2005 Pending Legislation

2005 Pending Legislation

Here is Glenn Karisch's subjective list of pending legislation affecting decedents' estates, guardianship and trust law. It is arranged by subject and listed roughly in order of importance within each heading. Click on the bill number to get information of the bill (bill status, text of bill, etc.) from Texas Legislature Online. References to "REPTL" are to the Real Estate, Probate and Trust Law Section of the State Bar of Texas, which sponsors legislation relating to guardianship, probate and trust law. Bill status is shown as of May 25, 2005. Bills which appear to have no chance of passing are listed and described in gray type.

Contents

Trust Legislation
Guardianship Legislation
Decedents' Estates Legislation
Jurisdictional Legislation
Power of Attorney/Disability Planning Legislation
Marital Property Legislation
Medicaid/Elder Law Legislation
Other Legislation

Trust Legislation

The last two legislative sessions (2003 and 2005) have brought the most significant changes in trust law in Texas in 20 years. In 2003, the Uniform Prudent Investor Act and the Uniform Principal and Income Act were enacted. This year, several Uniform Trust Code concepts are being incorporated in the 20-year-old Texas Trust Code.

UTC Concepts into Texas Trust Code. REPTL conducted a multiyear study of the new Uniform Trust Code, adopted by the National Council of Commissioners on Uniform State Laws (NCCUSL) in 2000, and concluded that the Texas Trust Code is familiar to Texans, is superior to the UTC in many ways and should be retained. However, REPTL concluded that Texas should: (1) adopt the two UPIAs -- the Uniform Prudent Investor Act and the Uniform Principal and Income Act -- which were enacted in 2003; and (2) pick up some of the better UTC provisions and incorporate them into the Texas Trust Code. HB 1190 (Hartnett) is REPTL legislation which picks up many UTC provisions and incorporates them in the Texas Trust Code. HB 1190 has passed both houses and has been signed by the Governor. It is effective January 1, 2006. SB 1157 (Harris) is the Senate companion to HB 1190.

· Default and Mandatory Rules. It is hornbook trust law that there are limits on what a settlor can do in a trust instrument and still have a trust. For example, in order for a trust to be a trust, the trustee must have some duty to account to someone. The UTC recognizes this principle and contains a section listing default and mandatory rules -- mandatory rules being rules which applied notwithstanding contrary terms in the trust instrument. The Texas Supreme Court decision in Texas Commerce Bank, N. A. v. Grizzle, 96 S. W. 3d 240 (Tex. 2002), was a wakeup call on this point in Texas. Currently, Section 111.002 of the Trust Code provides that the terms of the trust control over the Trust Code except for two corporate self-dealing rules (Sections 113.052 and 113.053). In Grizzle, the Supreme Court cited this section and stated, or at least implied, that those two sections were the only limits in Texas on a settlor's ability to alter the terms of a trust. Grizzle was an exculpatory clause case, and in 2003 the Texas Legislature responded with HB 3503, which made it clear that, notwithstanding Grizzle, a settlor can't exculpate the trustee from liability for breaches of trust committed in bad faith, intentionally or with reckless indifference to the interest of the beneficiary. However, HB 3503 did not address the other "mandatory" rules of a trust. HB 1190 does that. It amends Section 111.002 and adds Section 111.0035 to the Trust Code, which contains a laundry list of things which cannot be overridden in the trust instrument, including the duty to account to first-tier beneficiaries and the authority of a court to act with respect to the trust.

· Duty to Keep Beneficiaries Informed. Texas common law has long required imposed a “duty of full disclosure” on trustees. See Huie v. DeShazo, 922 S. W. 2d 920, 923 (Tex. 1996), and Montgomery v. Kennedy, 669 S. W. 2d 309, 313 (Tex. 1984). However, the Trust Code has no provision addressing this general duty. (It has Section 113.151, requiring a trustee to respond to an accounting demand, but it does not address the affirmative duty of a trustee to keep beneficiaries reasonably informed.) HB 1190 adds new Section 113.060, which is taken from the UTC and provides that a trustee has a duty to keep beneficiaries reasonably informed concerning the administration of the trust and the material facts necessary for the beneficiaries to protect their interests. This is a mandatory (non-waivable) duty for trustees with respect to beneficiaries 25 years of age and over who are either (a) entitled or permitted to receive current distributions or (b) “first tier” remaindermen. In a compromise with TBA, the settlor is permitted to waive this duty with respect to beneficiaries under age 25. However, an income beneficiary or “first tier” remainderman under age 25 still can demand an accounting under Section 113.151, assuming he or she finds out about the existence of the trust.

· Judicial Modification and Termination of Trusts. HB 1190 follows the UTC's lead in expanding the bases for modifying or terminating an irrevocable trust by court action. Changes to Section 112.054 should make it easier to modify or terminate a trust in appropriate cases.

· Trust for Care of Animal. HB 1190 follows the UTC's lead by adding Section 112.037 to the Trust Code, which permits trusts for the care of animals. The statute permits such trusts only for animals that are alive during the settlor's lifetime. The statute addresses issues such as who may enforce the trust and what happens to the trust property when the animal or animals die.

· Division and Combination of Trusts. Most well-drafted trusts permit division of one trust into two or more trusts or the combination of two or more trusts into one trust in various circumstances. Currently, Section 112.057 of the Trust Code permits division or combination in cases where the trust instrument is silent only for tax reasons. HB 1190 amends this section to permit division or combination of trusts for any reason, so long as the rights of beneficiaries are not impaired and the achievement of the purposes of the trust is not adversely affected.

· Another Option for Distributions to Minor and Incapacitated Beneficiaries. Most well-drafted trusts contain a "facility of payment" provision giving the trustee various options in making distributions to or for the benefit of a beneficiary. Section 113.021 of the Trust Code is a default provision for trusts with no specific facility of payment provision. Currently it gives the trustee various options when making distributions to or for the benefit of a minor or incapacitated beneficiary, including making the distribution to a Uniform Transfers for Minors Act (UTMA) account. HB 1190 adds one more distribution option -- it permits the trustee to manage the distribution as a separate fund for the beneficiary, subject to the beneficiary's continuing right to withdraw the distribution. This will permit the trustee in the appropriate case to hold onto the money until the beneficiary obtains majority or regains capacity.

· Non Pro Rata Trust Distributions. HB 1190 adds Section 113.027 to the Trust Code, which permits a trustee to make non pro rata distributions and divisions of trust property.

· Other UTC-Inspired Changes. HB 1190 also makes the following changes based on similar UTC provisions:

o Section 111.004 -- Definition of "settlor" revised; "breach of trust" defined.

o Section 112.009 -- Permits a person named as trustee to take limited actions to preserve or investigate trust property without accepting the trust.

o Section 113.003 -- Authorizes granting, acquiring and exercising options.

o Section 113.051 -- Adds "good faith" to the trustee's general duty.

o Section 113.058 -- Makes it clear that a court may order a trustee to post a bond in an appropriate case even if the trust instrument does not require a bond.

o Sections 113.085 and 114.006 -- Clarifies rules for multiple trustees.

o Section 114.003 -- Clarifies rules when someone other than the trustee is given power to modify or terminate a trust (such as so-called "trust protectors"), and makes it clear that someone in that capacity owes fiduciary duties to the beneficiaries.

o Section 114.008 -- Lists the remedies for breach of trust.

o Section 115.014 -- Permits a guardian ad litem to consider the general benefit accruing to the living members of his client's family.

Clarifying Spendthrift Rules. HB 1190 (Hartnett) is REPTL legislation which amends Section 112.035 to clarify how spendthrift trusts work in Texas in light of the publication in 2003 of Volumes 1 and 2 of the Restatement, Third, of Trusts, by the American Law Institute. HB 1190 clarifies, for example, that spendthrift protection is not lost if the surviving spouse is made the trustee of a bypass trust, so long as his or her power as trustee to make distributions to himself or herself is limited by an ascertainable standard such as health, education, maintenance and support. HB 1190 has passed both houses and has been signed by the Governor. It is effective January 1, 2006.

Uniform Principal and Income Act Fixes. HB 1190 (Hartnett) is REPTL legislation which fixes two provisions of the Uniform Principal and Income Act enacted in 2003. First, it fixes the garbled language in Section 116.172 regarding deferred compensation plans that made that section almost impossible to administer. The change clarifies what was intended in 2003. Second, it eliminates Section 116.005(c)(1). When it was enacted, Section 116.005(c)(1) was necessary because a power to adjust that could reduce income jeopardized the qualified terminable interest property (QTIP) status of a marital trust for federal estate tax purposes. Since enactment, Treasury Regulation 1.643(b)-1 (effective January 2, 2004) makes it clear that an adjustment meeting the regulation's requirements that reduces income in a QTIP trust does not disqualify the trust. Repeal of subsection (c)(1) gives the trustee greater flexibility in administering QTIP trusts. HB 1190 has passed both houses and has been signed by the Governor. It is effective January 1, 2006.

Authority of Court in Trust Cases. HB 1190 (Hartnett) is REPTL legislation which amends Section 115.001 of the Trust Code to clarify that a court may intervene in the administration of a trust to the extent its jurisdiction is properly invoked, but that a trust is not subject to continuing judicial supervision unless the court orders such supervision. HB 1190 has passed both houses and has been signed by the Governor. It is effective January 1, 2006.

To RAP, Or Not to RAP, That is the Question. HB 2561 (Eiland) and HJR 75 (Eiland) would make the rule against perpetuities (RAP) inapplicable to a trust created on or after January 1, 2006. Similar bills have been filed in recent session, but they’ve gone nowhere. HB 2561 and HJR 75 are pending in the House Financial Institutions Committee.

Prohibiting the Sale of Living Trusts By Non-Lawyers. HB 2011 (Nixon) would amend add Chapter 48 to the Business and Commerce Code prohibiting any person other than a licensed attorney from engaging "in any act, practice or course of business involving the solicitation of another person to become the settlor of a living trust or to purchase a document or other instrument creating or purporting to create a living trust" or inducing, soliciting, employing or contracting with "another" to engage in such conduct. Civil remedies are imposed, and the prohibited actions constitute the unauthorized practice of law. The statute does not prevent a licensed attorney from making a payment for secretarial, paralegal, or other ordinary and reasonable expenses incurred in connection with the representation of clients. This bill has noble sentiment, but it is very difficult to define the behavior that is (or should be) prohibited and to differentiate that behavior from appropriate action. For example, does a trust officer who provides the bank’s revocable trust form to a customer violate the statute? What about a trust officer who refers a customer to a lawyer for preparation of a trust? HB 2011 has passed the House and is pending in the Senate State Affairs Committee.

Right of Beneficiaries to Bar Trustee Lawsuits. HB 3434 (Hartnett) would add new Section 113.028 to the Texas Trust Code, permitting all of the beneficiaries of a trust to bar a trustee's prosecution of or participation in a lawsuit on behalf of the trust that seeks damages against a person who is not a beneficiary of the trust. The beneficiaries could not bar the trustee's participation if the trustee also is personally a party to the lawsuit. If the beneficiaries bar the trustee from pursuing the lawsuit under this statute, the trustee is protected from liability for failing to pursue the lawsuit. Since the right to bar trustee lawsuits is limited to damage claims against non-beneficiaries, this statute could affect suits for damages against former trustees who are not also beneficiaries of the trust, as well as suits against strangers to the trust -- for example, to collect a debt owed to the trust by a third party. It should not affect the trustee's access to court for trust administrative matters. The statute is triggered if "each beneficiary of the trust provides written notice to the trustee." This will be difficult or impossible to obtain in most trusts, due to contingent beneficiaries. Different versions of HB 3434 passed the House and the Senate.

Increasing the Notice Required to be Given to the Attorney General in Charitable Trust Litigation. Currently, under Tex. Prop. Code §123.003, the attorney general must be given notice of litigation involving a charitable trust within 30 days of filing and at least 10 days prior to a hearing in the proceeding. HB 934 (Taylor) increases the 10 days to 25 days, so litigants cannot have a hearing in the proceeding until 25 days had elapsed from the time the attorney general is given notice. The bill contains a provision that an applicant filing an uncontested application to probate a will is not required to give notice to the attorney general. HB 934 has passed the House, has been reported favorably as substituted by the Senate Jurisprudence Committee and is on the Senate calendar for consideration as early as May 25, 2005.

Cleaning Up the Code. Each year there are bills which clean up mistaken cross-references, change outdated terminology or correct similar minor problems in the statutes. HB 1190 (Hartnett) is REPTL legislation that cleans up references to the Uniform Transfers to Minors Act in Sections 113.021 and 113.171 of the Trust Code, cleans up language regarding trustee removal in Section 113.082, moves the statute on exculpation provisions from the "Duties of Trustee" part of the Code (Section 113.059) to the "Liability of Trustee" part (Section 114.007), and fixes a reference to the Texas Trust Code in Property Code Section 121.003. HB 1190 has passed both houses and has been signed by the Governor. It is effective January 1, 2006.

Guardianship Legislation

Protecting the Privacy of Wards and Others. At least two bills and two proposed Supreme Court rules would affect the way certain identifying information in guardianship and decedents’ estates proceedings is filed and accessed by the public. HB 2750 (Hartnett) would permit parties to probate and guardianship proceedings to ask the court to keep certain identifying information (such as account numbers on inventories and accountings) confidential, and it would make doing so discretionary with the court. HB 1309 (Ritter) would prohibit county clerks from posting certain identifying information contained in files concerning a decedent’s estate on the Internet. (Note that HB 1309 does not affect guardianships, while HB 2750 affects both guardianships and decedents’ estates.) Meanwhile, the Supreme Court is considering two new rules that would require parties to keep certain information confidential in court filings and would affect Internet and other public access to certain information. (SB 1148 (Harris) would require the Supreme Court to adopt rules to protect sensitive information.) Note that the proposed Supreme Court rules are mandatory, while HB 2750 is permissive. The current draft of proposed Rule 14 would require the following information to be kept confidential:

· Social security numbers;

· Bank account, credit card or other financial account numbers;

· Driver’s license numbers, passport numbers, and similar government-issued personal identification card numbers;

· Date of birth;

· The address and phone number of a person who is a crime victim; and

· The name and address of a minor child.

This so-called “sensitive data” cannot be filed in a case file except in a separate pink “sensitive data form.” Only “parties” and attorneys of record will be permitted to access the sensitive data forms. Since HB 2750 is permissive, while Rule 14 would be mandatory, the rule and its possible impact in guardianship and probate cases is worth studying. Among the issues to be faced:

· If the will contains the names, addresses and/or dates of birth of minor children, does the will have to be kept from public inspection when it is filed for probate? If so, how is that going to work?

· How can the minor’s name, address and birthdate be kept out of the case file in a guardianship proceeding for the minor child?

· How can the court declare heirship if one or more of the heirs is a minor child?

HB 2750 passed the House on May 13, 2005.

Changes Coming Regarding Protective Services. SB 6 (Nelson) is an omnibus bill regarding protective services for children, the elderly and the disabled. This large bill addresses many issues surrounding protective services, and it may impact guardianships. The version which passed the House abolishes the Guardianship Advisory Board and replaces it with the Guardianship Alliance Office. It also provides for the appointment of the Department of Aging and Disability Services (DADS) as guardian of last resort. Different versions of SB 6 have passed the House and the Senate and a conference committee has been appointed. HB 920 (Uresti) also affects adult protective services. It requires DFPS to refer persons to the Department of Aging and Disability Services (DADS) for guardianship services if such persons meet certain specified criteria, unless a less restrictive alternative to guardianship is appropriate and available. HB 920 has passed the House and is pending in the Senate Health and Human Services Committee.

Guardians Ad Litem and Court Investigators in Restoration/Modification Proceedings. Section 694A of the Probate Code permits a ward to provide an informal letter to the court supervising the guardianship requesting a modification of the guardianship or full restoration of the ward's capacity. Currently, Section 694A(c) provides that, upon receipt of such a letter, the court shall appoint the court investigator or a guardian ad litem, who is then required to file an application for modification or restoration. HB 1191 (Hartnett) is REPTL legislation that changes this section so that the court investigator or guardian ad litem is required to investigate the situation and report to the court, but the court investigator or guardian ad litem is required to file an application for restoration or modification only if he or she determines that such filing is in the best interest of the ward. HB 1191 also makes a corresponding change to Section 672. HB 1191 has passed both the House and Senate and is awaiting action by the Governor. SB 1158 (Harris) is the Senate companion to HB 1191.

Buying and Selling Securities Pursuant to Investment Plan. Section 855B of the Probate Code was amended in 2003 to require guardians of the estate to submit an investment plan for approval to the court. If the investment plan approved by the court calls for the buying and selling of securities along the guidelines set in the plan, then there is no reason that the guardian should have to follow the sale of personal property provisions (which may require issuing citation) in the guardianship chapter of the Code. HB 1191 (Hartnett) is REPTL legislation that amends Section 855B to make it clear that a guardian may sell securities pursuant to a court-approved investment plan without having to meet the citation requirements for sales of personal property. (If the court wants the guardian to be subject to those rules, it can so order in the investment plan.) HB 1191 has passed both the House and Senate and is awaiting action by the Governor.

Application of the Monthly Allowance. Section 776 of the Probate Code currently states that a guardian of the estate shall pay to the guardian of the person the monthly allowance set by the court. In those situations in which the guardian of the estate and guardian of the person are different, it should not be required that all of the monthly allowance be delivered to the guardian of the person as opposed to service providers, such as nursing home, etc. This should be determined by the court when setting the monthly allowance. HB 1191 (Hartnett) is REPTL legislation that amends Section 776 to permit the court to provide for a different application of the monthly allowance. HB 1191 has passed both the House and Senate and is awaiting action by the Governor.

Presumption of Incapacity in Temporary Guardianships. In 2003, Section 875 of the Probate Code was amended to delete this sentence: "A person for whom a temporary guardian has been appointed may not be presumed to be incapacitated." Deleting this sentence called into question whether the appointment of a temporary guardian, which may occur without all of the safeguards of a full guardianship proceeding, constitutes a finding of incapacity that could have adverse consequences for the ward, even though he or she may later be found not to be incapacitated. HB 1191 (Hartnett) is REPTL legislation that, in effect, replaces the sentence deleted in 2003 by adding new Section 874 to the Probate Code. HB 1191 has passed both the House and Senate and is awaiting action by the Governor.

Filing Fee Increase? In 1999, HB 2822 eliminated the dreaded $3-for-the-first page, $2-for-each-additional-page filing fees from probate and guardianship cases. The “deal” in 1999 was that certain specific filing fees would be raised to make up for elimination of the $3 and $2 fees. This session, HB 1404 (Deshotel) keeps the 1999 increases in specific filing fees, but requires a $25 filing fee for all other documents which are more than 25 pages long filed after the inventory is approved or 120 days after the proceeding begins, whichever is earlier. As originally filed, the bill would have required a fee regardless of the length of the document and would have required all documents to be in type no smaller than 12 points. The 12-point type requirement and the filing fee for documents 25 pages or under was dropped in the House Judiciary Committee. These changes make the bill much more palatable, given that most filings will be 25 pages or fewer except in big, complicated cases where the filing fee presumably won't be that big of a deal. HB 1404 passed the House on May 13, 2005, has been reported favorably without amendment by the Senate Jurisprudence Committee and is on the Senate calendar for consideration as early as May 25, 2005.

Home Equity Loans When Minor Owns Interest in Residence Homestead. HB 637 (Goolsby) amends Section 781 and adds Sections 889A and 890A to the Probate Code to permit certain persons to apply to the probate court for a home equity loan in cases where a minor owns an interest in a residence homestead. The loan is subject to court approval. The minor may not "disaffirm" the mortgage. Under Section 889A, the parent or managing conservator of a minor may apply for the loan without the need for a guardianship. Under Section 890A, the guardian of the estate of a ward may apply for the loan. In both cases, the loan proceeds "attributable to the minor's interest" may only be used to make improvements to the property, pay for education or medical expenses of the minor or pay the outstanding balance on the loan. HB 637 passed the House on May 13, 2005, has been reported favorably without amendment by the Senate Business and Commerce Committee and is on the Senate calendar for consideration as early as May 25, 2005.

Who Can Apply for an 867 Trust? Currently only guardians, attorneys ad litem and guardians ad litem may apply for creation of a guardianship management trust under Section 867 of the Probate Code. Also, currently some courts will not allow an 867 management trust to be created without first creating a guardianship. HB 1472 (Casteel) would permit any person interested in the welfare of the ward to apply for creation of an 867 trust if no guardian of the estate is serving when the application is filed. It also would make it clear that an 867 trust can be created without the need for creation of a guardianship. HB 1472 passed the House on May 13, 2005, has been reported favorably without amendment by the Senate Jurisprudence Committee and is on the Senate calendar for consideration as early as May 25, 2005.

Approval of Periodic Tax-Motivated Gifts. HB 1501 (Casteel) would permit the guardian of an estate to obtain approval of a multi-year tax-motivated gifting plan under Section 865 of the Probate Code. Many courts already permit this, but some courts read Section 865 as requiring the guardian to apply for authority to make gifts every year. HB 1501 has passed both the House and the Senate and is awaiting action by the Governor.

Do Adult Siblings of Proposed Ward Get Notice of Guardianship Proceeding? HB 3435 (Hartnett) would do away with the requirement that the adult siblings of a proposed ward be served with citation in an application to appoint an guardian if the proposed ward’s spouse is the applicant and proposed guardian. HB 3435 is pending in the House Judiciary Committee.

Neglect of Ward Grounds for Removal Without Notice. Currently, a guardian who "cruelly treats" a ward may be removed without notice. HB 230 (Hartnett) amends Probate Code §761 to authorize the court to remove a guardian without notice who "neglects or cruelly treats" a ward. HB 230 has passed both the House and Senate and is awaiting action by the Governor.

Cleaning Up the Code. Each year there are bills which clean up mistaken cross-references, change outdated terminology or correct similar minor problems in the statutes. In 2003, the deadline for a guardian of the estate to file his or her inventory, appraisement and list of claims was shortened from 90 days to 30 days. SB 346 (Wentworth) amends Section 761 of the Probate Code to provide that the court may remove a guardian who fails to file an inventory within 30 days of qualification, rather than 90 days. SB 346 has passed both houses and has been signed by the Governor. It became effective April 27, 2005. HB 1191 (Hartnett) amends Sections 615 and 616 of the Probate Code to clarify what happens to the file when a guardianship case is transferred. HB 1191 (Hartnett) also cleans up a mistaken cross-reference in Section 788 and deletes superfluous references to a decedent's estate in Section 831. HB 1191 has passed both the House and Senate and is awaiting action by the Governor.

Decedents' Estates Legislation

Protecting the Privacy of Heirs and Others. At least two bills and two proposed Supreme Court rules would affect the way certain identifying information in guardianship and decedents’ estates proceedings is filed and accessed by the public. HB 2750 (Hartnett) would permit parties to probate and guardianship proceedings to ask the court to keep certain identifying information (such as account numbers on inventories and accountings) confidential, and it would make doing so discretionary with the court. HB 1309 (Ritter) would prohibit county clerks from posting certain identifying information contained in files concerning a decedent’s estate on the Internet. (Note that HB 1309 does not affect guardianships, while HB 2750 affects both guardianships and decedents’ estates.) Meanwhile, the Supreme Court is considering two new rules that would require parties to keep certain information confidential in court filings and would affect Internet and other public access to certain information. (SB 1148 (Harris) would require the Supreme Court to adopt rules to protect sensitive information.) Note that the proposed Supreme Court rules are mandatory, while HB 2750 is permissive. The current draft of proposed Rule 14 would require the following information to be kept confidential:

· Social security numbers;

· Bank account, credit card or other financial account numbers;

· Driver’s license numbers, passport numbers, and similar government-issued personal identification card numbers;

· Date of birth;

· The address and phone number of a person who is a crime victim; and

· The name and address of a minor child.

· How can the minor’s name, address and birthdate be kept out of the case file in a guardianship proceeding for the minor child?

· How can the court declare heirship if one or more of the heirs is a minor child?

HB 2750 passed the House on May 13, 2005.

Effect of Divorce on Living Trusts, Multiparty Accounts, etc. HB 1186 (Hartnett) is REPTL legislation that creates a new Chapter XI-A of the Probate Code (new Sections 471 through 475) addressing the effect of a divorce on a living trust which makes a gift to an ex-spouse. While Texas has a statute on this subject regarding wills, no such statute covers living trusts. HB 1186 provides that trusts which are revocable by the decedent spouse that benefit the former spouse or name the former spouse in a fiduciary capacity treat the former spouse as having disclaimed or predeceased the decedent spouse, unless the instrument is re-executed or unless a court order or contract provides otherwise. HB 1186 has passed both the House and the Senate and is awaiting action by the Governor. HB 1176 (Dutton) amends the Family Code to provide similar rules for multi-party accounts, joint tenancy property, annuities, and other types of property. HB 1176 is pending in the House Juvenile Justice and Family Issues Committee.

Nonexoneration of Liens. HB 1186 (Hartnett) is REPTL legislation that would reverse the common law exoneration of liens doctrine in Texas. HB 1186 would add new Section 71A to the Probate Code to provide that, unless the will provides to the contrary, a specific devise of property passes to the devisee subject to any liens securing debt. Creditors' rights are protected, and there is a procedure for paying the debt if a creditor elects matured secured status. The bill also makes a corresponding change to Section 306 of the Probate Code. HB 1186 has passed both the House and the Senate and is awaiting action by the Governor.

Sale of Real Estate By Independent Executors. HB 3186 (Casteel) would revise Section 331 of the Probate Code to provide that independent executors have the authority to sell real property even if the will contains no power of sale for three years after letters testamentary are issued. This would change the “default” rule, that independent executors have the power to sell real estate for purposes other than paying debts and administrative expenses only if the will gives the executor that power. HB 3186 is pending in the House Judiciary Committee.

Good Cause Required for Appointment of Appraisers. SB 347 (Wentworth) and HB 3434 (Hartnett) would amend Probate Code Sections 248 and 727 to require a good cause showing before the court is required to appoint appraisers for estate property in decedents' estates and guardianships. SB 347 has passed both the Senate and the House and is awaiting action by the Governor. Different versions of HB 3434 passed the House and the Senate.

Extending the Deadline for Temporary Administrator’s Bond. HB 3434 (Hartnett) would give the person appointed as temporary administrator under Section 131A of the Probate Code three business days to file his or her bond, instead of requiring the bond to be filed on the date of the order appointing the temporary administrator. Different versions of HB 3434 passed the House and the Senate.

Inheritance Rights of Adopted Adults. Probate Code §40 now provides that an adopted child retains the right to inherit (as an intestate heir) from his or her natural (birth) parents. HB 204 (Goodman) amends Probate Code §40 and Family Code §162.507 to provide that a person who is adopted when he or she is an adult does not retain the right to inherit from his or her birth parents. HB 204 has passed both the House and Senate and is awaiting action by the Governor.

Estate Tax/State Inheritance Tax. SB 73 (Shapleigh) would change Texas's "soak up" inheritance tax (which goes away when the state death tax credit for federal estate tax goes away) with a tax which is tied to what the state death tax credit was on December 31, 2000, before the state death tax phaseout. HB 2113 (Merritt) would repeal the state inheritance tax. HJR 99 (Merritt) would amend the constitution to prohibit an inheritance tax unless approved by the voters. None of these bills appear to be going anywhere.

Ex-Cons’ Right to Serve as Personal Representative. HB 1916 (Allen) would restore the right of certain convicted felons to serve as personal representative of an estate. HB 1916 is pending in the House Corrections Committee.

Suits to Recover Funds From Comptroller. HB 2233 (Keffer) and SB 1690 (Duncan) are omnibus fiscal bills. Each would amend Section 433(a) of the Probate Code to provide: “Any heir, devisee, legatee, or their assigns of an estate whose funds were paid to the comptroller under this chapter before September 1, 1991, must institute suit under this section not later than September 1, 2009.” Different versions of HB 2233 have passed the House and the Senate. SB 1690 is pending in the Senate Finance Committee.

Eliminating Reference to Natural Resources Code Tax. As originally filed, SB 1863 (Ogden) would have repealed the $0.001875 per barrel tax on crude petroleum produced in Texas that was imposed by Section 81.111 of the Natural Resources Code, and correspondingly removed the reference to the Section 81.111 tax from Class 5 Claims under Section 322 of the Texas Probate Code. A Senate committee substitute removed the change to Probate Code Section 322. SB 1863 has passed the Senate, been reported favorably the House Appropriations Committee, and is pending on the House calendar. Several floor amendments have been considered, some have been adopted, and action on the bill was postponed until May 24, 2005.

Cleaning Up the Code. Each year there are bills which clean up mistaken cross-references, change outdated terminology or correct similar minor problems in the statutes. HB 1186 (Hartnett) is REPTL legislation which clarifies Section 58b of the Probate Code. Currently, a testamentary gift to an "heir or employee" of the attorney who prepared the will is void (with some exceptions). HB 1186 removes the word "heir" and replaces it with a description of the family members of the lawyer who are within the group of prohibited devisees. HB 1186 also cleans up Section 271 and 272 by removing references to the homestead rights of unmarried adult children living at home, since they do not have those rights. HB 1186 has passed both the House and the Senate and is awaiting action by the Governor.

Jurisdictional Legislation

Jurisdiction over Testamentary Trusts. Amendments to Probate Code Sections 5 and 5A in 2003 called into question which courts have jurisdiction to hear cases involving testamentary trusts. SB 349 (Wentworth) would solve that question by amending Section 5 of the Probate Code to add new subsection (e-1), which provides that, in counties with a statutory probate court, the statutory probate court has exclusive jurisdiction over testamentary trusts, while in counties with no statutory probate court, the district court has exclusive jurisdiction over testamentary trusts. HB 1186 (Hartnett) is REPTL legislation which solves the same problem in another way -- by going back to the pre-2003 language that statutory probate courts and district courts have concurrent jurisdiction over charitable, inter vivos and testamentary trusts. HB 1186 also gives statutory probate judges concurrent jurisdiction with the district court in any case “by or against a trustee.” The HB 1186 approach gives litigants more flexibility and eliminates the possible trap of filing the case in the wrong court. (Section 115.001 of the Trust Code gives district courts exclusive jurisdiction over trusts, except for jurisdiction conferred by law on statutory probate courts, so it is easy to see how someone unfamiliar with the problem could file his or her testamentary trust case in district court notwithstanding SB 349's change to Section 5 of the Probate Code.) SB 349 would force all testamentary trust litigation in the most populous counties into probate court, while inter vivos trust litigation and charitable trust litigation still could go either to district court or probate court. SB 349 passed the Senate on second reading but failed to obtain a necessary procedural vote on May 9. (Three readings are required.) HB 1186 has passed both the House and the Senate and is awaiting action by the Governor. HB 1793 (Naishtat) is the House companion for SB 349. HB 1793 is pending in the House Judiciary Committee.

Jurisdiction over 142 Trusts. The decision of the Texas Supreme Court in Texas Commerce Bank, N. A. v. Grizzle, 96 S. W. 3d 240 (Tex. 2002), and the enactment of HB 3503 in 2003 made it clear that the Trust Code applied to trusts created under Section 142.005 of the Property Code. Unfortunately, this called into question the authority of courts other than district courts and statutory probate courts to create, modify and terminate so-called "142 Trusts." This is because Section 115.001(d) of the Trust Code currently says that district courts have exclusive jurisdiction over trust matters, except for the jurisdiction given to statutory probate courts. HB 1190 (Hartnett) amends Section 142.005 of the Property Code and Section 115.001 of the Trust Code to clarify that any court of record with jurisdiction to hear the suit in which the 142 Trust is created may create, modify, terminate and otherwise deal with the 142 Trust so created. HB 1190 has passed both houses and has been signed by the Governor. It is effective January 1, 2006. SB 1157 (Harris) is the Senate companion for HB 1190.

Venue Rules and Section 5B/608 Transfer Power. In Gonzalez v. Reliant Energy, Inc., decided March 11, 2005, the Texas Supreme Court held that the venue rules in the Civil Practice and Remedies Code “trump” a statutory probate court’s authority to transfer a case to itself under Section 5B or Section 608 of the Probate Code in wrongful death, personal injury and property damage cases. This settles several years of uncertainty over this issue, but it leaves a few questions unanswered. For example, if the venue rules applicable to personal injury cases trump the 5B/608 transfer power, might other venue rules also trump it? As originally filed, HB 2875 (Solis) and SB 1216 (Hinojosa) would have, in effect, overturned the result in Reliant Energy by amending Sections 5B and 608 of the Probate Code to permit statutory probate judges transfer tort and non-tort cases under those sections even if they do not have proper venue. SB 1216 was reported favorably by the Senate Jurisprudence Committee but appears to be in trouble, if not dead, on the Senate floor. HB 2875 was reported favorably as substituted by the House Judiciary Committee. The substitute concedes the Reliant Energy issue -- confirming that statutory probate courts cannot transfer personal injury, death and property damage cases if venue is improper -- but confirms the courts' power to transfer other (non-tort) cases and clarifies that "property damage" cases which cannot be transferred without proper venue are cases in which the property damages are incident to personal injury or death cases. (There has been some concern that "property damages" might be broadly construed to include suits for recovery of property, such as a surcharge action against the personal representative of an estate.) Even this "half a loaf" bill may have trouble passing. HB 1910 (Solis) and HB 1911 (Solis) would make amendments to Sections 5A, 5B and 608 of the Probate Code which appear irrelevant in light of the Reliant Energy case, so any change in this area are likely to come in HB 2875 or SB 1216. HB 2875 was withdrawn from the House calendar on May 13, 2005, and appears dead. SB 1216 was "not again placed" on the Senate calendar on May 4, 2005, and appears dead.

Trial by Special Judge. HB 231 (Hartnett) amends Civ. Prac. and Rem. Code §§151.001 to make clear that a civil or family matter pending in a district court, statutory probate court or statutory county court may be referred for trial to a special judge with the agreement of the parties. Though the act mentions statutory probate courts, it does not specifically refer to probate matters, just civil and family matters. Nevertheless, it appears likely that litigants in contested probate proceedings may be able to use the revised statute to choose a special judge to hear their case by agreement, circumventing the assignment of a statutory probate judge process in some cases. HB 231 has passed both houses and has been signed by the Governor. It is effective September 1, 2005.

Associate Judges Permitted in Harris County Probate Court No. 3. HB 3557 (Talton) would amend Government Code Section 54.602 to permit associate judges in Harris County Probate Court No. 3. If it passes, the three Dallas statutory probate courts and Harris County Probate Court No. 1 will be the only statutory probate courts where associate judges are not permitted. HB 3557 has passed the House, been reported favorably without amendment by the Senate Jurisprudence Committee and is on the Senate calendar for consideration as early as May 25, 2005.

New Courts with Probate Jurisdiction. These bills would lead to the creation of additional courts with probate jurisdiction in the counties in question:

HB 564 (Gattis) -- Relating to the creation of an additional county court at law in Williamson County. HB 564 has passed both houses and has been signed by the Governor. It is effective September 1, 2005.
HB 597 (Smithee) and SB 671 (Seliger) -- Relating to the creation of an additional county court at law in Randall County. HB 597 has passed both houses and has been signed by the Governor. It is effective September 1, 2005.
HB 782 (Haggerty), HB 3475 (Haggerty) and SB 367 (Shapleigh) -- Relating to the statutory probate courts of El Paso County (creates the Probate Court No. 2 of El Paso County, Texas, which has primary responsibility for mental illness proceedings). HB 3475 has passed both the House and the Senate and is awaiting action by the Governor.
HB 1119 (Frost) and SB 524 (Eltife) -- Relating to the creation of a county court at law in Cass County. SB 524 has passed both houses and has been signed by the Governor. It became effective April 27, 2005.
HB 1622 (Pitts) -- Relating to the creation of a county court at law in Hill County. Different versions of HB 1622 have passed the House and the Senate.
HB 3489 (Dawson) and SB 1252 (Janek) -- Relating to the creation of an additional statutory county court in Brazoria County. HB 3489 has passed the House and Senate and awaits action by the Governor.
HB 3547 (Brown, Betty) and SB 1868 (Deuell) -- Relating to the creation of an additional county court at law in Kaufman County. HB 3547 has passed both the House and the Senate and is awaiting action by the Governor.

Power of Attorney/Disability Planning Legislation

Amazingly, given all the publicity surrounding the Terri Schiavo and her tragic circumstances, there is no significant pending legislation on durable powers of attorney, medical powers of attorney or directives to physicians and family or surrogates. HB 2765 (Truitt) would add persons entitled to consent to medical treatment under Health and Safety Code Chapter 313 to the list of persons who can authorize the release of private health care information by a hospital. This no doubt would make it easier for the hospital to find someone to consent to the release of information, and it may have adverse consequences for patient privacy, but it has no effect on the preparation or use of disability planning documents. HB 2765 passed the House on May 13, 2005, was reported favorably by the Senate Health and Human Services Committee and is on the Senate calendar for consideration as early as May 25, 2005.

Marital Property Legislation

Can a Premarital Agreement Deny Spousal Maintenance? Currently Section 4.003 of the Family Code permits parties in a premarital agreement to contract regarding a number of issues, including the modification or elimination of spousal support. HB 1175 (Dutton) would amend that section to prohibit the parties to a premarital agreement from agreeing to modify or eliminate spousal support as may be ordered as maintenance under Subchapter B, Chapter 8 of the Family Code. HB 1175 has been reported favorably without amendment by the House Juvenile Justice and Family Issues Committee.

Income from Partitioned Property. Family Code §4.102 now provides that a spousal partition of community property into separate property includes the income from the property "unless the spouses agree in a record that the future earnings and income will be community property after the partition or exchange." HB 202 (Goodman) in effect reverses the presumption, providing that the partition agreement "may also provide that future earnings and income arising from the transferred property shall be the separate property of the owning spouse." HB 202 has passed both the House and the Senate and is awaiting action by the Governor. (The Senate committee substitute added a provision which permits binding settlement agreements from "informal" (with or without lawyers' presence) divorce settlement meetings.)

Determining Separate/Community Interests in Retirement Plans, Options and Insurance Proceeds. HB 410 (Goodman) add Family Code §§3.007 and 3.008, which attempt to specify how to calculate the separate and community property shares of retirement plans, stock options and certain insurance proceeds when a person marries while such plans, options and policies are in effect. HB 410 has passed both the House and the Senate and is awaiting action by the Governor.

Abolition of Informal Marriage. HB 2620 (Eiland) would repeal the provisions of the Family Code permitting informal marriage. It would prohibit anyone from entering into an informal marriage on or after its effective date (September 1, 2005), but persons who entered into an informal marriage before that date still could use the methods of proof of that marriage that were in effect prior to the effective date. HB 2620 is pending in the House Juvenile Justice and Family Issues Committee.

Medicaid/Elder Law Legislation

This site doesn't attempt to follow Medicaid and elder law bills in detail, but here are some bills that affect Medicaid and elder law. Bills which are in bold-faced type have at least been reported favorably by a committee by April 11, 2005, which, of course, means they are more likely to pass:

· HB 6 (Hupp) -- Relating to protective services; providing penalties.

· HB 24 (Thompson) HB 288 (Chavez) and SB 199 (Gallegos) -- Relating to the personal needs allowance for certain Medicaid recipients who are residents of long-term care facilities.

· HB 69 (McClendon) -- Relating to the imposition of a lien on property to recover certain medical assistance.

· HB 114 (Wong) -- Relating to the rate at which interest accrues in connection with the deferral or abatement of the collection of ad valorem taxes on the residence homestead of an elderly or disabled person.

· HB 122 (Naishtat) -- Relating to services provided by certain mental health professionals under the Medicaid program.

· HB 124 (Naishtat) and HB 194 (Uresti)-- Relating to an increase in the cigarette tax and to the use of that increase for certain health and human services programs.

· HB 343 (Deshotel) -- Relating to the regulation of convalescent homes, nursing homes, and related institutions.

· HB 385 (Naishtat) -- Relating to administrative and judicial review of certain decisions about public assistance benefits.

· HB 405 (Villarreal) -- Relating to providing supplemental financial assistance to certain primary caretakers of a child receiving financial assistance.

· HB 420 (Naishtat) -- Relating to the eligibility of certain persons for the temporary assistance for needy families and food stamp programs.

· HB 445 (Chavez) -- Relating to reimbursement rates for ambulance services under the medical assistance program.

· HB 470 (Davis, J) and SB 194 (Nelson) -- Relating to local delivery of aging, disability, behavioral health, and mental retardation services.

· HB 478 (Goodman) -- Relating to the operation of the child protective services and foster care system.

· HB 545 (Naishtat) -- Relating to services provided by podiatrists under the Medicaid program.

· HB 636 (Brown, Fred) -- Relating to county responsibility for indigent health care services.

· HB 660 (Chavez) -- Relating to training in gerontology for certain health care practitioners.

· HB 669 (Jones, Jesse) -- Relating to the registration of certain assisted living facilities.

· HB 671 (Jones, Jesse) -- Relating to the prosecution of an offense involving injury to certain individuals.

· HB 709 (Naishtat) -- Relating to the exclusion of certain resources in determining eligibility for financial assistance.

· HB 710 (Naishtat) -- Relating to provision of certain optional services for adults and operation of the medically needy program under the state Medicaid program.

· HB 711 (Naishtat) -- Relating to the eligibility of certain financial assistance recipients for medical assistance.

· HB 713 (Quintanilla) -- Relating to the punishment for forgery committed against an elderly person.

· HB 714 (Quintanilla) -- Relating to the punishment for criminal simulation committed against an elderly person.

· HB 715 (Quintanilla) -- Relating to the punishment for credit card or debit card abuse committed against an elderly person.

· HB 716 (Quintanilla) -- Relating to the punishment for false statements to obtain property or credit committed against an elderly person.

· HB 717 (Quintanilla) -- Relating to the punishment for fraudulent use or possession of an elderly person's identifying information.

· HB 725 (Pena) -- Relating to restoring services under the Medicaid and children's health insurance programs; making an appropriation.

· HB 778 (Quintanilla) -- Relating to the punishment for the crime of issuance of a bad check committed against an elderly person.

· HB 800 (Uresti) -- Relating to protective services.

· HB 801 (Uresti) -- Relating to training for Department of Family and Protective Services personnel receiving reports of child abuse and neglect.

· HB 802 (Uresti) -- Relating to the investigation of certain reports of child abuse and neglect.

· HB 920 (Uresti) -- Relating to protective and guardianship services for elderly and disabled persons.

· HB 921 (Uresti) -- Relating to the personal needs allowance for certain Medicaid recipients who are residents of long-term care facilities.

· HB 930 (Branch) and SB 230 (West, Royce) -- Relating to regional funding of indigent health care services.

· HB 954 (Chavez) -- Relating to the collection and reporting of employment information regarding beneficiaries of certain health care services.

· HB 1061 (Naishtat) -- Relating to penalties and sanctions imposed on recipients of financial assistance.

· HB 1135 (Delisi) and SB 566 (Deuell) -- Relating to a Medicaid buy-in program for employed persons with disabilities.

· HB 1218 (Uresti) -- Relating to reporting requirements concerning investigations of alleged abuse, neglect, or exploitation of elderly or disabled persons; providing a criminal penalty.

· HB 1252 (Guillen) -- Relating to providing services for persons with chronic kidney disease under the medical assistance program.

· HB 1376 (Jones) -- Relating to criminal history record checks for potential residents of nursing homes.

· HB 1377 (Jones) -- Relating to the maintenance of area agencies on aging that provide services for the aging and persons with disabilities.

· HB 1502 (Davis, John) -- Relating to payment for medical assistance provided to an individual who is dually eligible for Medicaid and Medicare

· HB 1558 (Davis, John) and SB 1055 (Janek) -- Relating to an alternative method of satisfying certain licensing and program participation requirements for assisted living facilities.

· HB 1616 (Edwards) -- Relating to payments made to certain dentists under the medical assistance program.

· HB 1663 (Blake), HB 1982 (Blake) and SB 1321 (Staples) -- Relating to the creation and operation of a Texas Certified Retirement Community Program.

· HB 1756 (Herrero) -- Relating to requiring posting of certain information regarding nursing homes and related institutions on the Department of Aging and Disability Services website.

· HB 1771 (Delisi) and SB 871 (Nelson) -- Relating to the Medicaid managed care delivery system.

· HB 1852 (Herrero) -- Relating to the installation of panic buttons in certain nursing homes and related institutions.

· HB 1969 (Coleman) and SB 1330 (Nelson) -- Relating to the immunization of elderly persons by certain health care facilities.

· HB 2074 (Coleman) -- Relating to providing medical assistance for care in an assisted living facility.

· HB 2213 (Quintanilla) -- Relating to the punishment for certain crimes of fraud committed against elderly persons.

· HB 2254 (Rose) -- Relating to reducing the penalty for a failure by a disabled or elderly person to make a timely installment payment of ad valorem taxes imposed on the person's residence homestead.

· HB 2328 and HJR 68 (Villareal) -- Relating to a limitation on the amount of ad valorem taxes that may be imposed on the residence homesteads of certain elderly individuals by a county.

· HB 2352 and