By: Carona S.B. No. 698
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the applicability of the rule against perpetuities to
1-3 trusts.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subsection (a), Section 5.042, Property Code, is
1-6 amended to read as follows:
1-7 (a) The following common-law rules or doctrines do not apply
1-8 in this state:
1-9 (1) [known as] the rule in Shelley's case;
1-10 (2) [,] the rule forbidding a remainder to the
1-11 grantor's heirs;
1-12 (3) [,] the doctrine of worthier title;
1-13 (4) the rule against perpetuities as that rule relates
1-14 to trusts;[,] and
1-15 (5) the doctrine or rule prohibiting an existing lien
1-16 upon part of a homestead from extending to another part of the
1-17 homestead not charged with the debts secured by the existing lien
1-18 upon part of the homestead [do not apply in this state].
1-19 SECTION 2. Section 112.036, Property Code, is amended to
1-20 read as follows:
1-21 Sec. 112.036. RULE AGAINST PERPETUITIES. (a) Except as
1-22 provided by Section 121.004 and this section, the [The] rule
1-23 against perpetuities does not apply [applies] to trusts [other than
1-24 charitable trusts].
1-25 (b) No nonvested property interest, interest in a trust, or
2-1 other disposition of property, including any interest created
2-2 pursuant to the exercise of a power of appointment, is invalid
2-3 under any rule against perpetuities during the 360 years following
2-4 the date the instrument creating the interest becomes irrevocable
2-5 [Accordingly, an interest is not good unless it must vest, if at
2-6 all, not later than 21 years after some life in being at the time
2-7 of the creation of the interest, plus a period of gestation. Any
2-8 interest in a trust may, however, be reformed or construed to the
2-9 extent and as provided by Section 5.043].
2-10 (c) If, at the end of the 360 years following the date the
2-11 instrument creating an interest becomes irrevocable, any of the
2-12 assets subject to the interest have not vested, the assets shall be
2-13 distributed by a court having jurisdiction. The court shall give
2-14 effect to the general intent of the settlor of the trust or person
2-15 exercising a power of appointment in the case of any further trust
2-16 or other disposition of property made pursuant to the exercise of a
2-17 power of appointment.
2-18 (d) Perpetual charitable trusts are permitted and are not
2-19 subject to the rule against perpetuities.
2-20 SECTION 3. Section 121.004, Property Code, is amended to
2-21 read as follows:
2-22 Sec. 121.004. CONTINUATION OF PENSION TRUSTS [RULE AGAINST
2-23 PERPETUITIES]. A pension trust may continue for as long as is
2-24 necessary to accomplish the purposes of the trust and is not
2-25 invalid under [the rule against perpetuities or] any [other] law
2-26 restricting or limiting the duration of a trust.
3-1 SECTION 4. (a) This Act takes effect January 1, 2002, but
3-2 only if the constitutional amendment proposed by the 77th
3-3 Legislature, Regular Session, 2001, removing the prohibition
3-4 against perpetual trusts is approved by the voters. If that
3-5 amendment is not approved by the voters, this Act has no effect.
3-6 (b) The change in law made by this Act applies only to a
3-7 trust that becomes irrevocable or is judicially modified or
3-8 reformed to make the provisions of this Act applicable on or after
3-9 the effective date of this Act. A trust that does not become
3-10 irrevocable or is not judicially modified or reformed to make the
3-11 provisions of this Act applicable on or after the effective date of
3-12 this Act is governed by the law in effect when the trust was
3-13 created, and the former law is continued in effect for that
3-14 purpose.