Texas 2017 - 85th Regular

Texas Senate Bill SB617 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	By: Rodríguez S.B. No. 617
2		-	(Wray)
	1	+	S.B. No. 617
3	2
4	3
5		-	A BILL TO BE ENTITLED
6	4		AN ACT
7	5		relating to trusts.
8	6		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	7		SECTION 1. Section 111.0035(b), Property Code, is amended
10	8		to read as follows:
11	9		(b) The terms of a trust prevail over any provision of this
12	10		subtitle, except that the terms of a trust may not limit:
13	11		(1) the requirements imposed under Section 112.031;
14	12		(2) the applicability of Section 114.007 to an
15	13		exculpation term of a trust;
16	14		(3) the periods of limitation for commencing a
17	15		judicial proceeding regarding a trust;
18	16		(4) a trustee's duty:
19	17		(A) with regard to an irrevocable trust, to
20	18		respond to a demand for accounting made under Section 113.151 if the
21	19		demand is from a beneficiary who, at the time of the demand:
22	20		(i) is entitled or permitted to receive
23	21		distributions from the trust; or
24	22		(ii) would receive a distribution from the
25	23		trust if the trust terminated at the time of the demand; and
26	24		(B) to act in good faith and in accordance with
27	25		the purposes of the trust;
28	26		(5) the power of a court, in the interest of justice,
29	27		to take action or exercise jurisdiction, including the power to:
30	28		(A) modify, reform, or terminate a trust or take
31	29		other action under Section 112.054;
32	30		(B) remove a trustee under Section 113.082;
33	31		(C) exercise jurisdiction under Section 115.001;
34	32		(D) require, dispense with, modify, or terminate
35	33		a trustee's bond; or
36	34		(E) adjust or deny a trustee's compensation if
37	35		the trustee commits a breach of trust; or
38	36		(6) the applicability of Section 112.038.
39	37		SECTION 2. Section 112.035(e), Property Code, is amended to
40	38		read as follows:
41	39		(e) A beneficiary of the trust may not be considered a
42	40		settlor merely because of a lapse, waiver, or release of:
43	41		(1) a power described by Subsection (f); or
44	42		(2) the beneficiary's right to withdraw a part of the
45	43		trust property to the extent that the value of the property affected
46	44		by the lapse, waiver, or release in any calendar year does not
47	45		exceed the greater of [the amount specified in]:
48	46		(A) the amount specified in Section 2041(b)(2) or
49	47		2514(e), Internal Revenue Code of 1986; or
50	48		(B) the amount specified in Section 2503(b),
51	49		Internal Revenue Code of 1986, with respect to the contributions by
52	50		each donor.
53	51		SECTION 3. Section 112.038, Property Code, is amended to
54	52		read as follows:
55	53		Sec. 112.038. FORFEITURE CLAUSE. (a) A provision in a
56	54		trust that would cause a forfeiture of or void an interest for
57	55		bringing any court action, including contesting a trust, is
58	56		enforceable unless in a court action determining whether the
59	57		forfeiture clause should be enforced, the person who brought the
60	58		action contrary to the forfeiture clause establishes by a
61	59		preponderance of the evidence that:
62	60		(1) just cause existed for bringing the action; and
63	61		(2) the action was brought and maintained in good
64	62		faith.
65	63		(b) This section is not intended to and does not repeal any
66	64		law, recognizing that forfeiture clauses generally will not be
67	65		construed to prevent a beneficiary from seeking to compel a
68	66		fiduciary to perform the fiduciary's duties, seeking redress
69	67		against a fiduciary for a breach of the fiduciary's duties, or
70	68		seeking a judicial construction of a will or trust.
71	69		SECTION 4. The heading to Section 112.054, Property Code,
72	70		is amended to read as follows:
73	71		Sec. 112.054. JUDICIAL MODIFICATION, REFORMATION, OR
74	72		TERMINATION OF TRUSTS.
75	73		SECTION 5. Section 112.054, Property Code, is amended by
76	74		amending Subsections (a), (b), and (c) and adding Subsections
77	75		(b-1), (e), and (f) to read as follows:
78	76		(a) On the petition of a trustee or a beneficiary, a court
79	77		may order that the trustee be changed, that the terms of the trust
80	78		be modified, that the trustee be directed or permitted to do acts
81	79		that are not authorized or that are forbidden by the terms of the
82	80		trust, that the trustee be prohibited from performing acts required
83	81		by the terms of the trust, or that the trust be terminated in whole
84	82		or in part, if:
85	83		(1) the purposes of the trust have been fulfilled or
86	84		have become illegal or impossible to fulfill;
87	85		(2) because of circumstances not known to or
88	86		anticipated by the settlor, the order will further the purposes of
89	87		the trust;
90	88		(3) modification of administrative, nondispositive
91	89		terms of the trust is necessary or appropriate to prevent waste or
92	90		[avoid] impairment of the trust's administration;
93	91		(4) the order is necessary or appropriate to achieve
94	92		the settlor's tax objectives or to qualify a distributee for
95	93		governmental benefits and is not contrary to the settlor's
96	94		intentions; or
97	95		(5) subject to Subsection (d):
98	96		(A) continuance of the trust is not necessary to
99	97		achieve any material purpose of the trust; or
100	98		(B) the order is not inconsistent with a material
101	99		purpose of the trust.
102	100		(b) The court shall exercise its discretion to order a
103	101		modification or termination under Subsection (a) or reformation
104	102		under Subsection (b-1) in the manner that conforms as nearly as
105	103		possible to the probable intention of the settlor. The court shall
106	104		consider spendthrift provisions as a factor in making its decision
107	105		whether to modify, [or] terminate, or reform, but the court is not
108	106		precluded from exercising its discretion to modify, [or] terminate,
109	107		or reform solely because the trust is a spendthrift trust.
110	108		(b-1) On the petition of a trustee or a beneficiary, a court
111	109		may order that the terms of the trust be reformed if:
112	110		(1) reformation of administrative, nondispositive
113	111		terms of the trust is necessary or appropriate to prevent waste or
114	112		impairment of the trust's administration;
115	113		(2) reformation is necessary or appropriate to achieve
116	114		the settlor's tax objectives or to qualify a distributee for
117	115		governmental benefits and is not contrary to the settlor's
118	116		intentions; or
119	117		(3) reformation is necessary to correct a scrivener's
120	118		error in the governing document, even if unambiguous, to conform
121	119		the terms to the settlor's intent.
122	120		(c) The court may direct that an order described by
123	121		Subsection (a)(4) or (b-1) has retroactive effect.
124	122		(e) An order described by Subsection (b-1)(3) may be issued
125	123		only if the settlor's intent is established by clear and convincing
126	124		evidence.
127	125		(f) Subsection (b-1) is not intended to state the exclusive
128	126		basis for reformation of trusts, and the bases for reformation of
129	127		trusts in equity or common law are not affected by this section.
130	128		SECTION 6. Section 112.058(a)(2), Property Code, is amended
131	129		to read as follows:
132	130		(2) "Community trust" means a community trust as
133	131		described by 26 C.F.R. Section 1.170A-9 (2008) [1.170A-9(e)(11)
134	132		(1999)], including subsequent amendments.
135	133		SECTION 7. Sections 112.071(5), (6), and (7), Property
136	134		Code, are amended to read as follows:
137	135		(5) "Full discretion" means a [the] power to
138	136		distribute principal to or for the benefit of one or more of the
139	137		beneficiaries of a trust that is not a trust with limited discretion
140	138		[limited or modified by the terms of the trust in any way, including
141	139		by restrictions that limit distributions to purposes such as the
142	140		best interests, welfare, or happiness of the beneficiaries].
143	141		(6) "Limited discretion" means:
144	142		(A) a power to distribute principal according to
145	143		mandatory distribution provisions under which the trustee has no
146	144		discretion; or
147	145		(B) a [limited or modified] power to distribute
148	146		principal to or for the benefit of one or more beneficiaries of a
149	147		trust that is limited by an ascertainable standard, including the
150	148		health, education, support, or maintenance of the beneficiary.
151	149		(7) "Presumptive remainder beneficiary," with respect
152	150		to a particular date, means a beneficiary of a trust on that date
153	151		who, in the absence of notice to the trustee of the exercise of the
154	152		power of appointment and assuming that any other powers of
155	153		appointment under the trust are not exercised, would be eligible to
156	154		receive a distribution from the trust if:
157	155		(A) the trust terminated on that date; or
158	156		(B) the interests of all current beneficiaries
159	157		[currently eligible to receive income or principal from the trust]
160	158		ended on that date without causing the trust to terminate.
161	159		SECTION 8. Section 112.072(a), Property Code, is amended to
162	160		read as follows:
163	161		(a) An authorized trustee who has the full discretion to
164	162		distribute the principal of a trust may distribute all or part of
165	163		the principal of that trust in favor of a trustee of a second trust
166	164		for the benefit of one, [or] more than one, or all of the current
167	165		beneficiaries of the first trust [who are eligible to receive
168	166		income or principal from the trust] and for the benefit of one, [or]
169	167		more than one, or all of the successor or presumptive remainder
170	168		beneficiaries of the first trust [who are eligible to receive
171	169		income or principal from the trust].
172	170		SECTION 9. Section 112.074, Property Code, is amended by
173	171		amending Subsection (c) and adding Subsections (e-1) and (e-2) to
174	172		read as follows:
175	173		(c) Except as provided by Subsection (e-1), in [In] addition
176	174		to the notice required under Subsection (a), the authorized trustee
177	175		shall give written notice of the trustee's decision to the attorney
178	176		general if:
179	177		(1) a charity is entitled to notice;
180	178		(2) a charity entitled to notice is no longer in
181	179		existence;
182	180		(3) the trustee has the authority to distribute trust
183	181		assets to one or more charities that are not named in the trust
184	182		instrument; or
185	183		(4) the trustee has the authority to make
186	184		distributions for a charitable purpose described in the trust
187	185		instrument, but no charity is named as a beneficiary for that
188	186		purpose.
189	187		(e-1) The trustee is not required to give notice to the
190	188		attorney general under Subsection (c) if the attorney general
191	189		waives that requirement in writing.
192	190		(e-2) For purposes of Subsection (e)(3), a beneficiary is
193	191		considered to have waived the requirement that notice be given
194	192		under this section if a person to whom notice is required to be
195	193		given with respect to that beneficiary under Subsection (d) waives
196	194		the requirement that notice be given under this section.
197	195		SECTION 10. Section 112.078, Property Code, is amended by
198	196		adding Subsection (f) to read as follows:
199	197		(f) This section does not limit a beneficiary's right to
200	198		bring an action against a trustee for a breach of trust.
201	199		SECTION 11. Section 112.085, Property Code, is amended to
202	200		read as follows:
203	201		Sec. 112.085. EXCEPTIONS TO POWER OF DISTRIBUTION. An
204	202		authorized trustee may not exercise a power to distribute principal
205	203		of a trust under Section 112.072 or 112.073 to:
206	204		(1) reduce, limit, or modify a beneficiary's current,
207	205		vested right to:
208	206		(A) receive a mandatory distribution of income or
209	207		principal;
210	208		(B) receive a mandatory annuity or unitrust
211	209		interest;
212	210		(C) withdraw a percentage of the value of the
213	211		trust; or
214	212		(D) withdraw a specified dollar amount from the
215	213		trust;
216	214		(2) [materially impair the rights of any beneficiary
217	215		of the trust;
218	216		[(3)] materially limit a trustee's fiduciary duty:
219	217		(A) under the terms of the trust; or
220	218		(B) in a manner that would be prohibited [as
221	219		described] by Section 111.0035;
222	220		(3) [(4)] decrease or indemnify against a trustee's
223	221		liability;
224	222		(4) add a provision exonerating [or exonerate] a
225	223		trustee from liability for failure to exercise reasonable care,
226	224		diligence, and prudence;
227	225		(5) eliminate a provision granting another person the
228	226		right to remove or replace the authorized trustee exercising the
229	227		distribution power under Section 112.072 or 112.073; or
230	228		(6) reduce, limit, or modify in the second trust a
231	229		perpetuities provision included in the first trust, unless
232	230		expressly permitted by the terms of the first trust.
233	231		SECTION 12. Section 113.018, Property Code, is amended to
234	232		read as follows:
235	233		Sec. 113.018. EMPLOYMENT AND APPOINTMENT OF AGENTS. (a) A
236	234		trustee may employ attorneys, accountants, agents, including
237	235		investment agents, and brokers reasonably necessary in the
238	236		administration of the trust estate.
239	237		(b) Without limiting the trustee's discretion under
240	238		Subsection (a), a trustee may grant an agent powers with respect to
241	239		property of the trust to act for the trustee in any lawful manner
242	240		for purposes of real property transactions.
243	241		(c) A trustee acting under Subsection (b) may delegate any
244	242		or all of the duties and powers to:
245	243		(1) execute and deliver any legal instruments relating
246	244		to the sale and conveyance of the property, including affidavits,
247	245		notices, disclosures, waivers, or designations or general or
248	246		special warranty deeds binding the trustee with vendor's liens
249	247		retained or disclaimed, as applicable, or transferred to a
250	248		third-party lender;
251	249		(2) accept notes, deeds of trust, or other legal
252	250		instruments;
253	251		(3) approve closing statements authorizing deductions
254	252		from the sale price;
255	253		(4) receive trustee's net sales proceeds by check
256	254		payable to the trustee;
257	255		(5) indemnify and hold harmless any third party who
258	256		accepts and acts under a power of attorney with respect to the sale;
259	257		(6) take any action, including signing any document,
260	258		necessary or appropriate to sell the property and accomplish the
261	259		delegated powers;
262	260		(7) contract to purchase the property for any price on
263	261		any terms;
264	262		(8) execute, deliver, or accept any legal instruments
265	263		relating to the purchase of the property or to any financing of the
266	264		purchase, including deeds, notes, deeds of trust, guaranties, or
267	265		closing statements;
268	266		(9) approve closing statements authorizing payment of
269	267		prorations and expenses;
270	268		(10) pay the trustee's net purchase price from funds
271	269		provided by the trustee;
272	270		(11) indemnify and hold harmless any third party who
273	271		accepts and acts under a power of attorney with respect to the
274	272		purchase; or
275	273		(12) take any action, including signing any document,
276	274		necessary or appropriate to purchase the property and accomplish
277	275		the delegated powers.
278	276		(d) A trustee who delegates a power under Subsection (b) is
279	277		liable to the beneficiaries or to the trust for an action of the
280	278		agent to whom the power was delegated.
281	279		(e) A delegation by the trustee under Subsection (b) must be
282	280		documented in a written instrument acknowledged by the trustee
283	281		before an officer authorized under the law of this state or another
284	282		state to take acknowledgments to deeds of conveyance and administer
285	283		oaths. A signature on a delegation by a trustee for purposes of
286	284		this subsection is presumed to be genuine if the trustee
287	285		acknowledges the signature in accordance with Chapter 121, Civil
288	286		Practice and Remedies Code.
289	287		(f) A delegation to an agent under Subsection (b) terminates
290	288		six months from the date of the acknowledgment of the written
291	289		delegation unless terminated earlier by:
292	290		(1) the death or incapacity of the trustee;
293	291		(2) the resignation or removal of the trustee; or
294	292		(3) a date specified in the written delegation.
295	293		(g) A person who in good faith accepts a delegation under
296	294		Subsection (b) without actual knowledge that the delegation is
297	295		void, invalid, or terminated, that the purported agent's authority
298	296		is void, invalid, or terminated, or that the agent is exceeding or
299	297		improperly exercising the agent's authority may rely on the
300	298		delegation as if:
301	299		(1) the delegation were genuine, valid, and still in
302	300		effect;
303	301		(2) the agent's authority were genuine, valid, and
304	302		still in effect; and
305	303		(3) the agent had not exceeded and had properly
306	304		exercised the authority.
307	305		(h) A trustee may delegate powers under Subsection (b) if
308	306		the governing instrument does not affirmatively permit the trustee
309	307		to hire agents or expressly prohibit the trustee from hiring
310	308		agents.
311	309		SECTION 13. Sections 115.002(b-1) and (b-2), Property Code,
312	310		are amended to read as follows:
313	311		(b-1) If there are multiple [noncorporate] trustees none of
314	312		whom is a corporate trustee and the trustees maintain a principal
315	313		office in this state, an action shall be brought in the county in
316	314		which:
317	315		(1) the situs of administration of the trust is
318	316		maintained or has been maintained at any time during the four-year
319	317		period preceding the date the action is filed; or
320	318		(2) the trustees maintain the principal office.
321	319		(b-2) If there are multiple [noncorporate] trustees none of
322	320		whom is a corporate trustee and the trustees do not maintain a
323	321		principal office in this state, an action shall be brought in the
324	322		county in which:
325	323		(1) the situs of administration of the trust is
326	324		maintained or has been maintained at any time during the four-year
327	325		period preceding the date the action is filed; or
328	326		(2) any trustee resides or has resided at any time
329	327		during the four-year period preceding the date the action is filed.
330	328		SECTION 14. Section 163.011, Property Code, is amended to
331	329		read as follows:
332	330		Sec. 163.011. APPLICABILITY OF OTHER PARTS OF CODE.
333	331		Chapters 116 and 117 do [Subtitle B, Title 9 (the Texas Trust Code),
334	332		does] not apply to any institutional fund subject to this chapter.
335	333		SECTION 15. Section 240.002, Property Code, is amended by
336	334		amending Subdivision (1) and adding Subdivision (1-a) to read as
337	335		follows:
338	336		(1) "Charity" means a charitable entity or a
339	337		charitable trust, as those terms are defined by Section 123.001.
340	338		(1-a) "Current beneficiary" and "presumptive remainder
341	339		beneficiary" have the meanings assigned by Section 112.071.
342	340		SECTION 16. Section 240.0081, Property Code, is amended by
343	341		amending Subsection (c) and adding Subsections (e-1) and (e-2) to
344	342		read as follows:
345	343		(c) Except as provided by Subsection (e-1), in [In] addition
346	344		to the notice required under Subsection (a), the trustee shall give
347	345		written notice of the trustee's disclaimer to the attorney general
348	346		if:
349	347		(1) a charity is entitled to notice;
350	348		(2) a charity entitled to notice is no longer in
351	349		existence;
352	350		(3) the trustee has the authority to distribute trust
353	351		assets to one or more charities that are not named in the trust
354	352		instrument; or
355	353		(4) the trustee has the authority to make
356	354		distributions for a charitable purpose described in the trust
357	355		instrument, but no charity is named as a beneficiary for that
358	356		purpose.
359	357		(e-1) The trustee is not required to give notice to the
360	358		attorney general under Subsection (c) if the attorney general
361	359		waives that requirement in writing.
362	360		(e-2) For purposes of Subsection (e)(3), a beneficiary is
363	361		considered to have waived the requirement that notice be given
364	362		under this section if a person to whom notice is required to be
365	363		given with respect to that beneficiary under Subsection (d) waives
366	364		the requirement that notice be given under this section.
367	365		SECTION 17. (a) Except as otherwise expressly provided by
368	366		a trust, a will creating a trust, or this section, the changes in
369	367		law made by this Act apply to a trust existing on or created on or
370	368		after September 1, 2017.
371	369		(b) For a trust existing on September 1, 2017, that was
372	370		created before that date, the changes in law made by this Act apply
373	371		only to an act or omission relating to the trust that occurs on or
374	372		after September 1, 2017.
375	373		SECTION 18. This Act takes effect September 1, 2017.
	374	+	______________________________ ______________________________
	375	+	President of the Senate Speaker of the House
	376	+	I hereby certify that S.B. No. 617 passed the Senate on
	377	+	April 25, 2017, by the following vote: Yeas 31, Nays 0.
	378	+	______________________________
	379	+	Secretary of the Senate
	380	+	I hereby certify that S.B. No. 617 passed the House on
	381	+	May 9, 2017, by the following vote: Yeas 145, Nays 0, two present
	382	+	not voting.
	383	+	______________________________
	384	+	Chief Clerk of the House
	385	+	Approved:
	386	+	______________________________
	387	+	Date
	388	+	______________________________
	389	+	Governor