74(R) HB 2268 Senate Committee Report

BILL ANALYSIS

H.B. 2268
By: Hilbert (Whitmire)
Jurisprudence
5-10-95
Senate Committee Report (Unamended)
BACKGROUND

Texas law has included the Texas Uniform Gift to Minors Act (TUGMA)
which provides for custodianships of minors which terminate at age
18. While TUGMA has been amended over the years to modernize it
and to give it greater flexibility, it is still somewhat
antiquated. Most states have now adopted the Uniform Transfers to
Minors Act which provides even more adjustability and extends
custodianships to age 21.

PURPOSE

As proposed, H.B. 2268 sets forth the Texas Uniform Transfers to
Minors Act and deletes the Texas Uniform Gifts to Minors Act.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Chapter 141, Property Code, as follows:

Sec. 1. SHORT TITLE: Texas Uniform Transfers to Minors Act
(Transfers Act).

Sec. 2. DEFINITIONS. Defines "adult," "benefit plan,"
"broker," "court," "custodial property," "custodian,"
"financial institution," "guardian," "legal representative,"
"member of the minor's family," "minor," "transfer,"
"transferor," and "trust company."

Sec. 3. SCOPE AND JURISDICTION. (a) Applies this chapter to
a transfer that refers to the Transfers Act by which the
transfer is made if at the time of the transfer, the
transferor, the minor, or the custodian is a resident of this
state or the custodial property (property) is located in this
state. Provides that the custodianship created under Section
10 remains subject to this chapter despite a subsequent change
in residence of a transferor, the minor, or the custodian
(parties) or the removal of property from this state.

(b) Subjects a person designated as a custodian to personal
jurisdiction in this state with respect to any matter
relating to the custodianship.

(c) Provides that a transfer that is made and valid under
this Act, the Uniform Gifts to Minors Act, or similar out-of-state act is governed by the law of the designated state
and may be executed and enforceable in this state if the
parties are residents of or the property is located in the
designated state.
Sec. 4. NOMINATION OF CUSTODIAN. (a) Authorizes a person
having the right to designate the recipient of property
transferable on the occurrence of a future event to revocably
nominate a custodian to receive the property for a minor
beneficiary on the occurrence of the event by naming one or
more custodians by following a certain procedure.

(b) Requires a custodian named under this section to be a
person to whom a transfer of property of that kind may be
made.

(c) Provides that the nomination does not create property
until the nominating instrument becomes irrevocable or a
transfer is completed. Provides that unless the nomination
has been revoked, the custodianship becomes effective on the
occurrence of the future event, and the custodian shall
enforce a transfer of the property.

Sec. 5. TRANSFER BY GIFT OR EXERCISE OF POWER OF APPOINTMENT.
Authorizes a person to make a transfer by irrevocable gift to
or the irrevocable exercise of a power of appointment in favor
of, a custodian for the benefit of a minor.

Sec. 6. TRANSFER AUTHORIZED BY WILL OR TRUST. (a) Authorizes
a legal representative or trustee (representative) to make an
irrevocable transfer to a custodian for a minor's benefit as
authorized in the governing will or trust.

(b) Requires the transfer to be made to the testator or
settlor if that person has nominated a custodia to receive
the property.

(c) Requires the representative to designate the custodian
from persons eligible to serve as custodian if the testator
or settlor has not nominated a custodian or all persons
nominated as custodian are unable to serve for certain
reasons.
Sec. 7. OTHER TRANSFER BY FIDUCIARY. (a) Authorizes, subject
to Subsections (b) and (c) a representative of guardian to
make an irrevocable transfer to another adult or trust company
as custodian in the absence of a will or under a will or trust
that does not contain an authorization to do so.

(b) Authorizes a guardian, with approval of the court
supervising the guardianship, a guardian to make an
irrevocable transfer to another adult or trust company as
custodian.

(c) Authorizes a transfer under Subsection (a) and (b) to be
made only under certain circumstances.
Sec. 8. TRANSFER BY OBLIGOR. (a) Authorizes, subject to
Subsections (b) and (c), a person who is not subject to
Section 6 or 7 and who holds property of or owes a liquidated
debt to a minor who does not have a guardian to make an
irrevocable transfer.

(b) Requires the transfer to be made to a person who has
been nominated to receive the property by an authorized
person.

(c) Authorizes a transfer to be made to an adult member of
the minor's family or to a trust company if a custodian has
not been nominated or all persons are ineligible for certain
reasons, with an exception.

Sec. 9. RECEIPT FOR CUSTODIAL PROPERTY. Provides that a
written acknowledgement of delivery by a custodian constitutes
a sufficient receipt and discharge for property transferred to
the custodian.

Sec. 10. MANNER OF CREATING CUSTODIAL PROPERTY AND EFFECTING
TRANSFER; DESIGNATION OF INITIAL CUSTODIAN; CONTROL. (a) Sets
forth circumstances under which property is created and a
transfer is made.

(b) Sets forth the form and language for an instrument that
satisfies the requirements of Subsections (a)(1)(B) and (7).

(c) Requires a transferor to place the custodian in control
of the property as soon as practicable.
Sec. 11. SINGLE CUSTODIANSHIP. Authorizes a transfer to be
made only for one minor, and only one person may be the
custodian. Provides that all property held for the benefit of
the same minor constitutes a single custodianship.

Sec. 12. VALIDITY AND EFFECT OF TRANSFER. (a) Sets forth
factors which do not affect the validity of a transfer made in
a manner prescribed by this chapter.

(b) Provides that a transfer under Section 10 is
irrevocable, and the custodian has all the rights, powers,
duties, and authority provided in this chapter, and the
minor or the minor's representative does not have any
similar responsibilities with respect to the property except
as provided by this chapter.

(c) Provides that the transferor incorporates all the
provisions of this chapter in the disposition and grants to
the custodian, or any third person dealing with a designated
custodian, the respective powers, rights and immunities
provided by this chapter.
Sec. 13. CARE OF CUSTODIAL PROPERTY. (a) Sets forth
activities a custodian is required to perform.

(b) Requires a custodian to observe the standards of care
that would be observed by a prudent person when dealing with
property and is not limited by any other statute restricting
investments by fiduciaries. Requires the custodian to use
any skill or expertise the custodian has. Authorizes a
custodian, in the custodian's discretion and without
liability to the minor or the minor's estate, to retain any
property received from a transferor.

(c) Authorizes a custodian to invest in or pay premiums on
life insurance or endowment policies on the life of the
minor or another person in whom the minor has an insurable
interest, under certain circumstances.

(d) Requires a custodian to keep custodial property separate
and distinct from all other property to identify it as
custodial property of the minor. Provides that property
consisting of an undivided interest is so identified if the
minor's interest is held as a tenant in common and is fixed.
Provides that property subject to recordation is so
identified if it is recorded, and the property subject to
registration is so identified if it is registered, or held
in an account designated in a certain manner.

(e) Requires a custodian to keep records of transactions
with respect to custodial property and to make the records
available for inspection by a parent or representative of
the minor or by the minor if the minor is at least 14-years-old.
Sec. 14. POWERS OF CUSTODIAN. (a) Provides that a custodian
has all the rights, powers, and authority over the property
that unmarried adult owners have, but a custodian may exercise
those rights in that capacity only.

(b) Provides that this section does not relieve a custodian
from liability for breach of Section 13.
Sec. 15. USE OF CUSTODIAL PROPERTY. (a) Authorizes a
custodian to deliver or pay to or expend for the minor as much
of the property as the custodian advisable for the use and
benefit of the minor, without court order and without regard
to certain factors.

(b) Authorizes the court to order the custodian to deliver
or pay to or expend for the minor as much of the property as
the court considers advisable on the petition or an
interested party or the minor if the minor is at least 14-years-old.

(c) Provides that a delivery, payment, or expenditure is in
addition to and does not affect any obligation of a person
to support the minor.
Sec. 16. CUSTODIAN'S EXPENSES, COMPENSATION, AND BOND. (a)
Entitles a custodian to reimbursement from property for
reasonable expenses incurred in the performance of the
custodian's duties.

(b) Provides that a custodian has a noncumulative election
to charge reasonable compensation for services performed,
except for one who is a transferor under Section 5.

Sec. 17. EXEMPTION OF THIRD PERSON FROM LIABILITY.
Authorizes a third person to act on the instructions of or
deal with any person purporting to make a transfer or act in
the capacity of a custodian and is not responsible for
determining the validity or propriety of certain actions.

Sec. 18. LIABILITY TO THIRD PERSON. (a) Authorizes a claim
based on a contract entered into by a custodian acting in
official capacity, an obligation arising from the ownership or
control of property, or a tort committed during the
custodianship to be asserted against the property by
proceeding against the custodian in the custodian's custodial
capacity.

(b) Sets forth circumstances under which a custodian is not
personally liable.

(c) Provides that a minor is not personally liable for an
obligation arising from ownership of custodial property or
for a tort committed during the custodianship unless the
minor is at fault.

Sec. 19. RENUNCIATIONS, RESIGNATION, DEATH, OR REMOVAL OF
CUSTODIAN; DESIGNATION OF SUCCESSOR CUSTODIAN. (a) Authorizes
a person nominated or designated to serve as a custodian to
decline to serve. Provides that if the event giving rise to
a transfer has not occurred and no able substitute was
nominated, the person who made the nomination may nominate a
substitute custodian; otherwise requires the transferor or the
transferor's representative to designate a substitute.
Provides that a substitute has the rights of a successor
custodian.

(b) Authorizes a custodian to designate as successor
custodian a trust company or an adult other than a
transferor by executing an instrument of designation before
subscribing witness other than the successor. Provides that
the designation does not take effect until the custodian
resigns, dies, becomes incapacitated, or is removed.

(d) Authorizes the minor to designate as successor custodian
an adult member of the minor's family, a guardian of the
minor, or a trust company if a custodian is unable to
continue serving and the minor is older than 14-years-old.
Provides that the minor's guardian becomes successor if the
minor is younger or fails to act within a certain time
period. Authorizes certain interested persons to petition
the court to designate a successor candidate.

(e) Requires a custodian who declines to serve or resigns
under this Act, or the representative of a deceased or
incapacitated custodian, to put the property and records in
the possession and control of the successor custodian.
Authorizes the successor by action to enforce the
obligation.

(f) Authorizes a transferor, the representative, the adult
member of the minor's family, a guardian of the person of
the minor, a guardian of the minor, or the minor if the
minor is at least 14-years-old, to take certain actions.

Sec. 20. ACCOUNTING BY AND DETERMINATION OF LIABILITY. (a)
Authorizes certain parties to petition the court for an
accounting by the custodian or the custodian's representative
or a determination of responsibility for claims against the
property, with an exception.

(b) Authorizes a successor custodian to petition the court
for an accounting by the predecessor custodian.

(d) Requires the court to require an accounting and order
delivery of the custodial property and records to the
successor custodian and the very execution of all
instruments required for transfer of the custodial property.

Sec. 21 TERMINATION OF CUSTODIANSHIP. Requires the custodian
to transfer in an appropriate manner the custodial property to
the minor or to the minor's estate within a specified time
frame.

Sec. 22. APPLICABILITY. Applies this chapter to a transfer
within the scope of Section 3 made after September 1, 1995, if
the transfer purports to have been made under this Act or the
instrument by which the transfer purports to have been made
uses in substance a certain designation and the application of
this chapter is necessary to validate the transfer.

Sec. 23. EFFECT ON EXISTING CUSTODIANSHIPS. (a) Provides
that any transfer made before September 1, 1995, is validated.

(b) Provides that Sections 2 and 21, with respect to the age
of a minor for whom custodial property is held do not apply
custodial property held in custodianship that terminated
because the minor attained the age of 18 before August 26,
1973 and before September 1, 1995.

Sec. 24. UNIFORMITY OF APPLICATION AND CONSTRUCTION.
Requires this chapter to be applied and construed to effect
its general purpose, to make uniform the law with respect to
the subject of this chapter. Deletes existing Subchapter A
relating to the Texas Uniform Gifts to Minors Act.

SECTION 2. Makes application of this Act prospective, except to the
extent that the application impairs constitutionally vested rights
or extends the duration of custodianships in existence on the
effective date.

SECTION 3. Emergency clause.
Effective date: 90 days after adjournment.