2005 Texas Property Code CHAPTER 112. CREATION, VALIDITY, MODIFICATION, AND TERMINATION OF TRUSTS

PROPERTY CODE

CHAPTER 112. CREATION, VALIDITY, MODIFICATION, AND TERMINATION OF 
TRUSTS

SUBCHAPTER A. CREATION


	§ 112.001. METHODS OF CREATING TRUST.  A trust may be 
created by:         
		(1)  a property owner's declaration that the owner 
holds the property as trustee for another person;
		(2)  a property owner's inter vivos transfer of the 
property to another person as trustee for the transferor or a third 
person;
		(3)  a property owner's testamentary transfer to 
another person as trustee for a third person;
		(4)  an appointment under a power of appointment to 
another person as trustee for the donee of the power or for a third 
person;  or
		(5)  a promise to another person whose rights under the 
promise are to be held in trust for a third person.

Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, 
eff. Jan. 1, 1984.


	§ 112.002. INTENTION TO CREATE TRUST.  A trust is created 
only if the settlor manifests an intention to create a trust.

Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, 
eff. Jan. 1, 1984.


	§ 112.003. CONSIDERATION.  Consideration is not required 
for the creation of a trust.  A promise to create a trust in the 
future is enforceable only if the requirements for an enforceable 
contract are present.

Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, 
eff. Jan. 1, 1984.


	§ 112.004. STATUTE OF FRAUDS.  A trust in either real or 
personal property is enforceable only if there is written evidence 
of the trust's terms bearing the signature of the settlor or the 
settlor's authorized agent.  A trust consisting of personal 
property, however, is enforceable if created by:
		(1)  a transfer of the trust property to a trustee who 
is neither settlor nor beneficiary if the transferor expresses 
simultaneously with or prior to the transfer the intention to 
create a trust;  or
		(2)  a declaration in writing by the owner of property 
that the owner holds the property as trustee for another person or 
for the owner and another person as a beneficiary.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.


	§ 112.005. TRUST PROPERTY.  A trust cannot be created 
unless there is trust property.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.


	§ 112.006. ADDITIONS TO TRUST PROPERTY.  Property may be 
added to an existing trust from any source in any manner unless the 
addition is prohibited by the terms of the trust or the property is 
unacceptable to the trustee.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.


	§ 112.007. CAPACITY OF SETTLOR.  A person has the same 
capacity to create a trust by declaration, inter vivos or 
testamentary transfer, or appointment that the person has to 
transfer, will, or appoint free of trust.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.


	§ 112.008. CAPACITY OF TRUSTEE.  (a) The trustee must 
have the legal capacity to take, hold, and transfer the trust 
property.  If the trustee is a corporation, it must have the power 
to act as a trustee in this state.
	(b)  Except as provided by Section 112.034, the fact that the 
person named as trustee is also a beneficiary does not disqualify 
the person from acting as trustee if he is otherwise qualified.
	(c)  The settlor of a trust may be the trustee of the trust.                   

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.


	§ 112.009. ACCEPTANCE BY TRUSTEE.                                           

Text of subsec. (a) effective until January 1, 2006
	(a)  The signature of the person named as trustee on the 
writing evidencing the trust or on a separate written acceptance is 
conclusive evidence that the person accepted the trust.  A person 
named as trustee who exercises power or performs duties under the 
trust is presumed to have accepted the trust.

Text of subsec. (a) effective January 1, 2006
	(a)  The signature of the person named as trustee on the 
writing evidencing the trust or on a separate written acceptance is 
conclusive evidence that the person accepted the trust.  A person 
named as trustee who exercises power or performs duties under the 
trust is presumed to have accepted the trust, except that a person 
named as trustee may engage in the following conduct without 
accepting the trust:
		(1)  acting to preserve the trust property if, within a 
reasonable time after acting, the person gives notice of the 
rejection of the trust to:
			(A)  the settlor;  or                                                        
			(B)  if the settlor is deceased or incapacitated, 
all beneficiaries then entitled to receive trust distributions from 
the trust;  and
		(2)  inspecting or investigating trust property for any 
purpose, including determining the potential liability of the trust 
under environmental or other law.
	(b)  A person named as trustee who does not accept the trust 
incurs no liability with respect to the trust.
	(c)  If the person named as the original trustee does not 
accept the trust or if the person is dead or does not have capacity 
to act as trustee, the person named as the alternate trustee under 
the terms of the trust or the person selected as alternate trustee 
according to a method prescribed in the terms of the trust may 
accept the trust.  If a trustee is not named or if there is no 
alternate trustee designated or selected in the manner prescribed 
in the terms of the trust, the court shall appoint a trustee on a 
petition of any interested person.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.  Amended by Acts 2005, 79th Leg., ch. 148, § 4, eff. 
Jan. 1, 2006.


	§ 112.010. ACCEPTANCE OR DISCLAIMER BY OR ON BEHALF OF 
BENEFICIARY.  (a) Acceptance by a beneficiary of an interest in a 
trust is presumed.
	(b)  If a trust is created by will, a beneficiary may 
disclaim an interest in the manner and with the effect for which 
provision is made in the applicable probate law.
	(c)  Except as provided by Subsection (c-1) of this section, 
the following persons may disclaim an interest in a trust created in 
any manner other than by will:
		(1)  a beneficiary, including a beneficiary of a 
spendthrift trust;         
		(2)  the personal representative of an incompetent, 
deceased, unborn or unascertained, or minor beneficiary, with court 
approval by the court having jurisdiction over the personal 
representative;  and
		(3)  the independent executor of a deceased 
beneficiary, without court approval.
	(c-1)  A person authorized to disclaim an interest in a trust 
under Subsection (c) of this section may not disclaim the interest 
if the person in his capacity as beneficiary, personal 
representative, or independent executor has either exercised 
dominion and control over the interest or accepted any benefits 
from the trust.
	(c-2)  A person authorized to disclaim an interest in a trust 
under Subsection (c) of this section may disclaim an interest in 
whole or in part by:
		(1)  evidencing his irrevocable and unqualified 
refusal to accept the interest by written memorandum, acknowledged 
before a notary public or other person authorized to take 
acknowledgments of conveyances of real estate;  and
		(2)  delivering the memorandum to the trustee or, if 
there is not a trustee, to the transferor of the interest or his 
legal representative not later than the date that is nine months 
after the later of:
			(A)  the day on which the transfer creating the 
interest in the beneficiary is made;
			(B)  the day on which the beneficiary attains age 
21;  or                  
			(C)  in the case of a future interest, the date of 
the event that causes the taker of the interest to be finally 
ascertained and the interest to be indefeasibly vested.
	(d)  A disclaimer under this section is effective as of the 
date of the transfer of the interest involved and relates back for 
all purposes to the date of the transfer and is not subject to the 
claims of any creditor of the disclaimant.  Unless the terms of the 
trust provide otherwise, the interest that is the subject of the 
disclaimer passes as if the person disclaiming had predeceased the 
transfer and a future interest that would otherwise take effect in 
possession or enjoyment after the termination of the estate or 
interest that is disclaimed takes effect as if the disclaiming 
beneficiary had predeceased the transfer.  A disclaimer under this 
section is irrevocable.
	(e)  Failure to comply with this section makes a disclaimer 
ineffective except as an assignment of the interest to those who 
would have received the interest being disclaimed had the person 
attempting the disclaimer died prior to the transferor of the 
interest.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.  Amended by Acts 1987, 70th Leg., ch. 467, § 3, eff. 
Sept. 1, 1987;  Acts 1993, 73rd Leg., ch. 846, § 3, eff. Sept. 1, 
1993.

SUBCHAPTER B. VALIDITY


	§ 112.031. TRUST PURPOSES.  A trust may be created for any 
purpose that is not illegal.  The terms of the trust may not require 
the trustee to commit a criminal or tortious act or an act that is 
contrary to public policy.

Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, 
eff. Jan. 1, 1984.


	§ 112.032. ACTIVE AND PASSIVE TRUSTS;  STATUTE OF 
USES.  (a) Except as provided by Subsection (b), title to real 
property held in trust vests directly in the beneficiary if the 
trustee has neither a power nor a duty related to the administration 
of the trust.
	(b)  The title of a trustee in real property is not divested 
if the trustee's title is not merely nominal but is subject to a 
power or duty in relation to the property.

Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, 
eff. Jan. 1, 1984.


	§ 112.033. RESERVATION OF INTERESTS AND POWERS BY 
SETTLOR.  If during the life of the settlor an interest in a trust 
or the trust property is created in a beneficiary other than the 
settlor, the disposition is not invalid as an attempted 
testamentary disposition merely because the settlor reserves or 
retains, either in himself or another person who is not the trustee, 
any or all of the other interests in or powers over the trust or 
trust property, such as:
		(1)  a beneficial life interest for himself;                                  
		(2)  the power to revoke, modify, or terminate the 
trust in whole or in part;
		(3)  the power to designate the person to whom or on 
whose behalf the income or principal is to be paid or applied;
		(4)  the power to control the administration of the 
trust in whole or in part;
		(5)  the right to exercise a power or option over 
property in the trust or over interests made payable to the trust 
under an employee benefit plan, life insurance policy, or 
otherwise;  or
		(6)  the power to add property or cause additional 
employee benefits, life insurance, or other interests to be made 
payable to the trust at any time.

Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, 
eff. Jan. 1, 1984.


	§ 112.034. MERGER.  (a) If a settlor transfers both the 
legal title and all equitable interests in property to the same 
person or retains both the legal title and all equitable interests 
in property in himself as both the sole trustee and the sole 
beneficiary, a trust is not created and the transferee holds the 
property as his own.  This subtitle does not invalidate a trust 
account validly created and in effect under Chapter XI, Texas 
Probate Code.
	(b)  Except as provided by Subsection (c) of this section, a 
trust terminates if the legal title to the trust property and all 
equitable interests in the trust become united in one person.
	(c)  The title to trust property and all equitable interests 
in the trust property may not become united in a beneficiary, other 
than the settlor, whose interest is protected under a spendthrift 
trust, and in that case the court shall appoint a new trustee or 
cotrustee to administer the trust for the benefit of the 
beneficiary.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.


	§ 112.035. SPENDTHRIFT TRUSTS.  (a) A settlor may provide 
in the terms of the trust that the interest of a beneficiary in the 
income or in the principal or in both may not be voluntarily or 
involuntarily transferred before payment or delivery of the 
interest to the beneficiary by the trustee.
	(b)  A declaration in a trust instrument that the interest of 
a beneficiary shall be held subject to a "spendthrift trust" is 
sufficient to restrain voluntary or involuntary alienation of the 
interest by a beneficiary to the maximum extent permitted by this 
subtitle.
	(c)  A trust containing terms authorized under Subsection 
(a) or (b) of this section may be referred to as a spendthrift 
trust.
	(d)  If the settlor is also a beneficiary of the trust, a 
provision restraining the voluntary or involuntary transfer of his 
beneficial interest does not prevent his creditors from satisfying 
claims from his interest in the trust estate.

Text of subsec. (e) effective until January 1, 2006
	(e)  A beneficiary of the trust may not be considered a 
settlor merely because of a lapse, waiver, or release of the 
beneficiary's right to withdraw a part of the trust property if the 
value of the property that could have been withdrawn by exercising 
the right of withdrawal in any calendar year does not exceed at the 
time of the lapse, waiver, or release the greater of the amount 
specified in:
		(1)  Section 2041(b)(2) or 2514(e), Internal Revenue 
Code of 1986;  or      
		(2)  Section 2503(b), Internal Revenue Code of 1986.                          

Text of subsec. (e) effective January 1, 2006
	(e)  A beneficiary of the trust may not be considered a 
settlor merely because of a lapse, waiver, or release of:
		(1)  a power described by Subsection (f);  or                                 
		(2)  the beneficiary's right to withdraw a part of the 
trust property to the extent that the value of the property affected 
by the lapse, waiver, or release in any calendar year does not 
exceed the greater of the amount specified in:
			(A)  Section 2041(b)(2) or 2514(e), Internal 
Revenue Code of 1986;  or     
			(B)  Section 2503(b), Internal Revenue Code of 
1986.                       

Text of subsec. (f) effective January 1, 2006
	(f)  A beneficiary of the trust may not be considered to be a 
settlor, to have made a voluntary or involuntary transfer of the 
beneficiary's interest in the trust, or to have the power to make a 
voluntary or involuntary transfer of the beneficiary's interest in 
the trust, merely because the beneficiary, in any capacity, holds 
or exercises:
		(1)  a presently exercisable power to:                                        
			(A)  consume, invade, appropriate, or distribute 
property to or for the benefit of the beneficiary, if the power is:
				(i)  exercisable only on consent of another 
person holding an interest adverse to the beneficiary's interest;  
or
				(ii)  limited by an ascertainable standard, 
including health, education, support, or maintenance of the 
beneficiary;  or
			(B)  appoint any property of the trust to or for 
the benefit of a person other than the beneficiary, a creditor of 
the beneficiary, the beneficiary's estate, or a creditor of the 
beneficiary's estate;
		(2)  a testamentary power of appointment;  or                                 
		(3)  a presently exercisable right described by 
Subsection (e)(2).          

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.  Amended by Acts 1997, 75th Leg., ch. 109, § 1, eff. 
Sept. 1, 1997;  Acts 2005, 79th Leg., ch. 148, § 5, eff. Jan. 1, 
2006.


	§ 112.036. RULE AGAINST PERPETUITIES.  The rule against 
perpetuities applies to trusts other than charitable trusts.  
Accordingly, an interest is not good unless it must vest, if at all, 
not later than 21 years after some life in being at the time of the 
creation of the interest, plus a period of gestation.  Any interest 
in a trust may, however, be reformed or construed to the extent and 
as provided by Section 5.043.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.  Amended by Acts 1984, 68th Leg., 2nd C.S., ch. 18, 
§ 10, eff. Oct. 2, 1984.


	§ 112.037. TRUST FOR CARE OF ANIMAL.  (a)  A trust may be 
created to provide for the care of an animal alive during the 
settlor's lifetime.  The trust terminates on the death of the animal 
or, if the trust is created to provide for the care of more than one 
animal alive during the settlor's lifetime, on the death of the last 
surviving animal.
	(b)  A trust authorized by this section may be enforced by a 
person appointed in the terms of the trust or, if a person is not 
appointed in the terms of the trust, by a person appointed by the 
court.  A person having an interest in the welfare of an animal that 
is the subject of a trust authorized by this section may request the 
court to appoint a person to enforce the trust or to remove a person 
appointed to enforce the trust.
	(c)  Except as provided by Subsections (d) and (e), property 
of a trust authorized by this section may be applied only to the 
property's intended use under the trust.
	(d)  Property of a trust authorized by this section may be 
applied to a use other than the property's intended use under the 
trust to the extent the court determines that the value of the trust 
property exceeds the amount required for the intended use.
	(e)  Except as otherwise provided by the terms of the trust, 
property not required for the trust's intended use must be 
distributed to:
		(1)  if the settlor is living at the time the trust 
property is distributed, the settlor;  or
		(2)  if the settlor is not living at the time the trust 
property is distributed:
			(A)  if the settlor has a will, beneficiaries 
under the settlor's will;  or
			(B)  in the absence of an effective provision in a 
will, the settlor's heirs.
	(f)  For purposes of Section 112.036, the lives in being used 
to determine the maximum duration of a trust authorized by this 
section are:
		(1)  the individual beneficiaries of the trust;                               
		(2)  the individuals named in the instrument creating 
the trust;  and       
		(3)  if the settlor or settlors are living at the time 
the trust becomes irrevocable, the settlor or settlors of the trust 
or, if the settlor or settlors are not living at the time the trust 
becomes irrevocable, the individuals who would inherit the settlor 
or settlors' property under the law of this state had the settlor or 
settlors died intestate at the time the trust becomes irrevocable.

Added by Acts 2005, 79th Leg., ch. 148, § 6, eff. Jan. 1, 2006.            

SUBCHAPTER C. REVOCATION, MODIFICATION, AND TERMINATION OF TRUSTS


	§ 112.051. REVOCATION, MODIFICATION, OR AMENDMENT BY 
SETTLOR.  (a) A settlor may revoke the trust unless it is 
irrevocable by the express terms of the instrument creating it or of 
an instrument modifying it.
	(b)  The settlor may modify or amend a trust that is 
revocable, but the settlor may not enlarge the duties of the trustee 
without the trustee's express consent.
	(c)  If the trust was created by a written instrument, a 
revocation, modification, or amendment of the trust must be in 
writing.

Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, 
eff. Jan. 1, 1984.


	§ 112.052. TERMINATION.  A trust terminates if by its 
terms the trust is to continue only until the expiration of a 
certain period or until the happening of a certain event and the 
period of time has elapsed or the event has occurred.  If an event of 
termination occurs, the trustee may continue to exercise the powers 
of the trustee for the reasonable period of time required to wind up 
the affairs of the trust and to make distribution of its assets to 
the appropriate beneficiaries.  The continued exercise of the 
trustee's powers after an event of termination does not affect the 
vested rights of beneficiaries of the trust.

Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, 
eff. Jan. 1, 1984.


	§ 112.053. DISPOSITION OF TRUST PROPERTY ON FAILURE OF 
TRUST.  The settlor may provide in the trust instrument how 
property may or may not be disposed of in the event of failure, 
termination, or revocation of the trust.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.  Amended by Acts 1991, 72nd Leg., ch. 895, § 17, 
eff. Sept. 1, 1991.


	§ 112.054. JUDICIAL MODIFICATION OR TERMINATION OF 
TRUSTS.  (a)  On the petition of a trustee or a beneficiary, a court 
may order that the trustee be changed, that the terms of the trust 
be modified, that the trustee be directed or permitted to do acts 
that are not authorized or that are forbidden by the terms of the 
trust, that the trustee be prohibited from performing acts required 
by the terms of the trust, or that the trust be terminated in whole 
or in part, if:
		(1)  the purposes of the trust have been fulfilled or 
have become illegal or impossible to fulfill;
		(2)  because of circumstances not known to or 
anticipated by the settlor, the order will further the purposes of 
the trust;
		(3)  modification of administrative, nondispositive 
terms of the trust is necessary or appropriate to prevent waste or 
avoid impairment of the trust's administration;
		(4)  the order is necessary or appropriate to achieve 
the settlor's tax objectives and is not contrary to the settlor's 
intentions;  or
		(5)  subject to Subsection (d):                                               
			(A)  continuance of the trust is not necessary to 
achieve any material purpose of the trust;  or
			(B)  the order is not inconsistent with a material 
purpose of the trust.   
	(b)  The court shall exercise its discretion to order a 
modification or termination under Subsection (a) in the manner that 
conforms as nearly as possible to the probable intention of the 
settlor.  The court shall consider spendthrift provisions as a 
factor in making its decision whether to modify or terminate, but 
the court is not precluded from exercising its discretion to modify 
or terminate solely because the trust is a spendthrift trust.
	(c)  The court may direct that an order described by 
Subsection (a)(4) has retroactive effect.
	(d)  The court may not take the action permitted by 
Subsection (a)(5) unless all beneficiaries of the trust have 
consented to the order or are deemed to have consented to the order.  
A minor, incapacitated, unborn, or unascertained beneficiary is 
deemed to have consented if a person representing the beneficiary's 
interest under Section 115.013(c) has consented or if a guardian ad 
litem appointed to represent the beneficiary's interest under 
Section 115.014 consents on the beneficiary's behalf.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.  Amended by Acts 1985, 69th Leg., ch. 149, § 1, eff. 
May 24, 1985;  Acts 2005, 79th Leg., ch. 148, § 7, eff. Jan. 1, 
2006.


	§ 112.055. AMENDMENT OF CHARITABLE TRUSTS BY OPERATION OF 
LAW.  (a) Except as provided by Section 112.056 and Subsection (b) 
of this section, the governing instrument of a trust that is a 
private foundation under Section 509, Internal Revenue Code, as 
amended, a nonexempt charitable trust that is treated as a private 
foundation under Section 4947(a)(1), Internal Revenue Code, as 
amended, or, to the extent that Section 508(e), Internal Revenue 
Code, is applicable to it, a nonexempt split-interest trust under 
Section 4947(a)(2), Internal Revenue Code, as amended, is 
considered to contain provisions stating that the trust:
		(1)  shall make distributions at times and in a manner 
as not to subject the trust to tax under Section 4942, Internal 
Revenue Code;
		(2)  may not engage in an act of self-dealing that would 
be subject to tax under Section 4941, Internal Revenue Code;
		(3)  may not retain excess business holdings that would 
subject it to tax under Section 4943, Internal Revenue Code;
		(4)  may not make an investment that would subject it to 
tax under Section 4944, Internal Revenue Code;  and
		(5)  may not make a taxable expenditure that would 
subject it to tax under Section 4945, Internal Revenue Code.
	(b)  If a trust was created before January 1, 1970, this 
section applies to it only for its taxable years that begin on or 
after January 1, 1972.
	(c)  This section applies regardless of any provision in a 
trust's governing instrument and regardless of any other law of 
this state, including the provisions of this title.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.


	§ 112.056. PERMISSIVE AMENDMENT BY TRUSTEE OF CHARITABLE 
TRUST.  (a) If the settlor of a trust that is described under 
Subsection (a) of Section 112.055 of this Act is living and 
competent and consents, the trustee may, without judicial 
proceedings, amend the trust to expressly include or exclude the 
provisions required by Subsection (a) of Section 112.055 of this 
Act.
	(b)  The amendment must be in writing, and it is effective 
when a duplicate original is filed with the attorney general's 
office.

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.


	§ 112.057. DIVISION AND COMBINATION OF TRUSTS .                             

Text of subsec. (a) intro. paragraph effective until January 1, 
2006
	(a)  The trustee may, unless expressly prohibited by the 
terms of the instrument establishing the trust, divide a trust into 
two or more separate trusts without a judicial proceeding if the 
trustee reasonably determines that the division of the trust could 
result in a significant decrease in current or future federal 
income, gift, estate, generation-skipping transfer taxes, or any 
other tax imposed on trust property.  If the trustee divides the 
trust, the terms of the separate trusts must be identical to the 
terms of the original trust, but differing tax elections may be made 
for the separate trusts.  The trustee may make a division under this 
subsection by:

Text of subsec. (a) intro. paragraph effective January 1, 2006
	(a)  The trustee may, unless expressly prohibited by the 
terms of the instrument establishing the trust, divide a trust into 
two or more separate trusts without a judicial proceeding if the 
result does not impair the rights of any beneficiary or adversely 
affect achievement of the purposes of the original trust. The 
trustee may make a division under this subsection by:
		(1)  giving written notice of the division, not later 
than the 30th day before the date of a division under this 
subsection, to each beneficiary who might then be entitled to 
receive distributions from the trust or may be entitled to receive 
distributions from the trust once it is funded;  and
		(2)  executing a written instrument, acknowledged 
before a notary public or other person authorized to take 
acknowledgements of conveyances of real estate stating that the 
trust has been divided pursuant to this section and that the notice 
requirements of this subsection have been satisfied.
	(b)  A trustee, in the written instrument dividing a trust, 
shall allocate trust property among the separate trusts on a 
fractional basis, by identifying the assets and liabilities passing 
to each separate trust, or in any other reasonable manner.  The 
trustee shall allocate undesignated trust property received after 
the trustee has divided the trust into separate trusts in the manner 
provided by the written instrument dividing the trust or, in the 
absence of a provision in the written instrument, in a manner 
determined by the trustee.

Text of subsec. (c) effective until January 1, 2006
	(c)  The trustee may, unless expressly prohibited by the 
terms of the instrument establishing the trust, merge two or more 
trusts having identical terms into a single trust if the trustee 
reasonably determines that merging the trusts could result in a 
significant decrease in current or future federal income, gift, 
estate, generation-skipping transfer taxes, or any other tax 
imposed on trust property.  The trustee shall complete the trust 
merger by:
		(1)  giving a written notice of the merger, not later 
than the 30th day before the effective date of the merger, to each 
beneficiary who might then be entitled to receive distributions 
from the separate trusts being merged or to each beneficiary who 
might be entitled to receive distributions from the separate trusts 
once the trusts are funded;  and
		(2)  executing a written instrument, acknowledged 
before a notary public or other person authorized to take 
acknowledgments of conveyances of real estate stating that the 
trust has been merged pursuant to this section and that the notice 
requirements of this subsection have been satisfied.

Text of subsec. (c) effective January 1, 2006
	(c)  The trustee may, unless expressly prohibited by the 
terms of the instrument establishing a trust, combine two or more 
trusts into a single trust without a judicial proceeding if the 
result does not impair the rights of any beneficiary or adversely 
affect achievement of the purposes of one of the separate trusts. 
The trustee shall complete the trust combination by:
		(1)  giving a written notice of the combination, not 
later than the 30th day before the effective date of the 
combination, to each beneficiary who might then be entitled to 
receive distributions from the separate trusts being combined or to 
each beneficiary who might be entitled to receive distributions 
from the separate trusts once the trusts are funded;  and
		(2)  executing a written instrument, acknowledged 
before a notary public or other person authorized to take 
acknowledgments of conveyances of real estate stating that the 
trust has been combined pursuant to this section and that the notice 
requirements of this subsection have been satisfied.

Text of subsec. (d) effective until January 1, 2006
	(d)  The trustee may divide or merge a testamentary trust 
after the will establishing the trust has been admitted to probate, 
even if the trust will not be funded until a later date.  The trustee 
may divide or merge any other trust before it is funded if the 
instrument establishing the trust is not revocable at the time of 
the division or merger.

Text of subsec. (d) effective January 1, 2006
	(d)  The trustee may divide or combine a testamentary trust 
after the will establishing the trust has been admitted to probate, 
even if the trust will not be funded until a later date.  The trustee 
may divide or combine any other trust before it is funded.

Added by Acts 1991, 72nd Leg., ch. 895, § 18, eff. Sept. 1, 1991.  
Amended by Acts 2005, 79th Leg., ch. 148, § 8, 9, eff. Jan. 1, 
2006.


	§ 112.058. CONVERSION OF COMMUNITY TRUST TO NONPROFIT 
CORPORATION.  (a) In this section:
		(1)  "Assets" means the assets of the component trust 
funds of a community trust.
		(2)  "Community trust" means a community trust as 
described by 26 C.F.R. Section 1.170A-9(e)(11) (1999), including 
subsequent amendments.
	(b)  A community trust with court approval may transfer the 
assets of the trust to a nonprofit corporation and terminate the 
trust as provided by this section.
	(c)  The community trust may transfer assets of the trust to 
a nonprofit corporation only if the nonprofit corporation is 
organized under the Texas Non-Profit Corporation Act (Article 
1396-1.01 et seq., Vernon's Texas Civil Statutes) and organized for 
the same purpose as the community trust.  The charter of the 
nonprofit corporation must describe the purpose of the corporation 
and the proposed use of the assets transferred using language 
substantially similar to the language used in the instrument 
creating the community trust.
	(d)  To transfer the assets of and terminate a community 
trust under this section, the governing body of the community trust 
must:
		(1)  file a petition in a probate court, county court, 
or district court requesting:
			(A)  the transfer of the assets of the trust to a 
nonprofit corporation established for the purpose of receiving and 
administering the assets of the trust;  and
			(B)  the termination of the trust;                                           
		(2)  send by first class mail to each trust settlor and 
each trustee of each component trust of the community trust who can 
be located by the exercise of reasonable diligence a copy of the 
governing body's petition and a notice specifying the time and 
place of the court-scheduled hearing on the petition;  and
		(3)  publish once in a newspaper of general circulation 
in the county in which the proceeding is pending a notice that reads 
substantially similar to the following:

TO ALL INTERESTED PERSONS:
	(NAME OF COMMUNITY TRUST)  HAS FILED A PETITION IN (NAME OF 
COURT) OF (NAME OF COUNTY), TEXAS, REQUESTING PERMISSION TO CONVERT 
TO A NONPROFIT CORPORATION.  IF PERMITTED TO CONVERT:
		(1)  THE (NAME OF COMMUNITY TRUST) WILL BE TERMINATED;  
AND                 
		(2)  THE ASSETS OF THE TRUST WILL BE:                                         
			(A)  TRANSFERRED TO A NONPROFIT CORPORATION WITH 
THE SAME NAME AND CREATED FOR THE SAME PURPOSE AS THE (NAME OF 
COMMUNITY TRUST);  AND
			(B)  HELD AND ADMINISTERED BY THE CORPORATION AS 
PROVIDED BY THE TEXAS NON-PROFIT CORPORATION ACT (ARTICLE 1396-1.01 
ET SEQ., VERNON'S TEXAS CIVIL STATUTES).
		(1)  THE (NAME OF COMMUNITY TRUST) WILL BE TERMINATED;  
AND                 
		(2)  THE ASSETS OF THE TRUST WILL BE:                                         
			(A)  TRANSFERRED TO A NONPROFIT CORPORATION WITH 
THE SAME NAME AND CREATED FOR THE SAME PURPOSE AS THE (NAME OF 
COMMUNITY TRUST);  AND
			(B)  HELD AND ADMINISTERED BY THE CORPORATION AS 
PROVIDED BY THE TEXAS NON-PROFIT CORPORATION ACT (ARTICLE 1396-1.01 
ET SEQ., VERNON'S TEXAS CIVIL STATUTES).
	THE PURPOSE OF THE CONVERSION IS TO ACHIEVE SAVINGS AND USE 
THE MONEY SAVED TO FURTHER THE PURPOSES FOR WHICH THE (NAME OF 
COMMUNITY TRUST) WAS CREATED.
	A HEARING ON THE PETITION IS SCHEDULED ON (DATE AND TIME) AT 
(LOCATION OF COURT).
	FOR ADDITIONAL INFORMATION, YOU MAY CONTACT THE GOVERNING 
BODY OF THE (NAME OF COMMUNITY TRUST) AT (ADDRESS AND TELEPHONE 
NUMBER) OR THE COURT.
	(e)  The court shall schedule a hearing on the petition to be 
held after the 10th day after the date the notices required by 
Subsection (d)(2) are deposited in the mail or the date the notice 
required by Subsection (d)(3) is published, whichever is later.  
The hearing must be held at the time and place stated in the notices 
unless the court, for good cause, postpones the hearing.  If the 
hearing is postponed, a notice of the rescheduled hearing date and 
time must be posted at the courthouse of the county in which the 
proceeding is pending or at the place in or near the courthouse 
where public notices are customarily posted.
	(f)  The court, on a request from the governing body of the 
community trust, may by order require approval from the Internal 
Revenue Service for an asset transfer under this section.  If the 
court orders approval from the Internal Revenue Service, the asset 
transfer may occur on the date the governing body of the community 
trust files a notice with the court indicating that the Internal 
Revenue Service has approved the asset transfer.  The notice 
required by this subsection must be filed on or before the first 
anniversary of the date the court's order approving the asset 
transfer is signed.  If the notice is not filed within the period 
prescribed by this subsection, the court's order is dissolved.
	(g)  A court order transferring the assets of and terminating 
a community trust must provide that the duties of each trustee of 
each component trust fund of the community trust are terminated on 
the date the assets are transferred.  This subsection does not 
affect the liability of a trustee for acts or omissions that 
occurred before the duties of the trustee are terminated.

Added by Acts 1999, 76th Leg., ch. 1035, § 1, eff. Sept. 1, 1999.