2003 Legislative Preview
By Glenn M. Karisch
Barnes & Karisch, P. C.
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While unpredictable things happen in every legislative session, at this writing (in early January 2003) it appears that there will be three key issues affecting probate, guardianship, estate planning and trust law in the 78th Texas Legislature:
Significant Trust Code Changes -- Texas versions of the Uniform Prudent Investor Act of 1994 and the Uniform Principal and Income Act of 1997 will be considered. If adopted, this will change the default investment standards and the default income and principal allocation rules for Texas trusts, beginning January 1, 2004. Also, another attempt to repeal the rule against perpetuities (or extend it to 360 or more years) is likely.
Changes for Guardians of the Estate -- Proposed legislation intended to get guardianships of the estate off on the right foot will shorten the deadline for filing an inventory in a guardianship from 90 days to 30 days (unless extended by the court), require the guardian to file an application for a monthly allowance within 30 days of appointment and require the guardian to file an investment plan within one year of appointment.
Powers of Attorney -- A legislative committee studied powers of attorney for property during the time between sessions and is likely to propose changes to the Durable Power of Attorney Act.
Of course, there will be many, many other proposed changes, some big and some small. This paper covers several of which the author is aware.
Trust Law Changes
The Two UPIAs
The Rap Against the RAP
Other Trust Law Changes
Guardianship Law Changes
Inventory, Monthly Allowance and Investment Plan
In-Patient Psychiatric Care
Other Guardianship Changes
Powers of Attorney
Probate Law Changes
Powers of Appointment
Contracts Affecting Wills
Ademption by Satisfaction
Other Probate Law Changes
Trust Law Changes
The Two UPIAs
The Uniform Prudent Investor Act -- A substantial majority of states have adopted versions of the Uniform Prudent Investor Act of 1994. Based on the Restatement (3rd) of Trusts: Prudent Investor Rule (1992) promulgated by the American Law Institute, the first "UPIA" modernizes the investment standard for trusts which do not specify another standard.
Currently, the default investment standard applicable to Texas trusts is found in Texas Trust Code § 113.056(a):
. . . [A] trustee shall exercise the judgment and care under the circumstances then prevailing that persons of ordinary prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income from as well as the probable increase in value and the safety of their capital. In determining whether a trustee has exercised prudence with respect to an investment decision, such determination shall be made taking into consideration the investment of all of the assets of the trust . . . over which the trustee had management and control, rather than a consideration as to the prudence of the single investment of the trust. . . .
This is a Texanization of the prudent man rule (or, to be more politically correct, the prudent person rule) first espoused in Harvard College v. Amory, 26 Mass. (9 Pick.) 446, 461 (1830) (trustees should "observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested") and later included in a slightly different form in the Model Prudent Man Rule Statute (1942) and the Restatement (2nd) of Trusts (1959). Texas added the last sentence quoted above in 1991 to make the standard of prudence applicable to investments as a whole rather than each separate investment.
The Real Estate, Probate and Trust Law Section (REPTL) of the State Bar of Texas recently concluded a multi-year study of the new Uniform Trust Code. It concluded that the Uniform Trust Code as a whole is not an improvement over the current Texas Trust Code. However, it concluded that one part of the UTC -- the Uniform Prudent Investor Act -- should be adopted, with a few Texas-oriented changes.
The proposed Texas Uniform Prudent Investor Act replaces the prudent person rule with the prudent investor rule. The key objectives of the Act are:
Most of these objectives are reflected in Section 2 of the Act:
SECTION 2. STANDARD OF CARE; PORTFOLIO STRATEGY; RISK AND RETURN OBJECTIVES.
(a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
(b) A trustee’s investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.
(c) Among circumstances that a trustee shall consider in investing and managing trust assets are such of the following as are relevant to the trust or its beneficiaries:
(1) general economic conditions;
(2) the possible effect of inflation or deflation;
(3) the expected tax consequences of investment decisions or strategies;
(4) the role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;
(5) the expected total return from income and the appreciation of capital;
(6) other resources of the beneficiaries;
(7) needs for liquidity, regularity of income, and preservation or appreciation of capital; and
(8) an asset’s special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.
(d) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.
(e) A trustee may invest in any kind of property or type of investment consistent with the standards of this [Act].
(f) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee’s representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise.
The Texas version of the Uniform Prudent Investor Act varies very little from the uniform version of the Act. One variation is that the Texas version proposed by REPTL retains with very few changes the current provision regarding a trustee's delegation of investment decisions (Texas Trust Code §113.060) rather than the more generous (from the trustee's perspective) provisions of Section 9 of the Uniform Act. REPTL believed that the uniform version could leave beneficiaries without an adequate remedy for breaches of trust by agents of the trustee.
If the Texas Uniform Prudent Investor Act is adopted, trustees will have an affirmative duty to diversify investments (UPIA §3) and an affirmative duty to review the trust assets and to make and implement decisions concerning the retention and disposition of assets in order to bring them in compliance with the prudent investor rule (UPIA §4). Gone will be the old Texas provision permitting retention of trust assets held at the inception of the trust without liability for diversification (see Texas Trust Code §113.003).
Like most of the current Texas Trust Code, the Uniform Prudent Investor Act imposes default rules -- rules which apply if the trust instrument is silent. Settlors of trusts may override these new rules and impose whatever standards they wish, within the limits of public policy, statutes and the common law.
If the Texas Uniform Prudent Investor Act passes, it will become effective January 1, 2004. It will apply not only to trusts created after that date, but also to existing trusts.
The Uniform Principal and Income Act -- The freedom to invest in a wide variety of investments granted by the prudent investor rule creates a serious accounting problem for the trustee: If the risk/return analysis makes it prudent to invest primarily in growth-oriented low-income-producing assets, how can the interests of the income beneficiary be protected? Harken back to yesteryear when a trustee free to invest in growth stocks could generate an annual return of 20% or more, but a trustee bound to generate income could hope for no more than a 5-6% return. Does the trustee have to forego these gains (and incur the wrath of the remainder beneficiaries) in order to assure the income beneficiary a reasonable return?
Under the Uniform Principal and Income Act of 1997, the answer is no (at least is some cases). Section 104 of the second "UPIA" permits the trustee to adjust between principal and income to the extent the trustee considers necessary if the trustee is following the prudent investor rule and cannot otherwise balance the interests of the income beneficiary and the remainder beneficiaries fairly. There are restrictions on this power to adjust if the trustee also is a beneficiary or if marital deduction trust (QTIP) considerations are involved, but Section 104 -- the heart of the new principal and income act -- will permit the adjustment in many cases.
REPTL considered the Uniform Principal and Income Act to be a necessary adjunct to the Uniform Prudent Investor Act -- if the Legislature is going to adopt the prudent investor rule, it also needs to adopt accounting rules to assure that the relative rights of the beneficiaries are protected. Therefore, REPTL also is proposing the adoption of a Texas version of this uniform act.
Several states have considered addressing the need to adjust between income and principal which arises under the prudent investor rule by allowing trustees to convert income-only trusts into unitrusts. REPTL considered this approach and rejected it for now. The unitrust conversion statutes are evolving. Eventually there may be a generally accepted, fair way to permit trustees to convert income-only trusts into unitrusts, but the current attempts in other states seem flawed in that they are overly complicated or likely to be unfair to beneficiaries. Similarly, REPTL rejected proposed Section 105 (added to the uniform act by the National Conference of Commissioners on Uniform State Laws after adoption of the 1997 version of UPIA) as being unnecessary and inappropriate.
While the unitrust conversion concept was left out, REPTL's proposal includes a provision which permits a settlor to draft a non-charitable unitrust. This provision is intended to take advantage of Proposed Treasury Regulation 1.643(b)-1, 66 Fed. Reg. 10396 (February 15, 2001), which provides that amounts allocated between income and principal pursuant to applicable local law will be respected if local law provides for a reasonable apportionment between the income and remainder beneficiaries of the total return of the trust. Under the proposed regulation, a state law that provides for the income beneficiary to receive each year a unitrust amount of between 3% and 5% of the annual fair market value of the trust assets is a reasonable apportionment of the total return of the trust. REPTL proposes including this provision to provide support in Texas law for a settlor who wishes to create a non-charitable unitrust paying a unitrust amount of between 3% and 5% by defining such amount as "income" for state fiduciary accounting purposes. If the proposed regulation becomes final, this should make it unnecessary for a settlor to provide for the payment of the greater of the unitrust amount or actual income in order to meet tax requirements for a trust which requires the distribution of all income to a beneficiary (for example, a marital deduction (QTIP) trust). The provision does not require that trust income be defined in terms of a unitrust percentage, nor does it provide a means for converting an all-income trust into a unitrust. Because other rules apply to charitable unitrusts, this proposal does not apply to them.
The Uniform Principal and Income Act comprehensively treats the subject of allocating receipts and disbursements between principal and income and, therefore, replaces Subchapter D of Chapter 113 of the Texas Trust Code (§§113.101 -- 113.111). So, if the two UPIAs are enacted by the Legislature, trustees, their lawyers and their accountants will have to learn some new rules.
In general, REPTL stuck with the new UPIA allocation rules. However, it varied from the uniform version in these two key areas:
Like the Texas Uniform Prudent Investor Act, the Texas Uniform Principal and Income Act is a default statute -- if the trust instrument is silent, its rules apply, but if the trust instrument specifies other rules, those other rules apply. Also, like the prudent investor act, it will become effective (if enacted) on January 1, 2004, and apply to existing as well as new trusts. There are some grandfather provisions (the most significant being the one that applies to mineral interests), but in general the accounting rules for existing trusts will change on January 1, 2004, if the Act passes.
The Rap Against the RAP
In 2001 the Trust Division of the Texas Bankers Association tried unsuccessfully to dramatically increase the length of time non-charitable trusts in Texas may last. While it didn't propose an outright repeal of the rule against perpetuities (RAP), it proposed extending the limit to 1,000 years. This 1,000-year limit was carved back to 360 years in order to eliminate some of the opposition to the proposal, and the proposal passed the Senate, but it could not get out of the Calendars Committee in the House.
It appears likely that TBA will try to repeal the RAP or extend its length again in 2003. The bankers point to other states which have either repealed the RAP or extended it to such a point that it is virtually repealed. These other states leave Texas banks and trust companies in an uncompetitive position, the bankers feel. There are policies arguments on both sides of this issue, and it will be interesting to see the form the bill takes this session (outright repeal or extension?), as well as the progress it makes through the Legislature. Perpetual trusts are prohibited by the Texas constitution, so a constitutional amendment will be necessary for outright repeal (and for a dramatic extension, assuming the proponents wish to be conservative about the likelihood of the statute being upheld by the courts.)
Other Trust Law Changes
Texas Trust Code §113.151(a) -- The Texas Probate Code imposes a 60-day deadline on independent executors for responding to a beneficiary’s accounting demand. See Tex. Prob. Code § 149A(b). While the accounting demand provision in the Texas Trust Code is similar to the Probate Code provision applicable to independent executors, there currently is no clear deadline for a trustee’s response to an accounting demand. REPTL proposes amending Section 113.151(a) of the Texas Trust Code to require the trustee to make the accounting within 60 days after receipt of the demand or such longer period ordered by a court. REPTL also proposes amending Section 113.151(a) to make it clear that the court in its discretion may award costs and legal fees against the trustee individually if a beneficiary successfully brings a suit to compel an accounting.
Texas Trust Code §113.082(a) -- REPTL also proposes amending Section 113.082(a) of the Texas Trust Code, which governs removal of a trustee, to make it clear that the court has the discretion to decide whether or not to remove a trustee for one of the reasons stated in that section. Judicial decisions have called this into question, making this change necessary. See Akin v. Dahl, 661 S. W. 2d 911, 913 (Tex. 1983), and Lee v. Lee, 47 S. W. 3d 767, 785-6 (Tex. App. – Houston [14th Dist.] 2001). Also, REPTL proposes making the failure to make an accounting which is required by law or by the terms of the trust an express basis for removal of a trustee. While the court has the discretion to remove a trustee for failing to account under the catch-all "other cause" currently in the Trust Code (Section 113.082(a)(4)), the importance of making required accountings justifies including it among the specific bases for removal. Also, this change mirrors the approach used for independent executors in Section 149C of the Texas Probate Code.
Guardianship Law Changes
Inventory, Monthly Allowance and Investment Plan
Approached logically, it is clear that, when a person first becomes guardian of the estate of a ward, he or she has to do certain things to fulfill the fiduciary duties owed to the ward. At a minimum, the new guardian needs to figure out what the assets of the ward are, what it's going to take to care for the ward, and what assets should be retained and what assets should be sold and reinvested in order to properly care for the ward's estate. In some cases, however, guardians don't get off on the right foot. They step into their role as guardian without giving conscious thought to some or all of these responsibilities. Of course, their attorneys can and should help them get on the right path. However, the current Probate Code scheme for commencement of a guardianship -- which is modeled after the scheme for decedent's estates -- does not do much to help. Currently, the deadline for filing an inventory is 90 days after letters of guardianship are issued. Ninety days may be an appropriate time in a decedent's estate, where the subject of the estate proceeding is dead and needs no immediate care, but it may be too long to wait to get on track with caring for the ward. Also, there currently is no requirement for the guardian to go through the ward's investments and report to the court on what should be sold and what should be retained. True, annual accounts are due each year and there are procedures in the Probate Code for the sale of assets with permission of the court, but the Probate Code does not make clear the guardian's duty to evaluate the assets of the ward and make determinations regarding the appropriateness of investments given the condition and need of the ward.
REPTL proposes overhauling the procedure for new guardians of the estate. Under the REPTL proposal, Texas Probate Code §729(a) would be amended to shorten the deadline for filing the inventory, appraisement and list of claims in a guardianship of the estate from 90 days to 30 days, unless a longer period is granted by the court. This will require the guardian to jump to it. In many cases, it will require the guardian to ask for an extension of the deadline.
The reason the REPTL proposal advances the inventory deadline is that REPTL also proposes amending Section 777 of the Probate Code to require the filing of an application for setting a monthly allowance within 30 days of the date letters are granted, unless that deadline is extended. (The amendment also anticipates that the request for the monthly allowance may be included in the original guardianship application, since in many cases the applicant knows what is in the ward's estate at that time and has a pretty good idea of what expenditures will be.) Section 777 has long been a trap for unwary guardians. It currently provides that the guardian cannot expend corpus of the ward's estate for the ward's care without court permission, and guardians who violate this rule -- even in good faith -- are limited to $5,000 per year in reimbursements (except for payments to nursing homes). Thus, under the current statute a guardian can be appointed and think that he or she is absolutely doing the right thing to pay for the care of the ward, but if the cost of that care exceeds the income of the estate by more than $5,000, the guardian can (must?) be held personally liable. REPTL's proposed amendment to Section 777 closes that trap in two ways. First, if the guardian is required to address the monthly allowance issue within 30 days of appointment, he or she is likely to get the appropriate court permission to expend corpus if necessary. Second, the proposed amendment eliminates the $5,000 rule, but requires the guardian to prove by clear and convincing evidence that any funds expended over and above the monthly allowance are reasonable and proper and would have been approved by the court.
The third part of REPTL's proposal involves the investment of the ward's estate. Section 857 would be amended to permit the guardian to retain without liability any asset of the ward's estate for a period of one year after qualifying. Under Section 858, within 12 months of qualifying as guardian of the estate, the guardian is required to file an investment plan or apply to the court for relief from the duty to invest the ward's assets. (As this was written, a change was being considered to extend this deadline from 12 months after qualifying as guardian to the due date of the first annual account, so that the financial tasks of preparing the first annual account and the investment plan could be coordinated.) Section 859 would allow the guardian (with court permission) to delegate investment authority, in a provision which is similar to the delegation provision in the Texas Trust Code (Section 113.060). Assuming that the guardian does not delegate investment authority, the investment plan tells the court which assets the guardian thinks should be sold, which assets should be retained and how the guardian proposes to invest the assets. The REPTL proposal retains the safe-harbor guardianship investments found in Section 855 of the current law -- FDIC-insured accounts, U. S. government obligations, etc. -- although in the reorganization of the sections under the REPTL proposal the list of these safe-harbor investments moves to Section 856. Thus, just because the guardian is required to file an investment plan doesn't mean that he or she has to become a stock wiz.
If these measures pass, guardians of the estate and their lawyers will have more work to do at the outset of guardianships, but hopefully they will spend less time explaining to the court why they failed to do something when the ox is in the ditch. On the other hand, the guardianship process already is complex and costly, and this is likely to make it still more complex and costly.
In-Patient Psychiatric Care
Currently Section 767(4) of the Texas Probate Code gives the guardian of the person the power to consent to medical, psychiatric, and surgical treatment "other than the in-patient psychiatric commitment of the ward." Similarly, Section 770(b) of the Probate Code prohibits the guardian from "voluntarily admit[ting] an incapacitated person to a public or private in‑patient psychiatric facility." The only way to get a ward who does not want to go to an in-patient psychiatric facility into that facility is under the mental health commitment procedures.
It is frustrating for the guardian of the person of a ward who periodically needs in-patient treatment not to be able to obtain that treatment for the ward without resorting to the commitment procedures. On the other hand, the civil rights of the ward are at stake. This is a hot-button issue for advocates of the rights of the mentally ill.
RETPL proposes a new procedure under new Sections 573.003 and 573.004 of the Texas Health and Safety Code. Under this procedure, in lieu of an application for emergency detention under either Section 573.002 or 573.011, a guardian of the person of an adult incapacitated individual, who has previously received court-ordered inpatient mental health services, acting under current letters of guardianship may transport his ward to an inpatient mental health facility if the ward is mentally ill and because of that mental illness there is a substantial risk of serious harm to the ward or to others unless the ward is immediately restrained. Immediately after transporting the ward, the guardian would be required to file an application for detention.
Other Guardianship Changes
In the past three sessions, the majority of probate, trust and estate planning legislation has been guardianship-related, and this session promises to continue that trend. Here are other guardianship proposals included in the REPTL package. Interested parties other than REPTL push for guardianship changes, so there probably will be many more proposals than those listed below.
Jurisdictional changes -- Some proposals will tinker with Probate Code Sections 606, 607 and 608 this session as prior changes to the jurisdiction of probate courts are corrected or expanded. None of these are likely to be earth-shattering, but they may affect the filing of cases in statutory probate courts or the transfer of cases to statutory probate courts.
Guardianship applications and citations -- REPTL proposes changing Probate Code Section 682 to require the guardianship application to give the names and addresses of the ward's next of kin if known and if the ward's spouse, parents and siblings and children are all deceased. The proposal also would amend Section 633 to provide that the applicant (not the clerk) must mail notice to various persons related to or interested in the ward, and it adds the next of kin from Section 682 to the list of persons entitled to notice. REPTL also proposes amending Section 665B to authorize the court to pay from the ward's estate the attorneys' fees of persons who apply for a guardianship and ask for someone other than themselves to be appointed guardian. Currently Section 665B permits payment of attorneys' fees only for persons who apply to have themselves appointed guardian. REPTL also proposes amending Section 687(c) to permit determinations of incapacity for mentally retarded persons to be based on MH-MR reports no more than 24 months old, rather than 6 months old as is currently the case. No change is proposed for the physician's certificate requirement for proposed wards who are not mentally retarded, so the current 120-day requirement would remain for them.
Bonds of Guardians of the Person -- REPTL proposes amending Section 702(b) to give the court the discretion not to require a bond of a guardian of the person only if that person is the parent or sibling of the ward who in the opinion of the Court has demonstrated a history of consistent attentiveness and responsibility towards the ward.
Qualifying Income Trusts -- REPTL proposes amending Sections 767 and 774 to permit a guardian to establish a Qualified Income Trust pursuant to Section 42 USCA §1396p(d)(4)(B) for the sole purpose of qualifying the ward for government benefits and direct the ward’s income to be paid directly to such Qualified Income Trust upon application and order of the court.
No Guardian Required When There's an 867 Trust -- REPTL proposes eliminating the requirement in Section 868A that either a guardian of the estate or guardian of the person remain when the court has authorized the creation of a guardianship management trust under Section 867 of the Probate Code.
Other Cleanups -- REPTL proposes amending Section 745(c) of the Probate Code to clarify that the guardianship of the estate of a minor ward may be terminated if it falls below $100,000 in assets, and the assets then can be held by the county clerk. Conflicting legislation in 2001 made it unclear if the limit was $50,000 or $100,000. Also, REPTL proposes additions to Section 883 (regarding the management of community property when one spouse is incapacitated) to make it clear that creditors' rights are not affected, that no partition of community property occurs and that the property managed by the guardian is the sole management community property of the incapacitated spouse while the property managed by the non-incapacitated spouse is the sole management community property of that spouse (in cases where management of the community property is divided between the spouse and a guardian).
Interference with a Guardian's Possessory Right -- REPTL proposes adding Section 25.10 to the Penal Code to make it a crime to interfere with a guardian of the person's possessory right over a ward.
Powers of Attorney
Late in the 2001 legislative session a controversy developed over a bill that would have changed the statutory durable power of attorney form and required recordation of powers of attorney. In the end the bill was modified to specify the recordkeeping and accounting duties of agents under powers of attorney (Probate Code §489B), but no changes to the form were made and no recording requirement was imposed.
Between sessions a legislative committee has held hearings about powers of attorney, and it is likely that one or more bills will be introduced to change the power of attorney form or practice. Hopefully the legislation which results will strike a balance between protecting the interests of elderly persons who entrust their affairs to agents and preserving the power of attorney as a viable, inexpensive alternative to guardianship. This is a difficult balance to achieve. Anecdotes about power of attorney abuse encourage lawmakers to place restrictions and limitations on powers of attorney which might make them unusable in non-abuse situations.
Probate Law Changes
Powers of Appointment
REPTL proposes two changes which affect powers of appointment. First, it proposes adding Section 58C to the Probate Code, providing that a residuary clause in a will, or a will making general disposition of all of the testator's property, does not exercise a power of appointment held by a testator unless specific reference is made to the power or there is some other indication of intention to include the property subject to the power. Second, it proposes adding Section 181.081 to the Texas Property Code, providing that, unless contrary intent is evidenced by the instrument, a donee who holds a power of appointment may (1) make appointments of present or future interests or both; (2) make appointments with conditions and limitations; (3) make appointments with restraints on alienation upon the appointed interests; (4) make appointments of interests to a trustee for the benefit of one or more objects of the power; (5) make appointments that create in the object of the power additional powers of appointment to permissible objects of the power of appointment pursuant to which such powers are created; (6) if the donee could appoint outright to the object of a power, make appointments that create in the object of the power additional powers of appointment and such powers of appointment may be exercisable in favor of such persons or entities as the person creating such power may direct, even thought the objects of such powers of appointment may not have been permissible objects of the power of appointment pursuant to which such powers are created; and (7) make appointments that create any right existing under common law. Most or all of these points are covered in well-drafted instruments, and to a large extent this may just be a restatement of the common law. In fact, the effective date provisions state that these are merely clarifications of existing law. In any event, if the proposals pass, these issues will be addressed with statutory certainty.
Contracts Affecting Wills
In 1979, the Texas Legislature added Section 59A to the Probate Code. This legislation was intended to deal with two problems: First, and foremost, was the problem of joint wills. The practice of having a husband and wife sign a joint will has mostly died out, but it used to be quite common. These wills led to litigation over whether the joint will was contractual -- whether the surviving spouse was free to adopt a different dispositive plan or was stuck with the one in the joint will. Section 59A requires a joint will to say that it is contractual, and its enactment in 1979 has effectively eliminated litigation in this area. Second was the problem of caregiver arrangements: an alleged oral agreement that "if you move in and take care of me until I die, I promise to leave you my house." See Johanson's Texas Probate Code Annotated (2002), Commentary to Section 59A.
Section 59A was modeled after Section 2-514 of the Uniform Probate Code, but it left out a significant provision: that a contract to make a will or not to revoke a will could be included in a writing signed by the decedent and evidencing a contract but not contained in the will itself. The widespread use of marital property agreements which has sprung up in Texas since 1979 has illustrated the need for this addition to Section 59A. It is common for a testamentary conveyance to be a material part of a pre-marital or post-marital agreement. Many practitioners and commentators believe that these provisions are enforceable even with Section 59A reading the way it reads, but the absence of a clear provision in Section 59A results in confusion and unnecessary litigation.
REPTL proposes amending Section 59A to provide that a contract to make a will or not to revoke a will can be established by "provisions of a written contract otherwise binding and recognized under law." This will pick up marital agreement, business succession agreements, etc.
REPTL tried to make this change in 2001, but opposition by Judge Guy Herman of Travis County Probate Court No. 1 derailed the effort. REPTL and Judge Herman agreed on compromise language which Judge Herman said he would not oppose if the REPTL went forward with it in 2001, but REPTL decided that the compromise language was confusing and ill-advised, so it waited until 2003 and plans to try again with a cleaner, Uniform Probate Code-based approach.
Ademption by Satisfaction
Section 44 of the Texas Probate Code deals with the issue of an intestate donor giving property to an heir in advance of his or her death by providing that these gifts are treated as advancements and deducted from the heir's share only if the decedent declared in a contemporaneous writing or the heir acknowledged in writing that the gift was an advancement or otherwise was to be taken into account in determining intestate shares. This section does not deal with the same issue as it relates to a donor with a will. REPTL proposes adoption of Section 68A, which would provide that a lifetime gift is treated as a satisfaction of a devise only if the will provides for deduction of the lifetime gift, or the testator declares in a contemporaneous writing that the gift is to be deducted from the devise or is in satisfaction of the devise, or the devisee acknowledges in writing that the gift is in satisfaction of the devise.
Other Probate Law Changes
REPTL proposes making several other minor changes to the decedent's estates portion of the Probate Code. REPTL proposes a further clean-up of probate jurisdiction with an amendment to Section 5A(b). It also proposes minor changes to Sections 67, 84, 245, 322A and 378B.