HOUSE BILL 41

51st legislature - STATE OF NEW MEXICO - first session, 2013

INTRODUCED BY

Zachary J. Cook

AN ACT

RELATING TO PROPERTY INTERESTS; REVISING THE STATUTORY RULE AGAINST PERPETUITIES FOR CERTAIN PROPERTY INTERESTS HELD IN TRUST.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. Section 45-2-904 NMSA 1978 (being Laws 1992, Chapter 66, Section 4, as amended) is amended to read:

     "45-2-904. EXCLUSIONS--RULE FOR CERTAIN TRUST PROPERTY.--Section 45-2-901 NMSA 1978 does not apply to:

          A. a nonvested property interest or a power of appointment arising out of a nondonative transfer, except a nonvested property interest or a power of appointment arising out of:

                (1) a premarital or postmarital agreement;

                (2) a separation or divorce settlement;

                (3) a spouse's election;

                (4) a similar arrangement arising out of a prospective, existing or previous marital relationship between the parties;

                (5) a contract to make or not to revoke a will or trust;

                (6) a contract to exercise or not to exercise a power of appointment;

                (7) a transfer in satisfaction of a duty of support; or

                (8) a reciprocal transfer;

          B. a fiduciary's power relating to the administration or management of assets, including the power of a fiduciary to sell, lease or mortgage property and the power of a fiduciary to determine principal and income;

          C. a power to appoint a fiduciary;

          D. a discretionary power of a trustee to distribute principal before termination of a trust to a beneficiary having an indefeasibly vested interest in the income and principal;

          E. a nonvested property interest held by a charity, government or governmental agency or subdivision if the nonvested property interest is preceded by an interest held by another charity, government or governmental agency or subdivision;

          F. a nonvested property interest in or a power of appointment with respect to a trust or other property arrangement forming part of a pension, profit-sharing, stock bonus, health, disability, death benefit, income deferral or other current or deferred benefit plan for one or more employees, independent contractors or their beneficiaries or spouses, to which contributions are made for the purpose of distributing to or for the benefit of the participants or their beneficiaries or spouses the property, income or principal in the trust or other property arrangement, except a nonvested property interest or a power of appointment that is created by an election of a participant or a beneficiary or spouse;

          G. a property interest, power of appointment or arrangement that was not subject to the common-law rule against perpetuities or that is excluded by another statute of New Mexico; [or]

          H. a property interest or arrangement subject to a time limit under the provisions of Section 45-2-907 NMSA 1978; or

          I. an interest in property held in trust; provided, however, that the rule against perpetuities for real property or water or water rights held in trust is that, at the expiration of one hundred ten years from the later of the date on which an interest in real property or water or water rights is added to or purchased by a trust or the date that the trust became irrevocable, such interest in real property or water or water rights, if still held in the trust, shall be distributed in accordance with the following provisions:

                (1) if the trust instrument contains provisions regarding the distribution of the interest in real property or water or water rights upon termination of the trust, the property shall be distributed as though termination occurred at that time;

                (2) if no such provisions pursuant to Paragraph (1) of this subsection exist, the property shall be distributed to the beneficiaries then entitled to receive the income of the trust in proportion to the amount of the income so receivable by such beneficiaries, or in equal shares if specific proportions are not specified in the trust instrument;

                (3) if the trust instrument does not provide for distribution upon termination and there are no income beneficiaries of the trust, the property shall be distributed to the then-living persons who are then determined to be the trustor's or testator's distributees by the application of the intestacy laws of New Mexico then in effect governing the distribution of intestate real property as though the trustor or testator had died at that particular time, intestate, a resident of New Mexico and owning the property so distributable; and

                (4) for purposes of this subsection, an "interest in real property or water or water rights" does not include any intangible personal property such as an interest in a corporation, limited liability company, partnership, statutory trust, business trust or other entity, regardless of whether the entity is the owner of any interest in real property or water or water rights, unless the real property or water or water rights are located in New Mexico. If the real property or water or water rights are located in New Mexico, an "interest in real property or water or water rights" includes any interest in real property or water or water rights located in New Mexico that is held in trust, whether directly or indirectly, through one or more intermediaries, including any held through an intangible personal property interest in an entity. Such interest in real property or water or water rights shall be distributed as required by the provisions of this subsection."

     SECTION 2. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2013.

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