Sec. 858. LOANS AND SECURITY FOR LOANS

(a) If, at any time, the guardian of the estate has on hand money belonging to the ward in an amount that provides a return that is more than is necessary for the education, support, and maintenance of the ward and others the ward supports, if applicable, the guardian may lend the money for a reasonable rate of interest. The guardian shall take the note of the borrower for the money that is loaned, secured by a mortgage with a power of sale on unencumbered real estate located in this state worth at least twice the amount of the note, or by collateral notes secured by vendor's lien notes, as collateral, or the guardian may purchase vendor's lien notes if at least one-half has been paid in cash or its equivalent on the land for which the notes were given.

(b) A guardian of the estate is considered to have obtained a reasonable rate of interest for a loan for purposes of Subsection (a) of this section if the rate of interest is at least equal to 120 percent of the applicable short-term, midterm, or long-term interest rate under Section 7520, Internal Revenue Code of 1986, as amended, for the month during which the loan was made.

(c) Except as provided by this subsection, a guardian of the estate who loans estate money with the court's approval on security approved by the court is not personally liable if the borrower is unable to repay the money and the security fails. If the guardian committed fraud or was negligent in making or managing the loan, including in collecting on the loan, the guardian and the guardian's surety are liable for the loss sustained by the guardianship estate as a result of the fraud or negligence.

(d) Except as provided by Subsection (e) of this section, a guardian of the estate who lends estate money may not pay or transfer any money to consummate the loan until the guardian:

(1) submits to an attorney for examination all bonds, notes, mortgages, abstracts, and other documents relating to the loan; and

(2) receives a written opinion from the attorney stating that the documents under Subdivision (1) of this subsection are regular and that the title to relevant bonds, notes, or real estate is clear.

(e) A guardian of the estate may obtain a mortgagee's title insurance policy on any real estate loan in lieu of an abstract and attorney's opinion under Subsection (d) of this section.

(f) The borrower shall pay attorney's fees for any legal services required by this section.

(g) Not later than the 30th day after the date the guardian of the estate loans money from the estate, the guardian shall file with the court a written report, accompanied by an affidavit, stating fully the facts related to the loan. This subsection does not apply to a loan made in accordance with a court order.

(h) This section does not apply to an investment in a debenture, bond, or other publicly traded debt security.

Added by Acts 1993, 73rd Leg., ch. 957, Sec. 1, eff. Sept. 1, 1993. Amended by Acts 2003, 78th Leg., ch. 549, Sec. 27, eff. Sept. 1, 2003.