SRC-JBJ S.B. 698 77(R)   BILL ANALYSIS


Senate Research Center   S.B. 698
77R5412 CAS-FBy: Carona
Jurisprudence
2/27/2001
As Filed


DIGEST AND PURPOSE 

Currently in Texas, a property interest must vest in a person entitled to
the property within a certain period of time.  This practice, commonly
known as the rule against perpetuities, limits the right to control the
disposition of trust assets for more than one or two generations by
requiring a trust to terminate in the same period of time.  Under current
federal law, however, it is possible to create a trust that can grow, free
of estate, gift, or generation-skipping tax as long as the trust lasts.  As
proposed, S.B. 698 provides that the common-law rule against perpetuities
as that rule relates to trusts does not apply in this state and that the
rule against  perpetuities does not apply to trusts.  Additionally, S.B.
698 lengthens the vesting period for the rule against perpetuities from 21
years to 1,000 years. 

RULEMAKING AUTHORITY

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

SECTION BY SECTION ANALYSIS


SECTION 1.  Amends Section 5.042(a), Property Code, to set forth certain
specific common-law rules or doctrines that do not apply in this state. 

SECTION 2.  Amends Section 112.036, Property Code, as follows:

Sec. 112.036.  New heading:  RULE AGAINST PERPETUITIES; REMOTENESS IN
VESTING.  (a)  Provides that this section governs the applicability of any
rule against perpetuities or remoteness of vesting as that rule relates to
trusts, except as provided by Section 121.004.   

(b)  Provides that the rule against perpetuities does not apply, rather
than applies, to trusts.  Deletes existing text pertaining to charitable
trusts. 

(c)  Provides that an interest in a trust is not good unless it must vest,
if at all, not later than 1,000 years, rather than 21 years, after some
life in being at the time of the creation of the interest.  Deletes
existing text pertaining to a period of gestation and interest in a trust
being reformed or construed. 

SECTION 3.  Amends Section 121.004, Property Code, as follows:

Sec. 121.004.  New heading:  CONTINUATION OF PENSION TRUSTS.  Deletes
existing text pertaining to the rule against perpetuities. 

SECTION 4.  (a)  Effective date: January 1, 2002.  Makes application of
this Act contingent upon approval by the voters of the constitutional
amendment proposed by the 77th Legislature removing the prohibition against
perpetual trusts. 
 
 (b)  Makes application of this Act prospective.