SRC-DPW H.B. 1373 76(R)   BILL ANALYSIS


Senate Research Center   H.B. 1373
76R5569 PAM-DBy: Williams (Sibley)
Jurisprudence
4/23/1999
Engrossed


DIGEST 

Currently, Texas law does not specify whether an increase in an annuity of
a trust is principal or income. The Internal Revenue Code leaves that
determination to state law.  This bill would establish, as income, an
increase in the value of a deferred annuity before annuitization or the
increase in value of a life insurance contract before the death of the
insured, unless the trust specifies otherwise. 

PURPOSE

As proposed, H.B. 1373 sets forth guidelines for the allocation of
principal and income in certain trusts. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Chapter 113D, Property Code, by adding Section 113.1021,
as follows: 

Sec. 113.1021. ALLOCATION OF PRINCIPAL AND INCOME IN CERTAIN TRUSTS.
Provides that an increase in the value of a deferred annuity before
annuitization and a life insurance contract before the death of the
insured, over the value at the time the obligation was acquired by trust is
income, unless otherwise provided by the trust instrument.  Provides that
the increase in value of an obligation is available for distribution only
when the trustee receives cash on account of the obligation.  Requires the
cash received to be attributed first to the increase, if the obligation is
surrendered or partially liquidated.  Provides that the increase in the
value of the obligation is available for distribution to the income
beneficiary who is the income beneficiary when the cash is received and, if
different, not to the income beneficiary who was the income beneficiary at
the time the income accrued, notwithstanding Section 113.103. Provides that
Section 113.109 applies to the allocation of principal and income for a
deferred annuity after annuitization. 

SECTION 2.Effective date: September 1, 1999.
  Makes application of this Act prospective.

SECTION 3. Emergency clause.