Alternatives to Guardianships of the Person

February 1, 2010 by fordmath

A few weeks ago, we took a more in-depth look at the use of Section 867 Trusts as an alternative to guardianships for a minor. We examined some the advantages of the trusts and pointed out that guardianship alternatives like them are fine examples of the legislature working to provide reasoned solutions to issues that affect more people every day. There are others, and this time I thought we would focus on a few alternatives to guardianship of the person.

Recall that guardianship of the person involves the Probate Court’s judicial finding of incapacity of a minor or adult. Once the court finds the person lacks some or all capacity, the court appoints an individual to be responsible for that person’s non-financial interests. Often, the court reaches this restrictive measure because there is no option that can better protect the incapacitated person. Other times, there are alternatives that are not nearly as restrictive as the imposition of a guardianship.

For example, the Texas Health and Safety Code provides several useful options. Under that Code’s provisions, a person may take advantage of naming an agent under a Medical Power of Attorney. With some pre-need estate planning, a person could avoid guardianship altogether by nominating someone to make the same kinds of decisions before the need ever arises. Directives to Physicians, also authorized under the Health and Safety Code, might be useful as well. Used correctly, these documents can communicate a person’s intentions and directions regarding medical treatment under terminal or other specified circumstances.

Likewise, the Health and Safety Code may help avoid guardianship and permit the nomination of a surrogate decision maker, much like the agent under a Medical Power of Attorney. In both emergency and non-emergency situations, Texas law may provide a means of assisting the person without the time and expense of a formal guardianship.

Keep in mind that the Probate Court does not approach the creation of a guardianship lightly. Because the process can involve the removal of rights and liberties that a person would otherwise enjoy, most probate judges in Texas are very careful to invoke their guardianship authority only in those circumstances where it appears that there is no other option available. Even then, by requiring appointed guardians to report on the condition of their ward annually, those probate judges are careful to keep a watchful eye on the guardian to see that he or she is making decisions consistent with the ward’s best interests.

Too often, guardianship issues become litigated matters. They are particularly emotional when guardianship of the person is at issue. These cases can pit brothers against sisters, sons against mothers, and so on. Meanwhile, a person who may need help is often tugged in both directions. The fact is that in many cases, these fights have been brewing for some time, and they are going to happen despite all the best estate planning. Human nature often knows no logic. But, with alternatives to formal guardianships in place, the Probate Court and the parties can begin to work together toward crafting a result that accomplishes what everyone should be concerned about – the well-being and best interests of the incapacitated person.

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This Week in Probate and Guardianship Appeals

January 26, 2010 by fordmath

Johnny Carroll, Individually and as Trustee of the Johnny Carroll Trust, v. Letha Frances Carroll and Donald Carroll, Supreme Court of Texas
This week’s entry comes to us from on high, the Texas Supreme Court. Johnny Carroll appealed the Appellate court’s ruling on a default judgment which was awarded in favor of Letha and Donald Carroll. Johnny raised the issue of jurisdiction for the first time in the Supreme Court cliaming that the County Court, to which this case had been transferred, lacked the requisit jurisdiction to hear the matter. The Supreme Court agreed.

Jurisdiction in regard to Trust Proceedings

The Texas Property Code provides that a district court has original and exclusive jurisdiction over all proceedings concerining trusts, including proceedings to appoint or remove a trustee, determine the liablity of a trustee, or to require an accounting by a trustee.

Letha and Donald’s original suit sought exactly such accounting and removal. Despite this, the 66th District Court of Hill County transferred this suit to to County Court at Law.

The Supreme Court noted that the district courts may only assign cases to the county courts at law that are within the county court at law’s jurisdiction. Because nothing in the Texas Government Code confers jurisdiction on county courts at law over trust proceedings, the transfer to the Hill County Court at Law was improper. In light of the fact that the Hill County Court at Law had no jurisdiction over the proceeding, its judgment was void.

What does all of this mean for you? Perhaps a lot. Void judgments are no judgments at all. They are good nowhere and can be attacked at any time. Therefore, even if you have been out of court for years and you now read this and realize your trust case was handled in a court that lacked jurisdiction, you may still be able to attack such a judgment on the basis of voidness. To make sure, call us today and schedule an appointment to discuss your options.

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The High Cost of Your Will

January 18, 2010 by fordmath

Each week, The Houston Chronicle runs a column entitled “State Your Case,” where local attorney Ron Lipman answers 4 or 5 questions from readers regarding various legal subjects. Recently, Lipman devoted the entire week’s column to estate planning and probate questions covering a range of concerns regarding Wills and probate questions.

In one of those questions, the reader asked Lipman, “What should I expect to pay for a simple Will…?” The reader pointed out that he just wanted a Will that passed everything to he or his wife when the first of them died, and then upon the death of the second of them, everything would be split equally between their children.

Having apparently conducted an informal survey of other attorneys in Houston, Lipman discussed that fees for a simple Will can sometimes be as high as $2,000 for a married couple. He also pointed out that a simple trust for a special needs child will generally cost anywhere from $2,000 on the low side or $4,000 on the higher end.

In my opinion, Lipman has provided useful information to answer this reader’s question, and his answer is probably fairly accurate. What surprises me, though, is the fairly high cost that some lawyers are charging for their “simple” Wills and for trusts for special needs children.

Ford & Mathiason has always advocated that each person in Texas should have a Will and that there is no substitute for the competent, experienced advice of attorneys who routinely advise clients in estate planning. However, Ford and Mathiason has historically charged much lower rates for these services and has always been very upfront and honest about the manner in which we charge for our estate planning services. In the Rates and Fees section of our website, you can find detailed information on the methods that we use for charging for our services, which we provide so that potential clients can fully understand the financial commitment that they are making when hiring an attorney.

As you embark on new decisions in 2010, consider carefully whether you need to make changes to your existing Will or if you need to create a Will for the first time. At the same time, do not let articles like Lipman’s scare you into thinking that these services are cost prohibitive. Ford & Mathiason is happy to offer estate planning expertise at reasonable rates. Please contact us if you would like to discuss your options further.

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This Week in Probate and Guardianship Appeals

January 8, 2010 by fordmath

Starting in 2010, Ford & Mathiason LLP will be writing a weekly entry covering newly released opinions by the Texas Courts of Appeals in the areas of Probate and Guardianship. Jason Brower, Associate in charge of the appellate section of Ford & Mathiason LLP, will be authoring these entries.

Estate of Pauline Moran Allen, Tyler Court of Appeals

This week’s entry comes to us from the 12th District Court of Appeals in Tyler. Dollie Weir appealed the trial court’s order which granted Leonard Allen’s motion for summary judgment. Two Issues were raised by Dollie, (1) that Leonard failed to present any summary judgment evidence to support his motion, and (2) that the thirteen writings, purported to be a codicil to Pauline Moran Allen’s Will, lacked testamentary intent.

Summary Judgment Evidence

The Will of Pauline Moran Allen was admitted to probate as a muniment of title on January 16, 2008. On April 2, 2006, Leonard filed a motion to amend the application and probate as a muniment of title thirteen writings purportedly signed by Pauline on December 27, 2002. Dollie filed a contest to Leonard’s motion, stating that the writings lacked testamentary intent. Leonard filed a motion for summary judgment, asserting that the thirteen writings were prepared, dated, and executed by Pauline, contained the signatures of the two witnesses, and complied with all the formalities of a will except for being entitled a will or codicil. However, he failed to attach any summary judgment evidence to his motion.

Dollie moved for both a no-evidence and a traditional summary judgment (attaching the 13 writings along with other summary judgment evidence) and asserted that the writings lacked the necessary testamentary intent to constitute a will or codicil. The trial court granted Leonard’s motion and denied both of Dollie’s motions. The court found that there was no genuine issue of material fact in Dollie’s contest, that no ambiguity existed with regard to the testamentary intent of Pauline in the codicils and that Leonard was entitled to have the codicils admitted to probate as a muniment of title.

The Court of Appeals agreed with the Trial Court on the basis that even though Leonard did not attach any summary judgment evidence in his motion, when both parties move for summary judgment, the trial court may consider the combined summary judgment evidence. Therefore, because Dollie had included all the evidence needed to establish Leonard’s motion, the granting of such motion was not in error.

Lack of Testamentary Intent

Dollie’s second issue revolved around her claim that the thirteen writings lacked testamentary intent. The Court of Appeals first noted that any writing introduced as a will or codicil must contain an explicit statement declaring that the writings are wills or codicils or that the property division will take place only after the decedent’s death. The Court then further noted that the intent of the testator must be ascertained from the language used within the four corners of the instrument offered for probate. Commonly called the “Four Corners Rule” this means that unless there is some ambiguity in the language of the instrument, outside evidence cannot be used to add or contradict the writing or show that the testator intended something different than what is on the instrument.

Leonard, in his motion for summary judgment, was in effect saying that these thirteen writings are unambiguous, executed with all requisite formalities of a codicil, and therefore no outside evidence of testamentary intent is needed or even allowed. Dollie disputed this however, and stated that none of the writings are referred to as wills or codicils, and contain no words evidencing that Pauline intended for these to dispose of her property only upon her death, and therefore lacked the requisite testamentary intent to be regarded as codicils.

The Court of appeals agreed with Dollie. They stated that nowhere in the writings did they find testamentary language, such as words of grant or devise, nor were there words from which a bequest could reasonably inferred. Because no amount of outside evidence could supply the absent testamentary intent, such writings were not a codicil. The trial court therefore erred in granting Leonard’s motion for summary judgment and the Court of Appeals reversed such judgment.

What does all of this mean for you? If you want to ensure proper disposal of your property upon your death, do not draft your own documents. Instead, call us today and schedule an appointment to discuss your estate planning needs.

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Alternatives to Guardianships for Minors: Section 867 Trusts

December 28, 2009 by fordmath

In many cases, the Court’s creation of a guardianship of the estate for an incapacitated individual or a minor may be inevitable. It may be the least restrictive option for the Court. However, many times I am approached by clients for whom there are lesser-restrictive and more efficient mechanisms or processes that can achieve many of the same goals.

When faced with the situation that a minor child is supposed to inherit some money from a parent or grandparent, the Courts cannot allow the minor to receive the property outright. Likewise, the law does not allow a parent to collect the money on their behalf without some formal procedure like a guardianship.

Take, for example, a father’s $50,000.00 life insurance policy naming his minor child as the sole beneficiary. The surviving parent wants to collect the funds owed to the child so that they can be used for the ordinary expenses of raising the minor, or perhaps the funds will be tucked away for college. In either event, the mother wants to collect the funds, and the insurance company wants to pay them but cannot pay the minor child directly. As par for the course, the insurer usually demands that a guardianship be created. They don’t want to be liable to the child by delivering the funds to the mother without some kind of security that the mother will be accountable for the funds. Guardianship of the minor’s estate seems like the best choice, if not the only one. But is it?

As with most attorney answers – it depends. The mother could request that the Court appoint her as the Guardian of the minor’s Estate. But this choice often comes with some significant downside. The mother would need to post a bond for the policy proceeds, and the proceeds will be reduced by the fees and expenses of creating the guardianship. Moreover, the guardianship must be maintained, which means that additional expenses will be incurred annually until the child turns 18. Again, the proceeds would be reduced, sometimes significantly, over time. The overall process might be inefficient and challenging, if not impossible under certain circumstances.

One alternative available to the mother might be a trust created by the Court under Section 867 of the Texas Probate Code. Under this law, a financial institution, and sometimes a person, can be appointed by the Court to act as Trustee of a trust created by the Court for the benefit of the minor. The trust comes equipped with very specialized terms that permit the Trustee to collect the insurance proceeds and use them for the benefit of the minor until anywhere from the age of 18 to 25. Every year, the Trustee reports to the Court and accounts for the trust’s activities.

Often, such an alternative can be achieved relatively quickly and with significantly lower cost. The insurance company is happy to pay a bank or person who will be accountable for the funds, and the mother is happy that the funds will be available for the same purpose for which they were intended by the deceased father.

Sometimes, guardianship is not just the best choice, but the only one. But, alternatives such as the Section 867 Trusts are prime examples of the legislature working for our citizens to provide reasoned answers to questions and issues that affect more people every day. In the areas of guardianship and probate, there may be a number of achievable alternatives that provide the same, if not better, results for the client, at lower cost and with greater overall benefit.

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Powers of Attorney

December 11, 2009 by fordmath

Even the most basic estate planning counseling will often involve some discussion with clients about powers of attorney, their effect, limitations and the consequences of certain decisions. In nearly every case, these documents can be perfectly effective mechanisms permitting someone to make important decisions for the client at a time when they are no longer able. At the same time, many of our clients are surprised to learn that these simple documents can carry with them some very important legal consequences.

Generally speaking, there are two types of powers of attorney used in Texas – those that cover decisions of a medical nature, and those that cover non-medical decisions, such as decisions regarding property. Today, I thought it might be helpful to discuss some facets of the latter in a bit more detail.

Although the document itself may come with any of a variety of titles, a commonly used non-medical power of attorney is the Statutory Durable Power of Attorney. The document, depending on the wishes of the client, might become effective immediately, or may become effective only on the occurrence of a future event, such as the client’s (or principal’s) incapacity.

Many clients view the document simply as one of convenience, and they can, in fact, be very convenient. It might help, for example, to give a family member or loved one the ability to sign checks for routine expenses, or permit them to deal with a principal’s bank accounts when the principal is not in a position to do so for herself. When the principal selects this responsible person (or agent,) they often do so because there is a natural trust or confidence between the two.

However, even in these naturally-trusting relationships, the potential for abuse exists, even if it is minimal. For example, what happens when the agent changes the mailing address on the bank statements to his address, instead of the principal’s, and fails to keep the principal advised of the financial activities? What happens when the principal receives no response to questions about the agent’s recent actions?

Beyond matters of simple convenience, powers of attorney create a legal relationship between the principal and the agent. When acting, the agent becomes a fiduciary to the principal, and owes certain and specific legal obligations. One of these primary duties is an obligation to act only in the manner that the principal directs. Another duty of the agent, often overlooked in my experience, is a legal obligation to account to the principal.

Texas law requires an agent to inform and account to the principal of his or her actions. Agents should keep careful and accurate records of their activities and transactions, as a principal may demand a detailed accounting of such things at whatever time they choose. If the agent fails to provide it, the principal may revoke the power of attorney, or may even file suit against the agent to compel the production of the accounting. Many times, these steps will not prove necessary, but the remedies serve to remind the agent that it is the principal running the show. Although nobody ever anticipates having to file suit to keep their agent in line, the availability of such a remedy should give agents reason enough to act correctly, and should give principals reason enough to exercise care and caution when selecting their agent.

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Non-Probate Assets

December 1, 2009 by fordmath

Every estate planning client is unique. There are simply far too many variables to boil effective estate planning down to a “one-size-fits-all” approach. Families and loved ones are diverse and dynamic, and assets vary immeasurably from one circumstance to the next. However, there are some common elements in most cases. The coordination of what are typically known as “non-probate assets” is one of those elements that comes up in the case of nearly every estate planning client that I counsel.

In a nutshell, “non-probate assets” are those assets that are specifically designed to pass to a designated beneficiary, or group of beneficiaries, at a future point. They can come in all sorts of shapes and sizes, and insurance policies represent a perfect example. John Doe purchases a $1 million insurance policy and names his wife, Jane, as the sole beneficiary. At John’s death, his insurer holds up their end of the contract and pays Jane once she informs them of John’s death and provides the necessary identification. Seems easy enough.

However, in many past cases, I have seen decedents’ Wills that attempt to direct who is entitled to certain “non-probate assets,” whether a life insurance policy, retirement account, or other such similar asset. Sometimes they identify the same beneficiary, and sometimes they do not. What if John Doe died leaving a Will that gave his life insurance policy to his girlfriend, and not to Jane, as the policy directed? And so many clients ask the obvious question: When they conflict, do the policy proceeds pass under the Will, or does the insurance policy control where the proceeds go?

The answer, which remains surprising to some, is that the provisions of the Will take a backseat to the provisions of the contract. With very little exception, the Texas Probate Code governs Wills, Trusts and other types of instruments. Insurance policies are not generally governed by the same law. Rather, they are contracts between the insured party and the insurer. When an event (John’s death,) triggers the obligation of the insurer (paying the proceeds to Jane,) the insurer’s obligation is to abide by the contract and pay the proceeds to Jane. Whether or not John left a Will is irrelevant to the insurance company. Similarly, his attempt to direct the proceeds to someone other than his designated beneficiary falls short.

In future posts, look for some discussion of some circumstances where it may work to John’s advantage to coordinate his “non-probate assets” with his Will to achieve the result that he wanted. In the meantime, remember that “non-probate assets” are generally governed by the contract that creates them. Many clients neglect this side of their estate planning, as they are primarily focused on having a well-drafted Will in place. Review the beneficiary designations that you have made on your own “non-probate assets,” and you can be certain that your plan fits together to cover all of your intentions.

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Wall Street Journal Article Fails the Test

November 21, 2009 by fordmath

In the Wall Street Journal’s issue on November 12, 2009, Journal writer Jane Hodges offers a “Cranky Consumer” article in which she compares and contrasts various online programs to create a do-it-yourself Will. The article, entitled “Before It’s Too Late: A Test of Online Wills,” provides a review of how easy each program is to use, and it offers information on costs, services, and technical support for each of the programs reviewed. However, Ms. Hodges seems to fail her own “test.”

The laws related to Wills and trusts vary by state. What may constitute a valid Will in Texas may not be a valid Will in California. Likewise, because of the extreme differences in the probate laws across the various states, the most effective method of planning for your estate in some states may be the creation of a revocable living trust, while in other states the most effective method of handling your estate may involve a traditional Will. Likewise, depending on the overall assets owned by an individual or married couple, including certain tax provisions in a Will or Trust might be useful in saving significant amounts of taxes when one or the other of them dies.

Ms. Hodges article fails to provide a single warning or caution about any of the programs that she reviewed. She does not address whether or not the programs create documents that adhere to the specific laws of the state in which you live (most do not). While she does make passing mention of the fact that only one of the programs even mentioned future taxes, she does not attempt to caution her readers of the fact that this issue along could be significant. Likewise, while she seems to presume that a Revocable Trust is the appropriate method for planning for an estate, she does not point out that this may not be the best advice for each consumer. Most disturbingly, Ms. Hodges makes a cavalier reference to seeking the advice of an attorney, and she seems to suggest that an attorney’s advice is not necessary. However, she does tout the fact that one of the programs allows you to call into their hotline and ask questions.

In reality, do-it-yourself Wills are very often poorly drafted, and they frequently fail to properly conform to the laws of the specific state in which you live. As a result, it can be significantly more expensive to probate the Will at your death, or the Will may be completely invalid because it was not prepared properly. Additionally, the thought that you can call a hotline to have an attorney in California answer “general” questions regarding your Will is preposterous, unless you live in California. You should not accept legal advice from an attorney who is not properly licensed in the state in which you live. In fact, it violates the ethics rules of every state in the country for an attorney to express a legal opinion about laws in a state in which he is not licensed.

While Ms. Hodges’ article may have some value, she should have done a much better job to caution her readers as to the very significant pitfalls that can befall them by using an online Will program rather than seeking the advice of a competent lawyer.

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A Peer of Your Juries

November 11, 2009 by fordmath

An article concerning the probate of the Estate of local oil pioneer provides an interesting glimpse into the mind of potential jurors.

I recently ran across a Houston Chronicle article concerning the Estate of Alfred C. Glassell. It seems the daughter of the oil pioneer and cultural philanthropist has contested the probate of his will, on the grounds that he was unduly influenced. Her claim revolves around the allegation that local museums (i.e. their attorneys) convinced the elderly man to change his will and give more to charity (i.e. the museums) thereby leaving less for his heirs (i.e. the daughter).

What struck me was not the content of the article, Lord knows there’s nothing new in a beneficiary contesting a will in a multi-million dollar estate. No, what caught my eye was the comment section located below the on-line version of the article. I was curious to see how joe public views such a fight. The results were not too surprising.

Of the 70 comments, my unofficial count was 12 in favor of the daughter, and 30 against. I noticed the following terms used to describe the daughter: “greedy wench,” “trust fund baby,” “roaches,” “brain dead liberal,” and my personal favorite “money grubbing wannabe heiress.” One poster asked “being a millionaire isn’t enough?”

However, I was somewhat surprised by the number of those who questioned the “disproportionate share” and lamented on how all of the estate was going to be sucked up by the money hungry attorneys. In fact, I counted at least ten anti-lawyer comments. Funny, I can’t remember any lawyer ever filing a suit without a client, but then again, I’ve come to expect such comments in my line of work. Like they say, the problem with lawyer jokes is that lawyers think they’re funny and everyone else thinks their true.

Either way, it should be interesting to see how the trial pans out, if these comments were any indication as to the bias of a potential jury pool, I would say the daughter is facing an uphill battle.

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Effective Trust Administration

October 21, 2009 by fordmath

Even in the case of simple estate planning, more and more individuals are utilizing the safety and flexibility of trusts in order to accomplish their goals. Marital, bypass and contingent trusts, just to name a few, are becoming more prevalent in wills and routine estate planning ever day. These tools can sometimes offer very attractive results, such as greater control, tax savings or creditor protection. They also often require maintenance and guidance long after the terms are written. Spouses, children and even trusted friends can easily find themselves named as trustees, with little to no understanding of the rights, obligations and liabilities that come with the job.

In the simple case of a married couple with two young children, the couple’s Wills might direct that the Estate of the surviving spouse pass into trust for the kids at his or her death. The Will might appoint the husband’s brother as Trustee, with instructions to hold and manage the property until the children reach the age of 30, at which time they will receive it with no strings attached. Perhaps the good uncle is authorized to make distributions from the Trust to the children, until they turn 30, for their health, education, maintenance and support, as he deems fit in his discretion.

Does the uncle owe the children any legal duties? Must he keep the current property, or can he invest it differently? Do the children have a right to complain if the uncle invests the Trust property unwisely? Can the uncle send the good child to Harvard, leaving the prodigal one only enough funds to attend the local community college? These are questions that linger long after mom and dad came into to plan and draft their Wills, and the legal relationship between the uncle and the children invokes decades of developed fiduciary law in Texas.

Well-drafted Wills and Trusts will expressly outline a Trustee’s duties and responsibilities. Even where these terms are absent, the Texas Trust Code fills most of the gaps. At a minimum, our uncle will owe his niece and nephew specific duties of loyalty, reasonable care, impartiality and full disclosure. The children may have the right to demand an accounting from the uncle to better understand his administration. All three might even collectively agree to terminate the trust before the children turn 30.

Trusts are as unique as the individuals for whom they are drafted. However, many of the common principles, rights and obligations of effective trust administration apply regardless of the language used. Beneficiaries should be well-advised of their rights and the limits of their ability to compel a trustee to act. Trustees, likewise, should be well-advised of how to administer the Trust competently, effectively and within the scope of the fiduciary laws of Texas.

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