants who do not give notice to the independent personal representative within 4 months are barred.
With the passage of µ 146(d) any notices required by creditors to independent personal representatives can be given by
i. Written notice (Certified mail, or hand delivery with proof of receipt)
ii. A pleading filed in a lawsuit concerning the claim; or,
iii. A written instrument or pleading filed in the court in which the administration of the estate is pending.
o. µ 281; Exempt Property (SB 506) (Section Legislation). The old statute, and as it existed before the 1995 overhaul of the claims statutes, states that exempt property (except for the homestead or allowance in lieu of, thus furniture, livestock etc.) is liable for timely filed funeral and last illness expenses. Because the old 60 day time limit has been eliminated and the statute in fact limits class one claims to $5,000 (changed to $15,000 by this legislature), the reference is changed to "Class 1 claims."
p. µ 290; Family Allowances (SB 506) (Section Legislation). Again the reference to funeral expenses and expenses of last illness are replaced with "Class 1 claims."
q. µµ 306(e) & (f) Foreclosure (SB 506) (Section Legislation). Under the 1995 statute it appeared that a creditor would have to make two trips to the courthouse to be allowed to foreclose. The amendment corrects that.
r. µ 320, Correction of Heading (HB 2007).. The heading for this section is corrected to read: "ORDER OF PAYMENT OF CLAIMS <AND ALLOWANCES>"
s. µ 320(a), 322, Increase Class 1 Claims to $15,000 (HB 881). This bill increases funeral and last illness expenses to $15,000.
t. µ 399(a)(9) and (c)(3), Accountings; Payment of Bond Premiums (HB 2189). Now accountings must include a statement that the bond premium for the accounting period has been paid.
u. µ 405 (10), Final Accounting, Payment of Bond Premiums (HB 2189) Likewise on the final accounting the personal representative must state and be ready to prove that all bond premiums have been paid.
v. NonTestamentary Transfers. µ 450, Adding Securities and Brokerage
Accounts to Multiparty Accounts (SB 506).
In response to the passage of the Uniform Transfer on Death Security Registration Act (SB 506), infra, the legislature amended Probate Code µ 450 and repealed that uniform act before its effective date.
i.This act adds to the µ 450 list of arrangements that are "deemed to be nontestamentary."
"...securities and accounts with financial institutions as defined in Part 1 of this chapter..."
By that one phrase, the substance of the uniform act has been incorporated into Texas law without the problems created by the uniform act.
w. Uniform Transfer on Death Security Registration Act., µµ 466 through 480 (SB 504, HB 411). Despite a concerted effort to defeat it, this bill was signed by Governor Bush on April 17th. However, by amendment to Senate Bill 506 this statute will be repealed before its effective date and be replaced by an amendment to Probate Code § 450, discussed above.
x. Durable Power of Attorney, µµ 481 et seq. (SB 620) (Section Legislation). The durable power of attorney statute (µµ 481 et seq) was originally enacted in 1993. This legislation represents several important changes to the existing statutes.
i.Divorce
1) With new µ 485(a) any power of attorney granted to a former spouse terminates upon divorce unless the power of attorney expressly provides otherwise.
However, because of the importance of third parties being able to rely on powers of attorney some of the other sections are amended.
2)Section 486 provides that the divorce (or annulment) does not terminate the power of attorney to anyone, other than the former spouse, who acts in good faith under or in reliance on the power.
3)Section 487(a) provides that good faith reliance upon a power of attorney, when accompanied by the affidavit of the power of attorney holder that he had no actual knowledge of termination, is conclusively proof of the non termination. Section 487(a) applied to termination by revocation, death of the principal or qualification of a guardian of the estate of the principal. The 1997 legislation adds termination by divorce or annulment.
ii. µµ 486, 487, 490, Good Faith Reliance. The amendments to Section 486 and 487(a) make clear that third parties relying in good faith on the power of attorney are protected, in the face of revocation by divorce or annulment.
Section 490 previously provided that when the statutory form was used, third parties could rely on the agent's authority without fear of liability to the principal. That paragraph of 490(a) has now been deleted. In its place is 487(e). Protecting third parties only under a statutory form was determined to be unnecessarily restrictive.
The 1997 legislation adds Section 487(e) that third parties who rely in good faith on the acts of the agent are not liable to the principal.
iii. µ 490, Statutory Form. The statutory form has been widely disseminated and used. The public has acquired and used these forms without any professional advice or input. Because of its widespread use, it was determined that it should be made more user friendly.
iv. Social Security Number. The requirement of the principal's social security number has been eliminated. This is consistent with the removal of the requirement of social security numbers on applications for probate and guardianship. As a general rule the public does not want their social security numbers made public.
v. Strikeout Form. The old form called for initialing each power to be conferred (or initialing the all encompassing power). Experience suggested that this procedure created confusion and uncertainty in laymen and was more susceptible to fraud. The new form requires a striking out to eliminate a power.
vi. Gifts. The right to make gifts is specifically identified. If a person wants to give that power, it must be initialed.
The statutory gifting form is limited to the $10,000 annual exclusion rights.
If a person wants to give a broader gifting power, it has to be specifically set out. Because of the possible disastrous effects on the principal and the possible adverse tax consequences of a broader gifting power on the agent this is an area for professional input.
vii. Springing Powers. The form also adds specific instruction for the procedures to follow for springing powers of attorneys. The statute has always provided that the power of attorney can be effective immediately or only upon disability.
Because of the wariness of third parties with springing powers of attorney and the involvement of doctors , most practitioners recommended using immediately effective powers.
If a client insisted on a springing power or if a springing power made sense for the particular client, the attorney had to provide specific instructions.
The old statute made no provision for third parties to determine if the principal was disabled. Nor did it provide any protection to doctors who provided the necessary medical opinion.
Despite this, experience has shown that some practitioners and many members of the public want springing powers. The new form provides that a third party is fully protected if they are presented with a written certification of a medical doctor that the principal is "mentally incapable of managing [his] financial affairs."
Further, it authorizes a medical doctor to disclose the principal's physical and mental condition for purposes of the power of attorney.
viii. Statutory Definitions of Powers. Sections 491 through 504 provide definitions of the powers set out in the statutory form. Two of those sections have been amended.
1) µ 492(E) Oil and Gas (The Mineral Estate). Section 492 defines the powers regarding real estate. Subsection (E) was added to specifically include the mineral estate.
2)Retirement Plans. Subsection (12) of Section 503 was amended to give a definition of "retirement plan." The definition includes any and all deferred compensation arrangements including IRAs and self employed pension plans.
ix. Effective Date. This act takes effect September 1, 1997 and only applies to powers of attorney executed after that date.
y. Informal Probate, Repealed (HB 2007). This bill repeals Chapter XII, Section 501 through 510 (not to be confused with Chapter XII Sections 481 to 506 on Durable Powers of Attorney).
Guardianship Code.
z. µ 609, More Corrections to the Revised Family Code (SB 997) (Section Legislation). Explained in heading.
aa. µ 601(17), Missing Person (HB 1317). Matters concerning missing persons are now moved from the Probate Code to the Human Resources Code, infra.
bb. µ 633, Notice and Citations (SB 997) (Section Legislation). The amendment adds persons who must be noticed of any proposed guardianship to include to the extent known:
i. Any person designated to be the guardian in case of later need under µ 679;
ii. Any person designated guardian under a probated will of the last surviving parent of the proposed ward; and,
iii. Any person designated to serve as guardian in a written declaratory by the proposed ward's last surviving parent.
cc. µ 677A Requirements for Designating a Guardian for A Minor (SB 997) (Section's Legislation). Currently µ 677A requires witnesses and a self proving affidavit for a parent to designate the guardian of a minor. That requirement was inadvertently inserted in 1995. This amendment restores the original requirements, as they existed before 1995.
dd. µ 682, Social Security Numbers (SB 997) (Section Legislation). This is the companion to §§ 81 and 82 above. Social Security numbers will no longer be required on applications but judges may require them as judicial records. See discussion at µ 36, supra.
ee. µ 691, MHMR, Agency of Last Resort (HB 3135). This bill repeals µ 691 which permitted appointment of agencies (MHMR, DPRS etc.) only as a last resort.
ff. µ 702, 702A, Waiver of Bond for County Guardianship Programs & New Types of Bonds (SB 318).
i. µ 702. This bill allow any county that operates a guardianship program to do so without a bond. Also see changes to the Civil Practice & Remedies Code, infra, regarding the liability of counties and their employees when running a guardianship program.
ii. µ 702A. Allows a guardian of a person to post bond in alternative ways. In addition to a corporate surety bond, now a GOP can use personal surety bonds, cash in lieu of a bond and personal bonds.
gg. µ 743(b)(14), Annual Accounting, Bond Premium for GOPs (HB 2189). On the annual accounts the guardian of the person must state that all required bond premiums have been paid.
hh. µ 749, Final Accounting, Bond Premiums and Taxes (HB 2189). In the final accounting the guardian must state, and be prepared to produce evidence, that all bond premiums have been paid.
It also requires that the guardian state that all tax returns have been filed, the amount of owed taxes paid and the any unpaid taxes or unfiled returns.
ii. µ 774, Abandonment of Property (SB 997) (Section Legislation). Another companion piece. Like administrators under µ 234, guardians will have a mechanism for disposing of worthless or burdensome property upon a showing that it is in the best interest of the estate.
jj. µ 776, Maintenance and Support of Ward's Spouse and Dependents (SB 997) (Section's Legislation). Old µ 776 allows expenditures for the education and maintenance of the ward. The amendment will allow a guardian, with court permission, to make expenditures for the ward's spouse and dependents.
kk. µ 783(a), Replacing "Decedent" with "Ward" (SB 997) (Section's Legislation). The old statute erroneously refers to the "decedent." The amendment merely changes that to "ward."
ll. µ 805, Order of Payment of Guardianship Claims (Amendment to HB 2189). Under this bill, if the estate is insolvent, costs of administration are to be paid first.
This act takes effect September 1, 1997 and applies only to guardianship applications filed on or after that date. Provided that the court may modify any existing guardianship to "conform to the requirements of Section 805as amended by this Act."
mm. µ 856(a), Tomorrow Fund, An Approved Investment (HB 1316). This statute permit guardians to invest in the "Texas Tomorrow Fund" with court permission.
This act takes effect September 1, 1997. It applies without reservation to guardianships established on or after that date. To apply to an existing guardianship the court may modify the guardianship on its own motion or the motion of any interested person.
nn. µ 865, Tax Motivated Gifts (SB 997) (Section Legislation). Currently tax motivated gifts are allowed to charities, heirs at law and devisees under the last will. There are two problems with "heirs at law." First, the living do not have heirs. Even assuming we know who the "heirs" are, that may be too restrictive. There are many people who are more inclined to give to relatives other than, or in addition to, their "heirs." To fix these problems, µ 865(2) is amended to substitute "spouse, descendants, or other persons related by blood or marriage" for "heirs at law."
oo. µ 867, Need for Guardianship & Supplemental Needs Trusts (HB 1314) (Judges's Legislation) . This statute has 3 primary purposes:
i. The amendment will allow the creation of a 867 trust at the instigation of a guardian, the court, an attorney ad litem or any interested person.
ii. This amendment also makes clear that if an 867 trust is created, the underlying guardianship of the estate, if created, may be terminated; however, there must be at least an underlying guardian of the person in place.
iii. Finally, it would allow a court to create an 867 trust that clearly complies with all of the requirements of a supplemental needs trust under 42 USC µ 1396p(d)(4)(A), sometimes also referred to as "(d)(4)(A) trust." This statute allows a person to transfer assets to one of these trusts and still qualify for medicaid. Some are concerned that under the existing statute, a special needs trust cannot be created.
The statute requires that there be a guardian (either of the estate or the person) in place at all times. After much drafting, the final bill allows for the creation of a trust in any guardianship, even though it is in existence before the date of the act.
pp. µµ 887, 889, 890, Increases to $50,000 the amount Sold by or Paid to: Without Guardianships (HB 1126). Previously the law allowed for payments by debtors of an incapacitated person (µ 887) and sales of an incapacitated person's property (µ 889) without a guardianship up to $25,000. Now the limit is $50,000.
Incapacitated persons include minors [Probate Code §601(13)(a)]. With the addition of § 890, such a sale or payment can occur even when a guardianship of the person is in existence.
qq. µµ 886(a)-(c) and 886A-F, POW & MIA Provisions (SB 334)..These provisions were in the Family Code. This Act moved them to the Probate Code intact.
Trust Code
rr. µ 112.035(e), Crummy Demand Rights (Section Legislation). Anyone who contributes to a trust, at least to the extent of their rights in the trust, is considered a settlor. As a result, the creditors of that contributor can access the trust to satisfy the settlor's debts [Texas Trust Code §112.035(d)] It was unclear under existing law how this applied to trust beneficiaries who hold demand rights (Crummy powers).
To clarify this, this act specifies that a beneficiary may not be considered a settlor merely because of a "lapse, waiver or release" of a Crummy demand right.
Legislative Council was insistent that the statute read "may not" rather than "shall not." They constantly reassured that "may not" and "shall not" mean the same thing. There is substantial legislative history showing that the statute is mandatory. Also, there is case law support for the proposition, see Hodges v Thompson, 932 S.W.2d 717 (Ft.Worth 1996) and Texas Attorney General Opinion, JM-501. The attorney general opinion also cites several other cases.
ss. µ 114.001(e), Environmental Protection for Fiduciaries (SB 911) (TBA). In 1996 Congress passed House Resolution 3610. In a part described as "Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996" it provided protection from the federal environmental laws for fiduciaries. This statute incorporates the benefits of that legislation [42 USC µ 9607(n)] into state law. This act takes effect September 1, 1997.
Property Code.
tt. µ 42.001(b), Alimony and Support Exempt from Forced Seizure (SB 1098) "Alimony, support, or separate maintenance received by the debtor for the support of the debtor or a dependent of the debtor" is exempt from forced seizure.
uu. µ 141.002, Contributions to Old TUGMAs OK (HB 887). In 1995 the old TUGMAs were replaced with the new Texas Uniform Transfers to Minors Act. Some brokerage houses and banks would not allow new contributions to old TUGMA accounts saying the law did not authorize them. In some instances grantors prefer to make new contributions to the old accounts rather than open new TUTMA accounts. This amendment allows for those new contributions to the old TUGMAs.
vv. µ 142.005(g), Allowing Supplemental Needs Trusts (SB 912) (TBA Legislation) This statute makes clear that a court can create a trust under 142 that qualifies as a special (or supplemental) needs trust under 42 USC 1396p(d)(4)(A).
Note that is very different from the guardianship statute on the same topic.
ww. Family Code. µµ 1.001 et seq, Recodification of Family Code Title 1 (SB 334). This is a non substantive recodification of Title 1. The most unusual aspect is its effective date. The Governor signed it on April 17th and it became effective on that same day except that it does not apply to proceedings pending on April 17th.
Government Code
xx. µ 25.022. Assignment of Probate Judges (HB 3086). Probate judges may be appointed to hear matters in county courts or statutory county court upon request to the presiding judge of an administrative judicial district.
yy. µ 406.0165, Notary for Physically Unable Persons (HB 242). This act allows a notary to sign for a person unable to sign or make a mark.
Local Government Code.
zz. µ 117.001, Funds Deposited Into Registry of the Court (SB 1304). This revises substantially the rules for monies deposited with the court. It expands the authorization for investment as well as making provisions for reporting the income to IRS.
aaa. µ 118.055(d), No additional Fees For 120 Days or Until Inventory Filed (HB 2702). Currently the clerk shall not charge any additional fees until the earlier of 90 days from the date of the original filing for probate or the approval of the inventory.
This bill makes the fee free period until the earlier of 120 days or the filing of the inventory, whichever occurs first.
Note:Because of space limitations, the Civil Practice and Remedies
Code, Health and Safety Code, and Human Resources Code could not be included.