HBA-DMD H.B. 115 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 115 By: Smith Business & Industry 7/27/1999 Enrolled BACKGROUND AND PURPOSE Prior to the 76th Legislative Session, Texas law provided that when a named charity or cause that is the beneficiary of a trust no longer exists, the attorney general must select a new charity to receive the trust benefits regardless of the wishes of the trust's settlor even if the said person is still living. H.B. 115 empowers the trustee of the trust to name a replacement charity for a failed charitable beneficiary. This bill also requires the trustee to attempt to consult with the settlor, if living, and to consider the settlor's wishes before naming a replacement charitable beneficiary. This bill authorizes the trustee to select replacement charitable beneficiaries for a failed charitable beneficiary and includes guidelines for a replacement charitable beneficiary. It also requires the trustee to consult with the settlor, if possible, concerning the selection of replacement charitable beneficiaries. H.B. 115 establishes provisions to be followed when the settlor and trustee agree or disagree on the replacement charitable beneficiaries. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter A, Chapter 113, Property Code, by adding Section 113.026, as follows: Sec. 113.026. AUTHORITY TO DESIGNATE NEW CHARITABLE BENEFICIARY. (a) Defines "charitable entity" and "failed charitable beneficiary." (b) Sets forth that this section applies only to an express written trust created by an individual with a charitable entity as a beneficiary. Provides that if the trust instrument provides a means for replacing a failed charitable beneficiary the trust investment governs the replacement and this section does not apply. (c) Authorizes the trustee of a trust (trustee) to select one or more replacement charitable beneficiaries for a failed charitable beneficiary in accordance with this section. (d) Provides that each replacement charitable beneficiary selected under this section by any person must be a charitable entity and an entity described under Section 170(b)(1)(A) (General Rule for any Charitable Contribution by an Individual), Section 170(c) (Charitable Contribution Defined), Section 2055(a) (Transfers for Public, Charitable, and Religious Uses), and Section 2522(a) (Charitable and Similar Gifts for Citizens or Residents) of the Internal Revenue Code of 1986, as amended; and have the same or similar charitable purpose as the failed charitable beneficiary. (e) Requires the trustee to consult with the settlor of the trust (settlor) concerning the selection of one or more replacement charitable beneficiaries, if the settlor is living and not incapacitated at the time the trustee designates a replacement charitable beneficiary. (f) Requires the trustee, if the trustee and settlor agree on the selection of one or more replacement charitable beneficiaries, to send notice of the selection to the attorney general. Requires the attorney general, if the attorney general determines that one or more replacement charitable beneficiaries do not have the same or similar charitable purpose as the failed charitable beneficiary, to request in writing that a district court in the county in which the trust was created review the selection, no later than 21 days after the attorney general receives notice of the selection. Establishes any remaining replacement charitable beneficiary agreed on by the trustee and the settlor as the replacement charitable beneficiary, if the court agrees with the attorney general's determination. Requires the court, if there is not a remaining replacement charitable beneficiary agreed on by the trustee and the settlor, to select one or more replacement charitable beneficiaries. Authorizes the court to require the attorney general to pay all court costs of the parties involved, if the court finds that the attorney general's request for a review is unreasonable, thus the replacement charitable beneficiary is the charitiable beneficiary agreed on by the trustee and the settlor. Requires the trustee, no later than 30 days after the selection is final, to provide notice to each replacement charitable beneficiary selected notice of the selection by certified mail, return receipt requested. (g) Requires the trustee, if the trustee and the settlor cannot agree on the selection of a replacement charitable beneficiary, to send notice of that fact to the attorney general no later than 21 days after the trustee determines that an agreement cannot be reached. Requires the attorney general to refer the matter to a district court in the county in which the trust was created. Authorizes the trustee and the settlor to each recommend to the court one or more replacement charitable beneficiaries. Requires the court to select a replacement charitable beneficiary and, no later than 30 days after the selection, provide to each charitable beneficiary selected notice of the selection by certified mail, return receipt requested. SECTION 2. Makes application of this Act retroactive. SECTION 3. Emergency clause. Effective date: upon passage.