HBA-JLV H.B. 1608 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1608
By: Averitt
Financial Institutions
3/2/2001
Introduced



BACKGROUND AND PURPOSE 

Currently, perpetual trusts are prohibited by the Texas Constitution and
the Property Code.  The Rule Against Perpetuities (RAP) provides that a
trust must end twenty-one years after the death of the last "measuring
life," or family members who are alive at the time the trust is created.
Since a Texas resident cannot create a perpetual trust in Texas, that
resident can create a perpetual trust by moving their capital to a trust
fund created in another state that allows perpetual trusts.  By revising
the RAP provision, Texans may be encouraged to leave trust assets in the
state, which may prevent an erosion of the intangible personal property tax
base.  House Bill 1608 removes the prohibition on perpetual trusts and
provides that a trust vesting interest can last for up to 1,000 years. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 1608 amends the Property Code to provide that the rule against
perpetuities or remoteness in vesting, as that rule relates to trusts, does
not apply in this state.  The bill provides that these provisions govern
the applicability of any rule against perpetuities or remoteness of vesting
as that rule relates to trusts, with an exception.  The bill provides that
an interest in a trust is not good unless it must vest, if at all, not
later than 1,000 years after some life in being at the time of the creation
of the interest. 

EFFECTIVE DATE

January 1, 2002, but only if the constitutional amendment proposed by the
77th Legislature, Regular Session, 2001, removing the prohibition against
perpetual trusts is approved by the voters.  If that amendment is not
approved by the voters, this Act has no effect.