Texas 2017 - 85th Regular

Texas House Bill HB1354 Compare Versions

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Version 2 (New)

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1	1	85R19330 AJA-F
2	2	By: Wray H.B. No. 1354
3	3	Substitute the following for H.B. No. 1354:
4	4	By: Smithee C.S.H.B. No. 1354
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to trusts.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Section 111.0035(b), Property Code, is amended
12	12	to read as follows:
13	13	(b) The terms of a trust prevail over any provision of this
14	14	subtitle, except that the terms of a trust may not limit:
15	15	(1) the requirements imposed under Section 112.031;
16	16	(2) the applicability of Section 114.007 to an
17	17	exculpation term of a trust;
18	18	(3) the periods of limitation for commencing a
19	19	judicial proceeding regarding a trust;
20	20	(4) a trustee's duty:
21	21	(A) with regard to an irrevocable trust, to
22	22	respond to a demand for accounting made under Section 113.151 if the
23	23	demand is from a beneficiary who, at the time of the demand:
24	24	(i) is entitled or permitted to receive
25	25	distributions from the trust; or
26	26	(ii) would receive a distribution from the
27	27	trust if the trust terminated at the time of the demand; and
28	28	(B) to act in good faith and in accordance with
29	29	the purposes of the trust;
30	30	(5) the power of a court, in the interest of justice,
31	31	to take action or exercise jurisdiction, including the power to:
32	32	(A) modify, reform, or terminate a trust or take
33	33	other action under Section 112.054;
34	34	(B) remove a trustee under Section 113.082;
35	35	(C) exercise jurisdiction under Section 115.001;
36	36	(D) require, dispense with, modify, or terminate
37	37	a trustee's bond; or
38	38	(E) adjust or deny a trustee's compensation if
39	39	the trustee commits a breach of trust; or
40	40	(6) the applicability of Section 112.038.
41	41	SECTION 2. Section 112.035(e), Property Code, is amended to
42	42	read as follows:
43	43	(e) A beneficiary of the trust may not be considered a
44	44	settlor merely because of a lapse, waiver, or release of:
45	45	(1) a power described by Subsection (f); or
46	46	(2) the beneficiary's right to withdraw a part of the
47	47	trust property to the extent that the value of the property affected
48	48	by the lapse, waiver, or release in any calendar year does not
49	49	exceed the greater of [the amount specified in]:
50	50	(A) the amount specified in Section 2041(b)(2) or
51	51	2514(e), Internal Revenue Code of 1986; or
52	52	(B) the amount specified in Section 2503(b),
53	53	Internal Revenue Code of 1986, with respect to the contributions by
54	54	each donor.
55	55	SECTION 3. Section 112.038, Property Code, is amended to
56	56	read as follows:
57	57	Sec. 112.038. FORFEITURE CLAUSE. (a) A provision in a
58	58	trust that would cause a forfeiture of or void an interest for
59	59	bringing any court action, including contesting a trust, is
60	60	enforceable unless in a court action determining whether the
61	61	forfeiture clause should be enforced, the person who brought the
62	62	action contrary to the forfeiture clause establishes by a
63	63	preponderance of the evidence that:
64	64	(1) just cause existed for bringing the action; and
65	65	(2) the action was brought and maintained in good
66	66	faith.
67	67	(b) This section is not intended to and does not repeal any
68	68	law, recognizing that forfeiture clauses generally will not be
69	69	construed to prevent a beneficiary from seeking to compel a
70	70	fiduciary to perform the fiduciary's duties, seeking redress
71	71	against a fiduciary for a breach of the fiduciary's duties, or
72	72	seeking a judicial construction of a will or trust.
73	73	SECTION 4. The heading to Section 112.054, Property Code,
74	74	is amended to read as follows:
75	75	Sec. 112.054. JUDICIAL MODIFICATION, REFORMATION, OR
76	76	TERMINATION OF TRUSTS.
77	77	SECTION 5. Section 112.054, Property Code, is amended by
78	78	amending Subsections (a), (b), and (c) and adding Subsections
79	79	(b-1), (e), and (f) to read as follows:
80	80	(a) On the petition of a trustee or a beneficiary, a court
81	81	may order that the trustee be changed, that the terms of the trust
82	82	be modified, that the trustee be directed or permitted to do acts
83	83	that are not authorized or that are forbidden by the terms of the
84	84	trust, that the trustee be prohibited from performing acts required
85	85	by the terms of the trust, or that the trust be terminated in whole
86	86	or in part, if:
87	87	(1) the purposes of the trust have been fulfilled or
88	88	have become illegal or impossible to fulfill;
89	89	(2) because of circumstances not known to or
90	90	anticipated by the settlor, the order will further the purposes of
91	91	the trust;
92	92	(3) modification of administrative, nondispositive
93	93	terms of the trust is necessary or appropriate to prevent waste or
94	94	[avoid] impairment of the trust's administration;
95	95	(4) the order is necessary or appropriate to achieve
96	96	the settlor's tax objectives or to qualify a distributee for
97	97	governmental benefits and is not contrary to the settlor's
98	98	intentions; or
99	99	(5) subject to Subsection (d):
100	100	(A) continuance of the trust is not necessary to
101	101	achieve any material purpose of the trust; or
102	102	(B) the order is not inconsistent with a material
103	103	purpose of the trust.
104	104	(b) The court shall exercise its discretion to order a
105	105	modification or termination under Subsection (a) or reformation
106	106	under Subsection (b-1) in the manner that conforms as nearly as
107	107	possible to the probable intention of the settlor. The court shall
108	108	consider spendthrift provisions as a factor in making its decision
109	109	whether to modify, [or] terminate, or reform, but the court is not
110	110	precluded from exercising its discretion to modify, [or] terminate,
111	111	or reform solely because the trust is a spendthrift trust.
112	112	(b-1) On the petition of a trustee or a beneficiary, a court
113	113	may order that the terms of the trust be reformed if:
114	114	(1) reformation of administrative, nondispositive
115	115	terms of the trust is necessary or appropriate to prevent waste or
116	116	impairment of the trust's administration;
117	117	(2) reformation is necessary or appropriate to achieve
118	118	the settlor's tax objectives or to qualify a distributee for
119	119	governmental benefits and is not contrary to the settlor's
120	120	intentions; or
121	121	(3) reformation is necessary to correct a scrivener's
122	122	error in the governing document, even if unambiguous, to conform
123	123	the terms to the settlor's intent.
124	124	(c) The court may direct that an order described by
125	125	Subsection (a)(4) or (b-1) has retroactive effect.
126	126	(e) An order described by Subsection (b-1)(3) may be issued
127	127	only if the settlor's intent is established by clear and convincing
128	128	evidence.
129	129	(f) Subsection (b-1) is not intended to state the exclusive
130	130	basis for reformation of trusts, and the bases for reformation of
131	131	trusts in equity or common law are not affected by this section.
132	132	SECTION 6. Section 112.058(a)(2), Property Code, is amended
133	133	to read as follows:
134	134	(2) "Community trust" means a community trust as
135	135	described by 26 C.F.R. Section 1.170A-9 (2008) [1.170A-9(e)(11)
136	136	(1999)], including subsequent amendments.
137	137	SECTION 7. Sections 112.071(5), (6), and (7), Property
138	138	Code, are amended to read as follows:
139	139	(5) "Full discretion" means a [the] power to
140	140	distribute principal to or for the benefit of one or more of the
141	141	beneficiaries of a trust that is not a trust with limited discretion
142	142	[limited or modified by the terms of the trust in any way, including
143	143	by restrictions that limit distributions to purposes such as the
144	144	best interests, welfare, or happiness of the beneficiaries].
145	145	(6) "Limited discretion" means:
146	146	(A) a power to distribute principal according to
147	147	mandatory distribution provisions under which the trustee has no
148	148	discretion; or
149	149	(B) a [limited or modified] power to distribute
150	150	principal to or for the benefit of one or more beneficiaries of a
151	151	trust that is limited by an ascertainable standard, including the
152	152	health, education, support, or maintenance of the beneficiary.
153	153	(7) "Presumptive remainder beneficiary," with respect
154	154	to a particular date, means a beneficiary of a trust on that date
155	155	who, in the absence of notice to the trustee of the exercise of the
156	156	power of appointment and assuming that any other powers of
157	157	appointment under the trust are not exercised, would be eligible to
158	158	receive a distribution from the trust if:
159	159	(A) the trust terminated on that date; or
160	160	(B) the interests of all current beneficiaries
161	161	[currently eligible to receive income or principal from the trust]
162	162	ended on that date without causing the trust to terminate.
163	163	SECTION 8. Section 112.072(a), Property Code, is amended to
164	164	read as follows:
165	165	(a) An authorized trustee who has the full discretion to
166	166	distribute the principal of a trust may distribute all or part of
167	167	the principal of that trust in favor of a trustee of a second trust
168	168	for the benefit of one, [or] more than one, or all of the current
169	169	beneficiaries of the first trust [who are eligible to receive
170	170	income or principal from the trust] and for the benefit of one, [or]
171	171	more than one, or all of the successor or presumptive remainder
172	172	beneficiaries of the first trust [who are eligible to receive
173	173	income or principal from the trust].
174	174	SECTION 9. Section 112.074, Property Code, is amended by
175	175	amending Subsection (c) and adding Subsections (e-1) and (e-2) to
176	176	read as follows:
177	177	(c) Except as provided by Subsection (e-1), in [In] addition
178	178	to the notice required under Subsection (a), the authorized trustee
179	179	shall give written notice of the trustee's decision to the attorney
180	180	general if:
181	181	(1) a charity is entitled to notice;
182	182	(2) a charity entitled to notice is no longer in
183	183	existence;
184	184	(3) the trustee has the authority to distribute trust
185	185	assets to one or more charities that are not named in the trust
186	186	instrument; or
187	187	(4) the trustee has the authority to make
188	188	distributions for a charitable purpose described in the trust
189	189	instrument, but no charity is named as a beneficiary for that
190	190	purpose.
191	191	(e-1) The trustee is not required to give notice to the
192	192	attorney general under Subsection (c) if the attorney general
193	193	waives that requirement in writing.
194	194	(e-2) For purposes of Subsection (e)(3), a beneficiary is
195	195	considered to have waived the requirement that notice be given
196	196	under this section if a person to whom notice is required to be
197	197	given with respect to that beneficiary under Subsection (d) waives
198	198	the requirement that notice be given under this section.
199	199	SECTION 10. Section 112.078, Property Code, is amended by
200	200	adding Subsection (f) to read as follows:
201	201	(f) This section does not limit a beneficiary's right to
202	202	bring an action against a trustee for a breach of trust.
203	203	SECTION 11. Section 112.085, Property Code, is amended to
204	204	read as follows:
205	205	Sec. 112.085. EXCEPTIONS TO POWER OF DISTRIBUTION. An
206	206	authorized trustee may not exercise a power to distribute principal
207	207	of a trust under Section 112.072 or 112.073 to:
208	208	(1) reduce, limit, or modify a beneficiary's current,
209	209	vested right to:
210	210	(A) receive a mandatory distribution of income or
211	211	principal;
212	212	(B) receive a mandatory annuity or unitrust
213	213	interest;
214	214	(C) withdraw a percentage of the value of the
215	215	trust; or
216	216	(D) withdraw a specified dollar amount from the
217	217	trust;
218	218	(2) [materially impair the rights of any beneficiary
219	219	of the trust;
220	220	[(3)] materially limit a trustee's fiduciary duty:
221	221	(A) under the terms of the trust; or
222	222	(B) in a manner that would be prohibited [as
223	223	described] by Section 111.0035;
224	224	(3) [(4)] decrease or indemnify against a trustee's
225	225	liability;
226	226	(4) add a provision exonerating [or exonerate] a
227	227	trustee from liability for failure to exercise reasonable care,
228	228	diligence, and prudence;
229	229	(5) eliminate a provision granting another person the
230	230	right to remove or replace the authorized trustee exercising the
231	231	distribution power under Section 112.072 or 112.073; or
232	232	(6) reduce, limit, or modify in the second trust a
233	233	perpetuities provision included in the first trust, unless
234	234	expressly permitted by the terms of the first trust.
235	235	SECTION 12. Section 113.018, Property Code, is amended to
236	236	read as follows:
237	237	Sec. 113.018. EMPLOYMENT AND APPOINTMENT OF AGENTS. (a) A
238	238	trustee may employ attorneys, accountants, agents, including
239	239	investment agents, and brokers reasonably necessary in the
240	240	administration of the trust estate.
241	241	(b) Without limiting the trustee's discretion under
242	242	Subsection (a), a trustee may grant an agent powers with respect to
243	243	property of the trust to act for the trustee in any lawful manner
244	244	for purposes of real property transactions.
245	245	(c) A trustee acting under Subsection (b) may delegate any
246	246	or all of the duties and powers to:
247	247	(1) execute and deliver any legal instruments relating
248	248	to the sale and conveyance of the property, including affidavits,
249	249	notices, disclosures, waivers, or designations or general or
250	250	special warranty deeds binding the trustee with vendor's liens
251	251	retained or disclaimed, as applicable, or transferred to a
252	252	third-party lender;
253	253	(2) accept notes, deeds of trust, or other legal
254	254	instruments;
255	255	(3) approve closing statements authorizing deductions
256	256	from the sale price;
257	257	(4) receive trustee's net sales proceeds by check
258	258	payable to the trustee;
259	259	(5) indemnify and hold harmless any third party who
260	260	accepts and acts under a power of attorney with respect to the sale;
261	261	(6) take any action, including signing any document,
262	262	necessary or appropriate to sell the property and accomplish the
263	263	delegated powers;
264	264	(7) contract to purchase the property for any price on
265	265	any terms;
266	266	(8) execute, deliver, or accept any legal instruments
267	267	relating to the purchase of the property or to any financing of the
268	268	purchase, including deeds, notes, deeds of trust, guaranties, or
269	269	closing statements;
270	270	(9) approve closing statements authorizing payment of
271	271	prorations and expenses;
272	272	(10) pay the trustee's net purchase price from funds
273	273	provided by the trustee;
274	274	(11) indemnify and hold harmless any third party who
275	275	accepts and acts under a power of attorney with respect to the
276	276	purchase; or
277	277	(12) take any action, including signing any document,
278	278	necessary or appropriate to purchase the property and accomplish
279	279	the delegated powers.
280	280	(d) A trustee who delegates a power under Subsection (b) is
281	281	liable to the beneficiaries or to the trust for an action of the
282	282	agent to whom the power was delegated.
283	283	(e) A delegation by the trustee under Subsection (b) must be
284	284	documented in a written instrument acknowledged by the trustee
285	285	before an officer authorized under the law of this state or another
286	286	state to take acknowledgments to deeds of conveyance and administer
287	287	oaths. A signature on a delegation by a trustee for purposes of
288	288	this subsection is presumed to be genuine if the trustee
289	289	acknowledges the signature in accordance with Chapter 121, Civil
290	290	Practice and Remedies Code.
291	291	(f) A delegation to an agent under Subsection (b) terminates
292	292	six months from the date of the acknowledgment of the written
293	293	delegation unless terminated earlier by:
294	294	(1) the death or incapacity of the trustee;
295	295	(2) the resignation or removal of the trustee; or
296	296	(3) a date specified in the written delegation.
297	297	(g) A person who in good faith accepts a delegation under
298	298	Subsection (b) without actual knowledge that the delegation is
299	299	void, invalid, or terminated, that the purported agent's authority
300	300	is void, invalid, or terminated, or that the agent is exceeding or
301	301	improperly exercising the agent's authority may rely on the
302	302	delegation as if:
303	303	(1) the delegation were genuine, valid, and still in
304	304	effect;
305	305	(2) the agent's authority were genuine, valid, and
306	306	still in effect; and
307	307	(3) the agent had not exceeded and had properly
308	308	exercised the authority.
309	309	(h) A trustee may delegate powers under Subsection (b) if
310	310	the governing instrument does not affirmatively permit the trustee
311	311	to hire agents or expressly prohibit the trustee from hiring
312	312	agents.
313	313	SECTION 13. Sections 115.002(b-1) and (b-2), Property Code,
314	314	are amended to read as follows:
315	315	(b-1) If there are multiple [noncorporate] trustees none of
316	316	whom is a corporate trustee and the trustees maintain a principal
317	317	office in this state, an action shall be brought in the county in
318	318	which:
319	319	(1) the situs of administration of the trust is
320	320	maintained or has been maintained at any time during the four-year
321	321	period preceding the date the action is filed; or
322	322	(2) the trustees maintain the principal office.
323	323	(b-2) If there are multiple [noncorporate] trustees none of
324	324	whom is a corporate trustee and the trustees do not maintain a
325	325	principal office in this state, an action shall be brought in the
326	326	county in which:
327	327	(1) the situs of administration of the trust is
328	328	maintained or has been maintained at any time during the four-year
329	329	period preceding the date the action is filed; or
330	330	(2) any trustee resides or has resided at any time
331	331	during the four-year period preceding the date the action is filed.
332	332	SECTION 14. Section 163.011, Property Code, is amended to
333	333	read as follows:
334	334	Sec. 163.011. APPLICABILITY OF OTHER PARTS OF CODE.
335	335	Chapters 116 and 117 do [Subtitle B, Title 9 (the Texas Trust Code),
336	336	does] not apply to any institutional fund subject to this chapter.
337	337	SECTION 15. Section 181.083, Property Code, is amended by
338	338	adding Subsections (c) and (d) to read as follows:
339	339	(c) To the extent specified in an instrument in which a
340	340	donee exercises a power, any estate or interest in real or personal
341	341	property created through the exercise of the power by the donee is
342	342	considered to have been created at the time of the exercise of the
343	343	donee's power and not at the time of the creation of the donee's
344	344	power, provided that in the instrument the donee:
345	345	(1) specifically refers to Section 181.083(c),
346	346	Property Code;
347	347	(2) specifically asserts an intention to exercise a
348	348	power of appointment by creating another power of appointment
349	349	described by Section 2041(a)(3) or 2514(d), Internal Revenue Code
350	350	of 1986; or
351	351	(3) specifically asserts an intention to postpone the
352	352	vesting of any estate or interest in the property that is subject to
353	353	the power, or suspend the absolute ownership or power of alienation
354	354	of that property, for a period ascertainable without regard to the
355	355	date of the creation of the donee's power.
356	356	(d) Subsection (c) applies regardless of whether the
357	357	donee's power may be exercised in favor of the donee, the donee's
358	358	creditors, the donee's estate, or the creditors of the donee's
359	359	estate.
360	360	SECTION 16. Section 240.002, Property Code, is amended by
361	361	amending Subdivision (1) and adding Subdivision (1-a) to read as
362	362	follows:
363	363	(1) "Charity" means a charitable entity or a
364	364	charitable trust, as those terms are defined by Section 123.001.
365	365	(1-a) "Current beneficiary" and "presumptive remainder
366	366	beneficiary" have the meanings assigned by Section 112.071.
367	367	SECTION 17. Section 240.0081, Property Code, is amended by
368	368	amending Subsection (c) and adding Subsections (e-1) and (e-2) to
369	369	read as follows:
370	370	(c) Except as provided by Subsection (e-1), in [In] addition
371	371	to the notice required under Subsection (a), the trustee shall give
372	372	written notice of the trustee's disclaimer to the attorney general
373	373	if:
374	374	(1) a charity is entitled to notice;
375	375	(2) a charity entitled to notice is no longer in
376	376	existence;
377	377	(3) the trustee has the authority to distribute trust
378	378	assets to one or more charities that are not named in the trust
379	379	instrument; or
380	380	(4) the trustee has the authority to make
381	381	distributions for a charitable purpose described in the trust
382	382	instrument, but no charity is named as a beneficiary for that
383	383	purpose.
384	384	(e-1) The trustee is not required to give notice to the
385	385	attorney general under Subsection (c) if the attorney general
386	386	waives that requirement in writing.
387	387	(e-2) For purposes of Subsection (e)(3), a beneficiary is
388	388	considered to have waived the requirement that notice be given
389	389	under this section if a person to whom notice is required to be
390	390	given with respect to that beneficiary under Subsection (d) waives
391	391	the requirement that notice be given under this section.
392	392	SECTION 18. (a) Except as otherwise expressly provided by a
393	393	trust, a will creating a trust, or this section, the changes in law
394	394	made by this Act apply to a trust existing on or created on or after
395	395	September 1, 2017.
396	396	(b) For a trust existing on September 1, 2017, that was
397	397	created before that date, the changes in law made by this Act apply
398	398	only to an act or omission relating to the trust that occurs on or
399	399	after September 1, 2017.
400	400	SECTION 19. This Act takes effect September 1, 2017.