The first place to start in a Will contest, is, not surprisingly, the Will itself. In Texas, a Will must be in writing in all but the most limited circumstances. If you knew the Decedent to have a Will, examine the one offered for probate. Is it the same document you knew to be the decedent’s Will? If not, is it consistent with what the Decedent relayed to you concerning the disposition of his Estate? Also, determine if the Will is from a familiar source. Most probate attorneys have some form of identification on their Wills. If you find it, ensure that it is a lawyer you knew the Decedent had used in the past or was at least familiar with. Feel free to give the attorney a call and inquire as to her recollection of the execution.

Second, the Will must be signed by the Decedent. If you were familiar with the signature of the Decedent, examine the Will and ensure that the signature matches what you knew to be the Decedent’s signature. However, it is important to note that almost any marking will suffice as a signature, just so long as it was the Decedent’s mark or a mark made by someone, for him, at his direction, and in his presence. If you feel the signature does not match up, consult a handwriting expert and obtain a professional opinion.

Third, the Will must be signed by the maker with the intent to express his wishes for a testamentary disposition of his property. In other words, the intention to make the document a Will. This is called “Testamentary Intent.” A letter may suffice as a Will, but it must clearly express the person’s desire to pass on property after his death. Anything short of that and the document will not be held to have been drafted with the requisite “intent.”

Finally, the drafter must have known and understood the contents of the document he was signing. While this element bleeds over slightly into testamentary capacity issues, the main thing to focus on here is did the drafter know what was in the Will, and did he understand what the document stated. If this was just some document that was drafted elsewhere and then shoved into the person’s face by a manipulative beneficiary, and the Decedent never knew or understood the contents, then it will not qualify as a valid Will.

These are the first questions to be asking yourself when you are concerned with the validity of a Will and contemplating a Will Contest in Texas. Tomorrow we will delve deeper into the requirements for a valid execution of a Texas Will.

The report also cited a second recent study showing that donors who include a charitable bequest in their estate plans make annual gifts more than double in size than similar donors who fail to utilize such bequests. (Source: The Bequest Study, The Center on Philanthropy at Indiana University; Giving USA 2008)

Given the current state of the economy and the uncertainty that lies ahead for medicaid/medicare and social security given these staggering numbers, its more important than ever to ensure you have a comprehensive estate plan to ensure your financial health well into the future.

Contact us today to discuss all of the ways you can ensure your estate plan is up to date and viable in this ever-evolving economy.

As a part of the 2001 legislation that eliminated the estate tax for 2010, Congress also included a moratorium on the step up in basis that has historically been offered to assets when someone dies. Under the law prior to 2010, when someone dies, any asset that they own receives a “step-up” in the basis of the asset equal to the value of the asset on the Decedent’s date of death. For instance, if Jack purchased 1,000 shares of Exxon stock in 1971 at $10/share and the same stock was selling at $75/share on Jack’s death in 2010, Jack’s family would receive the stock with a basis of $75/share, the value on his date of death. When they later sell the stock, they would pay capital gains only on the increase in the value after the date of death.

Because there was no estate tax in 2010, there was also going to be no step-up in basis, which could be costly to some taxpayers. When Congress passed the new legislation that increased the exemption amount for 2011 and 2012, they also included a provision that allows estates of persons who died in 2010 to elect to stick with the law that was passed in 2001 or to choose to apply the law applicable to 2011 and 2012. This gives those estates an opportunity to calculate which method would result in the lowest overall taxes and thereby save them the most money.

This new tax election stands to provide a substantial benefit to many of the estates of persons who died in 2010. Because the new law was not enacted until December 2010, Congress has allowed an extension for tax returns being filed for those estates. If you are set to receive an inheritance from an estate of someone who died in 2010, please contact us if you need more information about these potential tax issues.

It is easy to see that the new legislation contains two major changes. First, the estate tax exemption amount is increased from $1 million to $5 million per person in the United States. Second, the maximum tax rate imposed on the assets someone owns in excess of the exemption amount is reduced from 55% to 35%. These changes, undoubtedly, stand to save families substantial sums when family members die.

While these changes have been discussed widely in the media, another important change was enacted in the 2010 legislation that marks a dramatic shift in estate tax law. The new legislation contains a “portability” provision that allows the estate tax exemption of one spouse to be carried over upon their death and added to the surviving spouse’s exemption. Thereafter when the second spouse dies, he or she can utilize both exemptions to leave their children $10 million instead of $5 million.

For example: Jack died in January 2011 at the age of 85. He and his wife, Jane, owned combined assets valued at $9 million on the date of Jack’s death. Jane’s health is not good. She is not expected to live longer than another 6 months beyond Jack’s death. Her Will leaves all of her assets to the couple’s 3 children.

Under the prior version of the estate tax law, when Jack died leaving all of his assets outright to Jane, they lost Jack’s $5 million exemption. Consequently, upon Jane’s later death, when she left all $9 million to the 3 children, Jane’s estate could utilize her $5 million exemption but would have to pay taxes on the remaining $4 million. With a maximum tax rate of 35%, their children would end up paying over $1 million in taxes.

However, with the new portability provision, when Jack died leaving his assets to Jane, he can also leave her his $5 million exemption. As a result, when Jane later dies, she would be able to combine her $5 million exemption with Jack’s $5 million exemption to leave their children up to $10 million tax-free. Accordingly, upon Jane’s death, the couple’s entire $9 million would pass tax-free to the children.

The portability option is a substantial change in estate tax law, and it stands to provide a significant advantage to many clients. However, the new law contains several pitfalls in this portability provision. It also creates some new problems in putting together estate tax planning options. For more information about these pitfalls and challenges in estate planning, please contact us to discuss them more fully.

#5 – Designation of Guardian Before the Need Arises
This one is by far the most underutilized document on this list but speaking from experience as a litigation attorney, this is one of the most important documents to have to avoid a fight later on. This document allows you to name your guardian (or perhaps more importantly specifically disqualify someone from serving as your guardian) before the need for such a guardian arises. Few cases can get as emotionally charged as a contested guardianship. This is especially true in situations where there’s a new marriage late in life. To avoid the heartache that comes with such a fight, do your family a favor and specifically name who you want to be your guardian now while there’s no question as to your capacity. Trust me, they will thank you for it later.

#4 – Directive to Physicians
Another example of a choice you can make now that will save your family untold amounts of heartache and gut-wrenching later. Sometimes called a DNR, this document instructs doctors as to what level of life sustaining treatment they are to employ should you find yourself in a persistent vegetative state. Do you want the doctors to do all they can to keep you alive via all available means? Or would you rather not rely on machines to prolong your life artificially? Don’t make your loved ones have to guess at what your wishes are, get this document drafted and leave no doubt as to your choice.

#3 – Statutory Durable Power of Attorney
This is another document that can save you tons of money in the long run. A Statutory Durable Power of Attorney is a document that allows you to name an Agent to act on your behalf should you become incapacitated later. This allows you to avoid the necessity of a guardianship altogether. Your agent has the ability to act on your behalf without needing to be named as your guardian. Now you might be asking yourself why you should go the trouble of designating a guardian as stated in #5 if you are just going to draft a Power of Attorney as well. Well, think of it this way, you become incapacitated and your daughter (who you named as your Agent under a POA) takes over your affairs. Sounds great right? But what happens when your caregiver hands you a piece of paper and convinces you to sign it, and it turns out to be another POA which revokes the one where you named your daughter as your agent and all of the sudden names your unscrupulous caregiver as your agent. In light of the fact that a guardianship overrides a POA, you prevent a cycle of dueling Agents by naming your guardian and giving them the trump card to step in take control for good.

#2 – Medical Power of Attorney
Same document as #3 only this one deals with your medical care instead of your financial dealings.

#1 – Will
The granddaddy of them all, your will is the most important document you can write. The reason being that it’s the one document that speaks for you when you are gone. Too many times people come into my office and told me that their loved one told them in no uncertain terms that they were to receive certain property but that such bequest wasn’t contained in the Will or worse there was no will. Every time I am stuck telling them that while I believe them, it doesn’t matter because without a will the probate code controls the disposition of an estate, and with a will the four corners of the document control. So if you’ve been putting it off, the time is now to get it done. If you happened to have a will already but need to tweak it, perhaps a codicil is all you need. Either way, get it done, 2012 will be here before you know it.

Most notably, estates will now be able to claim a $5 million exemption per person or $10 million for couples. This exempts estates valued at less than $5 million from paying any Federal Estate Tax, which is dramatically different than the prior law that would have exempted only $1 million per estate. Second, the top tax rate for Estates, Gifts and Generation Skipping Tax will be capped at 35%, which is dramatically lower than the 55% top rate that would have applied under the prior legislation. Third, the $5 million exemption can also be used to shield gifts from Federal Gift tax as well, which is also different from the prior legislation that allowed individuals to make a maximum of $1 million in tax-free gifts during their lifetime. Fourth, individuals who died in 2010 can choose between the new tax laws or those that governed by the 2010 model. Finally, any of the unused $5 million exemption can be passed to the surviving spouse by the personal representative of the decedent’s estate, which provides a significant benefit different from the prior legislation that would have resulted in that unused exemption being lost.

These new changes will allow individuals more flexibility in managing their wealth and distributing it as they wish. For any unanswered estate planning questions, feel free to contact our office.

Court: Texas Supreme Court

The Supreme Court last week sent down a decision that has decided when the duty arises for an estate administrator to timely notify a bank of unauthorized transactions that occurred prior to their appointment.

In March of 2000, Mickey Marcus died with over $22,000 in his account at Jefferson State Bank. The following month, Melvyn Spillman presented the Bank with fraudulent letters of administration purporting to appoint him as administrator of the Marcus Estate. The Bank, relying on what it believed to be valid letters, gave Spillman access to the Marcus account. Throughout the next several months, Spillman withdrew most of the account balance. Spillman was arrested for perpetrating this fraud and several others.

In September of 2003, Christa Lenk was appointed as the Administratrix of Marcus’ Estate. She was aware of the fraud at the time of her appointment. However, following her appointment, she made no effort to contact the bank for over two years. In June of 2005, Lenk sent the bank a demand for payment of $185,785—the amount allegedly withdrawn by Spillman. When the bank refused to pay, Lenk sued to recover the funds.

The bank relied on Texas Business and Commerce Code Section 4.406 which precludes a customer from bringing a claim based on an unauthorized transaction if the customer fails to report the transaction to the bank within one year after the bank provides the customer with the relevant account statement. Both sides filed summary judgment motions. The trial court granted the bank’s motion, however the court of appeals overturned this decision. The Supreme Court then took the matter under advisement and has sided with the bank.

In their decision the Supreme Court has stated that the issue is whether the bank satisfied its initial burden to send or make available the statement to its customer. They held that in the context of a deceased customer that (1) the bank satisfies its burden by retaining account statements for retrieval by the estate administrator, and (2) the response period begins to run once an administrator is appointed.

The Supreme Court did however reject the bank’s argument that it satisfied its burden by sending statements to Spillman. They reasoned that even with reliance on a fraud, Spillman was never the bank’s customer, as required by Section 4.406(a). The bank instead satisfied its burden by retaining the statements, which the Court noted is the only real way a back can satisfy this burden. They held that once an estate administrator is appointed, a bank should not be faulted for failing to further send or make available the statements.

Therefore, the bank has a burden to retain statements, but the administrator’s burden to report unauthorized signatures does not arise until his appointment. Upon that appointment, the administrator has one year (unless otherwise contractually shortened) to notify the bank of any fraudulent or unauthorized transactions. Unfortunately for Lenk, she waited far too long to complain of these transactions, especially considering she knew of them upon the date of her appointment. Not only did she miss the year deadline, it turns out that Marcus and the bank had contractually shortened the deadline to 60 days.
Moral of the story:

If you are appointed as an Estate Administrator, you need to immediately obtain account information for the deceased and if you see any unauthorized transactions, you must report these to the bank at once. Do not rely on the year deadline because as we see here, even that may be severely shortened by agreement. If you have any questions about estate representation, do not hesitate to contact us at 713-260-3926.

For those not familiar with the self-appointed titan of online lawyering, LegalZoom was founded in part by Robert Shapiro, who you should remember was a leading element of O.J. Simpson’s legal team several years ago. The company provides a litany of online legal services and boasts the ability to serve individuals who might otherwise not be able to afford the expense of an actual attorney. For the most part, the nine-year-old company’s services seem centered on a do-it-yourself approach, specializing in providing what are claimed to be “common” or “routine” documents – things like Wills and documents to form a business.

Now, the company is playing defense. A recent class action lawsuit has accused LegalZoom of unfair and deceptive business practices. The company is accused of leading customers to practice law without a license, assisting in the unauthorized practice of law, and using fraudulent business practices.

The chief plaintiff, Katherine Webster, has sued as the Executor of the Estate of Anthony Ferrantino, and as Trustee of the Anthony J. Ferrantino Living Trust. LegalZoom provided several document forms, including a trust, a will and a power of attorney. Per the company’s model, the customer essentially wrote the documents herself by answering several questions, while a computer created the documents based upon the answers. But the documents were flawed, the plaintiff claims, and those flaws cost the Estate severely.

LegalZoom is not the only company of its kind. It’s just the only one that uses a well-known attorney-founder as its spokesperson, lending security and credibility that some might claim is unjustified. The suit at hand will determine if LegalZoom in fact made misrepresentations, buried disclaimers and omitted relevant facts when courting customers through its advertising. It should be interesting to follow, and should at least serve as a cautionary tale for clients with real and often complex legal issues. Perhaps another adage may teach all of us a valuable lesson – you get what you pay for.

9. You don’t like what your Will says. – Sort of obvious I know, but many people fail to realize that simply tearing up a Will and ignoring it will not always ensure that it does not find it’s way to probate court. (See #10 for an example.) Also crossing out provisions and penciling in new ones will not cut it. If you don’t like what the old one says, you must get a new one that revokes all former Wills.

8. You have moved states. – Probate laws vary from state to state so the Will you executed prior to moving to Texas may or may not be valid now that you are in God’s country. Don’t leave it to chance, get in and get a new Will.

7. You have aquired property that you want to leave to someone specific. – Did Christopher Walken recently visit you and hand you your great grandfather’s WWI watch? Again, we’ll skip the details but do you really want to ignore the, um, sacrifice that Mr. Walken made and not do something to ensure that watch goes to your son or grandson when you are gone? Do not trust that simply telling someone will get the job done. The only way to ensure it gets there is to put it in your Will as a specific bequest. Don’t rely on the fact that you will be able to have your own Pulp Fiction moment with junior as you pass down that uncomfortable hunk of metal. If that happens great, but you need a fall back plan in case you check out early. Put it in your Will.

6. You won the lottery. – Or inherited a ton of money. Or got a promotion. Or let’s just say you somehow “acquired” new found wealth (hey we’re not asking any questions). The point is you now need some tax planning and it’s more than likely that the Will you had when you were dirt poor won’t cut it. Why give more to the Government than absolutely necessary? Go get a new Will and make sure your new found wealth is not used to bail out any more billionaires.

5. You got a divorce. – Very few Wills are ambiguous when it comes to who is contemplated by the term “spouse.” If your Will was… well that may be why you got divorced in the first place, but I digress. If instead your Will lists your Ex by name, and you don’t want that person getting everything now that they left you heartbroken and penniless, get in and get a new Will. Don’t wait till you get remarried, you can always add that new spouse on later (or not, again we’re not here to judge you).

4. You have a new baby. – Congrats! If this is your first child then you really want to think about getting a Designation of Guardian drafted along with a Will now that you are parent. If this is not your first child, does your Will mention the other children by name? Does it divide your estate based on a percentage? Does it provide specific bequests to the kids? If so, you need an update. If this is a late-in-life addition to your family, you probably want to think about a trust since now you can’t guarantee you will be around to ensure they are fiscally sound through college. Just try and remember when you were 18, if someone had handed you even a modest share (say 30k) is there any doubt you would have been rolling around in a new Camaro? (Man I wish I still had that car… and that hair.)

3. Your Will is not Self-Proved. – Texas law makes it very, very simple to probate a Will, if you have a properly drafted Will. Just because a Will is valid does not mean it accomplishes everything to simplify probate. Don’t make your loved ones have to drag two people to Court to testify that you were of sound mind when you drafted your Will. Get up off the couch and go get a new Will drafted. And this time go to a real attorney, your brother-in-law does not count. (unless of course he’s a board certified estate planner).

2. Your Will does not provide for independent administration. – Just because your Will says “without bond” does NOT mean that you have appointed your executor to act independent of Court supervision. If your Will does not provide for independent administration your beneficiaries are going to be forced to either jump through hoops to avoid a dependent administration or else be stuck with a much more costly and time consuming dependent administration of your estate. Why would you do that to them when a new Will is just a phone call away? Seriously, give me one good reason. You’re better than that.

1. You don’t have a Will to re-do. God forbid, but if you still don’t have a valid written Will, get yourself to your nearest probate attorney and get it drafted. Do not pass Go, do not collect $200, just do it. NOW!

Hopper and his fifth wife were in the process of divorcing one another. He filed in January of this year. Under a prenuptial agreement, Victoria Duffy would receive 25% of Hopper’s Estate, and $250,000 in life insurance proceeds. As a catch, the two had to be married and living together when he died.

That last part’s the trick. Over the last several months, various court rulings resulted in Duffy residing at Hopper’s property, but in a completely separate house. In fact, Duffy was previously ordered to remain at least 10 feet away from Hopper. Nonetheless, the wheels of justice turn slowly, and the two remained married when Hopper passed away, so Duffy is halfway home to a large payout.

Interestingly enough, the stories say that Duffy is not challenging Hopper’s Will. She’s just trying to make sure that her deal under the prenup stands. One of Hopper’s children seems set on making sure that never happens.

So the fight, and there will likely be a big one, now moves from the divorce court to the probate court. Whatever becomes of Hopper’s Estate will demonstrate that court’s application of laws related to prenuptial agreements, contracts and probate. And the results may well prompt other not-so-celebrity types to fully evaluate their own estate plans. We may not all be Hollywood A-listers, but whether the estate is $40,000 or $40 million, the stakes are high enough to engage in smart planning.