At the beginning of every guardianship case, the Court is required to appoint an attorney (known as an Attorney Ad Litem) for the potentially incapacitated person.  In the past, the Probate Code did not provide a mechanism for the potential Ward to choose their own attorney.

However, new Probate Code Section 646A allows Wards or Proposed Wards to retain their own attorney instead of having the Court appoint an attorney for them.  This ability is subject to the Ward or the Proposed Ward having the capacity and power to enter into a contract.

A Ward must retain the power to contract under the terms of the current guardianship in order to hire a private attorney instead of allowing the Court to appoint an Attorney Ad Litem.  A Proposed Ward may hire a private attorney during the proceeding to appoint a Guardian as long as the Proposed Ward has capacity to contract.

When the Ward or Proposed Ward hires their own attorney, the attorney must hold the same certification requirements as an attorney who is eligible to be appointed as an Attorney Ad Litem.  If the attorney is certified by the State of Texas to serve as an Attorney Ad Litem, then he or she is free to serve as private counsel to a Ward or Proposed Ward instead of a Court-appointed Ad Litem.

These changes to the Probate Code allow individuals with the power to contract to retain their own private counsel, to represent their interests in the guardianship proceeding.  This allows Wards and Proposed Wards to have a greater voice and decision-making power in the process of appointing a Guardian over their person and financial assets.

Exemptions Level: In late 2010, Congress increased the estate tax exemption to $5 million for each person in the United States and reduced the highest estate tax rate to 35% of someone’s assets over $5 million.  The President’s budget lowers that $5 million exemption to $3.5 million and increases the maximum tax rate for estate and gift transfers exceeding the $3.5 million from 35 percent to 45 percent.  Currently an individual could transfer $5 million tax free.  If the President budget passes, that same individual could only transfer $3.5 million tax free.

Portability:  In 2011, Congress enacted a new “portability” provision that allows a spouse to utilize their deceased spouse’s estate tax exemption.  This is the first time in U.S. history that such a provision has been enacted, and President Obama’s budget introduced last week makes the portability rules permanent.  Because this provision is one that the Republicans also favor, we believe it is likely to pass through Congress.

Valuation Discounts: Finally, the budget makes significant changes to the way that business interests and real property held and transferred among family members is valued.  Until now, families creating family businesses could utilize valuation “discounts” on the transfers of certain business interests.  This is more frequently seen in the context of a Family Limited Partnership.  By utilizing the valuation discounts, families have been able to transfer larger assets without paying gift and estate taxes.  Under the budget proposed last week, the valuation discounts would be effectively eliminated, denying family members the ability to discount minority interest in family-owed businesses, family limited partnerships, and certain real property due to lack of marketability.  This a radical shift that could be incredibly detrimental to a huge number of Americans.

If you have additional questions about the new federal estate and gift tax laws and how they could effect your estate plan contact Ford + Mathiason LLP today for a consultation.

The current estate tax exemption is $5,120,000.00.  This means a married couple  dying in 2012 does not have to do any serious tax planning unless they amass over $10,240,000.00 prior to death.  Therefore, tax planning is not a major issue for a majority of Americans. However, change is coming.  Unless Congress acts in the next 8 months, the estate tax exemption is set to revert to $1 million per person. This means the same married couple can only amass $2 million before having to pay estate taxes.

Similar changes are slated for the estate tax rate, which currently is a maximum 35%.  If Congress does not act by January 1, 2013, the estate tax rate would increase to 55%.

To address the estate tax and estate exemption situation, Congress has four options:

1.    If Congress does nothing, the estate tax rate and estate tax exemption revert back to 2001 levels of a $1 million exemption and a 55%  tax rate.

2.    Congress could keep the current $5 million exemption and the 35% tax rate.  The exemption amount would be adjusted for inflation each year.

3.    Congress could split the difference and elect to  set the estate exemption at $3,500,000 and move the estate tax rate to 45%.  In 2008, then Senator Obama endorsed a plan like this, which means this compromise seems to be the most likely scenario.  However, Congress’ ability to work together on a comprehensive plan is suspect at best.

4.    Congress could eliminate the federal estate tax.  An estate would suffer no tax consequences when transferred to children or other beneficiaries.
The estate tax exemption and estate tax rate will most likely change in 2013.  If you have not discussed you estate planning options lately, feel contact Ford + Mathiason LLP today to determine the best way for you to minimize the taxes your estate will pay at your death.

“An evil gold-digging young tramp moved in with my elderly father a few years back and eventually convinced him to marry her. Now my dad has passed away and she’s telling everyone she has the RIGHT to live in the house rent free! This can’t be, my father left me the house in his Will, therefore I can kick her out whenever I want, right?”

Unfortunately, the short answer is no, the tramp, err… opportunistic young woman, is right, she has the right to live in the house. She doesn’t even have to pay the mortgage premiums or the insurance on the place.

Sounds like a raw deal, huh?

Well, what she is describing is called the Surviving Spouse’s Homestead Right of Occupancy. This means that, after a married person dies, the surviving spouse is entitled to occupy the homestead of the decedent for as long as he or she chooses to occupy it. This right is completely independent of any ownership right in the property. The spouse simply has to right to live there if she so chooses. Anyone who inherits the home, automatically takes such home subject to this right and cannot force the surviving spouse out of the house, or sell it out from under her. What’s worse, this right survives a remarriage by the surviving spouse.  So not only is this girl entitled to live there, she can now move her boyfriend in to the house and get married to him, just like she told him it would work out when she convinced him to allow her to marry the old guy in the first place. Sad, but true.

However, there is some good news. The surviving spouse does not get a completely free ride. She will be responsible not only for the cost to maintain the property, but also for all property taxes and if there is a mortgage, the interest on such mortgage. So her “rent-free” comment is not entirely accurate.

Finally, a reason to like higher property taxes.

In the latest chapter in this saga, Goodman’s own biological children are now suing him because of his recent adoption of current girlfriend, Heather Hutchins.  The children’s outrage has quickly morphed into litigation as Joseph Rebak, attorney for the children’s Guardian, filed suit attacking the legality of the adoption.  Rebak said he “has never seen anything like this adoption in his 32 years of practicing.”  The children are concerned that their trust fund, previously ruled exempt from any lawsuit, could be subject to a judgment for money damages as a result of Goodman’s actions in the accident.  Alleging the adoption is an abuse of the legal system, Rebak hopes to have the adoption overturned.

Whether the Judge that approved Goodman’s adoption knew of Goodman’s current legal troubles is in doubt.  At the adoption hearing, the Judge said that ultimately a Delaware or Texas probate Court will need to decide the fate of the adoption.  Apparently, paperwork for the lawsuit was filed both in Texas and Delaware.

As you can see, trust beneficiaries must be attentive to all events that could affect their trust assets.  If you have any questions or concerns about trusts or whether your assets need additional protection, contact Ford + Mathiason LLP  today.

Goodman is currently facing a myriad of criminal and civil charges, including driving under the influence, vehicular manslaughter, and leaving the scene of an accident.  All of the charges arise from an alleged drunk-driving incident where he is purported to have fled the scene after having killed a motorist.  Goodman could receive up to 30 years in prison if convicted, and he could be forced to pay millions in damages for his liability in a wrongful death suit filed by the parents of the killed motorist.

According to Florida law, Goodman is perfectly within his right to adopt an adult like Hutchins.   As a result of having adopted his girlfriend, Hutchins becomes a beneficiary of a trust established for Goodman’s children.  The reasoning behind Goodman’s decision is more apparent in light of his legal issues.  The assets in the children’s trust are shielded from civil judgments and cannot be touched by the Court in most circumstances to pay damages if Goodman was found liable for the death of injured motorist.   At the same time, since Hutchins is now considered to be one of Goodman’s children, distributions can be made to Hutchins out of the trust and would escape being deemed to be distributions to Goodman.  Thereby, Goodman can indirectly benefit from the Trust even if a Court has determined that he is liable to the family of the motorist he is alleged to have killed.

Estate planning is meant to be a constructive method to help individuals plan for the future and protect their assets from excessive tax liability.  Although Goodman’s motivations do not appear to be so pure, his creative estate planning highlights the fact that estate planning can be used in a variety of situations for a variety of purposes.  If you have any additional questions about your estate planning and ways to help you protect your assets in the future, please contact Ford + Mathiason LLP for assistance today.

Out of all the possible avenues for attack in a Will Contest, the question of Testamentary Capacity has to be the most well traveled.  Texas Probate Code Section 88 requires that the testator was of “sound mind” when the Will was executed.  “Sound Mind” is sort of the layman’s term for Testamentary Capacity.  Over the years, the Courts in Texas have developed a definition of Testamentary Capacity that, in its current form, looks like this:

The testator must, at the time of the Will execution, have sufficient mental ability to (1) understand the business in which he is engaged; (2) understand the effect of his act in making the Will; (3) know the general nature and extent of his property; (4) recognize his next of kin and the natural objects of his bounty; and (5) have sufficient memory to collect in his mind the elements of the business to be transacted and to hold them long enough to perceive at least their obvious relation to each other and to form a reasonable judgment.  Lindley v. Lindley, 384 S.W.2d 676, 683 n. 1 (Tex. 1964).

While it is never presumed, testamentary capacity is actually a fairly low bar to hurdle.  As long as the person has their wits on the day of the execution, even a subsequent finding of incapacity is not admissible.  The fact that the person writing the will was old or feeble is not enough.  The fact that the person was taking medication is not enough, unless it is shown that the medication rendered him incapable of knowing his family, his estate, or understanding his actions.

Interestingly, a physicians opinion regarding mental capacity is, in the eye of the law, no better than that of any other person.

So the question really becomes, did the person know he was signing a Will, know that a Will transfers his property upon his death, know what property he had, and know the people to whom he wished to leave property.    If those factors are covered, more than likely the person had capacity.

Next time we wrap up our series with a look at insane delusions and undue influence in the making of a Will.

Texas Probate Code Section 59 is where we find the rules for what constitutes a valid Will in Texas.  It states that a will shall be in writing and signed by the testator in person or by another person for him by his direction and in his presence, and shall, if not wholly in the handwriting of the testator, be attested by two or more credible witnesses above the age of fourteen years who shall subscribe their names thereto in their own handwriting and in the presence of the testator.

Now those are the physical requirements.  However, to be a valid Will, the document must be written with what is called “testamentary intent.”  It must possess in some degree the essential characteristics of a will.  The most common proof of such intent is a statement such as “This is my last Will and Testament,” or “it is my will and desire.”  However, the fact that the person may not realize they are writing a Will, does not prevent it from being probated as such, if it fulfills the statutory requirements.  The Supreme Court in Hinson v. Hinson stated that “The [testamentary intent] does not depend upon the maker’s realization that he is making a will, or upon his designation of the instrument as a will, but upon his intention to create a revocable disposition of his property to take effect at his death.  It is essential however that the maker shall have intended to express his testamentary wishes in the particular instrument offered for probate.”

What about Oral Wills?  Well, until 2007, there remained in Texas such a thing as an “oral will” or otherwise known as a “nuncupative” will.  However such a Will was only valid for personal property and required three witnesses and only counted if the person made it on his deathbed.  Now, even such limited circumstances do not count and all Wills must be in writing to be valid.

Regarding the technical requirements, the “signature” of the testator can be any mark and may even appear in the body of the document.  If the person signed with an “X” then that is a valid signature.  If the person wrote “Your son, Jimmy,” then that is a valid signature.  In fact, even if someone else signs the document, say because the Testator had two broken hands, this will be valid provided that it is done in the Testator’s presence and at his direction.

Furthermore, the witnesses to such Will must be “credible.” Luckily for most of us, this is a very low hurdle to overcome. To qualify as credible, the witness must not be receiving any bequest under the will, and must be over the age of fourteen.  In fact, the witnesses do not even need to know they are signing a Will.  Nor do they have to actually see the Testator sign the Will.  Nor do they have to sign in each others’ presence.  So long as they sign in the Testator’s presence and at his direction, they will qualify as a valid witness.

If one wishes to dispense with even the meager requirement of two witnesses, they need only to write the entire will in their own handwriting.  A “holographic” Will, as such is known, is a Will wholly in the handwriting of the Testator and requires nothing more than the Testator’s own signature.  There’s even a case in Texas of a man scratching out a valid Will on the fender of a tractor that he had unfortunately turned over and fatally pinned himself under.

So there you have it, the execution of a Will.  No notary requirement, no formal ceremony, no fancy recitals or oaths of fealty, just a writing with testamentary intent and signatures of witnesses if it’s typewritten.  Next time, we will look at “Testamentary Capacity,” and what it means to be of “sound mind.”

On Friday, November 4, 2011, the Houston Chronicle ran a front-page story entitled, “Elderly Texans at Risk, and It’s Legal,” which is the latest in a series of articles over the last few years regarding the Chronicle‘s perceived deficiencies in the way that guardianship cases are handled by the Probate Courts in Texas.  You may recall that we reported on a similar story from October 22, 2010, and prior stories were published in the Chronicle in June 2007.

The new article depicts the story of Helen Hale, an 86-year old widow who was “plucked” from her house and placed into a retirement home, but the article glosses over the fact that Hale’s children were neglecting to provide appropriate care for her.  The article cites that over 30,000 elderly people in Texas have “lost the right to decide where they live, to choose a caretaker or to spend their life savings…” due to becoming incapacitated in their later years.  The article also cites that the number of guardianship cases in the larger counties like Harris, Travis, and Bexar has increased to the point that each probate judge handles a caseload of between 1,500 and 3,000 guardianships per court, but it fails to cite that these counties have special courts dedicated to handling guardianship cases.  Most interestingly, the article casts a negative light on these courts because “most [probate] judges have only a single investigator to check out potential problems” in guardianship cases.

Although the Chronicle appears to tell a compelling story of neglect in the Probate Courts, the story clearly fails to convey the facts about guardianships accurately.  The article faults the probate courts for having only one investigator per court, but it fails to mention that only the 10 largest counties in the State with special courts dedicated to handling guardianship cases have court investigators to investigate problems in guardianship cases.  In the 224 other counties in the state, no court investigator exists in the entire county, which means that the vast number of counties in the state have nobody to investigate guardianship issues.

Likewise, in the 10 largest counties that have special judges dedicated to hearing nothing but probate and guardianship cases, the Courts have investigators and auditors to closely monitor what happens in guardianship cases.  The 224 other counties in the state have judges who do not “specialize” in guardianship cases, and in many cases, those judges are not even lawyers.  Instead, the courts in the 224 smaller counties hear a wide variety of cases – civil, criminal, family, guardianship, etc. – and do not offer incapacitated individuals the same level of attention that they receive in the larger counties.

The Chronicle is correct that the number of guardianship cases has exploded in the last 20 years because of the aging population in Texas.  The Chronicle also correctly cites one of the Probate Judges in Houston when she says that guardianship disputes are “the most expensive endeavors that I see in probate courts.”  Guardianship disputes are incredibly complex, and they are often made more complex by attorneys who do not routinely practice in this area and who do not fully understand the complexities of these cases before they get involved.

In reality, no system is perfect, and every system is going to have flaws.  However, the Probate Courts in Harris County take the greatest care of any Courts in the state in attempting to protect the interests of the elderly in Houston.  If you find that you need to pursue a guardianship over a family member, please contact Ford + Mathiason.  Our attorneys have very substantial experience in contested guardianship cases, and we would be glad to assist you.

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.