CHAPTER 121. EMPLOYEES' TRUSTS
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.