HOUSE FILE 2242

BY  COMMITTEE ON COMMERCE

(SUCCESSOR TO HSB 556)

A BILL FOR

An Act creating an exception to the statutory rule against perpetuities and making related changes.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 557.7, Code 2011, is amended to read as follows:
   557.7  Contingent remainders.
   A
 
Except as provided in section 558.68A, a contingent remainder shall take effect, notwithstanding any determination of the particular estate, in the same manner in which it would have taken effect if it had been an executory devise or a springing or shifting use, and shall, as well as such limitations, be subject to the rule respecting remoteness known as the rule against perpetuities, exclusive of any other supposed rule respecting limitations to successive generations or double possibilities.
    Sec. 2.  NEW SECTION.  558.68A  Exception to rule against perpetuities.
   1.  Notwithstanding section 558.68, a rule of law against perpetuities, a suspension of the power of alienation of the title to property, or a law restricting or limiting the duration of trusts shall not apply with respect to any interest in real or personal property held in trust if the instrument creating the trust specifically states that such rule or the provisions of section 558.68 shall not apply to the trust and if either the trustee of the trust has unlimited power to sell all trust assets or if one or more persons, one of whom may be the trustee, has unlimited power to terminate the entire trust.
   2.  A trust of real or personal property created by an employer as part of a stock bonus plan, pension plan, disability or death benefit plan, or profit sharing plan, for the benefit of some or all the employer’s employees, to which contributions are made by the employer or employees, or both, for the purposes of distributing to the employees or their beneficiaries the earnings or the principal, or both, of such trust is not invalid as violating the rule against perpetuities or any other law restricting or limiting the duration of trusts; but the trust may continue for the time that is necessary to accomplish the purposes for which it was created.

   3.  Subsection 1 shall be effective for interests in real or personal property in trust created by an inter vivos or testamentary trust or will executed on or after July 1, 2012, or pursuant to the exercise of a general power of appointment created on or after July 1, 2012. For the purposes of this subsection, “general power of appointment” means a power that is exercisable in favor of the individual possessing the power, the person’s estate, the person’s creditors, or the creditors of the person’s estate.
EXPLANATION
   This bill creates an exception to the statutory rule against perpetuities codified in Code section 558.68, which is a legal rule related to invalidating interests in property that are intended to belong to a person at some point in the future, but for which the actual determination of ownership cannot or will not be accomplished within a specified period of time. The purpose of the rule is to keep property from being frozen in trust beyond a certain period of years.
   The bill allows a creator of a trust to suspend, explicitly in the trust document, the rule from applying to a particular trust, but only if the trustee has the power to sell all trust assets or if one or more people, including the trustee, has the power to terminate the trust.
   The bill further allows suspension of the rule in situations where an employer creates a stock bonus plan, pension plan, disability or death benefit plan, or profit sharing plan, in trust, for the benefit of the employer’s employees, for the purpose of distributing to the employees or their beneficiaries earnings or principal or both.
   The bill applies to all interests in real or personal property created by testamentary or inter vivos trust or will be executed on or after July 1, 2012, or to the exercise of a general power of appointment created on or after July 1, 2012.