Stricken language would be deleted from and underlined language would be added to present law.
1 State of Arkansas
2 94th General Assembly A Bill
3 Regular Session, 2023 HOUSE BILL 1019
4
5 By: Representative Maddox
6
7 For An Act To Be Entitled
8 AN ACT TO AMEND THE LAW CONCERNING THE CREATION OF A
9 SPENDTHRIFT TRUST; TO CREATE THE ARKANSAS SPENDTHRIFT
10 TRUST ACT; TO AMEND THE UNIFORM STATUTORY RULE
11 AGAINST PERPETUITIES; AND FOR OTHER PURPOSES.
12
13
14 Subtitle
15 TO AMEND THE LAW CONCERNING THE CREATION
16 OF A SPENDTHRIFT TRUST; TO CREATE THE
17 ARKANSAS SPENDTHRIFT TRUST ACT; AND TO
18 AMEND THE UNIFORM STATUTORY RULE AGAINST
19 PERPETUITIES.
20
21
22 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
23
24 SECTION 1. Arkansas Code Title 18, Chapter 3 is amended to read as
25 follows:
26 18-3-101. Statutory rule against perpetuities.
27 (a) A nonvested property interest is invalid unless:
28 (1) when the interest is created, it is certain to vest or
29 terminate no later than 21 years after the death of an individual then alive;
30 or
31 (2) the interest either vests or terminates within 90 years
32 after its creation.
33 (b) A general power of appointment not presently exercisable because
34 of a condition precedent is invalid unless:
35 (1) when the power is created, the condition precedent is
36 certain to be satisfied or becomes impossible to satisfy no later than 21
*DTP024* 12/2/2022 2:00:29 PM DTP024
 HB1019
1 years after the death of an individual then alive; or
2 (2) the condition precedent either is satisfied or becomes
3 impossible to satisfy within 90 years after its creation.
4 (c) A nongeneral power of appointment or a general testamentary power
5 of appointment is invalid unless:
6 (1) when the power is created, it is certain to be irrevocably
7 exercised or otherwise to terminate no later than 21 years after the death of
8 an individual then alive; or
9 (2) the power is irrevocably exercised or otherwise terminates
10 within 90 years after its creation.
11 (d) In determining whether a nonvested property interest or a power of
12 appointment is valid under subdivision (a)(1), (b)(1), or (c)(1) of this
13 section, the possibility that a child will be born to an individual after the
14 individual's death is disregarded.
15 (e) If, in measuring a period from the creation of a trust or other
16 property arrangement, language in a governing instrument (i) seeks to
17 disallow the vesting or termination of any interest or trust beyond, (ii)
18 seeks to postpone the vesting or termination of any interest or trust until,
19 or (iii) seeks to operate in effect in any similar fashion upon, the later of
20 (A) the expiration of a period of time not exceeding 21 years after the death
21 of the survivor of specified lives in being at the creation of the trust or
22 other property arrangement or (B) the expiration of a period of time that
23 exceeds or might exceed 21 years after the death of the survivor of lives in
24 being at the creation of the trust or other property arrangement, that
25 language is inoperative to the extent it produces a period of time that
26 exceeds 21 years after the death of the survivor of the specified lives
27 The common law rule against perpetuities is not in force in this state.
28
29 18-3-102. When nonvested property interest or power of appointment
30 created Limitation on suspension of absolute power of alienation.
31 (a) Except as provided in subsections (b) and (c) of this section and
32 in § 18-3-105(a), the time of creation of a nonvested property interest or a
33 power of appointment is determined under general principles of property law.
34 (b) For purposes of this chapter, if there is a person who alone can
35 exercise a power created by a governing instrument to become the unqualified
36 beneficial owner of (i) a nonvested property interest or (ii) a property
2 12/2/2022 2:00:29 PM DTP024
 HB1019
1 interest subject to a power of appointment described in § 18-3-101(b) or §
2 18-3-101(c), the nonvested property interest or power of appointment is
3 created when the power to become the unqualified beneficial owner terminates.
4 (c) For purposes of this chapter, a nonvested property interest or a
5 power of appointment arising from a transfer of property to a previously
6 funded trust or other existing property arrangement is created when the
7 nonvested property interest or power of appointment in the original
8 contribution was created.
9 (d) For purposes of this chapter, if a nongeneral power of appointment
10 or a general testamentary power of appointment is used to create another
11 nongeneral power of appointment or general testamentary power of appointment,
12 the nonvested property interest or power of appointment created through the
13 exercise of the other nongeneral power of appointment or general testamentary
14 power of appointment is considered to have been created at the same time the
15 first nongeneral power of appointment or general testamentary power of
16 appointment was created
17 The absolute power of alienation may not be suspended by any limitation
18 or condition for a longer period than during the continuance of the lives of
19 persons in being plus a period of thirty (30) years at the creation of the
20 limitation or condition.
21
22 18-3-103. Reformation Permitted suspension of absolute power of
23 alienation.
24 Upon the petition of an interested person, a court shall reform a
25 disposition in the manner that most closely approximates the transferor's
26 manifested plan of distribution and is within the 90 years allowed by § 18-3-
27 101(a)(2), § 18-3-101(b)(2), or § 18-3-101(c)(2) if:
28 (1) a nonvested property interest or a power of appointment
29 becomes invalid under § 18-3-101;
30 (2) a class gift is not but might become invalid under § 18-3-
31 101 and the time has arrived when the share of any class member is to take
32 effect in possession or enjoyment; or
33 (3) a nonvested property interest that is not validated by § 18-
34 3-101(a)(1) can vest but not within 90 years after its creation
35 (a) Every future interest is void which suspends the absolute power of
36 alienation for a longer period than prescribed in § 18-3-103.
3 12/2/2022 2:00:29 PM DTP024
 HB1019
1 (b) A power of alienation is suspended when there are no persons in
2 being to whom an absolute interest in possession can be conveyed.
3
4 18-3-104. Exclusions from statutory rule against perpetuities
5 Suspension of term of years ownership.
6 Section 18-3-101 does not apply to:
7 (1) a nonvested property interest or a power of appointment
8 arising out of a nondonative transfer, except a nonvested property interest
9 or a power of appointment arising out of (i) a premarital or postmarital
10 agreement, (ii) a separation or divorce settlement, (iii) a spouse's
11 election, (iv) a similar arrangement arising out of a prospective, existing,
12 or previous marital relationship between the parties, (v) a contract to make
13 or not to revoke a will or trust, (vi) a contract to exercise or not to
14 exercise a power of appointment, (vii) a transfer in satisfaction of a duty
15 of support, or (viii) a reciprocal transfer;
16 (2) a fiduciary's power relating to the administration or
17 management of assets, including the power of a fiduciary to sell, lease, or
18 mortgage property, and the power of a fiduciary to determine principal and
19 income;
20 (3) a power to appoint a fiduciary;
21 (4) a discretionary power of a trustee to distribute principal
22 before termination of a trust to a beneficiary having an indefeasibly vested
23 interest in the income and principal;
24 (5) a nonvested property interest held by a charity, government,
25 or governmental agency or subdivision, if the nonvested property interest is
26 preceded by an interest held by another charity, government, or governmental
27 agency or subdivision;
28 (6) a nonvested property interest in or a power of appointment
29 with respect to a trust or other property arrangement forming part of a
30 pension, profit-sharing, stock bonus, health, disability, death benefit,
31 income deferral, or other current or deferred benefit plan for one or more
32 employees, independent contractors, or their beneficiaries or spouses, to
33 which contributions are made for the purpose of distributing to or for the
34 benefit of the participants or their beneficiaries or spouses the property,
35 income, or principal in the trust or other property arrangement, except a
36 nonvested property interest or a power of appointment that is created by an
4 12/2/2022 2:00:29 PM DTP024
 HB1019
1 election of a participant or a beneficiary or spouse;
2 (7) a property interest, power of appointment, or arrangement
3 that was not subject to the common-law rule against perpetuities or is
4 excluded by another statute of this State; or
5 (8)(A) a nonvested property interest or power of appointment
6 provided in a trust created or administered in this state so long as the
7 trust:
8 (i) has one (1) or more trustees who are able to convey an
9 absolute fee in possession of land, or full ownership of personal property;
10 (ii) has one (1) or more trustees with express or implied
11 power to sell the trust assets; or
12 (iii) vests in one (1) or more persons in being the
13 unlimited power to terminate the trust.
14 (B) if the power of alienation is suspended during the life of
15 the trust, the rule against perpetuities under § 18-3-101 will begin to run
16 from the date of suspension.
17 (C) the exception created in this subdivision (8) applies to a
18 trust created in Arkansas on or after August 1, 2017 and to any other trust
19 whose principal place of administration is transferred to Arkansas on or
20 after August 1, 2017, regardless of when the trust was created
21 The absolute ownership of a term of years cannot be suspended for a
22 longer period than the absolute power of alienation can be suspended in
23 respect to a fee.
24
25 18-3-105. Prospective application Suspension of power to alienate
26 subject of trust.
27 (a) Except as extended by subsection (b) of this section, this chapter
28 applies to a nonvested property interest or a power of appointment that is
29 created on or after March 9, 2007. For purposes of this section, a nonvested
30 property interest or a power of appointment created by the exercise of a
31 power of appointment is created when the power is irrevocably exercised or
32 when a revocable exercise becomes irrevocable.
33 (b) If a nonvested property interest or a power of appointment was
34 created before March 9, 2007, and is determined in a judicial proceeding,
35 commenced on or after March 9, 2007, to violate this State's rule against
36 perpetuities as that rule existed before March 9, 2007, a court upon the
5 12/2/2022 2:00:29 PM DTP024
 HB1019
1 petition of an interested person may reform the disposition in the manner
2 that most closely approximates the transferor's manifested plan of
3 distribution and is within the limits of the rule against perpetuities
4 applicable when the nonvested property interest or power of appointment was
5 created
6 The suspension of all power to alienate the subject of a trust is a
7 suspension of the power of alienation.
8 (b) However, there is no suspension of the power of alienation by a
9 trust or by equitable interests under a trust if the trustee has the power to
10 sell, either expressed or implied, or if there is an unlimited power to
11 terminate in one (1) or more persons in being.
12
13 18-3-106. Short title Computation of period for interest or trust
14 created under power of appointment.
15 This chapter may be cited as the Uniform Statutory Rule Against
16 Perpetuities If a future interest or trust is created by the exercise of a
17 power of appointment, the permissible period is computed from the time the
18 power is:
19 (1) Exercised, if the power is a general power including without
20 limitation a testamentary general power; or
21 (2) Created if the power is not a general power.
22
23 18-3-107. Uniformity of application and construction Final
24 distribution of trust assets.
25 This chapter shall be applied and construed to effectuate its general
26 purpose to make uniform the law with respect to the subject of this chapter
27 among states enacting it
28 If at the expiration of the period in which an instrument or a
29 provision of the instrument created by a trust or other legal relationship is
30 not to be rendered invalid by this chapter, measured by actual events rather
31 than possible events, any of the assets which have not by the terms of the
32 instrument become distributable or vested shall then be distributed as the
33 court having jurisdiction directs, giving effect to the general intent of the
34 creator of the trust or other instrument.
35
36 18-3-109. Supercession of common law Transfers exempt from chapter.
6 12/2/2022 2:00:29 PM DTP024
 HB1019
1 This chapter supersedes the rule of the common law known as the rule
2 against perpetuities
3 This chapter does not limit any of the following:
4 (1) Transfers, outright or in trust, for charitable purposes;
5 (2) Transfers to charitable corporations;
6 (3) Transfers to a cemetery corporation, society or association;
7 or
8 (4) Employees' trusts created as part of a pension, retirement,
9 insurance, savings, stock bonus, profit sharing, or similar plan established
10 by an employer for the benefit of employees eligible to participate.
11
12 18-3-110. Instruments
13 If an action or proceeding has not been instituted by July 1, 2024, to
14 declare void an instrument which existed before July 1, 2023, then the
15 instrument shall be interpreted under this chapter.
16
17 SECTION 2. Arkansas Code Title 28, Chapter 72, is amended to add an
18 additional subchapter to read as follows:
19 Subchapter 7 — Arkansas Spendthrift Trust Act
20
21 28-72-701. Title.
22 This subchapter shall be known and may be cited as the "Arkansas
23 Spendthrift Trust Act".
24
25 28-72-702. Applicability.
26 (a) Unless the writing expressly states to the contrary, this
27 subchapter governs the construction, operation and enforcement of a
28 spendthrift trust in this state whether the spendthrift trust is created
29 inside or outside this state if:
30 (1) All or part of the land, rents, issues, or profits affected
31 are in this state;
32 (2) All or part of the personal property and other produce of
33 the personal property are in this state;
34 (3) The declared domicile of the creator of a spendthrift trust
35 affecting personal property is in this state; or
36 (4) At least one (1) trustee qualified under subsection (b) of
7 12/2/2022 2:00:29 PM DTP024
 HB1019
1 this section has powers that include without limitation:
2 (A) Maintaining trust records;
3 (B) Preparing income tax returns for the trust; and
4 (B) Administering all or part of the trust in this state.
5 (b) If the settlor is a beneficiary of the trust, at least one (1)
6 trustee of a spendthrift trust shall be a:
7 (1) Natural person who resides and has his or her domicile in
8 this state;
9 (2) Trust company that:
10 (A) Is organized under federal law or under the laws of
11 this state or another state; and
12 (B) Maintains an office in this state for the transaction
13 of business; or
14 (3) Bank that:
15 (A) Is organized under federal law or under th