The 85th regular session of the Texas Legislature ended on May 29, 2017. Knowing trusts and estates legislation seldom attracts the interest of the media, here are some highlights that might impact your estate planning:
- Financial Powers of Attorney: The legislature made a number of substantial changes relative to financial powers of attorney, including the following:
➢ Appointment of Agents: An agent’s fiduciary duties arise only upon their acceptance of the appointment as agent, such as when the agent exercises authority or performs duties as agent. Two or more co-agents may be named, each of whom may act independently unless the document states otherwise. An agent may be given authority by the principal to name successor agents. Our Firm is cautious in granting these powers.
➢ Authority and Duties of the Agent: An agent is now authorized to take the following actions if expressly granted by a power of attorney: (1) create, amend, or revoke a trust; (2) make a gift; (3) create or change rights of survivorship; (4) create or change beneficiary designations; or (5) delegate authority under the power of attorney. An agent has a duty to preserve the principal’s estate plan, to the extent known by the agent. Farner & Perrin favors only powers 1 and 2, and only in certain cases.
➢ Third Party Acceptance of Power of Attorney: Except in limited circumstances, a third party presented with a power of attorney must now accept the power or request either an agent’s certification or an opinion of counsel that will substantiate the effectiveness of the power. A [separate] attorney for the agent needs to prepare and present the certification or opinion of counsel. Going forward, third parties are likely to require such a certification. As a result, we recommend that our clients execute proprietary powers of attorney from their brokerage firms (in addition to the statutory durable powers of attorney prepared by our Firm) in order to mitigate the obstacles presented by the new law. Farner & Perrin’s attorneys are pleased to field your questions concerning viability of your current power of attorney and recommend updates if advisable.
- Divorced Trust Beneficiaries: The Texas Estates Code was amended to clarify that the divorce of a trust beneficiary does not revoke express trust provisions in favor of the beneficiary’s ex-spouse. In response to this and recent case law developments, our Firm has developed specific provisions excluding former in-laws. We are glad to review your estate planning documents to evaluate this and add state-of-the-art language if applicable.
- Decanting: Texas Trust Code provisions authorizing “decanting” to a new trust have been slightly expanded. Decanting is the process of “pouring” an existing irrevocable trust into a new trust and remains fairly restrictive, even under the expanded Texas law. Decanting might be helpful for an irrevocable trust that needs some of its terms adjusted, especially the provisions for trustee succession. If applicable, this procedure can be done without court involvement.
- Beneficiary Designation for Motor Vehicles: Texas owners of motor vehicles may now designate a beneficiary to receive the motor vehicle upon the owner’s death, without the necessity of probate. This is achieved by submitting an application for title with the beneficiary designation to the Texas Department of Motor Vehicles (“TxDMV”). Be on the look out for a new motor vehicle title application that includes a beneficiary designation on the TxDMV website at http://www.txdmv.gov/motorists/buying-or-selling-a-vehicle.
- Digital Assets: Leaping into the 21st century, the Texas Estates Code now addresses access to an individual’s digital assets by four common types of fiduciaries: (1) executors or administrators of decedents’ estates, (2) court-appointed guardians or conservators of estates, (3) agents under financial powers of attorney, and (4) trustees. In general, if the digital custodian (e.g., Facebook) provides an online tool that allows the user to designate another person to access the user’s digital account, the user’s online instructions are now legally enforceable. In default of that, the user is legally authorized to give instructions in a Will or power of attorney.