CHAPTER 121. EMPLOYEES' TRUSTS - Texas Statutes

PROPERTY CODE

TITLE 9. TRUSTS

SUBTITLE C. MISCELLANEOUS TRUSTS

CHAPTER 121. EMPLOYEES' TRUSTS

SUBCHAPTER A. PENSION TRUSTS

Sec. 121.001. PENSION TRUSTS. (a) For the purposes of this

subchapter, a pension trust is an express trust:

(1) containing or relating to property;

(2) created by an employer as part of a stock-bonus plan,

pension plan, disability or death benefit plan, or profit-sharing

plan for the benefit of some or all of the employer's employees;

(3) to which contributions are made by the employer, by some or

all of the employees, or by both; and

(4) created for the principal purpose of distributing to the

employees, or the successor to their beneficial interest in the

trust, the principal or income, or both, of the property held in

trust.

(b) This subchapter applies to a pension trust regardless of

when the trust was created.

Acts 1983, 68th Leg., p. 3691, ch. 576, Sec. 1, eff. Jan. 1,

1984.

Sec. 121.002. EMPLOYEES OF CONTROLLED CORPORATIONS. For the

purposes of this subchapter, the relationship of employer and

employee exists between a corporation and its own employees, and

between a corporation and the employees of each other corporation

that it controls, by which it is controlled, or with which it is

under common control through the exercise by one or more persons

of a majority of voting rights in one or more corporations.

Acts 1983, 68th Leg., p. 3691, ch. 576, Sec. 1, eff. Jan. 1,

1984.

Sec. 121.003. APPLICATION OF TEXAS TRUST CODE. The Texas Trust

Code (Chapters 111 through 117) applies to a pension trust.

Acts 1983, 68th Leg., p. 3691, ch. 576, Sec. 1, eff. Jan. 1,

1984.

Amended by:

Acts 2005, 79th Leg., Ch.

148, Sec. 27, eff. January 1, 2006.

Sec. 121.004. RULE AGAINST PERPETUITIES. A pension trust may

continue for as long as is necessary to accomplish the purposes

of the trust and is not invalid under the rule against

perpetuities or any other law restricting or limiting the

duration of a trust.

Acts 1983, 68th Leg., p. 3691, ch. 576, Sec. 1, eff. Jan. 1,

1984.

Sec. 121.005. ACCUMULATION OF INCOME. Notwithstanding any law

limiting the time during which trust income may be accumulated,

the income of a pension trust may be accumulated under the terms

of the trust for as long as is necessary to accomplish the

purposes of the trust.

Acts 1983, 68th Leg., p. 3692, ch. 576, Sec. 1, eff. Jan. 1,

1984.

SUBCHAPTER B. DEATH BENEFITS UNDER EMPLOYEES' TRUSTS

Sec. 121.051. DEFINITIONS. (a) In this subchapter:

(1) "Death benefit" means a benefit of any kind, including the

proceeds of a life insurance policy or any other payment, in cash

or property, under an employees' trust or a retirement account, a

contract purchased by an employees' trust or a retirement

account, or a retirement-annuity contract that is payable because

of an employee's, participant's, or beneficiary's death to or for

the benefit of the employee's, participant's, or beneficiary's

beneficiary.

(2) "Employee" means a person covered by an employees' trust or

a retirement account that provides a death benefit or a person

whose interest in an employees' trust or a retirement account has

not been fully distributed.

(3) "Employees' trust" means:

(A) a trust forming a part of a stock-bonus, pension, or

profit-sharing plan under Section 401, Internal Revenue Code of

1954 (26 U.S.C.A. Sec. 401 (1986));

(B) a pension trust under Chapter 111; and

(C) an employer-sponsored benefit plan or program, or any other

retirement savings arrangement, including a pension plan created

under Section 3, Employee Retirement Income Security Act of 1974

(29 U.S.C.A. Sec. 1002 (1986)), regardless of whether the plan,

program, or arrangement is funded through a trust.

(4) "Individual retirement account" means a trust, custodial

arrangement, or annuity under Section 408(a) or (b), Internal

Revenue Code of 1954 (26 U.S.C.A. Sec. 408 (1986)).

(5) "Participant" means a person covered by an employees' trust

or a retirement account that provides a death benefit or a person

whose interest in an employees' trust or a retirement account has

not been fully distributed.

(6) "Retirement account" means a retirement-annuity contract, an

individual retirement account, a simplified employee pension, or

any other retirement savings arrangement.

(7) "Retirement-annuity contract" means an annuity contract

under Section 403, Internal Revenue Code of 1954 (26 U.S.C.A.

Sec. 403 (1986)).

(8) "Simplified employee pension" means a trust, custodial

arrangement, or annuity under Section 408, Internal Revenue Code

of 1954 (26 U.S.C.A. Sec. 408 (1986)).

(9) "Trust" and "trustee" have the meanings assigned by the

Texas Trust Code (Chapters 111 through 115), except that "trust"

includes any trust, regardless of when it is created.

(b) References to specific provisions of the Internal Revenue

Code of 1954 (26 U.S.C.A.) include corresponding provisions of

any subsequent federal tax laws.

Acts 1983, 68th Leg., p. 3692, ch. 576, Sec. 1, eff. Jan. 1,

1984. Amended by Acts 1987, 70th Leg., ch. 741, Sec. 3, eff. Aug.

31, 1987.

Sec. 121.052. PAYMENT OF DEATH BENEFIT TO TRUSTEE. (a) A death

benefit is payable to a trustee of a trust evidenced by a written

instrument or declaration existing on the date of an employee's

or participant's death, or to a trustee named or to be named as

trustee of a trust created under an employee's or participant's

will, if the trustee is designated as beneficiary under the plan

containing the employees' trust or under the retirement account.

(b) A trustee of a testamentary trust may be designated under

Subsection (a) prior to the execution of the will.

(c) A death benefit under a will is not payable until the will

is probated.

(d) The trustee shall hold, administer, and dispose of a death

benefit payable under this section in accordance with the terms

of the trust on the date of the employee's death.

(e) A death benefit is payable to a trustee of a trust created

by the will of a person other than the employee if:

(1) the will has been probated at the time of the employee's

death; and

(2) the death benefit is payable to the trustee to be held,

administered, and disposed of in accordance with the terms of the

testamentary trust.

Acts 1983, 68th Leg., p. 3693, ch. 576, Sec. 1, eff. Jan. 1,

1984. Amended by Acts 1987, 70th Leg., ch. 741, Sec. 4, eff. Aug.

31, 1987.

Sec. 121.053. VALIDITY OF TRUST DECLARATION. The validity of a

trust agreement or declaration is not affected by:

(1) the absence of a corpus other than the right of the trustee

to receive a death benefit as beneficiary;

(2) the employee's reservation of the right to designate another

beneficiary of the death benefit; or

(3) the existence of authority to amend, modify, revoke, or

terminate the agreement or declaration.

Acts 1983, 68th Leg., p. 3693, ch. 576, Sec. 1, eff. Jan. 1,

1984.

Sec. 121.054. UNCLAIMED BENEFITS. If a trustee does not claim a

death benefit on or before the first anniversary of the

employee's or participant's death or if satisfactory evidence is

provided to a trustee, custodian, other fiduciary, or other

obligor of the employees' trust, contract purchased by the

employees' trust, or the retirement account before the first

anniversary of the employee's or participant's death that there

is or will be no trustee to receive the death benefit, the death

benefit shall be paid:

(1) according to the beneficiary designation under the plan,

trust, contract, or arrangement providing the death benefit under

the employees' trust or retirement account; or

(2) if there is no designation in the employees' trust or

retirement account, to the personal representative of the

deceased employee's or participant's estate.

Acts 1983, 68th Leg., p. 3693, ch. 576, Sec. 1, eff. Jan. 1,

1984. Amended by Acts 1987, 70th Leg., ch. 741, Sec. 5, eff. Aug.

31, 1987.

Sec. 121.055. EXEMPTION FROM TAXES AND DEBTS. Unless the trust

agreement, declaration of trust, or will provides otherwise, a

death benefit payable to a trustee under this subchapter is not:

(1) part of the deceased employee's estate;

(2) subject to the debts of the deceased employee or the

employee's estate, or to other charges enforceable against the

estate; or

(3) subject to the payment of taxes enforceable against the

deceased employee's estate to a greater extent than if the death

benefit is payable, free of trust, to a beneficiary other than

the executor or administrator of the estate of the employee.

Acts 1983, 68th Leg., p. 3694, ch. 576, Sec. 1, eff. Jan. 1,

1984.

Sec. 121.056. COMMINGLING OF ASSETS. A trustee who receives a

death benefit under this subchapter may commingle the property

with other assets accepted by the trustee and held in trust,

either before or after the death benefit is received.

Acts 1983, 68th Leg., p. 3694, ch. 576, Sec. 1, eff. Jan. 1,

1984.

Sec. 121.057. PRIOR DESIGNATIONS NOT AFFECTED. This subchapter

does not affect the validity of a beneficiary designation made by

an employee before April 3, 1975, that names a trustee as

beneficiary of a death benefit.

Acts 1983, 68th Leg., p. 3694, ch. 576, Sec. 1, eff. Jan. 1,

1984.

Sec. 121.058. CONSTRUCTION. (a) This subchapter is intended to

be declaratory of the common law of this state.

(b) A court shall liberally construe this subchapter to effect

the intent that a death benefit received by a trustee under this

subchapter is not subject to the obligations of the employee or

the employee's estate unless the trust receiving the benefit

expressly provides otherwise.

(c) A death benefit shall not be included in property

administered as part of a testator's estate or in an inventory

filed with the county court because of a reference in a will to

the death benefit or because of the naming of the trustee of a

testamentary trust.

Acts 1983, 68th Leg., p. 3694, ch. 576, Sec. 1, eff. Jan. 1,

1984.