H.B. No. 1190
AN ACT
relating to trusts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 111.002, Property Code, is amended to
read as follows:
Sec. 111.002. CONSTRUCTION OF SUBTITLE. [(a) If the
provisions of this subtitle and the terms of a trust conflict, the
terms of the trust control except the settlor may not relieve a
corporate trustee from the duties, restrictions, and liabilities
under Section 113.052 or 113.053.
[(b)] This subtitle and the Texas Trust Act, as amended
(Articles 7425b-1 through 7425b-48, Vernon's Texas Civil
Statutes), shall be considered one continuous statute, and for the
purposes of any statute or of any instrument creating a trust that
refers to the Texas Trust Act, this subtitle shall be considered an
amendment to [of] the Texas Trust Act.
SECTION 2. Chapter 111, Property Code, is amended by adding
Section 111.0035 to read as follows:
Sec. 111.0035. DEFAULT AND MANDATORY RULES; CONFLICT
BETWEEN TERMS AND STATUTE. (a) Except as provided by the terms of a
trust and Subsection (b), this subtitle governs:
(1) the duties and powers of a trustee;
(2) relations among trustees; and
(3) the rights and interests of a beneficiary.
(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 duties and liabilities of and restrictions
placed on a corporate trustee under Section 113.052 or 113.053;
(3) the applicability of Section 114.007 to an
exculpation term of a trust;
(4) the periods of limitation for commencing a
judicial proceeding regarding a trust;
(5) 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;
(B) to act in good faith and in accordance with
the purposes of the trust; and
(C) under Section 113.060 to a beneficiary
described by Paragraph (A) that is 25 years of age or older; or
(6) the power of a court, in the interest of justice,
to take action or exercise jurisdiction, including the power to:
(A) modify 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 a trustee's compensation if
the trustee commits a breach of trust.
SECTION 3. Section 111.004, Property Code, is amended by
amending Subdivision (14) and adding Subdivision (25) to read as
follows:
(14) "Settlor" means a [the] person who creates a
trust or contributes property to a trustee of a [the] trust. If
more than one person contributes property to a trustee of a trust,
each person is a settlor of the portion of the property in the trust
attributable to that person's contribution to the trust. The terms
"grantor" and "trustor" mean the same as "settlor."
(25) "Breach of trust" means a violation by a trustee
of a duty the trustee owes to a beneficiary.
SECTION 4. Section 112.009(a), Property Code, is amended to
read as follows:
(a) The signature of the person named as trustee on the
writing evidencing the trust or on a separate written acceptance is
conclusive evidence that the person accepted the trust. A person
named as trustee who exercises power or performs duties under the
trust is presumed to have accepted the trust, except that a person
named as trustee may engage in the following conduct without
accepting the trust:
(1) acting to preserve the trust property if, within a
reasonable time after acting, the person gives notice of the
rejection of the trust to:
(A) the settlor; or
(B) if the settlor is deceased or incapacitated,
all beneficiaries then entitled to receive trust distributions from
the trust; and
(2) inspecting or investigating trust property for any
purpose, including determining the potential liability of the trust
under environmental or other law.
SECTION 5. Section 112.035, Property Code, is amended by
amending Subsection (e) and adding Subsection (f) to read as
follows:
(e) A beneficiary of the trust may not be considered a
settlor merely because of a lapse, waiver, or release of:
(1) a power described by Subsection (f); or
(2) the beneficiary's right to withdraw a part of the
trust property to the extent that [if] the value of the property
affected by the lapse, waiver, or release [that could have been
withdrawn by exercising the right of withdrawal] in any calendar
year does not exceed [at the time of the lapse, waiver, or release]
the greater of the amount specified in:
(A) [(1)] Section 2041(b)(2) or 2514(e),
Internal Revenue Code of 1986; or
(B) [(2)] Section 2503(b), Internal Revenue Code
of 1986.
(f) A beneficiary of the trust may not be considered to be a
settlor, to have made a voluntary or involuntary transfer of the
beneficiary's interest in the trust, or to have the power to make a
voluntary or involuntary transfer of the beneficiary's interest in
the trust, merely because the beneficiary, in any capacity, holds
or exercises:
(1) a presently exercisable power to:
(A) consume, invade, appropriate, or distribute
property to or for the benefit of the beneficiary, if the power is:
(i) exercisable only on consent of another
person holding an interest adverse to the beneficiary's interest;
or
(ii) limited by an ascertainable standard,
including health, education, support, or maintenance of the
beneficiary; or
(B) appoint any property of the trust to or for
the benefit of a person other than the beneficiary, a creditor of
the beneficiary, the beneficiary's estate, or a creditor of the
beneficiary's estate;
(2) a testamentary power of appointment; or
(3) a presently exercisable right described by
Subsection (e)(2).
SECTION 6. Subchapter B, Chapter 112, Property Code, is
amended by adding Section 112.037 to read as follows:
Sec. 112.037. TRUST FOR CARE OF ANIMAL. (a) A trust may be
created to provide for the care of an animal alive during the
settlor's lifetime. The trust terminates on the death of the animal
or, if the trust is created to provide for the care of more than one
animal alive during the settlor's lifetime, on the death of the last
surviving animal.
(b) A trust authorized by this section may be enforced by a
person appointed in the terms of the trust or, if a person is not
appointed in the terms of the trust, by a person appointed by the
court. A person having an interest in the welfare of an animal that
is the subject of a trust authorized by this section may request the
court to appoint a person to enforce the trust or to remove a person
appointed to enforce the trust.
(c) Except as provided by Subsections (d) and (e), property
of a trust authorized by this section may be applied only to the
property's intended use under the trust.
(d) Property of a trust authorized by this section may be
applied to a use other than the property's intended use under the
trust to the extent the court determines that the value of the trust
property exceeds the amount required for the intended use.
(e) Except as otherwise provided by the terms of the trust,
property not required for the trust's intended use must be
distributed to:
(1) if the settlor is living at the time the trust
property is distributed, the settlor; or
(2) if the settlor is not living at the time the trust
property is distributed:
(A) if the settlor has a will, beneficiaries
under the settlor's will; or
(B) in the absence of an effective provision in a
will, the settlor's heirs.
(f) For purposes of Section 112.036, the lives in being used
to determine the maximum duration of a trust authorized by this
section are:
(1) the individual beneficiaries of the trust;
(2) the individuals named in the instrument creating
the trust; and
(3) if the settlor or settlors are living at the time
the trust becomes irrevocable, the settlor or settlors of the trust
or, if the settlor or settlors are not living at the time the trust
becomes irrevocable, the individuals who would inherit the settlor
or settlors' property under the law of this state had the settlor or
settlors died intestate at the time the trust becomes irrevocable.
SECTION 7. Section 112.054, Property Code, is amended to
read as follows:
Sec. 112.054. JUDICIAL MODIFICATION OR TERMINATION OF
TRUSTS. (a) On the petition of a trustee or a beneficiary, a court
may order that the trustee be changed, that the terms of the trust
be modified, that the trustee be directed or permitted to do acts
that are not authorized or that are forbidden by the terms of the
trust, that the trustee be prohibited from performing acts required
by the terms of the trust, or that the trust be terminated in whole
or in part, if:
(1) the purposes of the trust have been fulfilled or
have become illegal or impossible to fulfill; [or]
(2) because of circumstances not known to or
anticipated by the settlor, the order will further the purposes of
the trust;
(3) modification of administrative, nondispositive
terms of the trust is necessary or appropriate to prevent waste or
avoid impairment of the trust's administration;
(4) the order is necessary or appropriate to achieve
the settlor's tax objectives and is not contrary to the settlor's
intentions; or
(5) subject to Subsection (d):
(A) continuance of the trust is not necessary to
achieve any material purpose of the trust; or
(B) the order is not inconsistent with a material
purpose of the trust [compliance with the terms of the trust would
defeat or substantially impair the accomplishment of the purposes
of the trust].
(b) The court shall exercise its discretion to order a
modification or termination under Subsection (a) in the manner that
conforms as nearly as possible to the probable intention of the
settlor. The court shall consider spendthrift provisions as a
factor in making its decision whether to modify or terminate, but
the court is not precluded from exercising its discretion to modify
or terminate solely because the trust is a spendthrift trust.
(c) The court may direct that an order described by
Subsection (a)(4) has retroactive effect.
(d) The court may not take the action permitted by
Subsection (a)(5) unless all beneficiaries of the trust have
consented to the order or are deemed to have consented to the order.
A minor, incapacitated, unborn, or unascertained beneficiary is
deemed to have consented if a person representing the beneficiary's
interest under Section 115.013(c) has consented or if a guardian ad
litem appointed to represent the beneficiary's interest under
Section 115.014 consents on the beneficiary's behalf.
SECTION 8. The heading to Section 112.057, Property Code,
is amended to read as follows:
Sec. 112.057. DIVISION AND COMBINATION OF TRUSTS.
SECTION 9. Sections 112.057(a), (c), and (d), Property
Code, are amended to read as follows:
(a) The trustee may, unless expressly prohibited by the
terms of the instrument establishing the trust, divide a trust into
two or more separate trusts without a judicial proceeding if the
result does not impair the rights of any beneficiary or adversely
affect achievement of the purposes of the original trust [trustee
reasonably determines that the division of the trust could result
in a significant decrease in current or future federal income,
gift, estate, generation-skipping transfer taxes, or any other tax
imposed on trust property. If the trustee divides the trust, the
terms of the separate trusts must be identical to the terms of the
original trust, but differing tax elections may be made for the
separate trusts]. The trustee may make a division under this
subsection by:
(1) giving written notice of the division, not later
than the 30th day before the date of a division under this
subsection, to each beneficiary who might then be entitled to
receive distributions from the trust or may be entitled to receive
distributions from the trust once it is funded; and
(2) executing a written instrument, acknowledged
before a notary public or other person authorized to take
acknowledgements of conveyances of real estate stating that the
trust has been divided pursuant to this section and that the notice
requirements of this subsection have been satisfied.
(c) The trustee may, unless expressly prohibited by the
terms of the instrument establishing a [the] trust, combine [merge]
two or more trusts into a single trust without a judicial proceeding
if the result does not impair the rights of any beneficiary or
adversely affect achievement of the purposes of one of the separate
trusts [having identical terms into a single trust if the trustee
reasonably determines that merging the trusts could result in a
significant decrease in current or future federal income, gift,
estate, generation-skipping transfer taxes, or any other tax
imposed on trust property]. The trustee shall complete the trust
combination [merger] by:
(1) giving a written notice of the combination
[merger], not later than the 30th day before the effective date of
the combination [merger], to each beneficiary who might then be
entitled to receive distributions from the separate trusts being
combined [merged] or to each beneficiary who might be entitled to
receive distributions from the separate trusts once the trusts are
funded; and
(2) executing a written instrument, acknowledged
before a notary public or other person authorized to take
acknowledgments of conveyances of real estate stating that the
trust has been combined [merged] pursuant to this section and that
the notice requirements of this subsection have been satisfied.
(d) The trustee may divide or combine [merge] a testamentary
trust after the will establishing the trust has been admitted to
probate, even if the trust will not be funded until a later date.
The trustee may divide or combine [merge] any other trust before it
is funded [if the instrument establishing the trust is not
revocable at the time of the division or merger].
SECTION 10. Subchapter A, Chapter 113, Property Code, is
amended by adding Section 113.003 to read as follows:
Sec. 113.003. OPTIONS. A trustee may:
(1) grant an option involving a sale, lease, or other
disposition of trust property, including an option exercisable
beyond the duration of the trust; or
(2) acquire and exercise an option for the acquisition
of property, including an option exercisable beyond the duration of
the trust.
SECTION 11. Section 113.021(a), Property Code, is amended
to read as follows:
(a) A trustee may make a distribution required or permitted
to be made to any beneficiary in any of the following ways when the
beneficiary is a minor or a person who in the judgment of the
trustee is incapacitated by reason of legal incapacity or physical
or mental illness or infirmity:
(1) to the beneficiary directly;
(2) to the guardian of the beneficiary's person or
estate;
(3) by utilizing the distribution, without the
interposition of a guardian, for the health, support, maintenance,
or education of the beneficiary;
(4) to a custodian for the minor beneficiary under the
Texas Uniform Transfers [Gifts] to Minors Act (Chapter 141) or a
uniform gifts or transfers to minors act of another state; [or]
(5) by reimbursing the person who is actually taking
care of the beneficiary, even though the person is not the legal
guardian, for expenditures made by the person for the benefit of the
beneficiary; or
(6) by managing the distribution as a separate fund on
the beneficiary's behalf, subject to the beneficiary's continuing
right to withdraw the distribution.
SECTION 12. Subchapter A, Chapter 113, Property Code, is
amended by adding Section 113.027 to read as follows:
Sec. 113.027. DISTRIBUTIONS GENERALLY. When distributing
trust property or dividing or terminating a trust, a trustee may:
(1) make distributions in divided or undivided
interests;
(2) allocate particular assets in proportionate or
disproportionate shares;
(3) value the trust property for the purposes of
acting under Subdivision (1) or (2); and
(4) adjust the distribution, division, or termination
for resulting differences in valuation.
SECTION 13. Section 113.051, Property Code, is amended to
read as follows:
Sec. 113.051. GENERAL DUTY. The trustee shall administer
the trust in good faith according to its terms and this subtitle.
In the absence of any contrary terms in the trust instrument or
contrary provisions of this subtitle, in administering the trust
the trustee shall perform all of the duties imposed on trustees by
the common law.
SECTION 14. Section 113.058(b), Property Code, is amended
to read as follows:
(b) Unless a court orders otherwise or the instrument
creating the trust provides otherwise, a noncorporate trustee must
give bond:
(1) payable to each person interested in the trust, as
their interests may appear; and
(2) conditioned on the faithful performance of the
trustee's duties.
SECTION 15. Subchapter B, Chapter 113, Property Code, is
amended by adding Section 113.060 to read as follows:
Sec. 113.060. INFORMING BENEFICIARIES. The trustee shall
keep the beneficiaries of the trust reasonably informed concerning:
(1) the administration of the trust; and
(2) the material facts necessary for the beneficiaries
to protect the beneficiaries' interests.
SECTION 16. Section 113.082(a), Property Code, is amended
to read as follows:
(a) A trustee may be removed in accordance with the terms of
the trust instrument, or, on the petition of an interested person
and after hearing, a court may, in its discretion, remove a trustee
and deny part or all of the trustee's compensation if:
(1) the trustee materially violated or attempted to
violate the terms of the trust and the violation or attempted
violation results in a material financial loss to the trust;
(2) the trustee becomes incapacitated [incompetent]
or insolvent;
(3) the trustee fails to make an accounting that is
required by law or by the terms of the trust; or
(4) [in the discretion of] the court finds[, for]
other cause for removal.
SECTION 17. Section 113.085, Property Code, is amended to
read as follows:
Sec. 113.085. EXERCISE OF POWERS BY MULTIPLE TRUSTEES. (a)
Cotrustees that are unable to reach a unanimous decision may act by
majority decision.
(b) If a vacancy occurs in a cotrusteeship, the remaining
cotrustees may act for the trust.
(c) A cotrustee shall participate in the performance of a
trustee's function unless the cotrustee:
(1) is unavailable to perform the function because of
absence, illness, disqualification under other law, or other
temporary incapacity; or
(2) has delegated the performance of the function to
another trustee in accordance with the terms of the trust or
applicable law, has communicated the delegation to all other
cotrustees, and has filed the delegation in the records of the
trust.
(d) If a cotrustee is unavailable to participate in the
performance of a trustee's function for a reason described by
Subsection (c)(1) and prompt action is necessary to achieve the
purposes of the trust or to avoid injury to the trust property, the
remaining cotrustee or a majority of the remaining cotrustees may
act for the trust.
(e) A trustee may delegate to a cotrustee the performance of
a trustee's function unless the settlor specifically directs that
the function be performed jointly. Unless a cotrustee's delegation
under this subsection is irrevocable, the cotrustee making the
delegation may revoke the delegation. [Except as otherwise
provided by the trust instrument or by court order:
[(1) a power vested in three or more trustees may be
exercised by a majority of the trustees; and
[(2) if two or more trustees are appointed by a trust
instrument and one or more of the trustees die, resign, or are
removed, the survivor or survivors may administer the trust and
exercise the discretionary powers given to the trustees jointly.]
SECTION 18. Section 113.171(a), Property Code, is amended
to read as follows:
(a) A bank or trust company qualified to act as a fiduciary
in this state may establish common trust funds to provide
investments to itself as a fiduciary, including as a custodian
under the Texas Uniform Transfers [Gifts] to Minors Act (Chapter
141) or a uniform gifts or transfers to minors act of another state
or to itself and others as cofiduciaries.
SECTION 19. Section 114.003, Property Code, is amended to
read as follows:
Sec. 114.003. POWERS TO DIRECT. (a) The terms of a trust
may give a trustee or other person a power to direct the
modification or termination of the trust.
(b) If the terms of a trust give a person the power to direct
certain actions of the trustee, the trustee shall act in accordance
with the person's direction unless:
(1) the direction is manifestly contrary to the terms
of the trust; or
(2) the trustee knows the direction would constitute a
serious breach of a fiduciary duty that the person holding the power
to direct owes to the beneficiaries of the trust.
(c) A person, other than a beneficiary, who holds a power to
direct is presumptively a fiduciary required to act in good faith
with regard to the purposes of the trust and the interests of the
beneficiaries. The holder of a power to direct is liable for any
loss that results from a breach of the person's fiduciary duty.
[PERSON OTHER THAN TRUSTEE IN CONTROL. If a trust instrument
reserves or vests authority in any person to the exclusion of the
trustee, including the settlor, an advisory or investment
committee, or one or more cotrustees, to direct the making or
retention of an investment or to perform any other act in the
management or administration of the trust, the excluded trustee or
cotrustee is not liable for a loss resulting from the exercise of
the authority in regard to the investments, management, or
administration of the trust.]
SECTION 20. Section 114.006, Property Code, is amended to
read as follows:
Sec. 114.006. LIABILITY OF COTRUSTEES FOR ACTS OF OTHER
COTRUSTEES. (a) A trustee who does not join in an action of a
cotrustee is not liable for the cotrustee's action, unless the
trustee does not exercise reasonable care as provided by Subsection
(b).
(b) Each trustee shall exercise reasonable care to:
(1) prevent a cotrustee from committing a serious
breach of trust; and
(2) compel a cotrustee to redress a serious breach of
trust.
(c) Subject to Subsection (b), a dissenting trustee who
joins in an action at the direction of the majority of the trustees
and who has notified any cotrustee of the dissent in writing at or
before the time of the action is not liable for the action. [POWER
EXERCISED BY MAJORITY. (a) A trustee who does not join in
exercising a power held by three or more cotrustees is not liable to
a beneficiary of the trust or to others for the consequences of the
exercise nor is a dissenting trustee liable for the consequences of
an act in which the trustee joins at the direction of the majority
trustees if the trustee expressed the dissent in writing to any of
the cotrustees at or before the time of joinder.
[(b) This section does not excuse a cotrustee from liability
for failure to discharge the cotrustee's duties as a trustee.]
SECTION 21. Subchapter A, Chapter 114, Property Code, is
amended by adding Sections 114.007 and 114.008 to read as follows:
Sec. 114.007. EXCULPATION OF TRUSTEE. (a) A term of a
trust relieving a trustee of liability for breach of trust is
unenforceable to the extent that the term relieves a trustee of
liability for:
(1) a breach of trust committed:
(A) in bad faith;
(B) intentionally; or
(C) with reckless indifference to the interest of
a beneficiary; or
(2) any profit derived by the trustee from a breach of
trust.
(b) A term in a trust instrument relieving the trustee of
liability for a breach of trust is ineffective to the extent that
the term is inserted in the trust instrument as a result of an abuse
by the trustee of a fiduciary duty to or confidential relationship
with the settlor.
(c) This section applies only to a term of a trust that may
otherwise relieve a trustee from liability for a breach of trust.
Except as provided in Section 111.0035, this section does not
prohibit the settlor, by the terms of the trust, from expressly:
(1) relieving the trustee from a duty or restriction
imposed by this subtitle or by common law; or
(2) directing or permitting the trustee to do or not to
do an action that would otherwise violate a duty or restriction
imposed by this subtitle or by common law.
Sec. 114.008. REMEDIES FOR BREACH OF TRUST. (a) To remedy
a breach of trust that has occurred or might occur, the court may:
(1) compel the trustee to perform the trustee's duty or
duties;
(2) enjoin the trustee from committing a breach of
trust;
(3) compel the trustee to redress a breach of trust,
including compelling the trustee to pay money or to restore
property;
(4) order a trustee to account;
(5) appoint a receiver to take possession of the trust
property and administer the trust;
(6) suspend the trustee;
(7) remove the trustee as provided under Section
113.082;
(8) reduce or deny compensation to the trustee;
(9) subject to Subsection (b), void an act of the
trustee, impose a lien or a constructive trust on trust property, or
trace trust property of which the trustee wrongfully disposed and
recover the property or the proceeds from the property; or
(10) order any other appropriate relief.
(b) Notwithstanding Subsection (a)(9), a person other than
a beneficiary who, without knowledge that a trustee is exceeding or
improperly exercising the trustee's powers, in good faith assists a
trustee or in good faith and for value deals with a trustee is
protected from liability as if the trustee had or properly
exercised the power exercised by the trustee.
SECTION 22. Sections 115.001(c) and (d), Property Code, are
amended to read as follows:
(c) The court may intervene in the administration of a trust
to the extent that the court's jurisdiction is invoked by an
interested person or as otherwise provided by law. A trust is not
subject to continuing judicial supervision unless the court orders
continuing judicial supervision. [Unless specifically directed by
a written order of the court, a proceeding does not result in
continuing supervision by the court over the administration of the
trust.]
(d) The jurisdiction of the district court over proceedings
concerning trusts is exclusive except for jurisdiction conferred by
law on a statutory probate court, [or] a court that creates a trust
under Section 867, Texas Probate Code, or a court that creates a
trust under Section 142.005.
SECTION 23. Section 115.011(b), Property Code, is amended
to read as follows:
(b) Contingent beneficiaries designated as a class are not
necessary parties to an action under Section 115.001 [of this Act].
The only necessary parties to such an action are:
(1) a beneficiary on whose act or obligation the
action is predicated;
(2) a beneficiary [person] designated by name in the
instrument creating the trust; [and]
(3) a person who is actually receiving distributions
from the trust estate at the time the action is filed; and
(4) the trustee, if a trustee is serving at the time
the action is filed.
SECTION 24. Section 115.014, Property Code, is amended by
adding Subsection (c) to read as follows:
(c) A guardian ad litem may consider general benefit
accruing to the living members of a person's family.
SECTION 25. Section 116.005(c), Property Code, is amended
to read as follows:
(c) A trustee may not make an adjustment:
(1) [that diminishes the income interest in a trust
that requires all of the income to be paid at least annually to a
spouse and for which an estate tax or gift tax marital deduction
would be allowed, in whole or in part, if the trustee did not have
the power to make the adjustment;
[(2)] that reduces the actuarial value of the income
interest in a trust to which a person transfers property with the
intent to qualify for a gift tax exclusion;
(2) [(3)] that changes the amount payable to a
beneficiary as a fixed annuity or a fixed fraction of the value of
the trust assets;
(3) [(4)] from any amount that is permanently set
aside for charitable purposes under a will or the terms of a trust
unless both income and principal are so set aside;
(4) [(5)] if possessing or exercising the power to
make an adjustment causes an individual to be treated as the owner
of all or part of the trust for income tax purposes, and the
individual would not be treated as the owner if the trustee did not
possess the power to make an adjustment;
(5) [(6)] if possessing or exercising the power to
make an adjustment causes all or part of the trust assets to be
included for estate tax purposes in the estate of an individual who
has the power to remove a trustee or appoint a trustee, or both, and
the assets would not be included in the estate of the individual if
the trustee did not possess the power to make an adjustment;
(6) [(7)] if the trustee is a beneficiary of the
trust; or
(7) [(8)] if the trustee is not a beneficiary, but the
adjustment would benefit the trustee directly or indirectly.
SECTION 26. Sections 116.172(c) and (d), Property Code, are
amended to read as follows:
(c) If no part of a payment is characterized as interest, a
dividend, or an equivalent payment, and all or part of the payment
is required to be made, a trustee shall allocate to income the part
of the payment that does not exceed an amount equal to:
(1) four percent of the fair market value of the future
payment asset on the date specified in [as determined under]
Subsection (d); less
(2) the total amount that the trustee has allocated to
income for all [a] previous payments [payment] received from the
future payment asset during the same accounting period in which the
payment is made [prescribed by Subsection (d)].
(d) For purposes of Subsection (c)(1), the determination of
the fair market value of a future payment asset is made on the later
of:
(1) the date on which the future payment asset [right]
first becomes subject to the trust; or
(2) the last [first] day of the [trust's] accounting
period of the trust that immediately precedes the accounting period
during which the [future] payment [asset] is received.
SECTION 27. Section 121.003, Property Code, is amended to
read as follows:
Sec. 121.003. APPLICATION OF TEXAS TRUST CODE [ACT]. The
Texas Trust Code [Act] (Chapters 111 through 117 [115]) applies to a
pension trust.
SECTION 28. Sections 142.005(a) and (d), Property Code, are
amended to read as follows:
(a) In a suit in which a minor who has no legal guardian or
an incapacitated person is represented by a next friend or an
appointed guardian ad litem, any [the] court of record with
jurisdiction to hear the suit may, on application by the next friend
or the guardian ad litem and on a finding that the creation of a
trust would be in the best interests of the minor or incapacitated
person, enter a decree in the record directing the clerk to deliver
any funds accruing to the minor or incapacitated person under the
judgment to a trust company or a state or national bank having trust
powers in this state.
(d) A court that creates a trust under this section has
continuing jurisdiction and supervisory power over the trust,
including the power to construe, amend, revoke, modify, or
terminate the trust. A trust created under this section [may be
amended, modified, or revoked by the court at any time before its
termination, but] is not subject to revocation by the beneficiary
or a guardian of the beneficiary's estate. If the trust is revoked
by the court before the beneficiary is 18 years old, the court may
provide for the management of the trust principal and any
undistributed income as authorized by this chapter. If the trust is
revoked by the court after the beneficiary is 18 years old, the
trust principal and any undistributed income shall be delivered to
the beneficiary after the payment of all proper and necessary
expenses.
SECTION 29. Section 113.059, Property Code, is repealed.
SECTION 30. (a) Section 5 of this Act is intended to
clarify existing law, but only as expressly provided by that
section. An inference may not be drawn from the amendments made by
that section for situations not specifically described by that
section.
(b) Section 26 of this Act is intended to clarify existing
law.
SECTION 31. (a) Except as otherwise provided by a will, the
terms of a trust, or this Act, the changes in law made by this Act
apply to:
(1) a trust existing or created on or after January 1,
2006;
(2) the estate of a decedent who dies before January 1,
2006, if the probate or administration of the estate is pending on
or after January 1, 2006; and
(3) the estate of a decedent who dies on or after
January 1, 2006.
(b) For a trust existing on January 1, 2006, 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 January 1, 2006.
SECTION 32. This Act takes effect January 1, 2006.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1190 was passed by the House on March
31, 2005, by a non-record vote.
______________________________
Chief Clerk of the House
I certify that H.B. No. 1190 was passed by the Senate on May
12, 2005, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor