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2017 Legislative Changes Affecting Probate and Estate Planning

The Texas legislature was busy in 2017. Significant changes were enacted relating to powers of attorney, the health and safety code, and the estates code. What follows is a non-exhaustive list of those significant changes.

Statutory Durable Power of Attorney

A principal may now name two or more individuals as co-agents, each of whom may act independently of the other unless the principal provides otherwise. The ability to appoint more than one agent may prove useful in situations of multiple children and the parent does not wish to appear to favor one child over the other. However, it is best to have an odd number of agents if you do appoint co-agents as this will prevent a deadlock on decisions.

A principal may now provide in the document that the agent is to receive reasonable compensation for services rendered, and for reimbursement of reasonable expenses. This may be desirable where a child or other relative spends an appreciable amount of time performing tasks on your behalf.

The principal may now grant an agent “hot powers” under the new form. These “hot powers” include creating, amending or revoking a trust; making a gift; creating or changing survivorship rights; creating or changing a beneficiary designation; or delegating authority to another. It is important to note that an employee benefit plan may not honor an agent’s request to change a beneficiary designation on an employer-sponsored life insurance benefit.  In addition, these “hot powers,” if granted, would allow the agent to create or change a P.O.D. for bank and trust accounts, and generally will not limit an agent’s authority to name himself or herself the beneficiary. Thus, it is very important to ensure that the individual(s) appointed as an agent are trustworthy.

Another significant change is the agent’s authority over the principal’s property. The agent’s authority is not limited to only that property located in Texas. Nor does it matter whether or not the power of attorney is executed in Texas.

The statute now incorporates an affirmative duty upon co-agents to notify the principal of a breach of fiduciary duty where the agent has actual knowledge of a breach or imminent breach. If the principal is incompetent, then the agent is under an obligation to take reasonable steps to safeguard the principal’s best interest. What steps are “reasonable” are not defined. If the non-breaching co-agent fails to take action to protect the principal, then the co-agent may be liable for reasonably foreseeable damages that could have been avoided. If the co-agent is unaware of and does not participate in the breach, then the co-agent is not liable for the acts of the predecessor agent or co-agent.

If you intend your agent to exercise powers with respect to real property, then the power of attorney must be filed with the county clerk within 30 days of the transaction. The legislature added home equity lines of credit and reverse mortgages to the list of real estate transactions to which this provision applies.

Under the prior statute there was no judicial mechanism available to force a third party to accept a power of attorney. As a result, individuals with valid powers of attorney could not use them if the principal was mentally incompetent or incapacitated. The agent was in most instance then required to obtain a guardianship at great expense to the principal. The statute now requires a third party to reasonably refuse to accept a power of attorney, with some exceptions (aren’t there always exceptions?).

Probate Changes

An application to probate a will or for letters of administration now requires the applicant to provide the last 3 digits of his driver’s license and social security numbers as well as for the deceased, if known.

Independent executors must be more mindful of their statutory duties. For example, if an independent executor misrepresents that all beneficiaries have received a copy of the inventory, the independent executor can now be fined up to $1,000.

Guardianships and Persons with Disabilities

Interested persons must file and serve a detailed motion to intervene upon all parties to a guardianship. The motion must include the grounds upon which the party wishes to intervene. However, this requirement does not apply to anyone entitled to notice of the proceeding.

If the guardian of the ward files an application to transport a ward to an inpatient mental health facility for preliminary examination under an emergency detention, then the guardian must provide written notice of the application to the court supervising the guardianship.

If a guardian places all of the ward’s assets in an Achieving a Better Life Experience (ABLE) account, the court may terminate the guardianship of the estate, as opposed to the person. The guardian of the person would remain.

Individuals may not be appointed a guardian until the individuals have been trained. In addition, individuals seeking to serve as guardians will be required to undergo a criminal background check. The proposed guardian must complete all training at least ten days prior to the hearing appointing the guardian.

The new Reporting Financial Exploitation of Vulnerable Adults Act requires the employee of a financial institution or securities professional to notify the institution, dealer or investment adviser of suspected financial exploitation of a vulnerable adult who is an account holder. A “vulnerable adult” is defined to include individuals 65 years of age or older, or who is disabled. Once such a report is made, the financial institution must assess the suspected exploitation and submit a report to the Department of Family and Adult Protective Services (DFAPS). A dealer or investment adviser must submit a report to the Securities Commissioner as well as DFAPS.

Do Not Resuscitate Orders

The new provisions apply only to a DNR order issued in a health care facility or hospital, thus, explicitly excluding application to out-of-hospital DNR orders. The in-hospital DNR order is only valid if issued by the patient’s attending physician, dated and the order is issued in any of 5 specified categories, including written, dated directions of the patient made while competent.

The new DNR law also requires a physician to revoke a DNR order if the patient, the patient’s medical agent or legal guardian effectively revokes an advance directive for which a DNR order was issued, or expresses to anyone providing direct care a desire to revoke consent the DNR order. If the physician or hospital does not want to comply with the DNR order or the patient’s instructions then the patient or the patient’s representative must be informed of the benefits and burdens of CPR. Significantly, a medical professional commits a Class A misdemeanor if the professional intentionally conceals, cancels, effectuates or falsifies a patient’s DNR order or withholds personal knowledge of the patient’s revocation of the DNR order.

Making Non-Probate Asset Transfers

The legislature passed a Transfer on Death Deed (TODD) for real estate, permitting the owner to designate, in the deed itself, the beneficiary who is to receive the real estate upon the owner’s death. The TODD may be useful to someone whose only significant asset is their home.

Similarly, the legislature has directed that a motor vehicle title be created which includes a beneficiary designation in the event of the vehicle owner’s death. The beneficiary’s legal name must be included on the title. The beneficiary designation does not create an ownership interest in the motor vehicle during the life of the owner. As with the TODD, the owner may change the beneficiary by simply submitting a new title application. Please note – a beneficiary must apply for transfer of title within 180 days of the owner’s death.