CHAPTER 274. SUBSTITUTE OR SUCCESSOR FIDUCIARY

State Codes and Statutes

Statutes > Texas > Finance-code > Title-3-financial-institutions-and-businesses > Chapter-274-substitute-or-successor-fiduciary

FINANCE CODE

TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES

SUBTITLE Z. MISCELLANEOUS PROVISIONS RELATING TO FINANCIAL

INSTITUTIONS AND BUSINESSES

CHAPTER 274. SUBSTITUTE OR SUCCESSOR FIDUCIARY

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 274.001. DEFINITIONS. In this chapter:

(1) "Bank" has the meaning assigned by Section 31.002(a)(2),

excluding a bank that does not have its main office or a branch

located in this state.

(2) "Bank holding company" has the meaning assigned by Section

2(a), Bank Holding Company Act of 1956 (12 U.S.C. Section

1841(a)), as amended.

(3) "Commissioner" means the banking commissioner of Texas.

(4) "Fiduciary" means an entity responsible for managing a

fiduciary account.

(5) "Fiduciary account" means an account with a situs of

administration in this state involving the exercise of a

corporate purpose specified by Section 182.001(b).

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.51, eff. Sept. 1,

1999; Acts 1999, 76th Leg., ch. 344, Sec. 2.030, eff. Sept. 1,

1999.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 78, eff. September 1, 2007.

Sec. 274.002. AFFILIATED BANK. A bank is affiliated with a

subsidiary trust company if more than 50 percent of the bank's

voting stock is directly or indirectly owned by a bank holding

company that owns more than 50 percent of the voting stock of the

subsidiary trust company.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.030, eff. Sept.

1, 1999.

Sec. 274.003. SUBSIDIARY TRUST COMPANY. An entity is a

subsidiary trust company of a bank holding company if:

(1) the entity is a:

(A) trust company organized under Subchapter A, Chapter 182; or

(B) bank that is organized to conduct a trust business and any

incidental business or to exercise trust powers; and

(2) more than 50 percent of the voting stock of the entity is

directly or indirectly owned by the bank holding company.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.52, eff. Sept. 1,

1999; Acts 1999, 76th Leg., ch. 344, Sec. 2.030, eff. Sept. 1,

1999.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 79, eff. September 1, 2007.

SUBCHAPTER B. SUBSIDIARY TRUST COMPANIES AS SUBSTITUTE OR

SUCCESSOR FIDUCIARIES

Sec. 274.101. AGREEMENT TO SUBSTITUTE FIDUCIARIES. (a) A

subsidiary trust company may enter into an agreement with an

affiliated bank of the company to substitute the company as

fiduciary for the bank in each fiduciary account listed in the

agreement, provided the situs of account administration is not

moved outside of this state without the express written consent

of all persons entitled to notice under Sections 274.103(a) and

(c).

(b) The agreement must include:

(1) a list of each fiduciary account for which substitution is

requested;

(2) a statement of whether the substitution will cause a change

in the situs of administration of each fiduciary account; and

(3) the effective date of the substitution, which may not be

before the 91st day after the date of the agreement.

date the substitution takes effect.

(d) A fiduciary account may be removed from the operation of the

agreement by the filing of an amendment to the agreement with the

commissioner before the effective date stated in the agreement.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.031, eff. Sept.

1, 1999.

Sec. 274.102. SITUS OF ACCOUNT ADMINISTRATION. The situs of

administration of a fiduciary account is the county in this state

in which the fiduciary maintains the office that is primarily

responsible for dealing with the parties involved in the account.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.032, eff. Sept.

1, 1999.

Sec. 274.103. NOTICE OF SUBSTITUTION. (a) Not later than the

91st day before the effective date of a substitution under

Section 274.101, the parties to the substitution agreement shall

send notice of the substitution to:

(1) any other fiduciary;

(2) each surviving settlor of a trust relating to the fiduciary

account;

(3) each issuer of a security for which the affiliated bank

administers the fiduciary account;

(4) the plan sponsor of each employee benefit plan relating to

the fiduciary account;

(5) the principal of each agency account; and

(6) the guardian of the person of each ward that has the

fiduciary account resulting from a guardianship.

(b) If the substitution does not cause a change in the situs of

administration of a fiduciary account, the parties to the

substitution agreement shall also send notice of the substitution

to each person who is readily ascertainable as a beneficiary of

the account because the person has received account statements or

because a parent, conservator, or guardian of a minor beneficiary

has received account statements on the minor's behalf.

administration of a fiduciary account, the parties to the

substitution agreement shall also send notice of the substitution

to:

(1) each adult beneficiary of a trust relating to the account;

(2) each parent, conservator, or guardian of a minor beneficiary

receiving or entitled to receive current distributions of income

or principal from the account; and

(3) each person who individually or jointly has the power to

remove the fiduciary being substituted.

(d) The notice must be sent by United States mail to the

person's current address as shown on the fiduciary's records. The

fiduciary shall make a reasonable attempt to ascertain the

address of a person who does not have an address shown on the

fiduciary's records.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.104. FORM OF NOTICE OF SUBSTITUTION. The notice

required under Section 274.103 must be in writing and disclose:

(1) the effect the substitution of fiduciary will have on the

situs of administration of the fiduciary account;

(2) the person's rights with respect to objecting to the

substitution; and

(3) the liability of the existing fiduciary and the substitute

fiduciary for their actions.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.105. FAILURE TO SEND NOTICE OF SUBSTITUTION; DEFECTIVE

NOTICE. (a) If the parties to a substitution agreement under

Section 274.101 intentionally fail to send the required notice

under Section 274.103, the substitution of the fiduciary is

ineffective.

(b) If the parties unintentionally fail to send the required

notice, the substitution of the fiduciary is not impaired.

defect in the required notice, any action taken by a subsidiary

trust company before the substitution is determined to be

ineffective is valid if the action would have been valid if

performed by the affiliated bank.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.106. EFFECTIVE DATE OF SUBSTITUTION OF FIDUCIARIES.

(a) The substitution takes effect on the effective date stated

in the substitution agreement unless, not later than the 16th day

before the effective date:

(1) each party entitled to receive notice of the substitution

under Sections 274.103(a) and (c) provides the affiliated bank

with a written objection to the substitution; or

(2) a party entitled to receive notice of the substitution under

Section 274.103 files a written petition in a court seeking to

have the substitution denied under Section 274.107 and provides

the affiliated bank with a copy of the petition.

(b) A substitution that is objected to under Subsection (a)(1)

takes effect when:

(1) one of the parties objecting to the substitution removes the

party's objection in writing; or

(2) the bank obtains a final court order approving the

substitution.

takes effect when:

(1) the petition is withdrawn or dismissed; or

(2) the court enters a final order denying the relief sought.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.107. HEARING ON AGREEMENT TO SUBSTITUTE FIDUCIARIES.

(a) A court may deny the substitution if the court, after notice

and hearing, determines:

(1) if the substitution will not cause a change in the situs of

administration of a fiduciary account, that the substitution is

materially detrimental to the account or to its beneficiaries; or

(2) if the substitution will cause a change in the situs of

administration of a fiduciary account, that the substitution is

not in the best interests of the account or its beneficiaries.

(b) The court shall allow a substitution that will cause the

situs of administration of a fiduciary account to change if the

court, after notice and hearing, determines that the substitution

is in the best interests of the account and its beneficiaries.

costs and reasonable and necessary attorney's fees as the court

considers equitable and just.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.108. SUBSIDIARY TRUST COMPANY AS SUBSTITUTE FIDUCIARY.

On the effective date of the substitution as prescribed by

Section 274.106, the subsidiary trust company:

(1) without the necessity of an instrument of transfer or

conveyance, succeeds to all interest in property the affiliated

bank holds for the fiduciary account being substituted; and

(2) without the necessity of judicial action or action by the

creator of the fiduciary account, becomes fiduciary of the

account and shall perform the duties and exercise the powers of a

fiduciary in the same manner as if the company had originally

been designated fiduciary.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.109. NOTICE OF CHANGE IN SITUS OF ADMINISTRATION OF

FIDUCIARY ACCOUNT FOLLOWING SUBSTITUTION. (a) If the fiduciary

of a fiduciary account has changed as a result of a substitution

agreement under Section 274.101, the substitute fiduciary shall

send notice of a change in the situs of administration of the

account after the substitution to each person entitled to notice

under Sections 274.103(a) and (c) not later than the 91st day

before the effective date of the change.

(b) The notice must be sent by United States mail to the

person's current address as shown on the fiduciary's records. The

fiduciary shall make a reasonable attempt to ascertain the

address of a person who does not have an address shown on the

fiduciary's records.

(1) the effect that the change will have on the situs of

administration of the account;

(2) the effective date of the change; and

(3) the person's rights with respect to objecting to the change.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.110. FAILURE TO SEND NOTICE OF CHANGE IN SITUS OF

ADMINISTRATION. (a) If the substitute fiduciary of a fiduciary

account intentionally fails to send the required notice under

Section 274.109, the change in the situs of administration is

ineffective.

(b) If the substitute fiduciary unintentionally fails to send

the required notice, the change in the situs of administration is

not impaired.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.111. EFFECTIVE DATE OF CHANGE IN SITUS OF

ADMINISTRATION OF FIDUCIARY ACCOUNT. (a) A change in the situs

of administration takes effect on the effective date stated in

the notice under Section 274.109 unless, not later than the 16th

day before the effective date:

(1) each party entitled to receive notice for the fiduciary

account provides the subsidiary trust company with a written

objection to the change; or

(2) a party entitled to receive notice files a written petition

in a court seeking to have the change denied under Section

274.112 and provides the subsidiary trust company with a copy of

the petition.

(b) A change that is objected to under Subsection (a)(1) takes

effect when:

(1) one of the parties objecting to the change removes the

party's objection in writing; or

(2) the subsidiary trust company obtains a final court order

approving the change.

effect when:

(1) the petition is withdrawn or dismissed; or

(2) the court enters a final order denying the relief sought.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.112. HEARING ON CHANGE IN SITUS OF ADMINISTRATION OF

FIDUCIARY ACCOUNT. (a) A court may allow the change in the

situs of administration if the court, after notice and hearing,

determines that the change is in the best interests of the

fiduciary account and its beneficiaries. The court may deny the

change if the court, after notice and hearing, determines that

the change is not in the best interests of the account or its

beneficiaries.

(b) In a proceeding under this section, the court may award

costs and reasonable and necessary attorney's fees as the court

considers equitable and just.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.113. VENUE. (a) An action under this subchapter for a

fiduciary account resulting from a decedent's estate or

guardianship must be brought in the county provided for by the

Texas Probate Code with respect to the probate of a will,

issuance of letters testamentary or of administration,

administration of a decedent's estate, appointment of a guardian,

and administration of a guardianship.

(b) Except as provided by Subsection (c), an action under this

subchapter regarding any other fiduciary account must be brought

in the county of the situs of administration of the account,

notwithstanding a statute that would set venue in the location of

the fiduciary's principal office.

(b) may elect to bring the action in the county in which the

principal office of the first affiliated bank that transferred

the account under this subchapter is located.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.114. SUBSIDIARY TRUST COMPANY AS SUCCESSOR FIDUCIARY.

For purposes of qualifying as successor fiduciary under a

document creating a fiduciary account or a statute of this state

relating to fiduciary accounts, a subsidiary trust company:

(1) is considered to have capital and surplus in an amount equal

to the total of its capital and surplus and the capital and

surplus of the bank holding company that owns the company; and

(2) is treated as a national bank unless it:

(A) is not a national bank under federal law; and

(B) has not entered into a substitution agreement with an

affiliated bank of the company that is a national bank under

federal law.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.115. BOND OF SUCCESSOR FIDUCIARY. If an affiliated

bank of a subsidiary trust company has given bond to secure

performance of its duties and the company qualifies as successor

fiduciary, the company shall give bond to secure performance of

its duties in the same manner as the bank.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.116. RESPONSIBILITY FOR SUBSIDIARY TRUST COMPANY. The

bank holding company that owns a subsidiary trust company shall

file with the commissioner an irrevocable undertaking to be fully

responsible for the fiduciary acts and omissions of the

subsidiary trust company.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. BANKS AFFILIATED WITH SUBSIDIARY TRUST COMPANIES

Sec. 274.201. DESIGNATION OF AFFILIATED BANK AS FIDUCIARY IN

WILL. The prospective designation in a will or other instrument

of an affiliated bank of a subsidiary trust company as fiduciary

is also considered a designation of the company as fiduciary and

confers on the company any discretionary power granted in the

instrument unless:

(1) the bank and company agree in writing to have the

designation of the bank as fiduciary be binding; or

(2) the creator of the fiduciary account, by appropriate

language in the document creating the account, provides that the

account is not eligible for substitution under this chapter.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.202. LIABILITY OF AFFILIATED BANK ACTING AS FIDUCIARY.

After a substitution of a subsidiary trust company as fiduciary

for an affiliated bank of the company, the bank remains liable

for any action taken by the bank as a fiduciary.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 274.203. DEPOSIT OF MONEY WITH AFFILIATED BANK. (a) A

subsidiary trust company may deposit with an affiliated bank of

the company fiduciary money that is being held pending an

investment, distribution, or payment of a debt if:

(1) the company maintains under its control as security for the

deposit a separate fund of securities legal for trust investments

pledged by the bank;

(2) the total market value of the securities is at all times at

least equal to the amount of the deposit; and

(3) the fund of securities is designated as a separate fund.

(b) The bank may make periodic withdrawals from or additions to

the fund of securities required by this section only if the

required value is maintained.

(d) Security for a deposit under this section is not required to

the extent the deposit is insured or otherwise secured under law.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

State Codes and Statutes

State Codes and Statutes

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