This Week in Appeals – Ford & Mathiason Wins Again

Case: Courtney Guyton vs. Cynthia Monteau
Court: Fourteenth Court of Appeals – Houston

The Fourteenth Court of Appeals this week has ruled in F&M’s favor involving the ability of a probate court to appoint a third party administrator over the application of a beneficiary of the estate.

F&M appealed the denial of their client’s application to be appointed as the Successor Administrator of her father’s estate. After a hearing on the merits in which only one objection to her appointment was raised, the court denied the Applicant’s appointment based on a perceived conflict amongst the parties.

The trial court admitted that the only objection raised by the parties was not sufficient to disqualify the Applicant from serving. However after the opponent’s counsel requested the court to take judicial notice of the entire file, the Court ruled that it was appointing an independent third party as administrator.

The Court of Appeals overruled, noting that the burden of proof rests on those opposing an applicant’s appointment. Because none of the reasons given by the trial court for its decision was asserted by any interested party, the Court of Appeals ruled that the trial judge abused his discretion by denying the Applicant’s appointment and appointing a third party. The case was remanded to the trial court with instructions to grant the application and appoint Courtney Guyton as Administrator.

What does all of this mean for you? If you feel you’ve been wrongly denied an appointment, call us today and schedule an appointment to discuss your matter. Even where a Judge has ruled against you there may still be options available, but the timelines are short so do not delay.

2011 Legislative Update, Part 2

Among the other potential legislative changes that might have a negative effect on guardianships in Texas is Senate Bill 1027, which was also introduced by state Senator Chris Harris representing Denton County. Under this proposed bill, Harris would add a new section to the Probate Code that would prohibit an attorney who serves as guardian of someone to also provide legal services on behalf of the guardianship. This proposal is terrible legislation as it may be unconstitutional, and it is certainly counter to extremely long-standing law in Texas.

On the question of constitutionality, this proposed legislation would prohibit an attorney serving as guardian to also provide legal services for the Ward. This sounds like an unreasonable restriction on an attorney’s right to practice law, which raises a constitutional issue. Likewise, this proposal seems to discriminate only against lawyers and not other professionals like doctors, financial planners, and accountants who might also serve as guardians and also provide professional services to them.

More significant than the constitutional question is the fact that this proposed legislation violates long-standing Texas law that has been recognized by every Court in the state. The Courts have uniformly agreed that allowing an attorney to serve the dual role of guardian and attorney simply saves time and money for the Ward’s estate and promotes the Ward’s best interest because of the fees saved by the attorney/guardian not having to hire an additional attorney to complete the tasks that the attorney/guardian could complete more easily himself. The rationale recognizes the inherent inefficiency of having to educate an outside attorney at every turn of the guardianship when the attorney/guardian would not have to educate himself.

Ford & Mathiason practices extensively in the guardianship arena, and we certainly recognize that the appointment of an attorney as guardian can lead to some abuses of the position. However, the relatively small numbers of cases in which we find abuses do not justify the kind of bad law that would emanate from Senate Bill 1027. Please contact your Texas Legislators to encourage them to vote against this Bill.

2011 Legislative Update, Part 1

As you may know, the Texas Legislature convenes in January of every odd year, and the Legislative session generally extends for 140 days (approximately 4.5 months). During the Legislative session, hundreds of bills may be introduced covering a wide array of topics. The 2011 session convened in January and will extend until the end of May. Saturday, March 12, 2011, was the last day for legislators to file bills that they wanted to have considered in this Legislative session. The Legislature provides online access through the Texas Legislature Online to view and track the proposed legislation up for debate in the Legislative session.

Among the topics covered in many of these bills are various issues related to probate and guardianships. From my review of these bills, it appears that there are sweeping changes that have been proposed in the probate and guardianship arenas. Many of these changes mark distinct changes in the status of the current law, and some of the proposals are simply bad law.

Probably the most disconcerting of these proposed changes to law is Senate Bill 286, which has been introduced by state Senator Chris Harris, who represents Denton County in the Legislature. This bill would allow Judges in guardianship cases to charge the attorney’s fees in a guardianship case to one party or the other when there has been a guardianship contest. His legislation would also open the door for Courts to assess the fees for court-appointed attorneys against the party bringing the guardianship action.

This proposed legislation could have a chilling effect on guardianships and jeopardize the safety of many elderly adults who need protection from those taking advantage of them financially or neglecting their personal welfare and safety. Although the Bill is likely intended to curtail abuses of the guardianship process, its intent will be quickly distorted by Courts that do not fully appreciate the complexities of guardianships.

The problem created is this: Unlike litigants in any other type of lawsuit, litigants who file guardianship actions do not stand to benefit personally from the guardianship case. Rather, they are looking to institute a mechanism for protecting an elderly person who is incapable of protecting themselves. If a litigant faces the risk of having to pay someone else’s attorney’s fees when they are simply trying to help an elderly family member or friend will likely be deterred from getting involved in trying to help that person. This will create a significant deterrent for those who might be inclined to help protect an elderly person, and it will lead to significant problems for potential elderly victims of abuse.

You should contact your Texas Legislator to encourage them to vote against Senate Bill 286.

The 2010 Estate Tax Election

As we have reported previously in our Blog, the estate tax law for 2010 and 2011 has changed fairly dramatically with the passage of new legislation in December 2010. When Congress enacted a comprehensive tax package in June 2001, it included a provision that would eliminate the estate tax in 2010 but would re-institute the tax in 2011 at 2001 rates. Under those rules, the estate tax was set to return to a $1 million exemption per estate with a maximum estate tax rate of 55% on a person’s assets over the $1 million mark. Under the 2010 legislation, Congress increased the exemption for 2011 and 2012 to $5 million, and it reduced the maximum estate tax rate to 35%.

As a part of the 2001 legislation that eliminated the estate tax for 2010, Congress also included a moratorium on the step up in basis that has historically been offered to assets when someone dies. Under the law prior to 2010, when someone dies, any asset that they own receives a “step-up” in the basis of the asset equal to the value of the asset on the Decedent’s date of death. For instance, if Jack purchased 1,000 shares of Exxon stock in 1971 at $10/share and the same stock was selling at $75/share on Jack’s death in 2010, Jack’s family would receive the stock with a basis of $75/share, the value on his date of death. When they later sell the stock, they would pay capital gains only on the increase in the value after the date of death.

Because there was no estate tax in 2010, there was also going to be no step-up in basis, which could be costly to some taxpayers. When Congress passed the new legislation that increased the exemption amount for 2011 and 2012, they also included a provision that allows estates of persons who died in 2010 to elect to stick with the law that was passed in 2001 or to choose to apply the law applicable to 2011 and 2012. This gives those estates an opportunity to calculate which method would result in the lowest overall taxes and thereby save them the most money.

This new tax election stands to provide a substantial benefit to many of the estates of persons who died in 2010. Because the new law was not enacted until December 2010, Congress has allowed an extension for tax returns being filed for those estates. If you are set to receive an inheritance from an estate of someone who died in 2010, please contact us if you need more information about these potential tax issues.