1-1                                   AN ACT
 1-2     relating to allocation of principal and income in certain trusts.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Subchapter D, Chapter 113, Property Code, is
 1-5     amended by adding Section 113.1021 to read as follows:
 1-6           Sec. 113.1021.  ALLOCATION OF PRINCIPAL AND INCOME IN
 1-7     CHARITABLE TRUSTS.  (a)  Unless otherwise provided by the trust
 1-8     instrument, an increase in the value of the following obligations
 1-9     over the value at the time the obligation was acquired by the trust
1-10     is income:
1-11                 (1)  a deferred annuity before annuitization; and
1-12                 (2)  a life insurance contract before the death of the
1-13     insured.
1-14           (b)  For purposes of this section and unless otherwise
1-15     provided by the trust instrument, the increase in value of an
1-16     obligation described by Subsection (a) is available for
1-17     distribution only when the trustee receives cash on account of the
1-18     obligation.  If the obligation is surrendered or partially
1-19     liquidated, the cash received must be attributed first to the
1-20     increase.  Notwithstanding Section 113.103, the increase in the
1-21     value of the obligation is available for distribution to the income
1-22     beneficiary who is the income beneficiary when the cash is received
1-23     and, if different, not to the income beneficiary who was the income
1-24     beneficiary at the time the income accrued.
 2-1           (c)  Section 113.109 applies to the allocation of principal
 2-2     and income for a deferred annuity after annuitization.
 2-3           SECTION 2.  (a)  This Act takes effect September 1, 1999.
 2-4           (b)  The change in law made by this Act applies only to
 2-5     principal and income subject to allocation on or after September 1,
 2-6     1999.  Principal and income subject to allocation before September
 2-7     1, 1999, is governed by the law in effect immediately before that
 2-8     date, and the former law is continued in effect for that purpose.
 2-9           SECTION 3.  The importance of this legislation and the
2-10     crowded condition of the calendars in both houses create an
2-11     emergency and an imperative public necessity that the
2-12     constitutional rule requiring bills to be read on three several
2-13     days in each house be suspended, and this rule is hereby suspended.
         _______________________________     _______________________________
             President of the Senate              Speaker of the House
               I certify that H.B. No. 1373 was passed by the House on April
         13, 1999, by a non-record vote; and that the House concurred in
         Senate amendments to H.B. No. 1373 on May 8, 1999, by a non-record
         vote.
                                             _______________________________
                                                 Chief Clerk of the House
               I certify that H.B. No. 1373 was passed by the Senate, with
         amendments, on May 6, 1999, by the following vote:  Yeas 30, Nays
         0.
                                             _______________________________
                                                 Secretary of the Senate
         APPROVED:  _____________________
                            Date
                    _____________________
                          Governor