Texas 2015 - 84th Regular

Texas Senate Bill SB500 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	84R6541 AJA-D
2	2	By: Burton S.B. No. 500
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to self-settled asset protection trusts.
8	8	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	9	SECTION 1. Section 112.035(d), Property Code, is amended to
10	10	read as follows:
11	11	(d) Except as provided by Section 112.0351, if [If] the
12	12	settlor is also a beneficiary of the trust, a provision restraining
13	13	the voluntary or involuntary transfer of the settlor's beneficial
14	14	interest does not prevent the settlor's creditors from satisfying
15	15	claims from the settlor's interest in the trust estate. A settlor is
16	16	not considered a beneficiary of a trust solely because:
17	17	(1) a trustee who is not the settlor is authorized
18	18	under the trust instrument to pay or reimburse the settlor for, or
19	19	pay directly to the taxing authorities, any tax on trust income or
20	20	principal that is payable by the settlor under the law imposing the
21	21	tax; or
22	22	(2) the settlor's interest in the trust was created by
23	23	the exercise of a power of appointment by a third party.
24	24	SECTION 2. Subchapter B, Chapter 112, Property Code, is
25	25	amended by adding Section 112.0351 to read as follows:
26	26	Sec. 112.0351. SELF-SETTLED ASSET PROTECTION TRUST. (a)
27	27	If a spendthrift trust of which the settlor is a beneficiary
28	28	satisfies the requirements of Subsection (b):
29	29	(1) the trust is considered a self-settled asset
30	30	protection trust; and
31	31	(2) except as provided by this section, a restraint by
32	32	the trust of the voluntary or involuntary transfer of the settlor's
33	33	beneficial interest in the trust prevents the settlor's creditors
34	34	from satisfying claims from that interest.
35	35	(b) A spendthrift trust of which the settlor is a
36	36	beneficiary may be considered a self-settled asset protection trust
37	37	under this section only if:
38	38	(1) the trust:
39	39	(A) is created in a writing signed by the
40	40	settlor;
41	41	(B) is irrevocable;
42	42	(C) does not require that any part of the income
43	43	or principal of the trust be distributed to the settlor; and
44	44	(D) is not intended to hinder, delay, or defraud
45	45	known creditors; and
46	46	(2) at least one trustee of the trust is:
47	47	(A) an individual who resides in and is domiciled
48	48	in this state;
49	49	(B) a trust company that:
50	50	(i) is organized under federal law or under
51	51	the laws of this state or another state; and
52	52	(ii) maintains an office in this state for
53	53	the transaction of business; or
54	54	(C) a financial institution, as defined by
55	55	Section 201.101, Finance Code, that:
56	56	(i) is organized under federal law or under
57	57	the laws of this state or another state;
58	58	(ii) maintains an office in this state for
59	59	the transaction of business; and
60	60	(iii) has and exercises trust powers.
61	61	(c) A spendthrift trust may be considered a self-settled
62	62	asset protection trust even if under the trust terms:
63	63	(1) the settlor may prevent a distribution from the
64	64	trust;
65	65	(2) the settlor holds a special lifetime or
66	66	testamentary power of appointment, so long as that power cannot be
67	67	exercised in favor of the settlor, the settlor's estate, a creditor
68	68	of the settlor, or a creditor of the settlor's estate;
69	69	(3) the settlor is a beneficiary of a trust that
70	70	qualifies as a charitable remainder trust under 26 U.S.C. Section
71	71	664, or a successor provision, even if the settlor has the right to
72	72	release all or part of the settlor's retained interest in that trust
73	73	in favor of one or more of the remainder beneficiaries of the trust;
74	74	(4) the settlor is authorized or entitled to receive a
75	75	percentage of the value of the trust each year as specified in the
76	76	trust instrument, whether of the initial value of the trust assets
77	77	or their value determined from time to time as provided by the trust
78	78	instrument, so long as the authorized annual distribution may not
79	79	exceed:
80	80	(A) the amount that may be considered income
81	81	under 26 U.S.C. Section 643(b); or
82	82	(B) with respect to benefits from any qualified
83	83	retirement plan or any eligible deferred compensation plan, the
84	84	minimum required distribution as defined by 26 U.S.C. Section
85	85	4974(b);
86	86	(5) the settlor is authorized or entitled to receive
87	87	income or principal from:
88	88	(A) a grantor retained annuity trust paying out a
89	89	qualified annuity interest within the meaning of 26 C.F.R. Section
90	90	25.2702-3(b); or
91	91	(B) a grantor retained unitrust paying out a
92	92	qualified unitrust interest within the meaning of 26 C.F.R. Section
93	93	25.2702-3(c);
94	94	(6) the settlor:
95	95	(A) is authorized or entitled to use real
96	96	property held under a qualified personal residence trust as
97	97	described in 26 C.F.R. Section 25.2702-5(c), or a successor
98	98	provision; or
99	99	(B) may possess or actually possesses a qualified
100	100	annuity interest within the meaning of 26 C.F.R. Section
101	101	25.2702-3(b), or a successor provision;
102	102	(7) the settlor is authorized to receive income or
103	103	principal from the trust, so long as the authorized distribution is
104	104	subject to the discretion of another person; or
105	105	(8) the settlor is authorized to use real or personal
106	106	property owned by the trust.
107	107	(d) Except as provided by this subsection, this section may
108	108	not be construed to prohibit the settlor of a self-settled asset
109	109	protection trust from holding any power under the trust, whether or
110	110	not the settlor is a cotrustee, including the power to remove and
111	111	replace a trustee, direct trust investments, or execute other
112	112	management powers. The settlor may not hold a power to make
113	113	distributions to himself or herself without the consent of another
114	114	person.
115	115	(e) The settlor of a self-settled asset protection trust has
116	116	only those powers and rights that are conferred on the settlor by
117	117	the trust instrument. An agreement or understanding, express or
118	118	implied, between the settlor and the trustee that attempts to grant
119	119	or permit the retention of greater rights or authority than is
120	120	stated in the trust instrument is void.
121	121	(f) A person who is a settlor's creditor when a transfer is
122	122	made to a self-settled asset protection trust may not bring an
123	123	action with respect to the transfer unless the action is commenced
124	124	on or before the later of:
125	125	(1) the second anniversary of the date on which the
126	126	transfer was made; or
127	127	(2) the 180th day after the date on which the creditor
128	128	discovers or reasonably should have discovered the transfer.
129	129	(g) A person who becomes a settlor's creditor after a
130	130	transfer is made to a self-settled asset protection trust may not
131	131	bring an action with respect to the transfer unless the action is
132	132	commenced on or before the second anniversary of the date on which
133	133	the transfer was made.
134	134	(h) For purposes of Subsection (f), a person is considered
135	135	to have discovered a transfer at the time a public record is made of
136	136	the transfer, including a recording of the conveyance of real
137	137	property in the deed records of the county in which the property is
138	138	located or the filing of a financing statement under Chapter 9,
139	139	Business & Commerce Code.
140	140	(i) A settlor's creditor may not bring an action with
141	141	respect to transfer of property to a self-settled asset protection
142	142	trust unless the creditor can prove by clear and convincing
143	143	evidence that the transfer of property was a fraudulent transfer
144	144	under Chapter 24, Business & Commerce Code, or that the transfer
145	145	violates a legal obligation owed to the creditor under a contract or
146	146	a valid court order that is legally enforceable by the creditor. In
147	147	the absence of such clear and convincing proof, the property
148	148	transferred is not subject to the claims of the creditor. Proof by
149	149	one creditor that a transfer of property was fraudulent or wrongful
150	150	does not constitute proof as to any other creditor, and proof of a
151	151	fraudulent or wrongful transfer of property as to one creditor does
152	152	not invalidate any other transfer of property.
153	153	(j) For purposes of Subsections (f) and (g), if property
154	154	transferred to a self-settled asset protection trust is
155	155	subsequently conveyed to the settlor or other trust beneficiary for
156	156	the purpose of obtaining a loan secured by a mortgage or deed of
157	157	trust on the property and then reconveyed to the trust, the
158	158	conveyance from and reconveyance to the trust shall be disregarded
159	159	and the property is considered to have been transferred to the trust
160	160	on the date of the original transfer to the trust. The mortgage or
161	161	deed of trust on the property is enforceable against the trust.
162	162	(k) If more than one transfer is made to a self-settled
163	163	asset protection trust:
164	164	(1) for purposes of Subsections (f) and (g), each
165	165	subsequent transfer to the trust shall be disregarded for the
166	166	purpose of determining whether a person may bring an action with
167	167	respect to a previous transfer to the trust; and
168	168	(2) any distribution to a beneficiary from the trust
169	169	is considered to have been made from the most recent transfer made
170	170	to the trust.
171	171	(l) For purposes of this section, if a trustee of a
172	172	self-settled asset protection trust exercises the trustee's
173	173	discretion or authority to distribute trust income or principal to
174	174	or for the settlor of the trust by appointing the property of the
175	175	original trust in favor of a second trust for the benefit of the
176	176	settlor as provided by Subchapter D:
177	177	(1) the second trust is considered to be a
178	178	self-settled asset protection trust under this section so long as
179	179	it satisfies the requirements of this section other than the
180	180	self-settlement requirement; and
181	181	(2) if considered a self-settled asset protection
182	182	trust under Subdivision (1), property transferred to the second
183	183	trust is considered for purposes of Subsections (f) and (g) to have
184	184	been transferred on the date the settlor of the original
185	185	self-settled asset protection trust transferred the property into
186	186	that trust, regardless of the fact that the property has been
187	187	transferred to a second trust.
188	188	(m) A trust the domicile of which is changed to this state is
189	189	considered a self-settled asset protection trust under this section
190	190	if the requirements of this section are satisfied simultaneously
191	191	with, or immediately after, the change of domicile to this state.
192	192	For purposes of Subsections (f) and (g), if the domicile of a
193	193	self-settled asset protection trust is changed to this state from a
194	194	jurisdiction having laws substantially similar to this section, a
195	195	transfer of assets to the trust before the change in domicile to
196	196	this state is considered to have occurred:
197	197	(1) on the date the assets were transferred to the
198	198	trust if, at the time of the transfer and at all times after the
199	199	transfer, the laws governing the trust were substantially similar
200	200	to this section; or
201	201	(2) if Subdivision (1) does not apply, on the earliest
202	202	date on which the trust was subjected, without interruption, to
203	203	laws substantially similar to this section.
204	204	(n) Unless the trust instrument expressly provides
205	205	otherwise, this subtitle governs the construction, operation, and
206	206	enforcement in this state of a self-settled asset protection trust
207	207	created in or outside this state if:
208	208	(1) any of the trust assets are in this state;
209	209	(2) the trust affects personal property and the
210	210	declared domicile of the creator of the trust is in this state; or
211	211	(3) at least one trustee serving under Subsection
212	212	(b)(2) has the power to maintain records and prepare income tax
213	213	returns for the trust and at least part of the trust administration
214	214	is performed in this state.
215	215	SECTION 3. (a) Except as provided by this section, the
216	216	change in law made by this Act applies only to a transfer of
217	217	property on or after the effective date of this Act to a
218	218	self-settled asset protection trust that satisfies the
219	219	requirements of Section 112.0351, Property Code, as added by this
220	220	Act.
221	221	(b) For purposes of Section 112.0351, Property Code, as
222	222	added by this Act, property transferred before the effective date
223	223	of this Act to a trust that on or after the effective date of this
224	224	Act satisfies the requirements of that section is considered
225	225	transferred to the trust on the earliest date on or after the
226	226	effective date of this Act on which the trust terms satisfy the
227	227	requirements of that section.
228	228	(c) With respect to a trust the domicile of which is changed
229	229	to this state on or after the effective date of this Act, Section
230	230	112.0351, Property Code, as added by this Act, applies with respect
231	231	to transfers made to the trust before, on, or after the effective
232	232	date of this Act.
233	233	SECTION 4. This Act takes effect September 1, 2015.