By: Rodriguez  S.B. No. 1197
         (In the Senate - Filed March 4, 2011; March 16, 2011, read
  first time and referred to Committee on Jurisprudence;
  April 27, 2011, reported adversely, with favorable Committee
  Substitute by the following vote:  Yeas 5, Nays 0; April 27, 2011,
  sent to printer.)
 
  COMMITTEE SUBSTITUTE FOR S.B. No. 1197 By:  Rodriguez
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to trusts.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 112.010, Property Code, is amended by
  adding Subsection (c-3) to read as follows:
         (c-3)  Notwithstanding the deadline prescribed by Subsection
  (c-2)(2) for delivering the memorandum required by that subsection,
  in the case of an interest in a trust created by reason of the death
  of a decedent who died after December 31, 2009, and before December
  17, 2010, and to which Section 37A, Probate Code, does not apply, a
  memorandum delivered under Subsection (c-2)(2) is also effective to
  disclaim an interest in the trust if delivered not later than the
  date that is nine months after December 17, 2010.  This subsection
  expires September 1, 2013.
         SECTION 2.  Section 112.038, Property Code, is amended to
  read as follows:
         Sec. 112.038.  FORFEITURE CLAUSE. A provision in a trust
  that would cause a forfeiture of or void an interest for bringing
  any court action, including contesting a trust, is unenforceable
  if:
               (1)  just [probable] cause existed [exists] for
  bringing the action; and
               (2)  the action was brought and maintained in good
  faith.
         SECTION 3.  Section 112.057, Property Code, is amended by
  adding Subsections (e) and (f) to read as follows:
         (e)  A beneficiary to whom written notice is required to be
  given under this section may waive the notice requirement in a
  writing delivered to the trustee. If all beneficiaries to whom
  notice would otherwise be required to be given under this section
  waive the notice requirement, notice is not required.
         (f)  Notice required under this section shall be given to a
  guardian of the estate, guardian ad litem, or parent of a minor or
  incapacitated beneficiary. A guardian of the estate, guardian ad
  litem, or parent of a minor or incapacitated beneficiary may waive
  the notice requirement in accordance with this section on behalf of
  the minor or incapacitated beneficiary.
         SECTION 4.  Subsection (d), Section 115.001, Property Code,
  is amended to read as follows:
         (d)  The jurisdiction of the district court is exclusive
  except for jurisdiction conferred by law on:
               (1)  a statutory probate court;
               (2)  a court that creates a trust under Section 867,
  Texas Probate Code;
               (3)  a court that creates a trust under Section
  142.005;
               (4)  a justice court under Chapter 27, Government Code;
  [or]
               (5)  a small claims court under Chapter 28, Government
  Code; or
               (6)  a county court at law.
         SECTION 5.  Section 115.002, Property Code, is amended by
  adding Subsection (c-1) to read as follows:
         (c-1)  Notwithstanding Subsections (b) and (c), if the
  settlor is deceased and an administration of the settlor's estate
  is pending in this state, an action involving the interpretation
  and administration of an inter vivos trust created by the settlor or
  a testamentary trust created by the settlor's will may be brought:
               (1)  in a county in which venue is proper under
  Subsection (b) or (c); or
               (2)  in the county in which the administration of the
  settlor's estate is pending.
         SECTION 6.  Subsection (b), Section 115.011, Property Code,
  is amended to read as follows:
         (b)  Contingent beneficiaries designated as a class are not
  necessary parties to an action under Section 115.001.  The only
  necessary parties to such an action are:
               (1)  a beneficiary of the trust on whose act or
  obligation the action is predicated;
               (2)  a beneficiary of the trust designated by name,
  other than a beneficiary whose interest has been distributed,
  extinguished, terminated, or paid [in the instrument creating the
  trust];
               (3)  a person who is actually receiving distributions
  from the trust estate at the time the action is filed; and
               (4)  the trustee, if a trustee is serving at the time
  the action is filed.
         SECTION 7.  Subsections (d) and (e), Section 116.005,
  Property Code, are amended to read as follows:
         (d)  If Subsection (c)(4), (5) [(c)(5)], (6), or (7)[, or
  (8)] applies to a trustee and there is more than one trustee, a
  cotrustee to whom the provision does not apply may make the
  adjustment unless the exercise of the power by the remaining
  trustee or trustees is not permitted by the terms of the trust.
         (e)  A trustee may release the entire power conferred by
  Subsection (a) or may release only the power to adjust from income
  to principal or the power to adjust from principal to income if the
  trustee is uncertain about whether possessing or exercising the
  power will cause a result described in Subsections (c)(1)-(5) 
  [Subsection (c)(1)-(6)] or Subsection (c)(7) [(c)(8)] or if the
  trustee determines that possessing or exercising the power will or
  may deprive the trust of a tax benefit or impose a tax burden not
  described in Subsection (c). The release may be permanent or for a
  specified period, including a period measured by the life of an
  individual.
         SECTION 8.  Subsections (c) and (d), Section 116.205,
  Property Code, are amended to read as follows:
         (c)  A tax required to be paid by a trustee on the trust's
  share of an entity's taxable income must be paid [proportionately]:
               (1)  from income to the extent that receipts from the
  entity are allocated only to income; [and]
               (2)  from principal to the extent that[:
                     [(A)]  receipts from the entity are allocated only 
  to principal;
               (3)  proportionately from principal and income to the
  extent that receipts from the entity are allocated to both
  principal and income; and
               (4)  from principal to the extent that the tax exceeds
  the total receipts from the entity [and
                     [(B)     the trust's share of the entity's taxable
  income exceeds the total receipts described in Subdivisions (1) and
  (2)(A)].
         (d)  After applying the other provisions of this section, the
  trustee shall adjust income or principal receipts to the extent
  that the trust's taxes are reduced because the trust receives a
  deduction for payments made to a beneficiary  [For purposes of this
  section, receipts allocated to principal or income must be reduced
  by the amount distributed to a beneficiary from principal or income
  for which the trust receives a deduction in calculating the tax].
         SECTION 9.  (a)  Except as otherwise expressly provided by
  the will, the trust, or this Act, the changes in law made by this Act
  apply to:
               (1)  a trust existing or created on or after September
  1, 2011;
               (2)  the estate of a decedent who dies before September
  1, 2011, if the probate or administration of the estate is pending
  as of September 1, 2011; and
               (3)  the estate of a decedent who dies on or after
  September 1, 2011.
         (b)  For a trust existing on September 1, 2011, that was
  created before that date, the changes in law made by this Act apply
  only to an act or omission relating to the trust that occurs on or
  after September 1, 2011.
         (c)  Sections 112.038, 115.002, and 115.011, Property Code,
  as amended by this Act, apply to a court action commenced on or
  after September 1, 2011. An action commenced before September 1,
  2011, is governed by the law applicable to the action immediately
  before the effective date of this Act, and that law is continued in
  effect for that purpose.
         (d)  The amendment by this Act of Section 115.001, Property
  Code, is intended to clarify rather than change existing law.
         SECTION 10.  This Act takes effect September 1, 2011.
 
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