House Journal: Page 2247: Tuesday, June 3, 2003
May 30, 2003
The Honorable Chester Culver
Secretary of State
State Capitol Building
L O C A L
Dear Mr. Secretary:
I hereby transmit House File 450, an Act creating an exception to the statutory rule
against perpetuities and making related changes.
This Act would suspend the application of the rule against perpetuities with respect
to any interest in real or personal property held in trust if the instrument creating the
trust specifically states that the rule against perpetuities does not apply and either the
trustee of the trust has unlimited power to sell all trust assets, or one or more persons,
one of whom may be the trustee, has unlimited power to terminate the entire trust.
This Act would also suspend the application of the rule against perpetuities with
respect to any trust of real or personal property created by an employer as part of a
stock bonus plan, profiting sharing plan, pension plan, disability benefit plan, or death
benefit plan for the benefit of the employer's employees for the purpose of distributing
to the employees or their beneficiaries the earnings or the principal, or both, of such
trust.
The rule against perpetuities is a common law rule that invalidates future interests
in property unless that interest must vest, if at all, not later than 21 years, plus period
of gestation, after some life or lives in being at the time of the creation of the interest.
The courts of England adopted the rule against perpetuities in the seventeenth century
in part to promote the efficient use of property among living persons.
In 1983, the Iowa Legislature reformed the common-law application of the rule
against perpetuities by codifying two mechanisms that provided greater flexibility to
trust instruments. Under a newly-fashioned "wait-and-see" approach, courts were
empowered to monitor all non-vested future interests to determine if they would, in
fact, actually vest within the permissible statutory period under the rule against
perpetuities. If so, such non-vested future interests could be deemed to be valid under
the rule. This provision modified the "might-have-been" approach under the common
law rule, which invalidated all non-vested future interests if, based upon facts in
existence at the time the interest was created, the possibility existed that the non-
vested interest might vest after the permissible period had run. The legislation also
adopted the cy pres doctrine, which empowered courts to reform a non-vested interest
to ensure that it vests within the permissible time period if such a modification would
more accurately reflect the intent of the creator of the future interest.
The rule against perpetuities, and legislation adopted in 1983 to add flexibility to
the rule, strikes a fair balance between the interests of present generations who may
wish to influence the future use and alienability of property, and succeeding
generations who may wish to utilize and utilize and enjoy property that is not
encumbered by their ancestors. These provisions seek to maximize the market forces
that interact with property placed into a trust to promote the efficient and effective
usage of that property. House file 450 would disrupt the balance between current and
future interests by permitting individuals to create a class of trusts that are not subject
© 2003 Cornell College and
League of Women Voters of Iowa
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Last update: Wed Jul 30 14:40:01 CDT 2003
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