HBA-ATS, KMH H.B. 1851 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1851 By: Thompson Judicial Affairs 7/8/1999 Enrolled 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. H.B. 1851 codifies a number of the suggested revisions that the Real Estate, Probate and Trust Law section of the State Bar of Texas has identified as in need of revision. This bill authorizes the termination of a guardianship and payment of the balance over to the court registry if the amount in the estate is $50,000 or less. This bill also permits a resident agent to resign, grants the court authority to remove a nonresident guardian who does not appoint a resident agent, authorizes the court to order a person holding a ward's will to produce it to a guardian attempting to make tax motivated gifts, requires the court to appoint a trust company or state or national that has trust powers in this state to serve as trustee for the management of guardianship funds or funds of an incapacitated person's estate. This bill also authorizes a guardian of the person or estate of a ward to apply with the court that has jurisdiction over the guardianship to transfer the guardianship to a court in a foreign jurisdiction if the ward has moved permanently to the foreign jurisdiction. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority previously delegated to the Supreme Court of Texas is modified in SECTION 8 (Section 865A, Texas Probate Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 665(a), Texas Probate Code, to include, in addition to funds available from a ward's estate, other funds available to compensate a guardian of a ward. SECTION 2. Amends Section 687(b), Texas Probate Code, to provide that a court must make a decision as to the necessity of a physician's examination of a proposed ward at a hearing held for that purpose, unless it determines that an emergency examination is necessary. Requires the applicant, by the fourth day before the hearing, to give to the proposed ward and the proposed ward's attorney ad litem written notice specifying the purpose and the date and time of the hearing. SECTION 3. Amends Section 745(c), Texas Probate Code, to raise from $25,000 to $50,000 the value of an estate of a minor ward consisting of cash or cash equivalents which is authorized to be closed and managed, paid to the county clerk, and managed by the clerk. SECTION 4. Amends Subpart D, Part 4, Chapter XIII, Texas Probate Code, by adding Sections 760A and 760B, as follows: Sec. 760A. CHANGE OF RESIDENT AGENT. (a) Authorizes a guardian to change its resident agent for matters relating to the guardianship by filing the prescribed statement of change with the names and addresses of the guardian, resident agent, and successor resident agent. (b) Provides that the designation of a successor resident agent made in a statement filed under this section takes effect on the date on which the statement is filed with the court. Sec. 760B. RESIGNATION OF RESIDENT AGENT. Authorizes a resident agent of a guardian to resign as the resident agent by giving notice to the guardian and filing the prescribed resignation statement with the set forth contents. Requires the resident agent to send, by certified mail, return receipt requested, a copy of a resignation statement filed under this section to the guardian, each party or the party's representative of record. Provides that the resignation of the resident agent takes effect on the date on which the court enters an order accepting the agent's resignation. Prohibits a court from entering an order accepting the agent's resignation unless the agent complies with the requirements of this section. SECTION 5. Amends Section 761, Texas Probate Code, as follows: (a) Authorizes the removal of a guardian who can not be served with notices or process because the guardian is a nonresident of this state who does not have a resident agent to accept service of process in matters relating to the guardianship. (c) Includes a court's determination that there has been a dissolution of the joint guardians' marriage and only one of the joint guardians was named as managing conservator by a court with jurisdiction to decide child custody matters among the justifications under which a court is authorized to remove a guardian. (e) Provides that, if a joint guardian is removed because there has been a dissolution of the that joint guardian's marriage, the other joint guardian is entitled to continue to serve as the sole guardian unless removed for a reason other than the dissolution of the joint guardians' marriage. Redesignates existing Subsections (e) and (f) to Subsections (f) and (g), respectively. SECTION 6. Amends Section 784, Texas Probate Code, by adding Subsection (e), as follows: (e) Authorizes the guardian of the estate to expressly state in the notice required by Section 784(b) that the unsecured creditor must present a claim within 120 days after the unsecured creditor receives the notice or the claim is barred, if the claim is not barred by the general statutes of limitation. Sets forth the information needed in the notice. SECTION 7. Amends Section 786(a), Texas Probate Code, to bar the claim of an unsecured creditor for money if the claim is not presented within the time prescribed by the notice permitted by Section 784(e). SECTION 8. Amends Subpart M, Part 4, Chapter XIII, Texas Probate Code, by adding Section 865A, as follows: Sec. 865A. INSPECTION OF CERTAIN INSTRUMENT FOR ESTATE PLANNING PURPOSES. Authorizes the guardian of the ward's estate to apply to the court for an order to seek an in camera inspection of a true copy of a will, codicil, trust, or other estate planning instrument of the ward as a means of obtaining access to the instrument for purposes of establishing an estate plan under Section 865 (Power to Make Tax-Motivated Gifts)of this code. Sets forth the contents of an application under this section. Requires a copy of the application to be sent to each person who has custody of a described instrument, the ward's spouse, the ward's dependents, all devisees under the instrument, and as directed by the court. Sets forth procedures for notices. Requires the court to direct the person that has custody of the requested instrument to deliver a true copy to the court for inspection only, upon a finding of good cause at a hearing. Requires the court to review the instrument and release all or part of the instrument to the applicant only for the prescribed purpose on a finding of good cause after the in camera inspection. Authorizes the court to appoint a guardian ad litem for the ward or an interested party at any stage of the proceedings as is appropriate for the protection of the ward or party. Provides that an attorney does not violate attorney-client privilege by complying with the order of the court under this section. Provides that notwithstanding Section 22.004 (Rules of Civil Procedure), Government Code, the supreme court may not amend or adopt rules in conflict with the provision that the prescribed compliance does not violate attorney-client privilege. SECTION 9. Amends Section 867, Texas Probate Code, as follows: (a) Includes an incapacitated person's guardian ad litem as a person who is able to apply to a court after being appointed under Section 646 or another provision of the Texas Probate Code, for the court to enter an order that creates a trust for the management of guardianship funds or funds of the incapacitated person's estate. Requires the court to appoint a trust company or a state or national bank that has trust powers in this state to serve as trustee of the trust, except as provided by Subsection (b). Makes conforming changes. (b) Authorizes the court to appoint a person other than a trust company or bank described by Subsection (a) to serve as trustee of the trust only if no trust company or bank described by Subsection (a) is willing to serve as trustee, the value of the trust's principal is $50,000 or less, and the court determines the appointment to be in the ward's best interests. (c) Requires the order to direct the guardian or another person to deliver all or part of the assets of the guardianship to a person or corporate fiduciary appointed by the court as trustee of the trust. Makes a conforming change. SECTION 10. Amends Section 868(a), Texas Probate Code, to include among the requirements of a trust created under Section 867, Texas Probate Code, the condition that if the trustee is a corporate fiduciary, that trustee serves without giving a bond. SECTION 11. Amends Subpart N, Part 4, Chapter XIII, Texas Probate Code, by adding Section 868B, as follows: Sec. 868B. BOND REQUIREMENT FOR CERTAIN TRUSTEES. Requires a court to require a person, other than a corporate fiduciary, serving as trustee to file with the county clerk a bond in an amount equal to the value of the trust's principal and projected annual income and with the conditions the court determines are necessary. SECTION 12. Amends Section 869A, Texas Probate Code, to delete text that mentions a corporate fiduciary as eligible for appointment as a successor trustee for a trustee who resigns, becomes ineligible, or is removed. As amended, the court is authorized to appoint a successor trustee for a trustee who resigns, becomes ineligible, or is removed. SECTION 13. Amends Section 885(a), Texas Probate Code, to clarify that a court is required to appoint a receiver to take charge of a minor or other incapacitated person's estate in danger of injury, loss, or waste if there is no guardian of the estate who is qualified in this state and the appointment of a guardian for the estate is not necessary to protect the estate, rather than needed. SECTION 14. Amends Part 5, Chapter XIII, Texas Probate Code, by adding Subparts G and H, as follows: SUBPART G. INTERSTATE GUARDIANSHIPS Sec. 891. TRANSFER OF GUARDIANSHIP TO FOREIGN JURISDICTION. (a) Authorizes a guardian of the person or estate of a ward to apply with the court that has jurisdiction over the guardianship to transfer the guardianship to a court in a foreign jurisdiction if the ward has moved permanently to the foreign jurisdiction. (b) Requires the notice of the application to transfer a guardianship to be served personally on the ward and be given to the foreign court to which the guardianship is to be transferred. (c) Requires the court, on its motion or on the motion of the ward or any interested person, to hold a hearing to consider the application to transfer the guardianship. (d) Requires the court to transfer a guardianship if it determines the transfer is in the best interests of the ward. Provides that the transfer of the guardianship must be made contingent on the acceptance of the guardianship in the foreign jurisdiction. Requires the court to coordinate efforts with the appropriate foreign court to facilitate the orderly transfer of the guardianship. Sec. 892. RECEIPT AND ACCEPTANCE OF FOREIGN GUARDIANSHIP. (a) Authorizes a guardian appointed by a foreign court to represent an incapacitated person who is residing in this state or intends to move to this state to file an application with a court in which the ward resides or intends to reside to have the guardianship transferred to the court. (b) Requires the notice of the application for receipt and acceptance of a foreign guardianship to be served personally on the ward and be given to the foreign court from which the guardianship is to be transferred. (c) Requires a proceeding in which an application for receipt and acceptance of a foreign guardianship has been filed in two or more courts with jurisdiction to be heard in the court with jurisdiction over the application filed on the earliest date if venue is otherwise proper in that court. Requires a court that does not have venue to hear the application to transfer the proceeding to the proper court. (d) Enumerates the factors the court should determine in reviewing an application for receipt and acceptance of a foreign guardianship. (e) Requires the court, on its motion or on the motion of the ward or any interested person, to hold a hearing to consider the application for receipt and acceptance of a foreign guardianship. (f) Requires the court to grant an application for receipt and acceptance of a foreign guardianship if the transfer of the guardianship from the foreign jurisdiction is in the best interests of the ward. Requires the court to give full faith and credit to the provisions of the foreign guardianship order concerning the determination of the ward's incapacity and the rights, powers, and duties of the guardian, in granting the application. (g) Requires the court to coordinate efforts with the appropriate foreign court to facilitate the orderly transfer of the guardianship. (h) Provides that the denial of an application for receipt and acceptance of a guardianship does not affect the right of a guardian appointed by a foreign court to file an application to be appointed guardian of the incapacitated person under Section 682. Sec. 893. REVIEW OF TRANSFERRED GUARDIANSHIP. Requires the court, within 90 days after a court grants an application for receipt and acceptance of a foreign guardianship under Section 892, to hold a hearing to consider modifying the administrative procedures or requirements of the transferred guardianship in accordance with local and state law. SUBPART H. CONTRACTS IN ARTS, ENTERTAINMENT, ADVERTISEMENT, AND SPORTS Sec. 901. DEFINITIONS. Defines "advertise," "advertisement contract," "artist," "arts and entertainment contract," "consumer goods," and "sports contract." Sec. 902. APPROVAL OF CERTAIN CONTRACTS OF MINORS; NOT VOIDABLE. (a) Authorizes a court, on petition of a party to the contract, to enter an order approving an arts and entertainment contract, advertisement contract, or sports contract that is entered into by a minor. Authorizes the court to approve the contract only after the party requesting the petition provides to the other party to the contract notice of the petition and an opportunity to request a hearing in the manner provided by the court. (b) Sets forth the venues in which a proceeding under this section is authorized to be brought. (c) Provides that the approval of a contract under this section extends to the contract as a whole and any of the terms and provisions of the contract. (d) Authorizes a court to withhold approval of a contract under which part of the minor's net earnings under the contract will be set aside as provided by Section 903 until the guardian of the minor executes and files with the court written consent to the making of the order. (e) Prohibits an otherwise valid contract approved under this section from being voidable solely on the ground that it was entered into by a person during the age of minority. Sec. 903. NET EARNINGS OF MINOR; SET ASIDE AND PRESERVATION. (a) Sets forth the statutory formula for "net earnings." (b) Authorizes the court to require in an order approving a contract under Section 90, that a portion of the net earnings of the minor under the contract, not to exceed one-half of the minor's net earnings, be set aside and preserved for the benefit of the minor in a trust created under Section 867 or a similar trust created under the laws of another state. Provides that the amount to be set aside must be a reasonable amount as determined by the court. Sec. 904. GUARDIAN AD LITEM. Authorizes the court to appoint a guardian ad litem for a minor who has entered into an arts and entertainment contract, advertisement contract, or sports contract if the court finds that appointment of the ad litem would be in the best interest of the minor. SECTION 15. Makes application of this Act prospective as to Section 745(c), Texas Probate Code, regarding an application to close a guardianship. SECTION 16. Makes application of this Act prospective as to Sections 760A and 760B, Texas Probate Code, regarding a change in designation of or a resignation of a resident agent. SECTION 17. Makes application of this Act prospective as to Sections 687(b), 786(a), and 784(e), Texas Probate Code, regarding an application for the appointment of a guardian. SECTION 18. Makes application of this Act prospective as to Section 761, Texas Probate Code, regarding a motion for the removal of a guardian. SECTION 19. Makes application of this Act prospective as to Sections 867, 868(a), 869A, and 868B, Texas Probate Code, regarding an application for the creation of a trust. SECTION 20. Effective date: September 1, 1999. SECTION 21. Emergency clause.