HBA-RBT H.B. 1852 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1852 By: Thompson Judicial Affairs 4/15/1999 Introduced BACKGROUND AND PURPOSE Historically the Real Estate, Probate and Trust Law section of the State Bar of Texas has identified provisions of the Texas Probate Code that are in need of revision. Many revisions are necessary as a result of court rulings, some are intended as general improvements to the code and others are simply conforming changes that result from changes to other codes. As in the past, the Real Estate, Probate and Trust Law section of the State Bar has identified the following revisions for the 76th Legislature. Muniment of Title. When a will is probated as a "muniment of title" the will itself is sufficient evidence of title. This procedure eliminates the need for an administrator or an administration. The transfer is carried out without a lengthy, costly probate process. For example, a wife whose deceased husband's will has been probated as muniment of title may simply present the will and order admitting it to probate when claiming assets such as bank accounts or stock certificates. Not only is this process easier on beneficiaries, it is also the only solution available when a decedent has been dead longer than 4 years at the time the application is filed. While non-substantive revisions to the Probate Code during the 75th Legislature clarified the procedure for muniment of title, some sections of the code were not completely updated with the changes. As such, it is currently unclear if a will can be probated as muniment of title after 4 years. Nor is it clear if a will can be probated as muniment of title for other causes, even if there are no debts. Release of Independent Executors. Currently, state law does not prescribe a procedure for independent executors of estates to obtain a release. These independent representatives are the only fiduciaries without such a remedy. As such, an executor can be forced by beneficiaries, via litigation, to distribute all assets and defend any subsequent lawsuits with his own money. Even if the executor ultimately wins a suit brought by beneficiaries, the executor must look to the beneficiaries for payment. If the beneficiaries have spent all of the estate's funds the executor has no remedy. On the other hand, changes to the law must be drafted to avoid allowing an unscrupulous executor to demand a release before making distributions from the estate. Liability of Homestead for Debts. In recent years there have been several revisions to state law regarding the liability of homesteads for debt. The most notable, of course, was home equity lending legislation passed by the 75th Legislature. It is now necessary for conforming updates to be made to the Texas Probate Code's homestead provisions. Allocation of Interest. Currently interest on estate taxes is charged to the principal rather than to interest income. This practice is contrary to general accounting principles and often results in an unfair allocation between beneficiaries. To prevent such unfair allocations, a change is necessary to allow the administrator the discretion to allocate the interest as is just and equitable. HB 1852 simplifies the process for the administration of a decedent's estate by clarifying the conditions under which a will may be probated as muniment of title. This bill also outlines the procedures for releasing independent executors from fully disclosed transactions. Furthermore, this bill conforms the Texas Probate Code to the homestead liability laws of the State of Texas. Finally this bill authorizes the administrator to allocate interest due on the estate between income and principal. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 89A(a), Texas Probate Code, by removing the requirement that a social security number be filed with an application for probate. Requires an application to probate a will as muniment of title to state whether there is a reason why no administration of the estate is necessary, even though there are debts. will to state SECTION 2. Amends Section 89B(b), Texas Probate Code, to make conforming and nonsubstantive changes. SECTION 3. Amends Part 4, Chapter VI, Texas Probate Code, by adding sections 149D, 149E, 149F and 149G as follows: Sec. 149D. DISTRIBUTION OF REMAINING ESTATE PENDING FINAL ACCOUNT. Section 149D (a) allows the executor to seek court approval of his accounting if he distributes to the beneficiaries all assets or properties remaining except a reserve. (b) allows the court to review the amount on reserve and order further distributions if necessary. Sec. 149E. CLOSING INDEPENDENT ADMINISTRATION ON FINAL ACCOUNTING. (a) Authorizes an independent executor, upon final settlement of the administration, to file a final account and request discharge for fully disclosed transactions. This section also outlines the contents of the verified final account of the administration. (b) Requires the executor to send notice of the final account and prescribes the contents and method of distribution required for the notice. (c) Authorizes a waiver of the above-referenced notice by those entitled to receive it. (d) Requires the court to approve the final accounting and releases the executor from liability if no objection to the account is entered by an interested party within time frame outlined in Subsection (b). (e) Defines the procedure the court must follow if an objection to the final accounting is filed by an interested party. (f) Requires any assets remaining after settlement of the final account to be distributed by the court to the beneficiaries. Sec. 149F. COURT COSTS AND OTHER EXPENSES RELATED TO FINAL ACCOUNT. (a) Authorizes the court to award fees or costs associated with the final account to either the executor or beneficiaries. (b) Requires that upon approval of the final account by the court, the executor's fees and expenses to be charged to the estate as administrative expenses. (c) Authorizes a partial payment of the executors expenses in certain circumstances. (d) allows the executor to pay certain fees related to the final account from the estate. (e) Requires the executor to be personally liable for the refund to the estate for any charge deemed improper by the court. Sec.149G. RIGHTS AND REMEDIES CUMULATIVE. States that remedies outlined in these sections are in addition to any other remedies granted to the beneficiaries. SECTION 4. Amends Part 3, Chapter VII, Texas Probate Code, by adding Sections 221A and 2221B as follows: Sec. 221A. CHANGE OF RESIDENT AGENT. (a) Authorizes a personal representative to change its resident agent to accept process in probate or other court proceedings, prescribes the contents of the statement of the change and requires the statement to be filed with the court. (b) States that the effective date of the designation is the date it is filed with the court. Sec. 221B. RESIGNATION OF RESIDENT AGENT. (a) Authorizes a resident agent to resign as resident agent upon giving notice of its resignation to the personal representative and filing the statement of resignation with the court. Specifies the contents of the resignation statement. (b) Lists the parties required to receive a copy of the resignation statement and the process by which the copies must be served. (c) States that the effective date of the resignation is the date on which the court enters the order accepting the resignation and prohibits the court from entering the order until the agent has complied with the requirements of Subsections (a) and (b) of this section. SECTION 5. Amends Section 222, Texas Probate Code, by amending subsection (a)(1)(E) to authorize removal of a personal representative whose whereabouts are unknown, avoids service, or is a nonresident and does not have a resident agent to accept service. SECTION 6. Amends Section 270, Texas Probate Code, by adding a list of circumstances under which a lien is valid on a homestead. SECTION 7. Amends Section 378B(a), Texas Probate Code, to require interest due on estate taxes to be allocated between the income and the principal of the estate at the discretion of the executor. SECTION 8. Makes the application of the changes made by SECTION 1 and SECTION 2 of this Act prospective. SECTION 9. Makes the application of the changes made by SECTION 4 of this Act prospective. SECTION 10. Makes the application of the changes made by SECTION 5 of this Act prospective. SECTION 11. Makes the application of the changes made by SECTION 7 if this Act prospective. SECTION 12. Makes the application of the changes made by the Act, except as outlined in SECTIONS, 8, 9, and 10, and 11, prospective. SECTION 13. Effective date: September 1, 1999 SECTION 14. Emergency clause.