By Thompson H.B. No. 1475
76R1899 PAM-F
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. Section 113.056(a), Property Code, is amended to
1-11 read as follows:
1-12 (a) Unless the terms of the trust instrument provide
1-13 otherwise, in acquiring, investing, reinvesting, exchanging,
1-14 retaining, selling, supervising, and managing trust property,
1-15 including an investment vehicle authorized for the collective
1-16 investment of trust funds pursuant to Part 9, Title 12, of the Code
1-17 of Federal Regulations, a trustee shall exercise the judgment and
1-18 care under the circumstances then prevailing that persons of
1-19 ordinary prudence, discretion, and intelligence exercise in the
1-20 management of their own affairs, not in regard to speculation but
1-21 in regard to the permanent disposition of their funds, considering
1-22 the probable income from as well as [the probable increase in value
1-23 and] the safety of their capital. The standard prescribed by this
1-24 subsection does not require a trustee to invest trust funds for
2-1 capital appreciation or follow modern portfolio theory in investing
2-2 the funds or prohibit a trustee from investing trust funds for
2-3 capital appreciation or following modern portfolio theory in
2-4 investing the funds. In determining whether a trustee has
2-5 exercised prudence with respect to an investment decision, such
2-6 determination shall be made taking into consideration the
2-7 investment of all the assets of the trust, or the assets of the
2-8 collective investment vehicle, as the case may be, over which the
2-9 trustee had management and control, rather than a consideration as
2-10 to the prudence of the single investment of the trust, or the
2-11 single investment of the collective investment vehicle, as the case
2-12 may be.
2-13 SECTION 3. Subchapter B, Chapter 113, Property Code, is
2-14 amended by adding Section 113.060 to read as follows:
2-15 Sec. 113.060. AUTHORITY TO DELEGATE INVESTMENT DECISIONS.
2-16 (a) In this section, "beneficiary" means:
2-17 (1) a person entitled to a distribution;
2-18 (2) a person who would be entitled to a distribution
2-19 if the trust terminated; and
2-20 (3) a charitable entity as defined by Section 123.001
2-21 that has an interest in the trust.
2-22 (b) A trustee may employ and delegate investment decisions
2-23 to an investment agent. Except as provided by Subsection (c), the
2-24 trustee is responsible for the investment decisions of the agent.
2-25 (c) A trustee is not responsible for investment decisions
2-26 made by an investment agent employed as provided by this section
2-27 if:
3-1 (1) the trustee exercises the judgment and care under
3-2 the circumstances then prevailing that a person of ordinary
3-3 prudence, discretion, and intelligence would exercise in the
3-4 management of the person's own funds in selecting the investment
3-5 agent and in establishing the scope and terms of the delegation;
3-6 (2) the trustee investigates the credentials of the
3-7 investment agent, including:
3-8 (A) reviewing the agent's experience,
3-9 performance history, and financial stability;
3-10 (B) verifying the agent's professional license
3-11 and registration, if any; and
3-12 (C) establishing that the agent is insured or
3-13 bonded;
3-14 (3) the investment agent is subject to the
3-15 jurisdiction of the courts of this state;
3-16 (4) under the terms of the delegation agreement, the
3-17 investment agent:
3-18 (A) is subject to the standard of trust
3-19 management and investment prescribed by Section 113.056; and
3-20 (B) assumes liability for the failure to follow
3-21 that standard; and
3-22 (5) the trustee periodically reviews the investment
3-23 decisions made by the investment agent to ensure compliance with
3-24 the investment strategy prescribed by the trustee for the trust.
3-25 (d) Not later than the 30th day before the date a trustee
3-26 enters into an agreement to delegate investment decisions to an
3-27 investment agent under this section, the trustee shall send written
4-1 notice to each beneficiary of the trust informing the beneficiary
4-2 of the intended delegation and identifying the investment agent.
4-3 If a beneficiary is a minor or is incapacitated, the notice
4-4 required by this subsection must be provided to the beneficiary's
4-5 legal guardian.
4-6 SECTION 4. Subchapter B, Chapter 114, Property Code, is
4-7 amended by adding Section 114.032 to read as follows:
4-8 Sec. 114.032. LIABILITY FOR WRITTEN AGREEMENTS. (a) A
4-9 written agreement between a trustee and a beneficiary, including a
4-10 release, consent, or other agreement relating to a trustee's duty,
4-11 power, responsibility, restriction, or liability, is final and
4-12 binding on the beneficiary and any person represented by a
4-13 beneficiary as provided by this section if:
4-14 (1) the instrument is signed by the beneficiary;
4-15 (2) the beneficiary has legal capacity to sign the
4-16 instrument; and
4-17 (3) the beneficiary has full knowledge of the
4-18 circumstances surrounding the agreement.
4-19 (b) A written agreement signed by a beneficiary who has the
4-20 power to revoke the trust or the power to appoint, including the
4-21 power to appoint through a power of amendment, the income or
4-22 principal of the trust to or for the benefit of the beneficiary,
4-23 the beneficiary's creditors, the beneficiary's estate, or the
4-24 creditors of the beneficiary's estate is final and binding on any
4-25 person who takes under the power of appointment or who takes in
4-26 default if the power of appointment is not executed.
4-27 (c) A written instrument is final and binding on a
5-1 beneficiary who is a minor if:
5-2 (1) the minor's parent, including a parent who is also
5-3 a trust beneficiary, signs the instrument on behalf of the minor;
5-4 (2) no conflict of interest exists; and
5-5 (3) no guardian, including a guardian ad litem, has
5-6 been appointed to act on behalf of the minor.
5-7 (d) A written instrument is final and binding on an unborn
5-8 or unascertained beneficiary if a beneficiary who has an interest
5-9 substantially identical to the interest of the unborn or
5-10 unascertained beneficiary signs the instrument. For purposes of
5-11 this subsection, an unborn or unascertained beneficiary has a
5-12 substantially identical interest only with a trust beneficiary from
5-13 whom the unborn or unascertained beneficiary descends.
5-14 (e) This section does not apply to a written instrument that
5-15 terminates a trust in whole or in part unless the instrument is
5-16 otherwise permitted by law.
5-17 SECTION 5. (a) This Act takes effect September 1, 1999.
5-18 (b) The change in law made by Section 114.032, Property
5-19 Code, as added by this Act, applies only to a written agreement
5-20 entered into on or after the effective date of this Act. A written
5-21 agreement entered into before the effective date of this Act is
5-22 governed by the law as it existed immediately before the effective
5-23 date of this Act, and the former law is continued in effect for
5-24 that purpose.
5-25 SECTION 6. The importance of this legislation and the
5-26 crowded condition of the calendars in both houses create an
5-27 emergency and an imperative public necessity that the
6-1 constitutional rule requiring bills to be read on three several
6-2 days in each house be suspended, and this rule is hereby suspended.
6-3 COMMITTEE AMENDMENT NO. 1
6-4 Amend H.B. 1475 on pages 1 and 2, by deleting Section 2 of
6-5 the bill and renumbering the subsequent section appropriately.
6-6 Greenberg