Dallas Bar Association
HEADNOTES
Focus Probate, Trusts Estates/Tax Law
December 2017 Volume 42 Number 12
Mike Myers Gives Low-Income Dallasites a Hand Up Mike Myers is the owner and Chairman of Myers Financial Corporation and the Chairman and CEO of Myers Bancshares, Inc. He prides himself on supporting the community in which he lives and works. His mother was his original inspiration to give back. “She mirrored the joy that comes from helping others,” Myers said, as his mother devoted countless hours to teaching a young married women’s Sunday school class for 40 years. He started his philanthropic efforts early in life, establishing a foundation at the age of 29. For over 50 years, he has consistently made significant contributions to various charitable causes. This desire to give back to the Dallas community led him to generously contribute $30,500 to this year’s Equal Access to Justice Campaign. The Equal Access to Justice Campaign is the annual fundraising Mike A. Myers campaign which supports the activities of the Dallas Volunteer Attorney Program (DVAP). Myers’ gift makes it possible for DVAP to continue to provide and enhance legal aid to the poor in Dallas, keeping the doors to the courthouse and our overall justice system open to many more people in our community. Since 1982, DVAP has provided, recruited, and trained pro bono lawyers to provide free legal aid to the poor in Dallas. Last year, a 15 member staff supported over 3,000 volunteers in their efforts to volunteer at legal clinics, advise, and represent clients.
stated. “Equal access to justice gives those people who are at a financial disadvantage the legal help they need . . . help they would otherwise not be able to obtain on their own.” The value of pro bono work lies not only in helping low-income people access the courts, but it also provides an unparalleled training opportunity for young lawyers to learn their craft. In addition, the gratitude of the pro bono clients is a welcome benefit. Many volunteers can attest to similar pro bono experiences, which is why DVAP’s tagline, “pro bono: it’s like billable hours for your soul,” resonates with so many attorneys, paralegals, law students, judges, clerks, and others who donate their time. The commitment of Dallas attorneys and the DBA to the Equal Access to Justice Campaign is impressive. Since 1997, the DBA and Legal Aid have joined forces to raise money for the program, with Dallas lawyers donating almost $12 million. DVAP is pleased to announce that Sandra Phillips Rogers, General Counsel of Toyota, is serving as the Honorary Chair for this year’s Campaign. DVAP is a joint pro bono program of the DBA and Legal Aid of NorthWest Texas. The program is the only one of its kind in Texas and brings together the volunteer resources of a major metropolitan bar association with the legal aid expertise of the largest and oldest civil legal aid program in North Texas. For more information, or to donate, visit www.dallasvolunteerattorneyprogram.org. HN
$1 Million $900,000 $800,000 $700,000
To Give: www.dvapcampaign.org.
Myers also started his business endeavors early, by working his way through college and law school as a student who started a catering service, opened a hamburger restaurant, and found success as a Bible salesman. Although he is not a practicing attorney, he earned a J.D. from the University of Texas School of Law and believes that having a law degree has been very useful in the business world. After dabbling in politics, he made his fortune in real estate and banking, owning and operating restaurants, country clubs, banks, and residential community developments. His success in business has allowed him to make a substantial impact as a philanthropist in areas ranging from education to healthcare. “Giving back is about so much more than money or buildings,” Myers said. “It is about creating an example that you hope your children and grandchildren—even people you do not know—will follow. It is a commitment to make life better for others.” The problem of access to justice in Dallas County is one that DVAP works to correct every day. In a country based on justice for all and access to our court system, over 25 percent of Dallas County residents live near the poverty level, and 42 percent have slim hope of being able to afford an attorney. With annual poverty incomes of $30,750 for a family of four, justice is a luxury for low and moderate income families. “I have made it a priority in my life to always give ‘a hand up’ whenever I am able, Myers
BY MICHELLE ALDEN
Michelle Alden is the Director of the Dallas Volunteer Attorney Program. She can be reached at aldenm@lanwt.org.
$600,000
$500,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $50,0000
THANK YOU TO OUR MAJOR DONORS
The Dallas Bar Association and Legal Aid of NorthWest Texas kicked off their annual Equal Access to Justice Campaign benefitting the Dallas Volunteer Attorney Program. A number of Dallas firms, corporations, and friends have committed major support. Join us in recognizing and thanking the following for their generous gifts*:
PRESIDENT’S COUNCIL ($30,000+) Crain Lewis Brogdon, LLP Hartline Dacus Barger Dreyer LLP Mike A. Myers
PLATINUM (CONT) Deans & Lyons, LLP The Hartnett Law Firm Haynes and Boone, LLP Jackson Walker L.L.P. Jones Day Kastl Law, PC Locke Lord LLP Mike McKool Sidley Austin L.L.P. Vinson & Elkins Vistra Energy/TXU Energy
CHAIRMAN’S COUNCIL ($25,000+) Anonymous GOLD PATRON ($20,000+) Margaret & Jaime Spellings DIAMOND ($15,000+) AT&T Services, Inc. Dallas Association of Young Lawyers
GOLD ($5,100+) Anonymous Charla Aldous Baker Botts, LLP
PLATINUM ($10,000+) Akin Gump Strauss Hauer & Feld, LLP Business Litigation Section
GOLD (CONT) Balch & Bingham LLP Baron & Budd, P.C. Condon Tobin Sladek Thornton PLLC Eberstein & Witherite Enoch Kever PLLC W. Gary and Donna Fowler Gibson, Dunn & Crutcher LLP Gruber Hail Johansen Hail Shank LLP Latham & Watkins LLP The Mike & Barbara Lynn Philanthropic Fund Jeff & Annette Patterson Real Property Section Simon Greenstone Panatier Bartlett, PC Simpson Thacher & Bartlett LLP Nancy & John Solana Advised Fund of The Dallas Foundation Robert Tobey Waters, Kraus & Paul, LLP
Law firms, corporations, and individuals wishing to make a pledge will be prominently recognized beginning at the $5,000 level each month through January. To donate, contact Michelle Alden, aldenm@lanwt.org. For more information about the Campaign visit www.dallasbar.org/dvapcampaign. *Donors as of press time.
Inside 6 Pro Bono Award Recipients 10 Modification of Irrevocable Trusts by Agreement 19 DBA Annual Meeting & Awards 25 Choice of Entity and Self-Employment Tax
DONATE YOUR SUITS, DRESSES, COATS! The DBA Community Involvement Committee is collecting gently used men and women’s suits, coats, dress clothes, and accessories. Benefits the Dallas Life Foundation
Drop off donations Friday, December 8, 9:00 a.m. to noon at Belo (circle drive). For more information, contact mgarcia@dallasbar.org.
2 He a d n o t e s l D a l l a s B a r A s s o ciation
D ecem ber 2017
Calendar December Events DECEMBER 1-BELO Noon
FRIDAY CLINICS
“Expedited Proceeding: Trial Skills,” Joshua Sandler. (MCLE 1.00)* RSVP to mmejia@dallasbar.org.
DECEMBER 8-NORTH DALLAS** Noon
“Post Judgment Writs of Execution,” Hershel Chapin. (Ethics 1.00)* Two Lincoln Centre, 5420 Lyndon B. Johnson Frwy., Ste. 240, Dallas, TX 75240. Parking is available in the Visitor’s Lot located in front of the entrance to Two and Three Lincoln Centre. There are several delis within the building. Food is allowed inside the Conference Center. Thank you to our sponsor Fox Rothschild LLP. RSVP to RSVP to mmejia@dallasbar.org.
FRIDAY, DECEMBER 1 Noon
Friday Clinic-Belo “Expedited Proceeding: Trial Skills,” Joshua Sandler. (MCLE 1.00)* RSVP to RSVP to mmejia@dallasbar.org.
Intellectual Property Law Section “Notable Case Law Impacting Licensing 2017,” Jeffrey S. Whittle. (MCLE 1.00)*
DAYL Lunch & Learn CLE
5:00 p.m.
Tax Law Section “New Partnership Audit Rules: What They Mean to Partnerships and Tax Professionals,” Charles Pulman and Matt Roberts. (MCLE 1.00)* DVAP Belo Legal Clinic Volunteers needed. For more information, contact reed-brownc@lanwt.org
TUESDAY, DECEMBER 5
Employee Benefits & Executive Compensation Law Section “The Current Church Plan Litigation: An Update,” G. Daniel Miller. (MCLE 1.00)*
Peer Assistance Committee
6:00 p.m.
DBA Family Holiday Party Enjoy pictures with Santa, face-painting, balloon animals, sing-alongs and more! Please bring an unwrapped toy to be donated to charity. For more information, contact rthornton@dallasbar.org.
TUESDAY, DECEMBER 12 9:00 a.m.
Pictorial Directory Photographer at Belo
Noon
Business Litigation “How to Tame the E-Discovery Beast: What You Need to Know to Stay Out of Trouble,” Lauren Abeyta, Elizabeth Brandon, Laura O’Rourke, and Carol Payne, moderator. (Ethics 1.00)*
Solo & Small Firm Section “Arbitrating Customer Cases in FINRA: No Depositions, No Interrogatories, No Rules of Evidence – No Problem!” Richard Lewins. (MCLE 1.00)*
Juvenile Justice Committee
Public Forum Committee
DAYL Foundation Board
Home Project Committee
5:30 p.m.
Bankruptcy & Commercial Law Section “Fireside Chat with the Local Bankruptcy Judges,” Hon. Stacey G.C. Jernigan. (Ethics 1.00)*
Legal Ethics Committee
11:30 a.m. Alternative Dispute Resolution Section “Family Violence Training for Mediators, Civil Practice and Remedies Code Training Update,” Dawn Fowler, Kristene Ruddle, and Ashley Tanner. (MCLE 4.00)* RSVP estevan. troche@dallascounty.org.
THURSDAY, DECEMBER 7
Noon
Dallas Area Real Estate Lawyers Discussion Group
Noon
Family Law Section Board Meeting
5:15 p.m.
Corporate Counsel Section “Delaware Corporate Law Update,” Mark Morton. (MCLE 1.00)*
CLE Committee
Tort & Insurance Practice Section Topic Not Yet Available
9:00 a.m.
Santa Brings A Suit Drive Drop Off – Circle Drive at Belo.
St. Thomas More Society
Noon
1:30 p.m.
Intellectual Property Law Section “IP Attachés: How USPTO Resources Can Help You Navigate IP Issues Abroad,” various speakers. (MCLE 2.50, Ethics 0.25)*
North Dallas Friday Clinic “Post Judgment Writs of Execution,” Hershel Chapin. (Ethics 1.00)* Two Lincoln Centre, 5420 Lyndon B. Johnson Frwy., Ste. 240, Dallas, TX 75240. Parking is available in the Visitor’s Lot located in front of the entrance to Two and Three Lincoln Centre. There are several delis within the building. Food is allowed inside the Conference Center. Thank you to our sponsor Fox Rothschild LLP. RSVP to RSVP to mmejia@dallasbar.org.
6:00 p.m.
DVAP/JLTLA CLE “I’ve Passed the Bar, Now What? Things You Didn’t Learn in Law School,” Judicial panel. RSVP vallejod@lanwt.org. (MCLE 2.00)* DAYL Board of Directors Meeting
WEDNESDAY, DECEMBER 6 Noon
Outstanding Court Staff Awards The winners for the 2017 Outstanding Court Staff Awards will be announced and recognized at this luncheon. RSVP to lhayden@dallasbar.org.
MONDAY, DECEMBER 11
11:30 a.m. DAYL Foundation Fellows Luncheon. Register at https://2017fellowsluncheon.eventbrite.com Noon
Alternative Dispute Resolution “The Chartered Institute of Arbitrators and Its Arbitration Rules and Processes,” Tom Cunningham and Melinda G. Jayson. (MCLE 1.00)*
Mergers & Acquisitions Section “Tax 101 for M&A Lawyers,” Aaron Pinegar. (MCLE 1.00)*
7:45 a.m.
Environmental Law Section Topic Not Yet Available
FRIDAY, DECEMBER 8
Immigration Law Section “Introduction to the US ICE IMAGE Program,” Chip Black and Yas Sadri. (MCLE 1.00)*
WEDNESDAY, DECEMBER 13
Noon
5:30 p.m.
Real Property Law Section “Make Life Better: Leveraging Tech,” Keith Mullen. (MCLE 1.00)*
MONDAY, DECEMBER 4 Noon
Collaborative Law Section “The Story of Medicine Hat: Creating a Flourishing Collaborative Community,” Larry Hance. (MCLE 1.00)*
Visit www.dallasbar.org for updates on Friday Clinics and other CLEs.
FRIDAY, DECEMBER 15 Noon
Trial Skills Section “Winning In The Courtroom – A Conversation with Houston Trial Lawyer, Dan Cogdell,” moderated by Bill Mateja. (MCLE 1.00)*
DBA Community Service Fund Board Meeting
DAYL Lawyers Against Domestic Violence Committee
MONDAY, DECEMBER 18 Noon
DAYL Federal Practice CLE/Swearing-In Ceremony
DAYL Membership Committee
TUESDAY, DECEMBER 19 Noon
Blockchain Law Study Group “Bitcoin, Ethereum, and Blockchain: Surprising Insights from 200+ Podcast Interviews of Industry Insiders,” Richard Jacobs. (MCLE 1.00)*
Franchise & Distribution Law Section “International Joint Ventures in the Franchise Space: Unique Challenges, Strategies, and Risk Management,” Mo Alturk and Jorge Gonzalez. (MCLE 1.00)*
6:00 p.m.
DAYL Aid to the Homeless Committee
Dallas Hispanic Bar Association
WEDNESDAY, DECEMBER 20 Noon
Energy Law Section Topic Not Yet Available
DVAP New Lawyers Luncheon. Contact reedbrownc@lanwt.org.
Pro Bono Activites Committee
LegalLine. Volunteers needed. RSVP to sbush@dallasbar.org.
THURSDAY, DECEMBER 21
THURSDAY, DECEMBER 14
Noon
Appellate Law Section “Texas Supreme Court Metrics: New Numbers, New Perspectives,” R. Michael Northrup. (MCLE 1.00)*
Government Law Section Topic Not Yet Available
CLE Committee
Publications Committee
Christian Lawyers Fellowship
DAYL/DBA Moms in Law
DAYL Pro Bono Partners Committee
Dallas Women Lawyers Association
1:00 p.m.
DWLA Board of Directors Meeting
3:30 p.m.
DBA Board of Director Meeting
6:00 p.m.
J.L. Turner Legal Association
No DBA Events Scheduled
FRIDAY, DECEMBER 22
DBA Offices Closed in Observance of Christmas Holiday
MONDAY, DECEMBER 25
DBA Offices Closed in Observance of Christmas Holiday
TUESDAY, DECEMBER 26 No DBA Events Schedule
WEDNESDAY, DECEMBER 27 No DBA Events Scheduled
THURSDAY, DECEMBER 28 No DBA Events Scheduled
FRIDAY, DECEMBER 29 No DBA Events Scheduled
MONDAY, JANUARY 1
DBA Offices Closed in Observance of New Year’s Holiday
G®ò T« Ä»Ý T«ÙÊ禫 HÊÄÊÙ G®ò®Ä¦
A dona�on to DVAP is a though�ul way to honor someone while providing access to jus�ce for all. For a $50 dona�on, DVAP will send a holiday card to a person of your choice! Log on to www.dallasbar.org now to send your gi�!
If special arrangements are required for a person with disabilities to attend a particular seminar, please contact Alicia Hernandez at (214) 220-7401 as soon as possible and no later than two business days before the seminar. All Continuing Legal Education Programs Co-Sponsored by the DALLAS BAR FOUNDATION. *For confirmation of State Bar of Texas MCLE approval, please call Grecia Alfaro at the DBA office at (214) 220-7447. **For information on the location of this month’s North Dallas Friday Clinic, contact yhinojos@dallasbar.org.
De c e mb e r 2 0 17 â€
D al l as Bar A ssoci ati on l Headnotes 3
4 He a d n o t e s l D a l l a s B a r A s s o ciation
D ecem ber 2017
President’s Column
Headnotes
Stronger Together BY ROB CRAIN
This month closes out the 134th year of the Dallas Bar Association, and an extraordinary year it has been. Please indulge the personal privilege I take with this column; I will never be able to sufficiently express my gratitude for the honor of serving beside you as your President this year, but I am going to try. We entered this year with a long list of initiatives, probably more than we should have; but hey, that is what we do. From the outset, our primary goal this year was to serve and support our new Executive Director, Alicia Hernandez, as she took the controls of our Association. If we could help her successfully make the transition, then that would be a great year. Well, a funny thing happened. Alicia took hold of the job as if she had done it for 20 years. All of the service and support came from her to us. I am confident my attempts to assist her just created a nuisance for her to clean up. As I have said many times this year, I believe the success of this Association is attributable to three things: (1) having the Belo Mansion to call home, (2) having a remarkably selfless and generous membership of service-driven lawyers, and (3) being blessed over the past 50 years with excellent leadership from our Executive Directors. It is clear the DBA remains in the hands of world-class leadership. Alicia, we are not who we are without you. Thank you for your steady hand, endless work ethic, and delaying your eye rolls until after I leave your office. Alicia leads the best staff of any bar association in the country. I claim this statement as fact. Over the past two years I attended numerous conferences for bar association leaders. I learned to be careful in talking about programing by the DBA because no other bar association has a Belo Mansion, and no other bar association has a staff that does more. Their names are rarely called despite doing most of the work. To Grecia Alfaro, Biridiana Avina, Shawna Bush, Sherri Evans, Melissa Garcia, Liz Hayden, Yedenia Hinojos, Marcela Mejia, Viridiana Mejia, Judi Smalling, Jessica Smith, Rhonda Thornton, Kimberly Watson, Kathryn Zach, and Mary Ellen Johnson— thank you for your relentless dedication to our Association. You do the work while others take the credit, usually me. For many of us who wandered into bar service early in our careers, Cherie Harris, Executive Director of the Dallas Association of Young Lawyers, played a significant role in our journey. Cherie is celebrating her 25th year with DAYL. Cherie, thank you for helping shape generations of lawyers into service-minded professionals. Your impact is all over our community. The 2017 DBA Board of Directors is unique in many ways. It is the most inclusive and diverse of any past DBA board, and an example for bar associations across the country. There are more women on the Board than ever, representing nearly 60 percent of the Board. Just as importantly, leadership positions on the Board are increasingly diverse—and I’m confident these leadership numbers are on the rise. This is a working Board. Becoming a DBA Director is not a resume filler. I will take any bet this is the hardest working Board of Directors of any bar association in the nation. To all the Directors, thank you for your tireless work, dedicated example to our 11,285 members, and for embracing our vision this year. It is an honor to be associated with each of you. And to you, fellow members, it is truly humbling to be witness to your generosity toward one another, our profession, and our community. Once again you produced hundreds of continuing education events, provided over 50,486 hours of pro bono service (yes, that number is correct, likely low), built your 27th home for Habitat for Humanity, mentored hundreds (school children, law students, and young lawyers), collectively performed thousands of community service hours through DBA organized events, raised over $1.1 Million for the 2016-17 EAJ Campaign supporting legal aid for the poor, presented the 32nd Bar None Production which has cumulatively raised nearly $2 Million for scholarships, orchestrated the state’s largest mock trial competition, created another year of award-winning Headnotes, organized countless social events often supporting charitable causes, supported members with alcohol and/or mental health concerns, memorialized the passing of DBA members with beautiful resolutions for their families, amicably resolved fee disputes (for free), and on and on and on… All of your service is volunteered, often sacrificing time from work and family. I will say it again, with all due respect to the wonderful work performed by many local trades, there is not another profession in North Texas that does more to serve others than the legal community. Prior to getting engaged with bar service, I volunteered as a “Big” in the Big Brothers Big Sisters program (highly recommended), but that was the extent of my comfort zone. Making a systemic difference in my profession or community was not on my radar. It was only after being introduced to the DAYL and DBA, and watching all of you give endlessly to help one another, our profession, and our community did the light turn on—that giving back is not just the right thing to
do, it is a responsibility we share as lawyers to leave our profession and community better than we found it. I cannot thank you enough for being such a positive example in my life. I am indebted to you. We approached this year with a singular focus, to bring people together. We followed the mantra, Stronger Together. And you delivered. You brought over 500 people together for our “214/817 Night at the Ballpark.” Lawyers, judges, and family members from the DBA, Tarrant County Bar Association, and Arlington Bar Association dined together and attended a game between the Texas Rangers and Oakland Athletics. Robert Tobey and Krisi Kastl recruited many of you to launch an Ambassadors Program to educate non-members and encourage them to join the DBA or one of our sister bar associations. A contingency of DBA lawyers, judges and guests visited Cuba. Between visits to cultural and historical sites the group met with Cuban professors, lawyers, and judges. Relationships were forged and the world got smaller for all involved. Chief Judge Barbara Lynn conducted the first Naturalization Ceremony at the Belo Mansion. Our newest citizens were sworn in during a beautiful ceremony and then lunched with DBA members in the Pavilion. Dawn Estes and Dena Stroh led us in partnership with the Dallas Women Lawyers Association to host a Fireside Chat with Lesley Stahl in celebration of Women’s Equality Day. This was followed up a couple weeks later with a panel discussion, Bridging the Gap on Gender Diversity, with General Counsels from AT&T; Toyota, Sandra Phillips Rogers; and Walmart, Phyllis Perrin Harris. And a personal note of thanks to David R. McAtee II, Senior Executive Vice President and General Counsel of AT&T. He and AT&T were the Presenting Sponsors for both events and David was a principal participant in both. David, Sandra, and Phyllis are global champions for diversity and generous supporters of the DBA. The year also included a Fireside Chat with Mayor Mike Rawlings, an amazing Law Day address by Judge Tonya Parker, a revamped Bench Bar Conference (thank you Erin Nowell, Mary Scott, and Quentin Brogdon), celebration of the 40th anniversary of the purchase of the Belo Mansion (see video on DBA website), creation of Online CLE (coming to you very soon), creation of the Kim Askew Distinguished Service Award and new awards luncheon, security upgrades for the Belo Mansion, numerous improvements and appreciation efforts for Dallas County jurors (Judge Bonnie Goldstein led the effort with Judge Martin Hoffman, Laura Benitez Geisler, and others), rapid response to the legal needs of Hurricane Harvey evacuees (Michelle Alden), and on and on and on. Our signature effort this year was partnering with Pastor Richie Butler and The Year of Unity to produce Together We Dine, a series of dinner discussions/listening exercises about race. Our fourth and final event on November 7th attracted nearly 200 people at Highland Park United Methodist Church. The synergy of this joint effort with our sister bar associations, the faith community, the medical profession, law enforcement and many others cannot be overstated. This is a movement, and it is growing fast. There are many more unique efforts I should mention, and there are many more people I should publicly thank, but space is growing short, so please accept my apologies for not mentioning all your special contributions this year. A few final thoughts as we move forward—our nation’s public discourse on sensitive issues like race is not where it should be. Sometimes it feels like rational public discourse no longer exists as the voices on radio, television, and social media are so loud and so strident they drown out all other voices, or worse, they motivate others to take extreme views. We learned a number of lessons this year with Together We Dine. We learned there is a hunger for heartfelt discussion and listening. We learned that heartfelt discussion and listening almost always ends with an appreciation that what unites us is greater than what divides us. And, surprisingly, we learned how critical it is for professions like the legal profession to lead—not to lead the discussions, not to have the right answers, but to lead people together to places they feel safe sharing their beliefs while listening to others with different beliefs, and to help them find common ground. Most people actually trust the legal community. The people of North Texas want closer bonds and more common ground. All they need is help getting together so they can create those bonds and find that ground. You did that this year. And your impact is a snowball that has just started rolling. In virtually every measurable way, our Association is stronger today than ever before, because of you—your service, your ideas, your time, and your concern for others. Thank you for allowing me to partner with you and be witness to it all. It has truly been my honor. HN Stronger Together, Rob
Published by: DALLAS BAR ASSOCIATION 2101 Ross Avenue Dallas, Texas 75201 Phone: (214) 220-7400 Fax: (214) 220-7465 Website: www.dallasbar.org Established 1873
The DBA’s purpose is to serve and support the legal profession in Dallas and to promote good relations among lawyers, the judiciary, and the community.
OFFICERS President: Rob D. Crain President-Elect: Michael K. Hurst First Vice President: Laura Benitez Geisler Second Vice President: Robert L. Tobey Secretary-Treasurer: Rocio Cristina Garcia Immediate Past President: Jerry C. Alexander Directors: A. Shonn Brown, Jonathan Childers, Dawn Estes, Sakina Foster, Stephanie Gause, Hon. Bonnie Goldstein (Judicial At-Large), Hon. Martin Hoffman, Christopher Kang (President, Dallas Asian American Bar Association), Krisi Kastl, Angelina LaPenotiere (President, Dallas Hispanic Bar Association), Bill Mateja, Karen McCloud (Vice Chair), Kate Morris, Cheryl Camin Murray, Erin Nowell, Paul Simon (President, Dallas Association of Young Lawyers), Tramaine Tinner (President, J.L. Turner Legal Association), Aaron Tobin (Chair), and Victor D. Vital Advisory Directors: Isaac Faz (President-Elect, Dallas Hispanic Bar Association), Ashlei Gradney (PresidentElect, J.L. Turner Legal Association), Shruti Krishnan (President-Elect, Dallas Asian American Bar Association), Stephanie Osteen (President-Elect, Dallas Women Lawyers Association), Jennifer Ryback (President-Elect, Dallas Association of Young Lawyers), and Dena DeNooyer Stroh (President, Dallas Women Lawyers Association) Delegates, American Bar Association: Rhonda Hunter, Mark Sales Directors, State Bar of Texas: Jerry Alexander, David Kent, Gregory Sampson, Scott Stolley and Brad Weber HEADNOTES Executive Director/Executive Editor: Alicia Hernandez Communications/Media Director & Headnotes Editor: Jessica D. Smith In the News: Judi Smalling Art Director: Josh Garza Display Advertising: Tobin Morgan, Annette Planey, Jessica Smith Classified Advertising: Judi Smalling PUBLICATIONS COMMITTEE Co-Chairs: Alexander Farr and Keith Pillers Vice-Chairs: Andy Jones and Carl Roberts Members: Timothy Ackermann, Logan Adock, Wes Alost, Jason Bloom, Grant Boston, Andrew Botts, Emily Brannen, Amanda Brown, Paul Chappell, Charles Coleman, Shannon Conway, Rob Crain, James Deets, James Dockery, Maria Fernandez, Dawn Fowler, Andrew Gould, Susan Halpern, Meghan Hausler, Jeremy Hawpe, Beth Hearn, Lindsay Hedrick, Nicole Holland, Michael Hurst, Brad Jackson, Andrew Jones, Kristi Kautz, Daniel Klein, Michelle Koledi, Kevin Koronka, Susan Kravick, Jess Krochtengel, Dwayne Lewis, Margaret Lyle, Lawrence Maxwell, Jr., R. Sean McDonald, Kadie Michaelis, Terah Moxley, Jessica Nathan, Eugene Olshevskyy, Kirk Pittard, Laura Anne Pohli, Charles Price, Mark Rasmussen, Adam Reed, Kathy Roux, Joshua Sandler, Mary Scott, Jared Slade, Christopher Snyder, Thad Spalding, Shana Stein, John Stevenson, Scott Stolley, Amy Stowe, Adam Swartz, Ashely Swenson, Michael Tristan, Pryce Tucker, Kathleen Turton, Peter Vogel, Suzanne Westerheim, Yuki Whitmire, Jason Wietjes, Sarah Wilson, Pei Yu DBA & DBF STAFF Executive Director: Alicia Hernandez Accounting Assistant: Shawna Bush Communications/Media Director: Jessica D. Smith Controller: Sherri Evans Events Director: Rhonda Thornton Executive Assistant: Liz Hayden Executive Director, DBF: Elizabeth Philipp LRS Program Assistant: Biridiana Avina LRS Interviewers: Viridiana Avina, Marcela Mejia Law-Related Education & Programs Coordinator: Melissa Garcia Membership Director: Kimberly Watson Projects Coordinator: Kathryn Zack Publications Coordinator: Judi Smalling Receptionist: Grecia Alfaro Staff Assistant: Yedenia Hinojos DALLAS VOLUNTEER ATTORNEY PROGRAM Director: Michelle Alden Mentor Attorneys: Kristen Salas, Katherine Saldana Volunteer Recruiter: Chris Reed-Brown Paralegals: Whitney Breheny, Miriam Caporal, Tina Douglas, Zaporra Gonzales, Andrew Musquiz, Carmen Perales, Alicia Perkins, Karra Rybicki, Dominick Vallejo Program Assistant: Patsy Quinn Secretary: Debbie Starling Copyright Dallas Bar Association 2017. All rights reserved. No reproduction of any portion of this publication is allowed without written permission from publisher. Headnotes serves the membership of the DBA and, as such, editorial submissions from members are welcome. The Executive Editor, Editor, and Publications Committee reserve the right to select editorial content to be published. Please submit article text via e-mail to jsmith@dallasbar.org (Communications Director) at least 45 days in advance of publication. Feature articles should be no longer than 750 words. DISCLAIMER: All legal content appearing in Headnotes is for informational and educational purposes and is not intended as legal advice. Opinions expressed in articles are not necessarily those of the Dallas Bar Association. All advertising shall be placed in Dallas Bar Association Headnotes at the Dallas Bar Association’s sole discretion. Headnotes (ISSN 1057-0144) is published monthly by the Dallas Bar Association, 2101 Ross Ave., Dallas, TX 75201. Non-member subscription rate is $30 per year. Single copy price is $2.50, including handling. Periodicals postage paid at Dallas, Texas 75260. POSTMASTER: Send address changes to Headnotes, 2101 Ross Ave., Dallas, TX 75201.
De c e mb e r 2 0 17 â€
D al l as Bar A ssoci ati on l Headnotes 5
6 H e a d n o t e s l D a l l a s B a r A s s o ciation
D ecem ber 2017
Baker Botts Recognized as Pro Bono Law Firm of the Year Jack Fan Named Pro Bono Lawyer of the Year STAFF REPORT
Each year, the Dallas Volunteer Attorney Program (DVAP), a joint project of the Dallas Bar Association and Legal Aid of NorthWest Texas, honors the lawyers, judges, and other legal professionals who donate pro bono legal services. At the Annual Pro Bono Awards Reception on November 8, the Dallas office of Baker Botts L.L.P. was recognized as Pro Bono Law Firm of the Year for providing more than 4,500 hours of pro bono services to DVAP clients this year. The firm has been instrumental in supporting pro bono for many years, volunteering at DVAP’s various clinics, representing pro bono clients, and providing pro bono help wherever they can. Baker Botts donates nearly 30,000 hours to pro bono each year—38 percent of which is partner participation, and 75 percent of which is association participation. The firm encourages lawyers to devote time to pro bono legal work. Pro bono clients are on par with other clients— providing the full resources of the firm and the same level of client service. This work is valued on Jack Fan an equal basis with legal services provided to fee-paying clients. According to their website, Baker Botts has long been committed to “communities in which we live and work; helping those in need is a big part of that commitment.” The firm’s pro bono efforts have included a number of life-changing cases that have helped exonerate the innocent, assist the
Congratulations to all our DVAP Pro Bono Award winners!
homeless, advocate for children at risk and families in need. The firm is also involved in educational pro bono initiatives, such as the annual Invention Convention, a competitive event sponsored by the Richardson Independent School District in Texas. Jack Fan, of The Fan Law Office, P.C., was named Pro Bono Lawyer of the Year. Mr. Fan contributed more than 300 hours of pro bono service to DVAP. During the last year, he has accepted an amazing 45 cases from DVAP, many of which included various family law issues. He has interviewed countless applicants for legal assistance at many of DVAP’s legal intake clinics, including the South Dallas Clinic, the Expunction and Non-Disclosure Clinic, the Prove-Up Clinic, and the Garland Clinic. Mr. Fan was also the recipient of the
2017 Pro Bono Awards Lawyer of the Year Y. Jack Fan Fan Law Office Lawyer Firm of the Year Baker Botts L.L.P. Pro Bono Appreciation Award Rob Crain Crain Lewis Brogdon, LLP Hartman Judicial Pro Bono Service Award Hon. Drew Ten Eyck 301st District Court Ken Fuller Outstanding Mentor Attorney of the Year Jack Wilburn, Attorney at Law Gold Award for Pro Bono Service Haynes and Boone, LLP Norton Rose Fulbright US LLP Sidley Austin LLP Manning & Meyers Silver Award for Pro Bono Service Thompson & Knight LLP Jones Day Hunton & Williams LLP Kilpatrick Townsend & Stockton LLP Bronze Award for Pro Bono Service Locke Lord LLP Akin Gump Strauss Hauer & Feld LLP Andrews Kurth Kenyon LLP Morgan, Lewis & Bockius LLP Pro Bono Coordinator of the Year Traci Boyle Cozen O’Connor
Outstanding Support Volunteer John VanBuskirk, Attorney at Law
2017 DAYL Pro Bono Service Award for his impressive pro bono contributions. An outspoken advocate for pro bono legal service, he has not only taken on and represented numerous DVAP clients, but he has also volunteered at many clinics and training events. Additionally, he has mentored and encouraged colleagues and the wider
Dallas Bar community to participate in pro bono work. Mr. Fan, a 2007 graduate of the American University Washington College of Law, practices in the areas of probate, estate planning, and family law. DVAP congratulates Baker Botts L.L.P. and Jack Fan! HN
DAYL Foundation Fellows Luncheon Monday, December 11, 2017 11:30 a.m. – 1:00 p.m. Keynote address: Dallas District Attorney Faith Johnson Tickets $35; Table of ten $350 • Register at https://2017fellowsluncheon.eventbrite.com.
Why Donate to the Equal Access to Justice Campaign benefiting DVAP?
Outstanding Small Firm Attorney Jack Manning, Manning & Meyers Outstanding Solo Practitioner Sharon Campbell, Attorney at Law Outstanding Clinic Sponsor K&L Gates LLP Outstanding Clinic Attorney Volunteers West Dallas Clinic Pamela St. John, AT&T Garland Clinic L. Bradley Johnson, Bailey & Galyen South Dallas Clinic Steven Riddiough, Attorney at Law East Dallas Clinic Scott Robelen, Bailey & Galyen Outstanding Veterans Clinic Attorney Dustin Mauck RegitzMauck PLLC Pro Bono Court Reporter of the Year Glenda Finkley Dallas County Outstanding Court Personnel Jeffery White Dallas County Outstanding Corporate Coordinator Monique Goujat Southwest Airlines
TO GIVE
HOPE
TO ASSIST
NEEDS
TO SEEK
JUSTICE
☑ Help provide legal aid to the poor. recognition in Headnotes, D Magazine, The ☑ Receive Dallas Morning News Giving Guide, The Dallas Morning News, and Texas Lawyer.
recognition in the DBA’s weekly e-newsletter and ☑ Receive on the DBA website and social media pages.
☑ Be highlighted in press releases. the subject of a feature Headnotes article on you, your ☑ Be firm, or organization. ☑ Receive complimentary tickets to the DBA Inaugural Ball. ☑ Plus many more perks! Donate now to take advantage of these great benefits!
Find out more at www.dallasbar.org/dvapcampaign
De c e mb e r 2 0 1 7 â€
D al l as Bar A ssoci ati on l Headnotes 7
8 He a d n o t e s l D a l l a s B a r A s s o ciation
Focus
D ecem ber 2017
Probate, Trusts Estates/Tax Law
Luxury Property Special Purpose Entities BY CHRISTIAN S. KELSO, ESQ.
When it comes to luxury property, such as beach houses, lake houses, ski condos, hunting leases, aircraft, watercraft, limousines, and the like, two rules almost always apply: First, they are expensive to own and operate. Second, they tend to sit dormant much of the time. In order to spread out costs, decrease waste, and mitigate damage, it often makes sense for multiple owners to combine resources and share ownership of this type of property. Whether friends or family, parties wishing to maximize these advantages often hold the property in a special purpose entity (SPE). But ownership of luxury property involves legal and practical problems that differ from those of the standard, commercial world. The tips below will help practitioners recognize and address the problems. Entity Choice. LLCs are generally
the entity of choice for luxury property SPEs in Texas. General partnerships lack appropriate liability protection, while limited partnerships are more expensive and complicated. Although double taxation may be less of a concern where the principal asset is luxury property, the use of corporations nonetheless raises tax concerns, including upon contribution of the luxury property to the SPE in a qualifying non-recognition transaction. Also, LLCs provide a level of privacy that can be valuable. Usage Rules. Parties to a luxury property SPE must determine how, when, and by whom the property can be used. Options include reservation systems, drawing lots, or simply a first come, first served rule. Similarly, guests, family members, pets, and smoking should be addressed. Parties should also expressly permit or forbid outside rental of the property. Contributions. Rules for sharing
I Just Passed the Bar, Now What? Things You Didn’t Learn in Law School! Tuesday, December 5, 5:30-7:30 p.m. at Belo | MCLE 2.00 Judicial Panel on Discovery, Effective Communications with Clients and Employees To register contact vallejod@lanwt.org. Hosted by DVAP and J.L. Turner Legal Association
costs and expenses are also very important. Who will determine what expenses are proper? How and when will contributions be required? Should costs be shared pro rata, per capita, or otherwise? Many usage charges are difficult to track, which leads to infighting. Requiring users to pay for fuel may be appropriate, but allocating a hangar fee may not. Also, budgeting for expenses well in advance and providing limitations on increases can provide comfort. Penalties are another important concern. Unlike income-producing entities, luxury property SPEs require regular cash contributions for upkeep, taxes, and other expenses, so mechanisms are required to hold owners to their obligations. Thus, interest charges, as well as forfeiture of usage, voting rights, or even the ownership interest itself may be appropriate. Contributions must be carefully defined. If Uncle Bob takes his favorite recliner to the ski condo for a few years, is it contributed or can he take it back? Answers to such questions will depend on the circumstances and may change over time. Management. Especially where many owners are involved, appointing and empowering capable managers is important. Expecting family factions to agree on a cable package for the old family homestead is unrealistic. Managers’ powers should provide flexibility because they may need to make quick decisions. A company agreement can provide broad direction and allow managers to set specific policies and procedures internally, allowing for simpler, quicker amendments.
Ownership and Voting. Permissible owners of luxury property SPEs should be well defined. Transfers within this class should be easily made, while transfers outside the class should be difficult, but not impossible. Similarly, assignees’ rights should be clearly defined, particularly in the context of unintended transfers. For example, should assignees hold usage rights? Also, it may be helpful to limit ownership by disallowing fractionization of interests. For example, transferees receiving less than a whole unit might be made assignees until the entire unit is held by one person. Voting rights present other problems. Small luxury property SPEs will likely function better with a per capita voting whereas larger ones work best where votes are cast pro rata. Also, the threshold for supermajority voting should typically be lower with a luxury property SPE than with a business enterprise, because the entity represents a liability to its owners and they should have a more available exit strategy. To summarize, many of the above considerations either play out differently or simply do not apply in the context of commercial entities. Further guidance can be found in the rules applicable to social clubs and fraternal organizations. Unlike those organizations, however, additional flexibility is required with a luxury property SPE. If the parties are willing to exercise good planning, show a little patience, and adapt their systems, they will reap great benefits. HN Christian S. Kelso, Esq. is a senior associate at Farrow-Gillespie and Heath, LLP. He can be reached at christian.kelso@fghlaw.com.
Together We Dine
On Tuesday, November 7, Project Unity partnered with the Dallas Bar Association and Highland Park United Methodist Church to host the final Together We Dine event for 2017. Nearly 200 participants had open conversations about race, religion, and politics during the evening’s event.
ABA Publication Discount For DBA Members Dallas Bar members can purchase ABA books at a 15% discounted rate. For a complete list of titles or to place an order, visit www.ababooks.org. Enter code “PAB7EDBA” upon checkout and the 15% discount will be automatically applied to your order. Discount does not apply to ABA-CLE iPod products. For assistance, call (312) 988-6112.
De c e mb e r 2 0 17
D al l as Bar A ssoci ati on l Headnotes 9
“Our estate planning and probate litigation team is ready for anything . . . because there’s no such thing as a routine estate matter.” -- Former Probate Judge Chris Wilmoth
Elaine Price
Charlotte Nall Probate Litigation
Leah Lanier Probate Litigation
Probate & Guardianship
Christian Kelso
Estate Planning & Taxation
Jennifer Lewis
Liza Farrow-Gillespie Estate Planning & Investment
Estate Planning & Business
Jessica Dunne
Hon. Chris Wilmoth
Probate Litigation
Probate Litigation
Farrow-Gillespie & Heath LLP Business | Litigation | Employment | Estates
www.fghlaw.com
10 H e a d n o t e s l D a l l a s B a r A s s o ciation
Focus
D ecem ber 2017
Probate, Trusts Estates/Tax Law
Modification of Irrevocable Trusts by Agreement BY AUBREY P. BOSWELL
It is not uncommon for a settlor to create an irrevocable trust, only to later desire to modify the trust. Fortunately, several remedies have been developed to enable modification of irrevocable trusts, including judicial modification, flexibility built into a trust instrument permitting future modification, and modification by decanting under statutory authority. A fourth option has also been developed through common law—modification by agreement of the settlor and beneficiaries. Modification by agreement is not as widely known or used in practice as other techniques for modifying irrevocable trusts, but can be a valuable tool in an estate planner’s toolbox. The elements for modification by agreement are found in Musik v. Reynolds, 798 S.W.2d 626 (Tex. App.—Eastland 1990, no writ). The settlor must consent to the modification, all of the beneficiaries
must consent to the modification, and no beneficiary may be under an incapacity. The last element – no beneficiary may be under an incapacity – seems to preclude many irrevocable trusts from modification by agreement by virtue of such trusts having minor, unborn, unascertainable, or contingent beneficiaries. In Musik, the nephews of the settlor argued that settlor’s trust modification was invalid because there were unborn or unascertainable beneficiaries who did not consent. In that case, the settlor and the named beneficiaries of the irrevocable trust, executed a settlement agreement modifying the trust. However, the trust also named as beneficiaries settlor’s “children born to or legally adopted by him.” The nephews argued that not all necessary parties had consented to the modification because the settlor could have sired or adopted other children after the date of the modification, and these potential children did not consent. However, the court rejected
that argument and held that since the two daughters who signed the agreement were the only children of settlor as of the time of his death, all of the beneficiaries had in fact given their consent to the trust modification. The court then went further and stated “[m]oreover, a trust can be modified without the consent of unascertainable beneficiaries if their interests are not prejudiced by the modification,” citing the Restatement (Second) of Trusts Section 338(2) (1959). Two aspects of the Musik holding are instructive. First, the court appears to look to the settlor’s time of death to determine whether there were any unborn or unascertained beneficiaries, instead of looking at the date the trust modification was executed. Second, the court suggests that unborn or unascertainable beneficiaries may be virtually represented by other beneficiaries who are parties to the trust modification so long as the interests of the potential unborn or unascertainable beneficiaries are not prejudiced. Under Musik, it appears that not only may a trust modification be made when there is an open class of beneficiaries, if at the time the class closes there are no additional beneficiaries, but also a trust modification may be made when the interests of minor, unborn, unascertainable, and contingent beneficiaries are not prejudiced. From a practical standpoint, this makes sense. If the beneficiary class closes without any additional beneficiaries between the time a trust modification is made and the time the class closes, then no additional beneficiary will be in existence to complain
with regard to the trust modification. Additionally, if all of the beneficiaries to the trust modification comprise all of the beneficiaries of the trust who are adults with mental capacity, and such beneficiaries do not impair the interests of minor, unborn, unascertainable, and contingent beneficiaries, then the likelihood of a challenge to the trust modification for lack of consent by all beneficiaries is extremely low. The concept of virtual representation is well established by Texas common law. In addition, as of 1999, Texas codified non-judicial virtual representation into Texas Trust Code Section 114.032. However, the statute is almost entirely ineffective for trust modifications due to subsection (e) of the statute which explicitly excepts the application of the statute to trust modifications, “unless otherwise permitted by law.” As a result, practitioners must rely almost exclusively on the common law concept of virtual representation for trust modification by agreement of parties. Musik is helpful in that it sheds additional light on the common law concept of virtual representation. Practitioners may find the concepts identified in Musik to be a valuable resource for clients seeking to modify an irrevocable trust, but who do not desire the time and expense which may be incurred with judicial modification and who may not qualify for other non-judicial methods of trust modification such as decanting. HN Aubrey P. Boswell is an associate at Andrews & Barth, PC. He can be reached at aboswell@andrews-barth.com.
BROUSSEAU NAFTIS & MASSINGILL, P.C. They partner. They protect. They deliver.
Personal, yet powerful, Brousseau Naftis & Massingill, P.C. concentrates on helping individuals, small businesses, and entrepreneurs with their legal needs inside or outside of the courtroom. The firm offers a high level of personal service and strategic thinking that are unmatched, and its attorneys are unarguably the “go-to” attorneys for small business owners, families, and individuals. The award-winning attorneys provide their clients with a notable edge, as the firm assists clients not only with family law issues, but also with real estate matters, estate planning and probate, and fiduciary and commercial litigation. They treat their clients’ issues as their own and offer solutions based on cost and achievable benefit. The firm’s attorneys are consistently sought after for their ability and success in crisis management and for a creative, pragmatic approach in achieving client objectives, whether by the aggressive pursuit of a courtroom victory or innovative thinking that results in the settlement of the most challenging disputes.
Johnston Pratt PLLC is thrilled to announce the addition of:
Bruce Heitz, of counsel
adding deep bank regulatory experience to our financial services group -and-
Left to Right: Madhvi Patel, Stephanie Hynes, Matthew Naftis, Maryann Brousseau, Ron Massingill, Elayna Erick
300 Knox Place | 4645 North Central Expressway Dallas, Texas 75205 | 214.220.1220 bnmdallas.com
Anna Lee Alford, associate specializing in commercial real estate financing. Welcome!
De c e mb e r 2 0 17
D al l as Bar A ssoci ati on l Headnotes 11
FAMILY LAW
Private Judge • Litigator • Mediator • Arbitrator
Susan Rankin FAMILY LAW SPECIALIST SUSAN RANKIN FAMILY LAW SHAREHOLDER srankin@QSLWM.com
• 12 Years Presiding Judge 301st and 254th Family District Courts • 2 1/2 Years Associate Judge 301st Family District Court • Board Certified in Family Law • 29 Years Practicing Family Law • Voted to D Magazine’s Top Womens Lawyers in North Texas (2010) • Member of Texas Academy of Family Specialists
TWO LOCATIONS Dallas (Primary) 2001 Bryan Street, Suite 1800 Dallas, Texas 75201 Phone: 214.871.2100
Plano 7800 N. Dallas Parkway, Suite 560 Plano, Texas 75024 Phone: 214.871.2100
QSLWM.com
12 H e a d n o t e s l D a l l a s B a r A s s o ciation
Focus
D ecem ber 2017
Probate, Trusts Estates/Tax Law
Trust FAQs: Ask an Estate Planner BY BRANDYE L. BROWN AND JULIE S. HARRIS
Trust us, there are many good questions about trusts! Keep reading for answers to the top 10 questions estate planners hear. This discussion focuses on “trusts” formed under Texas law, including revocable, irrevocable, grantor, nongrantor, intervivos, and testamentary trusts. A trust is a fiduciary relationship formed by agreement between grantors who “settle” the trust and trustees who manage property on behalf of beneficiaries. These answers do not apply to real estate trusts or business trusts. 1. Is a trust an entity? Under the Texas Business Organizations Code (TBOC), a trust is a “person,” but not an “entity.” Texas trusts are not domestic entities, because trusts are not formed under, nor governed by, the
TBOC. Additionally, trust agreements are not filed with the Secretary of State and generally remain private. 2. Can trusts be partners of partnerships? Own real property? Yes, in both cases, subject to the response to Question 3 below. A trust can be a stockholder, member, or partner of an entity and can even serve as general partner, managing partner, or managing member. Trusts can own assets just as individuals do, e.g., equity investments, real and personal property, digital assets, and financial accounts. 3. Who signs on behalf of a trust? The trustee signs documents on behalf of a trust—in the fiduciary capacity “as trustee.” Note that because a trust is a relationship and not an entity, trust property is technically held in the name of the trustee and not the name of the trust, e.g. Charles R. Flint, as Trustee of the Smith Revocable Trust.
DBA MEMBER REMINDER – RENEW ONLINE TODAY! You may renew your 2018 DBA Dues online. Go to dallasbar.org and click on Member Login to access the Online Renewal form. If you prefer to mail in your payment, log in and select the View you 2018 Dues Statement option to print and mail in your 2018 DBA DUES STATEMENT with payment. Your 2018 DBA DUES must be paid by December 31, 2017 in order to continue receiving ALL your member benefits. Thank you for your support of the Dallas Bar Association!
4. How do I transfer property into a trust? Most property can be transferred into a trust by an assignment agreement. However, real property must be transferred by deed filed in the county of record. Bank or brokerage accounts can be opened on behalf of a trust. Trusts can be designated beneficiaries of assets that are transferred by contract, such as life insurance policies. 5. Do trusts pay income taxes? It depends on the trust agreement and the specific facts. A trust can itself be responsible for taxes on income generated by trust property. The tax brackets for trusts are very condensed so the tax rate may be higher than for individuals with the same amount of income. However, the trust agreement can be drafted so that the grantor individually is responsible for the payment of income taxes if certain conditions are met. Further, a beneficiary may be responsible for taxes on income distributed to the beneficiary from a trust. 6. Can I fire my trustee? Generally, a trust agreement will govern the powers that beneficiaries, trustees, and others have regarding trustee removal, replacement, and appointment. Many trusts permit beneficiaries to remove trustees, but may require a corporate trustee as a replacement. 7. Can a gift to a trust qualify for the annual exclusion from gift tax? Yes, if there is language in the trust agreement that specifically allows the beneficiaries to have certain withdrawal rights with respect to gifts (a/k/a, “Crummey” powers), a gift to the trust can qualify for the annual exclusion from gift tax.
8. What is UTMA? The Texas Uniform Transfers to Minors Act (UTMA) provides a set of rules under which a custodian can hold and manage property for the benefit of minors without the expense of a trust. However, UTMA requires all assets be paid outright to the beneficiary at age 21. 9. Can I create a trust for myself in Texas to protect my assets from creditors? No. Transferring assets to a trust created for your own benefit (a “selfsettled” trust) will not provide asset protection in Texas. In order for the assets in a Texas trust to be protected from creditors, the grantor may not be a beneficiary. 10. Should I transfer all my assets to my Living Trust during my lifetime? In Texas, the probate process is relatively painless, so it is not necessary to transfer all of your assets to your Living Trust during your lifetime if you have a valid will that provides for independent administration and “pours” your assets into trust upon your death. Funding your Living Trust during your lifetime, however, does provide other benefits such as privacy (i.e., assets transferred into trust are not listed on an inventory publicly-filed during probate) and avoiding a court-appointed guardianship in the event of your disability. Transferring out-of-state real property to your Living Trust is key to avoiding out-of-state probate, which can be more onerous than probate in Texas. HN Brandye L. Brown and Julie H. Harris practice estate planning at The Blum Firm, P.C. They can be reached at bbrown@ theblumfirm.com and jharris@theblumfirm.com, respectively.
Our local knowledge spans the globe RSM and our global network of litigation consulting professionals specialize in working with global, national and regional law firms. This focus leads to custom insights designed to meet your specific case challenges. Our experience, combined with yours, helps you move forward with confidence to reach even higher goals. rsmus.com/litigation
THANK YOU TO ALL WHO VOLUNTEERED & HELPED TO MAKE THE DBA DAY OF SERVICE A SUCCESS! FOR YOUR SERVICE: Armstrong & Munoz, PLLC Christian Legal Society Dallas Chapter Dallas Asian American Bar Association Greenberg Traurig Luminant/Vistra Energy SMU Dedman School of Law UNT Dallas College of Law
Bonton Farms C.C. Young Memorial Home/Senior Source Dallas Animal Services Dallas Arboretum RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International.
Dallas Area Habitat for Humanity Dallas Volunteer Attorney Program The North Texas Food Bank
De c e mb e r 2 0 17 â€
D al l as Bar A ssoci ati on l Headnotes 13
14 H e a d n o t e s l D a l l a s B a r A s s o ciation
Focus
D ecem ber 2017
Probate, Trusts Estates/Tax Law
How to Avoid a Will Contest: Five Tips and Tricks BY LARRY A. FLOURNOY, JR.
An impending will contest is like a nightmare that you are not able to wake up from. It is a messy ordeal that puts more at risk than an estate’s assets; it can ruin families and potentially the drafting lawyer’s reputation. No matter how careful a drafter, as long as money motivates people, you may be subject to potential challenges against a will that you drafted. While there is no magic language that completely insulates against a will contest, there are some tips and tricks that can be utilized to reduce the chances of a successful challenge:
No-Contest Clauses
While no-contest clauses are supposed to strike fear into a beneficiary and prevent contests, Texas lawyers need not live in terrorem of no-contest clauses. Section 254.005 of the Texas Estates Code codified the good faith and just cause excep-
tions to a no-contest clause. While these clauses remain enforceable in Texas, have they lost their teeth due to the statutory exceptions? Unfortunately, some uncertainty will remain until Texas courts interpret these exceptions and provide further guidance. Nevertheless, the practice of inserting a no-contest clause into a will is still the most common deterrent to an unknowing, potential, will contestant.
Certify Testator’s Capacity
Issues surrounding a testator’s capacity give litigators fodder in a will contest. In order to circumvent capacity concerns, there are some precautionary measures that drafters can take. Before testamentary documents are drafted, you can encourage your client to obtain a doctor’s letter certifying his or her capacity. If drafters are confident of their testator’s capacity and communication skills, videotaping the execution ceremony is another option. However, this a widely debated tactic. While videotaping could
be persuasive evidence that the testator had sufficient mental capacity, it can also be ammunition to attack the will. For example, such videos could cause jurors to presume that the testator, due to advanced age or physical appearance, lacked capacity or question why it was videotaped in the first place.
Have the Testator Handwrite a Letter
Rather than expressing the reasons for disinheritance within the will, the testator could handwrite a letter explaining the reasons for disposing of his or her estate in the specific manner. Relying on the letter, drafters could draft a will consistent with its contents and retain the letter as proof of testamentary intent. Having such a letter may help to show that the disinheritance was not the result of undue influence, but measured consideration. Of course, if the testator’s handwriting is shaky, illegible, or the letter is written by someone else on behalf of the testator, this could create new grounds for a contest that would not have existed without the letter.
Upfront Gifts Outright to Beneficiaries If you have recently moved, please verify that we have your correct office and home address on file. Just login at www.dallasbar.org/membership, review the information, and update.
Congratulations to Haynes & Boone for raising $38,197 to win the Inaugural Legal Cup Challenge! Thank you to the firms that participated: Haynes & Boone, Jones Day, Thompson Knight and Locke Lord. PICTURED BELOW: TIM POWERS MANAGING PARTNER HAYNES & BOONE
SUSAN WETZL HEART WALK COMPANY LEADER HAYNES & BOONE
MYRA ROBINSON VICE PRESIDENT OF DEVELOPMENT AMERICAN HEART ASSOCIATION
In the event that a potential beneficiary is likely to be litigious after the testator’s death, drafters may suggest that outright gifts occur immediately post mortem. This tactic may be successful to bar claims from a beneficiary who has already collected on a specific bequest under a will. Generally, a party who accepts benefits under a will is estopped from contesting that will. But, it is important to note
that there may be an exception to this rule recognized in the Dallas/Fort Worth area. The Dallas court held that a person who received benefits under a will may not be estopped to contest that will if the person would have received the same or a greater amount under another will of the testator or under the laws of intestacy. Holcomb v. Holcomb, 803S.W.2d 411, 414 (Tex. App. Dallas Jan. 8, 1991). This exception is not recognized by all jurisdictions, so this tactic may still be effective in other parts of the state. See In re Estate of McDaniel, 935 S.W.2d 827, 829 (Tex. App. Texarkana Oct. 4, 1996).
Consider Pre-Death Gifting and Non-Testamentary Transfers
Instead of having to worry about the timing of upfront gifts, another method used to avoid contests is to refrain from using a will to transfer property. Methods include inter vivos gifting, trusts, multiparty payable upon death accounts, beneficiary designations and joint tenancy with right of survivorship deeds. While not completely shielded from challenges, it may be harder for those opposing nontestamentary transfers because they are difficult to trace in comparison to testamentary assets and are subject to different challenge standards. Utilizing these preventative measures may go a long way towards protecting you and your practice from the costly consequences of having a will that you drafted challenged. HN
Larry A. Flournoy, Jr. is a partner at Jordan Flournoy LLP. He can be reached at lflournoy@jfattorneys.com.
DVAP’s Finest WINIFRED CANNON
Winifred Cannon is a sole practitioner who answered a few questions for Headnotes about her pro bono involvement: 1. Why do you do pro bono? I do it because I believe in giving back and paying it forward. The Bible says that it is more blessed to give than to receive, and I wholeheartedly ascribe to this principle. I become better equipped as a counselor since we must be compassionate enough to listen to the client’s concerns and adept at quickly assessing the matter to propose a viable solution. I am humbled to serve those who have laid their lives down for us. They deserve our respect and our best legal representation. I treat the persons who come to our Veterans Clinic the same as I do paying clients. I suit up and bring a listening ear and a learned heart to help assess their legal concerns and to give the next attorney an intake memo with an action plan. 2. What impact has pro bono services had on your career? Pro bono services has helped me sharpen my time-management skills (since I know that I want to serve, I must purposefully approach work/life balance). I have met many attorneys and paralegals who also render pro bono services and count these relationships and teamwork as positively impacting my career and fueling my passion to continue the practice of law. 3. What is the most unexpected benefit you have received from doing pro bono? I was introduced to a new practice area, Veterans Benefits, by attending a DVAPsponsored CLE which prompted me to go the extra mile to serve the needs of the veterans who attend the Veterans Clinic.
Pro Bono: It’s Like Billable Hours for Your Soul. To volunteer or make a donation, call 214/748-1234, x2243.
De c e mb e r 2 0 17
D al l as Bar A ssoci ati on l Headnotes 15
Estate planning and litigation lawyers you can count on The firm—with two Texas offices—represents clients in fiduciary litigation, trust disputes, estate litigation and will contests. It also provides innovative solutions for sophisticated business, estate and probate matters.
JORDAN FLOURNOY LLP 10000 N. Central Expressway, Suite 800 Dallas, TX 75231 PH: (214) 369-0361 JFAttorneys.com
Raymond C. Jordan, Jr.
Larry A. Flournoy, Jr.
16 H e a d n o t e s l D a l l a s B a r A s s o ciation
D ecem ber 2017
Dallas Bar Foundation – Believing in People STAFF REPORT
Throughout this past year, Frank Stevenson, Chair of the Dallas Bar Foundation, spoke on several occasions to DBF Fellows, scholarship and clerkship donors, and law student mentors about their true mission— “the believing in people business.” He commented that their generosity of time and financial resources allowed the Dallas Bar Foundation to award a record number of clerkships and scholarships to area law students this year. He noted that as a result of their beneficence, the law students who were selected to receive these clerkships and scholarships developed a sense of confidence they would not otherwise have, except for the fact that people believed in them. At the annual Clerkship Luncheon in August, Mr. Stevenson acknowledged that the clerkships would not have been possible without the willingness of judges and attorneys to mentor the law students and he thanked the mentors in attendance. The Justice James A. Baker Clerkship at the Supreme Court of Texas with Chief Justice Nathan Hecht was awarded to Henrik Strand, 2L Texas A&M University School of Law. At the conclusion of his clerkship, Mr. Strand was selected for a one-year, post-
graduation clerkship with Texas Supreme Court Justice John Devine. The recipient of the Collins Clerkship at the Supreme Court of Texas with Justice Eva Guzman was Cyndy MacMahon, 2L SMU Dedman School of Law. Both Mr. Strand and Ms. MacMahon were named Coleman Scholars with the Higginbotham Inn of Court for 2017. The DBF also awarded the Bob Mow Judicial Internship at the U.S. District Court and the Stephen Philbin Media Law Clerkship, which is the only one of its kind offered in Texas. Additionally, nine students were selected to receive the Judge Nikki DeShazo and Edward Smith Probate Clerkships and seven other Collins Clerkships were awarded to minority law students. The Baker Clerkship selection com-
SAVE THE DATE THE DALLAS BAR ASSOCIATION’S NEW MEMBER RECEPTION will now be held on Thursday, February 8, 2018 Invitation to Follow For more information, or for sponsorship opportunities, contact kwatson@dallasbar.org
Texas Insurance Coverage Litigation — The Litigator’s Practice Guide, by Amy Elizabeth Stewart is the definitive resource for any litigator handling an insurance coverage dispute.
mittee members are all DBF Fellows and included: David Luther, of K&L Gates LLP; Steve Russell, of Russell &Wright, PLLC; and Trisha DeLeon, of Gruber Hail Johansen Shank LLP. The Bob Mow Judicial Internship Committee was chaired by Kim Askew, of K&L Gates LLP, who was joined by Greg Taylor, of Diamond McCarthy, LLP, and Bobby Rubarts, of Koning Rubarts LLP, all of whom are DBF Fellows. Susan Philbin was able to personally thank the DBF Fellows serving on the Stephen Philbin Media Law Clerkship Committee. Russ Coleman, of Dean Foods, served as chair, and was joined for the second year by Christine Larkin, of The Dallas Morning News, and Paul Watler, of Jackson Walker, L.L.P. DBF Trustees, Victor Corpuz, of Jackson Lewis P.C., and Steve Bolden, from Mahomes Bolden PC, were joined on the Collins Clerkship Committee by Hughes Scholar, Elisabeth Wilson. The Judge Sarah T. Hughes Diversity Scholarship remains the signature program for the DBF. There were a total of seven Hughes Scholars attending law school at the three area law schools in Spring 2017. For the past 32 years, the DBA Bar None Company has raised funds to support the Sarah T. Hughes Diversity Scholarship through their annual variety show. At the Bar None/ Hughes Scholar luncheon in October, Tom Mighell, of Contoural, Inc. and Martha Hofmeister, of Shackelford, Bowen, McKinley & Norton, LLP, announced that Bar None XXXII, Law Law Land, had raised over $85,000 for the scholarships this year bringing the cumulative total for Bar None to almost $2 million. The new Hughes Scholar, Collin Phillips, who started at SMU Dedman School of Law this fall, was introduced. For the seventh consecutive year, the DBF hosted “An Evening With” program, which benefits the Sarah T. Hughes Diversity Scholarships. This year, DBF Trustee, Talmage Boston, of Shackelford, Bowen,
McKinley & Norton, LLP served as Chair of the event. In addition, he led the on-stage interview for An Evening with Jon Meacham. The 2017 Grants Committee was chaired by Ms. Askew, with Mr. Boston serving as Vice-Chair. They were joined on the committee by Wei Wei Jeang, of Grable Martin Fulton PLLC, and Brad Weber, of Locke Lord LLP. Grant requests are thoroughly evaluated to determine that the requests are aligned with the mission of the Dallas Bar Foundation. The Board of Trustees were able to meet several beneficiaries of the grant awards to learn about the positive impact of the programs that were selected. A partial list of grant awards this year include: DBA High School Mock Trial program, which is organized and supported by DBA members. Local attorneys and judges volunteer many hours each year to host and judge the state-wide high school competition. The winning school advances to the national competition. Dallas Urban Debate Alliance, which provides debate instruction, debate competition, and attorney mentors to DISD students who would not otherwise have had an opportunity to participate on a debate team. Dallas CASA (Court Appointed Special Advocates) in support of their initiative to recruit volunteers who are approved with a background check to represent the children’s best interests in court proceedings. Family Law Clinic at SMU Dedman School of Law, which provides pro bono legal services for complex family law cases and which also provides practical training for law students. IGNITE, an after-school civics program for high school girls, which encourages their understanding of the political process, and the importance of having women involved in leadership positions as elected officials. HN
Park Place Dallas Ticket to Drive Raffle Winner receives a 2018 Mercedes-Benz CLA250*
Part I Practical guidance for: • Reviewing and analyzing insurance policies • Understanding the various types of business and management liability coverages that may be available to commercial insureds Part II Indispensable easy-reference overview of Texas law governing insurance coverage disputes Part III Practical strategies for litigating an insurance coverage case: • Dispute resolution and pre-litigation considerations • Discovery tips • Case management ideas • And more! To order call, 1.800.756.8993 or visit www.TexasLawyerBooks.com Amy Elizabeth Stewart is the founding shareholder of Amy Stewart PC, a boutique law firm in Dallas that represents corporations in disputes with their insurers. Amy conducts an active litigation practice involving complex insurance coverage and bad faith cases. She also provides advice on matters relating to risk management, policy procurement and renewals, pre-litigation disputes, and other contract issues implicating insurance or indemnity agreements. Having spent many years representing insurance companies in coverage litigation, Amy has
Runner-Up Receives: Charleston Luxury Getaway (Private Historical Photo Tour, Dinner & Wine Pairings at Charleston Grill, Belmond Charleston Place 3-Night Stay with Airfare for 2) Raffle tickets are $100 each — or 6 tickets for $500. Proceeds benefit the Dallas Volunteer Attorney Program, which provides legal services to the less fortunate in our community. No more than 1,500 tickets will be sold. *Picture shown is not exact winning vehicle
Purchase raffle tickets online at https://www2.dallasbar.org/dbaweb/dvap/raffle.aspx or at the DBA offices at the Belo Mansion (2101 Ross Avenue, Dallas, TX 75201).
insight into the perspectives of both the insurer and the insured. Her experience and understanding of insurance law make her an invaluable resource to clients facing insurance coverage disputes, evaluating and renewing their insurance programs, managing communications with their insurers, and addressing other complex insurance issues.
Drawing will be held at the DBA Inaugural Ball on January 20, 2018 The winner need not be present to win. The winner is responsible for all taxes, title and licensing. Prize is non-transferable. No cash option is available.
De c e mb e r 2 0 17 â€
D al l as Bar A ssoci ati on l Headnotes 17
Hon. Jorge A. Solis joins FedArb to provide Mediation, Mock Trial and Arbitration services
FedArb Texas Judges
Hon. David Folsom
Hon. Royal Furgeson
Hon. Joe Kendall
Hon. Robert J. O’Conor
Hon. T. John Ward
About FedArb Founded 10 years ago, FedArb is an elite provider of mediation, arbitration, mock trial and ADR related services worldwide. It was launched by Hon. Abraham D. Sofaer, who served as a federal judge in the S.D.N.Y. and then as Legal Advisor in the U.S. State Dept. under Hon. George P. Shultz, where Sofaer represented the U.S. in international arbitrations and in cases before the International Court of Justice. FedArb has the largest roster of former US federal district court judges in the world. It also has a roster of distinguished professors, lawyers and experts who, along with the retired judges, are responsible for resolving complex civil litigation across the globe. FedArb works actively with Fortune 500 and NASDAQ 100 companies to facilitate the resolution of disputes through arbitration and mediation, and also offers moot court exercises and leadership for corporate investigations. Its panelists have expertise in 27 different areas, including Securities Litigation, IP, Financial Services, Insurance, Construction, Employment, Entertainment, and Life Sciences/Pharmaceuticals. For more information, FedArb may be reached at 650-328-9500 or FedArb.com.
18 H e a d n o t e s l D a l l a s B a r A s s o ciation
D ecem ber 2017
DBA Presents Awards
Alex Farr, Keith Pillers, DBA President Rob Crain Dena DeNooyer Stroh, Mr. Crain
Kim Askew (center), DBA Distinguished Service Award recipient Mary Scott, Mr. Crain, Quentin Brogdon Mr. Crain, Karen McCloud, David Kent
Erin Nowell, Mr. Crain
Marc Hubbard, Mr. Crain Jennifer Wang, Mr. Crain Hon. Bonnie Goldstein, Mr. Crain
Justice Liz Lang-Miers, Mr. Crain
Robert Tobey, Mr. Crain
Roy Stacy, Morris Harrell Professionalism Award recipient, Mr. Crain
❑ Legal Malpractice Insurance ❑ Business Owner’s Insurance ❑ Probate Bonds ❑ Cyber Coverage
Kathy Roux, Mr. Crain
COME TO THE INAUGURAL OF Michael K. Hurst Saturday, January 20, 2018 The Omni Dallas Hotel and bid on Packages from:
Hotel Zaza
Times Ten Cellars
Local Restaurant
Uptown Yoga
Hattie’s
Hiatus Spa & Retreat
The Capital Grille
Billy Bob’s Texas
OVER 38 YEARS SUPPORTING TEXAS LAWYERS
TLIE.org / info@tlie.org / (512) 480-9074
Tickets $175; Tables $1,750 | Judiciary $125 To reserve your ticket, contact Shawna Bush at (214) 220-7453 or sbush@dallasbar.org. Visit www.dallasbar.org for more information!
De c e mb e r 2 0 17
D al l as Bar A ssoci ati on l Headnotes 19
Dallas Bar Elects 2018 Officers BY JESSICA D. SMITH
Members of the Dallas Bar Association proudly elected its 2018 officers during the Annual Meeting on November 3. Laura Benitez Geisler, of The Geisler Law Firm, was elected president-elect and will serve as the Association’s 110th president in 2019. Ms. Geisler began her service on the DBA Board of Directors in 2007 as President of the Dallas Association of Young Lawyers. She was later elected Chair of the Board of Directors in 2015. She currently serves as the Board Advisor to the Lawyer Referral Service Committee and to the Alternative Dispute Resolution and Intellectual Property Law Sections. In addition, Ms. Geisler was the Co-Chair of the 20142015 Campaign for Equal Access to Justice and she received a DBA Presidential Citation in 2016. Ms. Geisler is a Fellow of the Dallas Bar Foundation, the Texas Bar Foundation, and the DAYL Foundation. She also served as President of the Dallas Women Lawyers Association in 2003. Other officers elected at the Annual Meeting were: Robert Tobey, of Johnston Tobey Baruch, elected first vice-president; Aaron Tobin, of Condon Tobin Sladek Thornton, elected second vice-president; and Vicki Blanton, of AT&T, elected secretary-treasurer. Rob Crain, of Crain Lewis Brogdon, will serve as immediate past president and Michael K. Hurst, of Lynn Pinker Cox & Hurst, will serve as president in 2018. Additionally, on November 8, ballots for director positions were sent to members and six of the following nominees will assume director positions in 2018: Jonathan Childers, Rocío Cristina García Espinoza, Krisi Kastl, Audrey Moorehead, Kathryne (Kate) Morris, Cheryl Camin Murray, Keith Pillers, Kathy Roux, Mary Scott, and Victor Vital. Ballots were due back November 20 and results were not available at press time. The 2018 presidents of the minority bar associations will also serve on the board as Directors, and the president-elects of these associations will serve on the board as Advisory Direc-
Caption for photo Officers.jpg: 2018 Officers at the November 3 Annual Meeting include (left to right): Rob Crain, Immediate Past President; Laura Benitez Geisler, President-Elect; Michael K. Hurst, President; Robert Tobey, First Vice-President; Aaron Tobin, Second Vice-President; and Vicki Blanton, Secretary/Treasurer.
tors, including the president-elect of the Dallas Women Lawyers Association. The DWLA president will have a director position on the board, in accordance with an amendment to the DBA bylaws that was approved at the meeting. This year the DBA held a separate Awards Luncheon to honor our DBA award recipients, including the Distinguished Service Award, the Morris Harrell Professionalism Award, the Outstanding Minority Attorney Award, the Jo Anna Moreland Outstanding Committee Chair Award, and the Cathy Maher Special Section Award. The inaugural DBA Distinguished Service Award recipient was Kim Askew, of K&L Gates. This award, which going forward will be named the Kim Askew Distinguished Service Award, recognizes the DBA member who, through service to the Association and the Dallas community, has shown a lasting dedication to good works—above and beyond the traditional service of DBA members—while promoting good relations among lawyers, the judiciary, and the community. Each year, the Texas Center for Legal Ethics & Professionalism co-sponsors the presentation of the Morris Harrell Professionalism Award with the DBA. The award was created in 1999 in honor of DBA
Past President Morris Harrell to recognize an attorney who best exemplifies, by conduct and character, truly professional traits who others in the bar seek to emulate. This year’s Morris Harrell Professionalism Award recipient was Roy Stacy, of Stacy Conder Allen LLP. Kathy Roux, of the Law Office of Kathy E. Roux, Chair of the Minority Participation Committee, and Alex Farr, of Weil, Gotshal & Manges LLP, and Keith Pillers, of Bank of Texas, Co-Chairs of the Publications Committee, received the Jo Anna Moreland Outstanding Committee Chair Award. The Intellectual Property Law Section, chaired by Marc Hubbard, of Hubbard Johnston, PLLC, received the Cathy Maher Special Section Award. And, the Outstanding Minority Attorney Award was presented to Jennifer Wang, of Carter Scholer PLLC. Presidential Citations were also presented to behind-the-scenes members who have faithfully performed often timeconsuming tasks for the association. This year’s recipients were Karen McCloud, of Karen D. McCloud, P.C., and David Kent, of Drinker Biddle & Reath LLP, for their outstanding efforts as Co-Chairs of the 2016-2017 Equal Access to Justice Campaign benefiting DVAP; Hon. Bon-
nie Goldstein, of 44th District Court, for her work leading the Jury Appreciation Committee, her help with the Bench Bar Conference, and her dedicated role as the Judicial At-Large Director; Hon. Liz Lang-Miers, of the Fifth District Court of Appeals, for her many years of dedicated service on the DBA Board of Directors as an ABA Delegate; Dena Stroh, of the North Texas Tollway Authority, and Dawn Estes, of Estes Thorne & Carr PLLC, for their work on the Women’s Equality Day Luncheon and Gender Diversity Corporate GC Panel; Erin Nowell, of Simon Greenstone Panatier Bartlett, PC, for her work on the Bench Bar Conference CLE titled “Neuroscience of Decision-Making”; and Robert Tobey, of Johnston Tobey Baruch, P.C., for his work on the DVAP Improvement Committee, Pro Se Assistance, and the DBA Ambassador’s Program; Hon. Karen Gren Scholer, of Carter Scholer PLLC, for her decade of service as the Course Director for the Inspiring Women Program; and Mary Scott, for her six years as Course Director for the Trial Academy and work on the 2017 Bench Bar Conference. HN Jessica D. Smith serves as the DBA’s Communications/Media Director. She can be reached at jsmith@dallasbar.org.
~ In Memoriam ~
Since 1875, the DBA has honored recently deceased members by passing resolutions of condolences. This tradition continues through the work of the DBA Memorial & History Committee. To view the Memorial Resolutions presented to the families of deceased members, visit www.dallasbar.org. James Alexander (1923-2016), a 1946 graduate of The University of Texas School of Law
Gregory Gorman (1964-2017), a 1993 graduate of Southern Methodist University School of Law
Edward Rice (1958-2017), a 1987 graduate of the University of Houston Law Center
George Ashley (1919-2017), a 1948 graduate of University of Missouri School of Law
Roger Hansen (1932-2017), a 1957 graduate of Southern Methodist University School of Law
Hon. Theodore Robertson (1921-2017), a 1949 graduate of St. Mary’s University School of Law
Buford Berry, Jr. (1935-2017), a 1963 graduate of The University of Texas School of Law
Grover Hartt, III (1948-2017), a 1973 graduate of Texas Tech University School of Law
John Sanderson (1933-2017), a 1958 graduate of Southern Methodist University School of Law
Alexander Bolton (1985-2017), a 2012 graduate of SMU Dedman School of Law
Vester Hughes, Jr. (1928-2017), a 1952 graduate of Harvard Law School
Brian Shaw (1943-2017), a 1972 graduate of Baylor Law School
George Bramblett, Jr. (1940-2016), a 1966 graduate of Southern Methodist University School of Law
Karen Keltz (1957-2017), a 1985 graduate of Notre Dame Law School
Frank Shor (1952-2016), a 1977 graduate of Southern Methodist University School of Law
George Butler (1935-2017), a 1959 graduate of Southern Methodist University School of Law
Brian Loncar (1960-2016), a 1987 graduate of Texas Tech University School of Law
Terry Simmons (1954-2017), a 1978 graduate of Baylor Law School
Regis Campfield (1942-2017), a 1966 graduate of University of Virginia School of Law
Hon. James Mast (1928-2016), a 1953 graduate of The University of Texas School of Law
Jack Wahlquist (1933-2017), a 1958 graduate of The University of Texas School of Law
David Curtis (1930-2017), a 1960 graduate of Southern Methodist University School of Law
Hon. Michael Miller (1948-2017), a 1975 graduate of The University of Texas School of Law
Eliot Walker (1980-2017), a 2006 graduate of Cornell Law School
Edwin DeYoung (1946-2016), a 1971 graduate of The University of Texas School of Law
Hon. Robert O’Donnell (1931-2017), a 1960 graduate of St. Mary’s University School of Law
John Wilson (1921-2017), a 1947 graduate of The University of Texas School of Law
Robert Farquhar (1954-2017), a 1980 graduate of Southern Methodist University School of Law
Joseph Patterson (1927-2017), a 1954 graduate of Southern Methodist University School of Law
Michael Wurst (1958-2017), a 1985 graduate of the University of Houston Law Center
Hon. Albert Fenton, Jr. (1934-2017), a 1961 graduate of The University of Texas School of Law
William Pittenger (1940-2017), a 1965 graduate of The University of Texas School of Law
Henry Gilchrist (1924-2017), a 1950 graduate of The University of Texas School of Law
William Ravkind (1935-2017), a 1960 graduate of Southern Methodist University School of Law
20 H e a d n o t e s l D a l l a s B a r A s s o ciation
Focus
D ecem ber 2017
Probate, Trusts & Estates Law; Tax Law
The Intersection of Probate and Foreclosure in Texas BY ALEXANDER WOLFE
Few people take out a mortgage with the thought that they might not outlive the term of the note and deed of trust they have executed. However, it is an unfortunate reality that the passing of a borrower can result in a home loan going into default when there is no other party with the desire or the means to continue making payments. The death of the borrower can present surprising complications in what is typically a relatively uncomplicated nonjudicial foreclosure process in Texas. In Pearce v. Stokes, a decision handed down in 1956, the Texas Supreme Court ruled that the power of sale held by a mortgagee via a deed of trust is suspended during the pendency of a dependent administration. Furthermore, the
exercise of that power is subject to cancellation by a subsequently appointed estate administrator appointed at any point in the four years after the death of the borrower during which a dependent administration can be opened. For these reasons, a mortgage lender cannot simply proceed to foreclosure sale once they have discovered that a borrower is deceased. First, the lender must do their due diligence to determine if a dependent administration has been opened and, if so, whether it will be necessary to petition the court for approval to foreclose. Because of the uncertainty created regarding the validity of a foreclosure sale held within the four years following the death of the borrower, the lender may find it necessary to petition the court to open a dependent administration in those instances where the
Planning to do some holiday shopping on Amazon? If so, you can shop on Amazon and Give Back to DVAP! You can now help the Dallas Volunteer Attorney Program by simply shopping on Amazon. Go online to https://smile.amazon.com/ch/75-2410525 to get started. When you shop through AmazonSmile, the AmazonSmileFoundation will donate .5% of the price of eligible purchases to DVAP.
heirs are not themselves probating the estate, for the purpose of obtaining an order allowing foreclosure. This process is known colloquially as a “creditor’s administration.” Out of an abundance of caution and a desire to protect the interest any heirs have in estate property that may be subject to a foreclosure proceeding, some Texas probate courts require that the lender initiate an heirship determination in conjunction with its application for letters. Heirs may find themselves surprised to be contacted by a lender who is attempting to probate the estate of a loved one, but if they elect to participate they will find that the probate courts are often deferential towards and protective of their interest in the estate. Furthermore, the estate administrator is often in a position to deal with the affairs of the estate, including arranging a sale of the property, in such a way that ultimately benefits the heirs. The foreclosure process is also impacted by heirs’ efforts to probate the estate of a deceased borrower. Mortgage lenders are cautious about proceeding to foreclosure when the heirs are actively engaged in efforts to probate the estate, for two reasons; one, that a successful probate of the estate by the heirs resolves the uncertainty lenders face in circumstances when the estate is unprobated and two, any effort to proceed prematurely may result in a contest with the heirs in the probate courts. That is not to say that lenders will not intervene in a pending probate proceeding when efforts by the heirs have languished through inattention or
an inability to proceed, but lenders are often conscientious of the delays heirs may themselves experience in probating the estate. Upon the appointment of an independent administrator/executor, lenders are constrained by the estate code from holding a nonjudicial foreclosure sale earlier than six months from the date of the appointment, to allow the administrator time to make arrangements concerning the property. Case law and best practices necessitates that such sale, if necessary, take place with notice to the administrator. Generally speaking, it behooves an attorney employed by the heirs to probate the estate to reach out to the mortgage lender to make them aware of the borrower’s death and inform the lender of their intentions towards the estate of the borrower. Doing so helps to ensure that the lender doesn’t either prematurely foreclose upon the property or, in the alternative, initiate unnecessary probate proceedings, resulting in additional expense that ultimately incurs to the estate. If the loan is in default it is also a good practice to reach out directly to the lender’s foreclosure counsel, as notices provided to the lender can take their time reaching counsel. Often, a simple phone call to counsel is enough to allow heirs time to gather their resources and plan a course of action that ultimately avoids the necessity of a foreclosure sale. HN Alexander Wolfe is an associate at Buckley Madole, P.C. He can be reached at alexander.wolfe@buckleymadole.com.
Belo Mansion General Manager Named to NACE Hall of Fame tary/Treasurer and the NACE National President. He is one of a select few who Kevin Brant, CPCE, the Gen- have attained their CPCE (Certified eral Manager of the Belo Mansion, Professional Catering Executive) Certification. was recently named to the Held in conjunction National Association for with the Experience ConferCatering and Events (NACE) ence and Expo in Houston, Hall of Fame. Mr. Brant, TX, the annual NACE One whose career spans more than Awards recognize excellence 20 years, has served as the in the planning and execuGeneral Manager of the Belo tion of special events and for the past 7 years. celebrations, as well as indiHe has been a member vidual chapter programs and of the International Speaccomplishments. cial Events Society and of NACE Hall of Fame the National Association of Kevin Brant members are those who have Catering Executives for many years. With NACE he has served in demonstrated a career dedicated to the many capacities on the Chapter level catering and events industry and values including being the President of both the shared by NACE members. With more than 4,000 members, Ft. Lauderdale and Atlanta Chapters. On the NACE National level, he served NACE is the oldest and largest profesas both Region II and Region VI Vice- sional association dedicated to all aspects Presidents and as the National Secre- of the catering and events industry. STAFF REPORT
Spanish for Lawyers: Sign Up Now! 10-Week Course Spring 2018 | Cost: $180 January 2 — March 8, 2018 For more information, contact Grecia Alfaro at galfaro@dallasbar.org or (214) 220-7447 Belo Mansion_Headnotes Ad.indd 1
8/11/2017 3:57:49 PM
De c e mb e r 2 0 17
Focus
D al l as Bar A ssoci ati on l Headnotes 21
Probate, Trusts & Estates Law; Tax Law
A Primer on the Tax Implications of Settlements and Judgments BY JASON FREEMAN
The tax impacts of resolving a dispute (whether settled or adjudicated) is often little more than an afterthought. But a client’s net after-tax recovery can vary drastically depending on the applicable tax rules. An attorney with a keen understanding of the tax principles at play can often help steer a resolution towards the most favorable result for a client.
Basic Tax Principles
Judgments and settlements are, in theory, taxed the same. It is, therefore, generally irrelevant—from a tax perspective, at least—whether a dispute is resolved by a judgment or settlement. The taxability of a recovery generally turns on the nature of the claim at issue. Under the so-called origin-of-theclaim test, the tax consequences depend upon what, exactly, the amount is truly received “in lieu of.” For example, if the underlying claim sought to recover lost profits, the recovery would be taxable as ordinary income because those profits would have been taxable as such. If, on the other hand, the underlying claim was based on a valid right to inherit as an heir, the recovery may be excludable from income because the inheritance of property is generally not taxable. A federal authority, including the Internal Revenue Service, will generally look to the pleadings, settlement negotiations, settlement agreement, and the trial court’s orders to determine the true origin and basis of the recovery. As this implies, a party may have some ability to shape the tax consequences of the recovery through
JEFF ABRAMS
its pleadings and theory of recovery, as well as through its documentation of any settlement. Well-thought-out pleadings and theories of damages can sometimes determine taxability. Both state and federal law play a role in determining federal tax consequences. State law generally determines the nature and extent of a taxpayer’s property interests, while federal law provides the rules governing the taxation of those interests. A settlement agreement that awards or divides property interests in a manner contrary to the underlying state law that governs the claims may trigger unwanted federal tax consequences, such as gift taxation.
Common Recoveries
The Internal Revenue Code (IRC) and case law specifically address some common types of recoveries. For example, in a commercial litigation setting, claims are often centered on both lost profits and damage to assets. Recoveries for lost profits are tax-
able. However, recoveries for damage to identifiable assets, including goodwill, are only taxable to the extent they exceed a taxpayer’s tax basis in the assets. Punitive damages and interest on a recovery are generally taxable, regardless of whether they are awarded in connection with a claim that would otherwise result in a nontaxable recovery. The IRC excludes from income amounts received “on account of personal physical injuries or physical sickness.” However, neither the IRC nor its regulations define “physical” for these purposes. A frequent issue is whether damages attributable to emotional distress are excludable. While emotional distress is not treated as a physical injury or sickness under the rules, legislative history indicates that a taxpayer may exclude recoveries for emotional distress where that distress manifests from an underlying personal physical injury. Notably, modern advancements in medical technology may expand the
scope of conditions falling under this exclusion. For example, technology may provide evidence of underlying physical changes to the brain associated with conditions (like PTSD or depression) that may have traditionally been viewed as emotional distress. In the context of trust and estate litigation, property that is acquired by “gift, bequest, devise, or inheritance” is generally excluded from income. Thus, recoveries pursuant to a will contest are generally not subject to income tax where the “origin of the claim” is based upon a right to inherit or take under a will. There are, however, a host of traps for the unwary. For example, payments structured to be paid out of the residuary of an estate may carry out something known as “distributable net income,” which is subject to tax—an often-unintended consequence. HN Jason Freeman is the managing member of Freeman Law. He can be reached at jason@freemanlaw-pllc.com.
Shore Chan DePumpo LLP is pleased to announce that William D. Ellerman, Samuel E. Joyner and Chijioke E. Offor have joined the firm, marking an expansion of its existing intellectual property practice.
Mediator & Arbitrator
Experienced Creative Dog Friendly Online scheduling calendar www.abramsmediation.com
Will Ellerman, Partner
Sam Joyner, Partner
Chiji Offor, Of Counsel
• Accomplished trial and appellate lawyer with nearly twenty years of experience in representing corporations and individuals in complex, high stakes litigation
• Seasoned trial lawyer who established his credentials at an AmLaw200 firm and is now positioned to offer faster, better, and more value-driven world-class client service
• Seasoned IP litigator with seven years of AmLaw 50 firm experience, and first-chair trial success in federal court
• Former partner at Jackson Walker
• Former partner at Carrington Coleman
• Former associate at Jones Day and Carrington Coleman
Office 972-702-9066 Cell 214-289-4427 jeff@abramsmediation.com
Shore Chan DePumpo LLP is a veteran team of trial lawyers and intellectual property attorneys with a proven record of handling the most complex and demanding matters.
Case coordinator: kelli@abramsmediation.com
For a listing of our professionals, areas of practice, and recent news, please visit our website at: www.shorechan.com. 214-593-9110 | 901 Main Street, Suite 3300, Dallas, Texas 75202 | shorechan.com
22 H e a d n o t e s l D a l l a s B a r A s s o ciation
Column
D ecem ber 2017
Ethics
A Question of (the Client’s) Competence BY JAKE POLLACK
You handled Mrs. Smith’s estate planning several years ago. Mrs. Smith, a widow, designated her only child, Alice, as her agent in her financial power of attorney. Alice never married or had children, and has not worked for many years. Several months ago, Alice moved back home when Mrs. Smith’s mental faculties began to digress. When you last spoke to Mrs. Smith, she had difficulty recalling and understanding her planning and processing basic information. Her financial advisor and nephew have recently contacted you to complain about Alice’s control of Mrs. Smith’s estate. The advisor is concerned that Mrs. Smith will not
have sufficient assets for her long-term support, and the nephew (who is the successor agent) wants to hire you to have Alice removed. As Mrs. Smith’s attorney, what should you do? What can you do? Is there anything you must do? Texas Disciplinary Rule of Professional Conduct 1.02(g) requires that an attorney take reasonable action to have a guardian or other legal representative appointed, or seek other protective orders, for a client whenever the attorney reasonably believes that such action should be taken to protect a client who lacks legal competence. The comments following the rule provide that the lawyer should see to the appointment of a guardian or take other protective steps when it reasonably appears advisable to
Don’t miss your opportunity to advertise (print & online) in the #1 “Legal Resource & Expert Witness Guide” in Dallas County. Contact PJ Hines at (214) 597-5920 or pjhines@legaldirectories.com
serve the client’s best interests. Rule 1.02(g) was analyzed in Franks v. Roades in 2010. In that case, Mrs. Franks’ mental condition deteriorated, and she became unable to handle her own affairs. Her daughter, who was her agent, was helping her pay her bills, buy groceries, go to doctors’ appointments, and manage her medications. To the contrary, Mrs. Franks’ son disagreed with her doctors, encouraged her to not take her medication, and threatened his sister concerning their mother’s care. Her daughter ultimately hired Mrs. Franks’s attorney to file an application for guardianship. A mediated settlement was reached, and the guardianship proceeding was non-suited. However, Mrs. Franks’ attorney was later sued for breach of fiduciary duty, alleging that he wrongfully initiated and pursued the guardianship. The appellate court ruled in favor of the attorney. The court reiterated that an attorney’s fiduciary duty is breached when the attorney improperly benefits from the attorney-client relationship, typically by subordinating the client’s interests to his own, improperly using client confidences, engaging in selfdealing, or making misrepresentations. The contentions here were that, in pursuing the guardianship, the attorney represented someone adverse to his original client, and that the attorney personally benefitted because he was paid to handle the matter, and that the attorney failed to discuss the matter with his client before pursuing it. The court found that the attorney
actually represented Mrs. Franks, just through the person she had appointed to handle matters for her, so the representation was not adverse. The court further noted that “personally” benefitting from the representation of a client cannot be the sole measure for a breach of fiduciary duty claim because attorneys generally expect to be paid. The court acknowledged that attorneys have a fiduciary duty to fully disclose all material facts that might affect a client’s rights, but the disciplinary rules recognize that full disclosure may sometimes be impractical, as for example, when the client suffers from a mental disability. The court noted that a failure to follow the disciplinary rules cannot give rise to civil liability; therefore, following the disciplinary rules (by seeking a guardian for an incompetent client) also cannot give rise to civil liability. Finally, the court concluded that because the attorney believed that Mrs. Franks was incompetent, because her circumstances indicated that his belief was reasonable, and because he merely complied with the disciplinary rules, he did not breach his fiduciary duty by initiating or pursuing the guardianship. While the question of a client’s competence may be raised most often with estate planning attorneys, the Texas Disciplinary Rule of Professional Conduct apply to all Texas attorneys. If you are faced with that question, remember Rule 1.02(g). HN Jake Pollack is a partner at Bell | Nunnally. He can be reached at jpollack@bellnunnally.com.
2018 INAUGURAL OF Michael K. Hurst
The DBA Directory Photographer will available to take photos for the 2018 Directory on:
A T T HE O MNI D ALLAS H OTEL
Tuesday, December 12, 9 a.m. - 3 p.m. at Belo Photo session is FREE, requires no reservation and only takes a few minutes. Photos may be purchased for personal use. Questions? Judi Smalling at jsmalling@dallasbar.org or (214) 220-7452.
TURLEY LAW CENTER Westlaw Access - Group Rates On Site Security On Site Management & Owner
Saturday, January 20, 2018 The Dallas Bar Association will inaugurate its 109th President, Michael K. Hurst at the inaugural ball on Saturday, January 20.
24-hour Cardkey Access Covered Valet Parking Conference Rooms Dog-Friendly Building Fast Internet Access Sandwich/Deli Shop Beauty & Barber Shop
The black-tie ball will include dinner, live music by Live 80, and a silent auction. Cocktails 6:30 p.m. | Dinner 7:30 p.m. Tickets $175; Tables $1,750 | Judiciary $125 To reserve your ticket, contact Shawna Bush at (214) 220-7453 or sbush@dallasbar.org. Visit www.dallasbar.org for more information!
ATM UPS & FedEx Drop Boxes
Conveniently located at the Southeast corner of N. Central Expressway and University Blvd.
Proximity to Dart Rail Station
214-691-4025
Take a tour at: www.turleyproperties.com or Email us at: sandrac@wturley.com
De c e mb e r 2 0 17
Focus
D al l as Bar A ssoci ati on l Headnotes 23
Probate, Trusts & Estates Law; Tax Law
Celebrating the New Texas Durable Power of Attorney Act BY LORA G. DAVIS
Avid readers of the Dallas Bar Headnotes may recall past articles highlighting the difficulty in using durable powers of attorney (DPOAs) in Texas due to the ability of banks and other institutions to reject those powers for any reason, or for no reason at all. After several attempts at statutory changes to address these issues, we received an early holiday gift in the form of HB 1974 and the new Texas Durable Power of Attorney Act (Act). The Act expands the powers and duties of agents. New provisions allow agents to name successor agents, receive compensation, create or revoke trusts, make gifts, create or change survivorship and beneficiary designations, and delegate authority under the DPOA. Caution must be taken in implementing these Spiderman-like powers, because “with great power comes great responsibility.” In addition, adverse tax consequences can arise with the gifting powers making careful consideration essential. For DPOAs executed after September 1, 2017, an agent will not be considered a fiduciary to the principal unless he or she has accepted and is acting as an agent (overturning contrary case law). The biggest change to the Act is the inclusion of acceptance and reliance provisions. The new provisions are intended to balance the rights of principals and those asked to rely upon the DPOAs so that DPOAs can be used for their intended purpose and third
parties will be reasonably protected from liability when accepting them. Generally, a party presented with a DPOA must either accept the DPOA within a reasonable time or reject the DPOA with a written explanation of the reason for rejection. A party has 10 business days to accept or reject a DPOA or to ask for an agent’s certificate (as to a factual matter) or an opinion of counsel (as to a legal matter). If a certificate or opinion is requested, the DPOA must be accepted or rejected within 7 business days after receipt of the requested document. If a DPOA has language other than English, a translation can be requested and if the request is within the 10 business day timeframe the DPOA will not be considered presented until the translation is received. If a party accepts a DPOA in good faith, the party can rely on a presumption that the signature is genuine, the power is valid and has not been terminated, and that the agent is not exceeding his or her scope of authority. A party who accepts an agent’s certification, an opinion of counsel, or a translation can rely on it without further investigation. The statutory reasons for rejecting a DPOA are too numerous to list in detail here. Generally, a DPOA can be refused if the party has a good faith belief or knowledge that the DPOA is no longer valid, the agent is exceeding his or her scope of authority, or something else seems awry. Specifically, if elder financial abuse is suspected the DPOA must be rejected and the suspected abuse
must be reported. A special provision allows a party to reject a DPOA without stating the reason for rejection if the principal or agent is suspected of criminal activity or if the party had filed a suspicious activity report on the principal or agent. A DPOA can also be rejected if a request for a certificate or opinion is refused or the certificate or opinion is unclear or qualified in a manner that makes it ineffective. It is important to note that “not on our form” or “too old” are not valid reasons to reject a DPOA. In addition, filing in the deed records cannot be required unless recording is otherwise required (e.g., real property transactions or other law). The Act includes provisions to force acceptance of a valid DPOA and recovery of costs and fees through a
court proceeding. Note, however, that the Act includes a “loser pays” rule, so that if the party asked to accept the power is sued and the court finds the party had a valid reason to reject the power, then the party can recover costs and fees from the principal. A careful reading of the new Act is strongly recommended, as there have been numerous changes not discussed in this article. For a more detailed discussion of the Act, see the Probate, Trusts & Estates Section webpage (New Improved DPOA Act Outline from 9-25-17 Meeting). In all events, using your “Spider-Sense” (or brainpower) to customize DPOAs will yield the best result for your client. HN Lora G. Davis is a partner at Davis Stephenson, PLLC, and can be reached at lora@davisstephenson.com.
BECOME INVOLVED IN HIGH SCHOOL MOCK TRIAL
Volunteer as an Attorney Advisor
Judge mock trial
Be a compeƟƟon judge. No liƟgaƟon experience necessary! Earn CLE credit! MulƟple dates available.
Help with competitions
Mock Trial Compe��on Dates: January 20‐27, February 3 and March 2‐3, 2018 See website for details: www.texashighschoolmocktrial.com To volunteer, or for more informa�on: mgarcia@dallasbar.org | (214) 220‐7484.
Proud Member Benefit Provider
THE EXPERTS IN LEGAL PAYMENTS The proven payment solution for lawyers. Managing payments and growing revenue for over 45,000 lawyers in the United States, LawPay is the only payment solution offered through the ABA Advantage program. Developed specifically for law firms, LawPay guarantees complete separation of earned and unearned fees, giving you the confidence and peace of mind that your credit card transactions are handled the right way.
Trust Account Compliant
TRUST
LawPay.com/DallasBar | 877-260-1115 LawPay is a registered ISO of Merrick Bank, South Jordan, UT.
OPERATING
24 H e a d n o t e s l D a l l a s B a r A s s o ciation
D ecem ber 2017
Inspiring Women IX The DBA hosted the ninth annual “Inspiring Women” luncheon on Wednesday, November 1. More than 600 members of the Dallas legal community came to hear inspiring stories from a panel of esteemed women lawyers who related humorous and honest insights into professionalism and how they have reached the pinnacles in their careers. Those participating in the panel included: Shonn Brown, Lynn Pinker Cox & Hurst; Dawn Estes, Estes Thorne & Carr PLLC; Elsa Manzanares, Gardere Wynne Sewell LLP; Hon. Lana Myers, 5th Court of Appeals; Ellen Pryor, UNT Dallas College of Law; Hope Shimabuku, United States Patent Trademark Office; Hon. Jill Willis, 429th District Court, Collin County; and Hon. Karen Gren Scholer, Carter Scholer.
De c e mb e r 2 0 17
Focus
D al l as Bar A ssoci ati on l Headnotes 25
Probate, Trusts & Estates Law/Tax Law
Choice of Entity and Self-Employment Tax BY CHRISTOPHER WEEG
Many factors go into choosing the type of entity in which to operate a business, including liability protection, governance structure, and, of course, taxes. This article focuses on how this decision affects the business owner’s self-employment tax burden.
What is Self-Employment Tax?
In addition to regular income tax, an employee’s wages are also subject to employment tax, which is paid one-half by the employer and one-half by the employee. In addition, business profits from an actively run business are generally subject to selfemployment tax, which is paid by the business owner. The self-employment tax rate is currently 15.3 percent, plus an additional .9 percent on self-employment income in excess of $250,000 for married taxpayers and $200,000 for single taxpayers.
Overview of Pass-Through Entities
The most common entity types for small business owners are “pass-through” entities, such as S corporations, limited partnerships, and limited liability companies (LLCs). Passthrough entities do not pay income tax. Instead, their profits (or losses) pass-through to their owners, who report the income on their individual income tax returns and pay the applicable taxes. Not all pass-through entities, however, are treated the same from
a self-employment tax perspective.
S Corporations
Unlike other pass-through entities, the profits of an S corporation are not subject to self-employment tax. S corporation owners who actively run the business are treated as shareholder-employees and must therefore be paid a reasonable salary, which is subject to employment tax as wages. What is “reasonable” has been extensively litigated over the years because S corporations are incentivized to pay insufficient compensation to avoid employment taxes. A conservative rule of thumb is the shareholder-employee’s salary should be similar to what the S corporation would have had to pay a non-shareholder employee.
Limited Partnerships
A limited partnership has two types of partners: general partners, who manage the partnership and have unlimited liability, and limited partners, who are essentially passive investors lacking management authority but enjoying no personal liability for partnership debts. A general partner’s share of partnership profits is subject to self-employment tax, which is a stark difference from a similarly situated S corporation shareholder-employee who avoids this tax on corporate profits. A limited partner’s share of partnership profits, on the other hand, is not subject to self-employment tax because, conceptually, his or her share of income is attributable to capital invested rather than compensation. The IRS, however, can treat a limited part-
ner as a general partner if he or she actively participates in the partnership’s operations, regardless of such partner’s designation as a limited partner under state law or in the entity’s organizational documents. If this occurs, the partner will need to pay self-employment tax on his or her share of partnership profits for the years at issue, as well as interest and penalties.
Limited Liability Companies
By default, LLCs are taxed as partnerships for federal tax purposes. LLC members, therefore, are treated like partners in a partnership for determining whether their LLC profits are subject to self-employment tax. The IRS has generally taken the position that (1) LLC members who actively participate in the management of the LLC are subject to self-employment tax on their share of LLC profits and (2) those who merely invest in the LLC are akin to limited partners and thus not subject to self-employment tax.
Putting It All Together
Although the S corporation has a selfemployment tax advantage over the LLC or limited partnership, it is not for everyone. The tax benefit comes at a cost of reduced flexibility due to the S corporation’s strict eligibility restrictions—i.e., all S corporation shareholders must generally be individuals and either U.S. citizens or residents, it must have no more than 100 shareholders, and it may only have one class of stock outstanding. Distributing profits to shareholders on an uneven, or disproportionate basis, also can be problematic. If, instead, an LLC or limited partnership is chosen, passive LLC members and limited partners must be cautious of becoming too active in the business, which could thereby trigger self-employment tax liability on their share of profits. HN
Christopher Weeg, J.D., LL.M., CPA, is an associate at Meadows, Collier, Reed, Cousins, Crouch & Ungerman, LLP, and can be reached at cweeg@meadowscollier.com.
High School Mock Trial Competition – Judges Needed! Help Judge the Texas High School Mock Trial Competitions for January, February and March 2018! A variety of dates and times are available. No experience necessary! Earn self-study CLE credit. For more details, visit www.dallasbar.org/mocktrialjudges or contact mgarcia@dallasbar.org
DBA Hosts Fireside Chat with Mayor RHSB CFT business fund holder and Freedom Day volunteers
CLIENT: C Foundatio JOB#: CF 2017 Bran
TRIM: 5"w LIVE: 5"w BLEED: n/ COLOR: C
PUB: Hea CONTAC Jessica D. Headnote Communi (214) 220-7 jsmith@da
RELEASE INSERTIO
On October 30, the DBA hosted a fireside chat with Dallas Mayor Mike Rawlings. DBA President Rob Crain interviewed the Mayor, as the two discussed issues relating to the City, as well as the importance of the legal profession taking a leading role on community issues like race and civility.
wh e re g iving
THRIVES RHSB Insurance is a CFT business-advised fund holder and longtime member of CFT’s business
HELP PRESERVE BELO—BECOME A SUSTAINING MEMBER OVER 200,000 PEOPLE COME THROUGH OUR BUILDING EACH YEAR
Your 2018 dues statements will arrive soon and we ask that you consider renewing as a Sustaining Member ($500). 200,000+ members and guests use the building each year and your contribu�on at the Sustaining Member level will help us con�nue the essen�al upkeep needed to preserve our beau�ful building—as the premiere bar headquarters in the na�on. Thank you for your support. All Sustaining Members will be prominently recognized in Headnotes and at our Annual Mee�ng.
engagement network that connects companies with nonprofits to make a positive community impact. CFT finds the most strategic alliances for businesses and nonprofits to maximize the contributions of good corporate citizens. During CFT’s 2017 Freedom Day event, RHSB volunteers packed lunches for children served by Hunger Busters, a charity dedicated to feeding food-insecure kids with a much-needed third meal
Join us today.
of the day. RHSB employees were grateful to take
Call us at 214-750-4239,
part in the event, which helped satisfy their appetite
email giving@cftexas.org
for hands-on community service.
or visit CFT4B.org/thrive
CFOT-17-010 Headnotes_RHSB Insurance_02mg.indd 1
11/9/17 6:21 PM
26 H e a d n o t e s l D a l l a s B a r A s s o ciation
D ecem ber 2017
TOD Vehicle Titles: Where There’s a Wheel, There’s a Way BY SAMUEL E. LONG JR.
The average cost of a new vehicle now exceeds $30,000 and some “motor vehicles” such as recreational vehicles far exceed that in value. A vehicle may be a principal asset even in small estates and, for various practical reasons, may often need to be sold or transferred promptly upon the owner’s death. The transmission of property at death increasingly is accomplished by nontestamentary forms of transfer. This trend has been fueled by many factors, including sticker shock at the cost of legal services, the complexities and delay of probate processes, and the availability of self-help tools. In response, the Texas Legislature has authorized “transfer on death” (TOD) title registration of motor vehicles, enacting new Chapter 115 of the Estates Code which became effective September 1, 2017. The Transportation Code authorizes the designation of a beneficiary on title applications to whom the owner’s interest in the vehicle will transfer on the owner’s death. These TOD title statutes create a new Texas form of revocable, nontestamentary transfer. Chapter 115 mirrors some of the provisions of the TOD real estate deed legislation (Chapter 114 of the Estates Code) enacted in 2015. TOD registration is more expansive than joint survivorship, which was permitted under prior law. It can be used even when the decedent has a will, and a will cannot revoke a TOD designation. It can also be combined with joint survivorship, with multiple joint owners making a TOD designation taking effect on the death of the last joint owner. When there are joint owners with rights of survivorship, the beneficiary designation must be made by all the joint owners, and each must consent to any revocation. A TOD designation is effective without consideration or notice or delivery to the beneficiary. The designation is subject to disclaimer by the designated beneficiary in the same manner as any other property. It is important to note that the designated beneficiary takes the motor vehicle subject to any liens or encumbrances secured by the vehicle. As with TOD deeds, a TOD designation does not necessarily exempt the vehicle from creditor claims, allowances in lieu of exempt property, or family allowances. Further, the designation does not affect an owner or
beneficiary’s eligibility for public assistance, subject to applicable federal law. The beneficiary has no rights during the original owner’s lifetime. If a designated beneficiary does not survive the owner by more than 120 hours, the designation is treated in a manner similar to the “anti-lapse” provisions of the Estates Code. In this situation, if the beneficiary is a descendant of the vehicle owner or a descendant of the vehicle owner’s parent, the gift will pass to the designated beneficiary’s descendants as if the gift were made pursuant to a will that did not address survivorship. These rules could create practical issues if descendants are minors, incapacitated persons, or there are multiple descendants who take by right of representation. In contrast, the Chapter 115 TOD deed provisions contain extensive alternate options for survivorship and lapse. Chapter 115 does not prohibit or limit the use of TOD vehicle titles by married persons or require spousal consent to a TOD designation. In fact, section 115.001(3) specifies that the term “joint owner” does not include an owner of community property. For example, assume X, whose spouse is Y, purchases a motor vehicle with community funds. The vehicle is titled in the name of X, with a TOD beneficiary designation of Z rather than Y. On the death of X, does Z have title to the vehicle free and clear of any claim of community or exempt property of Y? If not, how does Y protect Y’s interest? The Transportation Code now provides authority for designation of a TOD beneficiary on an application for title, for revocation of such designations, and a procedure for transfer of title to the designated beneficiary. The beneficiary will be required to submit an application for transfer of title within 180 days of the owner’s death, and provide satisfactory proof of the death of the owner or owners. As of this writing, the Texas Department of Motor Vehicles has not yet promulgated forms or guidance on the new law. It remains to be seen how widely TOD vehicle title designations will be used. While there are many factors that could either accelerate or put the brakes on their use, Chapter 115 is a new addition to the battery of tools for the estate planner. HN Samuel E. Long Jr. is an attorney with the law firm of Shackelford, Bowen, McKinley & Norton, LLP and adjunct professor at UNT Dallas College of Law. He can be reached at slong@shackelfordlaw.net.
De c e mb e r 2 0 17
Classifieds
D al l as Bar A ssoci ati on l Headnotes 27
December
EXPERT WITNESS
Insurance Industry Expert. R. P. “Bob” Gaddis, JD, 46 years’ experience in Property/Casualty Insurance, sequentially as Underwriter, Agent, and Insurance Litigation Attorney. His underwriting and agency work concentrated on complex commercial accounts. Served as Expert Witness in over 65 cases. Visit complexinsuranceconsulting.com or contact him at bgaddis@ complexins.com, (713) 621-1601. Economic Damages Experts – HSNO is the Forensics Firm. The Dallas office of HSNO has six CPA testifying experts who specialize in the calculation of economic damages in areas such as commercial lost profits, personal lost earnings, business valuations, property damage, insurance litigation, intellectual properties, commercial litigation, contract disputes, bankruptcy, and fraud. HSNO is qualified in most industries including, but not limited to; energy (offshore and onshore), manufacturing, hospitality, service, insurance, transportation, entertainment, product liability and construction. HSNO has 17 U.S. offices and an office in London. Contact Peter Hagen at (972) 980-5060 or go to HSNO.com. Mexican Law Expert - Attorney, former law professor testifying for 20 years in U.S. lawsuits involving Mexican law issues: FNC motions, Mexican claims/defenses, personal injury, moral damages, contract law, corporations. Co-author, leading treatise in field. J.D., Harvard Law. David Lopez, (210) 6029895. dlopez@ccn-law.com. Economic Damages Experts - Thomas Roney has more than thirty years’ experience providing economic consulting services, expert reports and expert testimony in court, deposition and arbitration. His firm specializes in the calculation of economic damages in personal injury, wrongful death, employment, commercial litigation, IP, and business valuation matters. Mr. Roney and his experienced team of economic, accounting and finance experts can help you with a variety of litigation services. Thomas Roney LLC serves attorneys across Texas with offices in Dallas, Fort Worth and Houston. Contact Thomas Roney in Dallas/Fort Worth (214) 665-9458 or Houston (713) 513-7113. troney@thomasroneyllc.com. “We Count.”
OFFICE SPACE
North Dallas - LBJ/Montfort. Executive Office Suites, external $650, internal $300. All inclusive: Receptionist, kitchen, garage parking, free guest parking, Internet, Wi-Fi, phone, conference room, coffee/water/ice, utilities, janitorial and maintenance. Contact Laura at: email laura@5580midtown. com or (214) 888-2800. North Dallas – Spring Valley/Midway. Sublease through April 2018. 1,584 Sq Ft., 2 Offices, Large Conference Room, work room, cubical area with two cubes. Upgraded, marble-floored reception area. Office suite is adjacent to elevator lobby. Professional appearance and finishes, full glass doors to lobby. Two covered parking spaces. Email Brett Christiansen at bchristiansen@cdfirm. com or call at (214) 838-3501 ext. 1. Professional office suites for lease in Uptown State Thomas area. Restored Victorian home circa 1890 w/ hardwood
floors throughout. Shared conference room. 2619/2608 Hibernia St 1 block from McKinney Avenue Whole Foods. Lawyers preferred. $750-$850/month. Includes phone & Internet. Phone (214) 987-8240. 75 Central & Forest Lane. Johnson English Law Center – Merit Tower Office Space. For lease – Sleek, contemporary office space…12222 Merit Drive – 12th Floor. Nine conference rooms, lobby with receptionist/mail service, high speed Internet, library, spacious breakroom…plus parking and workout facilities are complementary! Come take a look – Contact arobinson@englishpllc.com or (214) 528-4300. Downtown Dallas – Two window offices with included secretarial space available, in the historic KATY Building overlooking the Old Red Courthouse and Kennedy Memorial. Receptionist, notary, phone system, conference room, Wi-Fi, fax and copier provided for tenants use. No deposit or lease required. Please inquire at (214) 748-1948. Lee Park Area - executive office space available for lease in a professional, legal environment. Two large executive window offices available (furnished or unfurnished) to share with experienced and established lawyers. Separate areas available for assistants or paraprofessionals. Three bench seat spaces available for daily or short-term use, if desired. Referrals and other case arrangements are possible. Amenities include reception area, telephone, fax and copy machines, Wi-Fi, notary, conference room, kitchen area, covered visitor parking, and free secured office parking. Location convenient to Dallas courts, downtown, and all traffic arteries. Please contact Judy at (214) 740-5033 for a tour and information. McKinney Avenue. Office with secretarial area available at 4054 McKinney Avenue. Shared conference room, break room, copier, fax, DSL & phone equipment are available if needed. No long term commitment and a monthly rate of $800.00 for the furnished or unfurnished large office and $300.00 for the furnished secretarial office. Possibility of overflow Real Estate or Civil Litigation work. Call (214) 520-0600. Uptown. 4054 McKinney Avenue has available one office suite with 1550 sq. ft. and one suite with 2500 sq. ft. Each space has three offices with reception, conference and secretarial space. Located across from Cole Park with surface parking. One year terms with flat rates are available. Possibility of overflow Civil Litigation work. Call (214) 520-0600. Virtual Office – Available Immediately! Contemporary office space, 12222 Merit Drive, Suite 1200, offers nine conference rooms, receptionist, Internet service, mail service, parking, fully equipped breakroom. $300 monthly fee – competitive rates! Email Amy at arobinson@englishpllc.com or (214) 528-4300. Tollway/Keller Springs. Luxury Executive Office Sublease – Large furnished office w/ floor to ceiling windows. Share reception/ kitchen. Amenities: Large desk; Conference Table; Internet; VOIP Phone w/private number; Voice Mail to Email; 24/7 access. $1,500/mo. Contact Chris at cape74d@ gmail.com or call (972) 849-6013.
POSITIONS AVAILABLE
Construction Defendant & Personal Injury Defense Litigation. Established medium sized AV-rated law firm in downtown Dallas needs an associate attorney with two to three years of defense litigation experience. This position entails working on construction defect and other multi-party, document intensive, litigation. Principal duties include interacting with clients, preparing reports, legal research, drafting and arguing legal motions including motions for summary judgment, handling discovery, attending hearings, taking depositions, and assisting in trying lawsuits. Energetic work environment offers substantial responsibility at competitive compensation plus bonus program. Other benefits include 401(k), medical and life insurance, and parking. Replies held in confidence. Reply via e-mail to personnel@tbjbs.com. Far North Dallas/Farmers Branch Area law firm seeks an associate attorney with 2 - 3 years’ experience. Transactional, business law and/or real estate law background a plus. Compensation commensurate with experience. Send resume to chicagogar7@yahoo.com. Commercial Insurance Litigation Attorney. Small, highly-respected, downtown Dallas, insurance coverage/ defense firm seeks 4-5yr+ attorney with solid commercial insurance coverage/ coverage litigation experience. Ideal candidate has significant experience with CGL insurance, particularly construction defects. Portable business and insurance defense litigation experience a plus, but not required. Reasonable billable hour expectation allows for good lifestyle balance. Excellent benefits (health insurance, 401k, and parking). Salary negotiable. Email cramsey@schubertevans.com or call (214) 744-4400. Downtown Defense Firm – Experienced Associate. Downtown mid-sized defense litigation firm looking for associate with 5+ years’ experience. Practice areas include overall defense litigation, premises liability, automobile, trucking and subrogation (both workers’ compensation and ERISA). Must have good communication skills, solid writing ability, be able to work independently and with others, and have experience working with insurance companies. Great opportunity for a motivated, self-starting individual. Please submit resume and salary requirements to dwoodard@downsstanford.com. Family Law Litigator with 3-5 years of experience needed at Plano firm. Start as a contract attorney for a period of 3-6 months, with the opportunity of
full-time employment. Principal duties include client interaction, drafting and responding to discovery, preparing for and attending hearings, taking depositions, and handling or assisting with trial. Must have excellent communication and writing skills and be able to work independently and with others. Compensation commensurate with experience, bonus possible. Great opportunity for a motivated, self-starting individual who wants to experience a work environment before making a full-time commitment. We are a small, family oriented firm that emphasizes work/life balance. We are looking for team members that will be committed to the firm’s growth and expansion in the future. Please submit resume and payment requirements to pam@carsonsteinbauer.com. Boutique Dallas civil law firm serving the construction industry seeks a 1-3 year associate attorney to work in both commercial litigation and transaction departments. Candidates should have good discovery/motion practice/court room/deposition experience & skills, along with excellent writing skills. Candidates should have some contract and business law experience. This position will have direct client interfacing; work on cases from the contract stage through final appeal. The position has opportunity for growth. The firm offers health benefits, 401K and a good work-life balance. Interested candidates should send their resume, writing sample and salary requirements to: Dallas Bar Association, Box 17-12B, 2101 Ross Avenue, Dallas, Texas 75201.
SERVICES
Mediation Dispute Resolution Service-Mediation Center. Mediations at affordable rates. Please visit our website at www.mediatewithme.com. (469) 2130940 (214) 932-3495. Immediate Cash Paid For Diamonds and Estate Jewelry. Buying all types of jewelry and high end watches. Consignment terms available @ 10-20 % over cash. For consultation and offers please call J. Patrick (214) 739-0089. Credentialed Forensic Genealogist & Attorney – hire an experienced attorney and credentialed forensic genealogist to ethically find next of kin and missing heirs for intestacy, probate, guardianship, property issues, and more. Reasonable hourly rate. See www.ProfessionalAncestry Research.com. Wanda Smith, 972-8369091. To place an affordable classified ad here, contact Judi Smalling at (214) 2207452 or email jsmalling@dallasbar.org.
WINNING IN THE COURTROOM: A CONVERSATION WITH HOUSTON TRIAL LAWYER, DAN COGDELL Friday, December 15, Noon at Belo | MCLE 1.00 Presented by the DBA Trial Skills Section
Need Help? You’re Not Alone. Texas Lawyers’ Assistance Program…………...(800) 343-8527 Alcoholics Anonymous…………………………...(214) 887-6699 Narcotics Anonymous…………………………….(972) 699-9306 Al Anon…………………………………………..…..(214) 363-0461 Mental Health Assoc…………………………….…(214) 828-4192 Crisis Hotline………………………………………..1-800-SUICIDE Suicide Crisis Ctr SMU.…………………………...(214) 828-1000 Metrocare Services………………………………...(214) 743-1200 More resources available online at www.dallasbar.org/content/peer-assistance-committee
Dan Cogdell has tried nearly 300 cases in over sixteen states including the Branch Davidian trial, the Houston City Hall Bribery case, and Enron, in which he obtained a not guilty verdict. The conversation with Dan will focus not just on his notable cases but also on the secret to his success and what tips he can share for civil and criminal trial lawyers alike. The conversation will be moderated by Dallas white collar defense attorney Bill Mateja of Polsinelli PC.
28 H e a d n o t e s l D a l l a s B a r A s s o ciationâ€
D ecem ber 2017
To the best staff and hardest working Board of Directors of any bar association in the country, thank you for all your support. To all of you, the Members of the Dallas Bar Association, thank you for the privilege of serving beside you this year. It is humbling to witness your service to one another and our community.
Stronger Together Rob Crain DBA President
crainlewis.com | 214.522.9404 Personal Injury | Criminal Defense