Texas Probate Litigation

New Texas Law Regarding Forfeiture Clauses

J. Michael Young — Wed, 01 Jul 2009 09:47:00 -0500

Many testators try to discourage potential will contestants by leaving them a modest amount in the will, while providing that bequest will forfeit if the beneficiary files a will contest. These in terrorem or "no contest" clauses are construed narrowly by Texas courts, but they do sometimes discourage even well founded contests.

Such clauses will now be more difficult to enforce. On June 19, 2009, Governor Perry signed HB 1969, which became effectively immediately. It amends the Texas Probate and Trust Codes to provide that no-contest clauses will not be enforced to forfeit a devise if the contest to the will or trust is brought:

1) with probable cause; and
2) in good faith

Some Texas appellate decisions had at least hinted that forfeiture would not apply if the contest was brought with probable clause and in good faith, but the Texas Supreme Court has never directly addressed the issue. While probate litigators will no doubt wrangle over what constitutes probable cause and good faith, this codification provides needed clarity.

Some estate planners will argue that this is not a good change to the law because it will encourage more will contests and frustrate the intent of testators. However, those of us who litigate in this area see far too many cases of new wills being executed just after the testator has suffered a stroke or is in the grip of Alzheimers or other dementia.

Texas Supreme Court: It is much easier to disqualify than remove an independent executor

J. Michael Young — Sat, 13 Jun 2009 20:20:58 -0500

In a recent opinion, the Texas Supreme Court considered an effort to remove an independent executor. The decedent's brother was appointed the independent executor of decedent's estate. The decedent's former wife attempted to remove the brother as executor after a dispute arose regarding the distribution of certain property and she claimed the executor had a conflict of interest since he had an ownership interest in the disputed property. The trial court rejected the effort to remove the executor.

The Supreme Court affirmed the trial court's decision. The Court noted that Section 78 of the Texas Probate Code sets out five different bases for disqualification of a would-be executor, including “[a] person whom the court finds unsuitable.” By contrast, Section 149c lists six specific grounds for removal of an executor, with no broad "unsuitability" standard giving a court broad discretion for removal.

The Supreme Court rejected the former wife's claim that the executor committed gross mismanagement or misapplied estate property. The Court noted the dispute arose from a simple good-faith disagreement and rejected the notion that an executor with a potential conflict of interest should be removed.

Increase in dementia expected to lead to more will contests

J. Michael Young — Wed, 29 Apr 2009 22:03:41 -0500

According to this article from the UK:

Experts believe the number of dementia sufferers will increase sharply in coming decades, mainly because of an ageing population, with one in three over-65s dying with the condition.

Law practitioners are now concerned this could mean more wills will be contested by family members who may argue that the sufferer did not know what they were doing when making changes.

It should surprise nobody that the aging population and increase in the diagnosis of dementia will lead to more will contests, in Texas and elsewhere. A testator suffering from alzheimers or other forms of dementia doesn't necessarily lack testamentary capacity. But it certainly provides good ammunition to a contestant. (photo credit)

North Texas Will Contest Attorneys

The trustee's duty to keep beneficiaries informed

J. Michael Young — Fri, 24 Apr 2009 20:36:24 -0500

Texas common law has long imposed a “duty of full disclosure” on trustees. However, until recently, the Trust Code contained no specific provision requiring this general duty.

In 2005, the Texas Legislature added new Section113.06, taken from the Uniform Trust Code, providing that a trustee has a duty to keep beneficiaries reasonably informed concerning the administration of the trust and the material facts necessary for the beneficiaries to protect their interests. This is a mandatory (non-waivable) duty for trustees with respect to beneficiaries 25 years of age and over who are either

(a) entitled or permitted to receive current distributions or

(b) “first tier” remaindermen.

In a legislative compromise with Texas Bankers Association, the settlor is permitted to waive this duty with respect to beneficiaries under age 25. However, an income beneficiary or “first tier” remainderman under age 25 still can demand an accounting under Section 113.151, assuming he or she finds out about the existence of the trust. Credit to Dallas trust attorney Bill Elliott for his expertise on this topic.

North Texas and Dallas-Fort Worth trust litigation attorneys

Time limit for challenging a will in Texas?

J. Michael Young — Tue, 21 Apr 2009 11:46:00 -0500

In Texas, a will contest must be filed within two year's of the challenged will's admission to probate. From Section 93 of the Texas Probate Code:

Period for Contesting Probate

"After a will has been admitted to probate, any interested person may institute suit in the proper court to contest the validity thereof, within two years after such will shall have been admitted to probate, and not afterward, except that any interested person may institute suit in the proper court to cancel a will for forgery or other fraud within two years after the discovery of such forgery or fraud, and not afterward. Provided, however, that incapacitated persons shall have two years after the removal of their disabilities within which to institute such contest."

Note that the statute does provide a discovery rule exception for forgery or fraud.

Texas Will Contest Law Firm

County Courts at Law do not have jurisdiction to consider trust disputes

J. Michael Young — Fri, 17 Apr 2009 22:54:51 -0500

Subject matter jurisdiction in Texas contested probate and trust cases is a patchwork, often confusing, system. The fear of all parties is litigating a case for years, only to find out on appeal that the lower court had no jurisdiction to consider key issues. Subject matter jurisdiction can not be conferred on a particular court by agreement, estoppel, or judicial admissions. Furthermore, lack of subject matter jurisdiction is an issue a party may raise for the first time on appeal.

These concepts are highlighted in a recent opinion by the Fort Worth Court of Appeals. In Wood v. Boldt, the court vacated various rulings made by the County Court at Law No.1 of Parker County. The problem? Only statutory probate courts and district courts have jurisdiction over trusts, even testamentary trusts:

When reviewing proceedings in the county court at law, the phrases “appertaining to estates” and “incident to an estate” are not defined as including the interpretation and administration of testamentary trusts. See id. Under section 5A(b), however, that task-“the interpretation and administration of testamentary trusts”-is a matter “appertaining to” or “incident to an estate” for probate proceedings in the statutory probate courts and district courts. See Act of May 22, 1997, 75th Leg., R.S., ch. 1302, § 1, 1997 Tex. Gen. Laws 4954, 4954-55 (amended 1999 and 2003) (current version at Tex. Prob.Code Ann. § 5A(b) (Vernon Supp.2008)). Thus, under probate code section 5A, county courts at law do not have jurisdiction over matters involving a testamentary trust, but statutory probate courts and district courts do.

The county court at law should have transferred the disputes regarding the testamentary trusts to a district court in Parker County.

Plano man prosecuted for financial exploitation of his mother

J. Michael Young — Sat, 11 Apr 2009 10:39:17 -0500

As I've noted before, all too often district attorneys don't place a priority on prosecuting financial crimes against the elderly. Credit to Tarant County prosecutors David Lobingier and Sabrina Sabine for obtaining a guilty plea and order of restitution for misappropriation of property by a fiduciary. According to the Fort Worth Star Telegram story:

A Plano man was ordered Wednesday to repay his 74-year-old mother more than $87,000 as a condition of his probation for improperly spending money she entrusted to him.

John Michael Hook, 54, was sentenced in November to 10 years’ probation after he pleaded guilty to misappropriation of property by a fiduciary, someone who acts on another’s behalf. Because his victim — his mother — was older than 65, the charge became a second-degree felony with a maximum punishment of 20 years in prison.

But Hook disputed the state’s assertion that he improperly spent $87,148 of his mother’s money over four months in 2004. So, a hearing was scheduled for March 20 where Hook’s attorney, Jim Shaw, and prosecutors David Lobingier and Sabrina Sabine argued about how much Hook owed his mother, Phyllis Parish.

The case was prosecuted in Tarrant County because that is where Parish signed over her power of attorney to Hook in 2002 and that’s where her bank was.

During the 50-minute hearing before 396th District Judge George Gallagher, a financial analyst demonstrated how Hook transferred money from his mother’s bank accounts to his own accounts and used the money to pay off credit cards, a motorcycle loan and other expenses.

Unfortunately, abuse of powers of attorney is all too common and is often done by a family member.

New Sanders, O'Hanlon & Motley web site

J. Michael Young — Tue, 31 Mar 2009 22:01:04 -0500

I am very happy to announce that our new web site has gone live. This has been a project many months in the making and I'm pleased with the result. I believe it fairly reflects the spirit of the firm and the types of cases we handle. While business litigation is a primary focus of our practice, Anthony O'Hanlon is well known for his personal injury and medical malpractice work.

A special thanks to Tony Dean and DSB Worldwide for the site design work.

Texas home buyers remain powerless against builders

J. Michael Young — Mon, 23 Mar 2009 18:37:32 -0500

Buying a home can be the most significant investment in your life. It is also often the most valuable asset in an estate.

When a buyer makes a down payment and takes out a huge loan to purchase a new home, they place a trust in the builder. Most of us are not construction experts and even an inspector we hire is unlikely to find all potential defects in an inspection lasting only a few hours.

In most states, a purchaser has a remedy to sue a builder for shoddy construction. That remedy was yanked in Texas in 2003 as part of the "tort reform" movement pushed by Governor Rick Perry. A group of home builders, led by mega-donor Bob Perry, convinced (with plenty of campaign cash) the Texas Legislature to establish the Texas Residential Construction Commission. In a sales pitch that would have made Orwell cringe, the homebuilders touted the commission as an added layer of protection for home buyers. Of course, it really was protection for the builders. Amazingly, the legislation was written by the Senior Vice President of Bob Perry Homes, John Krugh, who was later appointed to the Commission. The TRCC legislation stripped legal remedies from consumers and forced them to seek relief from an essentially powerless commission controlled by the industry. The horrors of the commission have been well documented.

The staff of the Texas Sunset Advisory Commission recommended last year that the Legislature abolish the TRCC. However that appears unlikely, as this Houston Chronicle article details:

After numerous consumer complaints that the TRCC is little more than an industry lapdog, the agency now is under sunset review, fighting for its continued existence.

Legislation up for a hearing before the House Business and Industry Committee would keep the agency open for another four years but would make it more responsive to consumer complaints, sponsors say.

But if Perry’s money is a factor, consider this:

Ten of the 11 members on the panel have received a collective $324,500 from Perry during their legislative careers. Leading the pack are Reps. Sylvester Turner, D-Houston, $115,000; Sid Miller , R-Stephenville, $91,500; Kirk England, D-Grand Prairie, $47,500; and Wayne Christian , R-Center, $31,500.

You may recall that the staff of the Sunset Advisory Commission recommended last year that the Legislature abolish the TRCC.

But the commission, most of whose members are legislators, voted to keep the TRCC in business while making it more consumer friendly.

The 10 lawmakers on the Sunset Commission (a separate group from today’s committee) had received $486,000 in political donations from Perry.

“We’re supportive of the intent of the TRCC, which is to improve regulation of home builders and protect consumers,” Perry spokesman Anthony Holm said.

Any doubt that Bob Perry will continue to get his way on this issue? Readers of this blog in Texas should ask their legislators if they voted for the TRCC in 2003 and if they support its continued existence.

Ironically, buyers of used homes still have legal remedies against sellers who fail to disclose defects. Furthermore, the TRCC only applies to residential, not commercial, construction.

You can contact a North Texas construction defect lawyer if you are the victim of a failure to disclose or of shoddy construction.

Scam artists coming out of the woodwork

J. Michael Young — Sat, 14 Mar 2009 14:46:17 -0500

I've blogged often about financial scams targeting the elderly. According to this MSNBC article, the scams are spreading in the general population:

Having troubles with the mortgage? Trying to get out of debt?

Be careful who you ask for help -- a new wave of scams is targeting anyone suffering during the tough economy.

Those who investigate or study fraud said normally, the economically challenged or elderly are easy targets for scammers, but now those scammers are casting a wider net, and some might make you doubt who you can trust.

The growing number of scammers is unfortunate, but predictable. Last year, I represented a family who were threatened with eviction. Unfortunately, the foreclosure sale had already occurred before they came to see me for help. Before the foreclosure, they had received an official looking notice from a copy that they believed was affiliated with the lender, a national bank. They sent the company over $1,500 with the belief it would be forwarded to the lender along with a workout proposal for modifying the mortgage note. Unfortunately, it was a fly by night operation that preyed on unsuspecting homeowners facing foreclosure. The lender received none of the money and the family was out of money they desperately needed.