House File 2242 - Introduced HOUSE FILE 2242 BY COMMITTEE ON COMMERCE (SUCCESSOR TO HSB 556) A BILL FOR An Act creating an exception to the statutory rule against 1 perpetuities and making related changes. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5708HV (1) 84 rh/sc

H.F. 2242 Section 1. Section 557.7, Code 2011, is amended to read as 1 follows: 2 557.7 Contingent remainders. 3 A Except as provided in section 558.68A, a contingent 4 remainder shall take effect, notwithstanding any determination 5 of the particular estate, in the same manner in which it 6 would have taken effect if it had been an executory devise 7 or a springing or shifting use, and shall, as well as such 8 limitations, be subject to the rule respecting remoteness 9 known as the rule against perpetuities , exclusive of any other 10 supposed rule respecting limitations to successive generations 11 or double possibilities . 12 Sec. 2. NEW SECTION . 558.68A Exception to rule against 13 perpetuities. 14 1. Notwithstanding section 558.68, a rule of law against 15 perpetuities, a suspension of the power of alienation of 16 the title to property, or a law restricting or limiting the 17 duration of trusts shall not apply with respect to any interest 18 in real or personal property held in trust if the instrument 19 creating the trust specifically states that such rule or the 20 provisions of section 558.68 shall not apply to the trust and 21 if either the trustee of the trust has unlimited power to sell 22 all trust assets or if one or more persons, one of whom may be 23 the trustee, has unlimited power to terminate the entire trust. 24 2. A trust of real or personal property created by 25 an employer as part of a stock bonus plan, pension plan, 26 disability or death benefit plan, or profit sharing plan, for 27 the benefit of some or all the employer’s employees, to which 28 contributions are made by the employer or employees, or both, 29 for the purposes of distributing to the employees or their 30 beneficiaries the earnings or the principal, or both, of such 31 trust is not invalid as violating the rule against perpetuities 32 or any other law restricting or limiting the duration of 33 trusts; but the trust may continue for the time that is 34 necessary to accomplish the purposes for which it was created. 35 -1- LSB 5708HV (1) 84 rh/sc 1/ 2

H.F. 2242 3. Subsection 1 shall be effective for interests in real 1 or personal property in trust created by an inter vivos or 2 testamentary trust or will executed on or after July 1, 2012, 3 or pursuant to the exercise of a general power of appointment 4 created on or after July 1, 2012. For the purposes of this 5 subsection, “general power of appointment” means a power that is 6 exercisable in favor of the individual possessing the power, 7 the person’s estate, the person’s creditors, or the creditors 8 of the person’s estate. 9 EXPLANATION 10 This bill creates an exception to the statutory rule against 11 perpetuities codified in Code section 558.68, which is a legal 12 rule related to invalidating interests in property that are 13 intended to belong to a person at some point in the future, but 14 for which the actual determination of ownership cannot or will 15 not be accomplished within a specified period of time. The 16 purpose of the rule is to keep property from being frozen in 17 trust beyond a certain period of years. 18 The bill allows a creator of a trust to suspend, explicitly 19 in the trust document, the rule from applying to a particular 20 trust, but only if the trustee has the power to sell all trust 21 assets or if one or more people, including the trustee, has the 22 power to terminate the trust. 23 The bill further allows suspension of the rule in situations 24 where an employer creates a stock bonus plan, pension plan, 25 disability or death benefit plan, or profit sharing plan, in 26 trust, for the benefit of the employer’s employees, for the 27 purpose of distributing to the employees or their beneficiaries 28 earnings or principal or both. 29 The bill applies to all interests in real or personal 30 property created by testamentary or inter vivos trust or will 31 be executed on or after July 1, 2012, or to the exercise of a 32 general power of appointment created on or after July 1, 2012. 33 -2- LSB 5708HV (1) 84 rh/sc 2/ 2