By Thompson H.B. No. 1475 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to management and investment of trust assets. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Section 113.018, Property Code, is amended to 1-5 read as follows: 1-6 Sec. 113.018. EMPLOYMENT OF AGENTS. A trustee may employ 1-7 attorneys, accountants, agents, including investment agents, and 1-8 brokers reasonably necessary in the administration of the trust 1-9 estate. 1-10 SECTION 2. Subchapter B, Chapter 113, Property Code, is 1-11 amended by adding Section 113.060 to read as follows: 1-12 Sec. 113.060. AUTHORITY TO DELEGATE INVESTMENT DECISIONS. 1-13 (a) In this section, "beneficiary" means: 1-14 (1) a person entitled to a distribution; 1-15 (2) a person who would be entitled to a distribution 1-16 if the trust terminated; and 1-17 (3) a charitable entity as defined by Section 123.001 1-18 that has an interest in the trust. 1-19 (b) A trustee may employ and delegate investment decisions 1-20 to an investment agent. Except as provided by Subsection (c), the 1-21 trustee is responsible for the investment decisions of the agent. 1-22 (c) A trustee is not responsible for investment decisions 1-23 made by an investment agent employed as provided by this section 1-24 if: 2-1 (1) the trustee exercises the judgment and care under 2-2 the circumstances then prevailing that a person of ordinary 2-3 prudence, discretion, and intelligence would exercise in the 2-4 management of the person's own funds in selecting the investment 2-5 agent and in establishing the scope and terms of the delegation; 2-6 (2) the trustee investigates the credentials of the 2-7 investment agent, including: 2-8 (A) reviewing the agent's experience, 2-9 performance history, and financial stability; 2-10 (B) verifying the agent's professional license 2-11 and registration, if any; and 2-12 (C) establishing that the agent is insured or 2-13 bonded; 2-14 (3) the investment agent is subject to the 2-15 jurisdiction of the courts of this state; 2-16 (4) under the terms of the delegation agreement, the 2-17 investment agent: 2-18 (A) is subject to the standard of trust 2-19 management and investment prescribed by Section 113.056; and 2-20 (B) assumes liability for the failure to follow 2-21 that standard; and 2-22 (5) the trustee periodically reviews the investment 2-23 decisions made by the investment agent to ensure compliance with 2-24 the investment strategy prescribed by the trustee for the trust. 2-25 (d) Not later than the 30th day before the date a trustee 2-26 enters into an agreement to delegate investment decisions to an 2-27 investment agent under this section, the trustee shall send written 3-1 notice to each beneficiary of the trust informing the beneficiary 3-2 of the intended delegation and identifying the investment agent. 3-3 If a beneficiary is a minor or is incapacitated, the notice 3-4 required by this subsection must be provided to the beneficiary's 3-5 legal guardian. 3-6 SECTION 3. Subchapter B, Chapter 114, Property Code, is 3-7 amended by adding Section 114.032 to read as follows: 3-8 Sec. 114.032. LIABILITY FOR WRITTEN AGREEMENTS. (a) A 3-9 written agreement between a trustee and a beneficiary, including a 3-10 release, consent, or other agreement relating to a trustee's duty, 3-11 power, responsibility, restriction, or liability, is final and 3-12 binding on the beneficiary and any person represented by a 3-13 beneficiary as provided by this section if: 3-14 (1) the instrument is signed by the beneficiary; 3-15 (2) the beneficiary has legal capacity to sign the 3-16 instrument; and 3-17 (3) the beneficiary has full knowledge of the 3-18 circumstances surrounding the agreement. 3-19 (b) A written agreement signed by a beneficiary who has the 3-20 power to revoke the trust or the power to appoint, including the 3-21 power to appoint through a power of amendment, the income or 3-22 principal of the trust to or for the benefit of the beneficiary, 3-23 the beneficiary's creditors, the beneficiary's estate, or the 3-24 creditors of the beneficiary's estate is final and binding on any 3-25 person who takes under the power of appointment or who takes in 3-26 default if the power of appointment is not executed. 3-27 (c) A written instrument is final and binding on a 4-1 beneficiary who is a minor if: 4-2 (1) the minor's parent, including a parent who is also 4-3 a trust beneficiary, signs the instrument on behalf of the minor; 4-4 (2) no conflict of interest exists; and 4-5 (3) no guardian, including a guardian ad litem, has 4-6 been appointed to act on behalf of the minor. 4-7 (d) A written instrument is final and binding on an unborn 4-8 or unascertained beneficiary if a beneficiary who has an interest 4-9 substantially identical to the interest of the unborn or 4-10 unascertained beneficiary signs the instrument. For purposes of 4-11 this subsection, an unborn or unascertained beneficiary has a 4-12 substantially identical interest only with a trust beneficiary from 4-13 whom the unborn or unascertained beneficiary descends. 4-14 (e) This section does not apply to a written instrument that 4-15 terminates a trust in whole or in part unless the instrument is 4-16 otherwise permitted by law. 4-17 SECTION 4. (a) This Act takes effect September 1, 1999. 4-18 (b) The change in law made by Section 114.032, Property 4-19 Code, as added by this Act, applies only to a written agreement 4-20 entered into on or after the effective date of this Act. A written 4-21 agreement entered into before the effective date of this Act is 4-22 governed by the law as it existed immediately before the effective 4-23 date of this Act, and the former law is continued in effect for 4-24 that purpose. 4-25 SECTION 5. The importance of this legislation and the 4-26 crowded condition of the calendars in both houses create an 4-27 emergency and an imperative public necessity that the 5-1 constitutional rule requiring bills to be read on three several 5-2 days in each house be suspended, and this rule is hereby suspended.