The Texas Legislature meets every “odd-numbered” year. In the 2015 session, some of the major legislative initiatives put forth by the Probate and Trust Section of the State Bar got caught up in the legislative process and, unexpectedly, did not pass to become law. Therefore, we have less to report on this session than we expected. Stay tuned, as many of these proposed law changes will likely be re-introduced when the Legislature meets again in 2017.
Highlights from the 2015 legislative session include:
- The provisions authorizing disclaimers of property (or a renunciation of an inheritance, whether under a Last Will or Trust Agreement) have been consolidated in one place in our Texas statutes, reducing confusion, duplicity and inconsistency. The new provisions also decouple the Texas disclaimer law from the Federal law, and allow disclaimers after the nine-month period required for a disclaimer for Federal tax law purposes. This means that as long as the party receiving a bequest has not yet accepted it, he or she can take advantage of the disclaimer technique, possibly to avoid his or her creditors reaching the inheritance. It is also clear that fiduciaries (in addition to beneficiaries) may now disclaim property or rights under Texas law, although notice to the relevant beneficiaries is required (and in some cases, court approval is also required). The provisions for delivery or filing of disclaimers have been streamlined. In some cases, the new law will make it easier for Texans to disclaim property or trust interests to accomplish tax planning after a family member dies, or to attempt to remedy issues in the estate plan.
- Authorization for judicial modification or reformation of Wills is now broadened to address administrative issues, to achieve the testator’s tax objectives, to qualify a beneficiary for governmental benefits, or to correct a scrivener’s error.
- A “directed trust” statute was enacted for Texas trusts, allowing the person creating a trust to grant authority to another given person to direct, consent to, or disapprove a trustee’s investments, distributions, or other decisions. This person is considered a fiduciary when exercising the granted authority, except to the extent that the instrument provides otherwise. A trustee who acts in accordance with these directions is not liable for doing so, except in cases of willful misconduct on the part of the trustee. This can add a powerful dimension to Texas trust drafting if bifurcation of powers is desired.
- Owners of Texas real property may now designate a beneficiary to receive the real property upon the owner’s death automatically, without probate. This is achieved by means of a recorded transfer-on-death (TOD) deed, informally known as a “Ladybird Deed.” During the owner’s lifetime, the beneficiary of a TOD deed has no interest in the property, and the owner retains full power to transfer or encumber the property, or to revoke the deed. A TOD deed is somewhat limited in that it does not allow property to be left to several people in varying percentages, nor does it address what happens if a minor is designated to inherit the property. In addition, for persons choosing to use a TOD deed, it is recommended that they coordinate their Last Wills to cover what will happen to the property if the beneficiary named in the deed dies before the owner.
Though not legislative in nature, we would be remiss not to mention that same-sex marriage has been made legal in Texas since our last newsletter. On June 26, 2015, the U.S. Supreme Court ruled in Obergefell v. Hodges that state-level bans on same-sex marriage are unconstitutional. This means that, among other things, the marriages of all same-sex Texans who had married in other states are now legally recognized in Texas. As such, community property laws now apply to such marriages, as well as all other Texas marriage-related laws.