Bulletin: TX2011008

Dear Associates:

The 2011 Texas Legislature passed a major overhaul of the Texas Probate Code. HB 2759 is Effective January 1, 2014.

This bill makes nonsubstantive revisions to Estates Code, which replaces the Probate Code January 1, 2014. Chapter 751 concerns Durable Powers of Attorney, and Chapter 752 concerns Statutory Durable Powers of Attorney. Chapters 1001-1356 concern guardianships.

The Estates Code includes the substance of the provisions in the current Texas Probate Code. The 81st Legislature enacted Title 1 and Subtitles A through M, Title 2, Estates Code, representing a nonsubstantive revision of the provisions of the Texas Probate Code applicable to decedents' estates, and redesignated without revising the remaining provisions of the Texas Probate Code as Subtitles X, Y, and Z, Title 2, Estates Code, and Title 25, Estates Code. House Bill 2759 proposes Subtitle P, Title 2, Estates Code, as a revision of the durable powers of attorney statutes and Title 3, Estates Code, as a revision of the statutes relating to guardianships, guardianship-related proceedings, and alternatives to guardianships. Provisions relating to scope, jurisdiction, and venue for guardianship proceedings, and a provision relating to payment for certain professional services in guardianship proceedings, have been redesignated without revision as Subtitles Y and Z of Title 3, Estates Code. Subtitle P, Title 2, and the revised provisions in Title 3, Estates Code, are divided into chapters. Each proposed chapter is divided into subchapters, if appropriate, and is further divided into sections. Sections are numbered decimally, and the number to the left of the decimal point is the same as the chapter number. Gaps in chapter and section numbering are for future expansion.

SB 1198

Effective September 1, 2011 (except as otherwise provided; effective January 1, 2014 as to Estates Code).

This bill makes numerous changes to the Probate Code and to the Estates Code (which becomes effective January 1, 2014).

Section 37A, Probate Code, (applicable to disclaimers made after December 31, 2009, for decedents dying after December 31, 2009 and before December 17, 2010) authorizes an extension of time for certain disclaimers:

(p) Extension of Time for Certain Disclaimers . Notwithstanding the periods prescribed by Subsections (h) and (i) of this section, a disclaimer with respect to an interest in property passing by reason of the death of a decedent dying after December 31, 2009, but before December 17, 2010, may be executed and filed, and notice of the disclaimer may be given, not later than nine months after December 17, 2010. A disclaimer filed and for which notice is given during this extended period is valid and shall be treated as if the disclaimer had been filed and notice had been given within the periods prescribed by Subsections (h) and (i) of this section. This subsection does not apply to a disclaimer made by a beneficiary that is a charitable organization or governmental agency of the state. [THIS IS SECTION 122.057, ESTATES CODE]

What you should do: Note that the time period for a disclaimer under this section is date dependent. The latest date a disclaimer can be effective is September 17, 2011.

Section 67, Probate Code, (applicable to estates of decedents dying on or after effective date of this Act) relating to pretermitted children is amended to add new Subsection (e):

(e) If a pretermitted child's other parent is not the surviving spouse of the testator, the portion of the testator's estate to which the pretermitted child is entitled under Subsection (a)(1)(A) or (a)(2) of this section may not reduce the portion of the testator's estate passing to the testator's surviving spouse by more than one-half. [Section 255.056, Estates Code]

SB 1198 adds new provisions to the Probate Code relating to authority to sell (applicable to estates of decedents dying on or after effective date of this Act):

Sec.145A.GRANTING POWER OF SALE BY AGREEMENT.

In a situation in which a decedent does not have a will or a decedent's will does not contain language authorizing the personal representative to sell real property or contains language that is not sufficient to grant the representative that authority, the court may include in an order appointing an independent executor under Section 145 of this code any general or specific authority regarding the power of the independent executor to sell real property that may be consented to by the beneficiaries who are to receive any interest in the real property in the application for independent administration or in their consents to the independent administration. The independent executor, in such event, may sell the real property under the authority granted in the court order without the further consent of those beneficiaries. [SECTION 401.006, ESTATES CODE]

Sec.145B.INDEPENDENT EXECUTORS MAY ACT WITHOUT COURT APPROVAL.

Unless this code specifically provides otherwise, any action that a personal representative subject to court supervision may take with or without a court order may be taken by an independent executor without a court order. The other provisions of this part are designed to provide additional guidance regarding independent administrations in specified situations, and are not designed to limit by omission or otherwise the application of the general principles set forth in this part. [SECTION 402.002, ESTATES CODE]

Sec.145C.POWER OF SALE OF ESTATE PROPERTY.

(a) Definition. In this section, "independent executor" does not include an independent administrator.

(b) General. Unless limited by the terms of a will, an independent executor, in addition to any power of sale of estate property given in the will, and an independent administrator have the same power of sale for the same purposes as a personal representative has in a supervised administration, but without the requirement of court approval. The procedural requirements applicable to a supervised administration do not apply. [SECTION 402.052, ESTATES CODE]

(c) Protection of Person Purchasing Estate Property. (1)A person who is not a devisee or heir is not required to inquire into the power of sale of estate property of the independent executor or independent administrator or the propriety of the exercise of the power of sale if the person deals with the independent executor or independent administrator in good faith and:

(A) a power of sale is granted to the independent executor in the will;

(B) a power of sale is granted under Section 145A of this code in the court order appointing the independent executor or independent administrator; or

(C) the independent executor or independent administrator provides an affidavit, executed and sworn to under oath and recorded in the deed records of the county where the property is located, that the sale is necessary or advisable for any of the purposes described in Section 341(1) of this code.

(2) As to acts undertaken in good faith reliance, the affidavit described by Subsection (c)(1)(C) of this section is conclusive proof, as between a purchaser of property from an estate, and the personal representative of the estate or the heirs and distributees of the estate, with respect to the authority of the independent executor or independent administrator to sell the property. The signature or joinder of a devisee or heir who has an interest in the property being sold as described in this section is not necessary for the purchaser to obtain all right, title, and interest of the estate in the property being sold.

(3) This section does not relieve the independent executor or independent administrator from any duty owed to a devisee or heir in relation, directly or indirectly, to the sale. [SECTION 402.053, ESTAES CODE]

(d) No Limitations. This section does not limit the authority of an independent executor or independent administrator to take any other action without court supervision or approval with respect to estate assets that may take place in a supervised administration, for purposes and within the scope otherwise authorized by this code, including the authority to enter into a lease and to borrow money. [SECTION 402.054, ESTATES CODE]

Section 146, Probate Code, (applicable to estates of decedents dying after effective date of this Act) concerning secured claims, is amended as follows:

(a-2) Statement in Notice of Claim. To be effective, the notice provided under Subsection (a)(2) of this section must include, in addition to the other information required by Section 294(d) of this code, a statement that a claim may be effectively presented by only one of the methods prescribed by this section.

(b) Secured Claims for Money. Within six months after the date letters are granted or within four months after the date notice is received under Section 295 of this code, whichever is later, a creditor with a claim for money secured by real or personal property of the estate must give notice to the independent executor of the creditor's election to have the creditor's claim approved as a matured secured claim to be paid in due course of administration. In addition to giving the notice within this period, a creditor whose claim is secured by real property shall record a notice of the creditor's election under this subsection in the deed records of the county in which the real property is located. If no [the] election to be a matured secured creditor is made, or the election is made, but not within the prescribed period, or is made within the prescribed period but the creditor has a lien against real property and fails to record notice of the claim in the deed records as required within the prescribed period [is not made], the claim shall be [is] a preferred debt and lien against the specific property securing the indebtedness and shall be paid according to the terms of the contract that secured the lien, and the claim may not be asserted against other assets of the estate. The independent executor may pay the claim before the claim matures if paying the claim before maturity is in the best interest of the estate. [SECTION 403.052, ESTATES CODE]

(b-1) Matured Secured Claims. (1)A claim approved as a matured secured claim under Subsection (b) of this section remains secured by any lien or security interest against the specific property securing payment of the claim but subordinated to the payment from the property of claims having a higher classification under Section 322 of this code. However, the secured creditor:

(A) is not entitled to exercise any remedies in a manner that prevents the payment of the higher priority claims and allowances; and

(B) during the administration of the estate, is not entitled to exercise any contractual collection rights, including the power to foreclose, without either the prior written approval of the independent executor or court approval.

(2) Subdivision (1) of this subsection may not be construed to suspend or otherwise prevent a creditor with a matured secured claim from seeking judicial relief of any kind or from executing any judgment against an independent executor. Except with respect to real property, any third party acting in good faith may obtain good title with respect to an estate asset acquired through a secured creditor's extrajudicial collection rights, without regard to whether the creditor had the right to collect the asset or whether the creditor acted improperly in exercising those rights during an estate administration due to having elected matured secured status.

(3) If a claim approved or established by suit as a matured secured claim is secured by property passing to one or more devisees in accordance with Section 71A of this code, the independent executor shall collect from the devisees the amount of the debt and pay that amount to the claimant or shall sell the property and pay out of the sale proceeds the claim and associated expenses of sale consistent with the provisions of Section 306(c-1) of this code applicable to court supervised administrations. [SECTION 403.053, ESTATES CODE]

(b-2) Preferred Debt and Lien Claims. During an independent administration, a secured creditor whose claim is a preferred debt and lien against property securing the indebtedness under Subsection (b) of this section is free to exercise any judicial or extrajudicial collection rights, including the right to foreclosure and execution; provided, however, that the creditor does not have the right to conduct a nonjudicial foreclosure sale within six months after letters are granted. [SECTION 403.054, ESTATES CODE]

(b-3) Certain Unsecured Claims; Barring of Claims. An unsecured creditor who has a claim for money against an estate and who receives a notice under Section 294(d) of this code shall give to the independent executor notice of the nature and amount of the claim not later than the 120th day after the date the notice is received or the claim is barred. [SECTION 403.055, ESTATES CODE]

(b-4) Notices Required by Creditors. Notice to the independent executor required by Subsections (b) and (b-3) of this section must be contained in:

(1) a written instrument that is hand-delivered with proof of receipt, or mailed by certified mail, return receipt requested with proof of receipt, to the independent executor or the executor's attorney;

(2) a pleading filed in a lawsuit with respect to the claim; or

(3) a written instrument or pleading filed in the court in which the administration of the estate is pending.

(b-5) Filing Requirements Applicable. Subsection (b-4) of this section does not exempt a creditor who elects matured secured status from the filing requirements of Subsection (b) of this section, to the extent those requirements are applicable. [SECTION 403.056, ESTATES CODE]

(b -6) Statute of Limitations. Except as otherwise provided by Section 16.062, Civil Practice and Remedies Code, the running of the statute of limitations shall be tolled only by a written approval of a claim signed by an independent executor, a pleading filed in a suit pending at the time of the decedent's death, or a suit brought by the creditor against the independent executor. In particular, the presentation of a statement or claim, or a notice with respect to a claim, to an independent executor does not toll the running of the statute of limitations with respect to that claim. [SECTION 403.057, ESTATES CODE]

(b-7) Other Claim Procedures of Code Generally Do Not Apply. Except as otherwise provided by this section, the procedural provisions of this code governing creditor claims in supervised administrations do not apply to independent administrations. By way of example, but not as a limitation:

(a) Section 313 of this code does not apply to independent administrations, and consequently a creditor's claim may not be barred solely because the creditor failed to file a suit not later than the 90th day after the date an independent executor rejected the claim or with respect to a claim for which the independent executor takes no action; and

(a) Sections 306(f)-(k) of this code do not apply to independent administrations. [SECTION 403.058, ESTATES CODE]

Section 151, Probate Code, (applicable to a notice filed on or after effective date of this Act) addresses closing independent administration and authorizes an independent executor to file a notice of closing estate verified by affidavit that debts have been paid to the extent permitted by assets, that remaining assets have been distributed and the names and addresses of distributes. The independent administration of an estate is considered closed 30 days after the date of filing the closing report or notice of closing estate and the power and authority of the independent executor is then terminated. [SECTION 405.004, ET SEQ, ESTATES CODE]

Section 250, Probate Code, (applicable to estate of decedent dying on or after effective date of this Act) authorizes an affidavit in lieu of inventory, appraisement and list of claims if there are no unpaid debts, except secured debts, taxes and administration expenses. [SECTION 309.056, ESTATES CODE]

Amended Section 472, Probate Code, (applicable to estate of decedent dying on or after effective date of this Act)relates to revocation of nontestamentary transfers on dissolution of marriage and also revokes a revocable disposition or appointment, provision in a trust, or nomination in a trust to a relative of the former spouse who is not a relative of the divorced individual. [SECTION 123.053, ESTATES CODE]

Section 473, Probate Code,(applicable to the estate of a decedent dying on or after the effective date of this Act) is amended to provide:

(a) A bona fide purchaser of property from a divorced individual's former spouse or any relative of the former spouse who is not a relative of the divorced individual or a person who receives from a divorced individual's former spouse or any relative of the former spouse who is not a relative of the divorced individual a payment, benefit, or property in partial or full satisfaction of an enforceable obligation:

(1) is not required by this chapter to return the payment, benefit, or property; and

(2) is not liable under this chapter for the amount of the payment or the value of the property or benefit. [SECTION 123.054, ESTATES CODE]

Section 8(b) includes preexisting and clarifying language concerning protection of a bona fide purchaser in a later probate proceeding, which also appears in the new Estates Code:

Sec.33.055.PROTECTION FOR CERTAIN PURCHASERS.

Notwithstanding Section 33.052, a bona fide purchaser of real property who relied on a probate proceeding that was not the first commenced proceeding, without knowledge that the proceeding was not the first commenced proceeding, shall be protected with respect to the purchase unless before the purchase an order rendered in the first commenced proceeding admitting the decedent's will to probate, determining the decedent's heirs, or granting administration of the decedent's estate was recorded in the office of the county clerk of the county in which the purchased property is located.
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