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PAG LIN 1 1 Section 1. Section 557.7, Code 1995, is amended to read as 1 2 follows: 1 3 557.7 CONTINGENT REMAINDERS. 1 4 A contingent remainder shall take effect, notwithstanding 1 5 any determination of the particular estate, in the same manner 1 6 in which it would have taken effect if it had been an 1 7 executory devise or a springing or shifting use, and shall, as 1 8 well as such limitations, be subject to the rulerespecting1 9 contained in section 558.68 regarding remoteness in vesting 1 10 known as the rule against perpetuities, exclusive of any other 1 11 supposed rule respecting limitations to successive generations 1 12 or double possibilities. 1 13 Sec. 2. Section 558.68, Code 1995, is amended by striking 1 14 the section and inserting in lieu thereof the following: 1 15 558.68 PERPETUITIES. 1 16 1. STATUTORY RULE AGAINST PERPETUITIES. 1 17 a. VALIDITY OF NONVESTED PROPERTY INTEREST. A nonvested 1 18 property interest is invalid unless either of the following 1 19 applies: 1 20 (1) When the interest is created, it is certain to vest or 1 21 terminate no later than twenty-one years after the death of an 1 22 individual then alive. 1 23 (2) The interest either vests or terminates within ninety 1 24 years after its creation. 1 25 b. VALIDITY OF GENERAL POWER OF APPOINTMENT SUBJECT TO A 1 26 CONDITION PRECEDENT. A general power of appointment not 1 27 presently exercisable because of a condition precedent is 1 28 invalid unless either of the following applies: 1 29 (1) When the power is created, the condition precedent is 1 30 certain to be satisfied or becomes impossible to satisfy no 1 31 later than twenty-one years after the death of an individual 1 32 then alive. 1 33 (2) The condition precedent either is satisfied or becomes 1 34 impossible to satisfy within ninety years after its creation. 1 35 c. VALIDITY OF NONGENERAL OR TESTAMENTARY POWER OF 2 1 APPOINTMENT. A nongeneral power of appointment or a general 2 2 testamentary power of appointment is invalid unless either of 2 3 the following applies: 2 4 (1) When the power is created, it is certain to be 2 5 irrevocably exercised or otherwise to terminate no later than 2 6 twenty-one years after the death of an individual then alive. 2 7 (2) The power is irrevocably exercised or otherwise 2 8 terminates within ninety years after its creation. 2 9 d. POSSIBILITY OF POST-DEATH CHILD DISREGARDED. In 2 10 determining whether a nonvested property interest or a power 2 11 of appointment is valid under paragraph "a", subparagraph (1), 2 12 paragraph "b", subparagraph (1), or paragraph "c", 2 13 subparagraph (1), the possibility that a child will be born to 2 14 an individual after the individual's death is disregarded. 2 15 e. EFFECT OF CERTAIN "LATER-OF" TYPE LANGUAGE. The 2 16 language in a governing instrument is inoperative to the 2 17 extent it produces a period of time that exceeds twenty-one 2 18 years after the death of the survivor of the specified lives, 2 19 if, in measuring a period from the creation of a trust or 2 20 other property arrangement, the language seeks to disallow the 2 21 vesting or termination of any interest or trust beyond, or 2 22 seeks to postpone the vesting or termination of any interest 2 23 or trust until, or seeks to operate in effect in any similar 2 24 fashion upon, the later of either of the following: 2 25 (1) The expiration of a period of time not exceeding 2 26 twenty-one years after the death of the survivor of specified 2 27 lives in being at the creation of the trust or other property 2 28 arrangement. 2 29 (2) The expiration of a period of time that exceeds or 2 30 might exceed twenty-one years after the death of the survivor 2 31 of lives in being at the creation of the trust or other 2 32 property arrangement. 2 33 2. WHEN NONVESTED PROPERTY INTEREST OR POWER OF 2 34 APPOINTMENT CREATED. 2 35 a. Except as provided in paragraphs "b" and "c" and in 3 1 subsection 5, paragraph "a", the time of creation of a 3 2 nonvested property interest or a power of appointment is 3 3 determined under general principles of property law. 3 4 b. For purposes of this section, if there is a person who 3 5 alone can exercise a power created by a governing instrument 3 6 to become the unqualified beneficial owner of a nonvested 3 7 property interest or a property interest subject to a power of 3 8 appointment described in subsection 1, paragraphs "b" and "c", 3 9 the nonvested property interest or power of appointment is 3 10 created when the power to become the unqualified beneficial 3 11 owner terminates. 3 12 c. For purposes of this section, a nonvested property 3 13 interest or a power of appointment arising from a transfer of 3 14 property to a previously funded trust or other existing 3 15 property arrangement is created when the nonvested property 3 16 interest or power of appointment in the original contribution 3 17 was created. 3 18 3. REFORMATION. Upon the petition of an interested 3 19 person, a court shall reform a disposition in the manner that 3 20 most closely approximates the transferor's manifested plan of 3 21 distribution and is within the ninety years allowed by 3 22 subsection 1, paragraph "a", subparagraph (2), paragraph "b", 3 23 subparagraph (2), and paragraph "c", subparagraph (2), if any 3 24 of the following applies: 3 25 a. A nonvested property interest or a power of appointment 3 26 becomes invalid under subsection 1. 3 27 b. A class gift is not but might become invalid under 3 28 subsection 1 and the time has arrived when the share of any 3 29 class member is to take effect in possession or enjoyment. 3 30 c. A nonvested property interest that is not validated by 3 31 subsection 1, paragraph "a", subparagraph (1), can vest but 3 32 not within ninety years after its creation. 3 33 4. EXCLUSIONS FROM RULE AGAINST PERPETUITIES. Subsection 3 34 1 does not apply to any of the following: 3 35 a. A nonvested property interest or a power of appointment 4 1 arising out of a nondonative transfer, except a nonvested 4 2 property interest or a power of appointment arising out of any 4 3 of the following: 4 4 (1) A premarital or postmarital agreement. 4 5 (2) A separation or divorce settlement. 4 6 (3) A spouse's election. 4 7 (4) A similar arrangement arising out of a prospective, 4 8 existing, or previous marital relationship between the 4 9 parties. 4 10 (5) A contract to make or not to revoke a will or trust. 4 11 (6) A contract to exercise or not to exercise a power of 4 12 appointment. 4 13 (7) A transfer in satisfaction of a duty of support. 4 14 (8) A reciprocal transfer. 4 15 b. A fiduciary's power relating to the administration or 4 16 management of assets, including the power of a fiduciary to 4 17 sell, lease, or mortgage property, and the power of a 4 18 fiduciary to determine principal and income. 4 19 c. A power to appoint a fiduciary. 4 20 d. A discretionary power of a trustee to distribute 4 21 principal before termination of a trust to a beneficiary 4 22 having an indefeasibly vested interest in the income and 4 23 principal. 4 24 e. A nonvested property interest held by a charity, 4 25 government, or governmental agency or subdivision, if the 4 26 nonvested property interest is preceded by an interest held by 4 27 another charity, government, or governmental agency or 4 28 subdivision. 4 29 f. A nonvested property interest in or a power of ap- 4 30 pointment with respect to a trust or other property 4 31 arrangement forming part of a pension, profit-sharing, stock 4 32 bonus, health, disability, death benefit, income deferral, or 4 33 other current or deferred benefit plan for one or more 4 34 employees, independent contractors, or their beneficiaries or 4 35 spouses, to which contributions are made for the purpose of 5 1 distributing to or for the benefit of the participants or 5 2 their beneficiaries or spouses the property, income, or 5 3 principal in the trust or other property arrangement, except a 5 4 nonvested property interest or a power of appointment that is 5 5 created by an election of a participant or a beneficiary or 5 6 spouse. 5 7 g. A property interest, power of appointment, or ar- 5 8 rangement that was not subject to the common-law rule against 5 9 perpetuities or is excluded by another statute. 5 10 5. PROSPECTIVE APPLICATION. 5 11 a. Except as extended by paragraph "b", this section 5 12 applies to a nonvested property interest or a power of 5 13 appointment that is created on or after the effective date of 5 14 this section. For purposes of this subsection, a nonvested 5 15 property interest or a power of appointment created by the 5 16 exercise of a power of appointment is created when the power 5 17 is irrevocably exercised or when a revocable exercise becomes 5 18 irrevocable. 5 19 b. If a nonvested property interest or a power of ap- 5 20 pointment was created before the effective date of this 5 21 section and is determined in a judicial proceeding, commenced 5 22 on or after the effective date of this section, to violate 5 23 this state's rule against perpetuities as that rule existed 5 24 before the effective date of this section, a court upon the 5 25 petition of an interested person may reform the disposition in 5 26 the manner that most closely approximates the transferor's 5 27 manifested plan of distribution and is within the limits of 5 28 the rule against perpetuities applicable when the nonvested 5 29 property interest or power of appointment was created. 5 30 6. SHORT TITLE. This section may be cited as the "Uniform 5 31 Statutory Rule Against Perpetuities". 5 32 7. UNIFORMITY OF APPLICATION AND CONSTRUCTION. This 5 33 section shall be applied and construed to effectuate its 5 34 general purpose to make uniform the law with respect to the 5 35 subject of this section among states enacting the uniform 6 1 statutory rule against perpetuities. 6 2 EXPLANATION 6 3 This bill provides for the enactment of the uniform 6 4 statutory rule against perpetuities. The uniform rule has 6 5 been adopted in 25 states as of December 1995, and is intended 6 6 to promote uniformity in application and predictability in 6 7 outcome regarding the validity or invalidity of future 6 8 interests in property. 6 9 The common-law rule against perpetuities is aimed at 6 10 invalidating interests in property that are intended to belong 6 11 to an individual at some point in the future, but for which 6 12 the actual determination of ownership cannot be or will not be 6 13 accomplished within a specified time period. The basic rule 6 14 states that a nonvested interest in property is invalid unless 6 15 it must vest, if at all, within 21 years after one or more 6 16 lives in being at the creation of the interest and any 6 17 relevant period of gestation. Iowa Code section 558.68 6 18 contains a version of this common-law rule which states that 6 19 the rule shall be measured by actual events rather than by 6 20 possible events in situations which would provide validation, 6 21 and further provides for judicial reformation of a nonvested 6 22 interest violating the rule to most closely approximate the 6 23 intention of the creator of the interest and provide for 6 24 vesting. 6 25 The uniform rule builds upon this emphasis on actual rather 6 26 than theoretical events, and judicial reformation. The 6 27 uniform rule provides that a nonvested interest is invalid 6 28 unless either the interest when created is certain to vest or 6 29 terminate within the lifetime of an individual then alive or 6 30 within 21 years after the death of that individual, or the 6 31 interest either vests or terminates within 90 years after its 6 32 creation. A 90-year interval is regarded in the rule as a 6 33 sufficient length of time for a nonvested future interest to 6 34 vest. If vesting does not occur within that time frame, the 6 35 interest is invalidated. This applies to powers of 7 1 appointment in addition to traditional, nondelegated 7 2 interests. 7 3 The rule also provides for a reformation function similar 7 4 in spirit to Code section 558.68. A court can reform an 7 5 interest which would otherwise be considered invalid by vest- 7 6 ing it within the 90-year time period. Certain nonvested 7 7 property interests or powers of appointment to which the rule 7 8 does not apply are set out. 7 9 The bill provides that the uniform rule will apply 7 10 prospectively to a nonvested property interest or a power of 7 11 appointment created on or after the effective date of this 7 12 section. For nonvested property interests or powers of 7 13 appointment created before the effective date, determined in a 7 14 judicial proceeding commenced on or after the effective date 7 15 of this section to violate the then-applicable rule against 7 16 perpetuities, judicial reformation to conform to the 7 17 transferor's manifested plan of distribution may be available 7 18 upon petition. 7 19 LSB 3275SV 76 7 20 rn/sc/14
Text: SF02401 Text: SF02403 Text: SF02400 - SF02499 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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