Texas 2019 - 86th Regular

Texas Senate Bill SB631 Compare Versions

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

Old	New	Differences
1	1	86R2864 AJA-F
2	2	By: Rodríguez S.B. No. 631
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 111.0035(b), Property Code, is amended
10	10	to read as follows:
11	11	(b) The terms of a trust prevail over any provision of this
12	12	subtitle, except that the terms of a trust may not limit:
13	13	(1) the requirements imposed under Section 112.031;
14	14	(2) the applicability of Section 114.007 to an
15	15	exculpation term of a trust;
16	16	(3) the periods of limitation for commencing a
17	17	judicial proceeding regarding a trust;
18	18	(4) a trustee's duty:
19	19	(A) with regard to an irrevocable trust, to
20	20	respond to a demand for accounting made under Section 113.151 if the
21	21	demand is from a beneficiary who, at the time of the demand:
22	22	(i) is entitled or permitted to receive
23	23	distributions from the trust; or
24	24	(ii) would receive a distribution from the
25	25	trust if the trust terminated at the time of the demand; and
26	26	(B) to act in good faith and in accordance with
27	27	the purposes of the trust;
28	28	(5) the power of a court, in the interest of justice,
29	29	to take action or exercise jurisdiction, including the power to:
30	30	(A) modify, reform, or terminate a trust or take
31	31	other action under Section 112.054;
32	32	(B) remove a trustee under Section 113.082;
33	33	(C) exercise jurisdiction under Section 115.001;
34	34	(D) require, dispense with, modify, or terminate
35	35	a trustee's bond; [or]
36	36	(E) adjust, [or] deny, or order disgorgement of a
37	37	trustee's compensation if the trustee commits a breach of trust; or
38	38	(F) make an award of costs and attorney's fees
39	39	under Section 114.064; or
40	40	(6) the applicability of Section 112.038.
41	41	SECTION 2. Subchapter B, Chapter 112, Property Code, is
42	42	amended by adding Section 112.0335 to read as follows:
43	43	Sec. 112.0335. CONSTRUCTION OF CERTAIN TRUSTS. (a) Unless
44	44	the terms of the trust provide otherwise, if a trust is created and
45	45	amendable or revocable by the settlor, or by the settlor and the
46	46	settlor's spouse, Chapter 255, Estates Code, applies at the
47	47	settlor's death to the construction and interpretation of at-death
48	48	transfers as if the settlor of the trust is the testator, the
49	49	beneficiaries of the at-death transfer are devisees, and the
50	50	at-death transfers are devises.
51	51	(b) Section 355.109, Estates Code, applies to the abatement
52	52	of at-death transfers.
53	53	(c) For purposes of this section, "at-death transfer" means
54	54	a transfer pursuant to the terms of a trust described by Subsection
55	55	(a) that is intended to take effect or become irrevocable by reason
56	56	of the settlor's death.
57	57	(d) For purposes of the Estates Code provisions specified by
58	58	this section:
59	59	(1) an at-death transfer of specifically identifiable
60	60	trust property is a specific bequest, devise, or legacy;
61	61	(2) an at-death transfer from the general assets of
62	62	the trust that does not transfer specifically identifiable property
63	63	is a general bequest, devise, or legacy; and
64	64	(3) an at-death transfer of trust property that
65	65	remains after all specific and general transfers have been
66	66	satisfied is the residuary estate.
67	67	SECTION 3. Section 112.054(c), Property Code, is amended to
68	68	read as follows:
69	69	(c) The court may direct that an order described by
70	70	Subsection (a)(4) [or (b-1)] has retroactive effect. The
71	71	reformation of a trust under an order described by Subsection (b-1)
72	72	is effective as of the creation of the trust.
73	73	SECTION 4. Subchapter D, Chapter 112, Property Code, is
74	74	amended by adding Section 112.0715 to read as follows:
75	75	Sec. 112.0715. CREATION OF SECOND TRUST. (a) A second
76	76	trust may be created by a distribution of principal under Section
77	77	112.072 or 112.073 to a trust created under the same trust
78	78	instrument as the first trust from which the principal is
79	79	distributed or to a trust created under a different trust
80	80	instrument.
81	81	(b) If a second trust is created by a distribution of
82	82	principal under Section 112.072 or 112.073 to a trust created under
83	83	the same trust instrument as the first trust from which the
84	84	principal is distributed, the property is not required to be
85	85	retitled.
86	86	(c) The legislature intends this section to be a
87	87	codification of the common law of this state in effect immediately
88	88	before September 1, 2019.
89	89	SECTION 5. Chapter 112, Property Code, is amended by adding
90	90	Subchapter E to read as follows:
91	91	SUBCHAPTER E. EFFECT OF DISSOLUTION OF MARRIAGE ON CERTAIN
92	92	TRANSFERS IN TRUST
93	93	Sec. 112.101. DEFINITIONS. In this subchapter:
94	94	(1) "Disposition or appointment of property" includes
95	95	a transfer of property to or a provision of another benefit to a
96	96	beneficiary under a trust instrument.
97	97	(2) "Divorced individual" means an individual whose
98	98	marriage has been dissolved by divorce, annulment, or a declaration
99	99	that the marriage is void.
100	100	(3) "Relative" means an individual who is related to
101	101	another individual by consanguinity or affinity, as determined
102	102	under Sections 573.022 and 573.024, Government Code, respectively.
103	103	(4) "Revocable," with respect to a disposition,
104	104	appointment, provision, or nomination, means a disposition to,
105	105	appointment of, provision in favor of, or nomination of an
106	106	individual's spouse or any relative of the individual's spouse who
107	107	is not a relative of the individual that is contained in a trust
108	108	instrument executed by the individual before the dissolution of the
109	109	individual's marriage to the spouse and that the individual was
110	110	solely empowered by law or by the trust instrument to revoke
111	111	regardless of whether the individual had the capacity to exercise
112	112	the power at that time.
113	113	Sec. 112.102. REVOCATION OF CERTAIN NONTESTAMENTARY
114	114	TRANSFERS; TREATMENT OF FORMER SPOUSE OR FORMER SPOUSE'S RELATIVE
115	115	AS BENEFICIARY UNDER CERTAIN POLICIES OR PLANS. (a) The
116	116	dissolution of the marriage revokes a provision in a trust
117	117	instrument that was executed by a divorced individual as settlor
118	118	before the divorced individual's marriage was dissolved and that:
119	119	(1) is a revocable disposition or appointment of
120	120	property made to the divorced individual's former spouse or any
121	121	relative of the former spouse who is not a relative of the divorced
122	122	individual;
123	123	(2) revocably confers a general or special power of
124	124	appointment on the divorced individual's former spouse or any
125	125	relative of the former spouse who is not a relative of the divorced
126	126	individual; or
127	127	(3) revocably nominates the divorced individual's
128	128	former spouse or any relative of the former spouse who is not a
129	129	relative of the divorced individual to serve:
130	130	(A) as a personal representative, trustee,
131	131	conservator, agent, or guardian; or
132	132	(B) in another fiduciary or representative
133	133	capacity.
134	134	(b) Subsection (a) does not apply if one of the following
135	135	provides otherwise:
136	136	(1) a court order;
137	137	(2) the express terms of a trust instrument executed
138	138	by the divorced individual before the individual's marriage was
139	139	dissolved; or
140	140	(3) an express provision of a contract relating to the
141	141	division of the marital estate entered into between the divorced
142	142	individual and the individual's former spouse before, during, or
143	143	after the marriage.
144	144	(c) Sections 9.301 and 9.302, Family Code, govern the
145	145	designation of a former spouse as a beneficiary of certain life
146	146	insurance policies or as a beneficiary under certain retirement
147	147	benefit plans or other financial plans.
148	148	Sec. 112.103. EFFECT OF REVOCATION. (a) An interest
149	149	granted in a provision of a trust instrument that is revoked under
150	150	Section 112.102(a)(1) or (2) passes as if the former spouse of the
151	151	divorced individual who executed the trust instrument and each
152	152	relative of the former spouse who is not a relative of the divorced
153	153	individual disclaimed the interest granted in the provision.
154	154	(b) An interest granted in a provision of a trust instrument
155	155	that is revoked under Section 112.102(a)(3) passes as if the former
156	156	spouse and each relative of the former spouse who is not a relative
157	157	of the divorced individual died immediately before the dissolution
158	158	of the marriage.
159	159	Sec. 112.104. LIABILITY OF CERTAIN PURCHASERS OR RECIPIENTS
160	160	OF CERTAIN PAYMENTS, BENEFITS, OR PROPERTY. A bona fide purchaser
161	161	of property from a divorced individual's former spouse or any
162	162	relative of the former spouse who is not a relative of the divorced
163	163	individual or a person who receives from the former spouse or any
164	164	relative of the former spouse who is not a relative of the divorced
165	165	individual a payment, benefit, or property in partial or full
166	166	satisfaction of an enforceable obligation:
167	167	(1) is not required by this subchapter to return the
168	168	payment, benefit, or property; and
169	169	(2) is not liable under this subchapter for the amount
170	170	of the payment or the value of the property or benefit.
171	171	Sec. 112.105. LIABILITY OF FORMER SPOUSE OR FORMER SPOUSE'S
172	172	RELATIVE FOR CERTAIN PAYMENTS, BENEFITS, OR PROPERTY. A divorced
173	173	individual's former spouse or any relative of the former spouse who
174	174	is not a relative of the divorced individual who, not for value,
175	175	receives a payment, benefit, or property to which the former spouse
176	176	or the relative of the former spouse who is not a relative of the
177	177	divorced individual is not entitled as a result of Sections
178	178	112.102(a) and (b):
179	179	(1) shall return the payment, benefit, or property to
180	180	the person who is entitled to the payment, benefit, or property
181	181	under this subchapter; or
182	182	(2) is personally liable to the person described by
183	183	Subdivision (1) for the amount of the payment or the value of the
184	184	benefit or property received, as applicable.
185	185	Sec. 112.106. CERTAIN TRUSTS WITH DIVORCED INDIVIDUALS AS
186	186	JOINT SETTLORS. (a) This section applies only to a trust created
187	187	under a trust instrument that:
188	188	(1) was executed by two married individuals as
189	189	settlors whose marriage to each other is subsequently dissolved;
190	190	and
191	191	(2) includes a provision described by Section
192	192	112.102(a).
193	193	(b) On the death of one of the divorced individuals who is a
194	194	settlor of a trust to which this section applies, the trustee shall
195	195	divide the trust into two trusts, each of which shall be composed of
196	196	the property attributable to the contributions of only one of the
197	197	divorced individuals.
198	198	(c) An action authorized in a trust instrument described by
199	199	Subsection (a) that requires the actions of both divorced
200	200	individuals may be taken with respect to a trust established in
201	201	accordance with Subsection (b) from the surviving divorced
202	202	individual's contributions solely by that divorced individual.
203	203	(d) The provisions of this subchapter apply independently
204	204	to each trust established in accordance with Subsection (b) as if
205	205	the divorced individual from whose contributions the trust was
206	206	established had been the only settlor to execute the trust
207	207	instrument described by Subsection (a).
208	208	(e) This section does not apply if one of the following
209	209	provides otherwise:
210	210	(1) a court order;
211	211	(2) the express terms of a trust instrument executed
212	212	by the two divorced individuals before their marriage was
213	213	dissolved; or
214	214	(3) an express provision of a contract relating to the
215	215	division of the marital estate entered into between the two
216	216	divorced individuals before, during, or after their marriage.
217	217	SECTION 6. Section 142.005(b), Property Code, is amended to
218	218	read as follows:
219	219	(b) The decree shall provide for the creation of a trust for
220	220	the management of the funds for the benefit of the beneficiary and
221	221	for terms, conditions, and limitations of the trust, as determined
222	222	by the court, that are not in conflict with the following mandatory
223	223	provisions:
224	224	(1) The beneficiary shall be the sole beneficiary of
225	225	the trust.
226	226	(2) The trustee may disburse amounts of the trust's
227	227	principal, income, or both as the trustee in the trustee's sole
228	228	discretion determines to be reasonably necessary for the health,
229	229	education, support, or maintenance of the beneficiary. The trustee
230	230	may conclusively presume that medicine or treatments approved by a
231	231	licensed physician are appropriate for the health of the
232	232	beneficiary.
233	233	(3) The income of the trust not disbursed under
234	234	Subdivision (2) shall be added to the principal of the trust.
235	235	(4) If the beneficiary is a minor who is not considered
236	236	disabled for purposes of 42 U.S.C. Chapter 7, Subchapter XVI, the
237	237	trust shall terminate on the death of the beneficiary, on the
238	238	beneficiary's attaining an age stated in the trust, or on the 25th
239	239	birthday of the beneficiary, whichever occurs first.
240	240	(4-a) If the court finds that a minor beneficiary is
241	241	considered disabled for purposes of 42 U.S.C. Chapter 7, Subchapter
242	242	XVI, the trust shall terminate on the death of the beneficiary.
243	243	(4-b) If[, or if] the beneficiary is an incapacitated
244	244	person, the trust shall terminate on the death of the beneficiary or
245	245	when the beneficiary regains capacity.
246	246	(5) A trustee that is a financial institution shall
247	247	serve without bond.
248	248	(6) The trustee shall receive reasonable compensation
249	249	paid from trust's income, principal, or both on application to and
250	250	approval of the court.
251	251	(7) The first page of the trust instrument shall
252	252	contain the following notice:
253	253	NOTICE: THE BENEFICIARY AND CERTAIN PERSONS INTERESTED IN THE
254	254	WELFARE OF THE BENEFICIARY MAY HAVE REMEDIES UNDER SECTION 114.008
255	255	OR 142.005, PROPERTY CODE.
256	256	SECTION 7. Chapter 142, Property Code, is amended by adding
257	257	Section 142.010 to read as follows:
258	258	Sec. 142.010. TRANSFER OF TRUST PROPERTY TO A POOLED TRUST
259	259	SUBACCOUNT. (a) In this section, "management trust" means a trust
260	260	created for a beneficiary in accordance with Section 142.005.
261	261	(b) If the court with continuing jurisdiction over a
262	262	management trust determines that it is in the best interests of the
263	263	beneficiary for whom the management trust is created, the court may
264	264	order the transfer of all property in the management trust to a
265	265	pooled trust subaccount established in accordance with Chapter 143.
266	266	(c) For purposes of a proceeding to determine whether to
267	267	transfer property from a management trust to a pooled trust
268	268	subaccount, the court may, but is not required to, appoint an
269	269	attorney ad litem or guardian ad litem to represent the interests of
270	270	a management trust beneficiary who has a physical disability and is
271	271	not an incapacitated person. The attorney ad litem or the guardian
272	272	ad litem is entitled to a reasonable fee and reimbursement of
273	273	expenses to be paid from the management trust property.
274	274	(d) The transfer of property from the management trust to
275	275	the pooled trust subaccount shall be treated as a continuation of
276	276	the management trust and may not be treated as the establishment of
277	277	a new trust for purposes of 42 U.S.C. Section 1396p(d)(4)(A) or (C)
278	278	or otherwise for purposes of the management trust beneficiary's
279	279	eligibility for medical assistance under Chapter 32, Human
280	280	Resources Code.
281	281	(e) The court may not allow termination of the management
282	282	trust from which property is transferred under this section until
283	283	all of the property in the management trust has been transferred to
284	284	the pooled trust subaccount.
285	285	SECTION 8. Subtitle A, Title 10, Property Code, is amended
286	286	by adding Chapter 143 to read as follows:
287	287	CHAPTER 143. POOLED TRUST SUBACCOUNTS
288	288	Sec. 143.001. DEFINITIONS. In this chapter:
289	289	(1) "Beneficiary" means a person for whose benefit a
290	290	subaccount is established.
291	291	(2) "Incapacitated person" has the meaning assigned by
292	292	Section 142.007.
293	293	(3) "Medical assistance" means benefits and services
294	294	under the medical assistance program administered under Chapter 32,
295	295	Human Resources Code.
296	296	(4) "Pooled trust" means a trust that meets the
297	297	requirements of 42 U.S.C. Section 1396p(d)(4)(C) for purposes of
298	298	exempting the trust from the applicability of 42 U.S.C. Section
299	299	1396p(d) in determining the eligibility of a person who is disabled
300	300	for medical assistance.
301	301	(5) "Subaccount" means an account in a pooled trust
302	302	established under this chapter.
303	303	Sec. 143.002. APPLICATION TO ESTABLISH SUBACCOUNT. The
304	304	following persons may apply to the court having jurisdiction under
305	305	Section 142.005 for the establishment of a subaccount solely for
306	306	the benefit of a proposed beneficiary who is a person for whom a
307	307	management trust has been or could be established for the person's
308	308	benefit under Section 142.005:
309	309	(1) the trustee of a management trust established
310	310	under Section 142.005 for the benefit of the proposed beneficiary
311	311	of the subaccount;
312	312	(2) the guardian of the person or estate, or both, of
313	313	the proposed beneficiary of the subaccount;
314	314	(3) a person who has filed an application for the
315	315	appointment of a guardian of the person or estate, or both, for the
316	316	proposed beneficiary of the subaccount;
317	317	(4) an attorney ad litem or guardian ad litem
318	318	appointed to represent the proposed beneficiary of the subaccount;
319	319	or
320	320	(5) the proposed beneficiary, if the proposed
321	321	beneficiary is not a minor or incapacitated person.
322	322	Sec. 143.003. APPOINTMENT OF ATTORNEY AD LITEM. (a) The
323	323	court shall appoint an attorney ad litem for a person who is a minor
324	324	or an incapacitated person and who is the subject of an application
325	325	under Section 143.002.
326	326	(b) The attorney ad litem is entitled to a reasonable fee
327	327	and reimbursement of expenses to be paid from the person's
328	328	property.
329	329	Sec. 143.004. ESTABLISHMENT OF SUBACCOUNT. If the court
330	330	finds that it is in the best interests of a person who is the subject
331	331	of an application under Section 143.002, the court may order:
332	332	(1) the establishment of a subaccount of which the
333	333	person is the beneficiary; and
334	334	(2) the transfer to the subaccount of any of the
335	335	person's property on hand or accruing to the person.
336	336	Sec. 143.005. TERMS OF SUBACCOUNT. Unless the court orders
337	337	otherwise, the terms governing the subaccount must provide that:
338	338	(1) the subaccount terminates on the earliest of the
339	339	date of:
340	340	(A) the beneficiary's 18th birthday, if the
341	341	beneficiary:
342	342	(i) is not found by the court to be
343	343	considered disabled for purposes of 42 U.S.C. Chapter 7, Subchapter
344	344	XVI; and
345	345	(ii) is a minor at the time the subaccount
346	346	is established;
347	347	(B) the beneficiary's death; or
348	348	(C) a court order terminating the subaccount;
349	349	and
350	350	(2) on termination, any property remaining in the
351	351	beneficiary's subaccount after making any required payments to
352	352	satisfy the amounts of medical assistance reimbursement claims for
353	353	medical assistance provided to the beneficiary under this state's
354	354	medical assistance program and other states' medical assistance
355	355	programs shall be distributed to:
356	356	(A) the beneficiary, if on the date of
357	357	termination the beneficiary is living and is not a minor or
358	358	incapacitated person;
359	359	(B) the beneficiary's guardian of the estate, if
360	360	on the date of termination the beneficiary is living and is a minor
361	361	or incapacitated person; or
362	362	(C) the personal representative of the
363	363	beneficiary's estate, if on the date of termination the beneficiary
364	364	is deceased.
365	365	Sec. 143.006. FEES AND REPORTING. (a) The manager or
366	366	trustee of a pooled trust may:
367	367	(1) assess fees against a subaccount of that pooled
368	368	trust that is established under this chapter, in accordance with
369	369	the manager's or trustee's standard fee structure; and
370	370	(2) pay fees assessed under Subdivision (1) from the
371	371	subaccount.
372	372	(b) If required by the court, the manager or trustee of the
373	373	pooled trust shall file a copy of the annual report of account with
374	374	the court clerk.
375	375	Sec. 143.007. JURISDICTION EXCLUSIVE. Notwithstanding any
376	376	other law, the court that orders the establishment of a subaccount
377	377	for a beneficiary has exclusive jurisdiction of a subsequent
378	378	proceeding or action that relates to both the beneficiary and the
379	379	subaccount, and the proceeding or action may be brought only in that
380	380	court.
381	381	SECTION 9. (a) Except as otherwise expressly provided by a
382	382	trust, a will creating a trust, or this section, the changes in law
383	383	made by this Act apply to a trust existing on or created on or after
384	384	September 1, 2019.
385	385	(b) For a trust existing on September 1, 2019, that was
386	386	created before that date, the changes in law made by this Act apply
387	387	only to an act or omission relating to the trust that occurs on or
388	388	after September 1, 2019.
389	389	(c) Section 112.0335, Property Code, as added by this Act,
390	390	applies to a trust only if the settlor's death occurs on or after
391	391	September 1, 2019.
392	392	(d) Subchapter E, Chapter 112, Property Code, as added by
393	393	this Act, applies to a trust only with respect to a dissolution of
394	394	marriage that occurs on or after September 1, 2019.
395	395	SECTION 10. This Act takes effect September 1, 2019.