Bill not drafted by TLC or Senate E&E. Line and page numbers may not match official copy. By Williams H.B. No. 2936 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the allocation of principal and income in certain 1-3 trusts. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Section 113.102, Texas Trust Code (Vernon's Texas 1-6 Statutes and Codes Annotated Property Code, Title 9.) is amended by 1-7 adding Subsection (d) to read as follows: 1-8 (d) (a) Except as provided in subsections (b) and (d), bonds 1-9 or other obligations for the payment of money and the proceeds of 1-10 sale, redemption, or other disposition thereof are principal. No 1-11 provision may be made for the amortization of bond premiums or for 1-12 accumulation for discount. 1-13 (b) Unless otherwise provided in this chapter or the 1-14 trust instrument, an increase in the value of the following 1-15 obligations is distributable as income: 1-16 1. A zero coupon security. 1-17 2. A deferred annuity contract before annuitization. 1-18 3. A life insurance contract before the death of the 1-19 insured. 1-20 4. An interest in a common trust fund (as defined 1-21 under Section 584 of the Internal Revenue Code) owned by a pooled 1-22 income fund (as defined under Section 642(c)(5) of the Internal 1-23 Revenue Code) or charitable remainder unitrust (as defined under 1-24 Section 664(d)(2) and 664(d)(3) if the Internal Revenue Code). 2-1 payable at a future time in accordance with a fixed, variable, or 2-2 discretionary schedule of appreciation in excess of the price at 2-3 which it was issued. 2-4 (c) The increase in value is distributable to the 2-5 beneficiary at the time of the increase from the first principal 2-6 cash available, when realized by sale, redemption, or other 2-7 disposition. Whenever an unrealized increase is distributed out of 2-8 principal as income, the principal shall be reimbursed for the 2-9 increase when realized. 2-10 (d) For the purposes of this section, the increase in 2-11 value of an obligation defined in subsection (b) is available for 2-12 distribution only when the trustee receives cash on account of the 2-13 obligation. 2-14 SECTION 2. This Act takes effect September 1, 91997. 2-15 SECTION 3. The importance of this legislation and the 2-16 crowded condition of the calendars in both houses create an 2-17 emergency and an imperative public necessity that the 2-18 constitutional rule requiring bills to be read on three several 2-19 days in each house be suspended, and this rule is hereby suspended.