Probate inventory may be kept private
This is one of a series of posts about 2011 legislation.
The 2011 legislative change that is likely to have the biggest impact on Texas probate lawyers is SB 1198’s amendment to Section 250 of the Probate Code permitting independent executors to file an affidavit in lieu of an inventory, appraisement and list of claims if there are no unpaid debts, except for secured debts, taxes and administration expenses, at the time the inventory is due. The public disclosure of information in the inventory is unpopular with clients and drives some Texans to use a living trust-based plan when a will otherwise would suffice.
Here are the particulars of the change:
Only independent executors and independent administrators are permitted to file an affidavit in lieu of an inventory. Dependent administrators must file a public inventory.
The affidavit may be used if there are no unpaid estate debts, other than secured debts, taxes and administration expenses, at the time the inventory is due. If the independent executor can pay all unsecured debts between the date he or she qualifies and the due date of the inventory, the independent executor can avoid the public disclosure of inventory information.
The change does not mean that it no longer is necessary to prepare an inventory. The independent executor still must prepare a verified, full and detailed inventory and deliver it to each estate beneficiary.
Any person interested in the estate – specifically including a possible heir of the decedent or a beneficiary named in a prior will – is entitled to receive a copy of the inventory on request. The independent executor is protected from liability to the estate or its beneficiaries if he or she provides a copy of the inventory to a person the independent executor believes in good faith “may be” a person interested in the estate. If the independent executor refuses to give a person a copy of the inventory, he or she may apply to the court to compel the independent executor to do so.
The change to Section 250 necessitates changes to a number of related sections. An independent executor may be removed if he or she fails to file an inventory or the affidavit in lieu of aninventory (Section 149C). Successor independent executors also may file an affidavit in lieu of an inventory (Section 227). If additional property or claims are discovered, the independent executor either must file a supplemental inventory or a supplemental affidavit in lieu of an inventory (Section 256). The setting apart of exempt property (Section 271), the setting of the family allowance (Section 286) and the sale of property to raise funds for the family allowance (Section 293) are tied to the filing of the inventory or an affidavit in lieu of an inventory.
While Section 250 permits the independent executor to choose to file an inventory or an affidavit in lieu of an inventory, beneficiaries may believe that the independent executor has breached his or her duties if (a) he or she fails to use the affidavit in lieu of an inventory if the estate is eligible to do so and (b) he or she fails to quickly pay the decedent’s unsecured debts (if it is possible to do so) in order to make the estate eligible for the affidavit in lieu of inventory. It may be hard for the independent executor to justify making an unnecessary public disclosure of asset information.
This change should make will-based plans more popular. Clients still may wish to use living trusts for other reasons (out-of-state real property, disability planning or fear of a will contest, for example), but they may not have to forego a will-based plan merely to avoid a public disclosure of information.
An affidavit in lieu of an inventory may be used for the estates of decedents dying on or after September 1, 2011. For persons who died before September 1, 2011, an inventory must be filed, even if the inventory is filed after September 1, 2011.