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