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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
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-ninth Legislature Second Regular Session - 2008IN 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 ALIENATIONNO RULE AGAINST PERPETUITIES. 13The absolute power of alienation of real property cannot be suspended by any14limitation or condition whatever, for a longer period than during the continu-15ance of the lives of the persons in being at the creation of the limitation or16condition, and 25 years thereafter; tThere shall be no rule against perpetu- 17 ities applicable to real or personal property, nor any rule prohibiting the18placing of restraints on the alienation of personal property; no trust hereto-19fore or hereafter created, either testamentary or inter vivos, shall be20declared void, but shall be so construed as to eliminate parts violating the21above provisions, and in such a way that the testators or trustors wishes are22carried out to the greatest extent permitted by this act; that there shall be23no presumption that a person is capable of having children at any stage of24adult 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
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