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.