Legal Representation of Ward or Proposed Ward

The Texas Legislature has once again updated the Texas Probate Code, which governs all Guardianship proceedings in the State of Texas, to reflect the realities of life.  The determination of whether an individual is incapacitated is not always black and white.  Many individuals potentially subject to a guardianship retain many of their abilities.  One such ability is the right to contract.

At the beginning of every guardianship case, the Court is required to appoint an attorney (known as an Attorney Ad Litem) for the potentially incapacitated person.  In the past, the Probate Code did not provide a mechanism for the potential Ward to choose their own attorney.

However, new Probate Code Section 646A allows Wards or Proposed Wards to retain their own attorney instead of having the Court appoint an attorney for them.  This ability is subject to the Ward or the Proposed Ward having the capacity and power to enter into a contract.

A Ward must retain the power to contract under the terms of the current guardianship in order to hire a private attorney instead of allowing the Court to appoint an Attorney Ad Litem.  A Proposed Ward may hire a private attorney during the proceeding to appoint a Guardian as long as the Proposed Ward has capacity to contract.

When the Ward or Proposed Ward hires their own attorney, the attorney must hold the same certification requirements as an attorney who is eligible to be appointed as an Attorney Ad Litem.  If the attorney is certified by the State of Texas to serve as an Attorney Ad Litem, then he or she is free to serve as private counsel to a Ward or Proposed Ward instead of a Court-appointed Ad Litem.

These changes to the Probate Code allow individuals with the power to contract to retain their own private counsel, to represent their interests in the guardianship proceeding.  This allows Wards and Proposed Wards to have a greater voice and decision-making power in the process of appointing a Guardian over their person and financial assets.

Washington’s New Proposal on Estate and Gift Tax

President Obama recently released his 2013 proposed budget.  Significant estate and gift tax changes would go into effect on January 1, 2013, if the 2013 budget is passed by Congress.  A couple of the changes have fairly far-reaching implications for a significant portion of the American population.  Following is a description of a few of those changes that could greatly impact your estate plan.

Exemptions Level: In late 2010, Congress increased the estate tax exemption to $5 million for each person in the United States and reduced the highest estate tax rate to 35% of someone’s assets over $5 million.  The President’s budget lowers that $5 million exemption to $3.5 million and increases the maximum tax rate for estate and gift transfers exceeding the $3.5 million from 35 percent to 45 percent.  Currently an individual could transfer $5 million tax free.  If the President budget passes, that same individual could only transfer $3.5 million tax free.

Portability:  In 2011, Congress enacted a new “portability” provision that allows a spouse to utilize their deceased spouse’s estate tax exemption.  This is the first time in U.S. history that such a provision has been enacted, and President Obama’s budget introduced last week makes the portability rules permanent.  Because this provision is one that the Republicans also favor, we believe it is likely to pass through Congress.

Valuation Discounts: Finally, the budget makes significant changes to the way that business interests and real property held and transferred among family members is valued.  Until now, families creating family businesses could utilize valuation “discounts” on the transfers of certain business interests.  This is more frequently seen in the context of a Family Limited Partnership.  By utilizing the valuation discounts, families have been able to transfer larger assets without paying gift and estate taxes.  Under the budget proposed last week, the valuation discounts would be effectively eliminated, denying family members the ability to discount minority interest in family-owed businesses, family limited partnerships, and certain real property due to lack of marketability.  This a radical shift that could be incredibly detrimental to a huge number of Americans.

If you have additional questions about the new federal estate and gift tax laws and how they could effect your estate plan contact Ford + Mathiason LLP today for a consultation.