HBA-SEB H.B. 1373 76(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 1373
By: Williams
Pensions and Investments
6/28/1999
Enrolled



BACKGROUND AND PURPOSE 

Prior to the 76th Legislature, the law did not specify whether an increase
in an annuity of a trust was principal or income.  The  Internal Revenue
Code left that determination to state law.  H.B. 1373 establishes 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. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

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

Sec. 113.1021.  ALLOCATION OF PRINCIPAL AND INCOME IN CHARITABLE TRUSTS.
(a)  Establishes that, unless otherwise provided by the trust instrument,
an increase in the value of a deferred annuity before annuitization or an
increase in the value of a life insurance contract before the death of the
insured is income if the increase is over the value at the time the
obligation was acquired by the trust. 

(b)  Provides that the increase in value of an obligation described by
Subsection (a) is available for distribution only when the trustee receives
cash on account of the obligation, unless otherwise provided by the trust
instrument.  Specifies that if the obligation is surrendered or partially
liquidated, the cash received must be attributed first to the increase.
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, despite Section
113.103 (When Right to Income Arises; Apportionment of Income). 

(c)  Establishes that Section 113.109 (Property Other Than Natural
Resources Subject to Depletion) 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.