HB-4602, As Passed House, March 20, 2008

SUBSTITUTE FOR

HOUSE BILL NO. 4602

     A bill to amend 1988 PA 418, entitled

"Uniform statutory rule against perpetuities,"

by amending sections 2 and 5 (MCL 554.72 and 554.75).

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 2. (1) A Subject to section 5, a nonvested property

interest is invalid unless 1 or more of the following are

applicable to the interest:

     (a) When the interest is created, it is certain to vest or

terminate no later than 21 years after the death of an individual

then alive.

     (b) The interest either vests or terminates within 90 years

after its creation.

     (2) A Subject to section 5, a general power of appointment not

presently exercisable because of a condition precedent is invalid

unless 1 or more of the following are applicable to the power:

     (a) When the power is created, the condition precedent is

certain either to be satisfied or become impossible to satisfy no

later than 21 years after the death of an individual then alive.

     (b) The condition precedent either is satisfied or becomes

impossible to satisfy within 90 years after its creation.

     (3) A Subject to section 5, a nongeneral power of appointment

or a general testamentary power of appointment is invalid unless 1

or more of the following are applicable to the power:

     (a) When the power is created, it is certain to be irrevocably

exercised or otherwise to terminate no later than 21 years after

the death of an individual then alive.

     (b) The power is irrevocably exercised or otherwise terminates

within 90 years after its creation.

     (4) In determining whether a nonvested property interest or a

power of appointment is valid under subsection (1)(a), (2)(a), or

(3)(a), the possibility that a child will be born to an individual

after the individual's death is disregarded.

     (5) If, in measuring a period from the creation of a trust or

other property arrangement that was irrevocable on September 25,

1985, language in an instrument governing the effect of an exercise

of a power of appointment over property exempt from federal

generation skipping transfer tax (a) seeks to disallow the vesting

or termination of any interest or trust beyond, (b) seeks to

postpone the vesting or termination of any interest or trust until,

or (c) seeks to operate in effect in any similar fashion upon, the

later of (i) the expiration of a period of time ending with, or not

exceeding 21 years after, the death of the survivor of specified

lives in being at the creation of the trust or other property

arrangement or (ii) the expiration of a period of time that exceeds

or might exceed 21 years after the death of the survivor of lives

in being at the creation of the trust or other property

arrangement, that language is inoperative to the extent it produces

a period of time that exceeds 21 years after the death of the

survivor of the specified lives.

     Sec. 5. (1) Section 2 shall does not apply to any of the

following:

     (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 a premarital or

postmarital agreement; a separation or divorce settlement; a

spouse's election; a similar arrangement arising out of a

prospective, existing, or previous marital relationship between the

parties; a contract to make or not to revoke a will or trust; a

contract to exercise or not to exercise a power of appointment; a

transfer in satisfaction of a duty of support; or 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 property interest, power of appointment, or any other

arrangement that was not subject to the common-law rule against

perpetuities or is excluded by another statute.

     (f) Except as provided in subsection (2), an interest in, or

power of appointment over, personal property held in a trust that

is either revocable on or created after the effective date of the

personal property trust perpetuities act.

     (2) Section 2 is applicable to an interest in, or power of

appointment over, personal property held in trust if the interest

or power was created, or property was made subject to the interest

or power, by the exercise of a second power. If section 2 is

applicable to an interest or power under this subsection, it

applies only to the extent of the exercise of the second power, and

instead of using a period of 90 years to determine whether section

2(1)(b), (2)(b), or (3)(b) is satisfied, or whether to reform a

disposition under section 4, a period of 360 years shall be used.

     (3) As used in this section, "second power" means that term as

defined in section 2 of the personal property trust perpetuities

act.

     Enacting section 1. This amendatory act does not take effect

unless House Bill No. 5909 of the 94th Legislature is enacted into

law.