SENATE BILL NO. 1334

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Bill Status



S1334................................................by JUDICIARY AND RULES
REAL AND PERSONAL PROPERTY - Adds to and amends existing law relating to
real and personal property to remove provisions dealing with the power of
alienation of real property and any rule prohibiting the placing of
restraints on the alienation of personal property; to provide for
suspension of power of alienation; and to provide for future interest by
power of appointment.

01/22    Senate intro - 1st rdg - to printing
01/23    Rpt prt - to Jud
02/05    Rpt out - rec d/p - to 2nd rdg
02/06    2nd rdg - to 3rd rdg
02/11    3rd rdg - PASSED - 34-0-1
      AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Burkett,
      Cameron, Coiner, Corder, Darrington, Davis, Fulcher, Gannon, Geddes,
      Goedde, Hammond, Heinrich, Hill, Jorgenson, Kelly, Keough, Langhorst,
      Little, Lodge, Malepeai(Sagness), McGee, McKague, McKenzie, Pearce,
      Richardson, Schroeder, Siddoway, Stegner, Werk
      NAYS -- None
      Absent and excused -- Stennett
    Floor Sponsor - Davis
    Title apvd - to House
02/12    House intro - 1st rdg - to Jud
02/26    Rpt out - rec d/p - to 2nd rdg
02/27    2nd rdg - to 3rd rdg
03/03    3rd rdg - PASSED - 67-0-3
      AYES -- Anderson, Andrus, Barrett, Bayer, Bedke, Bell, Bilbao, Black,
      Block, Bock, Boe, Bolz, Bowers, Brackett, Bradford, Chadderdon,
      Chavez, Chew, Clark, Collins, Crane, Durst, Eskridge, Hagedorn, Hart,
      Harwood, Henderson, Jaquet, Killen, King, Kren, Labrador, Lake,
      LeFavour, Loertscher, Marriott, Mathews, McGeachin, Mortimer, Moyle,
      Nielsen, Nonini, Pasley-Stuart, Patrick, Pence, Raybould, Ringo,
      Roberts, Ruchti, Rusche, Sayler, Schaefer, Shepherd(02),
      Shepherd(08), Shirley, Shively, Smith(24), Smith(30), Snodgrass,
      Stevenson, Thayn, Thomas, Trail, Vander Woude, Wills, Wood(27),
      Wood(35)
      NAYS -- None
      Absent and excused -- Henbest, Luker, Mr. Speaker
    Floor Sponsor - Bock
    Title apvd - to Senate
03/04    To enrol
03/05    Rpt enrol - Pres signed
03/06    Sp signed
03/07    To Governor
03/11    Governor signed
         Session Law Chapter 77
         Effective: 07/01/08

Bill Text




                                                                       
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   Second Regular Session - 2008

                                                                       

                                       IN THE SENATE

                                    SENATE BILL NO. 1334

                              BY JUDICIARY AND RULES COMMITTEE

  1                                        AN ACT
  2    RELATING TO REAL AND PERSONAL PROPERTY; AMENDING SECTION 55-111,  IDAHO  CODE,
  3        TO REMOVE PROVISIONS DEALING WITH THE POWER OF ALIENATION OF REAL PROPERTY
  4        AND  ANY  RULE  PROHIBITING THE PLACING OF RESTRAINTS ON THE ALIENATION OF
  5        PERSONAL PROPERTY AND TO REVISE DESCRIPTIVE LANGUAGE; AND AMENDING CHAPTER
  6        1, TITLE 55, IDAHO CODE, BY THE ADDITION OF A NEW SECTION  55-111A,  IDAHO
  7        CODE,  TO PROVIDE FOR SUSPENSION OF POWER OF ALIENATION AND TO PROVIDE FOR
  8        FUTURE INTEREST BY POWER OF APPOINTMENT.

  9    Be It Enacted by the Legislature of the State of Idaho:

 10        SECTION 1.  That Section 55-111, Idaho Code, be, and the  same  is  hereby
 11    amended to read as follows:

 12        55-111.  SUSPENSION  OF  POWER OF ALIENATION NO RULE AGAINST PERPETUITIES.
 13    The absolute power of alienation of real property cannot be suspended  by  any
 14    limitation or condition whatever, for a longer period than during the continu-
 15    ance of the lives of the persons in being at the creation of the limitation or
 16    condition,  and  25 years thereafter; tThere shall be no rule against perpetu-
 17    ities applicable to real or personal property, nor any  rule  prohibiting  the
 18    placing of restraints on the alienation of personal property; no trust hereto-
 19    fore  or  hereafter  created,  either  testamentary  or  inter vivos, shall be
 20    declared void, but shall be so construed as to eliminate parts  violating  the
 21    above  provisions, and in such a way that the testators or trustors wishes are
 22    carried out to the greatest extent permitted by this act; that there shall  be
 23    no  presumption  that  a  person is capable of having children at any stage of
 24    adult life.

 25        SECTION 2.  That Chapter 1, Title 55, Idaho Code,  be,  and  the  same  is
 26    hereby  amended by the addition thereto of a NEW SECTION, to be known and des-
 27    ignated as Section 55-111A, Idaho Code, and to read as follows:

 28        55-111A.  SUSPENSION OF POWER OF ALIENATION -- FUTURE INTEREST BY POWER OF
 29    APPOINTMENT. (1) The absolute power of alienation of property cannot  be  sus-
 30    pended  by  any  limitation  or  condition  whatever, for a longer permissible
 31    period than during the continuance of the lives of the persons in being at the
 32    creation of the limitation or condition, and twenty-five (25)  years  thereaf-
 33    ter.  No  trust  heretofore or hereafter created, either testamentary or inter
 34    vivos, shall be declared void, but shall be so construed as to eliminate parts
 35    violating the above provisions, and in  such  a  way  that  the  testators  or
 36    trustors  wishes are carried out to the greatest extent permitted by this sec-
 37    tion; and there shall be no presumption that a person  is  capable  of  having
 38    children at any stage of adult life.
 39        (2)  If  a  future  interest or trust is created by exercise of a power of
 40    appointment, the permissible period is computed from the  time  the  power  is
 41    exercised  if  the  power  is a general power including a testamentary general

                                       2

  1    power or from the time the power is created if the  power  is  not  a  general
  2    power.
  3        (3)  Notwithstanding  the  provisions  of  subsection (1) of this section,
  4    there is no suspension of the power of alienation of property by a trust or by
  5    equitable interests under a trust if the trustee has  power  to  sell,  either
  6    express  or implied, or if there is an unlimited power to terminate in one (1)
  7    or more persons in being.
  8        (4)  Furthermore, the provisions of subsection (1) of this  section  shall
  9    not  limit  transfers, outright or in trust, for charitable purposes or trans-
 10    fers to charitable entities.

Statement of Purpose / Fiscal Impact


                       STATEMENT OF PURPOSE

                            RS: 17520

Idaho currently has a rule which prohibit the suspension of power
of alienation as to real property for a longer period than the
lives of the persons in being at the creation of the limitation or
condition, and 25 years thereafter.  Idaho has no similar
prohibition with regard to personal property.  With regard to a
perpetual trust or a trust that will last longer than the lives in
being plus 25 years (a typical trust for grandchildren or great-
grandchildren), the practical application of this statute is for a
grantor to create a business entity, such as, but not limited to,
a limited liability company, contribute the land to the entity and
then give the entity interest to the trust rather than the actual
land itself.  This causes unnecessary creation of entities to
accomplish the grantor's goal.

By doing away with the prohibition against the suspension of power
of alienation as to real property, the issue is resolved but
another tax issue is created.  If the trust provides that a
beneficiary has a limited power of appointment of a portion or all
of the trust property (real or personal) and that beneficiary
excises that limited power of appointment in such a manner which
creates another limited power of appointment and that power is
excised, under current law the property subject to the limited
power of appointment will be subject to federal estate or gift tax
due to sections 2041(a)(3) or 2514(d), respectively, of the
Internal Revenue Code.  This often unanticipated tax has been
termed the "Delaware Tax Trap."  This bill provides that the
suspension of power of alienation as to both real and personal
property cannot be longer than a period of the lives in being plus
25 years thereafter, but it also provides that if a trustee has the
power to sell then the prohibition will not apply.  This avoids
both the need to put real property in an entity prior to
contribution to a trust and the Delaware Tax Trap.  The bill also
clarifies that the prohibition of the suspension of power of
alienation does not apply to charities or charitable purposes.

                                 
                          FISCAL NOTE

This bill will have no fiscal impact.






CONTACT:
Robert L. Aldridge, Trust & Estate Professionals of Idaho, Inc.
Telephone: office: (208) 336-9880  Cell: (208) 631-2481


STATEMENT OF PURPOSE/FISCAL NOTE                       S 1334