Texas lawmakers have introduced House Bill 4058, a significant piece of legislation aimed at clarifying the rules surrounding self-settled asset protection trusts. Introduced on March 7, 2025, the bill seeks to enhance the legal framework governing these trusts, which are designed to protect assets from creditors while allowing the creator to retain some control over them.

The bill outlines specific provisions regarding the change of domicile for trusts, stating that a trust's domicile is considered to have changed to Texas when certain conditions are met. This includes scenarios where the trust's assets are transferred to Texas or when the trust is administered within the state. Notably, the legislation stipulates that the governing laws of the trust must be substantially similar to Texas law for the change to be recognized.

One of the key aspects of House Bill 4058 is its focus on the duration of self-settled asset protection trusts, which cannot exceed the limits set by the Texas Trust Code. This provision aims to prevent indefinite asset protection, ensuring that trusts are not used to evade legal obligations indefinitely.

The bill has sparked discussions among legal experts and financial advisors, with some praising its clarity and potential to attract more trust business to Texas. However, there are concerns regarding the implications for creditors and the potential for abuse of these trusts. Critics argue that while the bill provides protections for trust creators, it may inadvertently complicate the recovery of debts owed to creditors.

House Bill 4058 is set to take effect on September 1, 2025, and its passage could have significant implications for estate planning and asset protection strategies in Texas. As the legislative process unfolds, stakeholders are closely monitoring the bill's progress and its potential impact on both individuals and the broader financial landscape in the state.