Under Texas law, a non-charitable trust may not last forever. Historically, a Texas trust was required to vest, “not later than 21 years after some life in being at the time of creation of the interest, plus a period of gestation”. This required vesting rule is generally known as the rule against perpetuities. As a practical matter, therefore, a Texas trust could have a life of about 130 years. Many states have extended the number of years a trust may last and some states have abolished the common law rule against perpetuities entirely. This has prompted some Texas residents looking to create generational trusts to avail themselves to the jurisdiction of other states. This may no longer be necessary. Effective September 1, 2021, the Texas rule against perpetuities will be extended to 300 years! Putting that into perspective, that is longer than the United States has been a country. In most cases, where applicable, Texas trusts should be revised to take advantage of the extended rule against perpetuities. In limited circumstances, this new law may automatically apply to existing Texas trusts. There is, however, one significant limitation; real property may not remain in trust for longer than 100 years. Thus, while the new rule against perpetuities generally works to significantly extend the period for vesting for non-real estate assets, it simultaneously shortens the vesting period for real estate.
For questions regarding this blog post or any other estate planning matter, please feel free to contact Eric Marchand at (214)744-3700 or email@example.com