1-1 By: Thompson (Senate Sponsor - Harris) H.B. No. 1475 1-2 (In the Senate - Received from the House May 3, 1999; 1-3 May 3, 1999, read first time and referred to Committee on 1-4 Jurisprudence; May 11, 1999, reported favorably, as amended, by the 1-5 following vote: Yeas 4, Nays 0; May 11, 1999, sent to printer.) 1-6 COMMITTEE AMENDMENT NO. 1 By: Harris 1-7 Amend HB1475 in SECTION 3 of the bill, Section 114.032(e), 1-8 Property Code by inserting "modifies or" before "terminates". 1-9 A BILL TO BE ENTITLED 1-10 AN ACT 1-11 relating to management and investment of trust assets. 1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-13 SECTION 1. Section 113.018, Property Code, is amended to 1-14 read as follows: 1-15 Sec. 113.018. EMPLOYMENT OF AGENTS. A trustee may employ 1-16 attorneys, accountants, agents, including investment agents, and 1-17 brokers reasonably necessary in the administration of the trust 1-18 estate. 1-19 SECTION 2. Subchapter B, Chapter 113, Property Code, is 1-20 amended by adding Section 113.060 to read as follows: 1-21 Sec. 113.060. AUTHORITY TO DELEGATE INVESTMENT DECISIONS. 1-22 (a) In this section, "beneficiary" means: 1-23 (1) a person entitled to a distribution; 1-24 (2) a person who would be entitled to a distribution 1-25 if the trust terminated; and 1-26 (3) a charitable entity as defined by Section 123.001 1-27 that has an interest in the trust. 1-28 (b) A trustee may employ and delegate investment decisions 1-29 to an investment agent. Except as provided by Subsection (c), the 1-30 trustee is responsible for the investment decisions of the agent. 1-31 (c) A trustee is not responsible for investment decisions 1-32 made by an investment agent employed as provided by this section 1-33 if: 1-34 (1) the trustee exercises the judgment and care under 1-35 the circumstances then prevailing that a person of ordinary 1-36 prudence, discretion, and intelligence would exercise in the 1-37 management of the person's own funds in selecting the investment 1-38 agent and in establishing the scope and terms of the delegation; 1-39 (2) the trustee investigates the credentials of the 1-40 investment agent, including: 1-41 (A) reviewing the agent's experience, 1-42 performance history, and financial stability; 1-43 (B) verifying the agent's professional license 1-44 and registration, if any; and 1-45 (C) establishing that the agent is insured or 1-46 bonded; 1-47 (3) the investment agent is subject to the 1-48 jurisdiction of the courts of this state; 1-49 (4) under the terms of the delegation agreement, the 1-50 investment agent: 1-51 (A) is subject to the standard of trust 1-52 management and investment prescribed by Section 113.056; and 1-53 (B) assumes liability for the failure to follow 1-54 that standard; and 1-55 (5) the trustee periodically reviews the investment 1-56 decisions made by the investment agent to ensure compliance with 1-57 the investment strategy prescribed by the trustee for the trust. 1-58 (d) Not later than the 30th day before the date a trustee 1-59 enters into an agreement to delegate investment decisions to an 1-60 investment agent under this section, the trustee shall send written 1-61 notice to each beneficiary of the trust informing the beneficiary 1-62 of the intended delegation and identifying the investment agent. 1-63 If a beneficiary is a minor or is incapacitated, the notice 2-1 required by this subsection must be provided to the beneficiary's 2-2 legal guardian. 2-3 SECTION 3. Subchapter B, Chapter 114, Property Code, is 2-4 amended by adding Section 114.032 to read as follows: 2-5 Sec. 114.032. LIABILITY FOR WRITTEN AGREEMENTS. (a) A 2-6 written agreement between a trustee and a beneficiary, including a 2-7 release, consent, or other agreement relating to a trustee's duty, 2-8 power, responsibility, restriction, or liability, is final and 2-9 binding on the beneficiary and any person represented by a 2-10 beneficiary as provided by this section if: 2-11 (1) the instrument is signed by the beneficiary; 2-12 (2) the beneficiary has legal capacity to sign the 2-13 instrument; and 2-14 (3) the beneficiary has full knowledge of the 2-15 circumstances surrounding the agreement. 2-16 (b) A written agreement signed by a beneficiary who has the 2-17 power to revoke the trust or the power to appoint, including the 2-18 power to appoint through a power of amendment, the income or 2-19 principal of the trust to or for the benefit of the beneficiary, 2-20 the beneficiary's creditors, the beneficiary's estate, or the 2-21 creditors of the beneficiary's estate is final and binding on any 2-22 person who takes under the power of appointment or who takes in 2-23 default if the power of appointment is not executed. 2-24 (c) A written instrument is final and binding on a 2-25 beneficiary who is a minor if: 2-26 (1) the minor's parent, including a parent who is also 2-27 a trust beneficiary, signs the instrument on behalf of the minor; 2-28 (2) no conflict of interest exists; and 2-29 (3) no guardian, including a guardian ad litem, has 2-30 been appointed to act on behalf of the minor. 2-31 (d) A written instrument is final and binding on an unborn 2-32 or unascertained beneficiary if a beneficiary who has an interest 2-33 substantially identical to the interest of the unborn or 2-34 unascertained beneficiary signs the instrument. For purposes of 2-35 this subsection, an unborn or unascertained beneficiary has a 2-36 substantially identical interest only with a trust beneficiary from 2-37 whom the unborn or unascertained beneficiary descends. 2-38 (e) This section does not apply to a written instrument that 2-39 terminates a trust in whole or in part unless the instrument is 2-40 otherwise permitted by law. 2-41 SECTION 4. (a) This Act takes effect September 1, 1999. 2-42 (b) The change in law made by Section 114.032, Property 2-43 Code, as added by this Act, applies only to a written agreement 2-44 entered into on or after the effective date of this Act. A written 2-45 agreement entered into before the effective date of this Act is 2-46 governed by the law as it existed immediately before the effective 2-47 date of this Act, and the former law is continued in effect for 2-48 that purpose. 2-49 SECTION 5. The importance of this legislation and the 2-50 crowded condition of the calendars in both houses create an 2-51 emergency and an imperative public necessity that the 2-52 constitutional rule requiring bills to be read on three several 2-53 days in each house be suspended, and this rule is hereby suspended. 2-54 * * * * *