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A BILL TO BE ENTITLED
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AN ACT
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relating to the participation of certain family members in a |
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family-controlled state trust company. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 183, Finance Code, is |
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amended by adding Section 183.1065 to read as follows: |
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Sec. 183.1065. LIMITATION OF POWERS IN RELATION TO |
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FAMILY-CONTROLLED TRUST COMPANY. (a) This section applies only to |
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a family member who: |
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(1) is an owner of voting securities in a |
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family-controlled state trust company; or |
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(2) holds an equity interest in, or is serving as a |
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director, officer, manager, or employee of, a family-controlled |
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state trust company. |
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(b) A family member may not participate in or otherwise have |
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a voice in a discretionary decision by the family-controlled state |
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trust company to exercise a power or make a decision with respect |
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to: |
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(1) a distribution of trust income or principal of any |
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trust to or for the benefit of a family member or for the discharge |
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of a legal obligation of the family member, unless: |
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(A) the exercise of the discretion in exercising |
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that power is limited by an ascertainable standard related to the |
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health, education, maintenance, or support of the family member; |
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(B) the distribution is necessary for the health, |
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education, maintenance, or support of the family member; or |
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(C) the instrument governing the administration |
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of that trust clearly provides for the exercise of that authority; |
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(2) the use or occupancy of any property of a trust by |
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a beneficiary of the trust or by a family member of the beneficiary, |
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unless use or occupancy of the property is necessary for the health, |
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maintenance, or support of the beneficiary; |
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(3) the exercise of an incident of ownership with |
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respect to any life insurance policy owned by a trust or a |
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family-controlled state trust company; |
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(4) the voting of stock in a corporation that is a |
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controlled corporation, as defined by Section 2036(b)(2) of the |
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Internal Revenue Code of 1986, with respect to any living grantor of |
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a trust; |
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(5) the exercise of any power that, under the terms of |
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the applicable trust instrument, must be held by a trustee who is |
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"independent," is not a "related or subordinate" party, or is |
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described by similar words of similar meaning; or |
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(6) the exercise of any other power that if held by a |
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grantor or beneficiary of a trust would cause all or part of the |
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trust to be included in the grantor's or beneficiary's estate for |
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federal estate tax purposes and would cause a distribution from the |
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trust to be treated as a transfer by the grantor or beneficiary for |
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federal gift tax purposes. |
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(c) In this section: |
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(1) "Degree of kinship," with respect to two |
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individuals, means: |
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(A) a degree of lineal kinship computed by |
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counting one degree for each individual in the line of ascent or |
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descent, exclusive of the individual from whom the computation |
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begins; or |
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(B) a degree of collateral kinship computed by |
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beginning with one of the individuals and ascending from that |
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individual to a common ancestor, descending from that ancestor to |
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the other individual, and counting one degree for each individual |
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in the line of ascent and in the line of descent, exclusive of the |
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individual from whom the computation begins, the total to represent |
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the degree of the kinship. |
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(2) "Designated relative" means the individual to or |
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through whom the family members are related. |
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(3) "Family" means a designated relative and family |
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members of the designated relative. |
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(4) "Family-controlled state trust company" means a |
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state trust company that: |
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(A) is organized primarily to engage in |
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family-controlled trust business with one or more family members; |
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and |
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(B) does not transact trust business with the |
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public. |
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(5) "Family-controlled trust business" means acting |
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as or performing the duties of an executor, administrator, |
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conservator, guardian, or trustee for family members in the regular |
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course of its business. |
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(6) "Family member" means a designated relative and: |
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(A) an individual within the fifth degree of |
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lineal kinship to the designated relative, or the ninth degree of |
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collateral kinship to the designated relative, for which purposes |
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only a legally adopted individual shall be treated as a natural |
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child of the adoptive parents; |
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(B) the current or former spouse of the |
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designated relative and of an individual who is considered a family |
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member under Paragraph (A); |
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(C) a trust established by a family member or |
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exclusively for the benefit of one or more family members; |
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(D) a corporation, limited partnership, or |
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limited liability company, all of the capital stock, partnership |
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interests, membership interests, or other equity interests of which |
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are owned by one or more family members, family members' spouses as |
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described by Paragraph (B), family members' trusts as described by |
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Paragraph (C), or family members' estates as described by Paragraph |
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(E); |
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(E) the estate of a family member; or |
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(F) a charitable organization or other |
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charitable entity created by a family member. |
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SECTION 2. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2007. |