Admin of Estates Outline PDF
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Uploaded by MagnificentCommonsense7961
Featherston
2024
Emily Lentzner
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Summary
This document is an outline for a course on estate administration, focusing on fiduciary relationships, obligations, and litigation. It covers topics such as the duty to administer an estate, duty of loyalty, and duty to account, as well as court-supervised vs. independent administration.
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Administration of Estates Outline Emily Lentzner Featherston Winter 2024 THE FIDUCIARY RELATIONSH...
Administration of Estates Outline Emily Lentzner Featherston Winter 2024 THE FIDUCIARY RELATIONSHIP.......................................................................................3 A. A Decedent’s Estate – Personal Representative/Heir or Devisee................................... 3 B. Personal Representatives..................................................................................................4 C. An Express Trust – Trustee/Beneficiary.......................................................................... 4 D. Who is the Lawyer’s Client?............................................................................................. 4 a. Trust/Estate Administration........................................................................................4 b. Guardianship................................................................................................................ 5 E. Compare Guardianship – Guardian/Ward....................................................................... 5 F. Third Party Perspective..................................................................................................... 5 a. Background...................................................................................................................5 b. Duty of Inquiry............................................................................................................. 5 c. Inquiry...........................................................................................................................6 d. Personal Liability of Fiduciary.................................................................................... 6 e. Liability of Estate Property......................................................................................... 7 f. Beneficiary’s Liability................................................................................................... 7 h. Common Law/Modern Statutes...................................................................................8 THE FIDUCIARY OBLIGATION..........................................................................................10 A. Duty to Administer Estate.............................................................................................. 10 B. Duty of Loyalty.................................................................................................................11 C. Duty to Account............................................................................................................... 12 D. Common Law/Modern Statutes...................................................................................... 12 E. Terms of Controlling Document...................................................................................... 12 FIDUCIARY LITIGATION.....................................................................................................13 A. Demand for Accounting................................................................................................... 13 B. Defenses of Fiduciary...................................................................................................... 13 a. Law and Fact.............................................................................................................. 13 b. Consent of Beneficiary............................................................................................... 13 c. Statute of Limitations................................................................................................ 14 d. Laches......................................................................................................................... 14 e. Affirmation or Ratification.........................................................................................14 f. Good Faith, Fair Deal................................................................................................. 14 C. When “Guilty” of Breach................................................................................................. 14 a. What does it mean?.................................................................................................... 14 b. Denial of Compensation............................................................................................. 14 c. Surcharge.................................................................................................................... 15 d. Injunctive.................................................................................................................... 15 e. Removal.......................................................................................................................15 D. Exculpatory Clauses........................................................................................................15 1 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 EFFECT OF DEATH ON PROPERTY & LIABILITIES...................................................16 A. Background...................................................................................................................... 16 B. Establishing New Ownership......................................................................................... 17 C. Types of Administration.................................................................................................. 19 a. Formal Administration.............................................................................................. 19 b. When there’s no need for Formal Administration.................................................... 19 D. Family Settlement Agreements......................................................................................20 EXECUTORS AND ADMINISTRATORS............................................................................ 20 A. Basics................................................................................................................................20 B. Establishing “Necessity”................................................................................................. 20 C. Court Supervised v. Independent Administration......................................................... 20 D. Qualification.................................................................................................................... 20 E. Duties of PR..................................................................................................................... 21 F. Investments in Solvent Estate........................................................................................ 22 G. Required Notice............................................................................................................... 22 H. The Inventory.................................................................................................................. 23 I. Community Property Administration..............................................................................25 J. Protection of Family......................................................................................................... 25 a. Conflicts of Law.......................................................................................................... 25 b. Homestead.................................................................................................................. 26 c. Personal Property....................................................................................................... 26 d. Family Allowance....................................................................................................... 27 K. Compensation and Indemnification............................................................................... 28 L. Tax Responsibilities......................................................................................................... 28 COURT-SUPERVISED ADMINISTRATION...................................................................... 28 A. Background...................................................................................................................... 28 B. Powers.............................................................................................................................. 28 a. Inherent v. Express/implied Powers –Marshalling the Assets................................ 28 e. Handling the Assets................................................................................................... 31 C. Claims Procedure.............................................................................................................32 a. Presentation by Creditor............................................................................................32 b. PR “allows” or “rejects”.............................................................................................. 32 c. Court “approves” or “disapproves”............................................................................. 32 d. Court “classifies”........................................................................................................ 33 e. Abatement....................................................................................................................34 f. Priority payment –Secured Creditors........................................................................ 35 g. ANALYSIS.................................................................................................................. 36 h. Foreclosure................................................................................................................. 36 i. If the creditor is the PR…........................................................................................... 36 2 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 D. Sales of Property..............................................................................................................36 E. Closing the Estate............................................................................................................41 INDEPENDENT ADMINISTRATION................................................................................. 43 A. When Permitted...............................................................................................................43 B. Comparison with Dependent Administration................................................................ 43 C. Marshalling of Assets...................................................................................................... 44 D. Payment of Obligations................................................................................................... 45 E. Closing/Delivery to Heirs/Devisees.................................................................................46 PROBATE JURISDICTION.................................................................................................. 46 A. Territorial Jurisdiction of the States.............................................................................. 46 B. Choice of Laws................................................................................................................. 47 C. Federal Courts................................................................................................................. 47 D. Primary v. Ancillary........................................................................................................ 47 E. Nature of Probate Proceedings....................................................................................... 47 F. Jurisdiction and Venue of Texas Courts..........................................................................47 G. Guardianship Administration........................................................................................ 52 TRUST ADMINISTRATION.................................................................................................. 55 A. The Basics........................................................................................................................ 55 B. Duties v. Powers...............................................................................................................55 C. Investments......................................................................................................................57 D. Trust Accountings............................................................................................................58 E. Trustee/Beneficiary: Power to Alter............................................................................... 58 F. Doctrine of Deviation....................................................................................................... 58 G. Compare Charitable Trust.............................................................................................. 58 OTHER STATUTORY FIDUCIARIES................................................................................. 58 A. Temporary Administration..............................................................................................58 B. Other Statutory Fiduciaries............................................................................................58 SUMMARY PROBATE PROCEDURES.............................................................................. 58 A. Community Administration............................................................................................ 58 B. Death of Ward.................................................................................................................. 58 C. Small Estates Affidavit................................................................................................... 58 D. Order of No Administration............................................................................................ 58 E. Withdrawal from Administration................................................................................... 58 F. Foreign Wills.....................................................................................................................58 G. Temporary Administration............................................................................................. 58 THE FIDUCIARY RELATIONSHIP A. A Decedent’s Estate – Personal Representative/Heir or Devisee a. Decedent’s Estate → decedent’s probate property 3 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 B. Personal Representatives a. Executor → if you have an executor then a valid will was admitted to probate and named an executor b. Administrator → an administrator is a court-appointed PR in intestate situations c. Administrator CTA → when a will is admitted to probate but there was no named executor d. PRs will either be: i. Dependent → court-supervised (this is common law approach) ii. Independent → can act without court permission for each action (TX creation) e. A PR is a fiduciary and owes duties to beneficiaries or heirs at law C. An Express Trust – Trustee/Beneficiary a. A trust is not a legal entity b. Types of Trusts i. Inter vivos 1. Revocable → created during settlor’s lifetime 2. Irrevocable ii. Testamentary → created in a will c. TPC §111.005 → common law is the default unless there is an applicable statutory provision d. TEC §351.001 → the rights, powers, and duties of executors and administrators are governed by common law principles to the extent that those principles do not conflict with the statutes of this state D. Who is the Lawyer’s Client? a. Trust/Estate Administration i. There can be some gray area as to who the lawyer’s client is because the lawyer is advising the PR who is a fiduciary to the beneficiaries/heirs at law. This can lead to potential conflicts of interest. ii. Some states → apply a legal fiction that PR/trustee is representing the “entity” aka lawyer represents the trustee and the beneficiaries 1. YIKES! iii. Default rule in other states including Texas → trustee only represents the fiduciary–even though the legal fees are coming from the trust/estate (aka the beneficiaries) 4 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 1. Ex: lawyer finds out that trustee/PR is stealing from the estate/trust, the lawyer cannot reveal this but must withdraw as counsel iv. A lot of times the lawyer may unintentionally end up representing both trustee and beneficiaries 1. Ex: B reaches out to lawyer to ask a question and lawyer answer–just gave legal advice and B could be client now 2. Best way to avoid this: lawyer needs to write a CYA letter to the beneficiaries stating “I’ve been retained by fiduciary–I don’t represent you but occasionally I may provide information to you as an agent of fiduciary, but I will not provide legal advice. You can get your own lawyer” b. Guardianship i. The guardian situation is different because the ward is incompetent ii. There is no case law that suggests that Texas’s default rule applies to guardianships 1. Ex: Lawyer finds out guardian is stealing from the ward (aka breaching fiduciary duties) there is a question of whether lawyer can breach confidentiality to his client, the guardian, for the protection of the ward. The answer is likely yes. E. Compare Guardianship – Guardian/Ward a. TEC §1001.002 → to the extent applicable and not inconsistent with other provisions of this code, the laws and rules governing estates of decedents apply to guardianships b. Laws that govern PRs also apply to guardians i. Not the default rule though F. Third Party Perspective a. Background i. A fiduciary is NOT an agent of the beneficiary or of the estate (because an estate is not a legal entity) ii. In a guardian situation → guardian is NOT an agent of the ward b. Duty of Inquiry i. Third parties have a duty to inquire and are charged with actual or constructive knowledge that they are engaged in a transaction with a fiduciary ii. **applies in a transactional scenario (aka a K), NOT tort iii. 3P must make sure he is dealing with the right fiduciary and that the fiduciary has the authority to engage in the transaction 5 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 1. The source of the fiduciary’s authority depends on the unique relationship c. Inquiry i. Is the fiduciary liable for BoK or tort? ii. Is the estate liable? iii. Is the beneficiary liable? iv. Intestate Hypo: O died intestate and he owned Blackacre. The only heir at law is H. X is a third party and owns adjoining property to Blackacre. X wants to buy Blackacre. X checks deed records to see title to Blackacre belongs to O but by operation of law, it belongs to H. X’s lawyer needs to check the probate records which shows that A was appointed as administrator of the estate. Blackacre is worth $1M and X offers to buy it from A and A accepts, takes the money, and goes to South America. 1. H still owns the property → whether he can successfully protect that ownership depends on whether A had authority to sell Blackacre. 2. X has no recourse against H because X had actual knowledge and had a duty to inquire whether A had authority BUT he could sue his lawyer for malpractice! v. Trust Hypo: Same facts as above and X has no authority. It would be the same result but now the Beneficiary has an election of remedies. 1) he can leave it as is or 2) he can ask for a constructive trust –B can get property back or just sue the fiduciary for breach of fiduciary duties and seek monetary damages. 1. If A didn’t sneak off to South America → the sale proceeds from BA would go into the trust. B could still sue but needs to show damages. d. Personal Liability of Fiduciary i. Selling Trust Property 1. The question is whether fiduciary acted with or without authority a. Trustee → may have authority b. Dependent administrator → would not have authority without court’s permission c. Independent administrator → may have authority without court approval d. Guardian → a guardian does not have authority to sell any property of estate without court’s authority ii. Contract 6 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 Ex: fiduciary enters into K with 3P where 3P performs services but F doesn’t pay 1. The question is whether fiduciary acted with or without authority 2. The fiduciary is personally liable iii. Tort Ex: part of the estate is a shopping center and a 3P slips and breaks a leg due to the negligence of the fiduciary (either direct negligence or respondeat superior) 1. The fiduciary is personally liable for his/her tort and can be sued in his individual capacity e. Liability of Estate Property i. Contract 1. The estate cannot be held liable since it is not an entity a. Still not suing the estate but ultimate source of payment may come out of the estate 2. Depends on whether fiduciary acted with authority a. If fiduciary had authority → estate can be used to pay damages b. If fiduciary has no authority → can’t collect from the estate ii. Tort 1. The estate cannot be held liable since it is not an entity 2. At CL, only the fiduciary is liable for the tort; however, some state statutes have tweaked this to allow 3Ps to sue the fiduciary in his fiduciary capacity and collect from the estate a. In this case, 3P will want to sue fiduciary in individual capacity and representative capacity f. Beneficiary’s Liability i. Selling Trust Property 1. Depends on whether F had authority ii. Contract 1. Beneficiary is not liable for K damages iii. Tort 1. A beneficiary is not liable for the fiduciary’s tort because the fiduciary is not an agent of the beneficiary g. Three Bears Case i. Owner of an incorporated coffee shop died and left all stock in trust for the benefit of his kids and grandkids. The corporation did not have enough money to get a loan. The trustee, believing this to be good for 7 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 the coffee shop, personally guaranteed the loan. 3P does work and the corporation goes under and can’t pay off the loan. Bank sued the trustee in his individual capacity because he personally guaranteed the loan. The individual usually doesn’t have much money to go after though so the bank sued the trustee in his fiduciary capacity as well so he could go after the trust property. DF argued that the trustee did not have authority to guarantee this loan and that the bank had a duty of inquiry. The trial court agreed so the bank was out of luck. The court of appeals agreed. The SCOTX reversed the lower courts and held that the trustee had implied authority. h. Common Law/Modern Statutes i. Guardians → still governed by common law ii. Dependent Court-supervised administrator → still governed by common law iii. Trusts The below statutes ONLY apply to TRUSTEES 1. TTC §114.082 → If property is conveyed or transferred to a trustee in trust but the conveyance or transfer does not identify the trust or disclose the names of the beneficiaries, the trustee may convey, transfer, or encumber the title of the property without subsequent question by a person who claims to be a beneficiary under the trust or who claims by, through or under an undisclosed beneficiary a. if property conveyed to T in trust, this protects good faith purchasers. B has no election of remedies–the only remedy is breach of fiduciary duty b. This is an affirmative defense that 3P can raise so still going to get sued i. Best practice is still to advise client to inquire 1. Don’t wanna have to litigate statutory interpretation 2. TTC §114.081 → PROTECTION OF PERSON DEALING WITH TRUSTEE a. A person who deals with a trustee in good faith and for fair value actually received by the trust is not liable to the trustee or the beneficiaries of the trust if the trustee has exceeded the trustee’s authority in dealing with the person. 8 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 b. A person other than a beneficiary is not required to inquire into the extent of the trustee’s powers or the propriety of the exercise of those powers if the person: i. Deals with the trustee in good faith; and ii. Obtains 1. A certification of trust; or 2. A copy of the trust instrument c. Good faith purchaser statute → GFP not liable to trustee or beneficiary if trustee exceeded his authority d. Purports to do away with a 3P’s duty of inquiry if 3P deals in good faith and obtains a certification of trust or a copy of trust instrument i. No cases have stated this yet since it is fairly knew but you likely have to read the trust instrument to be in good faith iv. Independent Personal Representative 1. TEC §402.053 → independent PR administers estate like a trustee so has a provision equivalent to TTC §114.081 v. TTC §114.0821 → although trust property is held by trustee without identifying the trust or its beneficiaries, the trust property is not liable to satisfy the personal obligations of the trustee 1. CL concept that also applies to guardians and PRs vi. TX Trustee Contract Scenario 1. TTC §114.084 → CONTRACTS OF TRUSTEE a. If a trustee or a predecessor trustee makes a contract that is within his power as trustee and a cause of action arises on the contract, the plaintiff may sue the trustee in his representative capacity, and a judgment rendered in favor of the plaintiff is collectible by execution against the trust property. The plaintiff may sue the trustee individually if the trustee made the contract and the contract does not exclude the trustee’s personal liability. b. The addition of “trustee” or “as trustee” after the signature of a trustee who is party to a contract is prima facie evidence of an intent to exclude the trustee from personal liability. 2. Contract trustee can be sued in representative capacity and personal capacity unless the contract excludes trustee’s personal liability a. codification of common law 9 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 3. Ex: If there’s a K between 3P and the trustee and the K excludes T’s personal liability → 3P can’t collect from trust if trustee acted without authority and also can’t sue trustee personally vii. TX Trustee Tort Scenario 1. TTC §114.083 → RIGHTS AND LIABILITIES FOR COMMITTING TORTS a. A personal liability of a trustee or a predecessor trustee for a tort committed in the course of administration of the trust may be collected from the trust property if the trustee is sued in a representative capacity and the court finds that: i. The trustee was properly engaged in a business activity for the trust and the tort is a common incident of that kind of activity; ii. The trustee was properly engaged in a business activity for the trust and neither the trustee nor an officer or employee of the trustee is guilty of actionable negligence or intentional misconduct in incurring the liability; or iii. The tort increased the value of the trust property b. A trust that is liable for the trustee’s tort is liable only to the extent of the permanent increase in value of the trust property c. A plaintiff in an action against the trustee as the representative of the trust does not have to prove that the trustee could have been reimbursed by the trust if the trustee had paid the claim d. Subject to §114.062, the trustee is personally liable for a tort committed by the trustee or by the trustee’s agents or employees in the course of their employment. 2. TLDR: personal liability of trustee for tort may be collected from trust property if trustee sued in representative capacity THE FIDUCIARY OBLIGATION A. Duty to Administer Estate a. Duty to take, retain, preserve, protect estate assets b. Duty to defend against 3Ps c. Duty to enforce claims d. Duty to segregate “estate” assets i. Earmark trust property → the trustee must label property belonging to the trust to prevent the trust property from being confused with the trustee’s own property 10 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 1. This protects the trust property from the trustee’s personal creditors, heirs, beneficiaries, and other claimants acting with a mistaken belief that the property belongs to the trustee 2. Just because the trustee failed to earmark doesn’t make it his–it’s just a breach of his fiduciary duty e. Duty to exercise reasonable care/skill i. Trustee must act as a reasonably prudent fiduciary in a similar set of circumstances would 1. Not all trustees created equally → Bank of America as trustee v. Uncle Charlie – difference in resources but at CL they are held to the same standard ii. TTC § 117.004(f) → a trustee who has special skills or expertise or is named trustee on reliance upon the trustee’s representation that the trustee has special skills or expertise has a duty to use those special skills or expertise 1. JUST FOR TRUSTEES f. Duty of non-delegation i. Common law → trustee had a duty of nondelegation ii. Modern view → trustee may delegate any investment or management decision provided a prudent trustee of comparable skills could properly delegate under the same circumstances B. Duty of Loyalty Fiduciary owes a duty of loyalty to all beneficiaries in making any decision regarding the trust a. Duty to not self-deal i. Trustee has a fundamental duty to not engage in any acts of self-dealing ii. EX: buying & selling trust assets among yourself 1. Hypo: the land is worth $500k, trustee could buy himself or could sell to someone else but would need to hire an agent which costs money so he buys it himself to save the agent fee–this is STILL self-dealing (damages could be increased value of land in upcoming years) b. Duty to avoid conflicts of interest i. Trustee has duty to avoid conflicts of interest 11 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 1. Hypo: the land is worth $500k, trustee sells land to brother willing to pay FMV –acting with a conflict of interest is a breach of a fiduciary duty 2. Trustee has an affirmative defense that he did it with good faith and for fair value c. Duty of impartiality i. The trustee must act with impartiality for all beneficiaries ii. Hypo: There is a trust: “during A’s lifetime, pay income to A and when A dies, then to B.” trustee invests $1M in a CD. A gets income with a high interest rate but the principal is depreciating because of inflation so this is unfair to B. 1. Trustee needs to generate a reasonable amount of income for A but preserve principal for B (usually by investing) C. Duty to Account a. Duty to render accountings i. Fiduciary has to provide accounting reports to beneficiaries–keep good books and records ii. Fiduciary accounting differs from business accounting so fiduciary will typically want to hire a CPA familiar with fiduciary accounting b. Duty to furnish information i. If a beneficiary wants information, fiduciary has to give it D. Common Law/Modern Statutes a. There’s a trend for shifting away from property-based trust law to more contract-based → settlors and trustees can negotiate terms of the trust and duties of the trustee b. §111.035(b) → the terms of the trust prevail over any provision of the statute (which includes the common law) with certain exceptions: i. Trust purpose ii. Exculpatory limitations iii. Duty to account iv. Powers of court E. Terms of Controlling Document a. Bottom line: legislature is telling us that duties trustee owes are governed by the document so look there first. i. if the document is silent → look to the statute which includes CL b. Modern approach for TRUSTEES → trustee can be authorized to engage in self-dealing and transactions with conflict of interest 12 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 i. CL still applies to dependent PRs and guardians FIDUCIARY LITIGATION A. Demand for Accounting a. First step: if beneficiary thinks something’s gone awry, he needs to demand an accounting i. This is when fiduciary will likely retain an attorney b. Second step: if fiduciary does not cooperate then beneficiary needs to go to court and ask the court to require an accounting i. If fiduciary made a mistake, he has a duty to fess up and make it right c. Third step: beneficiary needs to file lawsuit against fiduciary i. B v. F → beneficiary needs to list the duties fiduciary breached ii. Pending the lawsuit, fiduciary still has to administer the estate 1. The lawyer representing fiduciary on day to day likely will have a conflict of interest so fiduciary will need to retain a different lawyer for litigation B. Defenses of Fiduciary a. Law and Fact i. Argue the law: “I didn’t have that duty” – legal question 1. look to terms of the trust ii. Argue the facts: “I had the duty but I didn’t breach it” –fact question b. Consent of Beneficiary i. Argue consent of beneficiaries: “I did that but the beneficiaries consented” a. Cannot use this in guardianship context ii. Fiduciary can plead consent of beneficiaries as an affirmative defense iii. RULE: must be informed consent: 1. beneficiaries must have capacity to consent and 2. fiduciary needs to disclose all relevant facts and circumstances iv. RULE: It must be the consent of ALL the beneficiaries 1. Exception: consent from primary beneficiary a. It is unlikely secondary beneficiary will file suit but this is taking a risk 13 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 b. Could get primary beneficiary to consent and ask for indemnity against any secondary beneficiaries if they sue c. Doctrine of virtual representation: if the interests of B1 and B2 are aligned could be bound by B1’s consent c. Statute of Limitations i. Tex. Civ. Prac. & Rem. Code § 16.004(5): A person must bring suit on a breach of fiduciary duty not later than four years after the day the cause of action accrues 1. SOL begins when the beneficiary discovered or reasonably should have discovered the breach. d. Laches i. The adult beneficiary knew what was going on and did nothing about it, he impliedly consented ii. Sounds in equity and fairness e. Affirmation or Ratification i. After the fact, the beneficiary either explicitly or implicitly affirmed the fiduciary’s act. f. Good Faith, Fair Deal i. Fiduciary argues that the dealing was in good faith and it was a fair deal (for full FMV) 1. This comes up most often with respect to a breach of the duty of loyalty ii. Common law → self-dealing is liability per se iii. Modern practice → courts are more lenient and even in a self-dealing transaction, a fiduciary could use this as a defense 1. Texas allows this C. When “Guilty” of Breach a. What does it mean? i. “Guilty” does not mean guilty like in a criminal trial. In fact, most breaches of a fiduciary duty do not rise to the level of criminal charges (however, some do). 1. Modern practice → we don’t use the word “guilt” anymore b. Denial of Compensation i. Just as it sounds. Fiduciary is denied compensation or he is asked to pay back compensation he has already received. 14 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 c. Surcharge i. This is money damages and can include punitive damages if the breach is especially egregious d. Injunctive i. A beneficiary can get an injunction that tells the fiduciary that he must do or not do something. e. Removal i. If the breach is serious enough, the fiduciary will be removed from his position 1. While this is being litigated, the court may appoint receiver to administer the estate (in place of the fiduciary) D. Exculpatory Clauses a. If there’s a governing document, there may be an exculpatory provision → language in the document that purports to relieve the fiduciary from responsibility i. This prohibits/forgives surcharges; however, it does not prohibit injunctive relief. b. At common law, this is inconsistent with the law because the settlor did not impose these duties on the fiduciary–the law did! So courts would not give effect to this. c. Modern practice → allow exculpatory clauses i. Texas → codified case law for trustees ii. TTC § 114.007(a),(b) → Exculpatory Provision 1. A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that the term relieves a trustee of liability for: a. A breach of trust committed: i. In bad faith ii. Intentionally; or iii. With reckless indifference to the interest of a beneficiary b. Any profit derived by the trustee from a breach of trust 2. A term in a trust instrument relieving the trustee of liability for a breach of trust is ineffective to the extent that the term is inserted in the trust instrument as a result of an abuse by the trustee of a fiduciary duty to or confidential relationship with the settlor. 15 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 a. Ex: lawyer is serving as trustee and put the exculpatory clause in the document → they already have a fiduciary duty iii. Courts will look to TTC for executors but not guardians or administrators iv. This basically excuses simple negligence–minor breaches of trust d. Compare with Directory Provisions i. A directory provision authorizes a trustee to do things that would normally be a breach 1. Flexibility in negotiating between settlor and trustee ii. Cannot excuse self-dealing in an exculpatory clause but can get rid of duty or allow it in directory provision iii. TTC § 114.007(c) →Directory Provision 1. This section applies only to a term of a trust that may otherwise relieve a trustee from liability for a breach of trust. Except as provided in Section 111.035, this section does not prohibit the settlor, by the terms of the trust, from expressly: a. Relieving the trustee from a duty or restriction imposed by this subtitle or by common law; or b. Directing or permitting the trustee to do or not to do an action that would otherwise violate a duty or restriction imposed by this subtitle or by common law. iv. **MUST UNDERSTAND THE DIFFERENCE BETWEEN EXCULPATORY PROVISION AND DIRECTORY PROVISION EFFECT OF DEATH ON PROPERTY & LIABILITIES A. Background a. Factors that affect the inquiry: i. Real property v. personal property 1. Real property → governed by law of the situs 2. Personal property → governed by law of the domicile ii. Where the property is located iii. Where O is domiciled/residing in iv. Married or single b. **Basically T&E refresher → look at notes/handout materials when studying 16 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 B. Establishing New Ownership a. Will Scenario i. Upon O’s death, the heirs at law have ownership but once a will is admitted to probate, the heirs will be divested in favor of the beneficiaries 1. Step 1: Executor applies for probate of the will with the appropriate court by filing an application with the clerk of court. a. Both the executor and the beneficiaries have standing to initiate this process. b. Statute of limitations for admitting a will to probate is 4 years 2. Step 2: Clerk notifies the sheriff’s office for issuance of citation a. Clerk posts this on the courthouse door–serves as constructive notice i. Actual notice is not required because this is an in rem process 3. Step 3: applicant can schedule a hearing with the probate court a. Earliest can schedule is the first monday after the passing of 10 days b. Proponent, attorney, witnesses c. Most of the time the hearing is ex parte i. Testimony is committed to writing (TEC § 256.157) d. There is no summary judgment at this stage so the court has an affirmative duty to to make sure the proponent meets his burden of proof i. Have to establish due execution and nonrevocation 4. Step 4: if court is satisfied → court will enter order admitting will to probate (TEC § 256.201) a. Will admitted to probate → divests the heirs 5. Step 5: period of contest (TEC § 256.204) a. After a will is admitted to probate, an interested person may commence a suit to contest the validity of the will not later than the 2nd anniversary of the date the will was admitted to probate 17 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 i. This is a suit to set aside an already valid, probated will 1. Heir is the PL and has the essential burden of proof b. This contest period ensures that heirs are not divested of their property without due process of law (especially since they get no notice that they may be divested) 6. **Pre-probate contest → heirs also have the ability to contest a will before probate a. In a pre-probate contest, the burden of proof is on the proponent of the will. b. An heir may strategize by choosing to do a post-probate contest so the heir can address the jury first and last b. Intestate i. The heirs have a few options when a person dies intestate 1. Option 1: Do nothing because the property already belongs to the heirs by operation of law a. This may solve problems with 3Ps since the record title is not in the heirs name. Although it is the heir’s property, it is hard to prove that it is. 2. Option 2: Affidavit of heirship a. This is the interim approach that is unique to Texas b. This is a mechanism of proving up the identity of the heirs without having the go to court c. How it works: get disinterested parties who are familiar with the family history to swear to the facts and sign the affidavit. i. Ex: swear to the fact that O only ever had two children, A & B. ii. Must be disinterested –can’t be an heir d. Effect: there is no legal effect whatsoever. Therefore, this is mainly use to reassure 3Ps of the heirs ownership of the property so it will work so long as 3Ps accept it. AND it becomes prima facie 18 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 evidence of the facts therein after its been of record for 5 years. (TEC 203.001) 3. Option 3: Judicial determination of heirship (TEC § 202.001) a. This is the best approach to establish heirship; however, it's the longest and most expensive option b. This is an in rem and in personam process i. Must notify any creditor personally ii. Court will appoint an attorney ad litem to represent the heirs that aren’t there c. During this time, heirs can also ask for a judicial determination of necessity for formal administration d. Effect of judgment on heirs → it’s the heirs property now and they can hold this out to the world. (TEC § 202.205) C. Types of Administration a. Formal Administration i. Anyone with an interest in the estate can seek formal administration 1. Sometimes a creditor will ask to be an administrator of an estate in order to get paid ii. Process: 1. Proponent files application 2. citation/notice issued 3. Schedule hearing 4. At hearing, convince the court that there’s necessity for formal administration 5. If the court is convinced, court will appoint an administrator b. When there’s no need for Formal Administration i. In a will scenario, the heirs or executor can seek to have the will probated as a muniment of title 1. In this case, there would be no PR administering the estate 2. Most of the time, the executor will go through the process to probate the will and be appointed as the PR 19 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 D. Family Settlement Agreements a. Families (heirs) can agree to not probate the will and if no one else is involved then no one has standing to complain i. Only party that may have standing to complain/an interest is creditors. b. TEC § 301.153 → Additional Proof Required for Letters of Administration; Effect if Finding No Necessity for Administration Exists i. If letters of administration are to be granted, the applicant for the letters must prove to the court’s satisfaction that a necessity for an administration exists EXECUTORS AND ADMINISTRATORS A. Basics a. 1) must be dead b. 2) 4 year SOL c. 3) process i. Begins by filing application ii. PR is seeking letters 1. Letters are evidence of the PR’s authority (TEC § 306.007) 2. Executors named in a will → letters testamentary (TEC § 301.152) 3. Anyone else → letters of administration (TEC § 301.153) iii. Court order will include whether a bond is required B. Establishing “Necessity” a. Presumption for need of formal administration i. If proponent prevails → court will admit will to probate. ii. If opponent prevails → court will admit the will to probate as a muniment of title–end of probate. (TEC § 301.153). C. Court Supervised v. Independent Administration a. See section below. D. Qualification a. Step One: Every PR must file an oath of office b. Step Two: Do we need a bond? i. Defined: essentially an insurance policy that insures the estate against PR’s malfeasance 20 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 ii. A bond is usually required unless the testator waives the bond requirement for an executor in a will or PR is a corporate fiduciary iii. Bonds are expensive–the cost of the bond comes out of the estate (usually the natural, anticipated income of the estate) iv. Obtaining a bond in an intestate situation is a condition precedent to qualifying for the position 1. Cf. trust law where obtaining a bond is not a condition precedent; instead, it is a fiduciary duty. c. Step Three: Upon qualification, the court will grant the PR letters (testamentary or of administration). The letters will state whether the PR is independent or it will be silent in which case, the PR would be dependent. i. Dependent → need court approval while administering the estate ii. Independent → administer estate without need to get court approval (like a trustee) 1. Available when: a. There’s a will that designates that the executor be independent b. For an administrator to be independent → before filing application, all heirs must agree for applicant to be independent and the court has to agree that would be in the best interest of the estate E. Duties of PR a. PR general duties i. Marshall the assets (protect, possess, etc.) ii. Satisfy debts and obligations iii. Return to heirs/beneficiaries b. PR fiduciary duties i. Duty of loyalty ii. Duty of care iii. Duty to account c. To whom does the PR owe fiduciary duties to? i. Common law → heirs/beneficiaries and creditors ii. Texas → only to the beneficiaries 1. NOT creditors, but still owe statutory duties to creditors 21 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 F. Investments in Solvent Estate a. General Rule: PR does not have an affirmative duty to invest. i. Exception: if the will names an executor, the testator may grant the executor additional powers 1. Sometimes grants powers of a trustee under the TTC G. Required Notice a. TEC § 308.002 → Required Notice to Certain Beneficiaries After Probate of Will i. Except as provided by subsection (c), not later than the 60th day after the date of an order admitting a decedent’s will to probate, the PR of the decedent’s estate, including an independent executor or independent administrator, shall give notice…to each beneficiary named in the will whose identity and address are known to the representative or, through reasonable diligence, can be ascertained. If, after the 60th day after the date of the order, the representative becomes aware of the identity and address of a beneficiary who was not given notice on or before the 60th day, the representative shall give the notice as soon as possible after becoming aware of that information. 1. Essentially just tell the beneficiaries that they’re beneficiaries b. TEC § 308.051 → Required Notice Regarding Presentment of Claims in General i. Within one month after receiving letters testamentary or of administration, a PR of an estate shall provide notice requiring each person who has a claim against the estate to present the claim within the period prescribed by law by: 1. Having the notice published in the newspaper printed in the county in which the letters were issued; and 2. If the decedent remitted or should have remitted taxes administered by the comptroller, sending the notice to the comptroller by qualified delivery method ii. Notice provided under subsection (a) must include: 1. The date the letters of testamentary or of administration were issued to the PR; 2. The address to which a claim may be presented; and 22 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 3. An instruction of the representative’s choice that the claim be addressed in care of: a. The representative b. The representative’s attorney; or c. Representative, estate of ____ (naming the estate) c. TEC § 308.053 → Required Notice to Secured Creditors i. Within two months after receiving letters testamentary or of administration, a personal representative of an estate shall give [actual] notice of the issuance of the letters to each person the representative knows to have a claim for money against the estate that is secured by estate property. ii. Within a reasonable period after the personal representative obtains actual knowledge of the existence of a person who has a secured claim for money against the estate to whom notice was not previously given, the representative shall give notice to the person of the issuance of the letters testamentary or of administration iii. Notice provided under this section must be: 1. Sent by a qualified delivery method; and 2. Addressed to the record holder of the claim at the record holder’s last known post office address. iv. The following shall be filed with the clerk of the court in which the letters testamentary or of administration were issued: 1. A copy of each notice and of each return receipt or other proof of delivery receipt; and 2. The personal representative’s affidavit stating: a. That the notice was sent as required by law; and b. The name of the person to whom the notice was sent, if that name is not shown on the notice or receipt. d. TLDR: Texas does not require actual notice to general creditors, but TX does require actual notice to secured creditors. Unlike TX, some states require actual notice to all creditors. i. Actual notice → secured creditors ii. Constructive notice → general/unsecured creditors H. The Inventory a. TEC § 309.001 → Appointment of Appraisers 23 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 i. At any time after letters testamentary or of administration are granted, the court, for good cause, on the court’s own motion or on the motion of an interested party shall appoint at least one but not more than three disinterested persons who are residents of the county in which the letters were granted to appraise the estate property. ii. If the court makes an appointment under subsection (a) or (b) and part of the estate is located in a county other than the county in which the letters were granted, the court, if the court considers necessary, may appoint at least one but not more than three disinterested persons who are residents of the county in which the relevant part of the estate is located to appraise the estate property located in that county. 1. TLDR: after letters are granted, the court decides whether to appoint an independent appraiser. The court is much more likely to do this if there are likely to be creditors issues (i.e. an insolvent estate) b. TEC § 309.051 → Inventory and Appraisement i. [U]nless a longer period is granted by the court, before the 91st day after the date the PR qualifies, the PR shall prepare and file with the court clerk a single written instrument that contains a verified, full, and detailed inventory of all estate property that has come into the PR’s possession or of which the PR has knowledge. The inventory must: 1. include: a. All estate real property located in this state; and b. All estate personal property regardless of where the property is located; and 2. Specify which portion of the property, if any, is separate property and which, if any, is community property. ii. The PR shall: 1. Set out in the inventory the PR’s appraisement of the FMV on the date of the decedent’s death of each item of the inventory 2. If the court has appointed one or more appraisers for the estate: 24 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 a. Determine the FMV of each item in the inventory with the assistance of the appraiser or appraisers; and b. Set out the appraisement in the inventory c. TEC § 309.052 → List of Claims i. A complete list of claims due or owing to the estate must be attached to the inventory and appraisement required by Section 309.051. The list of claims must state: 1. The name and, if known, address of each person indebted to the estate; and 2. Regarding each claim: a. The nature of the debt, whether by note, bill, bond, or other written obligation, or by account or verbal contract; b. The date the debt was incurred c. The date the debt was or is due; d. The amount of the claim, the rate of interest on the claim, and the period for which the claim bears interest; and e. Whether the claim is separate property or community property. ii. **this is a list of claims owed to the decedent (aka it has nothing to do with the decedent’s creditors) 1. The PR has a duty to pursue any claim against someone who owes the decedent money/property. d. PR can ask for an extension to submit the inventory, appraisement, and/or list of claims but court will consider the claims of creditors when deciding whether to allow this or not, e. The surviving spouse has the opportunity to challenge the inventory and classification I. Community Property Administration a. Look back at notes and T&E stuff. J. Protection of Family a. Conflicts of Law i. If the decedent is in bankruptcy, federal law preempts state law. ii. TPC § 41.008 → Conflict with Federal Law 25 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 1. To the extent of any conflict between this subchapter and any federal law that imposes an upper limit on the amount, including the monetary amount or acreage b. Homestead i. During O’s life → the homestead is exempt from general debts/creditors ii. At death 1. Safe from creditors → the homestead is exempt from general debts/creditors (same as it was exempt during O’s lifetime) so long as O leaves a surviving spouse or surviving minor children. a. TEC § 102.002 → the homestead rights and respective interests of the surviving spouse and children of a decedent are the same whether the homestead was separate property or community property. 2. Exclusive right of occupancy → spouse or minor children have exclusive right of occupancy until the homestead is abandoned or the spouse dies. a. Spouse has priority (TEC §102.005) –cannot partition the homestead while the spouse is living there. b. Surviving spouse is on the hook for property taxes and has a duty not to commit waste but the heirs/beneficiaries of the house are on the hook for the mortgage. iii. If there is no homestead (i.e. live in an apartment), TX allows an allowance in lieu of a homestead right. c. Personal Property i. During O’s Lifetime 1. TPC § 42.001 → Personal Property Exemption during O’s lifetime a. Personal property is exempt from garnishment, attachment, execution, or other seizure if: i. The property is provided for a family and has an aggregate FMV of not more than $100,000, exclusive of the amount of any 26 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 liens, security interests, or other charges encumbering the property; or ii. The property is owned by a single adult, who is not a member of a family, and has an aggregate FMV of not more than $50,000, exclusive of the amount of any liens, security interests, or other charges encumbering the property. 2. TPC § 42.002 → Personal Property (what’s exempt) a. Home furnishings, provisions for consumption, farming or ranching vehicles, tools, equipment, books, clothes, jewelry of a certain value, two firearms, athletic equipment, a car, certain animals. 3. TPC § 41.021 → Additional Exemption for Certain Savings Plans ii. After O’s death 1. TEC §353.051 → Exempt Property to be Set Aside a. Unless an application and verified affidavit are filed immediately after the inventory, appraisement and list of claims of an estate are approved or after the affidavit in lieu of the inventory, appraisement, and list of claims is filed, the court by order shall set aside: i. The homestead for the use and benefit of the decedent’s surviving spouse and minor children; and ii. All other exempt property that is described in section 42.002(a) of TPC 2. What do we do with the property after formal administration is over? (TEC § 353.152 & 353.153) a. If it’s a solvent estate → the exempt property other than the HS is subject to partition and distribution among the heirs of the decedent b. If it’s an insolvent estate → the surviving spouse gets outright ownership d. Family Allowance i. TEC § 353.101 → Family Allowance 27 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 1. Surviving spouse may apply to the court to have the court fix a family allowance for one year from the date of the decedent’s death a. TEC § 353.102 → Amount must be sufficient for maintenance of the decedent’s surviving spouse, minor children, and adult incapacitated children for one year from the decedent’s date of death i. Must be fixed with regard to the facts or circumstances then existing and the facts and circumstances anticipated to exist during the first year after the decedent’s death. b. This is discretionary K. Compensation and Indemnification a. Statute says the PR gets compensation for services rendered i. A will can override this to either say no compensation or more compensation L. Tax Responsibilities a. PR’s Federal Tax Responsibilities under the IRC i. 1) file notice of fiduciary relationship ii. 2) obtain tax identification number for the estate (form 1041) iii. 3) file decedent’s final 1040 1. If decedent was married, PR and surviving spouse can file joint tax return iv. ** if estate is large enough → use form 706 ($14mil for individual) COURT-SUPERVISED ADMINISTRATION A. Background a. TEC § 351.011 → Applicability of Common Law i. The rights, powers, and duties of executors and administrators are governed by common law principles to the extent that those principles do not conflict with the statutes of this state. B. Powers a. Inherent v. Express/implied Powers –Marshalling the Assets i. Personal Representative has inherent power to marshal the estate with letters in hand 1. Does not have to go to the court for this. 28 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 ii. TEC § 351.051 → Exercise of Authority Under Court Order 1. A personal representative of an estate may renew or extend any obligation owed by or to the estate on application and order authorizing the renewal or extension. If a personal representative considers it is in the interest of the estate, the representative may, on written application to the court and if authorized by court order: a. Purchase or exchange property; b. Take claims or property for the use and benefit of the estate in payment of a debt due or owed to the estate; c. Compound bad or doubtful debts due or owed to the estate; d. Make a compromise or settlement in relation to property or a claim in dispute or litigation e. Compromise or pay in full any secured claim that has been allowed and approved as required by law against the estate by conveying to the holder of the claim the real estate or personal property securing the claim: i. In full payment, liquidation, and satisfaction of the claim; and ii. In consideration of cancellation of notes, deeds of trust, mortgages, chattel mortgages, or other evidence of liens securing the payment of the claim; or 2. Abandon the administration of burdensome or worthless estate property. b. TEC § 351.052 → Exercise of Authority Without Court Order i. A personal representative of an estate may, without application to or order of the court: 1. Release a lien on payment at maturity of the debt secured by the lien; 2. Vote stocks by limited or general proxy; 3. Pay calls and assessments; 4. Insure the estate against liability in appropriate cases; 5. Insure estate property against fire, theft, and other hazards; or 6. Pay taxes, court costs, and bond premiums ii. A personal representative who is under court control may apply and obtain a court order if the representative has doubts regarding the propriety of the exercise of any power listed in subsection (a) c. TEC § 351.101 → Duty of Care i. An executor or administrator of an estate shall take care of estate property as a prudent person would take care of that person’s own property, and if any buildings belong to the estate, th executor or administrator shall keep those 29 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 buildings in good repair, except for extraordinary casualties, unless directed by a court order not to do so. d. TEC § 351.106 → Digital Assets i. A PR of a decedent’s estate may apply for and obtain a court order, either at the time the PR is appointed or at any time before the administration of the estate is closed ii. TEC § 351.151 → Ordinary Diligence Required 1. If there is a reasonable prospect of collecting the claims or recovering the property of an estate, the PR of the estate shall use ordinary diligence to: a. Collect all claims and debts due the estate; and b. Recover possession of all property has a claim or title 2. If a PR willfully neglects to use the ordinary diligence required under subsection (a), the PR and the sureties on the PR’s bond are liable, on the suit of any person interested in the estate, for the use of the estate, for the amount of those claims or the value of that property lost by the neglect. iii. TEC § 351.152 → Contingent Interest for Certain Attorney’s Fees; Court Approval 1. A personal representative may, without court approval, convey or enter into a contract to convey for attorney services a contingent interest in any property sought to be recovered, not to exceed a one-third interest in the property. 2. A personal representative, including an independent executor or independent administrator, may convey or enter into a contract to convey for attorney services a contingent interest in any property sought to be recovered under this subchapter in an amount that exceeds a one-third interest in the property only on the approval of the court in which the estate is being administered. The court must approve a contract or conveyance described by this subsection before an attorney performs any legal services. A contract entered into or a conveyance made in violation of this subsection is void unless the court ratifies or reforms the contract or documents relating to the conveyance to the extent necessary to make the contract or conveyance meet the requirements of this subsection. 3. In approving a contract or conveyance under this section, the court shall consider: a. the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal services properly; b. the fee customarily charged in the locality for similar legal services; 30 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 c. the value of the property recovered or sought to be recovered by the personal representative under this subchapter; d. the benefits to the estate that the attorney will be responsible for securing; and e. the experience and ability of the attorney who will perform the services. iv. TEC § 351.152 → attorney can’t be paid from estate assets unless the court approves e. Handling the Assets i. “Claim for money” → a claim for money that is of a fixed amount. 1. Usually a contract claim (unless specific performance) 2. Usually not a tort claim (unless already reduced to a judgment). ii. TEC § 308.051 → Required Notice Regarding Presentment of Claims in General 1. Within one month after receiving letters testamentary or of administration, a PR of an estate shall provide notice by publication requiring each general creditor to present a claim iii. TEC § 308.053 → Required Notice to Secured Creditor 1. Within two months after receiving letters testamentary or of administration, a PR shall provide actual notice to secured creditors by qualified delivery method iv. TEC § 308.054 → Permissive Notice to Unsecured Creditor 1. At any time before an estate administration is closed, a personal representative may give notice by a qualified delivery method to an unsecured creditor who has a claim for money against the estate. a. Notice given under Subsection (a) must: i. expressly state that the creditor must present the claim before the 121st day after the date of the receipt of the notice or the claim is barred, if the claim is not barred by the general statutes of limitation; and ii. include: 1. the date the letters testamentary or of administration held by the personal representative were issued to the representative; 2. the address to which the claim may be presented; and 3. an instruction of the representative's choice that the claim be addressed in care of: a. the representative; 31 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 b. the representative's attorney; or c. "Representative, Estate of _______" (naming the estate). 2. **passes constitutional muster because the creditors get notice before being barred from claim. C. Claims Procedure a. Presentation by Creditor i. TEC § 355.001 → a claim may be presented to a PR of an estate at any time before the estate is closed if suit on the claim has not been barred by the general statutes of limitation. ii. TEC § 355.002 → a claim may be presented to PR but better practice is to present the claim to the clerk and let the clerk notify the PR because § 355.008 1. TEC § 355.008 → general statutes of limitation tolled on the date 1) a claim for money is filed or deposited with the clerk 2. If it is not a claim for money → sue the PR with respect to the claim b. PR “allows” or “rejects” i. TEC § 355.051 → A PR accepts or rejects a creditor’s claim not later than the 30th day after the claim is presented to the PR. 1. This is not an adversarial process–PR just considers whether its a good claim 2. If 30 days passes → auto-rejection ii. 90 Day Rule → A claim that has been rejected by the PR is barred unless the claimant commences suit on the claim in the court of original probate jurisdiction in which the estate is pending not later than the 90th day after the PR rejects the claim. 1. Court classifies the claim after the litigation process a. Most settle but need court approval to settle 2. TEC § 355.066 → no execution may issue on a rejected claim or part of a claim that is established by a suit. The judgment in the suit shall be: a. Filed in the court in which the estate is pending; b. Entered on the claim docket; c. Classified by the court; and d. Handled as if originally allowed and approved in due course of administration c. Court “approves” or “disapproves” i. TEC § 355.053 → after a claim against an estate has been presented to the PR and allowed or rejected, wholly or partly, by the representative, the claim must 32 Administration of Estates Outline Emily Lentzner Featherston Winter 2024 be filed with the county clerk of the proper county. The clerk shall enter the claim on the claim docket. d. Court “classifies” i. There are 8 different classes of claims. 1. The most common type is class 8 – general creditors ii. This order of claims only matters if the estate is insolvent iii. TEC 355.102 → Claims against an estate shall be classified and have priority of payment as provided by this section. 1. Class 1 claims are composed of funeral expenses and expenses of the decedent's last illness, including claims for reimbursement of those expenses, for a reasonable amount approved by the court, not to exceed $15,000 for funeral expenses and $15,000 for expenses of the decedent's last illness. Any excess shall be classified and paid as other unsecured claims. 2. Class 2 claims are composed of: a. expenses of administration; b. expenses incurred in preserving, safekeeping, and managing the estate, including fees and expenses awarded under Section 352.052; c. unpaid expenses of administration awarded in a guardianship of the decedent; and d. for an estate with respect to which a public probate administrator has taken any action under Chapter 455, court costs and commissions to which the administrator is entitled under Subchapter A, Chapter 352. e. **attorney’s fees for admin of the estate fall under this category–yay! 3. Class 3 claims are composed of each secured claim for money under Section 355.151(a)(1), including a tax lien, to the extent the claim can be
