USA – TEXAS Trends and Developments Contributed by: Perrin Clark, Ytterberg Deery Knull LLP
Private trust companies Law and practice in Texas with respect to the use of private trust companies (typically chartered as “exempt” trust companies by the Texas Department of Banking) has continued to develop over the past decade. The increasing popularity of private trust companies with wealthy families is due partly to the tremendous intergenerational transfer of wealth that is ongoing in the United States and in Texas. Wealthy families with significant trust planning often desire a tailored trustee solution. In addition, a private trust company can serve as an alternative strategy to the typical family office. The regulatory environment in Texas continues to be favourable to and supportive of private trust companies. Chartering and use of Tex - as private trust companies by wealthy families has become more common. The increasing use of Texas private trust companies is due partly to the continued modernisation of Texas trust law with, for example, the addition of trust protector and adviser roles with respect to directed trusts, and the extension of the general vesting period to 300 years with respect to the rule against perpetuities. These changes have made Texas a more attractive jurisdiction for both trust planning and private trust companies. However, even some Texas families still choose to create their private trust companies in jurisdictions that have well- developed and flexible private trust company laws, such as Nevada and Wyoming, or in jurisdictions that have more recently adopted laws favourable to private trust companies, such as Tennessee. Remote notarisation In 2018, Texas adopted a new statute with respect to “online notarisation”. Online notarisation, or remote notarisation, means notarisation performed by means of two-way video and audio conference technology. Although the requirements and procedures for online notarisation are more burdensome than in-person notarisation, it is becoming more routinely used in Texas. Rule against perpetuities In 2021, Texas adopted a new statute with respect to the rule against perpetuities. With respect to an inter - est in trust created before 1 September 2021, such interest must vest not later than 21 years after some life in being at the time of the creation of the interest,
plus a period of gestation. With respect to an interest in trust created on or after 1 September 2021, such interest must vest not later than the later of (i) 300 years after the creation of the interest; or (ii) 21 years after some life in being at the time of the creation of the interest, plus a period of gestation. Notwithstand - ing the foregoing, a trust may not direct the retention of, or prevent the sale of, a real property asset for a period longer than 100 years. For these purposes, an interest in trust is treated as created on the date the governing instrument creating such interest becomes irrevocable with respect to the interest (referred to in the statute as the “effective date”). Generally, an inter - est vests when it must be distributed from the trust to the beneficiary or when it otherwise becomes fixed and inalienable with respect to the beneficiary. Some commentators have suggested that this new statute may violate the Texas Constitution’s prohibition of per - petuities; however, it has yet to be tested in the courts. Nevertheless, with this new statute, Texas has joined the ranks of jurisdictions with significantly longer peri - ods for required vesting. Purpose trusts In 2023, Texas adopted a new statute authorising the creation of non-charitable trusts for a stated purpose, rather than for one or more ascertainable beneficiar - ies (referred to as “purpose trusts”). Purpose trusts are another exception to the rule that a trust must have ascertainable beneficiaries, joining the ranks of charitable trusts and pet trusts in Texas. Given their novelty in Texas, the utility of these trusts with respect to planning for Texas clients is yet to be determined; however, in light of their use in other jurisdictions, they may help business owners who wish to lock in future governance structures and/or limit the possibility of future sales. They may also provide a planning vehicle for socially inclined business owners who are not able to utilise other strategies to fulfil their charitable goals. Current Trends Constitutional amendments to forbid certain taxes Legislation proposing constitutional amendments that prohibit capital gains tax and that prohibit gift, estate, and generation-skipping transfer taxes passed both chambers of the Texas legislature in 2025 and will be voted on in an election for constitutional amendments later in 2025. SJR 18 (Perry, et al | Capriglione, Met -
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