Beneficiary Designations, again.

I've written about beneficiary designations before, but they continue to be a source of conflict I'm seeing for clients. It's not just life insurance, either.

Think about your assets. Bank account, stock account, CD's, IRA's, 401k.  Probably, without thinking, when you set each of these up you had to fill out all sorts of questions. As I'm sitting here, I have no idea who I've named for all my account beneficiaries, and I do this for a living, so I'm guessing most of you do not either.

If truly you have never named anyone ever, then the rules are relatively simple. Whatever your assets are pass under your will, or under the laws of the state where you live if you have no will to your heirs. Unless, the contract for your account says differently. Want to cut out your no good kid? Policy might not let you. Really hate your spouse? Account contract might give it all to them. See why this is important?

Where it gets really sticky is if you try and change things, and something happens, and you don't get it done.


Wanda Worker has been with her company for 30 years, and has built up a large retirement with stock options that have vested.  She has two children, one who is in the pen for attempting to harm her pet parakeets, and another who is a nun working with disabled children. She fills out the form to change her beneficiary designation on her retirement account and her life insurance to her nun daughter, and on the way to the mailbox to send it off has a heart attack and dies.


What happens? Per the usual, it depends.

If left alone, its distributed pursuant to the policy rules. If Wanda was married, usually goes all to the husband. If she was not, split between the kids. There are two different theories out there that could change the result, whoever. In Texas, for life insurance and in limited other circumstances, courts have held that if someone "substantially complied" with the rules to change, its good enough.  Other accounts or policies require "strict compliance" which means if its not done right, sorry.  The problem with the "substantial compliance" standard is it puts someone else in the position to determine another's wishes.

In our above example, at first glance, Wanda did everything she could do to change her beneficiary designation. It wasn't her fault that she had a heart attack, right? Well, why didn't Wanda do it the day, week, month...before? She went to the nail salon instead. Is that doing everything she possibly could have done?

Take away:

You simply cannot be too careful with this stuff. Tomorrow is too late. However, should you find yourself, a family member, or other involved in a situation like this, or where one family member is trying to take advantage of another, thankfully there are options to make it right.

For an example of a case that played out like this, see THIS CASE. Think the result is fair or unfair? Let me know. 

Be careful what you sign for...

We sign things all the time. Mostly credit card receipts, but if you have ever bought a car, a home, or signed for a package, you are also representing to the contracting world that, by signing the document, you accept the consequences therein.

For most things, this is fine. Sign your electronic name at the grocery store, sign for your fragile antique cuckoo clock you ordered off ebay. However, if you sign for something as part of your job, or in a business capacity, you need to be much more careful.

Scenario #1:

You are a manager for Big Box Store, who sell mature pokemon to the public. You negotiate a great contract with your supplier of pokemon eggs, Fantasy Farms, in part by not telling them who the eggs were for. You sign the contract only with YOUR NAME. Turns out, people stop caring about pokemon, and Big Box Store stops paying on the contract.

Fantasy Farms sues you for the contract. Who wins?

Weren't you just doing your job? Well, sorta. Texas courts look at a few things.

Who signed the contract? Well, you did. Not the company. You should have signed it, YOUR NAME, manager, Big Box Store. That would have protected you. But you wanted a deal, so you didn't.

Next, did you disclose you were an agent or officer of the company? No, obviously. Strike against you.

If I'm the judge, I'm probably finding that you are stuck paying the contract.

Scenario #2:

You and a buddy are starting your medical practice together. You set up your company (doctor's can have special "professional association" entities, think an LLC just for doctors) and you sign a lease. However, when you sign the lease, you signed it as "Doctor A and Doctor B."   Business dries up and you want to move out. You do, the landlord sues you individually for the remainder of the lease. Can they pierce your corporate entity?

Depends. Again, was it obvious you were signing for the company? Was that disclosed? Did the lease include specific provisions to hold you accountable? (READ YOUR LEASE.) Are your books and records in order, showing you observed the corporate formalities? This scenario is very avoidable if you are careful when you sign the contract. To see what not to do, read this case.


The basic rule is if you sign for something as your name, its on you. If you are the president, manager, or back room clerk for Big Box store, sign YOUR NAME, CLERK, BIG BOX STORE. Else, its on you. The exceptions come if you disclosed who you work for, it was obvious, and if you are the owner/officer of a company, as long as you weren't trying to perpetuate fraud, you should be ok too. Key is disclosure.

This same logic applies for owners of a company, partners in a partnership, members in an LLC, etc. Don't give away your liability protection by signing something without your representative capacity, else your "corporate veil" could be pierced.

Take away:

We all wear many different hats. Individual, parent, spouse, mother, son, employee, owner, etc. Whatever hat you are wearing on any given transaction, make sure you disclose that hat, or you could get stuck wearing a hat you didn't intend.

Gun Trusts, ATF 41P update

Image result for atfFinally, at long last, we have some clarity on what and how the ATF will be regulating the use of "gun trusts" for purchase of National Firearms Act items.

On January 15, the final rules were published in the Federal Register, so we have 6 months to stay under the old rules until these become effective.

Why they changed things:

 "The goal of this final rule is to ensure that the identification and background check requirements apply equally to individuals, trusts, and legal entities. To lessen potential compliance burdens for the public and law enforcement, DOJ has revised the final rule to eliminate the requirement for a certification signed by a chief law enforcement officer (CLEO) and instead require CLEO notification. DOJ has also clarified that the term “responsible person” for a trust or legal entity includes those persons who have the power and authority to direct the management and policies of the trust or legal entity to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust or entity. In the case of a trust, those with the power or authority to direct the management and policies of the trust include any person who has the capability to exercise such power and possesses, directly or indirectly, the power or authority under any trust instrument, or under State law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for or on behalf of the trust."

What this means: 

1. No more CLEO signoff. This means as an individual purchaser, (no trust) you don't need the sheriff (nor his deputy, if you're Bob Marley).  Additionally, they removed the proposed threat of having everyone on a trust having to get the CLEO sign off. Copies of applications just get sent to the CLEO. This is a good move.

2. Fingerprints, passport photos, background checks for all "responsible persons." If  (more) background checks help reduce crime and prevent weapons from getting into the hands of those who should not have them, I'm all for it. I still won't believe the justification for this (trusts and entities were allegedly "exempt" from the background check requirements) is that a trust was a free pass for bad guys to get machine guns. Why does the application process take up to a year? I can't fathom a scenario that the ATF does not check the names of all parties listed on a trust, nor does any reputable dealer not check the purchasing individual. But such is life, and after mid June, all your named Trustees, and beneficiaries will likely need to have the new form (fingerprints and photo) to send off.

Take Away:  

As of right now, nothing changes. As of June, we are in a new regime. It will be a little easier if you purchase an NFA item as an individual, and a little more paperwork if you use a trust after that point. Again, the only way for multiple individuals to possess a "shared" item individually is to use the trust or other entity, so if that is your goal, the trust will still be the recommended path. Happy (quiet) shooting.

Probate options when its been more than 4 years...

Time flies. The usual scenario is parent 1 passed away, parent 2 passed away 5 years later, and now the kids are stuck with a mess.

Today we will talk about what happens if the decedent had a will. 

In Texas, you have 4 years to probate a will, in general.  Thankfully, you still have options since we often get passed that point. What you need to do largely depends on what the person had that needs to be transferred.

1. If there is only stuff (pots and pans, personal property) to deal with:

You don't have to do anything. Just hopefully follow the decedent's wishes.

2. If there is real property or financial accounts in the name of the decedent:

You have to do something. In Texas, you can "probate the will as a muniment of title" after 4 years, just like you could before 4 years have passed. The hurdle here comes in that you will have to show good cause that you are "not in default" by waiting more than 4 years, but a reasonable "I didn't know" is usually good enough, and most courts will approve it. You also have to get service on all those who would be heirs at law (if there was no will) or have them sign off on a waiver requesting this process and that they are in agreement. This makes sense, because without the will, the heirs at law would inherit the estate. This can be tricky if the will changes who would be the heirs. Some counties also require the appointment of an attorney ad litem, which is an added cost, so check with your local rules.

This is sufficient to pass title to real property, and the preferred probate process if you don't have any debts (other than those secured by real property, like a mortgage).  This is what I like to call probate light, as there are fewer requirements (no inventory, no notice to creditors. etc.) and its great for everyone. This process should be sufficient to transfer title to bank and other financial accounts, including insurance. Most of the time it is, but I have had varied success with certain national banks and insurance companies (not naming names, chase and bank of america, you know who you are.)

3. If you are stuck with one of those out of town banks who require letters of some sort:

You have to go ahead and bite the bullet of an administration. If you can get all the heirs on board it can be independent (preferred, cheaper) instead of dependent, but its just like if you had no will at all, This is the penalty for waiting too long.

Take away:

If you are faced with the death of a loved one or are the named executor of a will, there are options. If you waited more than 4 years to deal with it, those options shrink, but you still have some choices. There is never an ideal time to process or handle the business that comes with losing a loved one, but thankfully there are processes in the Estates Code that allow for some simplified procedures. 

Caselaw Updates: Tortious Interference with Inheritance Rights

I don't love continuing legal education classes.  Here's why:

1. I don't like many things that are mandatory, and they are.
2. I'm surrounded by lawyers.
3. They are expensive.
4. They are usually in an overly cold/hot room and sometimes via video, which is not an ideal learning environment, (albeit a solid napping environment).

I don't love the dentist either. But both are necessary evils. One of the best CLE's is the annual Advanced Estate Planning and Probate seminar, which highlights updates in the law and new techniques to employ.

Some highlights:


Tortious Interference with Inheritance Rights

There is a cause of action/tort in Texas called "tortious interference with inheritance rights." Sort of. Sort of, as its only recognized and mentioned in some general treatises (Restatement of Torts) and by a handful of cases.

What that means is, if you are in the RIGHT court, you should be able to recover damages from someone who does something improper that causes your inheritance to be diminished.  It is fairly difficult to get an award for this, but it seems the way to punish someone for trying to steal an estate. To do so, you need to prove:

(1) that an interference with one's property or property rights occurred;
(2) such interference was intentional and caused damage; and
(3) the interference was conducted with neither just cause nor legal excuse.

For example, a housekeeper/caregiver forging a bogus beneficiary designation or will on the deathbed of your parent. Or a sibling unduly influencing that parent to cut you out and leave everything to them. Just filing a will contest though, is not tortious interference.

Anyway, two recent rulings affect this tort.  In Jackson Walker v. Kinsel, the Court of Appeals in Amarillo (7th District, Texas) held that actually, there is no tort at all. Their logic is that the Fort Worth Court,  the Texas Supreme Court, and the Texas Legislature haven't spelled out that it actually exists in Texas, so they are not going to do it.

Takeaway: Ok, I get it, courts are not supposed to create law. This however is a bad ruling: its a recognized tort, its a good tort (there needs to be a damages mechanism for people who try and steal estates) and this essentially says if you're in the Amarillo jurisdiction, there really is not any real downside to try and steal someone's inheritance.  This is such a rampant area, and the enforcement of it is almost nonexistent. We need to punish folks who do this, else there is no disincentive for the next one.

The other ruling, In re Hannah, says a tortious interference with inheritance case is filed like a normal tort damages case, if there is no underlying "probate proceeding." Ok, big deal. Well, while expressly acknowledging that tortious interference is a legit cause of action, it can be the only cause of action. Just not in Amarillo, apparently.

Conclusion: There is a theory called tortious interference with inheritance rights where, in theory, you can get money damages against someone who tries to steal/take away/interfere with your inheritance. Just not in Amarillo, for the time being, and likely some other places. If you want to steal inheritances, do so in Amarillo.

I'll write more on updates as they come along, but in a semi-unrelated aside, if you watched the HBO documentary Gasland, you likely saw the sad story of the Town of Dish, who have filed suit against various energy companies for their crashing property values and damages from the pollution and emissions from the oil and gas development and processing in their town. Apparently they lost a summary judgment ruling at the trial court, but our friends at the Amarillo Court of Appeals have them back in the game. Kind of a fun read, if you are into such things.