83R7165 NC-F
 
  By: Carona S.B. No. 778
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to trusts.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 113.053(f), Property Code, is amended to
  read as follows:
         (f)  A national banking association, a state-chartered
  corporation, including a state-chartered bank or trust company, a
  state or federal savings and loan association that has the right to
  exercise trust powers and that is serving as trustee, or such an
  institution that is serving as custodian with respect to an
  individual retirement account, as defined by Section 408, Internal
  Revenue Code, or an employee benefit plan, as defined by Section
  3(3), Employee Retirement Income Security Act of 1974 (29 U.S.C.
  Section 1002(3)), regardless of whether the custodial account is,
  or would otherwise be, considered a trust for purposes of this
  subtitle, may, subject to its fiduciary duties:
               (1)  employ an affiliate or division within a financial
  institution to provide brokerage, investment, administrative,
  custodial, or other account services for the trust or custodial
  account and charge the trust or custodial account for the
  services[, provided, however, nothing in this section shall allow
  an affiliate or division to engage in the sale or business of
  insurance if not otherwise permitted to do so]; [and]
               (2)  purchase insurance underwritten or otherwise
  distributed by an affiliate, a division within the financial
  institution, or a syndicate or a selling group that includes the
  financial institution or an affiliate and charge the trust or
  custodial account for the services, unless the instrument governing
  the fiduciary relationship expressly prohibits the purchase or
  charge; and
               (3)  receive a fee or compensation, directly or
  indirectly, on account of the services performed or the insurance
  product sold by the affiliate, [or] division within the financial
  institution, syndicate, or selling group, whether in the form of
  shared commissions, fees, or otherwise, provided that any amount
  charged by the affiliate, [or] division, syndicate, or selling
  group for the services or insurance product is disclosed and does
  not exceed the customary or prevailing amount that is charged by the
  affiliate, [or] division, syndicate, or selling group, or a
  comparable entity, for comparable services rendered or insurance
  provided to a person other than the trust.
         SECTION 2.  Section 116.201, Property Code, is amended to
  read as follows:
         Sec. 116.201.  DISBURSEMENTS FROM INCOME. (a) A trustee
  shall make the following disbursements from income to the extent
  that they are not disbursements to which Section 116.051(2)(B) or
  (C) applies:
               (1)  except as provided by Subsection (b) or (c),
  one-half of the regular compensation of the trustee and of any
  person providing investment advisory or custodial services to the
  trustee;
               (2)  one-half of all expenses for accountings, judicial
  proceedings, or other matters that involve both the income and
  remainder interests;
               (3)  all of the other ordinary expenses incurred in
  connection with the administration, management, or preservation of
  trust property and the distribution of income, including interest,
  ordinary repairs, regularly recurring taxes assessed against
  principal, and expenses of a proceeding or other matter that
  concerns primarily the income interest; and
               (4)  recurring premiums on insurance covering the loss
  of a principal asset or the loss of income from or use of the asset.
         (b)  If the trust is a revocable living trust, all of the
  trustee's compensation for services performed may be charged
  against income during the lifetime of the grantor, unless otherwise
  directed by the grantor.
         (c)  If charging a part or all of the trustee's compensation
  to income, in the judgment of the trustee, is impracticable because
  of the lack of sufficient income or is inadvisable because of a
  desire to provide increased income to the beneficiary, the trustee
  may pay part or all of the compensation out of principal. The
  decision of the trustee to pay a larger portion or all of the
  trustee's compensation out of the principal is conclusive.
         SECTION 3.  Section 116.202, Property Code, is amended by
  amending Subsection (a) and adding Subsection (c) to read as
  follows:
         (a)  A trustee shall make the following disbursements from
  principal:
               (1)  except as provided by Subsection (c), the
  remaining part [one-half] of the disbursements described in
  Sections 116.201(a)(1) [116.201(1)] and (2);
               (2)  all of the trustee's compensation calculated on
  principal as a fee for acceptance, distribution, or termination,
  and disbursements made to prepare property for sale;
               (3)  payments on the principal of a trust debt;
               (4)  expenses of a proceeding that concerns primarily
  principal, including a proceeding to construe the trust or to
  protect the trust or its property;
               (5)  premiums paid on a policy of insurance not
  described in Section 116.201(a)(4) [116.201(4)] of which the trust
  is the owner and beneficiary;
               (6)  estate, inheritance, and other transfer taxes,
  including penalties, apportioned to the trust; and
               (7)  disbursements related to environmental matters,
  including reclamation, assessing environmental conditions,
  remedying and removing environmental contamination, monitoring
  remedial activities and the release of substances, preventing
  future releases of substances, collecting amounts from persons
  liable or potentially liable for the costs of those activities,
  penalties imposed under environmental laws or regulations and other
  payments made to comply with those laws or regulations, statutory
  or common law claims by third parties, and defending claims based on
  environmental matters.
         (c)  If charging a part or all of the trustee's compensation
  to principal, in the judgment of the trustee, is impracticable
  because of the lack of sufficient cash and readily marketable
  assets or is inadvisable because of the nature of the principal
  assets, the trustee may determine to pay part or all of the
  compensation out of income. The decision of the trustee to pay a
  larger portion or all of the trustee's compensation out of income is
  conclusive, and the income of the trust is not entitled to
  reimbursement from principal.
         SECTION 4.  Section 117.005, Property Code, is amended to
  read as follows:
         Sec. 117.005.  DIVERSIFICATION. (a) Except as provided by
  Subsection (b), a [A] trustee shall diversify the investments of
  the trust unless the trustee reasonably determines that, because of
  special circumstances, the purposes of the trust are better served
  without diversifying.
         (b)  If trust assets include farm or ranch property, a
  closely held family business, life insurance, or interests in
  timber, oil, gas, or minerals, the trustee may elect to retain the
  assets unless otherwise directed by a majority of adult trust
  beneficiaries. A trustee's exercise of discretion to retain the
  assets is not a breach of the trustee's duty to diversify
  investments.
         SECTION 5.  (a) Except as otherwise expressly provided by a
  trust, a will creating a trust, or this section, the changes in law
  made by this Act apply to a trust existing or created on or after
  September 1, 2013.
         (b)  For a trust existing on September 1, 2013, 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, 2013.
         SECTION 6.  This Act takes effect September 1, 2013.