S.B. No. 506


Bill Description

The Governor signed SB 506 on June 20, 1997. SB 506 becomes effective September 1, 1997.

SB 506 turned out to be one of the most interesting pieces of legislation in the probate- and trust-law area this session. It started out as the State Bar of Texas's Real Estate, Probate and Trust Law Section's biennial collection of legislative odds and ends having to do with decedents' estates. Virtually all of the initial provisions of this "omnibus" bill survived and will become law on September 1, 1997. That's all ho-hum probate stuff that is described below. SB 506 is interesting (to the extent that any probate bill can be interesting) because of three last-minute floor amendments in the House.

Two battles earlier in the session set the stage for two of these last minute amendments.

You Mean I Don't Have to Learn About Tenancies By the Entireties After All?

The first battle was over SB 504 -- the Uniform Transfer of Security on Death Registration Act. SB 504 passed both houses and was sent to the Governor. SB 504 was strongly opposed by most probate lawyers, since it would have established a different set of rules for nontestamentary transfers of securities, including recognizing interests such as tenancies by the entireties which previously were not recognized in Texas.

Many probate lawyers (including at least a dozen or so from the probate@io.com Internet mailing list) sent letters to the Governor asking him to veto SB 504. Alas, the Governor signed SB 504 before he realized that there was a problem with the bill. When Governor Bush finally realized that SB 504 was flawed (due in part at least to a thoughtful letter from Professor Johanson of the University of Texas School of Law), he asked representatives of his office to work with the Texas Academy of Probate and Trust Lawyers to see if anything could be done. What emerged was a floor amendment to SB 506 by Representative Senfronia Thompson (sponsor of both SB 504 and SB 506) repealing the Uniform Transfer on Death Security Registration Act prior to its effective date and making the following amendment to Section 450(a) of the Probate Code to make it clear that nontestamentary transfers of securities are permitted under our existing statutory scheme (amended language highlighted):
(a)  Any of the following provisions in an insurance policy, contract of employment, bond, mortgage, promissory note, deposit agreement, employees' trust, retirement account, deferred compensation arrangement, custodial agreement, pension plan, trust agreement, conveyance of real or personal property, securities, accounts with financial institutions as defined in Part 1 of this chapter, or any other written instrument effective as a contract, gift, conveyance, or trust is deemed to be nontestamentary, and this code does not invalidate the instrument or any provision:

(1)  that money or other benefits theretofore due to, controlled, or owned by a decedent shall be paid after his death to a person designated by the decedent in either the instrument or a separate writing, including a will, executed at the same time as the instrument or subsequently;

(2)  that any money due or to become due under the instrument shall cease to be payable in event of the death of the promisee or the promissor before payment or demand; or

(3)  that any property which is the subject of the instrument shall pass to a person designated by the decedent in either the instrument or a separate writing, including a will, executed at the same time as the instrument or subsequently.

5B, or Not 5B, That Is the Question

The second battle had to do with probate jurisdiction. If there's anything more boring than probate legislation, one would think it would be probate jurisdiction legislation. Nonetheless, legislation on probate jurisdiction has produced fireworks at legislative sessions dating back to the 1970s, and the 1997 session was no different.

Several bills were introduced to change a statutory probate court's power to transfer cases to itself under Sections 5B and/or Section 608 of the Probate Code. These "reach out and touch someone" statutes permit a statutory probate court to transfer cases to itself from other courts if those cases are appertaining or incident to an estate. (Section 5B has to do with decedents' estates, while Section 608 has to do with guardianship estates.) Some of these bills would have expanded the power of the statutory probate courts to transfer cases (by allowing transfers not only of appertaining or incident to cases, but also cases by or against a personal representative in his or her capacity as personal representative). Others would have restricted that power (by, for example, requiring the consent of the transferring court, or by requiring a finding that the transfer serves the interests of justice).

These varied bills resulted in a standoff -- neither side could get one of their bills through.

But wait! At the same time Representative Thompson was amending SB 506 on the floor of the House to repeal the Uniform Transfer on Death Security Registration Act, she also amended the bill to change Section 5A (that's 5 "big A", not to be confused with 5(a) or 5B) of the Probate Code so that, effective September 1, 1997, it will read in pertinent part as follows (amended language highlighted):
(b) In proceedings in the statutory probate courts and districts courts, the phrases "appertaining to estates" and "incident to an estate" in this Code include the probate of wills, the issuance of letters testamentary and of administration, and the determination of heirship, and also include, but are not limited to, all claims by or against an estate, all actions for trial of title to land and for the enforcement of liens thereon, all actions for trial of the right of property, all actions to construe wills, the interpretation and administration of testamentary trusts and the applying of constructive trusts, and generally all matters relating to the settlement, partition, and distribution of estates of deceased persons. All statutory probate courts may, in the exercise of their jurisdiction, notwithstanding any other provisions of this Code, hear all suits, actions, and applications filed against or on behalf of any heirship proceeding or decedent's estate, including estates administered by an independent executor; all such suits, actions, and applications are appertaining to and incident to an estate for the purposes of this section. This subsection shall be construed in conjunction with and in harmony with Section 145 and all other sections of this Code dealing with independent executors, but shall not be construed so as to increase permissible judicial control over independent executors. All statutory probate courts shall have the same powers over independent executors that are exercisable by the district courts. In situations where the jurisdiction of a statutory probate court is concurrent with that of a district court, any cause of action appertaining to estates or incident to an estate shall be brought in a statutory probate court rather than in the district court.

There's no doubt that the proponents of this amendment intended to make all proceedings by or against the personal representative of a decedent's estate in his or her capacity as such "appertaining to or incident to" the estate for purposes of Section 5B. (Important Note: There was no corresponding change to Section 607, so this expansion of transfer power works only with respect to decedents' estate, if it works at all -- it does not work for guardianships.) It remains to be seen if the amended language accomplishes what the proponents intended.

There are potentially two problems with the amendment to Section 5A. First, for a purist, it is difficult to think in terms of suits filed "against or on behalf of any heirship proceeding or decedent's estate." Suits are filed by or against personal representatives of estates, not against the estates themselves. (However, litigants make this mistake frequently. See, for example, Estate of Crawford v. Town of Flower Mound, 933 S. W. 2d 727, 731 (Tex. App. -- Fort Worth 1996, no writ history), in which the appeals court refused to overturn a judgment against an estate on bill of review on the grounds that an estate is not an entity and cannot be sued as such.)

Second, the amended language states that suits against or on behalf of a decedent's estate are appertaining to and incident to an estate "for the purposes of this section." It doesn't really matter if those suits are appertaining or incident to for purposes of Section 5A. Rather, the key question is whether they are appertaining or incident to for purposes of Section 5B.

Despite these two potential problems, it seems likely that Section 5A as amended will give statutory probate courts the power to make 5B transfers of cases by or against a personal representative of a decedent's estate. The amendment could have no other purpose -- it is irrelevant whether or not such cases are appertaining or incident to for purposes of Section 5A. If the Legislature meant to accomplish anything by the Section 5A amendment, it must have meant to permit 5B transfers of cases affected by the amendments.

As a practical matter, statutory probate courts are likely to see the amended Section 5A as giving them broader transfer power. If a statutory probate court transfers a case which does not meet the old appertaining or incident to definition, the litigants in that case are faced with uncertain jurisdiction, an issue that can be raised on appeal at any time -- on mandamus or after trial.

Access to Medical Records in Will Contests

The third floor amendment to SB 506 was offered by Representative Will Hartnett. It relates to access to medical records in will contest litigation. The amendment adds new Section 10B to the Probate Code. This new section provides that, notwithstanding the Medical Practice Act, a party to a will contest (or other proceeding in which a party relies on the mental or testamentary capacity of a decedent) is entitled to production of all communications or records relevant to the decedent's condition before the decedent's death. The holder of medical records is to release the medical records upon receipt of a subpoena without further authorization.

It will be interesting to see how new Section 10B and Chapter 241 of the Health and Safety Code (as amended by SB 975) are construed. Section 10B can be read to require free disclosure of medical information, while Chapter 241 permits the custodian of such information to charge for it.

The "Bar" Part of this "Bar Bill"

While this bill started out as the Real Estate, Probate and Trust Law Section's bill, the three amendments described above were tacked on without the blessing of the Section. The rest of the bill represents the Section's effort to improve Texas's laws regarding decedents' estates.

Here are the changes to the Probate Code made by SB 506, section by section:

Section Description
5A Amendment is described above (not a Section provision).
10B Amendment is described above (not a Section provision).
36 Amended to permit the court to request an applicant or court-appointed fiduciary to produce identifying information, including his or her social security number, which information is to be kept separate and apart from the clerk's file. This was the quid pro quo for eliminating the social security number requirement from applications (see below).
42 Housecleaing changes -- references to the recodified Family Code
69 Clarifies that a provision in favor of a former spouse who is divorced from the decedent after making the will is read as if the former spouse failed to survive the testator. Thus, no intestacy is created by the voidness of the gift to the former spouse -- the alternate takers under the will take. (While this problem is fixed for purposes of Section 69, a similar problem may have been created by SB 1176, which makes testamentary gifts to attorneys and certain other parties void in some cases.)
81 Application for letters testamentary does not have to include the social security number of the applicant and the decedent. (Note, however, that while the social security requirement has been deleted in Section 82, new Section 89A, setting forth the contents of an application for probate of a will as a muniment of title, copied the old Section 82 and includes the social security requirement. Oh, well.)
82 Application for letters of administration does not have to include the social security number of the applicant and the decedent.
146 Amended to require a creditor to give notice to the independent executor of its claim. This applies not only to secured creditors, who were already required to notify the independent executor, but also to unsecured creditors who receive the Section 294(d) notice. Unsecured creditors receiving the Section 294(d) notice must notify the independent executor not later than the 120th day after receipt of the notice.
234 Permits the personal representative to abandon burdensome or worthless property with approval of the court.
281 Changes reference to funeral expenses and last illness expenses to "Class 1 claims."
290 Changes reference to funeral expenses and last illness expenses to "Class 1 claims."
299 Provides that the general statute of limitations is tolled on the date a claim for money is filed or deposited with the clerk or suit is brought against the personal representative with respect to a claim that is not required to be presented.
306 Cleans up the procedure for foreclosure of preferred debt and lien claims.
450 Amendment is described above (not a Section provision).

SB 506 takes effect September 1, 1997, and applies to persons dying on or after that date. Issues involving persons dying before September 1, 1997, are governed by former law.

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Copyright © 1997 by Glenn M. Karisch. This page was last revised on June 25, 1997.