* Estate Guardianship And Administration *

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TX Probate Code: Independent administration

[without court supervision or involvement.]

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1. When provided for in will (any words, however informal) OR

2. If all distributes agree in cases of intestacy or where will does not name independent executor (unless probate judge finds independent administration not in best interest of estate); but if independent executor is named in will, probate court can’t veto

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If a will creates a trust, income beneficiaries must agree on independent administration.

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No need for remaindermen consent.

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If a distributee is minor or incapacitated, guardian agrees

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If no guardian, court appoints guardian ad litem

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Absent provision in the will broadening independent executor’s powers, independent executor has the power to do, without a court order:

Anything a dependent administrator (under court-supervised administration) can be authorized to do with court order.

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Then, can sell real estate, sell personal property, borrow money.
However, the act must relate to:

[1] proper settlement of the estate (e.g., to pay debts, taxes) or
[2] preservation of estate assets

If will doesn't give power of sale, any purchaser from executor has burden to show that executor had authority to sell real or personal property (e.g., to pay debts). If there was enough cash in the estate to pay debts, purchaser is not protected.

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Interested parties are entitled to an on-demand account from an independent executor.

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15 months after will admitted to probate. Successive accountings on demand 12 months after last accounting rendered

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Independent executor may close estate administration by filing a closing report with verified affidavit. Show:

(1) property initially received,
(2) debts and expenses paid; and
(3) names and addresses of distributes

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File for declaratory judgment seeking judicial discharge of independent executor from further liability

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Interested party petition for estate distribution 2 years after appointment of independent executor.

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Merely results in a show case hearing to get the executor in court.

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What must a personal representative (executor if named in will; administrator if named by court) do within 120 days of appointment?

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1) Post fiduciary bond w/in 20 days (unless bonding requirement waived by will)
2) Publish notice of admin in paper of gen circulation w/in 1 month
3) File inventory of estate within 90 days (unless extended by court)
4) Give notice (and copy of will) to named beneficiaries w/in 60 days after admitted to probate **
5) File certificate that notice to beneficiaries was given w/in 90 days

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Circumstances when independent executor may be removed by court for cause

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1) Fails to return inventory w/in 90 days after appointment (unless extended by court)
2) No notice to beneficiaries w/in 60 days after admitted to probate, or fails to file cert that beneficiaries given notice within 90 days
3) Misapplied or embezzled estate property, or cause to believe he is about to do so;
4) Fails to make a required accounting;
5) Is guilty of gross misconduct or mismanagement;
6) Becomes incompetent or is sentenced to penitentiary

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Venue for all probate/guardianship proceedings

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County court.

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In smaller counties with only "constitutional county courts", uncontested matters (routine probate/guardianships) in county courts.

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If a contested matter arises, on motion either (1) a statutory probate judge is assigned or (2) matter is transferred to district court and returned to county court for further administration when contested matter is resolved

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In larger counties with statutory county courts at law, who hears uncontested (routine) matters goes to county court or county court at law.

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Contested matter may be transferred from county court to county court at law (if proceeding wasn’t instituted in that court). District court not involved.

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In larger counties with statutory probate courts, they hear both uncontested (routine) and contested matters?

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District court not involved.

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Estate with securities and real property titled in decedent’s name—estate administration w/least burden and cost w/o appointment of a personal representative

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1. Probate will as a muniment of title (link in chain of title); will and order admitting it to probate constitute muniment that serves same record function as deed. Order can’t be entered unless no unpaid debts (other than homestead mortgage); expenses, debts, etc., should be paid before petition for muniment of title probate filed

2. Statutory heirship proceeding: D died intestate and no need to formally administer estate but formal recognition needed to establish title of successors by inheritance. Judgment states person died intestate, names/addresses of heirs, and shares each is entitled to take

Order entered in statutory heirship proceeding or in a muniment of title probate can be used to collect a bank account in decendent’s name. Bank or other party who pays over in reliance on order is protected as fully as if payment made to decedent’s personal representative

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Small estate administration by affidavit

Used when value of intestate decedent’s probate estate (not counting homestead, exempt personal property) is less than $50k

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Affidavit serves same fxn as letters testamentary granted to executor

Party with affidavit can collect decedent’s assets by furnishing a copy

SEA can be used to clear title to decedent’s homestead (affidavit must be recorded in county where land is located); can only clear title to homestead- no other real property

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Unqualified community administrator

Under TPC Sec 155, W has authority to sell community assets as UCA (didn’t have to qualify in probate court) to pay community debts.

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If sufficient cash on hand to pay community debts, spouse does not have such selling power

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Nonstatutory affidavit of heirship

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Used to clear title to land where owner died years ago and no action taken to clear title then. Affidavits by neighbors or relatives recite facts of family history, etc.

Affidavit filed in county records. TX title insurance companies and title examiners will act in reliance on validity of recitals in the affidavit

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If an independent executor offers will for probate, but denied in will contest on ground of undue influence, executor entitled to attorney's fees from estate for unsuccessful probate attempt.

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IF MADE IN GOOD FAITH

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Temporary administrator

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Can be appointed pending appointment of a permanent personal representative. Powers limited to those granted by the court.

If appointed pending a will contest, appointment continues until contest termination and appointment of a permanent representative. Temporary administration cannot exceed 180 days.

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To show that under a will, estate (land) is devised to a person, what needs to be done?

Put will on record and order to probate (aka, have muniment of title)

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If T died in Oregon and will probated in Oregon, but land owned in Austin, then file certified copies in Austin of will and order admitting it to probate in Oregon.

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BFP who rely on valid court orders are protected.

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Bona fide purchasers.

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Will must be offered for probate within 4 years, unless party offering will for probate shows he was “not in default” for not probating will w/in that period

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Probate allowable if and only if party offering will “is not in default” for failure to probate it earlier, in which case will can be probated as a muniment of title; but no personal representative can be appointed and no estate administration can be opened >4 years after death

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Appointment as personal representative: Hierarchy

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1. Executor named in will
2. Surviving spouse
3. Principal beneficiary named in will
4. Any other beneficiary named in will
5. Next of kin, in nearest order of kinship
6. ** In intestacy, only surviving spouse/next of kin (in nearest order of kinship) would apply

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Who can't be named personal representative

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Minors, incapacitated persons, convicted persons, “a person whom the court finds unsuitable”

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A nonresident can can serve as administrator of TX estate or as guardian of a proposed ward’s estate, but ____..

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He has to appoint resident agent for service of process

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Who has priority in appointment of a temporary administrator?

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Statutory list of priority for appointment of a personal representative n/a. Court can appoint “any suitable person”

Court might want to appoint someone other than next of kin as Temporary Administrator if will contests

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The general test for independent executor is ____.

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Prudence.

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Compensation of executors and administrators is governed by the 5% in, 5% out rule

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1) Absent contrary provision, a personal representative is entitled to a commission of 5% of all sums actually received and 5% of all sums paid out in cash (sale of assets for payments of debts, payments of taxes, income received from estate assets, etc.)

2) Rule doesn’t apply to cash on hand (including bank accounts, CODs) or collection of life insurance proceeds

3) Doesn’t apply to distributions to the beneficiaries or heirs

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Notice requirements for dependent and independent administrations

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Notice for publication: w/in 1 month of appt, personal representative (executor or administrator) must publish notice in a newspaper of general circulation, requiring all persons having claims against estate to present them “within time prescribed by law.”

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PERMISSIVE personal notice is given to unsecured creditors in all administrations

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Personal representative may give personal notice by registered or certified mail to general (i.e., unsecured) creditors having claims for money stating that creditor must present claim w/in 4 months after receipt of notice, otherwise claim will be barred

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Personal notice owed to secured creditors in dependent and independent administrations

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w/in 2 months after being appointed, personal representative must give personal notice by registered or certified mail to secured creditors with valid liens

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Child custody/support issues and divorce action may be transferred to probate court if ____.

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They are matters incident to the guardianship estate

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Duties and rights of the Guardian of the Person

[right to take charge of ward]

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1) Duty to provide care, supervision, and protection for ward
2) Duty to provide clothing, food, medical care and shelter
3) Power to consent to medical and psychiatric treatment

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Right and duty of Guardian of the Estate

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To manage ward’s property, enforce ward’s obligations and bring or defend suits by or against the ward

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If value of child’s entire interest in all of property inherited (not just value of property sold) < $100k, parent (or MC or guardian of person of incapacitated adult) can obtain court order authorizing a sale w/o appointment of guardian

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Sale proceeds are paid into court registry (county clerk)

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Surviving parent may, by will or written declaration, appoint guardian of the parent’s minor children or incapacitated adult child in the event of the parent’s subsequent incapacity or after the parent’s death.

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Court must allow unless find that guardian is dead, disqualified or not w/in child's best interest

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Execution requirements for a written declaration are same as for wills

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1) Can be holographic (wholly in parent’s handwriting and signed by her);

2) If not, must be signed by parent or on her behalf by another person at parent’s direction and in her presence) and witnessed by 2 witnesses aged 14 or older

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Fiduciary bond as condition to serving as guardian of the person may be waived by will.

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Guardian of estate bond cannot be waived.

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Proper venue for appointment of guardian for minor

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County where parents (or MC parent) reside

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Proper venue for appointment of guardian for incapacitated adult

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County where proposed ward resides or where principal estate is located

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Proper venue for appointment of guardian named in parent’s will

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County where will was probated or county where appointee resides

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Who has standing to file a will contest?

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Someone whose economic interest adversely affected by will’s admission to probate

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Anyone has standing to bring a guardianship proceeding

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If bring guardianship proceeding but fails, entitled to recover attorney’s fees from proposed ward’s estate so long as acted in good faith

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CAN'T be appointed guardian

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1) Incapacitated person
2) Conflict of interest (owes money to proposed ward or asserting claim against proposed ward) unless
(a) court determines no conflict or (b) guardian ad litem is appointed
3) Inexperience, lack of education, or other reason makes her incapable of prudently managing proposed ward’s estate
4) Person expressly disqualified before need arises
5) Person convicted of sexual offense, sexual assault, injury to child or elderly person, etc.- not disqualified per se, but presumed not in ward’s best interest

Front 45

An adult for whom a guardian is appointed loses all legal and civil rights and powers granted to his guardian; Probate Code urges limited guardianship whenever possible

Back 45

Order appointing a guardian must specify (1) powers, duties, and limitations of guardians and (2) ward’s funds that can be expended for care w/o court approval

If ward regains some of his cognitive skills, the wards or an interested person can petition to have guardianship modified or terminated

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In an incapacity proceeding, safeguards are imposed to insure full protection of proposed ward’s rights

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1) Court must appoint an attorney ad litem to represent proposed ward (unless already has own attorney)

2) Appoint court investigator (investigates circumstances alleged in petition, determine whether a less restrictive guardianship is ok)

3) Proposed ward must be at trial (unless det unnecessary)

4) Proposed ward (or attorney ad litem) can motion for jury trial; mand.

5) Court does not have to appoint a court visitor (but statutory probate courts must have a court visitor program)

6) May appoint guardian ad litem for proposed ward (discretionary)

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If a guardian is appointed, letters of guardianship (same function as letters testamentary in estate administration proceeding) are valid for 16 mos.

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Policy is annual review as to whether guardianship should be modified or terminated

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Within 60 days after appointment, guardian must do ..

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1) Qualify by taking oath and posting fiduciary bond within 20 days

2) Publish notice of administration in paper of gen circ within 1 month

3) File estate inventory w/in 30 days unless time extended by court

4) File application for monthly allowance to be expended on ward’s behalf w/in 30 days (unless time period is extended by court)

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If guardian of person and estate seeks reimbursement for nursing facility funds, he’s probably entitled to reimbursement if ___.

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There is
(1) clear and convincing evidence that expenditures were reasonable/ proper and
(2) not possible or convenient to get prior court approval

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Court may remove a guardian ex parte (no notice or hearing) if guardian ___.

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1) Fails to qualify [oath and bond w/in 20 days], or file inventory w/in 30 days, or

2) Moves from TX, is absent from TX > 3 month; cannot be served with processes because whereabouts are unknown or is evading service; or

3) Neglected or cruelly treated ward OR has failed to maintain or educate ward OR has misapplied or embezzled assets OR removed assets from TX, if these are shown by Clear and Convincing Evidence!

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The court may remove a guardian but only after notice and hearing if ___.

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1) grounds to believe that she has neglected or cruelly treated ward, failed to educate or maintain ward, or has misapplied or embezzled assets, or has removed assets from TX, OR

2) she is guilty of gross misconduct or mismanagement; OR

3) fails to comply w/court order; or fails to file accountings (or as guardian of the person fails to file her report), required annually

4) OR if she becomes incapacitated, is sentenced to penintentiary, or for some other reason is incapable of properly performing duties

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4 things a guardian can do w/o court order or prior court approval

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1) Retain property received at inception of guardianship or thereafter acquired by gift, will or inheritance, with no duty to diversify and no liability for any resulting depreciation or loss for 1 yr

2) Make investments in assets on statutorily approved legal list of investments consistent with an investment plan approved by court

3) When obtaining prior court approval inconvenient or impossible, may expend amounts >monthly allowance fixed by court, if clear and convincing evidence that expenditures were reasonable and proper

4) Can insure property; pay taxes, court costs, bond premiums; release lien on payment of debt; vote stocks; pay calls and assessments on investments

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Guardian of estate has duty to invest all funds and assets that aren’t immediately needed for ward’s education, support or maintenance.

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1) Manage and invest as prudent person, considering factors like anticipated costs of supporting ward; ward’s age, education, income; and estate size and nature

2) Certain statutorily approved (“legal list”) investments meet this standard: gov bonds; interest-bearing accounts insured by FDIC

3) Guardian who wishes to invest in assets not on legal list must file investment plan with court within 180 days after his or her appointment

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Evidentiary standard as to whether proposed ward is incapacitated and guardian should be appointed is clear and convincing evidence.

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Preponderance of evidence to all other findings.

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Procedural steps for sale of real property in a court supervised administration

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1) File application for sale describing property, creditors’ claims, property on hand to pay creditors, facts showing need to sell for authorized purpose: funeral/admin expenses, debts, family allowance

2) Date for hearing set, and notice to all interested persons

3) Hearing held, at which court orders sale, specifying sale terms

4) Property is sold; sale reported to court within 30 days

5) After notice to interested parties, confirmation hearing; court affirms

6) Personal representative gives deed to purchaser

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Last survivng person names guardian of child (person and estate)

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Presumption (not conclusive) that designated person is in child's best interest.

If not designated by parent, then 1) grandparent, 2) next of kin in nearest degree of kinship.

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For guardian of person and estate of incapacitated adult, last surviving parent in will or other written declaration can be named.

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Person in written, witnessed Designation of Guardian Before Need Arises (prima facie evidence that named serves ward's best interest; may decline to appoint person if court finds unsuitable)

Without such declaration, look to 1) spouse; 2) next of kin in nearest degree of kinship

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What is the general test as to guardian appointment?

Back 58

Best interest of the ward.

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Two can't be appointed co-guardians unless ___.

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1) Husband and wife
2) Joint MCs of child
3) Appointed joint guardians in another state OR
4) Parents of adult incapacitated child

Front 60

Guardian sale of real or personal property of the estate always requires court approval except for sale of securities pursuant to court-approved plan.

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Can be made only to:

1) Pay claims and expenses
2) Maintenance of the ward
3) Unproductive property generating no income
4) *Statuory authorization: home equity loan on ward’s homestead can be made (w/court approval) for (1) improvements or repairs on homestead (2) providing for educational, medical expenses

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Compensation of guardian of person can't exceed 5% of ward's gross income

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Not inclusive of social security or veteran's benefits

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Guardian of estate is entitled to reasonable compensation that includes a fee of 5% of ward's gross income plus 5% of all 'money paid out of the estate" that does not include ___.

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Distributions on settlement of the estate or court-approved tax-motivated gifts.

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Guardianship can be terminated if burdensome in relation to income.

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Another option is to pay into court registry if $100k or less.

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If minor about to receive vast money, have a court-created management trust. If over $150k involved, who must be appointed trustee? Can be drafted as to continue until minor attains age 25.

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** Guardian of estate can also petition for court-created trust for incapacitated adult who inherited substantial until 1) determines trust no longer needed or 2) ward restored to capacity or dies.

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Exculpatory clause relieving trustee from liability for ordinary negligence, can’t be included in court-created trust.

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UNLESS court finds that because of unique circumstances, there is clear and convincing evidence that such a provision is in beneficiary’s best interest

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As guardian of person, can be appointed ___ if person gets a small disability pension.

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Guardian to Receive Funds from Governmental Source

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Temporary guardian may be appointed where there’s substantial evidence that a person or his estate requires immediate appointment of a guardian

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Powers limited to those granted by court. Can't remain in effect for more than 60 days.

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Tax-motivated estate planning is allowable pursuant to statute and requires court approval.

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Guardian of estate can apply order that compels person in possession of ward’s will, trust, or other estate planning document to deliver a copy to the court for inspection for purposes of establishing an estate plan.

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Family allowance: support for surviving spouse, minor children during period decedent’s assets are in administration

Permissible allowance: amount needed for 1 yr support

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Community estate not considered in determining whether spouse awarded family allowance. SP owned by spouse is considered.

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If decendent didn't own a homestead, can take $15k allowance.

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Generally can't opt for $ over house

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In lieu of exempt personal property, surviving spouse/minor children can take $5k allowance.

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To the extent that items on "exempt personal property" list are not in estate at death.

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Probate homestead

Right to occupy (even if homestead was decedent’s separate property) rent-free for life, or for so long as she chooses to occupy it as a homestead, in favor of surviving spouse or minor children

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*Legal owner: pays casualty insurance premiums and mortgage principal payments

*Homestead occupant pays real property taxes and mortgage interest payments

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What are the consequences of qualifying as a homestead?

**2009 statute: conveyance of homestead to revocable trust does not cause loss of creditor protection even though trustee holds legal title

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1) Both spouses must join in conveyance or mortgage of homestead property (even if homestead is one spouses’s separate property)

2) Free from creditors’ claims… except for: Purchase money mortgage lien; Taxes- ad valorem property taxes on the homestead itself; Federal tax liens; Mechanic’s, materialman’s lien for improvements on the homestead where written contract, signed by H and W, entered into before improvements are made, and recorded; Loan to enable parties to divide homestead on divorce; Equity loan (second mortgage loan) for up to 80% of equity value (difference between property’s fair market value and any balance on purchase money mortgage)

3) On owner’s death passes free of creditors’ claims (other than claims listed above) IF owner survived by spouse, minor child, or unmarried adult child who lived with decedent. Exemption attaches even tho homestead passes to someone other than indicated relative.

4) Probate Homestead

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Urban homestead consists of lot or contiguous lots not to exceed ___ acres without regard to value of improvements. Can be mixed use (residence/business).

Back 74

10 acres.

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Rural homestead consists of up to __ acres without regard to value of improvements and need not be contiguous.

Back 75

200 acres

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A single person homestead (not a member of a "family") is capped at __ for urban; __ acres for rural.

Back 76

10 urban; 100 rural.

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After mortgagor's death, secured creditor must follow ___ for collecting debt and cannot ____ without approval unless it's independent administration.

Back 77

1) Statutory procedures

2) Foreclose

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Emergency intervention to pay funeral expenses and to protect property in rental unit can be taken no sooner than 3 days and no later than 90 days after d’s death.

Back 78

Anybody can file application as long as no application for personal representative appointment or small estate administration is pending

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Estate is an entity that cannot be sued.

Back 79

Must bring action against personal representative.

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In dependent administration, general creditor must file an authenticated claim supported by an affidavit w/probate court or administrator.

Administrator must write a memo allowing or rejecting claim w/in 30 days. If doesn’t take action on claim within 30 days, conclusive presumption is that claim has been rejected.

Back 80

If the claim is allowed and approved by the court, it is paid.

If claim is disallowed, creditor must file suit on the claim w/in 90 days after it is rejected; if he fails to do so the claim is barred (short SOL).

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In a dependent administration, a creditor cannot bring an action on a “claim for money” unless claim is first presented to the administrator and rejected by the court. However, this rule does not apply to ___

Back 81

Unliquidated or contingent claims.

Front 82

In an independent administration, executor must give notice by publication and personal notice to secured creditors.

May give permissive personal notice to general creditors, but the above rules governing presentment of claims do not apply.

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Failure to formally present a claim does not affect creditor's right to bring an action on the claim.

Front 83

If decedent was personally liable on a note secured by a mortgage, secured creditor can present claim for payment out of estate's general assets even if the note is not yet due within (1) 6 months from date of personal representative’s appointment or (2) 4 months after receipt of personal notice, whichever is later

Back 83

If secured creditor fails to file its claim as a matured secured claim within the prescribed period, it is classified as preferred debt and lien. Result is that can foreclose but no deficiency judgment.

Front 84

Advantage of preferred debt and lien

Back 84

Bank’s money from foreclosure sale has priority over all claims including Class 1 funeral expenses, family allowance and class 2 administration expenses.

Important if estate insolvent.

Front 85

What extent do procedures applicable to creditors’ claims in a dependent administration apply in guardianship of incapacitated person?

Back 85

Need notice by publication.

No permissive personal notice to unsecured creditors requiring presentation of claims for money within 4 months of receipt of notice, otherwise claim is barred.

Mandatory permanent notice to all known creditors (guardianship).

Personal notice to secured creditors, who have same options (matured secured claim versus preferred debt and lien) as in an estate administration.

Front 86

Priority of claims against an estate

** IRS claim for unpaid federal income taxes takes priority over all claims except funeral and last sickness expenses and expenses of administration

Secured creditor with preferred debt and lien takes 100% of foreclosure sale proceeds; then:

Back 86

Class 1: Funeral expenses and expenses of last illness, up to $15k. This is only claim that take priority over the family allowance
Class 2: Administration expenses
Class 3: Secured claims, to extent covered by lien (if creditor filed a “matured secured claim”)
Class 4: Child support arrearages reduced to judgment
Class 5: State taxes
Class 6: Claims for repayment of Medicaid assistance paid by state
Class 7: Cost of confinement if decedent imprisoned in TX prison
Class 8: All other claims, including funeral, last sickness expenses in excess of $15k

Front 87

If estate is partially insolvent, residence may qualify for homestead exception

Back 87

Furnishings, car, cattle, etc. (up to $60k) qualify for exempty personal property set-side. Limit on jewelry can’t exceed $15k (25% of $60k amount).

If the estate is insolvent, the set-aside is permanent, and spouse gets to keep the property

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If estate is solvent, exempt property set-aside is only __, after which the personal property passes under the decedent’s will or by intestacy.

Back 88

Temporary, during the period of estate administration