Tex. Prop. Code Section 112.035
Spendthrift Trusts


(a)

A settlor may provide in the terms of the trust that the interest of a beneficiary in the income or in the principal or in both may not be voluntarily or involuntarily transferred before payment or delivery of the interest to the beneficiary by the trustee.

(b)

A declaration in a trust instrument that the interest of a beneficiary shall be held subject to a “spendthrift trust” is sufficient to restrain voluntary or involuntary alienation of the interest by a beneficiary to the maximum extent permitted by this subtitle.

(c)

A trust containing terms authorized under Subsection (a) or (b) of this section may be referred to as a spendthrift trust.

(d)

If the settlor is also a beneficiary of the trust, a provision restraining the voluntary or involuntary transfer of the settlor’s beneficial interest does not prevent the settlor’s creditors from satisfying claims from the settlor’s interest in the trust estate. A settlor is not considered a beneficiary of a trust solely because:

(1)

a trustee who is not the settlor is authorized under the trust instrument to pay or reimburse the settlor for, or pay directly to the taxing authorities, any tax on trust income or principal that is payable by the settlor under the law imposing the tax; or

(2)

the settlor’s interest in the trust was created by the exercise of a power of appointment by a third party.

(e)

A beneficiary of the trust may not be considered a settlor merely because of a lapse, waiver, or release of:

(1)

a power described by Subsection (f); or

(2)

the beneficiary’s right to withdraw a part of the trust property to the extent that the value of the property affected by the lapse, waiver, or release in any calendar year does not exceed the greater of:

(A)

the amount specified in Section 2041(b)(2) or 2514(e), Internal Revenue Code of 1986; or

(B)

the amount specified in Section 2503(b), Internal Revenue Code of 1986, with respect to the contributions by each donor.

(f)

A beneficiary of the trust may not be considered to be a settlor, to have made a voluntary or involuntary transfer of the beneficiary’s interest in the trust, or to have the power to make a voluntary or involuntary transfer of the beneficiary’s interest in the trust, merely because the beneficiary, in any capacity, holds or exercises:

(1)

a presently exercisable power to:

(A)

consume, invade, appropriate, or distribute property to or for the benefit of the beneficiary, if the power is:
(i)
exercisable only on consent of another person holding an interest adverse to the beneficiary’s interest; or
(ii)
limited by an ascertainable standard, including health, education, support, or maintenance of the beneficiary; or

(B)

appoint any property of the trust to or for the benefit of a person other than the beneficiary, a creditor of the beneficiary, the beneficiary’s estate, or a creditor of the beneficiary’s estate;

(2)

a testamentary power of appointment; or

(3)

a presently exercisable right described by Subsection (e)(2).

(f-1)

A beneficiary of the trust or the estate of a beneficiary of the trust may not be considered to be a settlor merely because the beneficiary, in any capacity:

(1)

held or exercised a testamentary power of appointment other than a general power of appointment;

(2)

held a testamentary general power of appointment; or

(3)

exercised a testamentary general power of appointment in favor of or for the benefit of the takers in default of the appointive assets.

(f-2)

If a beneficiary of the trust exercised a testamentary general power of appointment in favor of or for the benefit of any appointee other than the takers in default of the appointive assets, the appointive assets are:

(1)

subject to the claims of creditors of the beneficiary, but only to the extent the beneficiary’s own property is insufficient to meet the beneficiary’s debts; and

(2)

unless appointed to the beneficiary’s estate, not subject to:

(A)

administration as a part of the beneficiary’s estate;

(B)

recovery by the personal representative of the beneficiary’s estate, except as provided by Section 2207B, Internal Revenue Code of 1986; or

(C)

the payment of taxes or administration expenses of the beneficiary’s estate.

(f-3)

For the purposes of Subsections (f-1) and (f-2), “general power of appointment” has the meaning assigned by Section 2041(b)(1), Internal Revenue Code of 1986.

(g)

For the purposes of this section, property contributed to the following trusts is not considered to have been contributed by the settlor, and a person who would otherwise be treated as a settlor or a deemed settlor of the following trusts may not be treated as a settlor:

(1)

an irrevocable inter vivos marital trust if:

(A)

the settlor is a beneficiary of the trust after the death of the settlor’s spouse; and

(B)

the trust is treated as:
(i)
qualified terminable interest property under Section 2523(f), Internal Revenue Code of 1986; or
(ii)
a general power of appointment trust under Section 2523(e), Internal Revenue Code of 1986;

(2)

an irrevocable inter vivos trust for the settlor’s spouse if the settlor is a beneficiary of the trust after the death of the settlor’s spouse; or

(3)

an irrevocable trust for the benefit of a person:

(A)

if the settlor is the person’s spouse, regardless of whether or when the person was the settlor of an irrevocable trust for the benefit of that spouse; or

(B)

to the extent that the property of the trust was subject to a general power of appointment in another person.

(h)

For the purposes of Subsection (g), a person is a beneficiary whether named a beneficiary:

(1)

under the initial trust instrument; or

(2)

through the exercise of a limited or general power of appointment by:

(A)

that person’s spouse; or

(B)

another person.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2, eff. Jan. 1, 1984. Amended by Acts 1997, 75th Leg., ch. 109, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 148 (H.B. 1190), Sec. 5, eff. January 1, 2006.
Acts 2007, 80th Leg., R.S., Ch. 451 (H.B. 564), Sec. 4, eff. September 1, 2007.
Acts 2013, 83rd Leg., R.S., Ch. 699 (H.B. 2913), Sec. 2, eff. September 1, 2013.
Acts 2017, 85th Leg., R.S., Ch. 62 (S.B. 617), Sec. 2, eff. September 1, 2017.
Acts 2023, 88th Leg., R.S., Ch. 446 (H.B. 2196), Sec. 2, eff. June 9, 2023.

Source: Section 112.035 — Spendthrift Trusts, https://statutes.­capitol.­texas.­gov/Docs/PR/htm/PR.­112.­htm#112.­035 (accessed Mar. 23, 2024).

112.001
Methods of Creating Trust
112.002
Intention to Create Trust
112.003
Consideration
112.004
Statute of Frauds
112.005
Trust Property
112.006
Additions to Trust Property
112.007
Capacity of Settlor
112.008
Capacity of Trustee
112.009
Acceptance by Trustee
112.010
Presumed Acceptance by Beneficiary
112.011
Posthumous Class Gifts Membership
112.031
Trust Purposes
112.032
Active and Passive Trusts
112.033
Reservation of Interests and Powers by Settlor
112.034
Merger
112.035
Spendthrift Trusts
112.036
Rule Against Perpetuities
112.037
Trust for Care of Animal
112.038
Forfeiture Clause
112.051
Revocation, Modification, or Amendment by Settlor
112.052
Termination
112.053
Disposition of Trust Property on Failure of Trust
112.054
Judicial Modification, Reformation, or Termination of Trusts
112.055
Amendment of Charitable Trusts by Operation of Law
112.056
Permissive Amendment by Trustee of Charitable Trust
112.057
Division and Combination of Trusts
112.058
Conversion of Community Trust to Nonprofit Corporation
112.059
Termination of Uneconomic Trust
112.071
Definitions
112.072
Distribution to Second Trust: Trustee with Full Discretion
112.073
Distribution to Second Trust: Trustee with Limited Discretion
112.074
Notice Required
112.075
Written Instrument Required
112.076
Reference to Trust Terms
112.077
Settlor of Second Trust
112.078
Court-ordered Distribution
112.079
Divided Discretion
112.080
Later Discovered Assets
112.081
Other Authority to Distribute in Further Trust Not Limited
112.082
Need for Distribution Not Required
112.083
Duties Not Created
112.084
Certain Distributions Prohibited
112.085
Exceptions to Power of Distribution
112.086
Tax-related Limitations
112.087
Compensation of Trustee
112.101
Definitions
112.102
Revocation of Certain Nontestamentary Transfers
112.103
Effect of Revocation
112.104
Liability of Certain Purchasers or Recipients of Certain Payments, Benefits, or Property
112.105
Liability of Former Spouse or Former Spouse’s Relative for Certain Payments, Benefits, or Property
112.106
Certain Trusts with Divorced Individuals as Joint Settlors
112.121
Validity of Trust
112.122
Enforcement of Trust
112.123
Application or Distribution of Trust Property
112.0335
Construction of Certain Trusts
112.0715
Creation of Second Trust

Accessed:
Mar. 23, 2024

§ 112.035’s source at texas​.gov