Bill Text: TX SB631 | 2019-2020 | 86th Legislature | Introduced

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Bill Title: Relating to trusts.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2019-03-01 - Referred to State Affairs [SB631 Detail]

Download: Texas-2019-SB631-Introduced.html

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86R2864 AJA-F
By: Rodríguez S.B. No. 631

A BILL TO BE ENTITLED
AN ACT
relating to trusts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 111.0035(b), Property Code, is amended
to read as follows:
(b) The terms of a trust prevail over any provision of this
subtitle, except that the terms of a trust may not limit:
(1) the requirements imposed under Section 112.031;
(2) the applicability of Section 114.007 to an
exculpation term of a trust;
(3) the periods of limitation for commencing a
judicial proceeding regarding a trust;
(4) a trustee's duty:
(A) with regard to an irrevocable trust, to
respond to a demand for accounting made under Section 113.151 if the
demand is from a beneficiary who, at the time of the demand:
(i) is entitled or permitted to receive
distributions from the trust; or
(ii) would receive a distribution from the
trust if the trust terminated at the time of the demand; and
(B) to act in good faith and in accordance with
the purposes of the trust;
(5) the power of a court, in the interest of justice,
to take action or exercise jurisdiction, including the power to:
(A) modify, reform, or terminate a trust or take
other action under Section 112.054;
(B) remove a trustee under Section 113.082;
(C) exercise jurisdiction under Section 115.001;
(D) require, dispense with, modify, or terminate
a trustee's bond; [or]
(E) adjust, [or] deny, or order disgorgement of a
trustee's compensation if the trustee commits a breach of trust; or
(F) make an award of costs and attorney's fees
under Section 114.064; or
(6) the applicability of Section 112.038.
SECTION 2. Subchapter B, Chapter 112, Property Code, is
amended by adding Section 112.0335 to read as follows:
Sec. 112.0335. CONSTRUCTION OF CERTAIN TRUSTS. (a) Unless
the terms of the trust provide otherwise, if a trust is created and
amendable or revocable by the settlor, or by the settlor and the
settlor's spouse, Chapter 255, Estates Code, applies at the
settlor's death to the construction and interpretation of at-death
transfers as if the settlor of the trust is the testator, the
beneficiaries of the at-death transfer are devisees, and the
at-death transfers are devises.
(b) Section 355.109, Estates Code, applies to the abatement
of at-death transfers.
(c) For purposes of this section, "at-death transfer" means
a transfer pursuant to the terms of a trust described by Subsection
(a) that is intended to take effect or become irrevocable by reason
of the settlor's death.
(d) For purposes of the Estates Code provisions specified by
this section:
(1) an at-death transfer of specifically identifiable
trust property is a specific bequest, devise, or legacy;
(2) an at-death transfer from the general assets of
the trust that does not transfer specifically identifiable property
is a general bequest, devise, or legacy; and
(3) an at-death transfer of trust property that
remains after all specific and general transfers have been
satisfied is the residuary estate.
SECTION 3. Section 112.054(c), Property Code, is amended to
read as follows:
(c) The court may direct that an order described by
Subsection (a)(4) [or (b-1)] has retroactive effect. The
reformation of a trust under an order described by Subsection (b-1)
is effective as of the creation of the trust.
SECTION 4. Subchapter D, Chapter 112, Property Code, is
amended by adding Section 112.0715 to read as follows:
Sec. 112.0715. CREATION OF SECOND TRUST. (a) A second
trust may be created by a distribution of principal under Section
112.072 or 112.073 to a trust created under the same trust
instrument as the first trust from which the principal is
distributed or to a trust created under a different trust
instrument.
(b) If a second trust is created by a distribution of
principal under Section 112.072 or 112.073 to a trust created under
the same trust instrument as the first trust from which the
principal is distributed, the property is not required to be
retitled.
(c) The legislature intends this section to be a
codification of the common law of this state in effect immediately
before September 1, 2019.
SECTION 5. Chapter 112, Property Code, is amended by adding
Subchapter E to read as follows:
SUBCHAPTER E. EFFECT OF DISSOLUTION OF MARRIAGE ON CERTAIN
TRANSFERS IN TRUST
Sec. 112.101. DEFINITIONS. In this subchapter:
(1) "Disposition or appointment of property" includes
a transfer of property to or a provision of another benefit to a
beneficiary under a trust instrument.
(2) "Divorced individual" means an individual whose
marriage has been dissolved by divorce, annulment, or a declaration
that the marriage is void.
(3) "Relative" means an individual who is related to
another individual by consanguinity or affinity, as determined
under Sections 573.022 and 573.024, Government Code, respectively.
(4) "Revocable," with respect to a disposition,
appointment, provision, or nomination, means a disposition to,
appointment of, provision in favor of, or nomination of an
individual's spouse or any relative of the individual's spouse who
is not a relative of the individual that is contained in a trust
instrument executed by the individual before the dissolution of the
individual's marriage to the spouse and that the individual was
solely empowered by law or by the trust instrument to revoke
regardless of whether the individual had the capacity to exercise
the power at that time.
Sec. 112.102. REVOCATION OF CERTAIN NONTESTAMENTARY
TRANSFERS; TREATMENT OF FORMER SPOUSE OR FORMER SPOUSE'S RELATIVE
AS BENEFICIARY UNDER CERTAIN POLICIES OR PLANS. (a) The
dissolution of the marriage revokes a provision in a trust
instrument that was executed by a divorced individual as settlor
before the divorced individual's marriage was dissolved and that:
(1) is a revocable disposition or appointment of
property made to the divorced individual's former spouse or any
relative of the former spouse who is not a relative of the divorced
individual;
(2) revocably confers a general or special power of
appointment on the divorced individual's former spouse or any
relative of the former spouse who is not a relative of the divorced
individual; or
(3) revocably nominates the divorced individual's
former spouse or any relative of the former spouse who is not a
relative of the divorced individual to serve:
(A) as a personal representative, trustee,
conservator, agent, or guardian; or
(B) in another fiduciary or representative
capacity.
(b) Subsection (a) does not apply if one of the following
provides otherwise:
(1) a court order;
(2) the express terms of a trust instrument executed
by the divorced individual before the individual's marriage was
dissolved; or
(3) an express provision of a contract relating to the
division of the marital estate entered into between the divorced
individual and the individual's former spouse before, during, or
after the marriage.
(c) Sections 9.301 and 9.302, Family Code, govern the
designation of a former spouse as a beneficiary of certain life
insurance policies or as a beneficiary under certain retirement
benefit plans or other financial plans.
Sec. 112.103. EFFECT OF REVOCATION. (a) An interest
granted in a provision of a trust instrument that is revoked under
Section 112.102(a)(1) or (2) passes as if the former spouse of the
divorced individual who executed the trust instrument and each
relative of the former spouse who is not a relative of the divorced
individual disclaimed the interest granted in the provision.
(b) An interest granted in a provision of a trust instrument
that is revoked under Section 112.102(a)(3) passes as if the former
spouse and each relative of the former spouse who is not a relative
of the divorced individual died immediately before the dissolution
of the marriage.
Sec. 112.104. LIABILITY OF CERTAIN PURCHASERS OR RECIPIENTS
OF CERTAIN PAYMENTS, BENEFITS, OR PROPERTY. A bona fide purchaser
of property from a divorced individual's former spouse or any
relative of the former spouse who is not a relative of the divorced
individual or a person who receives from the former spouse or any
relative of the former spouse who is not a relative of the divorced
individual a payment, benefit, or property in partial or full
satisfaction of an enforceable obligation:
(1) is not required by this subchapter to return the
payment, benefit, or property; and
(2) is not liable under this subchapter for the amount
of the payment or the value of the property or benefit.
Sec. 112.105. LIABILITY OF FORMER SPOUSE OR FORMER SPOUSE'S
RELATIVE FOR CERTAIN PAYMENTS, BENEFITS, OR PROPERTY. A divorced
individual's former spouse or any relative of the former spouse who
is not a relative of the divorced individual who, not for value,
receives a payment, benefit, or property to which the former spouse
or the relative of the former spouse who is not a relative of the
divorced individual is not entitled as a result of Sections
112.102(a) and (b):
(1) shall return the payment, benefit, or property to
the person who is entitled to the payment, benefit, or property
under this subchapter; or
(2) is personally liable to the person described by
Subdivision (1) for the amount of the payment or the value of the
benefit or property received, as applicable.
Sec. 112.106. CERTAIN TRUSTS WITH DIVORCED INDIVIDUALS AS
JOINT SETTLORS. (a) This section applies only to a trust created
under a trust instrument that:
(1) was executed by two married individuals as
settlors whose marriage to each other is subsequently dissolved;
and
(2) includes a provision described by Section
112.102(a).
(b) On the death of one of the divorced individuals who is a
settlor of a trust to which this section applies, the trustee shall
divide the trust into two trusts, each of which shall be composed of
the property attributable to the contributions of only one of the
divorced individuals.
(c) An action authorized in a trust instrument described by
Subsection (a) that requires the actions of both divorced
individuals may be taken with respect to a trust established in
accordance with Subsection (b) from the surviving divorced
individual's contributions solely by that divorced individual.
(d) The provisions of this subchapter apply independently
to each trust established in accordance with Subsection (b) as if
the divorced individual from whose contributions the trust was
established had been the only settlor to execute the trust
instrument described by Subsection (a).
(e) This section does not apply if one of the following
provides otherwise:
(1) a court order;
(2) the express terms of a trust instrument executed
by the two divorced individuals before their marriage was
dissolved; or
(3) an express provision of a contract relating to the
division of the marital estate entered into between the two
divorced individuals before, during, or after their marriage.
SECTION 6. Section 142.005(b), Property Code, is amended to
read as follows:
(b) The decree shall provide for the creation of a trust for
the management of the funds for the benefit of the beneficiary and
for terms, conditions, and limitations of the trust, as determined
by the court, that are not in conflict with the following mandatory
provisions:
(1) The beneficiary shall be the sole beneficiary of
the trust.
(2) The trustee may disburse amounts of the trust's
principal, income, or both as the trustee in the trustee's sole
discretion determines to be reasonably necessary for the health,
education, support, or maintenance of the beneficiary. The trustee
may conclusively presume that medicine or treatments approved by a
licensed physician are appropriate for the health of the
beneficiary.
(3) The income of the trust not disbursed under
Subdivision (2) shall be added to the principal of the trust.
(4) If the beneficiary is a minor who is not considered
disabled for purposes of 42 U.S.C. Chapter 7, Subchapter XVI, the
trust shall terminate on the death of the beneficiary, on the
beneficiary's attaining an age stated in the trust, or on the 25th
birthday of the beneficiary, whichever occurs first.
(4-a) If the court finds that a minor beneficiary is
considered disabled for purposes of 42 U.S.C. Chapter 7, Subchapter
XVI, the trust shall terminate on the death of the beneficiary.
(4-b) If[, or if] the beneficiary is an incapacitated
person, the trust shall terminate on the death of the beneficiary or
when the beneficiary regains capacity.
(5) A trustee that is a financial institution shall
serve without bond.
(6) The trustee shall receive reasonable compensation
paid from trust's income, principal, or both on application to and
approval of the court.
(7) The first page of the trust instrument shall
contain the following notice:
NOTICE: THE BENEFICIARY AND CERTAIN PERSONS INTERESTED IN THE
WELFARE OF THE BENEFICIARY MAY HAVE REMEDIES UNDER SECTION 114.008
OR 142.005, PROPERTY CODE.
SECTION 7. Chapter 142, Property Code, is amended by adding
Section 142.010 to read as follows:
Sec. 142.010. TRANSFER OF TRUST PROPERTY TO A POOLED TRUST
SUBACCOUNT. (a) In this section, "management trust" means a trust
created for a beneficiary in accordance with Section 142.005.
(b) If the court with continuing jurisdiction over a
management trust determines that it is in the best interests of the
beneficiary for whom the management trust is created, the court may
order the transfer of all property in the management trust to a
pooled trust subaccount established in accordance with Chapter 143.
(c) For purposes of a proceeding to determine whether to
transfer property from a management trust to a pooled trust
subaccount, the court may, but is not required to, appoint an
attorney ad litem or guardian ad litem to represent the interests of
a management trust beneficiary who has a physical disability and is
not an incapacitated person. The attorney ad litem or the guardian
ad litem is entitled to a reasonable fee and reimbursement of
expenses to be paid from the management trust property.
(d) The transfer of property from the management trust to
the pooled trust subaccount shall be treated as a continuation of
the management trust and may not be treated as the establishment of
a new trust for purposes of 42 U.S.C. Section 1396p(d)(4)(A) or (C)
or otherwise for purposes of the management trust beneficiary's
eligibility for medical assistance under Chapter 32, Human
Resources Code.
(e) The court may not allow termination of the management
trust from which property is transferred under this section until
all of the property in the management trust has been transferred to
the pooled trust subaccount.
SECTION 8. Subtitle A, Title 10, Property Code, is amended
by adding Chapter 143 to read as follows:
CHAPTER 143. POOLED TRUST SUBACCOUNTS
Sec. 143.001. DEFINITIONS. In this chapter:
(1) "Beneficiary" means a person for whose benefit a
subaccount is established.
(2) "Incapacitated person" has the meaning assigned by
Section 142.007.
(3) "Medical assistance" means benefits and services
under the medical assistance program administered under Chapter 32,
Human Resources Code.
(4) "Pooled trust" means a trust that meets the
requirements of 42 U.S.C. Section 1396p(d)(4)(C) for purposes of
exempting the trust from the applicability of 42 U.S.C. Section
1396p(d) in determining the eligibility of a person who is disabled
for medical assistance.
(5) "Subaccount" means an account in a pooled trust
established under this chapter.
Sec. 143.002. APPLICATION TO ESTABLISH SUBACCOUNT. The
following persons may apply to the court having jurisdiction under
Section 142.005 for the establishment of a subaccount solely for
the benefit of a proposed beneficiary who is a person for whom a
management trust has been or could be established for the person's
benefit under Section 142.005:
(1) the trustee of a management trust established
under Section 142.005 for the benefit of the proposed beneficiary
of the subaccount;
(2) the guardian of the person or estate, or both, of
the proposed beneficiary of the subaccount;
(3) a person who has filed an application for the
appointment of a guardian of the person or estate, or both, for the
proposed beneficiary of the subaccount;
(4) an attorney ad litem or guardian ad litem
appointed to represent the proposed beneficiary of the subaccount;
or
(5) the proposed beneficiary, if the proposed
beneficiary is not a minor or incapacitated person.
Sec. 143.003. APPOINTMENT OF ATTORNEY AD LITEM. (a) The
court shall appoint an attorney ad litem for a person who is a minor
or an incapacitated person and who is the subject of an application
under Section 143.002.
(b) The attorney ad litem is entitled to a reasonable fee
and reimbursement of expenses to be paid from the person's
property.
Sec. 143.004. ESTABLISHMENT OF SUBACCOUNT. If the court
finds that it is in the best interests of a person who is the subject
of an application under Section 143.002, the court may order:
(1) the establishment of a subaccount of which the
person is the beneficiary; and
(2) the transfer to the subaccount of any of the
person's property on hand or accruing to the person.
Sec. 143.005. TERMS OF SUBACCOUNT. Unless the court orders
otherwise, the terms governing the subaccount must provide that:
(1) the subaccount terminates on the earliest of the
date of:
(A) the beneficiary's 18th birthday, if the
beneficiary:
(i) is not found by the court to be
considered disabled for purposes of 42 U.S.C. Chapter 7, Subchapter
XVI; and
(ii) is a minor at the time the subaccount
is established;
(B) the beneficiary's death; or
(C) a court order terminating the subaccount;
and
(2) on termination, any property remaining in the
beneficiary's subaccount after making any required payments to
satisfy the amounts of medical assistance reimbursement claims for
medical assistance provided to the beneficiary under this state's
medical assistance program and other states' medical assistance
programs shall be distributed to:
(A) the beneficiary, if on the date of
termination the beneficiary is living and is not a minor or
incapacitated person;
(B) the beneficiary's guardian of the estate, if
on the date of termination the beneficiary is living and is a minor
or incapacitated person; or
(C) the personal representative of the
beneficiary's estate, if on the date of termination the beneficiary
is deceased.
Sec. 143.006. FEES AND REPORTING. (a) The manager or
trustee of a pooled trust may:
(1) assess fees against a subaccount of that pooled
trust that is established under this chapter, in accordance with
the manager's or trustee's standard fee structure; and
(2) pay fees assessed under Subdivision (1) from the
subaccount.
(b) If required by the court, the manager or trustee of the
pooled trust shall file a copy of the annual report of account with
the court clerk.
Sec. 143.007. JURISDICTION EXCLUSIVE. Notwithstanding any
other law, the court that orders the establishment of a subaccount
for a beneficiary has exclusive jurisdiction of a subsequent
proceeding or action that relates to both the beneficiary and the
subaccount, and the proceeding or action may be brought only in that
court.
SECTION 9. (a) Except as otherwise expressly provided by a
trust, a will creating a trust, or this section, the changes in law
made by this Act apply to a trust existing on or created on or after
September 1, 2019.
(b) For a trust existing on September 1, 2019, that was
created before that date, the changes in law made by this Act apply
only to an act or omission relating to the trust that occurs on or
after September 1, 2019.
(c) Section 112.0335, Property Code, as added by this Act,
applies to a trust only if the settlor's death occurs on or after
September 1, 2019.
(d) Subchapter E, Chapter 112, Property Code, as added by
this Act, applies to a trust only with respect to a dissolution of
marriage that occurs on or after September 1, 2019.
SECTION 10. This Act takes effect September 1, 2019.