This Week in Appeals – Ford & Mathiason Wins Again

March 23, 2011

Case: Courtney Guyton vs. Cynthia Monteau
Court: Fourteenth Court of Appeals – Houston

The Fourteenth Court of Appeals this week has ruled in F&M’s favor involving the ability of a probate court to appoint a third party administrator over the application of a beneficiary of the estate.

F&M appealed the denial of their client’s application to be appointed as the Successor Administrator of her father’s estate. After a hearing on the merits in which only one objection to her appointment was raised, the court denied the Applicant’s appointment based on a perceived conflict amongst the parties.

The trial court admitted that the only objection raised by the parties was not sufficient to disqualify the Applicant from serving. However after the opponent’s counsel requested the court to take judicial notice of the entire file, the Court ruled that it was appointing an independent third party as administrator.

The Court of Appeals overruled, noting that the burden of proof rests on those opposing an applicant’s appointment. Because none of the reasons given by the trial court for its decision was asserted by any interested party, the Court of Appeals ruled that the trial judge abused his discretion by denying the Applicant’s appointment and appointing a third party. The case was remanded to the trial court with instructions to grant the application and appoint Courtney Guyton as Administrator.

What does all of this mean for you? If you feel you’ve been wrongly denied an appointment, call us today and schedule an appointment to discuss your matter. Even where a Judge has ruled against you there may still be options available, but the timelines are short so do not delay.

Posted in Guardianship, Probate | Comments Off

2011 Legislative Update, Part 2

March 18, 2011

Among the other potential legislative changes that might have a negative effect on guardianships in Texas is Senate Bill 1027, which was also introduced by state Senator Chris Harris representing Denton County. Under this proposed bill, Harris would add a new section to the Probate Code that would prohibit an attorney who serves as guardian of someone to also provide legal services on behalf of the guardianship. This proposal is terrible legislation as it may be unconstitutional, and it is certainly counter to extremely long-standing law in Texas.

On the question of constitutionality, this proposed legislation would prohibit an attorney serving as guardian to also provide legal services for the Ward. This sounds like an unreasonable restriction on an attorney’s right to practice law, which raises a constitutional issue. Likewise, this proposal seems to discriminate only against lawyers and not other professionals like doctors, financial planners, and accountants who might also serve as guardians and also provide professional services to them.

More significant than the constitutional question is the fact that this proposed legislation violates long-standing Texas law that has been recognized by every Court in the state. The Courts have uniformly agreed that allowing an attorney to serve the dual role of guardian and attorney simply saves time and money for the Ward’s estate and promotes the Ward’s best interest because of the fees saved by the attorney/guardian not having to hire an additional attorney to complete the tasks that the attorney/guardian could complete more easily himself. The rationale recognizes the inherent inefficiency of having to educate an outside attorney at every turn of the guardianship when the attorney/guardian would not have to educate himself.

Ford & Mathiason practices extensively in the guardianship arena, and we certainly recognize that the appointment of an attorney as guardian can lead to some abuses of the position. However, the relatively small numbers of cases in which we find abuses do not justify the kind of bad law that would emanate from Senate Bill 1027. Please contact your Texas Legislators to encourage them to vote against this Bill.

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2011 Legislative Update, Part 1

March 15, 2011

As you may know, the Texas Legislature convenes in January of every odd year, and the Legislative session generally extends for 140 days (approximately 4.5 months). During the Legislative session, hundreds of bills may be introduced covering a wide array of topics. The 2011 session convened in January and will extend until the end of May. Saturday, March 12, 2011, was the last day for legislators to file bills that they wanted to have considered in this Legislative session. The Legislature provides online access through the Texas Legislature Online to view and track the proposed legislation up for debate in the Legislative session.

Among the topics covered in many of these bills are various issues related to probate and guardianships. From my review of these bills, it appears that there are sweeping changes that have been proposed in the probate and guardianship arenas. Many of these changes mark distinct changes in the status of the current law, and some of the proposals are simply bad law.

Probably the most disconcerting of these proposed changes to law is Senate Bill 286, which has been introduced by state Senator Chris Harris, who represents Denton County in the Legislature. This bill would allow Judges in guardianship cases to charge the attorney’s fees in a guardianship case to one party or the other when there has been a guardianship contest. His legislation would also open the door for Courts to assess the fees for court-appointed attorneys against the party bringing the guardianship action.

This proposed legislation could have a chilling effect on guardianships and jeopardize the safety of many elderly adults who need protection from those taking advantage of them financially or neglecting their personal welfare and safety. Although the Bill is likely intended to curtail abuses of the guardianship process, its intent will be quickly distorted by Courts that do not fully appreciate the complexities of guardianships.

The problem created is this: Unlike litigants in any other type of lawsuit, litigants who file guardianship actions do not stand to benefit personally from the guardianship case. Rather, they are looking to institute a mechanism for protecting an elderly person who is incapable of protecting themselves. If a litigant faces the risk of having to pay someone else’s attorney’s fees when they are simply trying to help an elderly family member or friend will likely be deterred from getting involved in trying to help that person. This will create a significant deterrent for those who might be inclined to help protect an elderly person, and it will lead to significant problems for potential elderly victims of abuse.

You should contact your Texas Legislator to encourage them to vote against Senate Bill 286.

Posted in Guardianship | 1 Comment »

The 2010 Estate Tax Election

March 1, 2011

As we have reported previously in our Blog, the estate tax law for 2010 and 2011 has changed fairly dramatically with the passage of new legislation in December 2010. When Congress enacted a comprehensive tax package in June 2001, it included a provision that would eliminate the estate tax in 2010 but would re-institute the tax in 2011 at 2001 rates. Under those rules, the estate tax was set to return to a $1 million exemption per estate with a maximum estate tax rate of 55% on a person’s assets over the $1 million mark. Under the 2010 legislation, Congress increased the exemption for 2011 and 2012 to $5 million, and it reduced the maximum estate tax rate to 35%.

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.

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Major Change in Recent Estate Tax Legislation

February 15, 2011

As we reported on our Blog in December, Congress enacted new estate tax legislation in late 2010 that makes radical changes to the estate tax law that would have gone into effect on January 1, 2011. Under the old law, each person dying after December 31, 2010, would be entitled to a $1 million estate tax exemption, and any assets that he owned in excess of $1 million would be taxed at a maximum rate of 55%. Under the new legislation, taxpayers dying in 2011 and 2012 will be entitled to a $5 million exemption, and any assets in excess of $5 million would be taxed at a maximum rate of 35%.

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.

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Five Documents to Include in Your New Year’s Resolutions

February 8, 2011

Now that you’ve recovered from the holidays and can focus on starting the New Year off right, it’s time to stop putting off getting those estate planning documents done and make this the year you cross that resolution off your list. The only question is which documents do you need? Well here’s a list of the five most important ones to get you started.

#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.

Posted in Estate Planning, Guardianship, Trusts, Wills | Comments Off

Probate Court Changes in Houston and Dallas

January 11, 2011

The ringing in of a new year brings thoughts of all sorts of changes in life. It brings new opportunities, fresh perspectives, and renewed energy. In 2011, the same is true in the Probate Courts of Harris and Dallas Counties. The elections in November resulted in some distinct changes in the judges among the probate courts in these two counties.

In Harris County, contested races in all 4 probate courts resulted in the election of two new judges and the re-election of two others. In Probate Court One, Judge Loyd Wright was elected to his first term as a probate judge. Judge Wright brings 20+ years of experience as a probate lawyer and substantial real-world experience handling probate and guardianship cases as a practicing lawyer. Over in Harris County Probate Court Four, Judge Christine Butts was also elected to a first term as she replaced retiring Judge William McCulloch who served for 25 years as judge of this Court. Like Judge Wright, Judge Butts brings a substantial amount of probate and guardianship experience to the bench. She has been Board Certified in Estate Planning and Probate since 2003, and her entire career has been spent practicing in this area.

In Dallas County, contested races in Probate Courts 1 and 2 produced new judges in each Court. In Probate Court 1, newly-elected Judge Brenda Hull Thompson brings an extensive background in probate and guardianships, as well as substantial experience in having worked as a mediator in probate cases. With this background, she will doubtlessly bring a conciliatory approach to the bench to help those in her Court work out their issues effective. In Dallas County Probate Court 2, newly-elected Judge Chris Wilmoth succeeds retiring Judge Robert Price. Judge Wilmoth brings a fresh perspective and enthusiasm to the bench and has said that he plans to institute innovative changes to focus his Court on better serving the citizens of Dallas County.

Ford & Mathiason LLP congratulates each of these new probate judges and wishes them the best in their new role as public servants. The opportunities for change brought about by the election of each of these judges provides the citizens of Harris and Dallas counties with fresh perspectives and opportunities for improvements to our judiciary. We all look forward to working with each of these new judges!

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2011 Estate Tax Changes

December 27, 2010

As most people know, Congress and the President have been debating whether or not to extend the current tax rates and applicable rates beyond the end of 2010. In a last-minute agreement, Congress agreed to extend the “Bush” tax cut through 2012. One of the key disagreements between members of Congress was the provision related to the Federal Estate tax, but ultimately, they passed the legislation, which contains new regulations for the Federal Estate Tax Law. While the tax will remain the same for 2011 and 2012, there are a few new additions to be noted.

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.

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This Week In Trust Appeals

December 3, 2010

Case: In the Estate of Helen D. Wallace, Deceased
Court: Tenth Court of Appeals, Waco
The Tenth Court of Appeals this week has decided a case involving the jurisdiction of the Probate Court to hear a matter involving the interpretation of a will that possibly contains a trust.

Theresa Isenberger and Mary Moriset appealed the dismissal of their petition for construction of the will of Helen Wallace, their sister. This will was offered and admitted to probate in the County Court at Law of Johnson County, Texas. Upon their filing of the Will construction suit, the Independent Executor of the Will, Robert Semple, filed a plea to the jurisdiction claiming that the County Court at Law did not have jurisdiction because the suit related to a trust, over which the District Court has exclusive jurisdiction.

The Court of Appeals noted that section 5(c) of the Texas Probate Code (since repealed) gave the County Court at Law original probate jurisdiction over this matter. The reason being that Section 5(c) gave courts power to hear “all matters incident to an estate.” Isenberger and Moriset held that their action was a Will construction suit, therefore incident to an estate.

However the Independent Executor disagreed, citing the phrase in 5(c) of “unless otherwise provided by law.” He contended that because the property code grants the District Court exclusive jurisdiction to hear all proceedings concerning trusts, that this matter was to be heard in District Court.

The Court of Appeals disagreed however. They held that a power of appointment and a trust are not the same. Since the Will of Helen Wallace was questioned to create either a power of appointment or a trust, the Court found that it was erroneous for the trial court to grant the plea to the jurisdiction with no determination of whether the bequest was a valid power of appointment or something else, including a trust, or whether the bequest failed entirely. They noted that the District Court would have jurisdiction only if and when the County Court at Law determines that a trust was created.

If you have any questions about trusts, do not hesitate to contact us at 713-260-3926.

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Probate Court Guidelines Regarding Attorneys’ Fees

November 2, 2010

As I mentioned in my last post, the Chronicle has not offered any solutions to the corruption that it perceives in the Probate Court. While it continues to allege corruption in the Courts, it acknowledges that the Probate Courts have instituted fee guidelines that govern the fees charged in cases pending in the Probate Courts. As the Chronicle mentions, the maximum fee that can be charged by an attorney in a case in the Probate Courts is $300/hour, which is substantially lower than the fees charged by attorneys in most types of cases.

Following the articles that ran in 2008 in the Chronicle, the Probate Courts in Harris County instituted fee guidelines that they apply to fees submitted for approval by the Court. Those fee guidelines lay out how much an attorney can charge, the types of matters that he can bill for, etc. While those fee guidelines were instituted as a result of the Chronicle’s allegations, they do nothing to solve the corruption that the Chronicle alleges.

By establishing a cap on the fees that can be charged in Probate and guardianship cases, the guidelines hinder the public’s ability to retain talented attorneys to work on these cases. Under the guidelines, an attorney who has been licensed over 10 years can charge between $200 and $300 per hour. However, there is no provision for ever being able to charge more than $300 per hour. The problem that this creates is that highly skilled attorneys will charge $300 an hour or more by their 13th to 15th year in practice. Thereafter, as their rates increase, they have to take a reduction in their rates if they want to work on probate and guardianship cases. Because many firms will not allow their attorneys to take these kinds of reductions, the attorneys are forced to stop assisting clients with probate cases.

This problem played out dramatically about 3 years ago when all of the probate lawyers at a large firm in Houston had to leave their firm and start a smaller firm because their original firm required them to bill at rates higher than the Probate Courts would approve. This forced those attorneys to either stop practicing the area of law in which they were experts, or they had to leave their firm in order to cut their rates enough to meet the Probate Court guidelines.

Probate and guardianship cases often involve very complex situations, which would naturally require highly skilled attorneys to handle. However, because of the restrictions advocated by the Chronicle, the cap on fees makes it harder to find attorneys who are highly skilled and willing to reduce their fees enough to comply with the guidelines.

In reality, the vast majority of fees charged by attorneys in probate and guardianship cases are reasonable and necessary. Those fees are only submitted to the Court because the Probate Code requires that they be. Allowing the Houston Chronicle to legislate what happens in the Probate Courts is incredibly dangerous because a) the Chronicle does not understand the subject matter, and b) their restrictions would ensure that the public is denied competent legal representation. The last time I checked, Texas adhered to the free market system upon which this country was founded. The public should be given the option to hire any lawyer that they choose, and the lawyers should be allowed to charge the rates that the market will bear. The Chronicle is hindering the free market.

Posted in Uncategorized | 1 Comment »

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