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Drew Gibbs, Partner @ Carlson Law Firm

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The 2014 codification incorporates two substantive changes of which practitioners should be aware.

House Bill 2912, or the REPTL Decedents’ Estates Bill, made the following probate-related changes:

• For self-proving affidavits, unsworn declarations are no longer allowed.
• The following changes were made concerning heirship proceedings: no statute of limitations applies (reversing a 2010 Supreme Court decision imposing the residual four statute); any creditor may initiate proceedings; applicants must file an attorney’s certificate proving parties were given notice; and the paternity presumption based on genetic testing, as set out in Section 160.505 of the Family Code, applies in heirship proceedings.
• The following changes were made concerning the requirement of filing an inventory: an affidavit in lieu may be filed unless the testator specifically prohibits it, and the executor cannot be held liable for filing one over the other; remedies related to an erroneous or unjust affidavit are the same as those for inventories; failure to file an affidavit or inventory may result in a $1,000 fine; and a successor representative’s inventory should include only remaining assets if a standard inventory has already been filed.
• The following revision was made to the notice requirements for the removal of independent executors: the executor can be removed with notice by certified mail if he fails to either qualify or file an inventory or affidavit; the executor can be removed without notice if he cannot be found, is eluding notice, is a nonresident without a resident agent, or has misapplied or embezzled estate property; otherwise, the executor must be personally served notice of removal.
• Regarding Texas rules that govern conflicts of law: for nontestamentary transfers, Texas law determines the validity of survivorship provisions if a Texas resident contributes more than one-half of a nonprobate asset.
• Probate and guardianship proceedings are not subject to the 2011 statutory exclusion from expedited action rules and therefore can be expedited.

Other changes related to decedents’ estates can be found in House Bill 2621, which disallows a child support obligor from disclaiming property, and House Bill 2380, which revises the language regarding the enforceability of forfeiture clauses to clarify the burden of proof: forfeiture clauses shall be enforceable unless the opposing party shows by a preponderance of the evidence that there is just cause and good faith.

House Bill 2080, or the REPTL Guardianship Bill, made the following changes regarding guardianship proceedings:

• Filing fees are to be paid by the original applicant (unless indigent or a nonprofit) who may seek reimbursement from the estate.
• Appointment of attorneys ad litem is now permissive, giving the court broader discretion in such appointments.
• Nondisclosure orders available under the Family Code now apply and automatically carry over to guardianship proceedings where there is family violence.  Also, there is now a presumption against qualification as guardian for anyone who committed family violence or made terroristic threats.
• A party acting in bad faith may be ordered to pay fees and costs.
• An order appointing a guardian must detail the guardian’s rights regarding possession of the ward, the ward’s domicile, and a statement regarding officers’ ability to enforce those rights.
• Requirements for management trusts for persons with only physical disabilities have been relaxed.

Other miscellaneous changes include:

• House Bill 2918 provides that the principal of a power of attorney initial each granted power rather than crossing out each ungranted power.
• Senate Bill 651, or the REPTL Medical Power of Attorney Bill, allows for acknowledgement before a notary for a medical power of attorney, no longer requiring two witnesses.
• Senate Bill 649, or the REPTL Exempt Property Bill, includes Roth IRAs as exempt property.
• House Bill 789 increases “in lieu” allowances as follows: allowance in lieu of homestead is raised to $45,000, and the allowance in lieu of other property is raised to $30,000.

Sources:

Tex. Estates Code Ann. (West 2014).

William D. Pargaman, Estate, Guardianship, and Trust Law, 76 Tex. B. J. 713 (2013).

Special thanks to Jamie Vaughan for her assistance in preparing this post.

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On appeal, the Supreme Court faced a jurisdictional quandary. While the suit was pending in district court, the Office of the President decided not to defend the constitutionality of section three because of its own conclusion that classifications based on sexual orientation should be subject to strict scrutiny, and DOMA could not survive strict scrutiny. In response, the House of Representative’s Bipartisan Legal Advisory Group (BLAG) intervened and argued that the case should be dismissed because the parties were not adverse. The Court rejected that argument and agreed with Windsor that section three was unconstitutional. The Court then held that the Executive had standing to appeal because, although it agreed with Windsor on the merits, (1) it was injured by being ordered to refund taxes, (2) there was a causal connection between the injury and Windsor’s actions, and (3) it was likely that a favorable decision could work to redress the injury. Further, the Court saw no prudential problems in standing that would justify dismissal: the appointment of amici curiae and the intervention of BLAG was sufficient to ensure sufficient adversity; the effects on the rights of thousands of persons demanded immediate review of the law; and allowing a presidential opinion to preclude justiciability would upset the balance and separation of powers.

Subject to certain constitutional protections, the definition and regulation of marriage is an area typically reserved to the states, and the federal government has always deferred to state governments with respect to domestic relations. Windsor, 133 S. Ct. at 2680 (citing Ohio ex rel Popvici v. Agler, 280 U.S. 379 (1930)); see also U.S. Const. amend. X. However, Congress can and does pass laws affecting marital rights, such as laws refusing to recognize marriages entered into only to gain citizenship and laws recognizing common-law spouses as beneficiaries under the Social Security Act. Id. at 2690 (citing 8 U.S.C. § 1186a(b)(1) (2006 & Supp. 2011); 42 U.S.C. § 1382c(d)(2) (2006)). But, the majority reasoned that DOMA went too far because it affected over 1,000 federal statutes and its primary purpose was bare desire to harm a politically unpopular group. State laws recognizing same-sex marriage give same-sex couples a certain dignity and status, and DOMA sought to strip that away by departing from long-established traditions of federalism. Evidence that the essence of DOMA is discrimination is in the Act’s legislative history, stating that the Act’s purpose “was to promote an ‘interest in protecting the traditional moral teachings in heterosexual-only marriage laws,’” and the Act’s title itself. Windsor, 133 S. Ct. at 2693 (citing H.R. Rep. No. 104–664, 12–13 (1996)). DOMA has worked to systematically impose a disability and restrict the freedom of choice of a class of individuals and codify nationwide inequality. Id. at 2694. The law has affected same-sex couples and their children socially and economically. Id. at 2694–95. For these reasons, the majority found that section three of DOMA violated the Equal Protection clause of the Fifth Amendment and affirmed the holdings of the lower courts. Id. at 2696.

In dissent, Chief Justice Roberts disagreed that the Court had jurisdiction. Roberts also argued that the government’s purpose in enacting DOMA was not as sinister as the majority believed—the government had an interest in uniformity and stability in enacting the law, and it is not surprising that the government treated this important issue as something that should not be left to the states like consanguinity and a minimum age for marriage. Id. at 2696–97.

Justice Scalia agreed that the Court did not have jurisdiction and argued that, even if it did, it could not invalidate legislation adopted through the democratic process. Scalia argued there is no case or controversy because the two sides agree, and therefore, there is no Article Three standing. The fact that the Court decided the case anyway, Scalia argued, is “jaw-dropping,” as the Court has never before assumed the power to say what the law is without a case or controversy. Id. at 2698–99. Scalia argued this was not a prudential requirement of standing, but rather an essential one. On the merits, Scalia argued the majority’s opinion was “rootless and shifting,” and he expressed confusion over whether the opinion was based on principles of federalism, substantive due process, or equal protection. Id. at 2705. Scalia insisted that the Constitution does not forbid the government from enforcing “traditional moral and sexual norms,” and that there were plenty of valid reasons for DOMA, such as avoidance of difficult choice-of-law issues and preservation of “intended effects of prior legislation against then-unforeseen changes in circumstance.” Id. at 2707–08. He argued that “to defend traditional marriage is not to condemn, demean, or humiliate those who would prefer other arrangements . . . .” Id. at 2708.

Justice Alito expressed his agreement with Scalia that the Court did not have jurisdiction. On the merits, Alito argued that same-sex marriage was not a constitutional fundamental right, and that such an important change in policy should be made by the legislature’s elected officials, not appointed federal justices.

Regardless, same-sex couples may no longer be denied the rights guaranteed to opposite-sex married couples in states recognizing same sex marriage. Windsor also opened the door for more states to recognize same-sex marriage. At the time of the June 2013 opinion, nine states and Washington, D.C. recognized same sex marriage. Since that time, nine more states recognize gay marriage: by judicial decision in California, New Jersey, New Mexico, and Utah; and by state legislatures in Delaware, Hawaii, Illinois, Minnesota, and Rhode Island.

Special thanks to Jamie Vaughan for her assistance in preparing this blog post.

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When the October 1 launch of the government website setting up an insurance Marketplace for individuals proved to be a disaster, even more changes to the law were announced. Here’s an overview of those changes.

NOVEMBER 14 – Insurance companies had cancelled a number of plans that did not meet the law’s requirements for affordable, essential coverage. People who had these plans and were happy with them objected to losing their coverage. President Obama announced that states could allow a one-year extension of these plans. Insurance regulators in many states have refused to allow the extension.

NOVEMBER 21 – Originally the deadline for signing up for insurance to be effective January 1, 2014, was December 15, 2013. On November 21, it was announced that the deadline would be extended to December 23, 2013.

DECEMBER 13 – President Obama urged insurers to be flexible in dealing with those trying to buy coverage and allow people to sign up later in January 2014 for coverage retroactive to January 1. Insurers were also asked to cover care by any doctor or hospital in January and to cover prescription refills in January regardless of policy restrictions. In response to these requests, the insurance industry said it would allow payment for January 1 coverage as late as January 10, 2014. (Some insurers extended the payment deadline to January 31.)

DECEMBER 19 – The government announced that individuals whose insurance policies were cancelled because they did not meet the ACA’s requirements would be allowed to apply for hardship exemptions from the coverage mandate for 2014. Those qualifying for the hardship exemption may go without health insurance for 2014 without paying a fine or choose bare-bones “catastrophic” coverage. Catastrophic plans were originally intended for those under age 30. These plans usually have the lowest premiums and are not eligible for federal subsidies.

DECEMBER 23 – As this deadline for buying coverage arrived, the deadline was moved again – by one day to December 24.

The complexities of the Affordable Care Act remain, and it seems very likely that additional rule changes will be made as the law’s provisions continue to roll out. We will make every effort to keep you informed about changes that could affect your tax situation.

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The Court relied heavily on a recent amendment to the TMLA: the word “patient” was replaced with the word “claimant.” It reasoned that this amendment evidenced legislative intent to broaden the coverage of the statute. It then discussed the three elements of an HCLC: (1) a health care provider is the defendant; (2) the claim concerns the “treatment, lack of treatment, or a departure from accepted standards of medical care, or health care, or safety or professional or administrative services directly related to health care,” id. at 180, and (3) the alleged departure proximately caused the plaintiff’s injuries. The court focused on the second element and noted that the alleged negligence in health care is sufficiently related to a physician-patient relationship because health care inevitably involves the care of a patient. Additionally, the court concluded that the statute did not intend the phrase “directly related to health care” to refer to “safety,” because the two phrases were not in close proximity. See id. at 184 (construing TEX. CIV. PRAC. & REM. CODE § 74.001(a)(13) (West 2003)).

The dissent called the majority’s opinion a “strained” reading of the statute that contradicts the statute’s plain language, purpose, and common sense. The dissent pointed out that this was not an HCLC because a claim does not become an HCLC merely because of some potential relationship with a patient, but because it is founded on the breach of a duty owed to a patient. The dissent further argued that the majority relied too heavily on the amendment of the word “patient” in the statute. Additionally, the dissent argued the holding was inconsistent with expert provisions, Texas precedent, and mandated jury instructions. Finally, the dissent claimed the majority’s holding undermined the legislative goals in enacting the TWCA because it rewards non-subscribers by making it more difficult for their employees to file claims.

Regardless, no longer must an HCLC be brought by a patient. The inevitable result is that statutory requirements—specifically expert testimony—will be required to maintain a negligence claim against an employer if the employer happens to be a health care provider.

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A special thanks to Jamie Vaughan for her invaluable assistance in preparing this post.

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1. Estate Tax Exemption, Rate of Tax, and Indexing For Inflation.

The 2012 Tax Act permanently increased the estate tax exemption to $5,000,000 per person, and importantly, the exemption is now indexed for inflation. With that indexing, the exemption for 2013 is equal to $5,250,000, and it will continue to increase each year. To the extent a decedent’s estate exceeds the exemption available in the year of death, the excess will be taxed at 40%. This rate of tax is higher than the 35% which was due on taxable estates in 2011 and 2012, but it is far lower than the 55% rate of tax which was imposed for many years prior to the Bush tax cuts.

2. Portability.

The 2012 Tax Act also made “portability” a permanent part of the estate tax system. Portability, which was originally introduced into law in 2010, is a way for married taxpayers to save estate taxes. Before 2010, if a spouse with a taxable estate died without proper estate planning and left his or her estate outright to the surviving spouse, that deceased spouse’s ability to shelter property from estate taxes after both spouses died was lost (absent a disclaimer of the inheritance by the surviving spouse, something most surviving spouses have no interest in doing). Even though the bequest to the surviving spouse did not generate any estate taxes due to the “unlimited marital deduction,” it meant the surviving spouse was left with all the property, but with only one person’s exemption from estate taxes. The exemption of the first spouse to die was therefore lost if no “bypass” trust was created. Now when a spouse leaves property directly to the surviving spouse, the surviving spouse can add the deceased spouse’s unused exemption amount (referred to as the “DSUE Amount”) to his or her own $5,250,000 exemption, thereby potentially doubling the amount that can be given away or left tax-free at death.

These new estate tax provisions may make planning less complicated for some clients, but there are still good reasons to create a bypass trust at the first spouse’s death. For example, if an estate is left to a trust, any appreciation that accrues to the trust property between the two spouses’ deaths will be removed from the surviving spouse’s estate. The DSUE amount is a fixed number, and it does not adjust for inflation. For example, if a couple has a $10,500,000 combined estate when the husband dies, and the wife’s estate subsequently grows to $15,000,000 prior to her death, she would be able to add only $5,250,000 to her exemption even though her husband’s half had grown to $7,500,000. This disadvantage is mitigated though because property owned outright by a surviving spouse receives a stepped-up cost basis upon the surviving spouse’s death, whereas assets in the trust will not. Even so, estate tax rates have historically been at least double that of capital gains tax rates (in 2013, the estate tax rate is 40% and the long-term capital gains rate is 20%), so in most cases, it will be best to use a trust rather than rely on portability.

Importantly, trusts offer creditor and divorce protection, two benefits that can be very important to many surviving spouses. Further, the portability laws provide that you can only claim the unused exemption from your last deceased spouse. If the surviving spouse in the above example remarries a wealthy man who dies shortly thereafter leaving his large estate to his own children, he will have no DSUE Amount for his wife to claim since he will have used up all of his exemption. The surviving spouse would lose her first husband’s DSUE Amount and have none to claim from her newly deceased husband. So, for some widows without a bypass trust, there’s the very real possibility that extra unplanned taxes might be owed if a new spouse dies first. Also, because a surviving spouse is usually not permitted to pass trust property to a new spouse or other beneficiaries, a trust has the added benefit of preserving the trust property for the children or other beneficiaries of the spouse who dies first.

3. Gift and GST Taxes, Rate of Tax, and Indexing For Inflation.

The 2012 Tax Act also made permanent changes to the gift tax and to the generation skipping transfer (“GST”) tax. Gift taxes apply to transfers made during lifetime that are in excess of any available exclusions and exemptions. GST taxes generally apply to transfers made to grandchildren, great-grandchildren and certain other persons and trusts.

Just like the estate tax, the available lifetime exemption from both the gift and GST tax has been increased to $5,250,000 per person. Transfers that exceed this limit will be taxed at the same 40% rate that applies to the estate tax. This $5,250,000 exemption is also indexed for inflation and will be increasing along with the estate tax exemption in future years. Importantly, if a surviving spouse has unused exemption from a spouse who died (the DSUE Amount), that carry-over amount can be added to the $5,250,000 gift tax exemption, thus increasing the amount the surviving spouse can give away during his or her lifetime. With such large exemptions now available, there are far more planning options available to people who want to make gifts while they are alive, whether in trust or outright to their children or others.

Most people are not concerned with gift and GST taxes because of the annual exclusion. This is the amount that can be given to any person each year without using up any part of the lifetime exemption from gift and GST taxes. The annual exclusion in 2013 is now equal to $14,000, up from $13,000 last year. The annual exclusion allows any person to give any other person as much as $14,000 per calendar year without reducing the available lifetime exemption. The annual exclusion is indexed for inflation, and it increases from time to time in $1,000 increments.

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A 529 account combines great features to make a fairly good investment vehicle. The main advantage is that the earnings and most withdrawals are income tax free. Even though you must use after-tax money to create the accounts, all capital gains, dividends, and interest are generally tax free. Withdrawals are subject to income taxes only when they are not used for tuition, room, board, and other authorized expenses. Another advantage is that gifts to a 529 account not only qualify for the $13,000 annual gift tax exclusion, but you can even make five years worth of gifts today and elect to treat them as being made equally over a five year period. For example, a married couple with four grandchildren can give as much as $130,000 to each grandchild right now for a total of $520,000 to the four grandchildren. Each grandchild will be treated as receiving $26,000 per year for five years.

As far as estate taxes are concerned, all amounts you contribute to the account will be excluded from your estate even though you are the person controlling the account. However, if you elect to spread your contributions over five years for gift tax purposes and you die within that five year period, a portion of the gift will be included in your gross estate.

There are a few downsides worth noting. Unlike some of the other alternatives available for saving for college, 529 accounts don’t let you choose the investments yourself. All you can pick is the type of investment portfolio the account will maintain. Also, if you use funds in the account for non-qualified purposes, a 10% penalty will apply to the portion of the withdrawal which constitutes investment gains.

Overall, 529 accounts present you with an unbeatable combination of features. The accounts offer income tax free growth and withdrawals with no gift taxes, no estate taxes, retained control of the funds, and flexibility in the future should circumstances change.

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An Order for Non-Disclosure prohibits the government from disclosing your criminal conviction to the public and prevents a private entity that compiles and disseminates for compensation criminal record information from compiling or disseminating information that is covered by the Order. Although sealing the record prevents its release to the public, the record remains available to law enforcement and to certain state agencies—for instance, licensing agencies. Also, the information can still be used against you in criminal proceedings.

What is an Order of Non-Disclosure?

An Order of Non-Disclosure is an order from the court effectively sealing your record from the public. It allows an individual to deny arrest or prosecution for which public information exists unless they are being prosecuted for a subsequent offense.
Benefits of a Texas an Order of Non-Disclosure:

Tell employers that you have not been convicted of a crime
Become eligible for student loans
Become eligible for housing assistance
Become eligible for more types of professional licenses and certificates
Tell friends and family that you have not been convicted of a crime
No more fear or embarrassment when someone does a background check

Who is eligible?

You may qualify for an Order of Non-Disclosure if you satisfy the following requirements:

You entered a plea of guilty or no contest; AND
The judge deferred further proceedings against you and placed you on community supervision (probation) without a finding of guilt; AND
You have been successfully discharged from community supervision; AND
The case against you has been dismissed; AND
You meet waiting period after completing your sentence:
No waiting period for most misdemeanors
5-year waiting period for misdemeanors under Chapters 20 (kidnapping, unlawful restraint), 21(sexual offenses), 22 (assaultive offenses), 25 (offenses against the family), 42 (disorderly related offenses), and 46 (weapons offenses) of the Penal Code
5-year waiting period for all felonies.

Who is not eligible?

The following offenses are not eligible:

Aggravated Kidnapping
Sex Offender
Murder
Capital Murder
Injury to children, elderly, or disabled individuals
Child abandonment or endangerment
Stalking
Family violence

What is the process?

Contact the Law Office of Russell Frost right now!

Once you hire us, we can file a Petition for Non-Disclosure with the court and request a hearing be held to determine if an Order of Non-Disclosure can be granted in your case. We will prepare all of the documents for you and deliver them ready to be signed, notarized and filed with the courts. We will attend the hearing and guide you through the process.

Will I be required to travel for a hearing?

Any hearing would most likely be held in the county in which you were charged. We will attend the hearing for you–no matter its location–and your presence would most likely not be required.

What happens if the court grants it?

Many Texas agencies are forbidden from disclosing the information to the public. The records are eventually sealed by DPS.

After an Order of Non-Disclosure is granted, entities such as PublicData.com or other background check sites can be fined for releasing the information.

Note that a criminal justice agency can still disclose criminal history record information that is the subject of an Order of Non-Disclosure to the following non-criminal justice agencies or entities only:

State Board for Education Certification
School district, charter school, private school, commercial transportation company, or education shared service arrangement
Texas State Board of Medical Examiners
Texas School of the Blind and visually Impaired
Board of Law Examiners
State Bar of Texas
District Court regarding a petition for name change
Texas School for the Deaf
Department of Family and Protective Services
Texas Youth Commission
Department of Assistive and Rehabilitative Services
Department of State Health Services
Texas Private Security Board
Municipal of volunteer Fire Department
Board of Nurse Examiners
Safe house providing shelter to children
Public or Nonprofit Hospital
Texas Juvenile Probation Commission
Securities Commissioner, banking commissioner, savings and loan commissioner, or the credit union commissioner
Texas State Board of Public Accountancy
Texas Department of Licensing and Regulation
Health and Human Services Commission; and
Department of Aging and Disability Services

The court’s order will be sent to the Department of Public Safety. The Department of Public Safety will then send the order to all law enforcement agencies, jails or other detention facilities, magistrates, courts, prosecuting attorneys, correctional facilities, central state depositories of criminal records, and other officials or agencies or other entities of this state or of any political subdivision of this state, and to all central federal depositories of criminal records that there is reason to belie have criminal history record information that is the subject of the order. Those entities are obliged not to disclose the deferred adjudication record information to anyone other than:

Other criminal justice agencies
For criminal justice or regulatory licensing purposes
An agency or entity listed in Section 411.081(i)
The person who is the subject of the order

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The law made several other substantive changes intended to make the legal process more efficient, including the following:

• Requiring the Texas Supreme Court to adopt rules for dismissal of a baseless cause of action;
• Requiring the Texas Supreme Court to adopt rules to expedite civil trials;
• Permitting appeals of otherwise unappealable orders if they involve a controlling question of law and may materially advance the termination of the litigation;
• Attempting to make it easier for defendants to obtain litigation costs if they make a qualifying settlement offer, the plaintiff rejects the offer, and the final award is less than the qualifying offer; and
• Prohibiting defendants from designating responsible third parties after the applicable limitations period.

Special thanks to Shane Johnson for his research and preparation of this post.

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