Changes to forms effective September 1, 2015

As usual, the biennial session of the Texas legislature requires attorneys to update forms in the estate planning, probate, guardianship and trust areas.  Since most of the bills passed in 2015 became effective September 1, 2015, the new forms should be used beginning on that date.

Here is a collection of statutory changes which require form changes.  Also, Bill Pargaman, chair of the Real Estate, Probate and Trust Law Section of the State Bar of Texas, has prepared this list of important changes to note on September 1, 2015.

One-signature combo self-proving affidavit forms

The one-signature combination will and self-proving affidavit form has been changed to correct the tenses of the verbs.  Tex. Est. Code §251.1045(a).  The verb tenses also were corrected in the one-signature combination declaration of guardian and self-proving affidavit forms.  Tex. Est. Code §§1104.154 and 1104.205.

Directive to Physicians and Family or Surrogates

The statutory Directive to Physicians and Family or Surrogates form was revised slightly, including changing the term “artificial nutrition and hydration” to “artificially administered nutrition and hydration.”  Tex. Health and Safety Code §166.033.  

Word and pdf versions of the new form may be found among the disability planning forms on this website.

Appointment for Disposition of Remains

The statutory Appointment of Agent for Disposition of Remains form (Tex. Health and Safety Code §711.002) was renamed the “Appointment for Dispositions of Remains” and revised extensively. It no longer includes blanks in the body of the document for the agent to sign to accept appointment.  Rather, it provides that the instrument is valid without the signature of agents or successor agents.  At the end of the form it provides a place for the agent to accept the appointment before acting as agent. The agent’s signature after the principal’s death makes the instrument legally sufficient. Also, it automatically revokes the authority of an ex-spouse on divorce.    

Section 711.002 now includes the duly qualified executors and administrators of a decedent’s estate in the order of persons having the right to control the disposition of the decedent’s remains and provides that an executor or administrator is not personally liable for the reasonable cost of interment.

Word and pdf versions of the new form may be found among the disability planning forms on this website.

Application to probate will

In the application to probate a will, the applicant must state the date of death, not the time of death.  If the original will is not produced in court, the applicant is no longer required to state the age and marital status of each devisee or heir, but he or she must state whether or not the devisee or heir is an adult or minor.  Tex. Est. Code §§256.052 and 256.054.  If the application is to probate the will as a muniment of title, the applicant also must state the name, state of residence, and physical address where service can be had of the executor named in the will, as well as the name of each subscribing witness.  The residence address of the executor and witnesses no longer needs to be included.  Tex. Est. Code §257.051.

Application for letters of administration

In the application for letters of administration, the applicant must state the date of death, not the time of death, and the applicant is no longer required to state the age and marital status of each heir, but he or she must state whether or not the heir is an adult or minor.  Tex. Est. Code §§301.052.

Determination of heirship

In the application for determination of heirship, the applicant must state the date of death, not the time of death, and the applicant must state the physical address where service may be had of each heir and must state if each heir is an adult or a minor.  Tex. Est. Code §202.005.  Also, Sections 202.055 and 202.056 were amended to make it clear that a party may waive citation in an heirship proceeding and that no service is required on a party who enters and appearance in an heirship proceeding.  The judgment declaring heirship no longer needs to state the places of residence of heirs; it only must state their names.  Tex. Est. Code §202.201.

Affidavit or certificate of compliance with notice to beneficiaries requirement

The independent executor or his or her attorney is required to sign and file an affidavit or certification confirming compliance with the notice to beneficiary requirements of Section 308.002. Now the affidavit or certification no longer is required to state the addresses of beneficiaries. Tex. Est. Code §308.004.

Small estate affidavits

Previously a small estate affidavit had to include a list of all known estate assets and liabilities.  Now that list must indicate which assets the applicant claims are exempt.  Tex. Est. Code §205.002.  Section 205.009 was added to state that references to “homestead” or “exempt property” means only a homestead or other exempt property that would be eligible to be set aside under Estates Code Section 353.051 if the estate was being administered.  This means that, in the case of a homestead, there must be a surviving spouse or minor child and, in the case of exempt   property, there must be a surviving spouse, minor child, unmarried adult child remaining with the family or adult incapacitated child.

Disclaimers

The new Texas Uniform Disclaimer of Property Interests Act has new requirements for disclaimers and trustee notices.  Glenn Karisch's, Tom Featherston's and Julia Jonas's paper explaining the new act is available here, while Word and pdf versions of forms are available here.

Applications, reports and orders in guardianships

See the discussion of the three big changes in guardianships above for changes in applications, reports and orders in guardianships.

Physician’s certificate in guardianships

The physician’s certificate required before a guardianship may be created must state whether improvement is possible and, if so, when the proposed ward should be reevaluated.  Tex. Est. Code §1101.053.

The new Texas Uniform Disclaimer of Property Interests Act

The Texas Legislature enacted the Texas Uniform Disclaimer of Property Interests Act. Unless vetoed by Governor Abbott on or before June 21, 2015, the act will become effective on September 1, 2015.  Here is an updated version of the paper on the new disclaimer act by Glenn Karisch, Tom Featherston and Julia Jonas being presented June 10, 2015, to the Advanced Estate Planning and Probate Law Course in Dallas.  Here are forms drafted for use with the new disclaimer act.

More later. Enjoy!

Other trust law changes

The following is part of a series of posts on 2013 Texas probate, guardianship and trust law legislation.  The changes  became effective September 1, 2013.  For information on other changes, go to the 2013 Legislation page.

The big change affecting trust law in 2013 was decanting, which is discussed in a prior post.  Here are other miscellaneous trust law changes which became effective September 1, 2013:

1. Creditor Protection for Trusts Appointed Back to Settlor.  Trust Code Section 112.035 was amended to grant spendthrift trust protection in cases where a beneficiary uses a power of appointment to appoint property in trust for the settlor.  In those cases, the trust assets enjoy spendthrift protection from the original settlor’s creditors.  Section 112.035(d)(2), (g) and (H). 

2. Corporate Trustees May Purchase Insurance from Affiliates.  Trust Code Section 113.053(f) was amended to permit a corporate trustee to purchase insurance from an affiliate so long as the insurance product and premium are the same or similar to a product or premium offered by nonaffiliates.  The corporate trustee taking this action is expressly subject to fiduciary duties.

Problems with the Texas disclaimer laws

Texas's two disclaimer statutes (Texas Estates Code Chapter 122 and Texas Trust Code Section 112.010) have some problems.  Glenn Karisch and Julia Jonas of Austin presented a paper on Problems with Texas Disclaimer Laws and What to Do About Them at the Advanced Estate Planning and Probate Course in San Antonio June 11, 2014.  Here are links to the paper and the related Powerpoint slides (updated August 19, 2014).

The Real Estate, Probate and Trust Law Section has approved inclusion of the Texas Uniform Disclaimer of Property Interests Act in its 2015 legislative package.  A copy of the current draft of that legislation is attached to the paper.

Decanting

The following is part of a series of posts on 2013 Texas probate, guardianship and trust law legislation.  The changes  became effective September 1, 2013.  For information on other changes, go to the 2013 Legislation page.

The modernization and liberalization of Texas trust law that began with enactment of the two UPIAs (the Uniform Prudent Investor Act and Uniform Principal and Income Act) in 2003 continued in 2013 with enactment of Texas’s first default decanting statute.  New Subchapter D of Chapter 112 of the Trust Code (Sections 112.071 – 112.087) permits a trustee to distribute trust principal “in further trust” in some cases.

Several states have preceded Texas in permitting trustees to move property from one trust to another even if the first trust does not expressly authorize the move.  Since it is always better to use an obscure word when one is available rather than a word that is easy to understand, these statutes are known as “decanting” statutes.  They permit the trustee to “decant” (pour) principal from one trust into another if the conditions stated in the statute are met.

Trustees have used decanting statutes in other states to fix problems in irrevocable trusts.  For example, the trustee of a trust with archaic administrative provisions may use the statute to move trust property into a new trust with modern administrative provisions.  Of course, it is not always clear that the problem is a “problem” at all, nor that the settlor of the trust would want it to be “fixed” in this way.

Under prior law, there was no default statutory decanting provision that applied if the trust instrument was silent, but the settlor could provide for decanting in the trust instrument.  Under the new law, the settlor may expressly provide for decanting or expressly prohibit decanting.  If the trust instrument is silent, then the new decanting rules apply.

The Texas statute distinguishes between “full discretion trusts” and “limited discretion trusts.” In a full discretion trust, the trustee’s power to distribute is not limited in any manner.  In limited discretion trusts, the power to distribute is limited in some way.  HEMS trusts – trusts permitting the trustee to distribute property for the beneficiary’s health, education, maintenance and support – are “limited discretion trusts” under the Texas statutes.

Under the decanting statute, the trustee may distribute principal from a full discretion trust to another trust for the benefit of one or more of the current beneficiaries of the first trust.  Also, the trustee may give a wholly discretionary beneficiary a broad power of appointment.  The justification for these actions is that, if the trustee could distribute the entire principal to a beneficiary, the trustee ought to be able to make that distribution in further trust with new rules for a beneficiary.

In order to decant from a limited discretion trust, the current beneficiaries of both trusts must be the same, the successor and remainder beneficiaries of both trusts must be the same, and the distribution standard of both trusts must be the same.  Due to these limitations, it is likely that the decanting power in limited discretion trusts will be useful only for administrative changes.

When decanting, the trustee must act in good faith, in accordance with the terms and purposes of the trust and in the interests of the beneficiaries.  In no case is the trustee deemed to have a duty to decant.  The power to decant is reduced to the extent it would cause any intended tax benefits to be lost.

The trustee may not use decanting to take away a beneficiary’s mandatory distribution right, materially impair the rights of any beneficiary, materially lessen the trustee’s fiduciary duty, decrease the trustee’s liability or exonerate the trustee, or eliminate another person’s power to remove the trustee.

Significantly, the trustee may not modify the applicable rule against perpetuities period, “unless expressly permitted by the terms of the first trust.”  This eliminates one of the key reasons why a trustee may wish to decant.  Still, this gives Texas estate planning attorneys a drafting tip:  in appropriate cases, include language in the trust instrument making it clear that the perpetuities period may be modified by decanting.  In most cases, there is very little downside to doing this, since most clients have not given a lot of thought to the vested remainder beneficiary rights of their unborn remote descendants when they create trusts.

The trustee must give 30 days’ written notice to current beneficiaries and presumptive remainder beneficiaries.  If a charity is a beneficiary, the notice also must be given to the attorney general.  If no one objects during the 30-day notice period, the trustee may decant without judicial approval, although the trustee may seek judicial approval if desired.  If a beneficiary other than the attorney general objects, the trustee may seek judicial approval but is not required to do so.  If the attorney general objects, the trustee must seek judicial approval before decanting.

The trustee may not decant without judicial approval solely to change the trustee compensation provisions.  However, the trustee may change compensation provisions without judicial approval if the change is in conjunction with other changes for which there are valid reasons, so long as the change does not provide for unreasonable compensation under Texas law.

Except as otherwise provided in the trust instrument, the decanting provisions apply to trusts existing or created on or after September 1, 2013.  Interestingly, the effective date provision states that the Legislature intends the decanting provisions “to be a codification of the common law of this state in effect before the effective date of this Act.”  The Legislature does not get to say what the law was before it enacts a statute, but this is an attempt to bolster the argument that there already existed a common law power to decant in Texas.

2013 Legislation

The 83rd Texas Legislature ended its regular session May 27, 2013.  Some probate, trust and guardianship legislation became effective September 1, 2013, but many provisions will not become effective until January 1, 2014, when the new Estates Code takes effect.  

Useful links: 

• Texas Legislature Online.

• Bill Pargaman's 2013 Legislative Update on the Saunders Norval Pargaman & Atkins resources page -- all the bills, all the time.

• Glenn Karisch's 2013 Legislative Update in pdf format.

Here are summaries of the most significant changes:

• The Estates Code

• Substantive Changes Related to Estates Code Enactment

• New Statutory Durable Power of Attorney Form

• New Medical Power of Attorney Form

• Decanting

• Texas Law on Nontestamentary Transfers Applies to Out-of-State Accounts

• Burden of Proof in Will and Trust Forfeiture Cases

• Changes Affecting Ad Litems in Decedents' Estates and Guardianships

• Miscellaneous Decedents' Estates Changes

• Miscellaneous Guardianship Changes

• Miscellaneous Trust Law Changes

2013 Texas Legislative Update

Glenn Karisch's 2013 Texas Legislative Update is now available in pdf format here.  Bill Pargaman's more extensive legislative update is available on the Saunders Norval Pargaman & Atkins resources page here.

Resources about the 2013 changes may be found on Texas Probate's 2013 Legislation page.  The change that estate planning, probate and trust lawyers will notice most is the new Estates Code, which replaces the Probate Code effective January 1, 2014.  There also was a significant change to the Trust Code permitting decanting of trusts.

Two statutory forms changed, effective for use beginning January 1, 2014. See current forms here.

See Glenn Karisch's musings about the new statutory durable power of attorney form here.

The most significant 2013 changes will be summarized in a series of posts following this one.  Most of the changes become effective January 1, 2014, although some (particularly the trust law changes) become effective September 1, 2013.

Miscellaneous Trust Law Changes

1. Creditor Protection for Trusts Appointed Back to Settlor.  Trust Code Section 112.035 was amended to grant spendthrift trust protection in cases where a beneficiary uses a power of appointment to appoint property in trust for the settlor.  In those cases, the trust assets enjoy spendthrift protection from the original settlor’s creditors.  Section 112.035(d)(2), (g) and (H). 
2. Corporate Trustees May Purchase Insurance from Affiliates.  Trust Code Section 113.053(f) was amended to permit a corporate trustee to purchase insurance from an affiliate so long as the insurance product and premium are the same or similar to a product or premium offered by nonaffiliates.  The corporate trustee taking this action is expressly subject to fiduciary duties.

Miscellaneous Guardianship Changes

1. Information Letters.  There was much hubbub in this session about guardianship proceedings resulting from information letters presented to the court by family members or third parties under prior Probate Code Section 683A.  After the dust settled, the successor to that section (Estates Code Section 1102.003) was amended to require information letters submitted by family members of the proposed ward to be sworn to before a notary public or include a written declaration under penalty of perjury that the information is true to the best of the person’s knowledge.  This requirement does not apply to non-family members.
2. Management Trusts for Disabled Persons.  Guardianship management trusts (formerly known as 867 trusts) were overhauled to make it easier for a person suffering a physical disability only to apply for and benefit from a trust.  Persons suffering a physical disability only may benefit from a management trust in order to qualify for government benefits.  Since they do not lack mental capacity, they do not need the protections built into the management trust statutes.  Therefore, while ad litems are permitted (and may be necessary for some government benefits programs, since the applicant for benefits may not be able to apply for creation of his or her own management trust), they are not required.  Tex. Est. Code Sec. 1301.054 (c-1).  Also, corporate trustees are not required for management trusts for persons suffering a physical disability only (Section 1301.057(b)), a bond is not required, trustee compensation need not be approved by the court (Section 1301.101(a-1)), and accountings need not be filed with the court (Section 1301.154(d)).
3. Changes in Orders Appointing Guardians.  If a guardian of the person is given the right to have physical possession of the ward and to establish the ward’s legal domicile, the order appointing the guardian must contain a conspicuous statement addressed to Texas peace officers stating that the officer may use reasonable efforts to enforce the right of the guardian of the person to have physical possession of the ward or to establish the ward’s legal domicile.  Tex. Est. Code Sec. 1101.151(c) and 1101.152(c).

Miscellaneous Decedents’ Estates Changes

1. Proceedings to Probate Wills.  The application to probate a will no longer must list the residence address of the applicant.  Rather, the state of residence and a physical address where service can be had must be stated.  Tex. Est. Code Sec. 256.052(a).  Only the name of the subscribing witness must be stated – the address no longer is required.  Sec. 256.052(a).  In 2011, Section 84 of the Probate Code was amended to make it easier to establish that a will executed in another jurisdiction is self-proved if it was eligible to be treated as a self-proved will under the law of the state of execution.  In addition, the 2011 change created a safe harbor for self-proved wills meeting the Uniform Probate Code requirements.  Tex. Prob. Code Sec. 84(a)(2).  That portion of Section 84 was not expressly limited to wills executed outside Texas, making it possible to argue that a Texas-executed will could be made self-proved by complying with Section 84(a)(2) rather than the more orthodox Section 59.  The successor to Section 84(a)(2) has been amended to make it clear that the UPC-based safe harbor only applies to wills executed outside Texas.  Tex. Est. Code Sec. 256.152(c).
2. Inventories and Affidavits in Lieu of Inventory.  In 2011, the Legislature began permitting independent executors of estates with no debts (other than secured debts, taxes and administrative expenses) to file an affidavit in lieu of an inventory.  This removed a significant disadvantage of will-based plans, since public disclosure of assets is avoided.  Some courts refused to allow affidavits if the will contained the language from Probate Code Section 145(a) enabling independent administration because that language referred to the “return of an inventory….”  Section 309.056(b) has been amended to permit an affidavit in lieu of inventory if the other requirements are met notwithstanding a contrary provision in the will that does not specifically prohibit the filing of the affidavit.  Subsection (d) was added to Section 309.056 to provide that the independent executor is not liable for choosing to file an inventory or an affidavit in lieu of inventory.  Section 309.057 was added to permit the court to fine the personal representative up to $1,000 for failing to file an inventory or affidavit in lieu of inventory after being cited to appear and failing to show good cause.  Section 309.103 was amended to clarify that the court retains jurisdiction of a probate estate if an interested person who considered the affidavit in lieu of inventory filed by an independent executor to be erroneous or unjust files a written complaint.
3. Homestead, Exempt Property and Family Allowance.  An amendment to Section 102.004 of the Estates Code clarifies that the homestead of a decedent is not liable for the payment of the estate’s debts (other than mortgage debt or taxes due on the homestead) if the decedent was survived by a spouse or a minor child.  Previously there was confusion about whether an unmarried adult child entitled the estate to homestead exemption or if the spouse or minor child had to be occupying the homestead in order for the exemption to arise.  Now it is clear that an unmarried adult child does not trigger homestead exemption and that the exemption is not dependent upon the occupancy of the surviving spouse or minor child.  The allowance in lieu of a homestead was raised from $15,000 to $45,000 and the allowance in lieu of other exempt property was increased from $5,000 to $30,000. Tex. Est. Code Sec. 353.053.  In 2011, the family allowance was extended to the decedent’s adult incapacitated child.  This session the Legislature clarified that the family allowance for an adult incapacitated child is not made if, at the time of the decedent’s death, the decedent was not supporting the adult incapacitated child.  Tex. Est. Code Sec. 353.101(d)(3).
4. Heirship Proceedings.  An heirship proceeding may be brought at any time after the decedent’s death.  There is no four-year limitations period as in the case of probating a will.  Tex. Est. Code Sec. 202.0025.  Among other possible applicants, any creditor may bring an heirship proceeding, not just a secured creditor.  Tex. Est. Code Sec. 202.004. An attorney ad litem representing the interests of heirs whose names or locations are unknown is required (see the discussion of ad litems above).  The applicant for an heirship is required to file an affidavit of service of citation before the court may act on the application.  Tex. Est. Code Sec. 202.057.  Testimony in an heirship proceeding must be taken in open court or by deposition, and the court may require it to be reduced to writing.  Tex. Est. Code Sec. 202.151.
5. Section 294(d) Notices (now Section 308.054 Notices).  The deadline for responding to a permissive notice to an unsecured creditor has changed from “within four months” to “before the 121^st day.”  Tex. Est. Code Sec. 308.054(b).  This is a big deal because the form of the notice must contain the 121^st day language in order to be effective.
6. Accounting and Distribution by Independent Executor.  There was some question under prior law if Section 149B(b) required the court to order property incapable of division to be sold or if the court could order distribution of the property in undivided interests.  The successor to Section 149B (Estates Code Section 405.001(b)) was amended to make it clear that the court may choose to order the sale of property incapable of division or to order it distributed in undivided interests.
7. Disclaimers by Child Support Obligors.  A disclaimer now must state that the disclaimant is not a child support obligor, or if he or she is a child support obligor, that he or she owes no child support arrearages.  Tex. Est. Code Sec. 122.107.  If the disclaimant owes child support arrearages, the disclaimer is not effective to avoid that obligation.
8. Public Probate Administrators.  With a county commissioners’ court approval (and, therefore, with county funding), a statutory probate judge may appoint a “public probate administrator” who has various rights, duties and standing.  Chapter 455 of the Estates Code.

Changes Affecting Ad Litems in Decedents’ Estates and Guardianships

Various amendments clarify when an attorney ad litem or guardian ad litem may be appointed, whom the ad litem may represent and how the ad litem is compensated.

1. An attorney ad litem in a decedent’s estate case now may be appointed to represent the interest of “any person,” including a person with a disability under state or federal law, a nonresident, an unborn or unascertained person, an unknown heir, a missing heir, or an unknown or missing person for whom cash is deposited into the court’s registry.  The court is required to tax the ad litem’s compensation as costs in the probate proceeding and order the compensation to be paid out of the estate or by any party at any time during the proceeding.”  If the ad litem is appointed for an unknown or missing person for whom cash is deposited in the court’s registry, the court may order that the compensation be paid from the cash on deposit.  Tex. Est. Code Sec. 53.104.  Prior to this change, some courts had taken the position that the attorney ad litem could not be paid until the conclusion of the case, when the expenses could be taxed as costs.  This change also clarifies that the estate or any party may be tagged with paying the ad litem’s compensation, permitting the court to assess those costs disproportionately against a deleterious party.
2. In contrast, in a guardianship case, the court is required to appoint an attorney ad litem to represent a proposed ward’s interests in a proceeding for the appointment of a guardian, Tex. Est. Code Sec. 1054.001, while the court may appoint an attorney ad litem in any guardianship proceeding to represent the interests of an incapacitated person or another person who has a legal disability, a proposed ward, a nonresident, an unborn or unascertained person or an unknown or missing potential heir.  Tex. Est. Code Sec. 1054.007(a).  An attorney ad litem appointed under Section 1054.007 (the discretionary appointment section) is entitled to reasonable compensation for services provided in the amount set by the court, “to be taxed as costs in the proceeding.” Section 1054.007(b).   Tex. Est. Code Sec. 1155.054 and 1155.151 were amended to permit the court to order any party to pay the applicant’s fees and the compensation of all court-appointed personnel (including ad litems) upon a finding that the party acted in bad faith or without just cause in prosecuting or objecting to an application in the proceeding.  Section 1155.151(a) permits the court to set the cost of court-appointed personnel (including ad litems) in an amount the court considers equitable and just, to be paid from the guardianship estate or by the county if the estate is insufficient (unless the court makes the bad faith/without just cause finding and assesses costs against a party).
3. In heirship proceedings, the statute now clearly states that the court must appoint an attorney ad litem to represent the interests of heirs whose names or locations are unknown.  Tex. Est. Code Sec. 202.009(a).  The court is permitted but not required to expand the attorney ad litem’s appointment to include representation of an incapacitated heir on a finding that the appointment is necessary to protect the interests of the heir. Sec. 202.009(b).

Burden of Proof in Will and Trust Forfeiture Cases

Under former law, a provision in a will or trust that would cause a forfeiture of or void a devise or provision in favor of a person for bringing a court action, including a will or trust contest, was “unenforceable if” just cause existed for bringing the action and the action was brought and maintained in good faith.  (Tex. Prob. Code Sec. 64; Tex. Trust Code Sec. 112.038).  It seemed clear from the Texas Pattern Jury Charges and general practice that, under former law, the party wishing to avoid application of a forfeiture provision had the burden of proof on the just cause and good faith issues.  See, for example, PJC 235.8B (2012).  However, the proponents of HB 2380 used the burden of proof issue, among others, to advocate for changes to the current statute.  As changed, the statutes now read that a forfeiture provision “is enforceable unless in a court action determining whether the forfeiture clause should be enforced, the person who brought the action contrary to the forfeiture clause establishes [just cause and good faith] by a preponderance of the evidence.”  Tex. Est. Code Sec. 254.005; Tex. Trust Code Sec. 112.038).

Whether or not it was necessary, this clearly places the burden of proof on the just cause/good faith issues on the party seeking to avoid enforcement of the forfeiture provision.  It also means that the party seeking to avoid enforcement probably needs to plead just cause and good faith in the underlying lawsuit to assure that these issues are submitted to the jury in the underlying action.  Otherwise, a second trial on the forfeiture issue alone may be necessary.  It may seem odd that a party contesting an instrument would affirmatively seek a determination that the party’s action does not result in forfeiture, but failure to do so could cause a huge waste of time and energy if a separate later trial was necessary on the forfeiture issue alone.

Just cause and good faith are not the only reason courts have refused to enforce forfeiture provisions.  A recent Texas opinion found 12 types of lawsuits where Texas courts have concluded that an in terrorem clause did not trigger forfeiture:  (1) to recover an interest in devised property; (2) to compel an executor to perform duties; (3) to ascertain a beneficiary's interest under a will; (4) to compel the probate of a will; (5) to recover damages for conversion of estate assets; (6) to construe a will's provisions; (7) to request an estate accounting or distribution; (8) to contest a deed conveying a beneficiary's interest; (9) to determine the effect of a settlement; (10) to challenge an executor appointment; (11) to seek redress from executors who breach fiduciary duties; and (12) presenting testimony in a will contest brought by other beneficiaries. DiPortanova v. Monroe, 2012 WL 5986448 (Tex. App. – Houston [1^st Dist.] 2012).  For a while it appeared that, by changing “unenforceable if” to “enforceable unless,” HB 2380 unintentionally might have thrown out these other reasons for finding that a forfeiture provision did not result in forfeiture.  This flaw was discovered too late in the legislative process for an amendment to HB 2380, so the following was read into the Senate Journal when HB 2380 passed:

House Bill 2380 seeks to clear up the law on forfeiture clauses, which are frequently used provisions in wills and trusts. Legislation that passed in 2009 sought to clear up the inconsistent application of forfeiture clauses by recognizing that a forfeiture clause is invalid if the challenge to a will or trust is brought in good faith and with probable cause. However, questions remain in which party has this burden of proof. House Bill 2380 continues to recognize the good faith and just cause exceptions to the enforcement of forfeiture clauses but clarifies that the burden of proof is on the party seeking to avoid enforcement of the forfeiture clause. House Bill 2380 is not intended to and does not repeal Texas law, recognizing that forfeiture clauses generally will not be construed to prevent a beneficiary from seeking to compel a fiduciary to perform his duties, to seek redress against a fiduciary for breaches of his duties, or to seek a judicial construction of a will or trust.

Senate Journal, 83^rd Legislature – Regular Session, 61^st day (5/17/13), pp. 1962-1963 (emphasis added).  With this legislative history, HB 2380 should be construed to have no effect on the other bases for finding that an in terrorem provision does not result in forfeiture.

Texas Law on Nontestamentary Transfers Applies to Out-of-State Accounts

In McKeehan v. McKeehan, 355 S.W.3d 282 (Tex. App. – Austin 2011, writ denied), the appellate court applied Michigan law to determine that an account owned by Texans passed by right of survivorship.  The account was in a Michigan financial institution.  The agreement governing the administrative aspects of the account was governed by Michigan law.  The agreement did not have the language required by Texas law to create a right of survivorship, but the court found that it met the Michigan standard.

The Legislature responded with Section 111.054 of the Estates Code.  Under the new law, if more than 50 percent of the money or property in an account at a financial institution or in a retirement account is owned by one or more persons domiciled in Texas, or if more than 50 percent of the interest in an insurance contract, annuity contract, beneficiary designation or similar arrangement, is owned by one or more persons domiciled in Texas, then Texas law will be applied to determine if a nontestamentary transfer occurred notwithstanding a choice of law or similar provision in an agreement prepared or provided by the financial institution  or other contracting third party.

The new provision does not apply to an obligation owed by the account holder to the financial institution, or vice versa.

To bolster the chances that a court will apply the new Texas law in the case of an out-of-state financial institution, the Legislature specifically provided that the changes “represent the fundamental policy of this state for the protection of its residents and are intended to prevail over the laws of another state or jurisdiction, to the extent those laws are in conflict with Texas law.”