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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 111.0035(b), Property Code, is amended |
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to read as follows: |
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(b) The terms of a trust prevail over any provision of this |
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subtitle, except that the terms of a trust may not limit: |
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(1) the requirements imposed under Section 112.031; |
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(2) the applicability of Section 114.007 to an |
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exculpation term of a trust; |
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(3) the periods of limitation for commencing a |
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judicial proceeding regarding a trust; |
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(4) a trustee's duty: |
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(A) with regard to an irrevocable trust, to |
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respond to a demand for accounting made under Section 113.151 if the |
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demand is from a beneficiary who, at the time of the demand: |
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(i) is entitled or permitted to receive |
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distributions from the trust; or |
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(ii) would receive a distribution from the |
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trust if the trust terminated at the time of the demand; and |
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(B) to act in good faith and in accordance with |
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the purposes of the trust; |
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(5) the power of a court, in the interest of justice, |
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to take action or exercise jurisdiction, including the power to: |
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(A) modify, reform, or terminate a trust or take |
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other action under Section 112.054; |
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(B) remove a trustee under Section 113.082; |
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(C) exercise jurisdiction under Section 115.001; |
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(D) require, dispense with, modify, or terminate |
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a trustee's bond; [or] |
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(E) adjust, [or] deny, or order disgorgement of a |
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trustee's compensation if the trustee commits a breach of trust; or |
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(F) make an award of costs and attorney's fees |
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under Section 114.064; or |
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(6) the applicability of Section 112.038. |
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SECTION 2. Subchapter B, Chapter 112, Property Code, is |
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amended by adding Section 112.0335 to read as follows: |
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Sec. 112.0335. CONSTRUCTION OF CERTAIN TRUSTS. (a) Unless |
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the terms of the trust provide otherwise, if a trust is created and |
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amendable or revocable by the settlor, or by the settlor and the |
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settlor's spouse, Chapter 255, Estates Code, applies at the |
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settlor's death to the construction and interpretation of at-death |
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transfers as if the settlor of the trust is the testator, the |
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beneficiaries of the at-death transfer are devisees, and the |
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at-death transfers are devises. |
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(b) Section 355.109, Estates Code, applies to the abatement |
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of at-death transfers. |
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(c) For purposes of this section, "at-death transfer" means |
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a transfer pursuant to the terms of a trust described by Subsection |
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(a) that is intended to take effect or become irrevocable by reason |
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of the settlor's death. |
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(d) For purposes of the Estates Code provisions specified by |
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this section: |
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(1) an at-death transfer of specifically identifiable |
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trust property is a specific bequest, devise, or legacy; |
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(2) an at-death transfer from the general assets of |
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the trust that does not transfer specifically identifiable property |
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is a general bequest, devise, or legacy; and |
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(3) an at-death transfer of trust property that |
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remains after all specific and general transfers have been |
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satisfied is the residuary estate. |
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SECTION 3. Section 112.054(c), Property Code, is amended to |
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read as follows: |
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(c) The court may direct that an order described by |
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Subsection (a)(4) [or (b-1)] has retroactive effect. The |
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reformation of a trust under an order described by Subsection (b-1) |
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is effective as of the creation of the trust. |
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SECTION 4. Subchapter D, Chapter 112, Property Code, is |
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amended by adding Section 112.0715 to read as follows: |
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Sec. 112.0715. CREATION OF SECOND TRUST. (a) A second |
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trust may be created by a distribution of principal under Section |
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112.072 or 112.073 to a trust created under the same trust |
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instrument as the first trust from which the principal is |
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distributed or to a trust created under a different trust |
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instrument. |
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(b) If a second trust is created by a distribution of |
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principal under Section 112.072 or 112.073 to a trust created under |
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the same trust instrument as the first trust from which the |
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principal is distributed, the property is not required to be |
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retitled. |
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(c) The legislature intends this section to be a |
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codification of the common law of this state in effect immediately |
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before September 1, 2019. |
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SECTION 5. Chapter 112, Property Code, is amended by adding |
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Subchapter E to read as follows: |
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SUBCHAPTER E. EFFECT OF DISSOLUTION OF MARRIAGE ON CERTAIN |
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TRANSFERS IN TRUST |
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Sec. 112.101. DEFINITIONS. In this subchapter: |
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(1) "Disposition or appointment of property" includes |
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a transfer of property to or a provision of another benefit to a |
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beneficiary under a trust instrument. |
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(2) "Divorced individual" means an individual whose |
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marriage has been dissolved by divorce, annulment, or a declaration |
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that the marriage is void. |
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(3) "Relative" means an individual who is related to |
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another individual by consanguinity or affinity, as determined |
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under Sections 573.022 and 573.024, Government Code, respectively. |
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(4) "Revocable," with respect to a disposition, |
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appointment, provision, or nomination, means a disposition to, |
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appointment of, provision in favor of, or nomination of an |
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individual's spouse or any relative of the individual's spouse who |
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is not a relative of the individual that is contained in a trust |
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|
instrument executed by the individual before the dissolution of the |
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|
individual's marriage to the spouse and that the individual was |
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|
solely empowered by law or by the trust instrument to revoke |
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|
regardless of whether the individual had the capacity to exercise |
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the power at that time. |
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Sec. 112.102. REVOCATION OF CERTAIN NONTESTAMENTARY |
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TRANSFERS; TREATMENT OF FORMER SPOUSE OR FORMER SPOUSE'S RELATIVE |
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AS BENEFICIARY UNDER CERTAIN POLICIES OR PLANS. (a) The |
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dissolution of the marriage revokes a provision in a trust |
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instrument that was executed by a divorced individual as settlor |
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|
before the divorced individual's marriage was dissolved and that: |
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|
(1) is a revocable disposition or appointment of |
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|
property made to the divorced individual's former spouse or any |
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|
relative of the former spouse who is not a relative of the divorced |
|
|
individual; |
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(2) revocably confers a general or special power of |
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appointment on the divorced individual's former spouse or any |
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relative of the former spouse who is not a relative of the divorced |
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|
individual; or |
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(3) revocably nominates the divorced individual's |
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former spouse or any relative of the former spouse who is not a |
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relative of the divorced individual to serve: |
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(A) as a personal representative, trustee, |
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|
conservator, agent, or guardian; or |
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(B) in another fiduciary or representative |
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capacity. |
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(b) Subsection (a) does not apply if one of the following |
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|
provides otherwise: |
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(1) a court order; |
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|
(2) the express terms of a trust instrument executed |
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|
by the divorced individual before the individual's marriage was |
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|
dissolved; or |
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(3) an express provision of a contract relating to the |
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|
division of the marital estate entered into between the divorced |
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individual and the individual's former spouse before, during, or |
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|
after the marriage. |
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(c) Sections 9.301 and 9.302, Family Code, govern the |
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|
designation of a former spouse as a beneficiary of certain life |
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insurance policies or as a beneficiary under certain retirement |
|
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benefit plans or other financial plans. |
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Sec. 112.103. EFFECT OF REVOCATION. (a) An interest |
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granted in a provision of a trust instrument that is revoked under |
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Section 112.102(a)(1) or (2) passes as if the former spouse of the |
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divorced individual who executed the trust instrument and each |
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relative of the former spouse who is not a relative of the divorced |
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individual disclaimed the interest granted in the provision. |
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(b) An interest granted in a provision of a trust instrument |
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|
that is revoked under Section 112.102(a)(3) passes as if the former |
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spouse and each relative of the former spouse who is not a relative |
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of the divorced individual died immediately before the dissolution |
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of the marriage. |
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Sec. 112.104. LIABILITY OF CERTAIN PURCHASERS OR RECIPIENTS |
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OF CERTAIN PAYMENTS, BENEFITS, OR PROPERTY. A bona fide purchaser |
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of property from a divorced individual's former spouse or any |
|
|
relative of the former spouse who is not a relative of the divorced |
|
|
individual or a person who receives from the former spouse or any |
|
|
relative of the former spouse who is not a relative of the divorced |
|
|
individual a payment, benefit, or property in partial or full |
|
|
satisfaction of an enforceable obligation: |
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(1) is not required by this subchapter to return the |
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payment, benefit, or property; and |
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(2) is not liable under this subchapter for the amount |
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of the payment or the value of the property or benefit. |
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Sec. 112.105. LIABILITY OF FORMER SPOUSE OR FORMER SPOUSE'S |
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RELATIVE FOR CERTAIN PAYMENTS, BENEFITS, OR PROPERTY. A divorced |
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individual's former spouse or any relative of the former spouse who |
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|
is not a relative of the divorced individual who, not for value, |
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|
receives a payment, benefit, or property to which the former spouse |
|
|
or the relative of the former spouse who is not a relative of the |
|
|
divorced individual is not entitled as a result of Sections |
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112.102(a) and (b): |
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|
(1) shall return the payment, benefit, or property to |
|
|
the person who is entitled to the payment, benefit, or property |
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under this subchapter; or |
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|
(2) is personally liable to the person described by |
|
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Subdivision (1) for the amount of the payment or the value of the |
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benefit or property received, as applicable. |
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Sec. 112.106. CERTAIN TRUSTS WITH DIVORCED INDIVIDUALS AS |
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JOINT SETTLORS. (a) This section applies only to a trust created |
|
|
under a trust instrument that: |
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(1) was executed by two married individuals as |
|
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settlors whose marriage to each other is subsequently dissolved; |
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|
and |
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(2) includes a provision described by Section |
|
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112.102(a). |
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(b) On the death of one of the divorced individuals who is a |
|
|
settlor of a trust to which this section applies, the trustee shall |
|
|
divide the trust into two trusts, each of which shall be composed of |
|
|
the property attributable to the contributions of only one of the |
|
|
divorced individuals. |
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|
(c) An action authorized in a trust instrument described by |
|
|
Subsection (a) that requires the actions of both divorced |
|
|
individuals may be taken with respect to a trust established in |
|
|
accordance with Subsection (b) from the surviving divorced |
|
|
individual's contributions solely by that divorced individual. |
|
|
(d) The provisions of this subchapter apply independently |
|
|
to each trust established in accordance with Subsection (b) as if |
|
|
the divorced individual from whose contributions the trust was |
|
|
established had been the only settlor to execute the trust |
|
|
instrument described by Subsection (a). |
|
|
(e) This section does not apply if one of the following |
|
|
provides otherwise: |
|
|
(1) a court order; |
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|
(2) the express terms of a trust instrument executed |
|
|
by the two divorced individuals before their marriage was |
|
|
dissolved; or |
|
|
(3) an express provision of a contract relating to the |
|
|
division of the marital estate entered into between the two |
|
|
divorced individuals before, during, or after their marriage. |
|
|
SECTION 6. Section 142.005(b), Property Code, is amended to |
|
|
read as follows: |
|
|
(b) The decree shall provide for the creation of a trust for |
|
|
the management of the funds for the benefit of the beneficiary and |
|
|
for terms, conditions, and limitations of the trust, as determined |
|
|
by the court, that are not in conflict with the following mandatory |
|
|
provisions: |
|
|
(1) The beneficiary shall be the sole beneficiary of |
|
|
the trust. |
|
|
(2) The trustee may disburse amounts of the trust's |
|
|
principal, income, or both as the trustee in the trustee's sole |
|
|
discretion determines to be reasonably necessary for the health, |
|
|
education, support, or maintenance of the beneficiary. The trustee |
|
|
may conclusively presume that medicine or treatments approved by a |
|
|
licensed physician are appropriate for the health of the |
|
|
beneficiary. |
|
|
(3) The income of the trust not disbursed under |
|
|
Subdivision (2) shall be added to the principal of the trust. |
|
|
(4) If the beneficiary is a minor who is not considered |
|
|
disabled for purposes of 42 U.S.C. Chapter 7, Subchapter XVI, the |
|
|
trust shall terminate on the death of the beneficiary, on the |
|
|
beneficiary's attaining an age stated in the trust, or on the 25th |
|
|
birthday of the beneficiary, whichever occurs first. |
|
|
(4-a) If the court finds that a minor beneficiary is |
|
|
considered disabled for purposes of 42 U.S.C. Chapter 7, Subchapter |
|
|
XVI, the trust shall terminate on the death of the beneficiary. |
|
|
(4-b) If[, or if] the beneficiary is an incapacitated |
|
|
person, the trust shall terminate on the death of the beneficiary or |
|
|
when the beneficiary regains capacity. |
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|
(5) A trustee that is a financial institution shall |
|
|
serve without bond. |
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|
(6) The trustee shall receive reasonable compensation |
|
|
paid from trust's income, principal, or both on application to and |
|
|
approval of the court. |
|
|
(7) The first page of the trust instrument shall |
|
|
contain the following notice: |
|
|
NOTICE: THE BENEFICIARY AND CERTAIN PERSONS INTERESTED IN THE |
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WELFARE OF THE BENEFICIARY MAY HAVE REMEDIES UNDER SECTION 114.008 |
|
|
OR 142.005, PROPERTY CODE. |
|
|
SECTION 7. Chapter 142, Property Code, is amended by adding |
|
|
Section 142.010 to read as follows: |
|
|
Sec. 142.010. TRANSFER OF TRUST PROPERTY TO A POOLED TRUST |
|
|
SUBACCOUNT. (a) In this section, "management trust" means a trust |
|
|
created for a beneficiary in accordance with Section 142.005. |
|
|
(b) If the court with continuing jurisdiction over a |
|
|
management trust determines that it is in the best interests of the |
|
|
beneficiary for whom the management trust is created, the court may |
|
|
order the transfer of all property in the management trust to a |
|
|
pooled trust subaccount established in accordance with Chapter 143. |
|
|
(c) For purposes of a proceeding to determine whether to |
|
|
transfer property from a management trust to a pooled trust |
|
|
subaccount, the court may, but is not required to, appoint an |
|
|
attorney ad litem or guardian ad litem to represent the interests of |
|
|
a management trust beneficiary who has a physical disability and is |
|
|
not an incapacitated person. The attorney ad litem or the guardian |
|
|
ad litem is entitled to a reasonable fee and reimbursement of |
|
|
expenses to be paid from the management trust property. |
|
|
(d) The transfer of property from the management trust to |
|
|
the pooled trust subaccount shall be treated as a continuation of |
|
|
the management trust and may not be treated as the establishment of |
|
|
a new trust for purposes of 42 U.S.C. Section 1396p(d)(4)(A) or (C) |
|
|
or otherwise for purposes of the management trust beneficiary's |
|
|
eligibility for medical assistance under Chapter 32, Human |
|
|
Resources Code. |
|
|
(e) The court may not allow termination of the management |
|
|
trust from which property is transferred under this section until |
|
|
all of the property in the management trust has been transferred to |
|
|
the pooled trust subaccount. |
|
|
SECTION 8. Subtitle A, Title 10, Property Code, is amended |
|
|
by adding Chapter 143 to read as follows: |
|
|
CHAPTER 143. POOLED TRUST SUBACCOUNTS |
|
|
Sec. 143.001. DEFINITIONS. In this chapter: |
|
|
(1) "Beneficiary" means a person for whose benefit a |
|
|
subaccount is established. |
|
|
(2) "Incapacitated person" has the meaning assigned by |
|
|
Section 142.007. |
|
|
(3) "Medical assistance" means benefits and services |
|
|
under the medical assistance program administered under Chapter 32, |
|
|
Human Resources Code. |
|
|
(4) "Pooled trust" means a trust that meets the |
|
|
requirements of 42 U.S.C. Section 1396p(d)(4)(C) for purposes of |
|
|
exempting the trust from the applicability of 42 U.S.C. Section |
|
|
1396p(d) in determining the eligibility of a person who is disabled |
|
|
for medical assistance. |
|
|
(5) "Subaccount" means an account in a pooled trust |
|
|
established under this chapter. |
|
|
Sec. 143.002. APPLICATION TO ESTABLISH SUBACCOUNT. The |
|
|
following persons may apply to the court having jurisdiction under |
|
|
Section 142.005 for the establishment of a subaccount solely for |
|
|
the benefit of a proposed beneficiary who is a person for whom a |
|
|
management trust has been or could be established for the person's |
|
|
benefit under Section 142.005: |
|
|
(1) the trustee of a management trust established |
|
|
under Section 142.005 for the benefit of the proposed beneficiary |
|
|
of the subaccount; |
|
|
(2) the guardian of the person or estate, or both, of |
|
|
the proposed beneficiary of the subaccount; |
|
|
(3) a person who has filed an application for the |
|
|
appointment of a guardian of the person or estate, or both, for the |
|
|
proposed beneficiary of the subaccount; |
|
|
(4) an attorney ad litem or guardian ad litem |
|
|
appointed to represent the proposed beneficiary of the subaccount; |
|
|
or |
|
|
(5) the proposed beneficiary, if the proposed |
|
|
beneficiary is not a minor or incapacitated person. |
|
|
Sec. 143.003. APPOINTMENT OF ATTORNEY AD LITEM. (a) The |
|
|
court shall appoint an attorney ad litem for a person who is a minor |
|
|
or an incapacitated person and who is the subject of an application |
|
|
under Section 143.002. |
|
|
(b) The attorney ad litem is entitled to a reasonable fee |
|
|
and reimbursement of expenses to be paid from the person's |
|
|
property. |
|
|
Sec. 143.004. ESTABLISHMENT OF SUBACCOUNT. If the court |
|
|
finds that it is in the best interests of a person who is the subject |
|
|
of an application under Section 143.002, the court may order: |
|
|
(1) the establishment of a subaccount of which the |
|
|
person is the beneficiary; and |
|
|
(2) the transfer to the subaccount of any of the |
|
|
person's property on hand or accruing to the person. |
|
|
Sec. 143.005. TERMS OF SUBACCOUNT. Unless the court orders |
|
|
otherwise, the terms governing the subaccount must provide that: |
|
|
(1) the subaccount terminates on the earliest of the |
|
|
date of: |
|
|
(A) the beneficiary's 18th birthday, if the |
|
|
beneficiary: |
|
|
(i) is not found by the court to be |
|
|
considered disabled for purposes of 42 U.S.C. Chapter 7, Subchapter |
|
|
XVI; and |
|
|
(ii) is a minor at the time the subaccount |
|
|
is established; |
|
|
(B) the beneficiary's death; or |
|
|
(C) a court order terminating the subaccount; |
|
|
and |
|
|
(2) on termination, any property remaining in the |
|
|
beneficiary's subaccount after making any required payments to |
|
|
satisfy the amounts of medical assistance reimbursement claims for |
|
|
medical assistance provided to the beneficiary under this state's |
|
|
medical assistance program and other states' medical assistance |
|
|
programs shall be distributed to: |
|
|
(A) the beneficiary, if on the date of |
|
|
termination the beneficiary is living and is not a minor or |
|
|
incapacitated person; |
|
|
(B) the beneficiary's guardian of the estate, if |
|
|
on the date of termination the beneficiary is living and is a minor |
|
|
or incapacitated person; or |
|
|
(C) the personal representative of the |
|
|
beneficiary's estate, if on the date of termination the beneficiary |
|
|
is deceased. |
|
|
Sec. 143.006. FEES AND REPORTING. (a) The manager or |
|
|
trustee of a pooled trust may: |
|
|
(1) assess fees against a subaccount of that pooled |
|
|
trust that is established under this chapter, in accordance with |
|
|
the manager's or trustee's standard fee structure; and |
|
|
(2) pay fees assessed under Subdivision (1) from the |
|
|
subaccount. |
|
|
(b) If required by the court, the manager or trustee of the |
|
|
pooled trust shall file a copy of the annual report of account with |
|
|
the court clerk. |
|
|
Sec. 143.007. JURISDICTION EXCLUSIVE. Notwithstanding any |
|
|
other law, the court that orders the establishment of a subaccount |
|
|
for a beneficiary has exclusive jurisdiction of a subsequent |
|
|
proceeding or action that relates to both the beneficiary and the |
|
|
subaccount, and the proceeding or action may be brought only in that |
|
|
court. |
|
|
SECTION 9. (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 on or created on or after |
|
|
September 1, 2019. |
|
|
(b) For a trust existing on September 1, 2019, 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, 2019. |
|
|
(c) Section 112.0335, Property Code, as added by this Act, |
|
|
applies to a trust only if the settlor's death occurs on or after |
|
|
September 1, 2019. |
|
|
(d) Subchapter E, Chapter 112, Property Code, as added by |
|
|
this Act, applies to a trust only with respect to a dissolution of |
|
|
marriage that occurs on or after September 1, 2019. |
|
|
SECTION 10. This Act takes effect September 1, 2019. |