The "Genius and Miraculous" District Attorneys’ Office

Oh man.  

Kimbra.  

Just when I think she can’t be a more shamelessly self-aggrandizing politician, she pulls something new out of her little white Boss Ogg hat.

Today, she released a pre-recorded message to her Assistant District Attorneys that was chock full of pure political awesomeness as she laid out her plans for solving the backlog of criminal cases in Harris County, Texas.  At one point, she literally applauds the work of her office as “nothing short of genius and miracles.”

Seriously.

If you would like to watch it in its entirety, here it is.

NOTE:  If you are reading this on an iPhone, the video may not play, but you can get to it by clicking here.

If you don’t have thirty minutes to enjoy Kim Ogg celebrating herself, here are some of the highlights:

Highlight # 1 —  Even a Pre-Recorded Kim Ogg keeps the Commoners Waiting

Even though everyone is back in the building after receiving their vaccinations, Kimbra decided that she would best reach the members of the Office with a video message rather than a general assembly.  That makes sense.  After all, the rank and file is busy trying to work on that case backlog and who has time for an afternoon meeting, when a pre-recorded video can more efficiently get the message out, right?

But this mandatory pre-recorded meeting goes on for over TEN FREAKING MINUTES before Kim takes the stage with her campaign motivational, rally-the-troops speech.  It’s a freaking PRE-RECORDED MESSAGE.  Seriously?  Y’all don’t know how to, like, trim out the first ten minutes with iMovie or something?

It’s moments like these that I’m so glad that I’m not at the office anymore.  If your name ain’t Mick Jagger, I’m not waiting on your ass to take the stage.

Highlight # 2 — Move over Chris Pratt, the Guardians of Justice are Here

Approximately two minutes after Madonna has taken the stage Ogg begins speaking, she immediately begins addressing the difficulties facing her Office.  And, of course, that starts with blasting the Defense Bar.

At the 12 minute, 12 second mark (she started talking at the 10:14 mark), she begins with throwing insults at the Defense Bar:

. . . unlike the DEFENSE BAR, whose only duty is to THEIR CLIENTS . . . GUILTY OR NOT! . . . prosecutors are tasked under the law with protecting everyone’s rights, in our search for the truth in every single case.

And then she finishes with . . . .wait for it . . . 

. . . And that’s why I call us the Guardians of Justice!

Photo created by Luke Newman

 Gag.

Highlight # 3 — Blame the Judges and their Low Bonds

So, apparently, the real masterminds behind the “Crime Wave” affecting Harris County are those damn judges who are letting everyone out of jail.  At the 13:30 mark, almost a full minute after blasting the Defense Bar, Star Lord Kimbra goes after the Judiciary.

While we know that 55 hundred violent offenders are in jail awaiting trial [TRANSLATION:  “waiting on discovery”], tens of thousands more are out on bail.  At least four thousand of them are repeat and violent high-risk offenders on ankle monitors.  Let’s get them to trial!

Seriously, go back and watch how Kim sounds like a high school cheerleader when she exclaims that “Let’s get them to trial!” part.  It’s plain silliness.  Like she just came up with that idea and is suddenly yelling “Go team! Go!”

But wait, there’s more.

She takes a potshot at Pre-Trial as she continues to levy the blame for the carnage and maiming (yes, maiming) affecting Houston on these damn low bonds.

We’ve seen defendants commit crimes even while wearing ankle monitors and we know that we’re rarely notified. It’s these repeat and violent offenders, freed on insufficient bail, who are contributing to the crime wave that’s killing, injuring, maiming Houstonians.

Highlight # 4 — the Emergency Case Backlog Reduction Program

Once done blaming everyone but herself (and also, strangely, Covid) for the backlog, Kim gets down to business by rolling out her new idea called the Emergency Case Backlog Reduction Program. 

This new and innovative program authorizes overtime and extra pay for prosecutors to examine cases and determine whether or not they are serious or violent offenses.  If they are not, offer Diversion Programs that help move less serious cases.  

What a fantastic idea.  Wish I had thought of it.  Better yet, I wish she had implemented it at, you know, like at the START of the pandemic.

Although I’m all for prosecutors reviewing bullshit less serious cases, her “program” seems to be like a bit of overkill to me.  Overtime to evaluate cases?  Here’s a novel idea — how about asking prosecutors to hear out defense attorneys in court when they point out that a case is either weak or not serious, instead?  It’s really not all that complicated.  

As my mentor, the late, great Ed Ziegler once said:  “We’re pole vaulting over mouse turds, here.”

Instead of yet another Ogg Program, how about just returning some discretion to the trial bureau so that your rank and file prosecutors aren’t scared of getting fired if they dismiss a case or offer a pre-trial diversion?  Just a thought.  

My favorite part of her diversionary program is the warning she gives at the end:

The defense needs to respond.  After all, it’s in their clients’ best interest.

Um, yeah.  The first time I let a grandstanding-ass-politician like Kim Ogg tell me what’s in my client’s best interest is the day I need to hang up my law license. 

Diversion programs are very nice resolutions to the cases the State can actually prove, but if Kim thinks attorneys are going to be flocking to those programs without evaluating the cases against their clients first, she’s really banking on a large batch of ineffective defense attorneys.  Diversion Programs are not a substitute to fighting a bad case, just fyi.  In addition to having the tool of a diversion program, Kim needs to make sure that her prosecutors know that they can dump a piece of crap case without repercussions, as well.

Highlight # 5 — Experience Matters, if there is any of it left

Kim then moves on to those serious and violent cases that won’t be eligible for a diversion program, and she calls upon “our most experienced chief prosecutors, now serving in vertical and specialized prosecution units” to help the newer prosecutors try serious cases.

Take charge, Senior Prosecutors.  Help us make this program work!

There is no doubt that experience matters and Kim is right to call upon the senior prosecutors to help combat violent crime.  There’s just one small problem with that…

She’s fired or otherwise run off the vast majority of them. 

Whether it be the thirty-odd prosecutors she fired before even taking office, or the ten or so chief prosecutors that she ran off during her absolutely idiotic Pandemic Witch Hunt last year, experience is in extremely short supply at the D.A.’s Office these days.  The definition of a “senior prosecutor” has never been looser in the history of the Office.

She’s 100% correct in saying that senior prosecutors are needed during this time of crisis.  Unfortunately for all involved, there just aren’t very many left.

She closes this ridiculous speech by giving a motivational rallying cry:

Team, we have a big job ahead of us, but the STATE is ready!

Those of us who practice in the CJC know that under Kim Ogg’s leadership, nothing could be further from the truth. 

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Texas Extends Rule Against Perpetuities to 300 Years

The Rule Against Perpetuities is the bane of every first-year law student’s existence. It provides: no interest is good unless it must vest, if at all, no later than 21 years after some life in being at the creation of the interest.

The rule is concise but complicated. For example, if Jason devises property to John for life, then to John’s children for their lives, and then to Jane, the devise to Jane is valid because she is a life in being when the interest is created. However, if instead, Jason devises property to John for life, then to John’s children for life, and then Jane’s children then living, the devise to Jane’s children is void because there is a possibility that the interest of Jane’s children may not vest within 21 years of a life in being at the creation of the interest.  

Oh, and did I mention the “fertile octogenarian?” Basically, it’s the legal fiction at common law that a woman at any age is capable of having children for purposes of determining the applicability of the rule against perpetuities. I had stress dreams about problems related to the rule against perpetuity long after law school.

How Does the Rule Against Perpetuities Apply to Trusts?

For all practical purposes, the rule invalidates any trust that attempts to control interest in certain property for too long of a period after the person creating the trust died. As a result, trusts created in states that ascribe to the rule against perpetuities must terminate within a prescribed period; specifically 21 years after a life in being at the creation of the interest.

Most states have abolished the rule against perpetuities because of its complexity. Additionally, there is a growing interest in retaining assets in generational trusts for wealth preservation and asset protection purposes. Currently, there are just a handful of states still clinging to this rule. Texas is one of them.  But that’s about to change.

The New Rule

The Texas legislature passed a bill that extends the rule against perpetuities to 300 years for trusts other than charitable trusts. Governor Greg Abbott signed the bill on June 16. The new rule goes into effect on September 1, 2021.

Trust companies competing nationwide for trust businesses lobbied the legislature. They pointed out that citizens interested in unitizing long-term trusts for estate planning purposes were creating trusts in states that had abolished the rule against perpetuities. This put Texas at an economic disadvantage.

Under the new rule, the permissible duration for a trust to exist is now 300 years. Section 112.036 of the Texas Property Code, as amended, provides that an interest in a trust must be acquired, if applicable:

• no later than 300 years from the date of entry into effective date of the trust, if the effective date of the trust is on or after September 1, 2021; or
• except as provided in paragraph (d), no later than 21 years after a certain life at the time of the creation of the interest, plus a gestation period, if the effective date of the trust is before September 1, 2021.

Paragraph (d) provides that an interest in a trust that has an effective date before September 1, 2021, may extend for 300 years if the trust instrument provides that an interest in the trust is acquired under the provisions of Article 112.036 applicable to trusts on the date on which the interest is acquired.

What is the Effective Date of the Trust?

 The effective date of the trust is the date on which the trust becomes irrevocable.

If you create an irrevocable trust during your life, the effective date of your trust will be the date on which you execute the trust document. However, if your Will or Revocable Trust provides that trusts will be created for beneficiaries after your death,  the effective date of your beneficiaries’ trusts will be after your death. 

The post Texas Extends Rule Against Perpetuities to 300 Years appeared first on Rania Combs Law, PLLC.

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No cause of action, no RICO cause of action

The plaintiff in Arruda v. Curves Int’l alleged that violations of the Franchise Rule were RICO predicate acts, but the Fifth Circuit disagreed: “Congress’s omission of a private right of action in the [Federal Trade Commission Act] controls. A violation of the Franchise Rule does not itself constitute a predicate act of mail or wire fraud to support a RICO claim.” The Court cited D.C. Circuit opinion about the Service Contract Act that asked the cogent question: “If there is no implied cause of action for damages, how much the less for treble damages?” No. 20-50734 (June 28, 2021) (unpublished).

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Unanimity of Jury Verdict in Continuous Sex Abuse Cases

Following the horrendous kidnapping and murder of nine-year-old Jessica Lunsford in 2005, Florida enacted Jessica’s Law. The statute was intended to create tough penalties for sex offenders, such as 25-year minimum sentences for certain offenses and a lifetime of electronic monitoring for crimes against a child under 12. Following Florida’s lead, 46 states have adopted some version of Jessica’s Law.  

 

Texas created its version of Jessica’s Law in 2007. This version has five primary components:

 

1. 1. 1. Increased punishments by recategorizing specific offenses to a higher degree of felonies, such as upgrading third-degree sexual performance to a second-degree felony;
      2. Increased the penalty for aggravated sexual assault of a child to require a minimum of 25 years to a maximum of 99 years or a life sentence without an option for early release;
      3. Eliminated the statute of limitations for most sex offenses involving children;
      4. Eliminated probation eligibility for a majority of Texas’s child sex offenses; and
      5. Created the offense of continuous sexual abuse of a child, Texas Penal Code Section 21.02, which mandates a minimum sentence of 25 years to a maximum of 99 years with any second conviction requiring life without parole sentence.

 

Continuous Sexual Abuse of a Child

 

Section 21.02 has proven to be the most legally controversial part of Texas’s version of Jessica’s Law. This statute requires that the State prove that a defendant committed one or more sexual offenses against a child during a period that is 30 days or more in duration. The constitutional dilemma posed by the statute is that the jury does not have to reach a unanimous decision as to the underlying predicate offenses to convict the defendant of this crime.

 

The issue is this: Article V, Section 13 of the Texas Constitution, and Article 36.29 of the Texas Code of Criminal Procedure require that jury verdicts be unanimous. The Texas Court of Criminal Appeals has interpreted those requirements to mean that a jury must reach a unanimous verdict that “the defendant committed the same, single, specific criminal act.”

 

Elements v. Manner and Means

 

The Court of Criminal Appeals, however, has held that unanimity applies to a jury’s finding that a defendant committed all the “elements” necessary to prove a given offense but does not necessarily extend to a jury’s finding of the “manner and means” by which the offense is committed. In other words, a jury must unanimously agree that a defendant committed all the elements of the crime but does not have to unanimously agree on how the offense was committed. In “continuous” cases, this means that the jury must agree unanimously that the defendant, during a period that is 30 or more days in duration, committed two or more acts of sexual abuse. The courts have not required that juries must agree unanimously on the specific acts of sexual abuse supporting the offense.  

 

This constitutional issue emerged almost immediately after Section 21.02 was enacted. It continues to be addressed by the Texas courts of criminal appeals. For example, as recently as May 11, 2021, in Nguyen v. State, the Fourteenth District Court of Appeals [Houston] found that the court of criminal appeals in Austin, Waco, Fort Worth, San Antonio, Amarillo, El Paso, and Dallas have all endorsed the notion that a jury’s verdict need not be unanimous when it comes which acts of sexual abuse they relied upon in finding the defendant guilty of continuous sexual abuse.

 

The Texas Court of Criminal Appeals (“TexCrimApp”) has yet to weigh in on this issue. However, the court let stand the decisions reached by the courts of appeal in Austin, Waco, San Antonio, Amarillo, El Paso, and Dallas. By refusing to accept petitions for discretionary review in these six cases, the TexCrimApp signaled it had no problem with the statutory and constitutional interpretations made in those cases.  

 

Jury Unanimity in “Continuous” Cases

 

The TexCrimApp has, however, announced the law on jury unanimity. “A jury in Texas must reach a unanimous verdict. The jurors must agree that the defendant committed one specific crime, but not that the defendant committed the crime in one specific way or even with one specific act. The jurors must agree on each essential element of the crime. But the requirement of unanimity is not violated when the jury charge “presents the jury with the option of choosing among various alternative manner and means of committing the same statutorily defined offense.” 

 

SCOTUS Requires Unanimous Jury Verdicts to Convict

 

Last year, the U.S. Supreme Court, in Ramos v. Louisiana, held that a jury must reach a unanimous guilty verdict to convict. The impact the Ramos decision will have on the convoluted rulings by the Texas criminal appeals courts’ findings that there is a constitutional distinction between jury unanimity on the “elements” of the offense and the “manner and means” is subject to legal speculation.

 

A Ramos review by the TexCrimmApp was given added interest by yet another U.S. Supreme Court decision handed down on May 17, 2021, Edwards v. Vannoy, which held the court’s decision in Ramos is not retroactive to cases in which inmates are seeking federal post-conviction relief. 

 

Time for Texas Court of Criminal Appeals to Visit Unanimity in Continuous Cases

 

The TexCrimApp should address whether Ramos has any constitutional impact on the “manner and means” interpretation in Section 21.02 cases at the first opportunity. Defendants are being sentenced to life without parole under Section 21.02. We put it this way in 2010:

 

“... under Sec. 21.02 the State must specifically allege in the indictment that the defendant committed two or more’ acts of sexual abuse,’ which can only be specific, enumerated criminal sexual offenses, during a period of 30 days or more. Sexual assault, indecency with a child, or aggravated sexual assault of a child are not ‘theories’” as to how the offense of “continuous sexual abuse of a child” occurred. They are specific, predicate criminal offenses that must be proven—and since Art. V, § 13 of the Texas Constitution requires a unanimous jury to convict when these offenses are tried on their own merits, the same constitutional requisite should apply when they are used as a ‘series’ of acts of sexual abuse to make up the single offense of continuous sexual assault of a child.

 

‘Beyond the political inspiration of ‘Jessica’s Law’, the Texas Legislature was also encouraged to enact Sec. 21.02 by a concurring opinion delivered by Judge Cathy Cochran in State v. Dixon. In that aggravated sexual assault of a child case the child victim testified that the defendant had sexually assaulted her in a similar manner one hundred times over a period of months. Judge Cochran warned that ‘we are headed for a train wreck in Texas because our bedrock procedural protections cannot adapt to the common factual scenario of an ongoing crime involving an abusive sexual relationship of a child under current penal provisions.’ Judge Cochran suggested that ‘a new penal statute that focuses upon a continuing course of conduct crime—a sexually abusive relationship that is marked by a pattern or course of conduct of various sexual acts’ might’ “assist in preserving our bedrock criminal-procedure principles of double jeopardy, jury unanimity, due-process notice, grand-jury indictments, and election law.’

 

“The politically-motivated Texas Legislature, with its ear always to the ground trying to hear anything about another restrictive penal statute it can enact, particularly one dealing with the pedophile boogey-man, apparently heard Judge Cochran’s lamentations and enacted Sec. 21.02 the following year.”

 

Well, the “train wreck” is not coming; it’s here, and the ashes are smoldering...

 

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Police Drop Charges Against Two Juveniles over Texas Mass Shooting

Mass shootings are tragic, high-profile, and often chaotic. The pressure is on police to make arrests quickly after shootings. On occasions, law enforcement officers make mistakes.

Associated Press recently reported police have dropped charges against two juveniles after investigators identified a different shooter in an incident in downtown Austin that left a tourist dead and more than a dozen others injured.

The shooting on June 12 on 6th Street followed a dispute between two groups of teens from the city of Killeen, according to media reports.  The shootings claimed the life of 25-year-old Douglas John Kantor.

Police initially arrested Jeremiah Tabb, 17, on an aggravated assault charge. Tabb was charged as an adult. They also arrested an unnamed juvenile.

Austin’s interim police chief Joseph Cacon said last week investigators have identified a different person of interest – De’ondre White, 19, as the shooter. A warrant was issued for his arrest last week.

The United States Marshals Service’s Lone Star Fugitive Task Force, with the assistance of the Killeen Police Department SWAT, arrested White in Killeen on June 24. They charged him with murder.

Ballistics evidence played a part in the dropping of the charges. Chacon said Tabb and the juvenile who was arrested had guns and were involved in the dispute. However, ballistics evidence revealed that the deadly shot that killed Kantor came from White’s firearm.

Although the charges against Tabb and the unnamed juvenile were dropped, Chacon was at pains to stress they were not innocent bystanders to the shootings.

Travis County District Attorney Jose Garza told the Associated Press his office chose to dismiss the charges against the duo  because he wants to focus on the murder case. He left the door open to charges against them later in the investigation. 

The June 12 incident in Austin was the latest in a long series of mass shootings in Texas. Police said 14 people ended up injured. Kantor later succumbed to his injuries. Two other victims were reported to be in a critical condition after the shootings. Police said the victims all appeared to be innocent bystanders.

Chacon told CNN, investigators are reviewing video footage from numerous sources including the city’s video surveillance cameras to determine what happened.

Austin Mayor Steve Adler noted an uptick in gun violence seen in the city was consistent with what is happening across Texas and the United States in 2021.

Murder and manslaughter are among the most serious crimes on the statute books in Texas. If you have been charged with a violent crime, talk to an experienced Dallas homicide defense attorney as soon as possible. Call (214) 720-9552.

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Penalties of Drug Trafficking in Texas

Texas state laws are designed to discourage and eliminate people who live in or visit the state from possessing, using and distributing drugs. In fact, anyone who is found guilty of any of these offenses in Texas can face serious, long-lasting and expensive repercussions.

When you have been charged with drug trafficking in this state, you have a limited opportunity to argue for your best interests in court and possibly avoid the harshest penalties that the state allows. You can take the most important step in escaping severe punishments by hiring an experienced drug trafficking attorney in Texas to represent you. 

What is Drug Trafficking? 

Drug trafficking in Texas is defined as any act that involves manufacturing, distributing or possessing illegal substances. These illegal substances can include:

• Opium
• Morphine
• Fentanyl
• Hydrocodone
• Xanax
• Cocaine
• Crack
• Heroin
• LSD
• PCP
• Marijuana
• Mushrooms
• Peyote
• Methamphetamine

This offense involves more than just possessing and using illegal and controlled drugs. It can also involve smuggling and transporting them as well.

Drug trafficking in Texas is charged as a state crime and a felony if it is committed within the state’s boundaries. If the drugs leave state lines, however, the crime becomes a federal offense. Drug trafficking violates the state’s Controlled Substances Act. People who are convicted of this offense face penalties that can include years in prison and steep civil fines that range in the tens of thousands of dollars.

Learn how a criminal defense attorney can help your case. Get your free ebook today »

Categories of Drugs in Texas

To clarify the severity of drug trafficking within the state, Texas categorizes the numerous substances that are illegal to manufacture, sell and possess. It uses four categories to determine the level of penalties that people may face if they are found guilty of drug trafficking in Texas.

Penalty Group One, for example, is reserved for drugs like:

• Opioids
• Cocaine
• Oxycodone
• Methadone
• Methamphetamines
• Marijuana

Alternatively, Penalty Group Two contains substances like amphetamine, methaqualone and ecstasy.

The third penalty group involves drugs like LSD, Xanax and Valium. Penalty Group Four is for mixtures or drug compounds, including those that mix both illegal drugs and prescribed substances together.

 As a general rule, Texas penalizes the trafficking of more addictive drugs harsher. In essence, the higher the penalty group that the drugs belong to, the more severe penalties a drug trafficker can expect to face if he or she is convicted.

Penalties of Drug Trafficking in Texas

The extent and severity of penalties that you will face in Texas if you are convicted of drug trafficking will depend on a number of different factors. Factors that come into play when law enforcement decides if and how to charge you for this offense include:

• The penalty group of drugs found in your possession
• The amount of drugs that you are accused of trafficking
• If you have any prior drug trafficking convictions
• If the drug trafficking took place in a designated safe zone
• If the drug trafficking offense can be charged as as state or federal offense
• If you had any weapons on you at the time of your arrest
• If you had a sizable amount of cash on you when you were arrested
• If you possessed drug-related items like weighing scales or packaging materials

Depending on these factors, you could face any array of punishments. For example, if you are found guilty of trafficking less than one gram of any of the drugs in the first or second penalty groups, you could face six months to two years in jail and a fine of up to $4000.

However, if you are found guilty of trafficking four to 400 grams of any of the drugs in the second or higher penalty groups, you could face five to 99 years in prison, as well as a fine of up to $10,000. Likewise, trafficking 28 to 200 grams in Penalty Group Four can result in you being sentenced to two to 20 years in prison and paying a fine of $10,000.

Still, a number of mitigating factors can influence if or what kind of charges that you will face. For example, your defense attorney will determine if police violated your Constitutional Fourth Amendment rights. If they determine that the police violated these rights, your lawyer can ask that the evidence found during the illegal search and seizure of the drugs be thrown out of court.

Likewise, your lawyer can determine if any statements from drug informants in your case are valid and legal. If questions can arise from these statements, they can be sufficient in getting the charges against you dropped or reduced.

Have you been charged with a drug trafficking charge in Texas? Attorney Brett Podolsky can help »

Hiring a Drug Trafficking Attorney

A variety of circumstances can determine whether or not drug trafficking charges against you can be successfully litigated and lead to your conviction. As someone who is accused of this crime, you have rights under the law to explore these circumstances and use mitigating factors to your advantage. 

However, to make full use of legal advantages that are available to you, you need to hire an experienced drug trafficking attorney to represent you. Your lawyer can investigate the charges against you thoroughly and determine if they are legal and valid. He or she can also argue for why they should be reduced or dropped, based on the evidence in your case.

For example, if you were not aware of the presence of drugs in your car or home, you might have a solid defense to escape being sentenced to jail and fined thousands of dollars. Likewise, if you are charged with trafficking a substance the law enforcement labeled as illegal when, in fact, it was not meant for human consumption, you might have a case to avoid being charged.

Finally, your attorney may be able to argue that you were under duress and that you or your family were threatened. If you were compelled into trafficking drugs under duress, your attorney may be able to get the charges against you reduced or dropped. 

A drug trafficking attorney is a valuable ally to have on retainer if you are charged with this offense. He or she can determine what, if any, mitigating factors exist in your case. Your lawyer can also present evidence to show why the charges against you should be reduced or dropped entirely.

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What is reasonable compensation for employees of an I.R.C. § 501(c)(3)? (Part 1)

One of the most important decisions a board determines is what constitutes reasonable compensation. The rules for this determination are robust and so are the taxes imposed for violations of the Internal Revenue Code and the corresponding Treasury Regulations. In this 2-Part series, we examine the taxes imposed for unreasonable compensation and explain the steps for determining reasonable compensation. In this Part 1, we introduce the persons potentially subject to the taxes and the taxes themselves.

Whose compensation is possibly subject to I.R.C. § 4958 taxes?

In 1996, Congress enacted I.R.C. § 4958, the intermediate sanction on excess benefit transactions. An excess benefit transaction occurs when a disqualified person receives improper personal gain from the exempt organization.[1] A disqualified person is any person who was in a position to exercise substantial influence over the affairs of the tax-exempt organization at any time during the five-year period ending on the date of the excess benefit transaction.[2] Disqualified persons also include family members of other disqualified persons, including spouses and children.[3] Importantly, to be a disqualified person, it is not necessary that the person actually exercise substantial influence, only that the person be in a position to exercise substantial influence.[4] The Treasury Regulations define persons deemed to have substantial influence (e.g., presidents, CEO, treasurer, and CFO) as well as persons who are deemed not to have substantial influence.[5] When it is not clear whether someone is a disqualified person based on the influence, or lack of influence, the person has over the organization, a facts and circumstances test applies.[6]

While excess benefit transactions may arise in various situations, the issue most often arises when nonprofits pay unreasonable compensation to disqualified persons. Hence, the focus of this article.

Our organization paid unreasonable compensation to a disqualified person, now what?

The I.R.C. provides three types of tax to be imposed as intermediate sanctions when an excess benefit transaction occurs. Two of the taxes apply to disqualified persons who receive a benefit because of the excess benefit transaction. The third tax can apply to an organization manager.

Tax on disqualified person.

The disqualified person who receives unreasonable compensation is liable for an initial tax and potentially liable for an additional tax. The initial tax equals 25% of the value of the excess benefit.[7] The term excess benefit is defined as the amount by which the value of the compensation received exceeds the value of the services provided to the organization by the disqualified person in return.[8] This initial 25% tax is automatically due if an excess benefit transaction occurs. Further, the excessive compensation must be corrected, which is defined further below, in the taxable period if the disqualified person does not want to pay an additional tax. The taxable period begins on the date on which the excess benefit transaction occurs and ends on the earlier of: (i) the date of mailing of a notice of deficiency under I.R.C. § 6212 regarding the 25% tax, or (ii) the date when the 25% tax is assessed.[9] If the initial 25% tax is imposed and the disqualified person does not correct the excessive compensation within the taxable period, then an additional tax is imposed on the disqualified person equal to 200% of the excessive compensation received.[10] The financial burden of these two taxes plus the repayment of the excessive compensation can reach 325% of the excessive compensation. Stated alternatively, even if the disqualified person pays the 200% tax to the IRS, they are still required to return the entire excess benefit to the nonprofit organization.

Tax on organization manager.

If a tax is imposed against a disqualified person under I.R.C. § 4958, then any organization manager who knowingly participated in the excess benefit transaction is subject to a tax equal to 10% of the value of the excess benefit, unless that participation “is not willful and is due to reasonable cause.”[11] An organization manager is defined as “any officer, director, or trustee” of the non-profit organization, or “any individual having powers or responsibilities similar to those of officers, directors, or trustees of the organization . . . .”[12] An organization manager participates in a transaction knowingly only if the person:

1. Has actual knowledge of sufficient facts so that, based solely on those facts, the transaction would be an excess benefit transaction;
2. Is aware that the transaction may violate Federal tax law governing excess benefit transactions; and
3. Negligently fails to make reasonable attempts to ascertain whether the transaction is an excess benefit transaction, or the manager is aware that it is an excess benefit transaction.[13]

If more than one manager participates in the transaction, all are jointly and severally liable.[14]

If an organization manager relies on reasoned written opinion of an appropriate professional and the opinion reflects elements of the transaction within the professional’s expertise, then the organization’s manager is not considered knowing.[15] A written opinion is reasoned even though it reaches a conclusion that is later determined to be incorrect.[16] However, if the written opinion only recites facts and express a conclusion, then it is not reasoned.[17] An appropriate professional includes legal counsel, certified public accountants, accounting firms, and independent valuation experts.[18]

How to correct an excess benefit transaction.

An excess benefit transaction imposed against a disqualified person is corrected by (1) undoing the excess benefit, and (2) attempting to place the non-profit in a financial position not worse than if the non-profit would be if the disqualified person were dealing under the highest fiduciary.[19] The Treasury Regulations describe certain acceptable forms of correction (e.g., cash and return of specific property). The correction amount equals the sum of excess benefit and interest on the excess benefit.[20] Again, correction must occur during the taxable period.

This doesn’t end here . . .

In this Part 1, we’ve defined excess benefit transactions, explored the taxes imposed when excess benefit transactions occur, and explained how to correct excess benefit transactions. While that’s quite a bit of information, many of you are likely wondering how to determine reasonable compensation, and thus avoid everything stated above. For that discussion, you’ll need to read Part 2 of this series. So stay tuned for the next post, Part 2!

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[1] I.R.C. § 4958(c)(1); see also Treas. Reg. § 53.4958–4(a)(1).

[2] Treas. Reg. § 53.4958–3(a)(1). The five-year period is often referred to as the lookback period.

[3] Id. § 53.4958–3(b)(1). Special rules, not discussed here, apply to corporations and partnerships in which disqualified persons have an interest as well as donor advised funds and supporting organizations.

[4] See id. § 53.4958–3(a)(1).

[5] See id. § 53.4958–3(c), (d).

[6] See id. § 53.4958–3(e). The Treasury Regulations include facts and circumstances tending to show substantial influence as well as facts and circumstances tending to show no substantial influence.

[7] I.R.C. § 4958(a)(1).

[8] Treas. Reg. § 53.4958–1.

[9] I.R.C. § 4958(f)(5); Treas. Reg. § 53.4958–1(c)(2).

[10] I.R.C. § 4958(b).

[11] Id. § 4958(a)(2).

[12] Treas. Reg. § 53.4958–1(d)(2).

[13] Id. § 53.4958–1(d)(4).

[14] Id. § 53.4958–1(d)(8).

[15] Id. § 53.4958–1(d)(4)(d)(iii).

[16] Id. § 53.4958–1(d)(4)(d)(iii).

[17] Id. § 53.4958–1(d)(4)(d)(iii).

[18] Id. § 53.4958–1(d)(4)(d)(iii).

[19] Id. § 53.4958–7(a).

[20] I.R.C. § 4958(f)(6); Treas. Reg. § 53.4958–7(c).

The post What is reasonable compensation for employees of an I.R.C. § 501(c)(3)? (Part 1) appeared first on Freeman Law.

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How Long Does it Take to Settle a Personal Injury Claim?

It is normal to want your personal injury claim to be resolved as quickly as possible. It is critical, however, not to rush into a fast settlement. This can put you at significant risk of accepting less than you deserve for your injuries and losses. If you are curious about how long it will take your individual claim to successfully settle, consult with a personal injury attorney in San Antonio for advice.

 

Average Personal Injury Settlement Timelines

No set timeline exists for all personal injury claims. Some claims are settled in months, while others take a few years to resolve. Although each case is unique, you may be able to get an idea of how long it will take your personal injury claim to settle by looking at average settlement timelines. The best way to estimate your timeline, however, is by consulting with an attorney.

An example of a typical personal injury case is:

• The accident
• Initial medical treatment
• Consultation with an attorney
• Insurance claim filed
• Accident investigation
• Settlement negotiations
• A lawsuit filed (in some cases)
• Personal injury trial, if necessary

 

If you and the defendant’s insurance company reach a successful settlement soon after you file your claim, you may be looking at a timeline of several months or less to resolve your case. If, however, you have a complicated case or the insurance company refuses to make a fair settlement offer, you may have to go to trial. The average personal injury trial takes one year or longer to finish, depending on the availability of the courthouse.

What Can Affect Your Settlement Timeline?

It is difficult to accurately estimate how long your personal injury settlement will take. There are a number of factors involved in the settlement timeline. Since your case is 100 percent unique, it will not look like any other case. Factors that could increase the amount of time it takes to reach a settlement include:

• Problems, such as lack of evidence
• Severe or catastrophic injuries
• Waiting to reach your point of maximum medical improvement
• Major losses, such as wrongful death
• Significant case value
• Multiple defendants
• Liability dispute between insurance companies
• Comparative negligence argument

 

Hiring a personal injury attorney to help you navigate all of the factors and complications involved in your case can save time. Your lawyer will know how to settle your claim as efficiently as possible. At the same time, your lawyer can protect you from accepting a fast settlement that does not adequately pay for your present and future losses.

Why You Shouldn’t Rush Into a Settlement

Insurance companies are notorious for trying to save money on clients’ payouts with tactics such as devalued injuries, inadequate investigations and delayed settlements. One tactic an insurance company may use to take advantage of you is offering a settlement that is far lower than the true value of your case in the hopes that you will be eager to resolve your case and say yes. Accepting the first settlement offer, however, could take away your ability to obtain the compensation you deserve.

Even if your case has factors that will lengthen the settlement timeline, such as serious injuries, it is important to be patient and listen to your attorney’s advice for when to settle. Resisting a fast settlement can allow you or your lawyer to negotiate with the insurance company and submit counteroffers that can increase the final value of your settlement. This is especially important if you have catastrophic injuries that will require future medical care.

You cannot reopen your case once you accept a settlement, even if you discover later that your injuries are more serious than you originally thought. This is why it is important to take your time and work with a lawyer to negotiate a fair settlement value. Taking more time to settle can be well worth the wait if you obtain the financial compensation that you need.

 

The post How Long Does it Take to Settle a Personal Injury Claim? appeared first on Hill Law Firm.

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What to Expect If Your Car Accident Case Goes to Trial

Car accidents can often be minor, resulting in only superficial injuries and a bent fender. Unfortunately, many car accidents are severe, resulting in serious life-threatening injuries and thousands in property damage.

If you’ve been a victim of a serious car accident, you should be able to rely on the at-fault party’s insurance for compensation. However, there are cases that require going beyond the settlement and into a jury trial.

Many Car Accident Cases Settle Outside of Court

Many car accident cases can be settled outside of court through negotiation by a skilled attorney. In Texas, the at-fault driver’s insurance company is responsible for paying your medical bills. You may receive an adequate settlement for your injuries from the insurance company without ever stepping foot inside a courtroom.

When Is Court Appropriate for Your Car Accident?

In some cases, the insurance company may deny the accident claim or fail to provide enough compensation to cover your medical bills and property damage. If this is the case, you can then move forward with a lawsuit by suing the at-fault driver.

What to Expect During Your Trial

First, your attorney will do what it takes to try and reach a settlement outside of court via mediation. If negotiations fail, the case may proceed to a jury trial. Your car accident trial will feature all of the hallmark elements of a trial, including:

• Jury selection: The court will take the time to select a jury that meets the qualifications of your case.
• Presenting of evidence: Your attorney will be able to present evidence on your behalf, including photos, medical bills and witness statements to help prove your case.
• Cross-examination: The other party’s attorney will cross-examine the evidence and the witnesses.

After closing remarks, the jury will deliberate and return with a verdict. Due to the nature of these cases, the time it takes to complete the litigation process will differ for each case. It could take anywhere from months to a couple of years to complete the process.

Call the Attorneys at Ted B. Lyon & Associates for Help

Are you a victim of a serious accident? Worried that you’ll be unable to pay your medical bills? The attorneys at Ted B. Lyon & Associates have years of experience with litigation. Let us help you start to heal. To learn more about your potential case, give us a call at 866-503-4864  or send us a message.

The post What to Expect If Your Car Accident Case Goes to Trial appeared first on Ted B. Lyon & Associates.

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U.S. Group Requests to FTA for U.S. Individual NonConsenteng Account Information (6/30/21)

It’s been quite some time since I paid any attention to the application of FATCA with Swiss Banks and how information of U.S. taxpayers’ accounts are reported to the IRS under FATCA.  To provide a high-level summary, for U.S holders of accounts not consenting to automotive disclosure to the IRS of account information, those banks are required to make aggregate disclosures to the Federal Tax Administration (“FTA”) which provides the aggregate information to the IRS.  For Swiss Banks that report in the aggregate, the IRS may make “group requests” through the Administrative Assistance procedure that requires the Swiss Banks to disclose the individual account information.  The Swiss Federal Tax Administration discussion of the process is here; the IRS discussion and links describing the general process is here; the IRS description is here  Individual account owners are notified of the request either by notice to the notice information with respect to the account or by publication in Switzerland and may appeal (good luck with that).

 The IRS has made several group requests starting in December 2020.  The latest request (the 5^threquest) was June 28, 2021, with the aggregate banks for whom requests were made as follows (a copy and paste from the FTA page, here; note that some Financial Institution names may be slightly different on my spreadsheet): 

Financial Institution or Facilitator

Aargauische Kantonalbank

AXA Leben AG

Bank CIC

Bank Cler

Bank J. Safra Sarasin AG

Bank Julius Baer

Bank Lombard Odier & Co Ltd

Banque Cantonale de Genève

Banque Cantonale du Valais (Walliser Kantonal Bank)

Banque Cantonale Vaudoise

Banque Heritage SA

Banque SYZ PA

Basler Kantonalbank

Berner Kantonalbank AG (BEKB)

BNP Paribas (Suisse) SA (BNPP)

Bordier & Cie Switzerland

BSI SA

Coutts & Co Ltd

Credit Suisse (Schweiz) AG

Credit Suisse AG

Credit Suisse Stiftung für Mitarbeiter-Beteiligungsmodelle

EFG Bank SA

Falcon Private Bank AG

Frankfurter Bankgesellschaft (Schweiz) AG

Hapoalim (Schweiz)

Helvetia Schweizerische Lebensversicherungsgesellschaft AG

HSBC Private Bank (Suisse)

J.P. Morgan (Suisse) AG

Lloyds Bank plc, Londres, succursale de Genève (inzwischen gelöscht

Maerki Baumann & Co. AG

Migros Bank AG (Migros)

Neue Aargauer Bank AG (übernommen durch Credit Suisse (Schweiz) AG)

Pictet & Cie

Piquet Galland & Cie SA

PostFinance AG

Société Générale Private Banking (Suisse) SA (SGPB-Suisse)

Swiss Life Holding AG (& Subs)

Swissquote Bank SA

UBS AG

Zürcher Kantonalbank (ZKB)

 A discussion of the group request process is in the following linked web discussion: FATCA group requests – the New Reality for Swiss banks (EY Switzerland Blog), here

The following is from  the CreditSuisse Annual Report 2020, pp. 39-40; 41 (emphasis supplied) here:

Tax

Automatic exchange of information and administrative assistance in tax matters In Switzerland, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) and the Multilateral Competent Authority Agreement (MCAA), together with the Federal Act on the International Automatic Exchange of Information in Tax Matters and its implementing ordinance, form the legal basis for the automatic exchange of information. Based on the MCAA, the multilateral agreement with the EU on the international automatic exchange of information in tax matters and a number of bilateral AEI agreements, Switzerland collects and exchanges information with more than 100 jurisdictions in respect of financial assets held in, and income derived thereon and credited to, accounts or deposits maintained in Switzerland.

Further to the MAC, Switzerland is required to spontaneously exchange certain information on advanced tax rulings in accordance with the OECD and G20 project to combat base erosion and profit shifting (BEPS). Additionally in 2009, Switzerland adopted the OECD standard on administrative assistance in tax matters in accordance with Art. 26 of the OECD Model Agreement which has subsequently been included in 60 Double Tax Agreements (DTAs), of which are in force and applicable. The 2009 protocol (Protocol, ratified in 2019) amending the tax treaty [*37] regarding income tax between Switzerland and the US, a mechanism for the exchange of information upon request in tax matters between Switzerland and the US is now in place. This mechanism allows the US to make group requests under the US Foreign Account Tax Compliance Act (FATCA) concerning non-consenting US accounts and non-consenting non-participating foreign financial institutions. The Protocol further erases the distinction between tax evasion and tax fraud in the context of administrative assistance to permit any exchanges of information as may be relevant to the administration or  enforcement of the domestic laws concerning taxes.

Finally, in accordance with the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports as well as the implementing Swiss federal legislation, multinational groups of companies in Switzerland have to prepare country-by-country reports since the 2018 tax year with the exchange of the reports by Switzerland having started in 2020.

* * * * 

FATCA

Pursuant to an agreement with the US Internal Revenue Service (IRS) entered into in compliance with FATCA, Credit Suisse is required to identify and provide the IRS with information on accounts held by US persons and certain US-owned foreign entities, as well as to withhold tax on payments made to foreign financial institutions that are not in compliance with FATCA and account holders who fail to provide sufficient information to classify an account as a US or non-US account. Switzerland and the US have entered into a “Model 2” intergovernmental agreement to implement FATCA, which requires Credit Suisse to disclose account details directly to the US tax authority with the consent of the US clients concerned. Where US clients do not provide Credit Suisse consent to disclose to the IRS, the US authorities must make a group request for this data through normal administrative assistance channels. Group requests are effective for  information applying to cases dating from June 30, 2014.

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A Matter of Statutory Interpretation: Texas Supreme Court Declares Amazon.com Is Not a Seller Under Texas Products Liability Law

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Case Name: Morgan McMillan, individually and as next friend of E.G., a minor child, Plaintiff—Appellee, v. Amazon.com, Inc., Defendant—Appellant

On December 18, 2020, the United States Court of Appeals for the Fifth Circuit filed the following certified question with the Texas Supreme Court: “Under Texas products-liability law, is Amazon a ‘seller’ of third-party products sold on Amazon’s website when Amazon does not hold title to the product but controls the process of the transaction and delivery through Amazon’s Fulfillment by Amazon program?”

Image by athree23 from Pixabay

According to the Fifth Circuit, “If the former, then Amazon is a ‘seller’ under Texas products-liability law and potentially liable for injuries caused by unsafe products sold on its website.” However, if it is not a seller, “injured consumers cannot sue [Amazon] for alleged product defects.”

On June 25, 2021, the Texas Supreme Court stated that Amazon.com is not “a ‘seller’ under Texas law when it does not hold title to third-party products sold on its website but controls the process of the transaction and delivery.” Therefore, “when the ultimate consumer obtains a defective product through an ordinary sale, the potentially liable sellers are limited to those who relinquished title to the product at some point in the distribution chain.” Justice Boyd issued a dissenting opinion, in which Justice Devine joined.

Analyses in both the majority and dissenting opinions focused on language in Tex.Civ. Prac. & Rem. Code § 82.001(3), which defines a “seller” under the Texas Products Liability Act (“Act”) as a “person who is engaged in the business of distributing or otherwise placing, for any commercial purpose, in the stream of commerce for use or consumption a product or any component part thereof.” (Emphasis supplied.) The bolded terms in the preceding sentence are not defined within the Act.

Image by Free-Photos from Pixabay

Justice Busby, writing for the majority, referenced dictionary definitions and Texas common-law products liability case law, which “has been shaped by section 402A of the Second Restatement of Torts.” On the other hand, the dissenting opinion relies only on dictionary definitions, and states:

. . . we must determine its meaning as of the date of [the statutory section’s enactment, in 1993]. To the extent our pre-1993 decisions illustrate the phrase’s meaning, such that we can assume the legislature intended to incorporate that meaning, to “distribute or otherwise place” a product into the stream of commerce meant to physically convey or transfer it within the sales process. To retroactively impute a new common-law possession-of-title requirement is to improperly “judicially amend the statute to add an exception not implicitly contained in the language of the statute.”

Additional case information and appellate briefs are available here.

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The Criminal Appeals Process

Did you know that everyone convicted of a crime in a Texas court is entitled to appeal? The clock on this right, however, begins to tick right away and a person wishing to appeal a conviction only has 30 days from the date of conviction to file the notice of appeal. Should this notice not be filed before the 30-day window has passed, the right to an appeal may be lost.

In the case of a death sentence, the appeal goes to the Court of Criminal Appeals. In all other cases, the appeal will go to the Court of Appeals. The appellate court is tasked with reviewing the record of the case for legal errors that may entitle the defendant to some form of appellate relief.

The Criminal Appeals Process

In order to initiate the appeals process, as stated above, you must file your notice of appeal. The notice will detail what you are appealing from. It will state your desire to appeal as well as which appellate court will hear the appeal. The notice is filed in the Clerk’s office of the court where you received your criminal conviction and the clerk, in turn, will send notice and other pertinent information about your case to the appellate court.

After the notice of appeal is filed and the record of your case is complete, an appellate brief must be filed. The appellate brief will detail things such as errors made at the trial level. The state will then have an opportunity to file a response to this initial appellate brief and then the case will proceed to be reviewed by the appellate court.

During a criminal appeal, new evidence cannot be introduced. An appeal is strictly limited to the record as it stands. It is not a new trial, but instead, a review of the trial to see if there are legal errors present that would render the trial outcome fundamentally unfair. Such a review will involve going over decisions and actions taken by the trial judge and seeing if there were any rulings made during, or even before, the trial that could be seen as unfair. Was someone prevented from testifying that should have been permitted? Was evidence excluded that should have been admitted? These are decisions that could have significant impacts on the outcome of a case.

In Texas, there are 14 appellate courts. An appeal will be decided by a panel of three judges. These judges are not tasked with deciding guilt or innocence. They are tasked with determining whether or not a defendant received a fair trial. They are tasked with deciding whether there was sufficient evidence presented to support the conviction. Was the verdict manifestly unjust? This means that there was insufficient evidence to support such a conviction and this can be decided by the court of appeals.

Criminal Defense Attorneys

If you have been convicted of a crime, you still have options. Talk to the dedicated criminal defense team at Navarrete & Schwartz. We are proud to serve the residents of Midland, Texas. Contact us today.

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Litigation Techniques When Clients Deny Opioid Medication

After a personal injury or car accident, people often seek medical attention and the assistance of a lawyer. There is a symbiotic relationship between the medications and treatments clients receive and the monetary damages they are awarded in litigation. While the client’s decision to abstain from opioid use doesn’t make their injuries any less serious, it does create a hole where defense can argue that the injuries may be less severe.

Attorneys must understand their client’s reasoning when choosing not to take opioids, coach their client in the importance of keeping a record of pain, and work to understand the changing attitudes toward opioids in the general population.

In this article, learn how to control and respond to arguments defense may make when a client avoids taking prescription painkillers.

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Widespread Impact of Opioid Epidemic is Changing Patient Care and Attitudes

Opioids can be dangerous for multiple reasons. Their primary purpose is to relieve the perception of pain through the central nervous system. Another effect that they have on many people can be a feeling of euphoria. This effect can be highly addictive for many. It is now widely known that these drugs can be extremely habit forming.

Some forms of opioids can include:

• Oxycodone (1): Can be administered orally with a pill or liquid form. Oxycodone is prescribed to change how patients respond to pain. (Narcotic) This is considered a habit forming drug.
• Hydrocodone: A pain reliever. It is an opioid medication that is often combined with a non-opioid pain reliever, acetaminophen, in prescription drugs such as Zolvit, Lorcet, Generic Xodol, Norco, Lortab, Norcol or Hycet.
• Codeine: An opioid pain reliever. Often used to reduce coughing. In some medications it can be combined with acetaminophen or aspirin.
• Other opioids include: OxyContin, Vicodin, morphine, fentanyl.

The post Litigation Techniques When Clients Deny Opioid Medication appeared first on McMinn Law Firm.

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Wife’s Fraudulent Transfer Claim Against Husband For Transferring Business Interests To Trust Failed Due To The Statute Of Repose

In Austin v. Mitchell, a wife filed suit alleging her ex-husband fraudulently transferred a portion of his limited partnership interest in a family limited partnership to a trust for the benefit of his children. No. 05-19-01359-CV, 2021 Tex. App. LEXIS 4536 (Tex. App.—Dallas June 8, 2021, no pet. history). The trial court granted summary judgment for the husband and the wife appealed.

The court of appeals first discussed the husband’s statute of repose defense. The wife alleged that the transfer of the husband’s partnership interest to the trust was fraudulent because it was made:  without fair consideration and the husband was left insolvent as a result (Tex. Bus. & Com. § 24.006(a)); with the actual intent to hinder, delay, or defraud the wife (id. § 24.005(a)(1)); or without receiving reasonably equivalent value at a time when the husband believed or should have believed his debt to the wife was beyond his ability to pay as payments became due (id. § 24.005(a)(2)(B)). The court discussed the statute of repose for fraudulent transfer actions:

Section 24.010 provides that a cause of action with respect to a fraudulent transfer “is extinguished” unless action is brought: (1) under Section 24.005(a)(1) of this code, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant; (2) under Section 24.005(a)(2) or 24.006(a) of this code, within four years after the transfer was made or the obligation was incurred; or (3) under Section 24.006(b) of this code, within one year after the transfer was made... Statutes of repose are absolute in nature and, while they may work inequitable hardship in some cases, the “Legislature has balanced this hardship against the benefits of the certainty that a statute of repose provides by extinguishing claims upon a specific deadline.”

Id. Because the evidence showed that the wife should have known of the transfer more than four years before the suit due to the husband’s testimony in a deposition attended by the wife’s attorney, the court affirmed summary judgment on the repose defense.

The wife had also asserted an accounting and disgorgement claim against the trustee of the trust. The court of appeals held that the wife did not have a sufficient connection to the trust to have standing to bring those claims. Regarding standing, the court stated:

The property code provides that an “interested person” may bring an action against a trustee for an accounting and to make determinations of fact affecting a trust, including determinations regarding trust administration and distributions. Tex. Prop. Code §§ 115.011, 115.001. An “interested person” is: [A] trustee, beneficiary, or any other person having an interest in or a claim against the trust or any person who is affected by the administration of the trust. Whether a person, excluding a trustee or named beneficiary, is an interested person may vary from time to time and must be determined according to the particular purposes of and matter involved in any proceeding. Tex. Prop. Code § 111.004(7).

Id. The wife alleged that because she had a claim against the trust, she had standing. The court disagreed, and held that because the wife’s claim was meritless, she did not have sufficient connection to the trust:

Absent her fraudulent transfer claim against Mitchell, Austin has no claim against the trustee. She did not allege and there is no evidence that the trustee owed any duty to Austin. Any claim she has is through claims against Mitchell, and the only claim alleged was fraudulent transfer, but that claim is extinguished by the statute of repose. Thus, she does not have a “claim against the trust.” Prop. § 111.004(7). Mitchell testified in his affidavit that he does not control the trust and has never used its accounts for his personal expenses. Mitchell created the irrevocable trust for the benefit of his children; its purpose is to provide for the health, education, maintenance, and support of the beneficiaries. Austin is not a beneficiary or trustee of the trust. She is not named as a contingent beneficiary and the trust document expressly excludes her from becoming a successor trustee. Considering the purpose of the trust and the matter involved in this proceeding, Austin is not an interested person and does not have standing to bring her claims against the trustee.

Id.

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Court Holds That An Executor May Breach Duties In Making A Non-Pro Rata Distribution Of Assets

In In re Estate of Stewart, siblings filed claims regarding the administration of their father’s estate. No. 04-20-00103-CV, 2021 Tex. App. LEXIS 3897 (Tex. App.—San Antonio May 19, 2021, no pet. history). Among other claims, a sister claimed that her brother breached fiduciary duties as executor by distributing real property to three of the siblings, but not to her. The brother claimed that he had the right to do so under the Estates Code. The jury found that the brother breached his fiduciary duties, but found that the sister had not been harmed. The brother appealed. The court of appeals first discussed an executor’s fiduciary duties to the estate’s beneficiaries:

“The relationship between an executor and the estate’s beneficiaries is one that gives rise to a fiduciary duty as a matter of law.” “An executor’s fiduciary duty to the estate’s beneficiaries arises from the executor’s status as trustee of the property of the estate.” “The executor thus holds the estate in trust for the benefit of those who have acquired a vested right to the decedent’s property under the will.” “The fiduciary duties owed to the beneficiaries of an estate by an independent executor include a duty of full disclosure of all material facts known to the executor that might affect the beneficiaries’ rights.” “A fiduciary also ‘owes its principal a high duty of good faith, fair dealing, honest performance, and strict accountability.’” “When an independent executor takes the oath and qualifies in that capacity, he or she assumes all duties of a fiduciary as a matter of law which, in addition to other duties, includes the duty to avoid commingling of funds.”

Id.

Regarding the brother’s claim that the Texas Estates Code allowed him to make a non-pro rata distribution of the real property, the brother cited to section 405.0015 of the Texas Estates Code, which states:

Unless the will, if any, or a court order provides otherwise, an independent executor may, in distributing property not specifically devised that the independent executor is authorized to sell: (1) make distributions in divided or undivided interests; (2) allocate particular assets in proportionate or disproportionate shares; (3) value the estate property for the purposes of acting under Subdivision (1) or (2); and (4) adjust the distribution, division, or termination for resulting differences in valuation.

Id. (citing Tex. Est. Code § 405.0015). The sister claimed that even if the brother could make a non-pro rata distribution, that he still had a duty to make disclosures to her. The brother argued as follows:

Wayne further argues that Jennifer based her breach of fiduciary claims on (1) Wayne’s failure to disclose his distribution plan and his decision to deed the Goliad Property to the three brothers; (2) Wayne’s failure to disclose the AEP easement to her; and (3) Wayne’s failure to value the Goliad Property at $11,250.00 per acre, which is the amount AEP paid for its easement. According to Wayne, under section 405.0015 and the will, he had the authority to determine whether and how to make non-pro rata distributions of the residuary estate, and thus to exclude Jennifer from distribution of the Goliad Property. Wayne argues neither his plan nor ultimate distribution of the Goliad Property could have affected Jennifer’s rights so long as she received equal value of the residuary estate. Thus, Wayne argues the information Jennifer claims she did not receive was not material, and his failure to disclose that information, constitutes no evidence that he failed to comply with his fiduciary obligations.

Id. The court disagreed with the brother, and stated:

In looking at the plain meaning of section 405.0015, it clearly grants an independent executor, unless otherwise limited, authority to make distributions in divided or undivided interests; to allocate particular assets in proportionate or disproportionate share; to value the estate property; and to adjust the distribution, division or termination for resulting differences in valuation. See Tex. Est. Code § 405.0015. However, section 405.0015 states nothing about divesting an independent executor of the fiduciary duties he owes the beneficiaries of the will. We agree with Jennifer that Wayne’s interpretation would lead to an absurd result. We also agree with Jennifer that it is not a coincidence section 405.0015 became effective simultaneously with the Texas Uniform Partition of Heir’s Property Act (the “Heirs Partition Act”). See Tex. Prop. Code § 23A.001 (effective Sept. 1, 2017). The Heirs Partition Act provides a streamlined process by which heirs can either force partition in kind, or alternatively effectuate the buyout, of undivided interests in inherited property. See Tex. Prop. Code §§ 23A.001-.013. We conclude section 405.0015 merely provides an independent executor with the tools necessary to make non-pro-rata distributions and avoid the common partition litigation among heirs anticipated and addressed by the Heirs Partition Act. Thus, the typical fiduciary duties of good faith, fair dealing, and full disclosure still apply to Wayne’s actions notwithstanding section 405.0015.

Id. The court then held that there was sufficient evidence to support the jury’s finding that the brother breached his fiduciary duties to the sister by failing to disclose material facts:

As noted previously, an independent executor owes a fiduciary duty to fully disclose all material facts known to him that might affect the beneficiaries’ rights. “This duty exists independently of the rules of discovery, applying even if no litigious dispute exists between the trustee and beneficiaries.” Further, “[t]he existence of strained relations between the parties [does] not lessen the fiduciary’s duty of full and complete disclosure.” Here, there was evidence at trial that Wayne repeatedly did not disclose material facts to Jennifer about the administration of the estate. With regard to the Goliad Property, there was evidence that he did not disclose the AEP easement offer to her or to Mark Barnes, the appraiser hired to perform the valuation on the Goliad Property for the estate. The evidence shows Wayne then applied the lower valuation found by Barnes in distributing the estate’s assets while, at the same time, intentionally waiting to sell the easement until after he had deeded the property to himself and his brothers, at the exclusion of Jennifer. That is, between August and December 2017, Wayne and his brother Steven negotiated the easement purchase price from the initial offer of $7,500 per acre to $11,250 per acre. On December 19, 2017, after agreeing to the easement price of $11,250 per acre but before executing the easement, Wayne deeded the Goliad Property to himself and his brothers. Wayne testified he took these actions knowing he was going to receive $73,000 from AEP that Jennifer would not. Wayne’s failure to timely disclose material facts to Jennifer affected her ability to challenge valuation of the Goliad Property. In addition to the Goliad property, Wayne admittedly did not disclose to Jennifer the nature of the securities distributed to her. Without this information, Jennifer could not establish the fairness or completeness of the distribution to her in lieu of an in-kind share in the Goliad property. We conclude there was evidence that Wayne failed to disclose to Jennifer material facts that might have affected her rights.

Id. The court also held that the fact that the jury found that the sister had no damages was not dispositive because the evidence showed that the brother had a benefit from his breach of fiduciary duties: “Wayne’s repeated non-disclosures to Jennifer about the material facts relevant to her interest in the Goliad Property, as well as his decision to apply a lower valuation to Jennifer’s share of the Goliad Property and exclude her from the more lucrative offer made on the AEP easement, resulted in a benefit to himself at the exclusion of Jennifer. That is, Wayne received a larger portion of the remaining residuary estate for himself because he chose to pay Jennifer thousands of dollars an acre less for her share of the Goliad property prior to negotiating a higher price for the easement he agreed to with AEP.” Id. Thus, the court affirmed the jury’s finding of breach of fiduciary duty as against the brother.

That affirmance was pivotal in the case, as due to the breach finding, the court of appeals affirmed: the trial court’s award of the sister’s attorney’s fees against the brother, the trial court’s refusal to allow the brother’s fees to be paid by the estate, the trial court’s order to require the brother to pay back the money from the estate used to pay his attorneys, and the trial court’s refusal to discharge the executor.

from Texas Bar Today https://ift.tt/3xbwzPV
via Abogado Aly Website