Texas 2015 - 84th Regular

Texas House Bill HB1029 Compare Versions

Only one version of the bill is available at this time.

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1	1	84R1626 AJA-F
2	2	By: Wray H.B. No. 1029
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to trusts.
8	8	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	9	SECTION 1. Section 42.0021(b), Property Code, is amended to
10	10	read as follows:
11	11	(b) Contributions to an individual retirement account,
12	12	individual retirement annuity, or Roth IRA that are "excess
13	13	contributions" within the meaning of Section 4973 [exceed the
14	14	amounts permitted under the applicable provisions] of the Internal
15	15	Revenue Code of 1986, and any accrued earnings on such excess
16	16	contributions, are not exempt under this section unless otherwise
17	17	exempt by law. Amounts qualifying as nontaxable rollover
18	18	contributions under Section 402(a)(5), 403(a)(4), 403(b)(8), or
19	19	408(d)(3) of the Internal Revenue Code of 1986 before January 1,
20	20	1993, are treated as exempt amounts under Subsection (a). Amounts
21	21	treated as [qualified] rollover contributions under Section
22	22	402A(c)(3), 402A(c)(4), or 408A, Internal Revenue Code of 1986, are
23	23	treated as exempt amounts under Subsection (a). In addition,
24	24	amounts qualifying as nontaxable rollover contributions under
25	25	Section 402(c), 402(e)(6), 402(f), 403(a)(4), 403(a)(5),
26	26	403(b)(8), 403(b)(10), 408(d)(3), or 408A of the Internal Revenue
27	27	Code of 1986 on or after January 1, 1993, are treated as exempt
28	28	amounts under Subsection (a). Amounts qualifying as nontaxable
29	29	rollover contributions under Section 223(f)(5) of the Internal
30	30	Revenue Code of 1986 on or after January 1, 2004, are treated as
31	31	exempt amounts under Subsection (a).
32	32	SECTION 2. Section 112.035(e), Property Code, is amended to
33	33	read as follows:
34	34	(e) A beneficiary of the trust may not be considered a
35	35	settlor merely because of a lapse, waiver, or release of:
36	36	(1) a power described by Subsection (f); or
37	37	(2) the beneficiary's right to withdraw a part of the
38	38	trust property to the extent that the value of the property affected
39	39	by the lapse, waiver, or release in any calendar year does not
40	40	exceed with respect to the contribution by each donor the greater of
41	41	the amount specified in:
42	42	(A) Section 2041(b)(2) or 2514(e), Internal
43	43	Revenue Code of 1986; or
44	44	(B) Section 2503(b), Internal Revenue Code of
45	45	1986.
46	46	SECTION 3. Section 112.038, Property Code, is amended to
47	47	read as follows:
48	48	Sec. 112.038. FORFEITURE CLAUSE. (a) A provision in a
49	49	trust that would cause a forfeiture of or void an interest for
50	50	bringing any court action, including contesting a trust, is
51	51	enforceable unless in a court action determining whether the
52	52	forfeiture clause should be enforced, the person who brought the
53	53	action contrary to the forfeiture clause establishes by a
54	54	preponderance of the evidence that:
55	55	(1) just cause existed for bringing the action; and
56	56	(2) the action was brought and maintained in good
57	57	faith.
58	58	(b) This section is not intended to and does not repeal any
59	59	law, recognizing that forfeiture clauses generally will not be
60	60	construed to prevent a beneficiary from seeking to compel a
61	61	fiduciary to perform the fiduciary's duties, seeking redress
62	62	against a fiduciary for a breach of the fiduciary's duties, or
63	63	seeking a judicial construction of a will or trust.
64	64	SECTION 4. Sections 112.054(a) and (c), Property Code, are
65	65	amended to read as follows:
66	66	(a) On the petition of a trustee or a beneficiary, a court
67	67	may order that the trustee be changed, that the terms of the trust
68	68	be modified, that the trustee be directed or permitted to do acts
69	69	that are not authorized or that are forbidden by the terms of the
70	70	trust, that the trustee be prohibited from performing acts required
71	71	by the terms of the trust, or that the trust be terminated in whole
72	72	or in part, if:
73	73	(1) the purposes of the trust have been fulfilled or
74	74	have become illegal or impossible to fulfill;
75	75	(2) because of circumstances not known to or
76	76	anticipated by the settlor, the order will further the purposes of
77	77	the trust;
78	78	(3) modification of administrative, nondispositive
79	79	terms of the trust is necessary or appropriate to prevent waste or
80	80	avoid impairment of the trust's administration;
81	81	(4) the order is necessary or appropriate to achieve
82	82	the settlor's tax objectives and is not contrary to the settlor's
83	83	intentions; [or]
84	84	(5) subject to Subsection (d):
85	85	(A) continuance of the trust is not necessary to
86	86	achieve any material purpose of the trust; or
87	87	(B) the order is not inconsistent with a material
88	88	purpose of the trust; or
89	89	(6) the order is necessary to correct a scrivener's
90	90	error in the governing document, even if unambiguous, to conform
91	91	the terms to the settlor's intention if the settlor's intent with
92	92	respect to the error being corrected is proved by clear and
93	93	convincing evidence.
94	94	(c) The court may direct that an order described by
95	95	Subsection (a)(4) or (6) has retroactive effect.
96	96	SECTION 5. Sections 112.071(5), (6), and (7), Property
97	97	Code, are amended to read as follows:
98	98	(5) "Full discretion" means a [the] power to
99	99	distribute principal to or for the benefit of one or more of the
100	100	beneficiaries of a trust that is not a trust with limited discretion
101	101	[limited or modified by the terms of the trust in any way, including
102	102	by restrictions that limit distributions to purposes such as the
103	103	best interests, welfare, or happiness of the beneficiaries].
104	104	(6) "Limited discretion" means a [limited or modified]
105	105	power to distribute principal to or for the benefit of one or more
106	106	beneficiaries of a trust that is limited by an ascertainable
107	107	standard, including the health, education, support, or maintenance
108	108	of the beneficiary.
109	109	(7) "Presumptive remainder beneficiary," with respect
110	110	to a particular date, means a beneficiary of a trust on that date
111	111	who, in the absence of notice to the trustee of the exercise of the
112	112	power of appointment and assuming that any other powers of
113	113	appointment under the trust are not exercised, would be eligible to
114	114	receive a distribution from the trust if:
115	115	(A) the trust terminated on that date; or
116	116	(B) the interests of all current beneficiaries
117	117	[currently eligible to receive income or principal from the trust]
118	118	ended on that date without causing the trust to terminate.
119	119	SECTION 6. Section 112.072(a), Property Code, is amended to
120	120	read as follows:
121	121	(a) An authorized trustee who has the full discretion to
122	122	distribute the principal of a trust may distribute all or part of
123	123	the principal of that trust in favor of a trustee of a second trust
124	124	for the benefit of one, [or] more than one, or all of the current
125	125	beneficiaries of the first trust [who are eligible to receive
126	126	income or principal from the trust] and for the benefit of one, [or]
127	127	more than one, or all of the successor or presumptive remainder
128	128	beneficiaries of the first trust [who are eligible to receive
129	129	income or principal from the trust].
130	130	SECTION 7. Section 112.078, Property Code, is amended by
131	131	adding Subsection (f) to read as follows:
132	132	(f) This section does not limit a beneficiary's right to
133	133	bring an action against a trustee for a breach of trust.
134	134	SECTION 8. Section 112.085, Property Code, is amended to
135	135	read as follows:
136	136	Sec. 112.085. EXCEPTIONS TO POWER OF DISTRIBUTION. An
137	137	authorized trustee may not exercise a power to distribute principal
138	138	of a trust under Section 112.072 or 112.073 to:
139	139	(1) reduce, limit, or modify a beneficiary's current,
140	140	vested right to:
141	141	(A) receive a mandatory distribution of income or
142	142	principal;
143	143	(B) receive a mandatory annuity or unitrust
144	144	interest;
145	145	(C) withdraw a percentage of the value of the
146	146	trust; or
147	147	(D) withdraw a specified dollar amount from the
148	148	trust;
149	149	(2) [materially impair the rights of any beneficiary
150	150	of the trust;
151	151	[(3)] materially limit a trustee's fiduciary duty
152	152	under the trust or as described by Section 111.0035;
153	153	(3) [(4)] decrease or indemnify against a trustee's
154	154	liability;
155	155	(4) add a provision exonerating [or exonerate] a
156	156	trustee from liability for failure to exercise reasonable care,
157	157	diligence, and prudence;
158	158	(5) eliminate a provision granting another person the
159	159	right to remove or replace the authorized trustee exercising the
160	160	distribution power under Section 112.072 or 112.073; or
161	161	(6) reduce, limit, or modify in the second trust a
162	162	perpetuities provision included in the first trust, unless
163	163	expressly permitted by the terms of the first trust.
164	164	SECTION 9. Section 113.018, Property Code, is amended to
165	165	read as follows:
166	166	Sec. 113.018. EMPLOYMENT AND APPOINTMENT OF AGENTS. (a) A
167	167	trustee may employ attorneys, accountants, agents, including
168	168	investment agents, and brokers reasonably necessary in the
169	169	administration of the trust estate.
170	170	(b) Without limiting the trustee's discretion under
171	171	Subsection (a), a trustee may grant an agent powers with respect to
172	172	property of the trust to act for the trustee in any lawful manner
173	173	for purposes of real property transactions.
174	174	(c) A trustee acting under Subsection (b) may delegate any
175	175	or all of the duties and powers to:
176	176	(1) execute and deliver any legal instruments relating
177	177	to the sale and conveyance of the property, including affidavits,
178	178	notices, disclosures, waivers, or designations or general or
179	179	special warranty deeds binding the trustee with vendor's liens
180	180	retained or disclaimed, as applicable, or transferred to a
181	181	third-party lender;
182	182	(2) accept notes, deeds of trust, or other legal
183	183	instruments;
184	184	(3) approve closing statements authorizing deductions
185	185	from the sale price;
186	186	(4) receive trustee's net sales proceeds by check
187	187	payable to the trustee;
188	188	(5) indemnify and hold harmless any third party who
189	189	accepts and acts under a power of attorney with respect to the sale;
190	190	(6) take any action, including signing any document,
191	191	necessary or appropriate to sell the property and accomplish the
192	192	delegated powers;
193	193	(7) contract to purchase the property for any price on
194	194	any terms;
195	195	(8) execute, deliver, or accept any legal instruments
196	196	relating to the purchase of the property or to any financing of the
197	197	purchase, including deeds, notes, deeds of trust, guaranties, or
198	198	closing statements;
199	199	(9) approve closing statements authorizing payment of
200	200	prorations and expenses;
201	201	(10) pay the trustee's net purchase price from funds
202	202	provided by the trustee;
203	203	(11) indemnify and hold harmless any third party who
204	204	accepts and acts under a power of attorney with respect to the
205	205	purchase; or
206	206	(12) take any action, including signing any document,
207	207	necessary or appropriate to purchase the property and accomplish
208	208	the delegated powers.
209	209	(d) A trustee who delegates a power under Subsection (b) is
210	210	liable to the beneficiaries or to the trust for an action of the
211	211	agent to whom the power was delegated.
212	212	(e) A delegation by the trustee under Subsection (b) must be
213	213	documented in a written instrument acknowledged by the trustee
214	214	before an officer authorized under the law of this state or another
215	215	state to take acknowledgments to deeds of conveyance and administer
216	216	oaths. A signature on a delegation by a trustee for purposes of this
217	217	subsection is presumed to be genuine if the trustee acknowledges
218	218	the signature in accordance with Chapter 121, Civil Practice and
219	219	Remedies Code.
220	220	(f) A delegation to an agent under Subsection (b) terminates
221	221	six months from the date of the acknowledgment of the written
222	222	delegation unless terminated earlier by:
223	223	(1) the death or incapacity of the trustee;
224	224	(2) the resignation or removal of the trustee; or
225	225	(3) a date specified in the written delegation.
226	226	(g) A person that in good faith accepts a delegation under
227	227	Subsection (b) without actual knowledge that the delegation is
228	228	void, invalid, or terminated, that the purported agent's authority
229	229	is void, invalid, or terminated, or that the agent is exceeding or
230	230	improperly exercising the agent's authority may rely on the
231	231	delegation as if:
232	232	(1) the delegation were genuine, valid, and still in
233	233	effect;
234	234	(2) the agent's authority were genuine, valid, and
235	235	still in effect; and
236	236	(3) the agent had not exceeded and had properly
237	237	exercised the authority.
238	238	(h) A trustee may delegate powers under Subsection (b) if
239	239	the governing instrument does not affirmatively permit the trustee
240	240	to hire agents or expressly prohibit the trustee from hiring
241	241	agents.
242	242	SECTION 10. Section 114.003, Property Code, is amended by
243	243	amending Subsections (b) and (c) and adding Subsections (a-1), (d),
244	244	(e), and (f) to read as follows:
245	245	(a-1) In this section, "trust director" means any person who
246	246	is not a trustee and who has, under the terms of a trust, a power to
247	247	direct one or more trustees on any matter, or any cotrustee who has,
248	248	under the terms of a trust, a power to direct one or more cotrustees
249	249	on any matter. A person is not a trust director for purposes of this
250	250	section merely by holding a general or limited power of appointment
251	251	over the trust assets or, if a person is a beneficiary of the trust,
252	252	merely by holding a power to prohibit the trustee from taking any
253	253	action with respect to the trust.
254	254	(b) If the terms of a trust give a trust director [person]
255	255	the power to direct certain actions of a [the] trustee, Subsections
256	256	(c), (d), (e), and (f) apply [the trustee shall act in accordance
257	257	with the person's direction unless:
258	258	[(1) the direction is manifestly contrary to the terms
259	259	of the trust; or
260	260	[(2) the trustee knows the direction would constitute
261	261	a serious breach of a fiduciary duty that the person holding the
262	262	power to direct owes to the beneficiaries of the trust].
263	263	(c) A trust director is a fiduciary of the trust subject to
264	264	the same duties and standards applicable to a trustee of a trust as
265	265	provided by applicable law unless the terms of the trust provide
266	266	otherwise. The terms of the trust may not, however, limit the trust
267	267	director's duty [A person, other than a beneficiary, who holds a
268	268	power to direct is presumptively a fiduciary required] to act in
269	269	good faith with regard to the purposes of the trust and the
270	270	interests of the beneficiaries. The trust director is liable for
271	271	any loss resulting directly or indirectly from a breach of the trust
272	272	director's fiduciary duty [holder of a power to direct is liable for
273	273	any loss that results from a breach of the person's fiduciary duty].
274	274	(d) If the terms of a trust provide that a trustee is to
275	275	follow the direction of a trust director or act only with the trust
276	276	director's consent or direction, the trustee is not liable for any
277	277	loss resulting directly or indirectly from any act taken or not
278	278	taken by the trustee pursuant to the trust director's direction or
279	279	as a result of the trust director's failure to direct, consent, or
280	280	act, after having been requested to do so by the trustee, if:
281	281	(1) the direction is not contrary to an express
282	282	prohibition or mandate in the trust instrument, which shall be
283	283	evaluated exclusively on the terms of the trust and without
284	284	reference to any judicial or legal standard;
285	285	(2) the trustee does not act in bad faith; and
286	286	(3) the trustee does not have actual knowledge that
287	287	the direction would constitute fraud as applied to the fiduciary
288	288	duties of the trust director.
289	289	(e) Unless the terms of the trust expressly provide
290	290	otherwise, a trustee does not have any duty to:
291	291	(1) monitor the trust director's conduct;
292	292	(2) provide the trust director with advice or consult
293	293	with the trust director;
294	294	(3) inform or warn the trust director or any
295	295	beneficiary or third party that the trustee disagrees with any of
296	296	the trust director's actions or directions;
297	297	(4) take any action to prevent the trust director from
298	298	giving any direction or taking any action; or
299	299	(5) compel the trust director to redress the
300	300	director's action or direction.
301	301	(f) Absent clear evidence to the contrary, the actions of
302	302	the directed trustee pertaining to matters within the scope of
303	303	authority of the trust director, including confirming that the
304	304	trust director's directions have been carried out and recording and
305	305	reporting actions taken pursuant to the trust director's direction,
306	306	are presumed to be administrative actions taken by the trustee and
307	307	are not considered an undertaking by the trustee to monitor the
308	308	trust director's actions or participate in actions within the scope
309	309	of the trust director's authority.
310	310	SECTION 11. Sections 115.002(b-1) and (b-2), Property Code,
311	311	are amended to read as follows:
312	312	(b-1) If there are multiple [noncorporate] trustees none of
313	313	whom is a corporate trustee and the trustees maintain a principal
314	314	office in this state, an action shall be brought in the county in
315	315	which:
316	316	(1) the situs of administration of the trust is
317	317	maintained or has been maintained at any time during the four-year
318	318	period preceding the date the action is filed; or
319	319	(2) the trustees maintain the principal office.
320	320	(b-2) If there are multiple [noncorporate] trustees none of
321	321	whom is a corporate trustee and the trustees do not maintain a
322	322	principal office in this state, an action shall be brought in the
323	323	county in which:
324	324	(1) the situs of administration of the trust is
325	325	maintained or has been maintained at any time during the four-year
326	326	period preceding the date the action is filed; or
327	327	(2) any trustee resides or has resided at any time
328	328	during the four-year period preceding the date the action is filed.
329	329	SECTION 12. Section 181.083, Property Code, is amended by
330	330	adding Subsections (c) and (d) to read as follows:
331	331	(c) To the extent specified in an instrument in which a
332	332	donee exercises a power, any estate or interest in real or personal
333	333	property created through the exercise of the power by the donee is
334	334	considered to have been created at the time of the exercise of the
335	335	donee's power and not at the time of the creation of the donee's
336	336	power, provided that in the instrument the donee:
337	337	(1) specifically refers to Section 181.083(c),
338	338	Property Code;
339	339	(2) specifically asserts an intention to exercise a
340	340	power of appointment by creating another power of appointment
341	341	described in Section 2041(a)(3) or Section 2514(d), Internal
342	342	Revenue Code of 1986; or
343	343	(3) specifically asserts an intention to postpone the
344	344	vesting of any estate or interest in the property that is subject to
345	345	the power, or suspend the absolute ownership or power of alienation
346	346	of that property, for a period ascertainable without regard to the
347	347	date of the creation of the donee's power.
348	348	(d) Subsection (c) applies regardless of whether the
349	349	donee's power may be exercised in favor of the donee, the donee's
350	350	creditors, the donee's estate, or the creditors of the donee's
351	351	estate.
352	352	SECTION 13. (a) Except as otherwise expressly provided by a
353	353	trust, a will creating a trust, or this section, the changes in law
354	354	made by this Act apply to a trust existing or created on or after
355	355	September 1, 2015.
356	356	(b) For a trust existing on September 1, 2015, that was
357	357	created before that date, the changes in law made by this Act apply
358	358	only to an act or omission relating to the trust that occurs on or
359	359	after September 1, 2015.
360	360	SECTION 14. This Act takes effect September 1, 2015.