HB 1553, by Rep. Craddick, which would abolish the rule against perpetuities and permit grantors to set up spendthrift trusts benefiting themselves if certain restrictions are met, is set for a public hearing before the House Financial Institutions Committee at 3:00PM, Monday, March 15, 1999, in Capitol Room E2.012.

If passed, I believe that Texas would become the first populous state with the double-barreled self-settled spendthrift trusts/no rule against perpetuities approach. Alaska and Delaware have similar statutes now, but of course no one actually lives in these places. Four or five other states have abolished the rule against perpetuities, but those states don't have the self-settled spendthrift trust provisions. Missouri has some provision regarding self-settled spendthrift trusts, but to my knowledge that state hasn't approached it quite so aggressively and coupled it with abolition of the rule against perpetuities as has Alaska and Delaware.

Abolition of the rule against perpetuities would appear to require a constitutional amendment, since Article 1, Section 26 of the Texas Constitution provides: "Perpetuities and monopolies are contrary to the genius of a free government, and shall never be allowed, nor shall the law of primogeniture or entailments ever be in force in this State." To my knowledge Rep. Craddick has not coupled HB 1553 with a proposed constitutional amendment. (The bill filing deadline is 6 p.m. today, Friday, March 12, 1999).

On the surface HB 1553 seems to be so earth-shattering that it wouldn't have a chance of passing. These kind of sea-change bills, like the Family Harmony Bill, usually don't pass unless and until they are studied, sliced, diced, etc., every which way for a couple of sessions. Nonetheless, the folks who watch probate and trust legislation seem to be taking this bill very seriously.  [03/12/99]

HB 1553, by Rep. Craddick, would abolish the rule against perpetuities and permit grantors to set up spendthrift trusts benefiting themselves if certain restrictions are met. The bill, which is clearly modeled after the Alaska trust statute, has been referred to the House Financial Institutions Committee.

Up to seven states have abolished the rule against perpetuities wholly or in part, so it isn't that remarkable that a bill seeking to do that might hit the hopper in Texas. What is remarkable is the, shall we say, aggressive creditor protection afforded trusts meeting the requirements of the bill. If a grantor retains only the right to receive discretionary distributions from an independent trustee, then he/she can give himself/herself spendthrift protection. There's a four-year fraudulent conveyance standard in the bill.

I don't know where this bill came from. It is not a Texas Bankers Association bill, nor is it a Real Estate, Probate and Trust Law Section bill or a Texas Academy of Probate Lawyers bill. I also don't know what chance it has of passing, since it seems likely to draw opposition from consumer groups and lenders.