Texas 2019 - 86th Regular

Texas House Bill HB2245 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	H.B. No. 2245
	1	+	By: Wray, Raymond (Senate Sponsor - Rodríguez) H.B. No. 2245
	2	+	(In the Senate - Received from the House May 2, 2019;
	3	+	May 3, 2019, read first time and referred to Committee on State
	4	+	Affairs; May 14, 2019, reported favorably by the following vote:
	5	+	Yeas 9, Nays 0; May 14, 2019, sent to printer.)
	6	+	Click here to see the committee vote
2	7
3	8
	9	+	A BILL TO BE ENTITLED
4	10		AN ACT
5	11		relating to trusts.
6	12		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
7	13		SECTION 1. Section 111.0035(b), Property Code, is amended
8	14		to read as follows:
9	15		(b) The terms of a trust prevail over any provision of this
10	16		subtitle, except that the terms of a trust may not limit:
11	17		(1) the requirements imposed under Section 112.031;
12	18		(2) the applicability of Section 114.007 to an
13	19		exculpation term of a trust;
14	20		(3) the periods of limitation for commencing a
15	21		judicial proceeding regarding a trust;
16	22		(4) a trustee's duty:
17	23		(A) with regard to an irrevocable trust, to
18	24		respond to a demand for accounting made under Section 113.151 if the
19	25		demand is from a beneficiary who, at the time of the demand:
20	26		(i) is entitled or permitted to receive
21	27		distributions from the trust; or
22	28		(ii) would receive a distribution from the
23	29		trust if the trust terminated at the time of the demand; and
24	30		(B) to act in good faith and in accordance with
25	31		the purposes of the trust;
26	32		(5) the power of a court, in the interest of justice,
27	33		to take action or exercise jurisdiction, including the power to:
28	34		(A) modify, reform, or terminate a trust or take
29	35		other action under Section 112.054;
30	36		(B) remove a trustee under Section 113.082;
31	37		(C) exercise jurisdiction under Section 115.001;
32	38		(D) require, dispense with, modify, or terminate
33	39		a trustee's bond; [or]
34	40		(E) adjust, [or] deny, or order disgorgement of a
35	41		trustee's compensation if the trustee commits a breach of trust; or
36	42		(F) make an award of costs and attorney's fees
37	43		under Section 114.064; or
38	44		(6) the applicability of Section 112.038.
39	45		SECTION 2. Subchapter B, Chapter 112, Property Code, is
40	46		amended by adding Section 112.0335 to read as follows:
41	47		Sec. 112.0335. CONSTRUCTION OF CERTAIN TRUSTS. (a) Unless
42	48		the terms of the trust provide otherwise, if a trust is created and
43	49		amendable or revocable by the settlor, or by the settlor and the
44	50		settlor's spouse, Chapter 255, Estates Code, applies at the
45	51		settlor's death to the construction and interpretation of at-death
46	52		transfers as if the settlor of the trust is the testator, the
47	53		beneficiaries of the at-death transfer are devisees, and the
48	54		at-death transfers are devises.
49	55		(b) Section 355.109, Estates Code, applies to the abatement
50	56		of at-death transfers.
51	57		(c) For purposes of this section, "at-death transfer" means
52	58		a transfer pursuant to the terms of a trust described by Subsection
53	59		(a) that is intended to take effect or become irrevocable by reason
54	60		of the settlor's death.
55	61		(d) For purposes of the Estates Code provisions specified by
56	62		this section:
57	63		(1) an at-death transfer of specifically identifiable
58	64		trust property is a specific bequest, devise, or legacy;
59	65		(2) an at-death transfer from the general assets of
60	66		the trust that does not transfer specifically identifiable property
61	67		is a general bequest, devise, or legacy; and
62	68		(3) an at-death transfer of trust property that
63	69		remains after all specific and general transfers have been
64	70		satisfied is the residuary estate.
65	71		SECTION 3. Section 112.054(c), Property Code, is amended to
66	72		read as follows:
67	73		(c) The court may direct that an order described by
68	74		Subsection (a)(4) [or (b-1)] has retroactive effect. The
69	75		reformation of a trust under an order described by Subsection (b-1)
70	76		is effective as of the creation of the trust.
71	77		SECTION 4. Subchapter D, Chapter 112, Property Code, is
72	78		amended by adding Section 112.0715 to read as follows:
73	79		Sec. 112.0715. CREATION OF SECOND TRUST. (a) A second
74	80		trust may be created by a distribution of principal under Section
75	81		112.072 or 112.073 to a trust created under the same trust
76	82		instrument as the first trust from which the principal is
77	83		distributed or to a trust created under a different trust
78	84		instrument.
79	85		(b) If a second trust is created by a distribution of
80	86		principal under Section 112.072 or 112.073 to a trust created under
81	87		the same trust instrument as the first trust from which the
82	88		principal is distributed, the property is not required to be
83	89		retitled.
84	90		(c) The legislature intends this section to be a
85	91		codification of the common law of this state in effect immediately
86	92		before September 1, 2019.
87	93		SECTION 5. Chapter 112, Property Code, is amended by adding
88	94		Subchapter E to read as follows:
89	95		SUBCHAPTER E. EFFECT OF DISSOLUTION OF MARRIAGE ON CERTAIN
90	96		TRANSFERS IN TRUST
91	97		Sec. 112.101. DEFINITIONS. In this subchapter:
92	98		(1) "Disposition or appointment of property" includes
93	99		a transfer of property to or a provision of another benefit to a
94	100		beneficiary under a trust instrument.
95	101		(2) "Divorced individual" means an individual whose
96	102		marriage has been dissolved by divorce, annulment, or a declaration
97	103		that the marriage is void.
98	104		(3) "Relative" means an individual who is related to
99	105		another individual by consanguinity or affinity, as determined
100	106		under Sections 573.022 and 573.024, Government Code, respectively.
101	107		(4) "Revocable," with respect to a disposition,
102	108		appointment, provision, or nomination, means a disposition to,
103	109		appointment of, provision in favor of, or nomination of an
104	110		individual's spouse or any relative of the individual's spouse who
105	111		is not a relative of the individual that is contained in a trust
106	112		instrument executed by the individual before the dissolution of the
107	113		individual's marriage to the spouse and that the individual was
108	114		solely empowered by law or by the trust instrument to revoke
109	115		regardless of whether the individual had the capacity to exercise
110	116		the power at that time.
111	117		Sec. 112.102. REVOCATION OF CERTAIN NONTESTAMENTARY
112	118		TRANSFERS; TREATMENT OF FORMER SPOUSE OR FORMER SPOUSE'S RELATIVE
113	119		AS BENEFICIARY UNDER CERTAIN POLICIES OR PLANS. (a) The
114	120		dissolution of the marriage revokes a provision in a trust
115	121		instrument that was executed by a divorced individual as settlor
116	122		before the divorced individual's marriage was dissolved and that:
117	123		(1) is a revocable disposition or appointment of
118	124		property made to the divorced individual's former spouse or any
119	125		relative of the former spouse who is not a relative of the divorced
120	126		individual;
121	127		(2) revocably confers a general or special power of
122	128		appointment on the divorced individual's former spouse or any
123	129		relative of the former spouse who is not a relative of the divorced
124	130		individual; or
125	131		(3) revocably nominates the divorced individual's
126	132		former spouse or any relative of the former spouse who is not a
127	133		relative of the divorced individual to serve:
128	134		(A) as a personal representative, trustee,
129	135		conservator, agent, or guardian; or
130	136		(B) in another fiduciary or representative
131	137		capacity.
132	138		(b) Subsection (a) does not apply if one of the following
133	139		provides otherwise:
134	140		(1) a court order;
135	141		(2) the express terms of a trust instrument executed
136	142		by the divorced individual before the individual's marriage was
137	143		dissolved; or
138	144		(3) an express provision of a contract relating to the
139	145		division of the marital estate entered into between the divorced
140	146		individual and the individual's former spouse before, during, or
141	147		after the marriage.
142	148		(c) Sections 9.301 and 9.302, Family Code, govern the
143	149		designation of a former spouse as a beneficiary of certain life
144	150		insurance policies or as a beneficiary under certain retirement
145	151		benefit plans or other financial plans.
146	152		Sec. 112.103. EFFECT OF REVOCATION. (a) An interest
147	153		granted in a provision of a trust instrument that is revoked under
148	154		Section 112.102(a)(1) or (2) passes as if the former spouse of the
149	155		divorced individual who executed the trust instrument and each
150	156		relative of the former spouse who is not a relative of the divorced
151	157		individual disclaimed the interest granted in the provision.
152	158		(b) An interest granted in a provision of a trust instrument
153	159		that is revoked under Section 112.102(a)(3) passes as if the former
154	160		spouse and each relative of the former spouse who is not a relative
155	161		of the divorced individual died immediately before the dissolution
156	162		of the marriage.
157	163		Sec. 112.104. LIABILITY OF CERTAIN PURCHASERS OR RECIPIENTS
158	164		OF CERTAIN PAYMENTS, BENEFITS, OR PROPERTY. A bona fide purchaser
159	165		of property from a divorced individual's former spouse or any
160	166		relative of the former spouse who is not a relative of the divorced
161	167		individual or a person who receives from the former spouse or any
162	168		relative of the former spouse who is not a relative of the divorced
163	169		individual a payment, benefit, or property in partial or full
164	170		satisfaction of an enforceable obligation:
165	171		(1) is not required by this subchapter to return the
166	172		payment, benefit, or property; and
167	173		(2) is not liable under this subchapter for the amount
168	174		of the payment or the value of the property or benefit.
169	175		Sec. 112.105. LIABILITY OF FORMER SPOUSE OR FORMER SPOUSE'S
170	176		RELATIVE FOR CERTAIN PAYMENTS, BENEFITS, OR PROPERTY. A divorced
171	177		individual's former spouse or any relative of the former spouse who
172	178		is not a relative of the divorced individual who, not for value,
173	179		receives a payment, benefit, or property to which the former spouse
174	180		or the relative of the former spouse who is not a relative of the
175	181		divorced individual is not entitled as a result of Sections
176	182		112.102(a) and (b):
177	183		(1) shall return the payment, benefit, or property to
178	184		the person who is entitled to the payment, benefit, or property
179	185		under this subchapter; or
180	186		(2) is personally liable to the person described by
181	187		Subdivision (1) for the amount of the payment or the value of the
182	188		benefit or property received, as applicable.
183	189		Sec. 112.106. CERTAIN TRUSTS WITH DIVORCED INDIVIDUALS AS
184	190		JOINT SETTLORS. (a) This section applies only to a trust created
185	191		under a trust instrument that:
186	192		(1) was executed by two married individuals as
187	193		settlors whose marriage to each other is subsequently dissolved;
188	194		and
189	195		(2) includes a provision described by Section
190	196		112.102(a).
191	197		(b) On the death of one of the divorced individuals who is a
192	198		settlor of a trust to which this section applies, the trustee shall
193	199		divide the trust into two trusts, each of which shall be composed of
194	200		the property attributable to the contributions of only one of the
195	201		divorced individuals.
196	202		(c) An action authorized in a trust instrument described by
197	203		Subsection (a) that requires the actions of both divorced
198	204		individuals may be taken with respect to a trust established in
199	205		accordance with Subsection (b) from the surviving divorced
200	206		individual's contributions solely by that divorced individual.
201	207		(d) The provisions of this subchapter apply independently
202	208		to each trust established in accordance with Subsection (b) as if
203	209		the divorced individual from whose contributions the trust was
204	210		established had been the only settlor to execute the trust
205	211		instrument described by Subsection (a).
206	212		(e) This section does not apply if one of the following
207	213		provides otherwise:
208	214		(1) a court order;
209	215		(2) the express terms of a trust instrument executed
210	216		by the two divorced individuals before their marriage was
211	217		dissolved; or
212	218		(3) an express provision of a contract relating to the
213	219		division of the marital estate entered into between the two
214	220		divorced individuals before, during, or after their marriage.
215	221		SECTION 6. Section 142.005(b), Property Code, is amended to
216	222		read as follows:
217	223		(b) The decree shall provide for the creation of a trust for
218	224		the management of the funds for the benefit of the beneficiary and
219	225		for terms, conditions, and limitations of the trust, as determined
220	226		by the court, that are not in conflict with the following mandatory
221	227		provisions:
222	228		(1) The beneficiary shall be the sole beneficiary of
223	229		the trust.
224	230		(2) The trustee may disburse amounts of the trust's
225	231		principal, income, or both as the trustee in the trustee's sole
226	232		discretion determines to be reasonably necessary for the health,
227	233		education, support, or maintenance of the beneficiary. The trustee
228	234		may conclusively presume that medicine or treatments approved by a
229	235		licensed physician are appropriate for the health of the
230	236		beneficiary.
231	237		(3) The income of the trust not disbursed under
232	238		Subdivision (2) shall be added to the principal of the trust.
233	239		(4) If the beneficiary is a minor who is not considered
234	240		disabled for purposes of 42 U.S.C. Chapter 7, Subchapter XVI, the
235	241		trust shall terminate on the death of the beneficiary, on the
236	242		beneficiary's attaining an age stated in the trust, or on the 25th
237	243		birthday of the beneficiary, whichever occurs first.
238	244		(4-a) If the court finds that a minor beneficiary is
239	245		considered disabled for purposes of 42 U.S.C. Chapter 7, Subchapter
240	246		XVI, the trust shall terminate on the death of the beneficiary.
241	247		(4-b) If[, or if] the beneficiary is an incapacitated
242	248		person, the trust shall terminate on the death of the beneficiary or
243	249		when the beneficiary regains capacity.
244	250		(5) A trustee that is a financial institution shall
245	251		serve without bond.
246	252		(6) The trustee shall receive reasonable compensation
247	253		paid from trust's income, principal, or both on application to and
248	254		approval of the court.
249	255		(7) The first page of the trust instrument shall
250	256		contain the following notice:
251	257		NOTICE: THE BENEFICIARY AND CERTAIN PERSONS INTERESTED IN THE
252	258		WELFARE OF THE BENEFICIARY MAY HAVE REMEDIES UNDER SECTION 114.008
253	259		OR 142.005, PROPERTY CODE.
254	260		SECTION 7. Chapter 142, Property Code, is amended by adding
255	261		Section 142.010 to read as follows:
256	262		Sec. 142.010. TRANSFER OF TRUST PROPERTY TO A POOLED TRUST
257	263		SUBACCOUNT. (a) In this section, "management trust" means a trust
258	264		created for a beneficiary in accordance with Section 142.005.
259	265		(b) If the court with continuing jurisdiction over a
260	266		management trust determines that it is in the best interests of the
261	267		beneficiary for whom the management trust is created, the court may
262	268		order the transfer of all property in the management trust to a
263	269		pooled trust subaccount established in accordance with Chapter 143.
264	270		(c) For purposes of a proceeding to determine whether to
265	271		transfer property from a management trust to a pooled trust
266	272		subaccount, the court may, but is not required to, appoint an
267	273		attorney ad litem or guardian ad litem to represent the interests of
268	274		a management trust beneficiary who has a physical disability and is
269	275		not an incapacitated person. The attorney ad litem or the guardian
270	276		ad litem is entitled to a reasonable fee and reimbursement of
271	277		expenses to be paid from the management trust property.
272	278		(d) The transfer of property from the management trust to
273	279		the pooled trust subaccount shall be treated as a continuation of
274	280		the management trust and may not be treated as the establishment of
275	281		a new trust for purposes of 42 U.S.C. Section 1396p(d)(4)(A) or (C)
276	282		or otherwise for purposes of the management trust beneficiary's
277	283		eligibility for medical assistance under Chapter 32, Human
278	284		Resources Code.
279	285		(e) The court may not allow termination of the management
280	286		trust from which property is transferred under this section until
281	287		all of the property in the management trust has been transferred to
282	288		the pooled trust subaccount.
283	289		SECTION 8. Subtitle A, Title 10, Property Code, is amended
284	290		by adding Chapter 143 to read as follows:
285	291		CHAPTER 143. POOLED TRUST SUBACCOUNTS
286	292		Sec. 143.001. DEFINITIONS. In this chapter:
287	293		(1) "Beneficiary" means a person for whose benefit a
288	294		subaccount is established.
289	295		(2) "Incapacitated person" has the meaning assigned by
290	296		Section 142.007.
291	297		(3) "Medical assistance" means benefits and services
292	298		under the medical assistance program administered under Chapter 32,
293	299		Human Resources Code.
294	300		(4) "Pooled trust" means a trust that meets the
295	301		requirements of 42 U.S.C. Section 1396p(d)(4)(C) for purposes of
296	302		exempting the trust from the applicability of 42 U.S.C. Section
297	303		1396p(d) in determining the eligibility of a person who is disabled
298	304		for medical assistance.
299	305		(5) "Subaccount" means an account in a pooled trust
300	306		established under this chapter.
301	307		Sec. 143.002. APPLICATION TO ESTABLISH SUBACCOUNT. The
302	308		following persons may apply to the court having jurisdiction under
303	309		Section 142.005 for the establishment of a subaccount solely for
304	310		the benefit of a proposed beneficiary who is a person for whom a
305	311		management trust has been or could be established for the person's
306	312		benefit under Section 142.005:
307	313		(1) the trustee of a management trust established
308	314		under Section 142.005 for the benefit of the proposed beneficiary
309	315		of the subaccount;
310	316		(2) the guardian of the person or estate, or both, of
311	317		the proposed beneficiary of the subaccount;
312	318		(3) a person who has filed an application for the
313	319		appointment of a guardian of the person or estate, or both, for the
314	320		proposed beneficiary of the subaccount;
315	321		(4) an attorney ad litem or guardian ad litem
316	322		appointed to represent the proposed beneficiary of the subaccount;
317	323		or
318	324		(5) the proposed beneficiary, if the proposed
319	325		beneficiary is not a minor or incapacitated person.
320	326		Sec. 143.003. APPOINTMENT OF ATTORNEY AD LITEM. (a) The
321	327		court shall appoint an attorney ad litem for a person who is a minor
322	328		or an incapacitated person and who is the subject of an application
323	329		under Section 143.002.
324	330		(b) The attorney ad litem is entitled to a reasonable fee
325	331		and reimbursement of expenses to be paid from the person's
326	332		property.
327	333		Sec. 143.004. ESTABLISHMENT OF SUBACCOUNT. If the court
328	334		finds that it is in the best interests of a person who is the subject
329	335		of an application under Section 143.002, the court may order:
330	336		(1) the establishment of a subaccount of which the
331	337		person is the beneficiary; and
332	338		(2) the transfer to the subaccount of any of the
333	339		person's property on hand or accruing to the person.
334	340		Sec. 143.005. TERMS OF SUBACCOUNT. Unless the court orders
335	341		otherwise, the terms governing the subaccount must provide that:
336	342		(1) the subaccount terminates on the earliest of the
337	343		date of:
338	344		(A) the beneficiary's 18th birthday, if the
339	345		beneficiary:
340	346		(i) is not found by the court to be
341	347		considered disabled for purposes of 42 U.S.C. Chapter 7, Subchapter
342	348		XVI; and
343	349		(ii) is a minor at the time the subaccount
344	350		is established;
345	351		(B) the beneficiary's death; or
346	352		(C) a court order terminating the subaccount;
347	353		and
348	354		(2) on termination, any property remaining in the
349	355		beneficiary's subaccount after making any required payments to
350	356		satisfy the amounts of medical assistance reimbursement claims for
351	357		medical assistance provided to the beneficiary under this state's
352	358		medical assistance program and other states' medical assistance
353	359		programs shall be distributed to:
354	360		(A) the beneficiary, if on the date of
355	361		termination the beneficiary is living and is not a minor or
356	362		incapacitated person;
357	363		(B) the beneficiary's guardian of the estate, if
358	364		on the date of termination the beneficiary is living and is a minor
359	365		or incapacitated person; or
360	366		(C) the personal representative of the
361	367		beneficiary's estate, if on the date of termination the beneficiary
362	368		is deceased.
363	369		Sec. 143.006. FEES AND REPORTING. (a) The manager or
364	370		trustee of a pooled trust may:
365	371		(1) assess fees against a subaccount of that pooled
366	372		trust that is established under this chapter, in accordance with
367	373		the manager's or trustee's standard fee structure; and
368	374		(2) pay fees assessed under Subdivision (1) from the
369	375		subaccount.
370	376		(b) If required by the court, the manager or trustee of the
371	377		pooled trust shall file a copy of the annual report of account with
372	378		the court clerk.
373	379		Sec. 143.007. JURISDICTION EXCLUSIVE. Notwithstanding any
374	380		other law, the court that orders the establishment of a subaccount
375	381		for a beneficiary has exclusive jurisdiction of a subsequent
376	382		proceeding or action that relates to both the beneficiary and the
377	383		subaccount, and the proceeding or action may be brought only in that
378	384		court.
379	385		SECTION 9. (a) Except as otherwise expressly provided by a
380	386		trust, a will creating a trust, or this section, the changes in law
381	387		made by this Act apply to a trust existing on or created on or after
382	388		September 1, 2019.
383	389		(b) For a trust existing on September 1, 2019, that was
384	390		created before that date, the changes in law made by this Act apply
385	391		only to an act or omission relating to the trust that occurs on or
386	392		after September 1, 2019.
387	393		(c) Section 112.0335, Property Code, as added by this Act,
388	394		applies to a trust only if the settlor's death occurs on or after
389	395		September 1, 2019.
390	396		(d) Subchapter E, Chapter 112, Property Code, as added by
391	397		this Act, applies to a trust only with respect to a dissolution of
392	398		marriage that occurs on or after September 1, 2019.
393	399		SECTION 10. This Act takes effect September 1, 2019.
394		-	______________________________ ______________________________
395		-	President of the Senate Speaker of the House
396		-	I certify that H.B. No. 2245 was passed by the House on May 2,
397		-	2019, by the following vote: Yeas 143, Nays 0, 1 present, not
398		-	voting.
399		-	______________________________
400		-	Chief Clerk of the House
401		-	I certify that H.B. No. 2245 was passed by the Senate on May
402		-	21, 2019, by the following vote: Yeas 30, Nays 1.
403		-	______________________________
404		-	Secretary of the Senate
405		-	APPROVED: _____________________
406		-	Date
407		-	_____________________
408		-	Governor
	400	+	* * * * *