H.B. No. 2189

REPORTS MUST SAY THAT BOND PREMIUM IS PAID; SUPERPRIORITY FOR ADMINISTRATIVE CLAIMS IN INSOLVENT GUARDIANSHIP

Bill Description

Governor Bush signed HB 2189 on June 20, 1997. HB 2189 becomes effective September 1, 1997.

HB 2189 actually is a combination of two bills that were originally introduced by Rep. Elliott Naishtat (Democrat, Austin) this session. Originally, HB 2189 dealt only with reports of personal representatives saying that bond premiums (and, in some cases, taxes) have been paid. HB 3432 would have created a superpriority for administrative claims in insolvent guardianships, but it got caught in the rush of legislation toward the end of the session and did not pass the House by a required deadline. HB 2189 was then amended in the Senate Jurisprudence Committee to, in effect, tack HB 3432 onto HB 2189.

Thus, HB 2189 deals with two separate issues.

First, HB 2189 makes the following changes with respect to reports by personal representatives and guardians:

Probate Code Section Change
399 Annual accounts of decedent's estate subject to dependent administration must include a sworn statement that the personal representative has paid all the required bond premiums for the accounting period.
405 Eliminates references to accounts for final settlement in guardianships (since these are now covered by other sections of the Code dealing specifically with guardianships -- see Section 749) and requires the personal representative to state in the final account for a decedent's estate subject to dependent administration that the personal representative has paid all required bond premiums.
743 Annual reports of the guardian of the person must include a sworn statement that the guardian has paid the bond premium for the next reporting period.
749 Requires the guardian of the estate in the account for final settlement to include statements that the guardian has paid all required bond premiums, a listing of the tax returns the guardian has filed, a list of the taxes that the guardian has paid, and a description of all current delinquencies in the filing of tax returns and the payment of taxes and a reason for each delinquency.


The above changes apply only to an account or report filed on or after September 1, 1997.

Second, HB 2189 changes the order of payment of claims in an insolvent guardianship so that the guardian is required to give first priority to the payment of a claim relating to the administration of the guardianship. The order of payment of claims in Section 805 is not changed for estates that are not insolvent. Of course, a cynic might point out that the only time one really worries about the order of payment of guardianship claims is when the guardianship is insolvent. Nevertheless, the Texas legislature has determined that administration expenses are Class 3 claims if the guardianship estate is solvent and, in effect, Class 1 claims if the guardianship estate is insolvent.

If the legislature seemed to have been a little lost in space when establishing a different order of payment of claims for solvent and insolvent guardianship estates, then it may have gone all the way to Mars in its effective date provision for the change to the order of payment of guardianship claims. Sections 6 and 8 of HB 2189 read as follows:

SECTION 6. A court may modify any guardianship in effect on September 1, 1997, to conform with the requirements of Section 805, Texas Probate Code, as amended by this Act, on the court's own motion or on application by the ward, guardian, or any other interested person or entity.

SECTION 8. Except as provided by Section 6 of this Act:

(1) the change in law made by this Act to Section 805, Texas Probate Code, applies only to proceedings for the appointment of a guardian instituted on or after the effective date of this Act; and

(2) a proceeding for the appointment of a guardian that is instituted before the effective date of this Act is governed by the law in effect on the date the proceedings were instituted, and the former law is continued in effect for that purpose.



That all seems to make sense until one considers the practical application of this "modification" rule. To illustrate the problem, consider the following:

It is fun to come up with these questions since I don't have to come up with the answers. In addition, there are two other bills affecting guardianships that have a similar "modification" provision -- SB 997 (the State Bar Guardianship Bill, which makes many changes to the guardianship statutes) and HB 1316 (permitting court-approved investments in the state-run "Tomorrow Fund" tuition program).

This "modification" notion is Legislative Council's way of addressing a problem that comes up repeatedly -- how do you make statutory changes apply to existing administrative proceedings. The basic problem is this: Legislative Council (which works over every piece of legislation before it clears committee) hasn't figured out how to deal with ongoing administrative proceedings like guardianships. Its methods of dealing with changes affecting other litigation proceedings don't work for guardianships.

One statutory probate judge I spoke with is considering dealing with the "modification" provision in these three statutes by entering a blanket order modifying all existing guardianships so that they fall within the new statutes. These three bills permit the court to act on its own motion, so there seems no reason why this won't work. It seems easy to for the courts to justify this action, since the 1997 changes apparently represent current public policy on these subjects. Hopefully most courts around the state will do this, so that guardians don't have to face any tough issues about whether or not to seek modification.

If the judges don't do it on their own, I think I may recommend to my clients who are guardians that they call to the court's attention the modification provisions of HB 2189, SB 997 and HB 1316 and ask the court if it wishes to modify the guardianship at the time of filing the next annual account. This "neutral" request is less offensive than advocating for modification. My guess is that most judges will modify existing guardianships if asked.


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Copyright © 1997 by Glenn M. Karisch. This page was last revised on June 23, 1997.