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Interesting Developments In Inheritance Laws

My practice is limited to trials involving inheritance disputes including will contest, related property disputes and associated torts. To ask privately about a Texas litigation issue involving an inheritance dispute, click the big red button to go to our main site's contact page and ask a question privately.

Can Texas power of attorney create a trust using the principal’s money?

Can someone with a power of attorney create a trust for their principal?

Definitions:

The principal is the person who gives the power of attorney.  The agent or attorney-in-fact is the person to whom the power is given e.g. the holder of the power of attorney.

Discussion:

Can a holder of a Texas power of attorney create a trust using the principal’s money? In Texas, the answer is no, he cannot.  The law dealing with trust requires that, in order to create a trust, the person who creates the trust, the settlor (the principal in this case,) must have the requisite intent to create a trust.  A trust can be created “only if the settlor manifests an intention to create a trust.”

The statute that defines the powers held by an attorney-in-fact provides that if the principal has created a trust prior to his giving a power of attorney, the agent is authorized to transfer the principal’s property to that trust.  The court’s have interpreted that section as denying the attorney-in-fact the right to create the trust for the principal but only to add to one already created by the principal himself.  Thus, if the principal has created a trust and then gives someone a power of attorney, the attorney-in-fact can take the principal’s money and property and put it into the trust that the principal created. 230 3d 197, 170 3d 777.

Update:

In 2017, the Texas legislature added §751.031(b)(1) to the Estates Code. That section provides that an agent has the power to take certain actions if specifically authorized to do so in the POA such as to “create, amend, revoke, or terminate an inter vivos trust.” So, if the power of attorney states that the attorney-in-fact can create a trust, he can. The cases cited above would be overruled when he is granted those powers in the instrument. Most powers of attorneys don’t state that the attorney-in-fact can created trusts so the cases above are still good when the power of attorney is silent on the issue.

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By Robert Ray a Board Certified attorney. The foregoing information is general in nature and does not apply to every fact situation. We handle litigation involving inheritance disputes. We don’t prepare wills. We don’t file wills for probate or distribute estates except when we are contesting a will or protecting a will from a contest. We handle a select few cases on contingency. Don’t use a comment to ask a personal question about an inheritance issue because your name and comment will be public. To ask a litigation question and to protect your privacy, click the red button to the right.

Are all Powers of Attorney the same?

powerofattorneysfotolia.jpg The short answer is no.  A power of attorney can grant a general power or a special power.  It can be a durable power of attorney or not.  You can also have a power of attorney solely for medical decisions.

What do all of these terms mean?  A power of attorney is granted by one person, the principal, to another person, the agent usually called the “attorney in fact.”  The attorney in fact has the powers to act on behalf of the principal and to do those things that the principal has granted him the power to do just as if the principal were doing them himself.

A general power of attorney grants the broadest powers.  An attorney in fact with a general power of attorney can do almost anything from selling the principal’s real estate to opening and closing bank accounts on behalf of the principal.

A special power of attorney is less broad and is restricted to the powers that are specifically mentioned in the special power of attorney.  An example would be granting someone the power to transfer title to an automobile or to cash a check from an insurance settlement.  The attorney in fact is not allowed to act on behalf of the principal except within the limits set out in the special power of attorney.

A power of attorney for medical purposes gives the attorney in fact the right to make medical decisions on behalf of the principal at a time when the principal is not capable of making them himself.

Any power of attorney can be made “durable.”  A power of attorney ends if the principal becomes incompetent.  A durable power of attorney will remain in effect even if the principal becomes incompetent.  From this discussion, you can see that the principal must be competent at the time he grants a power of attorney otherwise, the power of attorney is no good.

A power of attorney ends on the death of the principal whether the power of attorney is durable or not.

The attorney in fact must exercise his powers with the upmost care because he is a fiduciary and is potentially liable if he does not take good care of the principal’s property under his control.

Who has the burden of proof in a will contest?

burdenthumbnailThe burden of proof in a will contest varies based on the time that the will contest is filed. Generally, if a will contest is filed before the Judge admits the will to probate, the person who filed the will for probate (the proponent) will have the burden of proof. If the will contest is filed after the will is admitted to probate by the Judge, the person opposing the will (the opponent) will have the burden of proof.

It is helpful to have your adversary shoulder the burden of proof. Therefore, if you are going to contest a will, you should contact an attorney as soon as possible. While having or not having the burden of proof in a will contest case is not determinative of the case, it is helpful for the other side to have that burden.

What is a will contest?

contestthumbnailFrom Wikipedia, the free encyclopedia

A will contest, in the law of property, is a formal objection raised against the validity of a will, based on the contention that the will does not reflect the actual intent of the testator (the party who made the will). Will contests generally focus on the assertion that the testator lacked testamentary capacity, was operating under an insane delusion, or was subject to undue influence or fraud. A will may be challenged in its entirety, or only in part.

In many states, a legal presumption of undue influence arises where a beneficiary under the will stands in a confidential relationship with the testator.

For example, where a testator leaves property to the attorney who drew up the will.

A will may include an interrorem clause, with language along the lines of “any person who contests this will shall forfeit his legacy”,which operates to disinherit any person who challenges the validity of the will. However, since this clause is within the will itself, a successful challenge to the will renders the clause meaningless.

How I learned to stop worrying and love probate, Part 2.

fearthumbnail1In the first part of this post, I talked about what probate is about. In this part, I want to talk about some of the problems that can occur when someone tries to avoid probate because they are afraid of it.

Recently, people have been buying trust packages from someone who comes into town and gives seminars about “the dangers of probate or the high cost of probate.” They are trying to sell some alternative package of documents that they claim will allow you to avoid probate. Most of these are trust. Trust, if done properly, are useful, especially if your estate is very large. When people try to put together a prepackaged trust, they almost always do it incorrectly. A trust needs to be created in writing and then funded. That means that your property has to be put in the trust. If you want to avoid probate by putting all of your property in the trust, you have to deed your house to the trust, sign over your car to the trust, transfer all of your bank accounts to the trust, etc. If you don’t make these transfers, then you still have property in your name when you die and that property needs to go through probate. While you can create a trust in your will that doesn’t come into existence until you death, most of the prepackaged trust are created while you are alive.

In Texas, we have homestead laws. That means that your homestead can’t be seized to pay your debts except for limited exceptions. If you deed your homestead to the trust, you may loose the homestead exemption unless the trust is set up properly.

Trusts are not a good idea if all you are trying to do is avoid probate. You will end up spending more money creating and managing a trust than you ever will by having an attorney draw up a simple will that will glide through the probate process without any difficulties. So stop worrying and love probate!

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We handle litigation involving inheritance disputes. We don't prepare wills. We handle a select few cases on contingency. Don't use a comment to ask a personal question about an inheritance issue because your name and comment will be public. To ask a litigation question and to protect your privacy, click the red button to the right.


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