By Craddick H.B. No. 1553
76R5118 PAM-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to permitting the creation of perpetual trusts in certain
1-3 circumstances.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 112.035(d), Property Code, is amended to
1-6 read as follows:
1-7 (d) Except as provided by Section 112.037 [If the settlor is
1-8 also a beneficiary of the trust], a provision restraining the
1-9 voluntary or involuntary transfer of a beneficiary's [his
1-10 beneficial] interest prevents a creditor existing when the trust is
1-11 created, a person who subsequently becomes a creditor, or another
1-12 person [does not prevent his creditors] from satisfying claims out
1-13 of the beneficiary's [from his] interest in the trust estate.
1-14 SECTION 2. Section 112.036, Property Code, is amended to
1-15 read as follows:
1-16 Sec. 112.036. SPENDTHRIFT TRUST AVOIDED IN CERTAIN
1-17 CIRCUMSTANCES. (a) A creditor existing when the trust is created,
1-18 a person who subsequently becomes a creditor, or another person may
1-19 satisfy a claim out of the beneficiary's interest in the trust if:
1-20 (1) the transfer was intended in whole or in part to
1-21 hinder, delay, or defraud a creditor or another person entitled to
1-22 recover by law;
1-23 (2) the trust instrument provides that the settlor may
1-24 revoke or terminate all or part of the trust without the consent of
2-1 a person who has a substantial beneficial interest in the trust and
2-2 the person's interest would be adversely affected by the exercise
2-3 of that power;
2-4 (3) the trust instrument provides that all or part of
2-5 the income or principal of the trust must be distributed to the
2-6 settlor; or
2-7 (4) at the time of the transfer, the settlor is in
2-8 default by 30 days or more in making a payment due under a child
2-9 support judgment or order.
2-10 (b) For purposes of Subsection (a)(2), the power to veto a
2-11 distribution from the trust, a testamentary special power or
2-12 similar power, or the right to receive a distribution of income or
2-13 corpus in the discretion of a person, including a trustee, other
2-14 than the settlor, does not constitute the power to revoke or
2-15 terminate all or part of the trust without the consent of a person
2-16 who has a substantial beneficial interest in the trust.
2-17 (c) The satisfaction of a claim under Subsection (a)(1),
2-18 (2), (3), or (4) is limited to that part of the trust to which the
2-19 subdivision applies.
2-20 (d) A person who is a creditor when the trust is created may
2-21 bring an action under Subsection (a)(1) only if the person brings
2-22 the action on or before the fourth anniversary of the date on which
2-23 the transfer is made or on or before the first anniversary of the
2-24 date the person should have known that the transfer was made,
2-25 whichever is later.
2-26 (e) A person who becomes a creditor after the transfer is
2-27 made may bring an action under Subsection (a)(1) only if the person
3-1 brings the action on or before the fourth anniversary of the date
3-2 on which the transfer is made [RULE AGAINST PERPETUITIES. The rule
3-3 against perpetuities applies to trusts other than charitable
3-4 trusts. Accordingly, an interest is not good unless it must vest,
3-5 if at all, not later than 21 years after some life in being at the
3-6 time of the creation of the interest, plus a period of gestation.
3-7 Any interest in a trust may, however, be reformed or construed to
3-8 the extent and as provided by Section 5.043].
3-9 SECTION 3. Subchapter B, Chapter 112, Property Code, is
3-10 amended by adding Section 112.037 to read as follows:
3-11 Sec. 112.037. CONFLICT OF LAWS PROVISION: SPENDTHRIFT
3-12 TRUSTS. (a) In this section:
3-13 (1) "Bank" has the meaning assigned by Article 1.002,
3-14 Texas Trust Company Act (Article 342a-1.002, Vernon's Texas Civil
3-15 Statutes).
3-16 (2) "Qualified person" means:
3-17 (A) an individual who is a resident of this
3-18 state;
3-19 (B) a state trust company that has its principal
3-20 place of business in this state; or
3-21 (C) a bank that possesses and exercises trust
3-22 powers and has its principal place of business in this state.
3-23 (3) "State trust company" has the meaning assigned by
3-24 Article 1.002, Texas Trust Company Act (Article 342a-1.002,
3-25 Vernon's Texas Civil Statutes).
3-26 (b) A provision in a trust instrument described by Section
3-27 112.035 that provides that the laws of this state govern the
4-1 validity, construction, and administration of the trust is
4-2 conclusive if:
4-3 (1) some or all of the trust assets are deposited in
4-4 this state and are administered by a qualified person;
4-5 (2) at least one trustee is a qualified person who is
4-6 designated as a trustee under the trust instrument or by a court
4-7 having jurisdiction over the trust;
4-8 (3) the administrative powers of the qualified person
4-9 include:
4-10 (A) maintaining records for the trust,
4-11 exclusively or nonexclusively; and
4-12 (B) preparing or providing for the preparation
4-13 of, exclusively or nonexclusively, an income tax return that must
4-14 be filed by the trust; and
4-15 (4) all or part of the administration occurs in this
4-16 state.
4-17 (c) For purposes of Subsection (b)(1), trust assets are
4-18 deposited in this state if the assets are held in a checking
4-19 account, time deposit, certificate of deposit, brokerage account,
4-20 trust company fiduciary account, or other similar account or
4-21 deposit that is located in this state.
4-22 SECTION 4. (a) This Act takes effect September 1, 1999.
4-23 (b) The change in law made by this Act applies only to a
4-24 trust created on or after the effective date of this Act. A trust
4-25 created before the effective date of this Act is governed by the
4-26 law in effect when the trust was created, and the former law is
4-27 continued in effect for that purpose.
5-1 SECTION 5. The importance of this legislation and the
5-2 crowded condition of the calendars in both houses create an
5-3 emergency and an imperative public necessity that the
5-4 constitutional rule requiring bills to be read on three several
5-5 days in each house be suspended, and this rule is hereby suspended.