By: Moody (Senate Sponsor - Hughes) H.B. No. 2179

(In the Senate - Received from the House May 17, 2021; May 17, 2021, read first time and referred to Committee on State Affairs; May 21, 2021, reported favorably by the following vote: Yeas 9, Nays 0; May 21, 2021, sent to printer.) Click here to see the committee vote

A BILL TO BE ENTITLED

AN ACT

relating to trusts.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 41.0021(a), Property Code, is amended to read as follows:

(a) In this section, "qualifying trust" means an express trust:

(1) in which the instrument or court order creating the express trust, an instrument transferring property to the trust, or any other agreement that is binding on the trustee provides that a settlor or beneficiary of the trust has the right to:

(A) revoke the trust without the consent of another person other than a spouse who is also a settlor of the trust;

(B) exercise an inter vivos general power of appointment over the property that qualifies for the homestead exemption, either alone or when aggregated with property subject to an inter vivos general power of appointment held by a spouse who is also a settlor of the trust; or

(C) use and occupy the residential property as the settlor's or beneficiary's principal residence at no cost, or rent free and without charge, except for [to the settlor or beneficiary, other than payment of] taxes and other costs and expenses specified in the instrument or court order:

(i) for the life of the settlor or beneficiary;

(ii) for the shorter of the life of the settlor or beneficiary or a term of years specified in the instrument or court order; or

(iii) until the date the trust is revoked or terminated by an instrument or court order that describes the property with sufficient certainty to identify the property and that is recorded in the real property records of the county in which the property is located [and that describes the property with sufficient certainty to identify the property]; and

(2) the trustee of which acquires the property in an instrument of title or under a court order that:

(A) describes the property with sufficient certainty to identify the property and the interest acquired; and

(B) is recorded in the real property records of the county in which the property is located.

SECTION 2. Section 112.035, Property Code, is amended by adding Subsections (f-1), (f-2), and (f-3) to read as follows:

(f-1) A beneficiary of the trust or the estate of a beneficiary of the trust may not be considered to be a settlor merely because the beneficiary, in any capacity:

(1) held or exercised a testamentary power of appointment other than a general power of appointment;

(2) held a testamentary general power of appointment; or

(3) exercised a testamentary general power of appointment in favor of or for the benefit of the takers in default of the appointive assets.

(f-2) If a beneficiary of the trust exercised a testamentary general power of appointment in favor of or for the benefit of any appointee other than the takers in default of the appointive assets, the appointive assets are:

(1) subject to the claims of creditors of the beneficiary, but only to the extent the beneficiary's owned property is insufficient to meet the beneficiary's debts; and

(2) unless appointed to the beneficiary's estate, not subject to:

(A) administration as a part of the beneficiary's estate;

(B) recovery by the personal representative of the beneficiary's estate, except as provided by Section 2207B, Internal Revenue Code of 1986; or

(C) the payment of taxes or administration expenses of the beneficiary's estate.

(f-3) For the purposes of Subsections (f-1) and (f-2), "general power of appointment" has the meaning assigned by Section 2041(b)(1), Internal Revenue Code of 1986.

SECTION 3. Sections 112.0715(a) and (b), Property Code, are amended to read as follows:

(a) A second trust may be created by a distribution of principal under Section 112.072 or 112.073 to a trust that retains the name used by the first trust. The second trust may retain, subject to applicable federal law, the same tax identification number of the first trust [created under the same trust instrument as the first trust from which the principal is distributed or to a trust created under a different trust instrument].

(b) If a second trust is created by a distribution of principal under Section 112.072 or 112.073 to a trust that retains [created under] the name of [same trust instrument as] the first trust [from which the principal is distributed], the property is not required to be retitled.

SECTION 4. Section 115.014(b), Property Code, is amended to read as follows:

(b) At any point in a proceeding a court may appoint an attorney ad litem to represent any interest that the court considers necessary, including an attorney ad litem to defend an action under Section 114.083 for a beneficiary of the trust who is a minor or who has been adjudged incompetent, if the court determines that representation of the interest otherwise would be inadequate.

SECTION 5. Section 112.0715(c), Property Code, is repealed.

SECTION 6. Sections 112.0715(a) and (b), Property Code, as amended by this Act, are intended by the legislature to be a codification of the common law of this state in effect immediately before the effective date of this Act.

SECTION 7. The changes in law made by this Act apply to a trust created before, on, or after the effective date of this Act.

SECTION 8. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2021.

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