SRC-HRD H.B. 1314 75(R) BILL ANALYSIS
Senate Research Center H.B. 1314
By: Naishtat (Wentworth)
Jurisprudence
5-13-97
Engrossed
DIGEST
The Texas Probate Code was amended in 1993 to allow probate courts to
create management trusts in limited circumstances. The limits are that
there must be a guardianship of a ward's estate in existence, the ward
must be the sole beneficiary of the trust, and distributions must be only
used for the ward's (or his dependents') health, education, support or
maintenance to the extent allowed by law. (The law requires a parent of a
minor, and in some instances of a disabled adult, to support the minor
disabled adult and to invest in the best interest of the
minor/incapacitated adult.)
These corporate fiduciary managed trusts were most appropriate for certain
limited circumstances, such as when there were large sums of money that
would normally be turned over to the person reaching the age of 18 or when
an incapacitated person other than a minor has such a large sum of money
that a corporate fiduciary's investment expertise would be needed to
manage these large estates.
Recent federal legislation has allowed assets of certain mentally disabled
persons, primarily those under age 65, to shelter assets in a trust from
Medicaid eligibility disqualification rules, when the trust instrument
provided (1) that the sheltered assets were only to be used to supplement
the needs of the disabled person beyond that provided by the Medicaid
program and (2) that any trust funds remaining upon the death of the
beneficiary be used to repay the Medicaid fund for any payments made on
behalf of the beneficiary during the time of "special need." If there
were no funds remaining at the time of death, or there were insufficient
funds to repay Medicaid, then any Medicaid claim would cease to exist.
Although all agree that "special needs trusts" are beneficial to the
disabled (and that failure to avail ourselves of this federal law results
in Texans getting less federal aid than the law allows), there has been
disagreement among probate practitioners whether the current management
trust language in Probate Code, Section 867 allows such "special needs
trusts" to be created in Texas. Amending the current law would recognize
the authority of our probate courts to create these types of trusts. H.B.
1314 would allow probate courts the right to create special needs trusts.
PURPOSE
As proposed, H.B. 1314 allows probate courts the right to create special
needs trusts.
RULEMAKING AUTHORITY
This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 867, Probate Code, to authorize the court, upon
application by the guardian of a ward or by a ward's attorney ad litem at
any time after the date of the attorney's appointment under Section 646 of
this code, in which the guardianship proceeding is pending, to enter an
order than creates for the ward's benefit a trust for the management of
guardianship funds if the court finds that the creation of the trust is in
the ward's best interests. Requires the order to direct the guardian or
another person to take certain action.
SECTION 2. Amends Section 868, Probate Code, by amending Subsections (a)
and (b) and adding Subsections (d) and (e), to authorize the trust to
provide that a trustee make a distribution, payment, use, or application
of trust funds for the health, education, support, or maintenance of the
ward or of another person whom the ward is legally obligated to support,
as necessary and without the intervention of a guardian or other
representative of the ward, to certain persons. Authorizes the court,
when creating or modifying a trust, to omit or modify terms required by
Subsection (a)(1) or (2) of this section only if the court makes certain
determinations regarding the omission or modification. Authorizes the
court to include additional provisions in a trust created or modified
under this section if the court determines an addition does not conflict
with Subsection (a), and if appropriate, Subsection (d) of this section.
SECTION 3. Amends Chapter XIII(4)(N), Probate Code, by adding Sections
868A, 869B, and 869C, as follows:
Sec. 868A. DISCHARGE OF GUARDIAN OF ESTATE AND CONTINUATION OF TRUST.
Authorizes the court, on or at any time after the creation of a trust
under this subpart, to discharge the guardian of the ward's estate only if
a guardian of the ward's person remains and the court determines that the
discharge is in the ward's best interests.
Sec. 869B. APPLICABILITY OF TEXAS TRUST CODE. Provides that a trust
created under Section 867 of this code is subject to Title 9B, Property
Code. Provides that to the extent of a conflict between Title 9B,
Property Code, and a provision of this subpart or of the trust, the
provision of the subpart or trust controls.
Sec. 869C. JURISDICTION OVER TRUST MATTERS. Provides that a court that
creates a trust under Section 867 of this code has the same jurisdiction
to hear matters relating to the trust as the court has with respect to the
guardianship and other matters covered by this chapter.
SECTION 4. Amends Section 870(b), Probate Code, to provide that if the
ward is an incapacitated person other than a minor, the trust terminates
on the date the court determines that continuing the trust, rather than a
guardianship, is no longer in the ward's best interests, rather than
necessary for the ward, or on the death of the ward.
SECTION 5. Amends Section 115.001(d), Property Code, to provide that the
jurisdiction of the district court over proceedings concerning trusts is
exclusive except for jurisdiction conferred by law on a statutory probate
court or a court that creates a trust under Section 867, Probate Code.
SECTION 6. Repealer: Section 868(c), Probate Code (Powers of
Trustee--Terms of Management Trust).
SECTION 7. Authorizes a trust to be created under Section 867, Probate
Code, as amended by this Act, regardless of the date on which the
guardianship was created. Provides that a trust otherwise valid under
Section 867, Probate Code, is not invalid solely because it was created
for a guardianship that was in existence before September 1, 1993, and
those trusts are validated as of the date of the creation of the trust.
SECTION 8. Effective date: September 1, 1997.
Provides that all trusts created under Section 867, Probate Code, are
retroactive.
SECTION 9. Emergency clause.