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


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
  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.
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