Final Accounts and Closing Guardianships
A guardianship of an estate of a ward is settled and closed if—
1.a minor ward dies or becomes an adult by becoming eighteen years old, by removal of disabilities of minority according to Texas law, or by marriage;
2.an incapacitated ward dies or is restored to full legal capacity;
3.the spouse of a married ward is qualified as the community survivor and the ward owns no separate property;
4.the estate of a ward becomes exhausted;
5.the foreseeable income accruing to a ward or to his estate is so negligible that maintaining the guardianship in force would be burdensome (see section 14.1:2 below for further discussion of closing an estate with negligible income);
6.all the assets of the estate have been placed in a management trust under Texas Estates Code chapter 1301 or have been transferred to a pooled trust subaccount in accordance with a court order issued as provided by chapter 1302, and the court determines that a guardianship of the ward’s estate is no longer necessary;
7.the court determines that the ward has sufficient capacity with supports and services to care for himself and to manage his property;
8.a minor’s estate consists only of cash or cash equivalents in an amount of $100,000 or less, in which case the guardianship may be terminated, the assets paid to the county clerk of the county in which the guardianship was pending, and the funds managed by the clerk as provided by chapter 1355 of the Estates Code;
9.all the ward’s assets are placed in a Texas Achieving a Better Life Experience (ABLE) account; or
10.the court determines for any other reason that a guardianship for the ward is no longer necessary.
Tex. Est. Code §§ 1204.001(b), (d), 1202.001(b)(2), 1202.003.
If any of the above situations exists, the guardian should prepare a verified account for final settlement (see section 14.2 below) setting out the specific reason that the guardianship should be settled and closed. See Tex. Est. Code §§ 1204.001, 1204.051, 1204.052, 1204.101, 1204.102, 1204.108. See form 14-1 in this chapter.
§ 14.1:2Closing Estate with Negligible Income
In the case of negligible income, the court may authorize the income to be paid to a parent or other person acting as guardian, to assist as far as possible in the maintenance of the ward, and without any liability for future accountings as to the income. See Tex. Est. Code § 1204.001(b)(6), (c).
Circumstances resulting in negligible income generally occur when a guardian is at the end of a “spend-down” strategy in order to qualify the ward for nursing home Medicaid.
Practice Pointer: Counsel for the guardian should be aware of a number of considerations well before this point:
1.An application should be made for a preneed funeral plan to be purchased by the guardian while sufficient funds ($4,000–$5,000) are on hand. See chapter 12 in this manual for a discussion on purchasing a preneed funeral plan that will not be considered a resource for Medicaid purposes.
2.A realistic estimate of the fees and expenses necessary to wind down the guardianship of the estate must be made so that an application for fees may be made while a reserve that will cover their payment still exists.
3.While Texas Estates Code section 1157.103 gives first priority for claims arising from expenses of administration (including attorney’s fees), there must be sufficient funds remaining in order to cover these expenses.
§ 14.1:3Appointing Attorney Ad Litem to Represent Ward
In the settlement or closing of a guardianship, the court may appoint an attorney ad litem to represent the ward’s interests in the final settlement with the guardian if the ward is deceased and there is no executor or administrator of the ward’s estate, the ward is a nonresident, or the ward’s residence is unknown. The court will allow the attorney ad litem reasonable compensation out of the ward’s estate for services provided. Tex. Est. Code § 1204.002. Chapter 6 in this manual deals with the appointment of an attorney ad litem to represent the interests of the ward.
§ 14.1:4Payment of Certain Expenses and Debts
In In re Estate of Glass, 961 S.W.2d 461 (Tex. App.—Houston [1st Dist.] 1997, no writ), the court restated the holding of Easterline v. Bean, 49 S.W.2d 427, 428 (Tex. 1932), in which the Supreme Court of Texas declared that “it has long been the public policy of this state that, when a ward dies, the probate court loses jurisdiction of the guardianship matter, save and except that the guardianship shall be immediately settled and closed, and the guardian discharged.” The court in Easterline ordered that the guardianship be terminated under section 745 of the Texas Probate Code (now Texas Estates Code section 1204.001) and ordered the guardian to deliver the property of the deceased ward to the personal representative of the deceased ward’s estate or other person entitled to the property. However, the Estates Code does give the guardian the power to take limited actions after the death of the ward. The guardian may make funeral arrangements and pay for the funeral subject to court approval. Tex. Est. Code § 1204.051. When there is a proceeding to declare the heirs of the deceased ward, the court may order the guardian to pay the taxes and expenses of administering the ward’s estate and to sell property of the ward’s estate in order to pay taxes and expenses of administering the estate or to distribute among the heirs. Tex. Est. Code § 1204.052.
When the guardianship of an estate is to be settled and closed, the guardian must prepare and submit an account for final settlement. Tex. Est. Code § 1204.101. The final report of a guardian of the person must be filed not later than the sixtieth day after the date on which the guardianship is required to be settled. Tex. Est. Code § 1204.108(b). For a list of situations requiring a guardianship to be closed, see section 14.1:1 above.
The Texas Estates Code requires that specific categories be reported in the account for final settlement, including—
1.the property, rents, revenues, and profits received by the guardian and belonging to the ward during the term of the guardianship;
2.the disposition made of the property, rents, revenues, and profits;
3.expenses or debts against the estate remaining unpaid, if any;
4.the property of the guardianship that remains in the hands of the guardian, if any;
5.payment by the guardian of all required bond premiums;
6.the tax returns the guardian has filed during the guardianship;
7.the amount of taxes the ward owed during the guardianship that the guardian has paid;
8.a complete account of the taxes the guardian has paid during the guardianship, including the amount of the taxes, the date the guardian paid the taxes, and the name of the governmental entity to which the guardian paid the taxes;
9.a description of all current delinquencies in the filing of tax returns and the payment of taxes and a reason for each delinquency; and
10.other facts necessary for a full understanding of the exact condition of the guardianship.
The guardian must verify the account and attach to it vouchers supporting each item not previously reported. A detailed description of every transaction during the guardianship administration is not necessary. It is sufficient simply to refer to the inventory already on file and to incorporate that and all other pleadings on file, including annual accounts and pleadings relating to approved sales, expenditures, and the like into the final account. Thus, any detailed statement of facts and figures in the account for final settlement should relate only to those items not already reported to the court. Tex. Est. Code § 1204.102. Unlike annual accounts, the account for final settlement does not require a verification of funds for the accounts shown in the account for final settlement. This is because the person to receive the funds is served with a copy of the account for final settlement and will verify the funds are present when the person signs the receipt.
Usually, the final item in the account for final settlement is a statement by the guardian that the property still on hand should be delivered to the person or persons entitled to receive it. The guardian is obligated to deliver the property of a deceased ward to the personal representative of the ward’s estate or other person entitled to it. Tex. Est. Code § 1204.108(a).
Form 14-1 in this chapter is an account for final settlement. The account should include a request for attorney’s fees for the attorney representing the guardian or the guardian’s estate. However, the application for and order approving payment of any appointee’s fees by the court must be separate. Forms 14-2 and 14-3 are a final report for guardian of the person only and the corresponding order discharging the guardian. See forms 6-19 and 6-20 for an application and order to pay appointee’s fees. The account should also request that the final fees awarded to the guardian, in a separate application and order, be paid before the remaining assets are delivered.
The final report of a guardian of the person must be sworn to and state the reason the guardianship was terminated and to whom the property of the ward was delivered. Tex. Est. Code § 1204.108(b).
One of the following forms of citation is required when the account for final settlement is filed unless waiver of service is authorized (see form 14-4 in this chapter).
1.If a resident ward is age fourteen or older and his address is known, he should be cited by personal service. Tex. Est. Code § 1204.105(c)(1).
2.If the ward is deceased and an executor or administrator other than the guardian has been appointed for the estate, the executor or administrator should be cited by personal service. Tex. Est. Code § 1204.105(c)(2), (e).
3.If the residence of the ward is unknown, if he is a nonresident of Texas, or if he is deceased and no representative has been appointed and has qualified in Texas, citation should be by publication. However, the court may by written order require citation by posting. Tex. Est. Code § 1204.105(c)(3).
Many courts make citation by posting a mandatory requirement; the attorney should check with the county clerk in the attorney’s county for local practice.
After citation has been returned, the court will examine the account and all accompanying vouchers, hear all evidence in support of the account and all objections, if any, to any portion of the account, and audit and settle the account. Tex. Est. Code § 1204.106. If the court approves the account, it will enter an appropriate order (see form 14-5 in this chapter). Tex. Est. Code § 1204.152. Included in that order will be authority for the guardian to deliver any property remaining on hand to the ward or to any person legally entitled to receive the property and authority to pay any unpaid debts or expenses. Tex. Est. Code § 1204.109. If there is no property remaining in the hands of the guardian at the time of the hearing, the order will discharge the guardian and his surety and close the estate. Tex. Est. Code § 1204.151.
If there is any property remaining in the estate for the guardian to deliver, he should obtain a signed receipt or other evidence of delivery from each person (see form 14-6). The guardian should then file an application for discharge (see form 14-7). Following that, the estate will be closed, the guardian will be discharged from his trust, and the guardian’s surety will be relieved of his obligations under the bond. Tex. Est. Code §§ 1105.159, 1204.152. See forms 14-8 through 14-10.
§ 14.2:5Delivery of Remaining Assets
The remaining assets are to be delivered to the ward, the personal representative of the ward’s estate if the ward is deceased and one has been appointed, or any other person legally entitled to receive the assets, such as a trustee of a guardianship management trust created for the ward or the county clerk as provided by chapter 1355 of the Texas Estates Code. Tex. Est. Code § 1204.109.
In some instances it may be appropriate for the guardian to seek to determine the deceased ward’s heirs. For example, the ward may have died intestate without any debts and with a modest estate. A probate court in which the guardianship is pending may determine the heirs if the ward dies intestate and no administration is pending. Tex. Est. Code § 33.004(b). The heirship proceeding brought under section 33.004(b) may not be brought in the guardianship proceeding but must be brought as a separate action in the court in which the guardianship is pending. Tex. Est. Code § 33.004(b).
If a cash bond has been delivered to the court, a motion to release the guardian’s cash bond should be filed with the probate court after orders approving the final account and authorizing the payment of all expenses, attorney’s fees, and the guardianship fee are entered. The probate judge will enter an order releasing the cash bond. Tex. Est. Code § 1105.159. See forms 14-9 and 14-10 in this chapter.
§ 14.3:2Refund of Surety Bond Premium
A copy of the order granting the discharge should also be forwarded to the bonding company with a request for refund of any unused premium. Many times if the guardianship is closed early in the year, part of the premium is refundable.