Sec. 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 the settlor's beneficial interest does not prevent the settlor's creditors from satisfying claims from the settlor's interest in the trust estate. A settlor is not considered a beneficiary of a trust solely because:
(1) a trustee who is not the settlor is authorized under the trust instrument to pay or reimburse the settlor for, or pay directly to the taxing authorities, any tax on trust income or principal that is payable by the settlor under the law imposing the tax; or
(2) the settlor's interest in the trust was created by the exercise of a power of appointment by a third party.
(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.
(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).
(g) For the purposes of this section, property contributed to the following trusts is not considered to have been contributed by the settlor, and a person who would otherwise be treated as a settlor or a deemed settlor of the following trusts may not be treated as a settlor:
(1) an irrevocable inter vivos marital trust if:
(A) the settlor is a beneficiary of the trust after the death of the settlor's spouse; and
(B) the trust is treated as:
(i) qualified terminable interest property under Section 2523(f), Internal Revenue Code of 1986; or
(ii) a general power of appointment trust under Section 2523(e), Internal Revenue Code of 1986;
(2) an irrevocable inter vivos trust for the settlor's spouse if the settlor is a beneficiary of the trust after the death of the settlor's spouse; or
(3) an irrevocable trust for the benefit of a person:
(A) if the settlor is the person's spouse, regardless of whether or when the person was the settlor of an irrevocable trust for the benefit of that spouse; or
(B) to the extent that the property of the trust was subject to a general power of appointment in another person.
(h) For the purposes of Subsection (g), a person is a beneficiary whether named a beneficiary:
(1) under the initial trust instrument; or
(2) through the exercise of a limited or general power of appointment by:
(A) that person's spouse; or
(B) another person.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2, eff. Jan. 1, 1984. Amended by Acts 1997, 75th Leg., ch. 109, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 148 (H.B. 1190), Sec. 5, eff. January 1, 2006.
Acts 2007, 80th Leg., R.S., Ch. 451 (H.B. 564), Sec. 4, eff. September 1, 2007.
Acts 2013, 83rd Leg., R.S., Ch. 699 (H.B. 2913), Sec. 2, eff. September 1, 2013.
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