H.B. 1472 78(R)    BILL ANALYSIS


H.B. 1472
By: Hartnett
Judicial Affairs
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

A power of appointment is a common tool in estate planning whereby a
person who does not own a property is given the right to designate to whom
that property will be transferred.  For instance, a father creates a trust
with his son as beneficiary.  Under a power of appointment, the father
would grant the son the right to designate who would receive the remainder
interest upon the son's death even though he never legally "owned" the
property in question.   

In well-drafted wills and trusts, the creator will be very specific as to
the power of appointment given.  For instance, the father may wish to keep
the trust proceeds within his blood family.  In such a case, a power of
appointment would be restricted to his son's children and would exclude
his son's wife.   

Unfortunately, not all wills and trusts are well-drafted, and this has
caused confusion in cases where the creator of the will or trust did not
clearly specify the powers of appointment granted.   H.B. 1472 creates a
set of default rules thereby preventing disputes and litigation over
poorly drafted trusts and wills. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

H.B. 1472 amends the Property Code to define the "object of the power of
appointment."   

The bill also provides that unless an instrument creating a power of
appointment expressly provides to the contrary, the donee (the person who
may exercise a power) may exercise a power in any manner consistent with
the Property Code.   

The bill also provides that in exercising a power of appointment, a donee
may make an appointment 1) of present, future, or present and future
interests; 2) with conditions and limitations; 3) with restraints on
alienation; 4) of interests to a trustee for the benefit of one or more
objects of the power; and 5) that creates any right existing under common
law.   

The bill also provides that in exercising a power, a donee, depending on
the terms of the original power of appointment, may make appointments that
create additional powers of appointment under certain circumstances.   


EFFECTIVE DATE

September 1, 2003.