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.
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