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Texas Property Code - Section 112.035. Spendthrift Trusts

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§ 112.035. SPENDTHRIFT TRUSTS.  (a) A settlor may provide 
in the terms of the trust that the interest of a beneficiary in the 
income or in the principal or in both may not be voluntarily or 
involuntarily transferred before payment or delivery of the 
interest to the beneficiary by the trustee.
	(b)  A declaration in a trust instrument that the interest of 
a beneficiary shall be held subject to a "spendthrift trust" is 
sufficient to restrain voluntary or involuntary alienation of the 
interest by a beneficiary to the maximum extent permitted by this 
subtitle.
	(c)  A trust containing terms authorized under Subsection 
(a) or (b) of this section may be referred to as a spendthrift 
trust.
	(d)  If the settlor is also a beneficiary of the trust, a 
provision restraining the voluntary or involuntary transfer of his 
beneficial interest does not prevent his creditors from satisfying 
claims from his interest in the trust estate.

Text of subsec. (e) effective until January 1, 2006
	(e)  A beneficiary of the trust may not be considered a 
settlor merely because of a lapse, waiver, or release of the 
beneficiary's right to withdraw a part of the trust property if the 
value of the property that could have been withdrawn by exercising 
the right of withdrawal in any calendar year does not exceed at the 
time of the lapse, waiver, or release the greater of the amount 
specified in:
		(1)  Section 2041(b)(2) or 2514(e), Internal Revenue 
Code of 1986;  or      
		(2)  Section 2503(b), Internal Revenue Code of 1986.                          

Text of subsec. (e) effective January 1, 2006
	(e)  A beneficiary of the trust may not be considered a 
settlor merely because of a lapse, waiver, or release of:
		(1)  a power described by Subsection (f);  or                                 
		(2)  the beneficiary's right to withdraw a part of the 
trust property to the extent that the value of the property affected 
by the lapse, waiver, or release in any calendar year does not 
exceed the greater of the amount specified in:
			(A)  Section 2041(b)(2) or 2514(e), Internal 
Revenue Code of 1986;  or     
			(B)  Section 2503(b), Internal Revenue Code of 
1986.                       

Text of subsec. (f) effective January 1, 2006
	(f)  A beneficiary of the trust may not be considered to be a 
settlor, to have made a voluntary or involuntary transfer of the 
beneficiary's interest in the trust, or to have the power to make a 
voluntary or involuntary transfer of the beneficiary's interest in 
the trust, merely because the beneficiary, in any capacity, holds 
or exercises:
		(1)  a presently exercisable power to:                                        
			(A)  consume, invade, appropriate, or distribute 
property to or for the benefit of the beneficiary, if the power is:
				(i)  exercisable only on consent of another 
person holding an interest adverse to the beneficiary's interest;  
or
				(ii)  limited by an ascertainable standard, 
including health, education, support, or maintenance of the 
beneficiary;  or
			(B)  appoint any property of the trust to or for 
the benefit of a person other than the beneficiary, a creditor of 
the beneficiary, the beneficiary's estate, or a creditor of the 
beneficiary's estate;
		(2)  a testamentary power of appointment;  or                                 
		(3)  a presently exercisable right described by 
Subsection (e)(2).          

Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, § 2, eff. 
Jan. 1, 1984.  Amended by Acts 1997, 75th Leg., ch. 109, § 1, eff. 
Sept. 1, 1997;  Acts 2005, 79th Leg., ch. 148, § 5, eff. Jan. 1, 
2006.

Last modified: August 11, 2007