WHAT HAS THE LEGISLATURE DONE TO US NOW? (DON T WORRY IT S NOT TOO BAD!) 2011 TEXAS PROBATE AND TRUST LEGISLATIVE UPDATE

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1 WHAT HAS THE LEGISLATURE DONE TO US NOW? (DON T WORRY IT S NOT TOO BAD!) 2011 TEXAS PROBATE AND TRUST LEGISLATIVE UPDATE Statutory Changes Affecting Probate, Guardianships, Trusts, Powers of Attorney, and Other Areas of Interest to Estate and Probate Practitioners WILLIAM D. PARGAMAN Brown McCarroll, L.L.P. 111 Congress Avenue, Suite 1400 Austin, Texas Fax bpargaman@brownmccarroll.com blog: This version was last updated June 1, The Governor s deadline for signing or vetoing bills is Sunday, June 19th. The author will post an update to this paper following the veto deadline. Check for the most recent posted version at: State Bar of Texas 35 th ANNUAL ESTATE PLANNING AND PROBATE COURSE June 8-10, 2011 Fort Worth CHAPTER , William D. Pargaman, All Rights Reserved

2 What Has The Legislature Done To Us Now? (Don t Worry It s Not Too Bad!) 2011 Texas Probate and Trust Legislative Update Statutory Changes Affecting Probate, Guardianships, Trusts, Powers of Attorney, and Other Areas of Interest to Estate and Probate Practitioners 2011, William D. Pargaman, All Rights Reserved. TABLE OF CONTENTS 1. The Preliminaries Introduction and Scope Acknowledgments CYA Disclaimer The Players REPTL The Academy The Statutory Probate Judges The Texas Bankers Association The Texas Legislative Council The Authors and Sponsors The Process The Genesis of REPTL s Package Preliminary Approval by the REPTL Council Actual Language is Drafted by the Committees, With Council Input and Approval REPTL s Package is Submitted to the Bar Legislative Policy Committee Review State Bar Board of Directors Approval REPTL is Ready to Go This Year s REPTL Package The Academy Steps In During the Session Where You Can Find Information About Filed Bills Summary of the Legislative Process Key Dates The New Estates Code A New Beginning Our Current Probate Code is Not a Code The Codification Process Began in 1963, After Our Probate Code Was Enacted The Legislative Council s Procedure REPTL s Probate Codification Committee The Nonsubstantive Estates Code Passed Revisor s Report for the Estates Code The Substantive Independent Administration Recodification Bill Did Not Pass Recodification of the Guardianship and Power of Attorney Portions of the Probate Code Continuing Codification Decedents Estates The REPTL Decedents Estates Bill... 7 (a) Deadline for Filing Disclaimers (Section 37A) Drafting Tip... 7 (b) Determination of Heirship Sought by Trustees (Sections 48 & 49) iii

3 2011 Texas Probate and Trust Legislative Update (c) One-Step Procedure for Will Execution (Section 59) (d) Foreign Self-Proving Affidavit (Section 84) (e) No Contest Provisions in Wills (Section 64) (f) Pretermitted Children (Section 67) Drafting Tip... 8 (g) Repeal of Testamentary Provision for Management of Separate Property (Section 70)... 8 (h) Dissolutions of Marriage After Execution of Will (Sections 81 & 89A)... 8 Drafting Tip... 8 (i) Dueling Will Applications (Section 83)... 8 (j) Notice to Beneficiaries (Section 128A) (k) Independent Administration... 9 (i) Determination of Heirships (Section 145) (ii) Independent Administration by Agreement (Section 145) (iii) Power of Sale by Consent (Sections 145A, 145B, & 145C)... 9 Drafting Tip... 9 (iv) Secured Claims (Section 146)... 9 (v) Method of Presenting Claims and Notices (Section 146) (vi) Statute of Limitations (Section 146) (vii) Other Claims Procedures (Section 146) (viii) Time for Petition for Accounting and Distribution (Section 149B) (ix) Removal of Independent Executor for Material Conflict of Interest (Section 149C) (x) Notice of Closing Estate (Section 151) (xi) Closing Not Required (Section 151) (l) Compensation of Representatives (Section 241) Not This Time! (m) Affidavit in Lieu of Inventories (Section 250) (n) Co-Owners Need Not be Listed on Inventory (Section 250) Guardianships The REPTL Guardianship Bill (a) Term of Attorney Ad Litem in Temporary Guardianship (Section 646) (b) Location of Hearings (Section 652) (c) Reasonable Compensation for Guardians (Section 665) Again, Not This Time! (d) Physician s Certificate (Section 687) (e) Co-Owners Need Not be Listed on Inventory (Section 729(c)) (f) Termination of Guardianship by Transfer to Pooled Interest Trust (Sections 745(6) & 867) (g) Admission of Ward to Psychiatric Facility (Section 770(c)(3)) (h) Gifts for Non-Tax Purposes (Section 865) (i) Asset Report Within 30 Days of Management Trust Funding (Section 867) (j) Management Trusts for Persons With Physical Disability Only (Sections 867, 871, & 873) (k) Person Eligible to Apply for Establishment of Pooled Interest Sub-Account (Section 911) Assorted Guardianship Changes (Sections 633, 646A, 682, 697B, & 761) Notice to Removed Guardian (Sections 761 & 762) Trusts The REPTL Trust Code Bill (a) Deadline for Filing Disclaimers (Trust Code Section ) Drafting Tip (b) No Contest Provisions in Trusts (Trust Code Section ) (c) Waiver of Notice of Combination of Trusts (Trust Code Section ) (d) Trust Jurisdiction of Statutory County Courts (Trust Code Section ) iv

4 Chapter 1 Statutory Changes Affecting Probate, Guardianships, Trusts, Powers of Attorney, Etc. (e) Permissive Venue of Trust Proceedings While Estate is Pending (Trust Code Section ) (f) Necessary Parties to Trust Proceedings (Trust Code Section (b)) (g) 2008 UPIA Amendment (Trust Code Section ) (h) Effect of Divorce on Revocable Trusts (Probate Code Sections ) Drafting Tip Jurisdiction and Venue The REPTL Decedents Estates Bill (a) Transfer of Entire Proceeding from Constitutional County Court (Section 4D) Another Thorny Issue (b) Consolidation of Venue Provisions (Sections 6, 7, 8, & 48) The REPTL Guardianship Bill (a) Transfer of Entire Proceeding from Constitutional County Court (Sections ) The Same Thorny Issue Charities Jurisdiction Over Charitable Breach of Fidiciary Proceedings Charitable Immunity Minimizing Control by Governmental Entities Over Charitable Organizations Court Administration Probate Fee Exemption for Estates of Persons Killed in Line of Duty Eligibility of Former Statutory Probate Court Judge for Assignment Nontestamentary Transfers The REPTL Decedents Estates Bill (a) Charities as Beneficiaries of POD Accounts (Section 436) (b) Community Property Survivorship Agreements (Sections 439 & 452) Disability Documents Uniform Power of Attorney Act Not This Time! Nonparent Relative Authorization Agreements Organ Donation Exempt Property Anti-Jarboe Bill Exemptions for Adult Incapacitated Children Encumbrance of Homestead by Co-Owner Selected Marital Issues Fraud on the Community LLC Interests and Marital Property Laws A Little Lagniappe Conclusion Attachment 1 List of Bills That Passed and Effective Dates Attachment Amendments to the Texas Probate Code (Decedents Estates) Sec. 4D. JURISDICTION OF CONTESTED PROBATE PROCEEDING IN COUNTY WITH NO STATUTORY PROBATE COURT OR STATUTORY COUNTY COURT Sec. 4H. CONCURRENT JURISDICTION WITH DISTRICT COURT Sec. 5. JURISDICTION WITH RESPECT TO PROBATE PROCEEDINGS Sec. 5B. TRANSFER TO STATUTORY PROBATE COURT OF PROCEEDING RELATED TO PROBATE PROCEEDING Sec. 6. VENUE: [FOR] PROBATE OF WILLS AND GRANTING OF LETTERS TESTAMENTARY AND OF ADMINISTRATION [OF ESTATES OF DECEDENTS] v

5 2011 Texas Probate and Trust Legislative Update Sec. 6A. VENUE: ACTION RELATED TO PROBATE PROCEEDING IN STATUTORY PROBATE COURT Sec. 6B. VENUE: CERTAIN ACTIONS INVOLVING PERSONAL REPRESENTATIVE Sec. 6C. VENUE: HEIRSHIP PROCEEDINGS Sec. 6D. VENUE: CERTAIN ACTIONS INVOLVING BREACH OF FIDUCIARY DUTY Sec. 8. CONCURRENT VENUE IN PROBATE PROCEEDING [AND TRANSFER OF PROCEEDINGS] Sec. 8A. TRANSFER OF VENUE IN PROBATE PROCEEDING [TRANSFER OF PROCEEDING] SEC. 8B. VALIDATION OF PRIOR PROCEEDINGS [(D) VALIDATION OF PRIOR PROCEEDINGS] Sec. 11B. EXEMPTION FROM PROBATE FEES FOR ESTATES OF CERTAIN LAW ENFORCEMENT OFFICERS, FIREFIGHTERS, AND OTHERS Sec. 15. CASE FILES Sec. 37A. MEANS OF EVIDENCING DISCLAIMER OR RENUNCIATION OF PROPERTY OR INTEREST RECEIVABLE FROM A DECEDENT Sec. 48. PROCEEDINGS TO DECLARE HEIRSHIP. [WHEN AND WHERE INSTITUTED.] Sec. 49. WHO MAY INSTITUTE PROCEEDINGS TO DECLARE HEIRSHIP Sec. 59. REQUISITES OF A WILL Sec. 64. FORFEITURE CLAUSE Sec. 67. PRETERMITTED CHILD Sec. 70. PROVISION IN WILL FOR MANAGEMENT OF SEPARATE PROPERTY Sec. 81. CONTENTS OF APPLICATION FOR LETTERS TESTAMENTARY Sec. 83. PROCEDURE PERTAINING TO A SECOND APPLICATION Sec. 84. PROOF OF WRITTEN WILL PRODUCED IN COURT Sec. 89A. CONTENTS OF APPLICATION FOR PROBATE OF WILL AS MUNIMENT OF TITLE Sec. 128A. NOTICE TO CERTAIN BENEFICIARIES AFTER PROBATE OF WILL Sec APPLICATION FOR ORDER OF NO ADMINISTRATION Sec HEARING AND ORDER UPON THE APPLICATION Sec SUMMARY PROCEEDINGS FOR SMALL ESTATES AFTER PERSONAL REPRESENTATIVE APPOINTED Sec INDEPENDENT ADMINISTRATION Sec. 145A. GRANTING POWER OF SALE BY AGREEMENT Sec. 145B. INDEPENDENT EXECUTORS MAY ACT WITHOUT COURT APPROVAL Sec. 145C. POWER OF SALE OF ESTATE PROPERTY Sec PAYMENT OF CLAIMS AND DELIVERY OF EXEMPTIONS AND ALLOWANCES Sec. 149B. ACCOUNTING AND DISTRIBUTION Sec. 149C. REMOVAL OF INDEPENDENT EXECUTOR Sec CLOSING INDEPENDENT ADMINISTRATION BY CLOSING REPORT OR NOTICE OF CLOSING ESTATE [AFFIDAVIT] Sec SUCCESSORS RETURN OF INVENTORY, APPRAISEMENT, AND LIST OF CLAIMS OR AFFIDAVIT IN LIEU OF INVENTORY, APPRAISEMENT, AND LIST OF CLAIMS Sec INVENTORY AND APPRAISEMENT; AFFIDAVIT IN LIEU OF INVENTORY, APPRAISEMENT, AND LIST OF CLAIMS Sec LIST OF CLAIMS Sec DISCOVERY OF ADDITIONAL PROPERTY Sec FAILURE OF JOINT PERSONAL REPRESENTATIVES TO RETURN AN INVENTORY, APPRAISEMENT, AND LIST OF CLAIMS OR AFFIDAVIT IN LIEU OF INVENTORY, APPRAISEMENT, AND LIST OF CLAIMS Sec EXEMPT PROPERTY TO BE SET APART Sec TO WHOM DELIVERED Sec ALLOWANCE IN LIEU OF EXEMPT PROPERTY vi

6 Chapter 1 Statutory Changes Affecting Probate, Guardianships, Trusts, Powers of Attorney, Etc. Sec HOW ALLOWANCE PAID Sec TO WHOM ALLOWANCE PAID Sec SALE TO RAISE ALLOWANCE Sec FAMILY ALLOWANCE TO SURVIVING SPOUSES, [AND] MINORS, AND ADULT INCAPACITATED CHILDREN Sec AMOUNT OF FAMILY ALLOWANCE Sec WHEN FAMILY ALLOWANCE NOT MADE Sec FAMILY ALLOWANCE PREFERRED Sec TO WHOM FAMILY ALLOWANCE PAID Sec MAY TAKE PROPERTY FOR FAMILY ALLOWANCE Sec SALE TO RAISE FUNDS FOR FAMILY ALLOWANCE Sec CLASSIFICATION OF CLAIMS AGAINST ESTATE [ESTATES] OF DECEDENT Sec PARTITION OF COMMUNITY PROPERTY Attachment Amendments to the Texas Probate Code (Guardianship) Sec DEFINITIONS Sec GENERAL PROBATE [COUNTY] COURT JURISDICTION IN GUARDIANSHIP PROCEEDINGS; APPEALS Sec JURISDICTION WITH RESPECT TO GUARDIANSHIP PROCEEDINGS Sec. 606A. MATTERS RELATED TO GUARDIANSHIP PROCEEDING Sec MATTERS APPERTAINING AND INCIDENT TO AN ESTATE Sec. 607A. ORIGINAL JURISDICTION FOR GUARDIANSHIP PROCEEDINGS Sec. 607B. JURISDICTION OF CONTESTED GUARDIANSHIP PROCEEDING IN COUNTY WITH NO STATUTORY PROBATE COURT OR COUNTY COURT AT LAW Sec. 607C. JURISDICTION OF CONTESTED GUARDIANSHIP PROCEEDING IN COUNTY WITH NO STATUTORY PROBATE COURT Sec. 607D. EXCLUSIVE JURISDICTION OF GUARDIANSHIP PROCEEDING IN COUNTY WITH STATUTORY PROBATE COURT Sec. 607E. CONCURRENT JURISDICTION WITH DISTRICT COURT Sec TRANSFER OF [GUARDIANSHIP] PROCEEDING BY STATUTORY PROBATE COURT Sec TRANSFER OF CONTESTED GUARDIANSHIP OF THE PERSON OF A MINOR Sec CONCURRENT VENUE AND TRANSFER FOR WANT OF VENUE Sec APPLICATION AND OTHER PAPERS TO BE FILED WITH CLERK Sec COSTS AND SECURITY Sec CALL OF THE DOCKETS Sec CLERK MAY SET HEARINGS Sec ISSUANCE, CONTENTS, SERVICE, AND RETURN OF CITATION, NOTICES, AND WRITS IN GUARDIANSHIP PROCEEDINGS [MATTERS] Sec NOTICE AND CITATION Sec DEFECTS IN PLEADING Sec APPOINTMENT OF ATTORNEY AD LITEM AND INTERPRETER Sec. 646A. REPRESENTATION OF WARD OR PROPOSED WARD BY ATTORNEY Sec DECREES Sec LOCATION OF HEARING Sec EXECUTION Sec EXPENSES ALLOWED Sec COSTS AGAINST GUARDIANSHIP Sec COMPENSATION OF CERTAIN GUARDIANS; CERTAIN OTHER GUARDIANSHIP COSTS Sec APPLICATION; CONTENTS Sec. 682A. APPLICATION FOR APPOINTMENT OF GUARDIAN FOR CERTAIN PERSONS Sec EXAMINATIONS AND REPORTS vii

7 2011 Texas Probate and Trust Legislative Update Sec. 697B. CERTIFICATION REQUIREMENT FOR PRIVATE PROFESSIONAL GUARDIANS AND PUBLIC GUARDIANS Sec INVENTORY AND APPRAISEMENT Sec LIST OF CLAIMS Sec SETTLING GUARDIANSHIPS OF THE ESTATE Sec REMOVAL Sec REINSTATEMENT AFTER REMOVAL Sec CARE OF WARD; COMMITMENT SUBPART M. TAX-MOTIVATED, [TAX MOTIVATED AND] CHARITABLE, AND OTHER GIFTS Sec POWER TO MAKE CERTAIN [TAX-MOTIVATED] GIFTS AND TRANSFERS Sec CREATION OF MANAGEMENT TRUST Sec TERMS OF MANAGEMENT TRUST Sec. 868C. TRANSFER OF MANAGEMENT TRUST PROPERTY TO POOLED TRUST Sec TRUST AMENDMENT, MODIFICATION, OR REVOCATION Sec TERMINATION OF TRUST Sec. 870A. INITIAL ACCOUNTING BY CERTAIN TRUSTEES REQUIRED Sec ANNUAL ACCOUNTING Sec DISTRIBUTION OF TRUST PROPERTY Sec DEFINITIONS Sec APPLICATION Attachment Amendments to the Texas Probate Code (Other Provisions) Sec DEFINITIONS Sec RIGHT OF SURVIVORSHIP Sec FORMALITIES Sec DEFINITIONS Sec REVOCATION OF CERTAIN NONTESTAMENTARY TRANSFERS ON DISSOLUTION OF MARRIAGE Sec LIABILITY FOR CERTAIN PAYMENTS, BENEFITS, AND PROPERTY Attachment Amendments to the Texas Trust Code Sec ACCEPTANCE OR DISCLAIMER BY OR ON BEHALF OF BENEFICIARY Sec FORFEITURE CLAUSE Sec DIVISION AND COMBINATION OF TRUSTS Sec JURISDICTION Sec VENUE Sec PARTIES Sec TRUSTEE S POWER TO ADJUST Sec INCOME TAXES Attachment Selected Amendments to the Texas Property Code (Other Than Trust Code) Sec ADDITIONAL EXEMPTION FOR CERTAIN SAVINGS PLANS CHAPTER 64. AUTHORITY OF CO-OWNER TO ENCUMBER RESIDENTIAL PROPERTY Sec APPLICATION OF CHAPTER Sec CONDITIONS FOR AUTHORITY TO ACT AS AGENT FOR CO-OWNER Sec REQUIRED DOCUMENTATION Sec SCOPE OF AUTHORITY Sec BREACH OF FIDUCIARY DUTY: VENUE; JURISDICTION Attachment Selected Amendments to the Texas Family Code Sec FRAUD ON THE COMMUNITY; DIVISION AND DISPOSITION OF RECONSTITUTED ESTATE Sec DEFINITION Sec AUTHORIZATION AGREEMENT Sec CONTENTS OF AUTHORIZATION AGREEMENT viii

8 Chapter 1 Statutory Changes Affecting Probate, Guardianships, Trusts, Powers of Attorney, Etc. Sec DUTIES OF PARTIES TO AUTHORIZATION AGREEMENT Sec TERMINATION OF AUTHORIZATION AGREEMENT Attachment 8 Other Selected 2011 Amendments GOVERNMENT CODE: Sec DISCLOSURE PROTECTIONS FOR CERTAIN CHARITABLE ORGANIZATIONS, CHARITABLE TRUSTS, AND PRIVATE FOUNDATIONS Attachment 9 Selected Bills that DID NOT Pass in Decedents Estates The Hartnett/Herman/Ferchill Omnibus Decedents Estates Bill (a) Appeal Bonds of Personal Representatives (Section 29) (b) Attorneys Ad Litem (Section 34A) (c) No Limitations Period for Heirship Proceedings (Section 48) (d) Unsecured Creditors May Initiate Heirship Proceedings (Section 49) (e) Use of Genetic Tests in Heirships (Section 53C) (f) Removal of Independent Executor Without Notice (Section 149C) (g) Fine for Failure to Timely File Inventory (Section 254) (h) Property Distributable to Unknown or Missing Person (Section 408) Convicted Felons as Independent Executors (Sections 78 & 78A) Beneficiary s Allowance for Defending Will (Section 243) Waiver of Inventories in Collin County (Section 250 Sorta) Repayment of Reverse Mortgage on Borrower s Death Adverse Possession by Co-Tenant Heirs Guardianships The Hartnett/Herman/Ferchill/Harris Omnibus Guardianship Bill (a) Transfer of Guardianships (Sections ) (b) Limited Intervention in Guardianship Proceedings (Section 642) (c) Location of Hearings (Section 652) (d) Allocation of Attorney s Fees and Costs (Sections 665A, 665B, 665D, 669, and 875) (e) Notice to Removed Guardian (Sections 761 & 762) (f) Foreign Guardianships (Sections ) The Lucio Omnibus Guardianship Bill (a) Duties of Court Investigator (Section 648A) (b) Required Testimony (Section 683) (c) Complaint Info Posting Requirement (Section 697C) (d) Removal of Guardian (Section 761) (e) Required Notice for Removal of Guardian (Section 761) (f) Required Notice for Reinstatement of Guardian (Section 762) (g) Temporary Appointment of Successor Guardian (Section 762A) (h) Reinstatement of Removed Guardian Following Appointment of Non-Family Successor Guardian (Section 762B) Provision of Legal Services by Guardian (Sections 665D & 773A) Temporary Admission of Certain Wards to Psychiatric Facilities (Section 770) Kinship Caregivers Trusts RAP Modification (Trust Code Section ) Right of Contingent Beneficiary to Demand Accounting (Trust Code Section ) Charities Authority of AG to Make Inquiries of Charities Court Administration ix

9 2011 Texas Probate and Trust Legislative Update 5.1 Eligibility of Former Statutory Probate Court Judge for Assignment Replacement of Recused or Disqualified Statutory Probate Judge Disability Documents The Patient and Family Treatment Choice Rights Act of Revocation of DNR Orders Selected Marital Issues Legal Separation Premarital Education Marriage Restoration Education Or Extended Waiting Period for Certain Divorces Same-Sex Marriages? Not So Fast! Attachment 10 Form for One-Step Method of Will Execution Attachment 11 Form for Notice of Closing Estate Under Section 151(b) Attachment 12 Form for Affidavit in Lieu of Inventory Under Section 250(c) Attachment 13 Conspicuous Statement to be Included in Notice to Interested Persons Under Section Texas Academy of Probate and Trust Lawyers 2011 Membership and Dues x