By:  Hartnett (Senate Sponsor - Harris)                           H.B. No. 1471
	(In the Senate - Received from the House April 3, 2003; 
April 7, 2003, read first time and referred to Committee on 
Jurisprudence; May 5, 2003, reported adversely, with favorable 
Committee Substitute by the following vote:  Yeas 5, Nays 0; 
May 5, 2003, sent to printer.)


COMMITTEE SUBSTITUTE FOR H.B. No. 1471                                   By:  Harris

A BILL TO BE ENTITLED
AN ACT
relating to the duties and removal of a trustee. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter A, Chapter 113, Property Code, is amended by adding Section 113.0211 to read as follows: Sec. 113.0211. ADJUSTMENT OF CHARITABLE TRUST. (a) In this section: (1) "Charitable entity" has the meaning assigned by Section 123.001(1). (2) "Charitable trust" means a trust: (A) the stated purpose of which is to benefit only one or more charitable entities; and (B) that qualifies as a charitable entity. (b) The trustee of a charitable trust may acquire, exchange, sell, supervise, manage, or retain any type of investment, subject to restrictions and procedures established by the trustee and in an amount considered appropriate by the trustee, that a prudent investor, exercising reasonable skill, care, and caution, would acquire or retain in light of the purposes, terms, distribution requirements, and other circumstances of the trust. The prudence of a trustee's actions under this subsection is judged with reference to the investment of all of the trust assets rather than with reference to a single trust investment. (c) The trustee of a charitable trust may make one or more adjustments between the principal and the income portions of a trust to the extent that the trustee considers the adjustments necessary: (1) to comply with the terms of the trust, if any, that describe the amount that may or must be distributed to a charitable entity beneficiary by referring to the income portion of the trust; and (2) to administer the trust in order to carry out the purposes of the charitable trust. (d) The authority to make adjustments under Subsection (c) includes the authority to allocate all or part of a capital gain to trust income. (e) In making adjustments under Subsection (c), the trustee shall consider: (1) except to the extent that the terms of the trust clearly manifest an intention that the trustee shall or may favor one or more charitable entity beneficiaries, the needs of a charitable entity beneficiary, based on what is fair and reasonable to all other charitable entity beneficiaries of the trust, if any; and (2) the need of the trust to maintain the purchasing power of the trust's investments over time. SECTION 2. Section 113.082, Property Code, is amended by amending Subsection (a) and adding Subsection (c) to read as follows: (a) A trustee may be removed in accordance with the terms of the trust instrument, or, on the petition of an interested person and after hearing, a court may, in its discretion, remove a trustee and deny part or all of the trustee's compensation if: (1) the trustee materially violated or attempted to violate the terms of the trust and the violation or attempted violation results in a material financial loss to the trust; (2) the trustee becomes incompetent or insolvent; [or] (3) the trustee fails to make an accounting that is required by law or by the terms of the trust; or (4) in the discretion of the court, for other cause. (c) A trustee of a charitable trust may not be removed solely on the grounds that the trustee exercised the trustee's power to adjust between principal and income under Section 113.0211. SECTION 3. Section 113.151(a), Property Code, is amended to read as follows: (a) A beneficiary by written demand may request the trustee to deliver to each beneficiary of the trust a written statement of accounts covering all transactions since the last accounting or since the creation of the trust, whichever is later. If the trustee fails or refuses to deliver the statement on or before the 90th day after the date the trustee receives the demand or after a longer period ordered by a court [within a reasonable time after the demand is made], any beneficiary of the trust may file suit to compel the trustee to deliver the statement to all beneficiaries of the trust. The court may require the trustee to deliver a written statement of account to all beneficiaries on finding that the nature of the beneficiary's interest in the trust or the effect of the administration of the trust on the beneficiary's interest is sufficient to require an accounting by the trustee. However, the trustee is not obligated or required to account to the beneficiaries of a trust more frequently than once every 12 months unless a more frequent accounting is required by the court. If a beneficiary is successful in the suit to compel a statement under this section, the court may, in its discretion, award all or part of the costs of court and all of the suing beneficiary's reasonable and necessary attorney's fees and costs against the trustee in the trustee's individual capacity or in the trustee's capacity as trustee. SECTION 4. This Act takes effect September 1, 2003, and applies only to a demand for an accounting made on or after that date.
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