1-1 By: Carona S.B. No. 698
1-2 (In the Senate - Filed February 14, 2001; February 15, 2001,
1-3 read first time and referred to Committee on Jurisprudence;
1-4 April 3, 2001, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 5, Nays 0; April 3, 2001,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 698 By: Jackson
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the applicability of the rule against perpetuities to
1-11 trusts.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Subsection (a), Section 5.042, Property Code, is
1-14 amended to read as follows:
1-15 (a) The following common-law rules or doctrines do not apply
1-16 in this state:
1-17 (1) [known as] the rule in Shelley's case;
1-18 (2) [,] the rule forbidding a remainder to the
1-19 grantor's heirs;
1-20 (3) [,] the doctrine of worthier title;
1-21 (4) the rule against perpetuities as that rule relates
1-22 to trusts;[,] and
1-23 (5) the doctrine or rule prohibiting an existing lien
1-24 upon part of a homestead from extending to another part of the
1-25 homestead not charged with the debts secured by the existing lien
1-26 upon part of the homestead [do not apply in this state].
1-27 SECTION 2. Section 112.036, Property Code, is amended to
1-28 read as follows:
1-29 Sec. 112.036. RULE AGAINST PERPETUITIES. (a) Except as
1-30 provided by Section 121.004 and this section, the [The] rule
1-31 against perpetuities does not apply [applies] to trusts [other than
1-32 charitable trusts].
1-33 (b) No nonvested property interest, interest in a trust, or
1-34 other disposition of property, including any interest created
1-35 pursuant to the exercise of a power of appointment, is invalid
1-36 under any rule against perpetuities during the 360 years following
1-37 the date the instrument creating the interest becomes irrevocable
1-38 [Accordingly, and interest is not good unless it must vest, if at
1-39 all, not later than 21 years after some life in being at the time
1-40 of the creation of the interest, plus a period of gestation. Any
1-41 interest in a trust may, however, be reformed or construed to the
1-42 extent and as provided by Section 5.043].
1-43 (c) If, at the end of the 360 years following the date the
1-44 instrument creating an interest becomes irrevocable, any of the
1-45 assets subject to the interest have not vested, the assets shall be
1-46 distributed by a court having jurisdiction. The court shall give
1-47 effect to the general intent of the settlor of the trust or person
1-48 exercising a power of appointment in the case of any further trust
1-49 or other disposition of property made pursuant to the exercise of a
1-50 power of appointment.
1-51 (d) Perpetual charitable trusts are permitted and are not
1-52 subject to the rule against perpetuities.
1-53 SECTION 3. Section 121.004, Property Code, is amended to
1-54 read as follows:
1-55 Sec. 121.004. CONTINUATION OF PENSION TRUSTS [RULE AGAINST
1-56 PERPETUITIES]. A pension trust may continue for as long as is
1-57 necessary to accomplish the purposes of the trust and is not
1-58 invalid under [the rule against perpetuities or] any [other] law
1-59 restricting or limiting the duration of a trust.
1-60 SECTION 4. (a) This Act takes effect January 1, 2002, but
1-61 only if the constitutional amendment proposed by the 77th
1-62 Legislature, Regular Session, 2001, removing the prohibition
1-63 against perpetual trusts is approved by the voters. If that
1-64 amendment is not approved by the voters, this Act has no effect.
2-1 (b) The change in law made by this Act applies only to a
2-2 trust that becomes irrevocable or is judicially modified or
2-3 reformed to make the provisions of this Act applicable on or after
2-4 the effective date of this Act. A trust that does not become
2-5 irrevocable or is not judicially modified or reformed to make the
2-6 provisions of this Act applicable on or after the effective date of
2-7 this Act is governed by the law in effect when the trust was
2-8 created, and the former law is continued in effect for that purpose
2-9 of a trust.
2-10 * * * * *