ESTATE ADMINISTRATION FROM A TO Z 1

Transcription

1 ESTATE ADMINISTRATION FROM A TO Z 1 Moderator: SARAH PATEL PACHECO, Houston Crain, Caton & James Presented By: M. KEITH BRANYON, Fort Worth Jackson Walker PAMELA D. ORSAK, Victoria Law Offices of Pamela D Orsak Co-Written By: SARAH PATEL PACHECO 2 CRAIN, CATON & JAMES A PROFESSIONAL CORPORATION 1401 MCKINNEY, 17 TH FLOOR HOUSTON, TEXAS (713) & PATRICK J. PACHECO JPMORGAN CHASE BANK, N.A. 707 TRAVIS, TENTH FLOOR HOUSTON, TEXAS (713) State Bar of Texas 13 th ANNUAL BUILDING BLOCKS OF WILLS, ESTATES AND PROBATE COURSE January 13, 2012 Via Webcast CHAPTER 5 1 This outline and any related presentation is for educational purposes only and is not intended to establish an attorney-client relationship or provide legal advice. And, to ensure compliance with requirements imposed by the Internal Revenue Service, the authors inform you that any discussion of U.S. federal tax contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of: (i) avoiding penalties under the internal revenue code, as amended or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter[s]. 2 This outlines was also co-written by Sharon Brand Gardner, formerly with Crain, Caton & James.

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3 TABLE OF CONTENTS I. SCOPE OF ARTICLE... 1 II. ALTERNATIVES TO PROBATE... 1 A. Proceedings to Declare Heirship Overview... 1 a. Decedent Died Intestate... 1 b. Decedent s Will Fails To Fully Dispose of Estate... 1 c. Decedent s Will is Not Probated in Four Years After Death Who May Apply Application Notice Ad Litem Appointment Hearing The Court s Judgment... 3 B. The Affidavit of Heirship Overview Validity Statutory Form... 3 C. The Small Estate Affidavit Overview Determining Value Application Asset Collection Effect of Affidavit Undisclosed Heir(s)... 5 D. Informal Family Agreements Overview Parties to Agreement... 6 a. Necessary Parties... 6 b. Proper Parties... 7 c. Persons Without Standing to Contest Settlement... 7 (i) Named Executor... 7 (ii) Temporary Administrator... 7 (iii) Creditor Consideration Court Approval Enforcement... 8 a. Legally Enforceable... 8 b. Breach of Contract... 9 c. Contempt of Court d. Statute of Limitation E. Application For Order Of No Administration Overview Requirements Hearing and Order Upon Application Effect of Order i

4 5. Proceeding To Revoke Order F. Summary Proceedings For Estate Overview Application & Order III. PRE PROBATE MATTERS A. Overview B. Funeral Arrangements Written Directions Persons Having Statutory Right to Make Burial Instructions Payment of Funeral Expenses and Filing Fees Opening Safe Deposit Box a. Without Court Order b. With Court Order C. Procedure to Appoint Temporary Administrator Overview Who is the Applicant Application Requesting Powers of Temporary Administrator Hearing Suitability of a Temporary Administrator IV. UNDERTAKING PROBATE ESTATE ADMINISTRATION A. Initial Information and Considerations Locating the Will Funeral Arrangements Death Certificates Secure Home Determining Responsibilities Determine Residence and Domicile of Decedent Obtain Overview of the Assets and the Debts of the Estate Information on Personal Representative and Beneficiaries Witnesses B. Advise Client of Client s Fiduciary Duties & Potential Liability V. PROBATE PROCEEDINGS A. Independent Administration by Will B. Probate of Will and Appointment of Administrator with Will Annexed C. Appointment of Independent Administrator D. The Probate of the Will Application Original Will and Codicil Notice Testimony Order Oath Letters Testamentary E. Notice to Creditors F. Notice to Beneficiaries G. Notice to Certain Charities ii

5 H. Inventory and List of Claims I. Ancillary Probate Texas Other States VI. THE APPLICANT, APPLICATION, CITATION, HEARING, AND ORDER A. Applicant Preferences Disqualification B. Application Intestate Will Annexed Comment C. Citation Administration With and Without Wills Lost Wills Court Requirements D. Hearing Time Facts Testimony Appraisers E. Order F. Contest VII. DECIDING ON DEPENDENT ADMINISTRATION A. Purpose B. Limitations C. Restrictions On Representatives D. Permitting Administration Administration Appropriate Necessity E. Annual Accounting Duty to File Accounting Contents Court Review and Approval a. Audit b. Approval c. Payment of Claims Failure to File Choosing Dependent Administration VIII. LETTERS, OATH, BOND AND SAFEKEEPING A. Letters Issuance Qualification Time B. Oath C. Bond Sureties iii

6 2. Bond Amount New Bonds D. Safekeeping Agreement IX. OVERVIEW OF DUTIES & LIABILITIES A. Duties and Powers General Duties General Powers Court Supervised Powers Power to Operate a Business Power to Borrow a. Application b. Citation c. Order B. Liability X. COLLECTION OF ASSETS A. Community Property vs. Separate Property B. Inventory, Appraisement and List of Claims Probate Assets Only Liabilities Claims Appraiser Certification Affidavit of Personal Representative Separate and Community Property C. Inventory Assets and Associated Problems Real Estate a. Obtain Exact Legal Descriptions b. Identify Homestead Property c. Obtain Insurance & Pay Taxes d. Review Farm and Ranch Property e. Review Mineral Interests Stocks and Bonds a. Re-Registering Securities b. Establishing Securities Account c. Obtaining CUSIP Numbers d. Partitioning Community Shares Cash & Notes a. Establishing Estate Accounts b. Watch FDIC Limits c. Identify Non-Probate Accounts d. Collect Notes e. Partitioning Community Shares Insurance Miscellaneous Assets Employee Benefits Debts D. Affidavit In Lieu of Inventory XI. CREDITORS AND CLAIMS iv

7 A. Notice Publication Notice Mail Notice Permissive Notice B. Presenting Claims Claim Form Deposit of Claim C. Approval and Rejection of Claims The Representative s Action The Court s Action Suit on Rejected Claim In Dependent Proceeding Must be Filed Within 90 Days of Rejection a. Improperly Presented Claims b. Suits on Partially Rejected Claims D. Claims of the Personal Representative Personal Representative s Own Claims: 6 Months Claims Procedure Inapplicable to Independent Administrators Expenses of Administration Child Support Claims E. Claims of Secured Creditors F. Classification and Payment Classification of Claims Payment of Claims Quick Reference Table XII. SALES AND LEASES A. Nature and Purpose B. Sales By Independent Representatives C. Sales By Dependent Representatives Application Report of Sale D. Considerations When Negotiating the Sale Listing Agreements Avoiding DTPA Claims Relating to the Condition of the Property Earnest Money Contract Addressing Environmental Issues E. Leases and Renting Application Notice Order XIII. ADMINISTERING JOINT ASSETS A. Community Property B. Tenants in Common XIV. REMOVAL AND COMPENSATION A. Removal Instituting Grounds a. No Notice Required v

8 b. Notice Required c. Additional Grounds Procedure Costs B. Executor s Compensation Compensation Pursuant to Section No Compensation Allowed by Section Extra Compensation Expenses XV. HOMESTEAD, EXEMPT PROPERTY AND ALLOWANCES A. Homestead Availability Passage of Title Right of Use and Equipment a. Surviving Spouse b. Children Creditors Rights Delivery B. Exempt Property Solvent Estates Insolvent Estates C. Exempt Property Allowance D. Family Allowance XVI. DISCLAIMERS A. Generally B. Applicable Law I.R.C. Section Texas Probate Code Section 37A Texas Property Code Section Strict Application of 9 Month Requirement Date of Transfer Age Twenty-One Rule Purpose Full and Partial Disclaimers Common Use of Disclaimers XVII. CLOSING THE ESTATE A. When to Close Advantages of Closing Estate Disadvantage of Closing Estate B. Partial Distributions C. Distributing Without Any Agreements Potential Advantages Potential Disadvantages D. Distributing With Only a Receipt Potential Advantages Potential Disadvantages E. Requesting A Release vi

9 1. Potential Advantages Potential Disadvantages F. The Closing Reports And Notices Of Closing Estate (F/N/A Closing Affidavits) Option62 1. Statutory Requirements Potential Advantages Potential Disadvantages G. The Judicial Discharge Option Statutory Requirements Potential Advantages Potential Disadvantages H. The Only Option For Dependent Administrations XVIII. LITIGATION A. Probate Jurisdiction and Venue Generally Constitutional County Court a. Uncontested Matters b. Contested Matters County Court at Law District Court Statutory Probate Court B. Concurrent Jurisdiction Statutory Probate Courts and District Courts Matters Related to Probate Proceeding a. Texas Probate Code Section 5B b. Conflicts with Civil Practice and Remedies Code Section Common Law Rule Determining Jurisdiction Trustee Liability Suits Assignment of a Statutory Probate Judge C. Executing Rule 11 Agreements Agreement Made By Counsel D. Final Versus Interlocutory Probate Orders Overview The Crowson Test Final Orders Interlocutory Orders XIX. TAX ISSUES A. Decedent s Final Federal Income Tax Return IRS Form B. Estate s Federal Fiduciary Income Tax Return IRS Form C. Decedent s Final Federal Gift Tax Return IRS FORM D. Federal Estate Tax Returns E. Carry Over Basis Tax Return F. State Transfer Tax Return XX. REDUCING POTENTIAL ETHICAL AND PROFESSIONAL CLAIMS WHEN REPRESENTING PERSONAL REPRESENTIVES A. The Client & Appointment Filter B. Assess Your Legal Competency C. Consider Potential Conflicts of Interest D. Clearly Define Who is the Client vii

10 E. Obtain Engagement Agreement F. Be Clear and Careful in All Written Communications with Clients Use Correspondence to Confirm and Clarify Practice Safe ing G. Be Careful in All Written Communications with Beneficiaries & Third Parties H. Advise Client of Client s Fiduciary Duties & Potential Liability I. Avoid Making Alleged Representations and Use Disclaimers of Reliance When Appropriate J. Theft By A Fiduciary-Client K. Consider the Possible Rights of Successor Fiduciaries L. Review Malpractice Coverage Regarding Fiduciary Appointments M. Be Cognizant Of The Discovery Rule N. Other Thoughts XXI. EXHIBITS A. Exhibit A: Civil Case Information Sheet B. Exhibit B: Quick Reference Table Creditor Claim Procedures C. Exhibit C: Affidavit of Facts Concerning The Identity of Heirs D. Exhibit D: Affidavit for Collection of Small Estate E. Exhibit E: Order Approving Affidavit for Collection of Small Estate F. Exhibit F: Sample Family Settlement Agreement G. Exhibit G: Sample Beneficiary Distribution Agreement H. Exhibit H: Application for Appointment of Temporary Administrator I. Exhibit I: Order Appointing Temporary Administrator J. Exhibit J: Application for Probate of Will and Issuance of Letters Testamentary K. Exhibit K: Order Admitting Will To Probate and Appointing Independent Executor L. Exhibit L: Oath of Independent Executor M. Exhibit M: Duties Letter To Client N. Exhibit N: Inventory and List of Claims O. Exhibit O: Receipt P. Exhibit P: Receipt and Release Q. Exhibit Q: Settlement and Release Agreement viii