XII. ESTATE ADMINISTRATION

Question 1

Central feature of Texas estate administration law: Independent administration.

Answer 1

A will may name an independent executor, and provide (as Texas wills invariably provide) that no action shall be held in the courts other than probate of the will, and filing an inventory (or affidavit in lieu of inventory) and list of claims of the estate.

Consequence is that most Texas estates are administered the same way trusts are administered in all states: Without court supervision or involvement.

Question 2

1. When is an independent administration authorized under the Estates Code?

Will provides, “I designate my son John independent executor of my estate,” but contains no provisions concerning administration of the estate. Is this sufficient to qualify the estate for independent administration?

Independent executor has power to do, without court order, anything a dependent administrator (under court-supervised administration) can be authorized to do with court order. This includes power to sell property if the sale is for purpose of paying debts, administration expenses and allowances. Problem: If will did not give independent executor a power of sale, purchaser of property from independent executor has burden of proof to show that sale was for one of the enumerated purposes. If there was enough cash in the estate to pay debts etc., the purchaser is not protected and the sale is void.

Answer 2

sufficient;

#1. When provided for in will
Holographic will: “... without any of that court stuff.”

or #2. If all distributees agree.
there can be an independent administration in cases of intestacy or where will does not name independent executor (unless probate judge finds independent administration not in best interest of estate). But if independent executor is named in the will, probate court cannot veto.

Statutes enacted in 2011 address this problem.

a. If will does not give independent executor power of sale, the order of appointment may grant a power of sale if beneficiaries who would receive any interest in the property give their consent.
b. Purchaser of property is protected if independent executor gives sworn affidavit stating that sale is for one of the statutory purposes.

Question 3

2. inventory as thief’s list

Answer 3

2. Because inventory to be filed within 90 days [unless time period is extended by the court] becomes a public record, to secure privacy, after all debts (other than secured debt, taxes and admin- istration expenses) have been paid, an independent executor can file an affidavit in lieu of an inventory stating that all debts (other than secured debt, taxes and administration expenses) have been paid. (Independent executor must still prepare an inventory and give a copy to the beneficiaries, but this keeps the inventory out of public records.)

still have to do inventory but only to beneficiaries not public

Question 4

3. Interested parties are entitled to an accounting from independent executor upon demand _________________ after will admitted to probate, and successive accountings on demand _________________ after last accounting was rendered.

Answer 4

15 months

12 months

Question 5

4. [July 1990] What procedures may [it’s optional] an independent executor use to close the administration?
   3

Answer 5

FILE CLOSING REPORT WITH VERIFIED AFFIDAVIT. Closing report must show: (1) property initially received; (2) debts and expenses paid; and (3) names and addresses of distributees—in effect, a full accounting.

FILE NOTICE OF CLOSING WITH VERIFIED AFFIDAVIT. Notice must show: (1) all known debts and expenses paid; and (2) names and addresses of distributees.

FILE FOR DECLARATORY JUDGMENT seeking judicial discharge of independent executor from further liability.

Question 6

5. [July 1985] For an estate under independent administration when and by whom may the closing or distribution of the estate be compelled?

Answer 6

Interested party can PETITION (doesn’t mean it will immediately distribute) for distribution of estate ____within 2 years______ after independent executor was appointed.

Question 7

6. [Feb. 1999] What actions must the personal representative (executor if named in a will; administrator if appointed by the court) take within 120 days after appointment?

Answer 7

Must post fiduciary bond within 20 days [unless bonding requirement was waived by the will].

Must publish notice of administration in newspaper in county within one month.

Must file inventory (or affidavit in lieu of inventory) within 90 days [unless time extended by court].

Must give notice (and copy of will) to named will beneficiaries within 60 days after will appointment of the personal representative (unless property bequeathed valued at less than $2,000).

Must file certificate that notice to beneficiaries was given within 90 days.

Question 8

7. Independent executor may be removed by

Answer 8

Independent executor may be removed by the court ex parte without notice and hearing if he cannot be served with process because his whereabouts are unknown or is eluding service, is a non-resident without a designated agent; or there are sufficient grounds to believe that he has misapplied or embezzled estate funds (or is about to do so).

Independent executor may be removed after notice and hearing if he fails to qualify by posting bond, [July 1994] fails to file inventory (or affidavit in lieu of inventory) within 90 days, fails to make an accounting upon demand, fails to give notice to beneficiaries within 60 days or affidavit thereon within 90 days, is guilty of gross misconduct or mismanagement, becomes incompetent or is sentenced to penitentiary, or a material conflict of interest prevents him from properly performing his duties.

Question 9

8. Jurisdiction: All probate proceedings must be filed and heard in

________ Do these same jurisdictional rules apply to a guardianship proceeding?

Answer 9

county court.

Smaller counties (in terms of population) with only “constitutional” county courts: Uncontested matters (routine probates and guardianships) are in county court. If a contested matter arises, on motion either (i) a statutory probate judge is assigned, or (ii) matter is transferred to district court and returned to county court for further administration when contested matter is resolved.

Larger counties with statutory county courts at law: probate proceeding is commenced in either county court or county court at law. Contested matter may be transferred from county court to county court at law (if proceeding did wasn’t instituted in that court). District court not involved.

Largest counties with statutory probate courts (e.g., Harris, Dallas, Bexar, Tarrant): Probate proceeding (whether contested or uncontested) is heard in that court. District court not involved.

yes

Question 10

9. [Feb. 1995—D left a will; Feb. 2013—D died intestate] Estate included securities and real property that are titled in the decedent’s name. “Discuss two methods by which the estate can be administered with least burden and cost without the appointment of a personal representative.”

Can a small estate administration be used to clear title to the decedent’s homestead? [The affidavit must be recorded in the county where the land is located.]
________ Can small estate administration be used to clear title to any other real property?

Answer 10

a-1. [If D left a will:]
Probate will as a _______muniment of title only_______. When D left a valid will and there is no need to have an executor appointed (even though an executor was named in the will) and no need to formally administer his estate (family can wind up decedent’s affairs informally), BUT formal recognition (e.g., in the land records) is needed to establish the title of successors named in the will. The will and the order admitting it to probate constitute a muniment of title (a link in the chain of title) that serves the same record function as a deed. (All you do is probate the will; no executor is appointed and notice to will beneficiaries is not required.)

a-2. [Feb. 2013– intestacy] _____statutory heirship proceeding______:
When D died intestate and there is no need to formally administer his estate, but formal recognition (e.g., in the land records) needed to establish title of successors by inheritance. Judgment states that the person died intestate, names and addresses of persons determined to be the heirs, and shares of the estate that each is entitled to take.

b. [Feb. 1998] Small estate administration by affidavit
if decedent died intestate [July 2012— can’t use if he left a will] and the value of the probate estate (not counting homestead, exempt personal property) is less than ____50k____. Affidavit (issued by court clerk) serves the same function as letters testamentary granted to an executor (or letters of administration granted to an administrator). Party with the affidavit can collect the decedent’s assets (e.g., bank account in her name) by furnishing a copy of the affidavit.

___YES___ [Feb. 1994] Can a small estate administration be used to clear title to the decedent’s homestead? [The affidavit must be recorded in the county where the land is located.]
___no___ Can small estate administration be used to clear title to any other real property?

Question 11

10. [July 1992] Rosie died leaving a will that devised her entire estate to Millie, who had been in Rosie’s employ as a maid for over 20 years. Millie, named as independent executor in the will, offered the will for probate, but in a will contest filed by Rosie’s sister, the will was denied probate on the ground of undue influence.
    * Is Millie entitled to attorney’s fees from Rosie’s estate for her unsuccessful attempt to probate the will?

Answer 11

yes; if made in good faith

no if ground is forgery

Question 12

11. [Feb. 1981, Feb. 1985] Tom, a resident of Harris County, leaves a will that devises his entire estate to Betty and names Ed as independent executor. The will is admitted to probate in Harris County [Feb. 1987: Proper venue since Tom was domiciled there]. Ed duly qualifies as executor and files an inventory of the estate. Tom owned land in Harris County and Travis County.
    a. Should anything further be done in Harris County to show that, under Tom’s will, Betty has record title to the land located there?
    b. [Feb. 1985, July 1988] What, if anything, should be done to show that Betty has record title to the land in Travis County?
12. [July 1986, Feb. 1993] T died domiciled in the state of Oregon, and his will was probated in Oregon. T owned land in Travis County, Texas. What proceedings should be taken in Travis County to establish title to T’s land?

Answer 12

a, no; will is of record in harris county

b, file certified copy of the will and the order admitting the probate in Harris

file certified copy of the will and the order admitting the probate in Oregon

Question 13

13. [July 1989] Tom’s will named his brother Bob as independent executor and devised his entire estate to his nephew Paul. Tom owned an apartment house in Travis County. After all debts were paid, Bob probated the will as a muniment of title in Travis County. Taking under the will, Paul immediately sold the apartment building to Jones. A year later, a second will was found, under which Tom revoked his earlier will, devised his entire estate to his sister Sue, and named Sue as independent executor. The second will was admitted to probate. Sue brings an action to set aside the deed from Paul to Jones, contending that Paul did not own the land and that the deed was invalid. Result?

What does that leave Sue?

Answer 13

Sue loses; Order admitting first will to probate was validly entered; BFP Jones relied on court order will be protected;

action against Paul to recover the sale proceed from Paul

Question 14

14. [Feb. 1986] Meg died in 2001; her will was not probated. Can the will now be probated as a muniment of title?

Answer 14

no; because a will must be offered for probate within 4 yrs
* unless the party offering the will for probate shows that he was “not in default” for not probating the will within that period.
innocent good faith reason like we just found it is ok; but not we didnt think we need to probate

Question 15

15. [Feb. 1999; five times since 1991] Priority as to who is to be appointed personal representative:

Disqualified from appointment are

Can a nonresident serve as administrator of a Texas estate or [July 1999] as guardian of a proposed ward’s estate?

Answer 15

(1) Executor named in will; (2) ___surviving spouse;____ (3) principal beneficiary named in will; (4) any other beneficiary named in will; (5) ___next of kin___, in nearest order of kinship. [Only the____ two would apply in an intestacy situation.]

minors, incapacitated persons, convicted felons, “a person whom the court finds unsuitable.” [Feb. 2007: Son, convicted of felony, could not serve as executor, but conviction of crime did not forfeit bequest to Son]

yes; But he has to appoint resident agent for service of process, so creditors etc. can file action against him in Texas court.

Question 16

16. [July 1988] A temporary administrator (“TA”)

does the statutory list of priority for appointment of a personal representative apply to the appointment of a temporary administrator?

Answer 16

can be appointed pending appointment of a permanent personal representative (e.g., will contest has been filed, meaning the will naming an executor has not been probated). The TA’s powers are limited to those granted by the court. If the TA is appointed pending a will contest, the appointment continues until termination of the contest and appointment of a permanent representative. In all other cases, the temporary administration cannot exceed 180 days.

The statutory list of priority for appointment of a personal representative does not apply to the appointment of a temporary administrator. The probate court can appoint any suitable person as temporary administrator.

no kin because will contest; family is fighting each other

Question 17

17. [July 1987, Feb. 1991] Sam does not carry insurance on his 25-foot cabin cruiser because the insurance premiums are so expensive. Sam dies, and Phil is appointed independent executor. Six months later, the boat is destroyed by fire at a loss of $20,000.
    Can Phil be held liable for failing to insure the boat?

Answer 17

yes; general test is prudence: if a prudent person would have insured then Phil is under a duty to do so

Question 18

Compensation of executors and administrators

Answer 18

Compensation of executors and administrators—the “5% in, 5% out” rule. Absent contrary provision, a personal representative is entitled to a commission of 5% of all sums actually received or paid out in cash. (Sale of assets for payment of debts and taxes—compensation is 5% of sale proceeds; 5% of income received from estate assets, etc.) This is known as the “5% in, 5% out” rule. The rule does not apply to cash on hand (including bank accounts, certificates of deposit) or the collection of life insurance proceeds. Thus, the executor doesn’t get a 5% fee for cashing in a bank account in the decedent’s name. Also, the “5% in, 5% out” commission does not apply to distributions to the beneficiaries or heirs.

Question 19

18. [Feb. 1987, Feb. 1989] What procedures apply to presentment of creditors’ claims against an estate (1) in a dependent administration, (2) in an independent administration?

Answer 19

Notice requirements are the same for dependent and independent administrations.

• Notice by publication: Within one month after being appointed, personal representative (executor or administrator) must publish notice in a newspaper in the county, requiring all persons having claims against the estate to present them “within the time prescribed by law.”
• PERMISSIVE personal notice to unsecured creditors: Personal representative may give personal notice by registered or certified mail to general (i.e., unsecured) creditors having claims for money stating that the creditor must present the claim within 120 days after receipt of notice; otherwise the claim will be barred.
• Personal notice to secured creditors: Within two months after being appointed, the personal representative must give personal notice by registered or certified mail to secured creditors with valid liens.

Question 20

In a dependent administration, a general creditor must file an authenticated claim supported by an affidavit with probate court or administrator. Administrator must then write a memorandum allowing or rejecting the claim within 30 days. [Feb. 1991:] What if the administrator doesn’t take action on the claim within 30 days?

If the claim is allowed and approved by the court, it is paid. If the claim is disallowed,
creditor must file suit on the claim within

Answer 20

conclusive presumption; the claim is being rejected

90 days after rejected
if he fails to do so: the claim is barred

In a dependent administration, a creditor cannot bring an action on a “claim for money” unless claim is first presented to the administrator and rejected by the court. However, [July 1995] this rule does not apply to unliquidated or contingent claims. Thus a tort action can be filed without first presenting claim to administrator. This is not a “claim for money.”
[Feb. 1989] In an independent administration, executor must give notice by publication and personal notice to secured creditors, and may give permissive personal notice to general creditors, but above rules governing presentment of claims do not apply. Failure to file suit within 90 days after claim is rejected does not affect creditor’s right to bring the action.

Question 21

19. Paul is badly injured in an accident in which Dan Doakes (who was killed in the accident) was the negligent driver. Paul’s lawyer files a petition that names “The Estate of Dan Doakes” as defendant, and in the resulting jury trial is awarded a judgment of $800,000. The estate appeals; what result on appeal?

Answer 21

reversed and remanded; an estate is not an entity that can be sued, must be against the personal representative of the estate

refile the action, 2 years SOL passed and cant sue anymore

Question 22

20. Secured creditors: [July 1998, July 2000] If decedent was personally liable on a note secured by a mortgage, the creditor can present its claim for payment out of the general assets of the estate even if the note is not yet due (e.g., there are still 12 years to go on a 20-year mortgage). The point: This is the last opportunity for the mortgage to realize on decedent’s personal liability.
    In order to be paid out of the general assets of the estate, within (i) 6 months from date of personal representative’s appointment or (ii) 4 months after receipt of personal notice, whichever is later, secured creditor must file its claim as:

If the secured creditor fails to file its claim as a matured secured claim within the prescribed period, it is classified as:
with the result that:

Answer 22

must use magic words:
matured secured claim
preferred debt and lien
can foreclose, but no deficiency judgment

Question 23

21.Dan died owning a house subject to a mortgage that secured a note whose balance was $185,000 on Dan’s death. Following appropriate procedures, Bank causes house to be sold at a foreclosure sale that produced $160,000 net sale proceeds.
If Bank filed its claim as a matured secured claim:
If Bank filed its claim as a preferred debt and lien [or is relegated to that status]:

Answer 23

bank gets 160k and deficiency judgment for 25k

no deficiency judgment, only foreclosure proceed