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.