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.
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