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HB 3190 seeks to make a few substantive changes to the Property code concerning trusts. They are below as followed:
The bill would establish that, for purposes of its provisions, the term "advisor"
includes a protector and that an advisor with authority with respect to investment decisions is an
HB 3190 would establish that a protector of a trust has all the power and authority granted to the protector by the trust terms, which may include the power to remove and appoint trustees, advisors, trust committee members, and other protectors; the power to modify or amend the trust terms to achieve favorable tax status or to facilitate the efficient administration of the trust; and the power to modify, expand, or restrict the terms of a power of appointment granted to a beneficiary by the trust terms.
The bill would establish that, if the terms of a trust give a person the authority to direct, consent to, or disapprove a trustee's actual or proposed investment decisions, distribution decisions, or other decisions, the person is considered to be an advisor and a fiduciary when exercising that authority, unless the trust terms provide that an advisor acts in a nonfiduciary capacity.
The bill would grant a trustee who acts in accordance with the direction of an advisor, as prescribed by the trust terms, immunity from liability for any loss resulting directly or indirectly from that act, except in cases of wilful misconduct on the part of the trustee. The bill would also grant a trustee, if the trust terms require a trustee to make decisions with the consent of an advisor, immunity from liability for any loss resulting directly or indirectly from any act taken or not taken as a result of the advisor's failure to provide the required consent after having been requested to do so by the trustee, except in cases of wilful misconduct or gross negligence on the part of the trustee.
HB 3190 would establish that a trustee, if the trust terms require a trustee to act in accordance with the direction of an advisor with respect to investment decisions, distribution decisions, or other decisions of the trustee, does not, except to the extent the trust terms provide otherwise, have the duty to monitor the advisor's conduct, to provide advice to the advisor or consult with the advisor, or to communicate with, warn, or apprise any beneficiary or third party concerning instances in which the trustee would or might have exercised the trustee's own discretion in a manner different from the manner directed by the advisor.
The bill would establish that, absent clear
and convincing evidence to the contrary, a trustee's actions pertaining to matters within the scope
of the advisor's authority are presumed to be administrative actions taken by the trustee solely to
allow the trustee to perform those duties assigned to the trustee under the trust terms and that
such administrative actions are not considered as constituting an undertaking by the trustee to
monitor the advisor or otherwise participate in actions within the scope of the advisor's authority
HB 3190, except as specifically provided by a trust term in effect before the bill's effective date, would apply to a trust created before, on, or after the bill's effective date with respect to an action taken or not taken on or after September 1, 2015, by a trustee, advisor, or other person with respect to the trust.
HB 3190 would repeal Section 114.003, Property Code, to remove statute concerning the powers to direct that would conflict with the new amendments HB 3190 seeks to instill.
No changes have been made to this bill in House committee. We continue to oppose HB 3190. The second chamber sponsor is Sen. Huffines.
First chamber recommendation is below:
HB 3190 seeks to make substantive changes to the directing of a trust that would place the "protector" or advisor above the trustee in terms of authority, provided the trust terms don't specifically state otherwise, while removing the trustee of the their fiduciary liability. Under this bill, a high evidentiary standard would be required to prove liability against a trustee for allowing a violation of the trust terms or for breach of fiduciary duty. Under HB 3190, the trust beneficiaries could lose money and may not have the same remedies available to them to recover losses. This bill removes the trustee of their liability to comply with the terms of the trust and of their fiduciary duty existing under current law. We are opposed to this legislation as this is an example of unnecessary government regulation which diminishes the personal responsibility of the trustee and the property rights of the beneficiary.