by
This article reviews legislation enacted by the 2003 Texas Legislature
relating to the Texas law of wills, estate administration, trusts, and
other estate planning matters. The reader is warned that not all recent
legislation is presented and not all aspects of each cited statute are
analyzed. You must read and study the full text of the legislation
before relying on it or using it as authority.
The lower courts of Texas have recognized the tort of tortious
interference with inheritance rights. See King v. Acker, 725 S.W.2d 750
(Tex. App.—Houston [1st Dist.] 1987, no writ). However, the courts have
not delineated exactly what actions would constitute tortious
interference. Taking an opposite approach, the 2003 Legislature declared
that certain specified actions may not be considered tortious
interference, that is, the filing or contesting in probate court of any
pleading relating to a decedent’s estate will not constitute tortious
interference. Prob. Code § 10C. [78th Leg., R.S., ch. 1060, § 6 (H.B.
1473), effective September 1, 2003.]
Texas now has a statute explaining when an inter vivos gift will be
treated as being in satisfaction of a testamentary gift. Prob. Code §
37C. [78th Leg., R.S., ch. 1060, § 7 (H.B. 1473), applicable only to
wills executed on or after September 1, 2003.] The provision is
analogous to the existing provision dealing with advancements in an
intestacy context. Prob. Code § 44.
An inter vivos gift will be considered in partial or total satisfaction
of a testamentary gift only if one of the following three conditions is
satisfied:
(1) The testator’s will expressly indicates that the inter vivos gift is
to be deducted from the testamentary gift.
(2) The testator declares in a contemporaneous writing that the inter
vivos gift is either (a) to be deducted from the testamentary gift or
(b) is in satisfaction of the testamentary gift.
(3) The beneficiary acknowledges in writing that the inter vivos gift is
in satisfaction of the testamentary gift.
The value of property the testator gives in partial satisfaction of a
testamentary gift is determined at the earlier of the date when (a) the
beneficiary acquires possession of or enjoys the property or (b) when
the testator dies.
Note the “interesting” placement of this new provision. The Legislature
included the section in the intestacy chapter (Chapter II – Descent and
Distribution) rather than in the chapter dealing with wills (Chapter IV
– Execution and Revocation of Wills).
The Legislature clarified whether a residuary clause will be deemed
to exercise a power of appointment held by the testator. Prob. Code §
58c. [78th Leg., R.S., ch. 1060, § 8 (H.B. 1473), applicable only to
wills executed on or after September 1, 2003.] A residuary clause or a
clause purporting to dispose of all of the testator’s property will
exercise a power of appointment in favor of the will beneficiary only if
one of the following two conditions is satisfied:
(1) The testator makes a specific reference to the power of appointment
in the will.
(2) There is some other indication in a writing (but not necessarily the
will itself) that the testator intended to include the property subject
to the power of appointment in the will.
The methods by which a contractual will may be proved have been
modernized so that the contract may be established by the provisions of
a written agreement that is binding and enforceable as well as the
provisions of the will itself. Prob. Code § 59A(a). [78th Leg., R.S.,
ch. 1060, § 9 (H.B. 1473), effective September 1, 2003.] Prior to this
change, a totally valid contract such as a pre-marital agreement,
post-marital agreement, divorce property settlement, or buy-sell
agreement could exist but because it was on a separate piece of paper,
its establishment was problematic if the will did not state that a
contract existed and list the material provisions of the contract.
The Legislature clarified the law governing pretermitted children.
Prob. Code § 67(a). [78th Leg., R.S., ch. 1060, § 10 (H.B. 1473),
effective only with regard to testators who die on or after September 1,
2003.] A specified method is used to determine the share of a
pretermitted child if the testator made a “provision” for a
non-pretermitted child in the will. The amendment provides that the
testator’s provision may be either vested or contingent.
Proper venue for an action by or against a personal representative
for personal injury, death, or property damages is determined under
Civil Practice & Remedies Code § 15.007. [78th Leg., R.S., ch. 204, §
3.05 (H.B. 4), applicable only to actions filed on or after September 1,
2003.] This change may be a codification of the holding in Reliant
Energy, Inc. v. Gonzalez, 102 S.W.3d 868 (Tex. App.—Houston [1st Dist.]
2003 pet. filed). Because the amendment only discusses venue, however,
uncertainty still remains regarding jurisdiction. In addition, the
courts could broadly interpret the phrase “property damages” to cover
all sorts of injury to the value of property, not just those caused by a
tort such as a motor vehicle accident (e.g., breach of fiduciary duty).
Attorneys fees and costs awarded to a person who in good faith and
with just cause attempts to have a will admitted to probate under
Probate Code § 243 are now included with other administration expenses
as a Class 2 claim. Prob. Code § 322. [78th Leg., R.S., ch. 1060, § 14
(H.B. 1473), effective September 1, 2003.] This change increases the
likelihood of attorneys receiving payment for their services if the
estate is insolvent.
The clerk must now also give notice to the successor representative of
the decedent’s estate if a personal representative who is removed seeks
reinstatement. Prob. Code § 222A. [78th Leg., R.S., ch. 1060, § 12 (H.B.
1473), effective only with regard to applications that are filed on or
after September 1, 2003.]
For decades, Probate Code § 84 has had two subsections labeled “(b)” –
one dealing with proof of a non-self-proved attested written will and
the second addressing proof of a holographic will. At long last, the
Legislature has provided unique letters to these subsections. [78th
Leg., R.S., ch. 1060, § 11 (H.B. 1473), effective September 1, 2003.]
Since the Legislature severed the decedent estate and guardianship
provisions a decade ago, vestiges of guardianship language remained in
Probate Code §§ 222A(b) & 245. The Legislature has now removed this
outdated language. [78th Leg., R.S., ch. 1060, §§ 12 & 13 (H.B. 1473).]
[see
Trust Investment and Allocation Rules:Texas Enters a New Era]
[see
Trust Investment and Allocation Rules:Texas Enters a New Era]
The Texas Legislature codified rules regarding the enforceability of
exculpatory clauses in trusts. [78th Leg., R.S., ch. 1154 (H.B. 3503),
effective for trusts existing on or created after September 1, 2003.]
A settlor is prohibited from relieving a trustee of liability for a
breach of trust committed (1) in bad faith, (2) intentionally, or (3)
with reckless indifference to the interest of the beneficiary. In
addition, the settlor may not permit the trustee to retain any profit
derived from a breach of trust. Prop. Code § 113.059(c).
An exculpatory clause is ineffective to the extent the provision was
included in the trust because of an abuse by the trustee of a fiduciary
duty to or confidential relationship with the settlor. Prop. Code §
113.059(d).
An exculpatory provision in a Chapter 142 management trust will be
enforceable only if the following two requirements are satisfied. Prop.
Code § 142.005(j).
(1) The exculpatory provision is limited to specific facts and
circumstances unique to the property of that trust and is not applicable
generally to the trust.
(2) The court creating or modifying the trust makes a specific finding
that there is clear and convincing evidence that the exculpatory
provision is in the best interests of the beneficiary of the trust.
This new requirement is a reaction to the Texas Supreme Court opinion in
Texas Commerce Bank, N.A. v. Grizzle, 96 S.W.3d 240 (Tex. 2002), in
which the court enforced a boilerplate exculpatory clause in a Chapter
142 trust.
Rules analogous to those for Chapter 142 management trusts now govern
Probate Code § 867 trusts as well. Prob. Code § 868(c).
Rather than having a “reasonable time” to render an accounting after a
beneficiary’s written request, a trustee must now provide the accounting
on or before the 90th day after the trustee receives the demand unless a
court order provides for a longer period. Prop. Code § 113.151(a). [78th
Leg., R.S., ch. 550, § 3 (H.B. 1471), applicable only to a demand for an
accounting made on or after September 1, 2003.]
If the beneficiary is successful in a suit to compel an accounting, the
court now has the discretion to award all or part of the court costs and
all the beneficiary’s reasonable and necessary attorney’s fees against
the trustee in either the trustee’s individual or representative
capacity. Prop. Code § 113.151(a). [78th Leg., R.S., ch. 550, § 3 (H.B.
1471), applicable only to a demand for an accounting made on or after
September 1, 2003.] Note that the section does not seem to permit the
court to award only a part of the attorney’s fees; it appears to be an
“all or nothing” situation unlike with regard to court costs where the
court has the discretion to award “all or part.”
Despite the use of the word “may” in Property Code § 113.082, Texas
courts have held that they must remove a trustee for the specific
reasons enumerated in the statute such as for materially violating the
trust or becoming insolvent. See Akin v. Dahl, 661 S.W.2d 911 (Tex.
1983). The Legislature has changed the statute by adding the phrase “in
its discretion” after the term “may” to make it clear that whether or
not to remove a trustee is always a discretionary decision of the court.
Prop. Code § 113.082.
The court may remove a trustee if the trustee fails to make an
accounting that is required either by law or the terms of the trust.
Prop. Code § 113.082(a)(3). [78th Leg., R.S., ch. 550, § 2 (H.B. 1471).]
A trustee of a charitable trust may not be removed solely on the grounds
that the trustee exercised the trustee’s power to adjust between
principal and income under new Property Code § 113.0211. Prop. Code §
113.082(c). [78th Leg., R.S., ch. 550, § 2 (H.B. 1471).]
Note the unusual effective date provision which provides that this
section applies only to a “demand for an accounting” which is made on or
after September 1, 2003. [78th Leg., R.S., ch. 550, § 4 (H.B. 1471).]
The Legislature probably intended this limitation to apply only to § 3
which deals with accountings
The Legislature enacted three bills impacting statutory probate court
jurisdiction. [78th Leg., R.S., ch. 204, § 3.05 (H.B. 4), applicable
only to action filed on or after September 1, 2003.] [78th Leg., R.S.,
ch. 549, §§ 2-6, 33 (H.B. 1470), applicable only to guardianship
proceedings commenced on or after September 1, 2003.] [78th Leg., R.S.,
ch. 1060, §§ 1-4, 16 (H.B. 1473), applicable only to probate proceedings
commenced on or after September 1, 2003.] Some of the changes are
technical in nature and enhance the readability and understandability of
the Probate Code’s jurisdiction provisions effecting decedents’ estates
and guardianships. Unfortunately, other provisions further complicate
the already confusing nature of statutory probate court jurisdiction.
Perhaps the most significant issue is the determination of proper
jurisdiction for a proceeding involving a testamentary trust. Below are
five possibilities identified by Glenn M. Karisch in 2003 Legislative
Update, at
http://www.texasprobate.com/03leg/03updatepaper.htm.
(1) If the estate is still pending in the statutory probate court which
probated the will creating the trust, the action must be brought in that
court. If the estate is not pending, the action would be brought in the
appropriate district court.
(2) Regardless of whether the estate is still pending in the statutory
probate court which probated the will creating the trust, the action
must be brought in that court. This could result in the probate court
hearing actions regarding testamentary trusts many decades after the
estate was closed.
(3) The action must be brought in the statutory probate court in the
county which has venue as determined by the Trust Code regardless of the
county in which the will was originally probated.
(4) The action may be brought either (a) in the district court or (b) in
the statutory probate court if the estate is still pending or if the
personal representative of an estate is a party to the proceeding.
(5) The action must be brought in the district court unless the estate
is still pending in a statutory probate court or if the personal
representative of an estate is a party to the proceeding.
The Texas Legislature clarified the rights of creditors against
multiple-party accounts. Prob. Code § 442. [78th Leg., R.S., ch. 564, §
1 (H.B. 1590), effective only for multiple-party accounts created on or
after September 1, 2003.] No multiple-party account is effective against
the claim of a secured creditor who has a lien on the account. Any
party, except a convenience signer to a convenience account, may use the
account as collateral without the joinder of any of the other parties.
If the secured creditor is a financial institution, the creditor must
give written notice sent by certified mail that the account was used as
collateral to the other party within thirty days of perfection. However,
notice need not be given to parties who have no current ownership rights
such as P.O.D. payees, trust account beneficiaries, and convenience
signers.
The rules governing convenience accounts were modernized to permit
multiple parties and multiple convenience signers on the same account.
Prob. Code § 438A. [78th Leg., R.S., ch. 658, § 1 (H.B. 2238), effective
only with respect to convenience accounts created on or after September
1, 2003.] This change enhances the usefulness of convenience accounts.
For example, a husband and wife may be parties and designate a child as
a convenience signer or a parent may designate several children as
convenience signers. The Uniform Single-Party or Multiple-Party Account
Selection Form Notice was revised to reflect this change. Prob. Code §
439A. [78th Leg., R.S., ch. 658, § 2 (H.B. 2238), effective only with
respect to convenience accounts created on or after September 1, 2003.]
The Legislature codified various aspects of the law governing the
exercise of powers of appointment. Prop. Code §§ 181.081 - .083. [78th
Leg., R.S., ch. 551, § 2 (H.B. 1472), applicable to any exercise of a
power of appointment on or after September 1, 2003 regardless of when
the power was created.] Unless the power of appointment expressly
provides otherwise, the donee of a power of appointment may do the
following things when exercising the power:
(1) Appoint present, future, or both present and future interests.
(2) Impose conditions and limitations on the appointment.
(3) Impose restraints on alienation.
(4) Appoint interests to a trustee for the benefit of one or more
objects of the power.
(5) Create any right existing under the common law.
(6) Grant the objects of the power of appointment the power to appoint
the property provided that these powers of appointment must be
exercisable only in favor of the objects of the power who would have
been permissible objects under the original donee’s power.
(7) If the donee has the power to appoint outright to the object of the
power, exercise the power to give a power of appointment to the object
of the original power. The donee of the original power becomes the donor
of the second generation power. There are no restrictions on the
identity of the objects of the second generation power; in other words,
these objects do not have to be permissible objects of the original
power of appointment.
The Texas Legislature has now authorized gestational agreements between
a surrogate mother and the intended parents. Fam. Code §§ 160.751 -
.762. [78th Leg., R.S., ch. 457, § 2 (H.B. 729), applicable only to a
motion or other request for relief made in a parentage or paternity
proceeding that is commenced on or after September 1, 2003.] If the
agreement is properly validated, the woman who gave birth to the child
will not be treated as the child’s mother. Accordingly, this child would
not inherit from or through the birth mother. Instead, the mother and
father of the child will be the intended parents and inheritance rights
will accrue accordingly.
Texas now has extensive procedures which must be followed when either
(1) the attending physician wishes to cease life-sustaining treatment
but the patient’s advance directive or medical agent indicates that
treatment should be continued or (2) the attending physician wishes to
continue life-sustaining treatment but the patient’s advance directive
or medical agent indicates that treatment should be withheld. Health &
Safety Code §§ 166.052 - .053. [78th Leg., R.S., ch. 1228, § 5 (S.B.
1320), effective June 1, 2003.] These procedures will assist the patient
in being transferred to a facility willing to comply with the advance
directive or the agent’s instructions.
The types of individuals who may honor a physician’s do-not-resuscitate
order in an out-of-hospital setting has been expanded to include (1)
licensed nurses and (2) anyone providing health care services in an
out-of-hospital setting. Health & Safety Code § 116.102. [78th Leg.,
R.S., ch. 1228, § 7 (S.B. 1320), effective June 1, 2003.] Emergency
medical services personnel responding to a call for assistance, however,
may honor only a properly executed or issued out-of-hospital DNR order
or a prescribed DNR identification device.
An out-of-hospital do-not-resuscitate order may now be executed for a
minor by the minor’s parents, guardian, or managing conservator only if
the minor has first been diagnosed by a physician as suffering from a
terminal or irreversible condition. Health & Safety Code § 116.085.
[78th Leg., R.S., ch. 1228, § 6 (S.B. 1320), effective June 1, 2003.]
In publishing this article, the author is not engaged in rendering
legal, accounting or other professional service. If legal advice is
required, the service of a competent professional should be sought.
© 2003 Gerry W. Beyer