                                  REVISED
                  United States Court of Appeals,

                             Fifth Circuit.

                      Nos. 96-50137, 96-50138.

   In The Matter of Billy R. SHURLEY and Jane Bryant Shurley,
Debtors.

      Billy R. SHURLEY and Jane Bryant Shurley, Appellants,

                                    v.

   TEXAS COMMERCE BANK—AUSTIN, N.A. and Texas Commerce Bank—San
Angelo, N.A., Appellees.

   In The Matter of Billy R. SHURLEY and Jane Bryant Shurley,
Debtors.

      Billy R. SHURLEY and Jane Bryant Shurley, Appellants,

                                    v.

TEXAS COMMERCE BANK—SAN ANGELO, N.A., Texas Commerce Bank—Austin,
N.A. and Dennis Elam, Trustee, Appellees.

   In The Matter of Billy R. SHURLEY and Jane Bryant Shurley,
Debtors.

               William H. ARMSTRONG, II, Appellant,

                                    v.

 TEXAS COMMERCE BANK—SAN ANGELO, N.A., Dennis Elam, Trustee, and
Texas Commerce Bank—Austin, Appellees.

                             June 20, 1997.

Appeals from the United States District Court for the Western
District of Texas.

Before REAVLEY, JOLLY and BENAVIDES, Circuit Judges.

     REAVLEY, Circuit Judge:

     The   question   here   is    to       what   extent   the   assets   of   a

spendthrift trust settled by a bankruptcy debtor and others are


                                        1
included in the debtor's bankruptcy estate.     The bankruptcy and

district courts held that the entirety of the debtor's interest in

the trust is property of the bankruptcy estate.       We limit the

estate to the property contributed to the trust by the debtor.

                            BACKGROUND

     In 1965 M.D. Bryant, Ethel Bryant, Anne Bryant Ridge, and Jane

Bryant Shurley created a trust under Texas law.      M.D. and Ethel

Bryant were husband and wife.     Anne Bryant Ridge and Jane Bryant

Shurley are their daughters.      The trust is known as the "M.D.

Bryant Family Trust" or the "Bryant Family Trust."

     The parents and daughters contributed real property to the

trust.   The property consisted of ranches owned by the family,

including one owned by Shurley.   Shurley contributed approximately

11,000 acres of raw land from the south of a west Texas ranch (her

contribution herein the "Marfa ranch").1       The trust agreement

states that the property contributed by the parents "represents

two-thirds (2/3) of the total value of all of said real property to

be contributed and that the value of that portion of said real

property to be contributed by [the two daughters] each represents

(1/6) of the total value of all of said real property to be

contributed."

     The trust agreement provided that additional property could be


     1
      The briefs indicate that the "Marfa Ranch" also refers to a
larger tract of land out of which came the acreage Shurley
contributed to the trust. In this opinion the "Marfa ranch" means
only that acreage owned by Shurley and conveyed to the trust in
1965, together with any mineral interests she may have owned and
conveyed to the trust.

                                  2
added to the trust at a later date.   According to Shurley the vast

bulk of the corpus of the trust came through pourover provisions in

the parents' wills, which were executed at the same time the trust

agreement was executed. She claims that the Marfa ranch represents

only two percent of the value of the total assets of the trust.

The parents died in 1967 and 1971.

     Under the trust agreement, while the parents were alive,

two-thirds of the income generated by the trust was distributed to

the parents and one-sixth of the income was distributed to each of

the daughters.   Upon the death of one parent, the income was

distributed equally among the living parent and the daughters.

Upon the death of the second parent, the two daughters each

received half of the income if both were living at the time.   The

agreement has provisions for the children and other descendants of

the daughters to receive income from the trust and distribution of

its assets upon final termination of the trust.

     In 1992, Shurley and her husband filed for bankruptcy under

Chapter 7 of the Bankruptcy Code. Since Shurley's parents were

deceased at the time, she and her sister each had a one-half

interest in the income from the trust.   The Marfa ranch was still

held by the trust.   Two bank creditors and the bankruptcy trustee

brought an adversary action, seeking a declaratory judgment that

Shurley's interest in the trust was property of the bankruptcy

estate.   After a trial, the bankruptcy court entered a judgment

declaring that Shurley's "entire interest in the [trust], being an

undivided 50 percent interest in the principal assets and income of


                                 3
the [trust], is property of the Chapter 7 bankruptcy estate."                          In

its memorandum opinion it enjoined the trustee of the trust "from

disbursing any beneficial interest previously held by Mrs. Shurley

to anyone other than" the bankruptcy trustee.2                        Shurley and the

trustee         of    the   trust3      appealed     to   the   district   court,   which

affirmed.            This appeal followed.

                                           DISCUSSION

          We review the bankruptcy court's factual findings under the

clearly erroneous standard, and we review its legal conclusions de

novo.4

      Under section 541 of the Bankruptcy Code5 a bankruptcy estate

is created at the commencement of the bankruptcy case.                          Section

541(a)(1) states that "[e]xcept as provided in subsections (b) and

(c)(2) of this section, all legal or equitable interests of the

debtor in property as of the commencement of the case" is included

in the estate.              Subsection (c)(2) states the exclusion relevant

here:         "A restriction on the transfer of a beneficial interest of

the   debtor          in    a   trust    that   is    enforceable    under   applicable

nonbankruptcy law is enforceable in a case under this title."

              Section 541(c)(2) excludes "spendthrift trusts" from the

bankruptcy estate if such a trust protects the beneficiary from

      2
          In re Shurley, 171 B.R. 769, 789 (Bankr.W.D.Tex.1994).
          3
      For convenience, appellants Shurley and the trustee of the
trust are sometimes collectively referred to as Shurley.
      4
        In re Herby's Foods, Inc., 2 F.3d 128, 130-31 (5th Cir.1993).

      5
          11 U.S.C. § 541.

                                                4
creditors under applicable state law.6          "In general, a spendthrift

trust is one in which the right of the beneficiary to future

payments of income or capital cannot be voluntarily transferred by

the beneficiary or reached by his or her creditors."7

     The     Bryant   Family   Trust   agreement    vests   in   the   trustee

authority over the trust assets.           Among other powers vested in the

trustee, the agreement provides:

     The trustee (and his successors) shall have full power and
     authority: to manage, handle, invest, reinvest, sell for cash
     or credit, or for part cash and part credit, convey, exchange,
     hold, dispose of, lease for any period of time, whether or not
     longer than the life of the trust, improve, repair, maintain,
     work, develop, operate, use, mortgage, or pledge all or any
     part of the funds.... The trustee shall have full power to
     determine the manner in which expenses are to be borne and in
     which receipts are to be credited as between principal and
     income, and also to determine what shall constitute income or
     net income and what shall constitute corpus and principal....
     [B]eneficiaries shall have no right or power to transfer,
     assign, convey, sell or encumber said trust estate and
     interest therein, legal or equitable, during the existence of
     these trusts.

The agreement expressly provides that trust assets cannot be

reached by creditors of the beneficiaries.8

         6
       Patterson v. Shumate, 504 U.S. 753, 762, 112 S.Ct. 2242,
2248, 119 L.Ed.2d 519 (1992) (noting legislative history that §
541(c)(2) "continues over the exclusion from property of the estate
of the debtor's interest in a spendthrift trust to the extent the
trust is protected from creditors under applicable State law.");
In re Moody, 837 F.2d 719, 722-23 (5th Cir.1988) ("A beneficiary's
interest in a spendthrift trust is excluded from his bankruptcy
estate by 11 U.S.C. § 541(c)(2), if state law and the trust so
provide.").
     7
        Id. at 723.
    8
     The agreement states: "The interest of the beneficiaries in
the trust estate and the increase and proceeds thereof, both legal
and equitable, so long as the same are held in trust, shall not be
subject in any manner to any indebtedness, judgment, judicial
process, creditors' bills, attachment, garnishment, execution,

                                       5
         By vesting control of the trust in the trustee, denying the

beneficiaries control over the trust, and denying creditors of the

beneficiaries access to trust assets, the trust agreement qualifies

as a spendthrift trust under Texas law.            For two reasons, however,

the bankruptcy court concluded that the trust assets are not beyond

the reach of creditors under state law.           The first reason, which we

reject in part, is that spendthrift trust protection under state

law does not extend to a trust settled by the beneficiary herself.

The second reason, which we reject, is that Shurley exercised

sufficient control over the trust to make the assets subject to her

creditors.

A. The Self-Settlor Rule and its Consequences

         The bankruptcy court's principal reason for holding that

Shurley's interest in the trust is property of the bankruptcy

estate is that she was one of the original settlors of the trust.

We have recognized that a beneficiary's interest in a spendthrift

trust is not subject to claims of creditors under Texas law

"[u]nless     the   settlor   creates       the   trust   and   makes   himself

beneficiary."9      The rationale for this "self-settlor" rule is


receivership, charge, levy, seizure or encumbrance, of or against
said beneficiaries; nor shall the interest of the beneficiaries in
said trust be in any manner reduced or affected by any transfer,
assignment, conveyance, sale, encumbrance, act, omission or mishap,
voluntary or involuntary, anticipatory or otherwise of said
beneficiaries...."
     9
      Id. at 723. See also Daniels v. Pecan Valley Ranch, Inc.,
831 S.W.2d 372, 378 (Tex.App.—San Antonio 1992, writ denied) ("In
Texas, a settlor cannot create a spendthrift trust for his own
benefit and have the trust insulated from the rights of
creditors."); Tex. Prop.Code Ann. § 112.035(d) ("If the settlor is
also a beneficiary of the trust, a provision restraining the

                                        6
obvious enough:    a debtor should not be able to escape claims of

his creditors by himself setting up a spendthrift trust and naming

himself as beneficiary.     Such a maneuver allows the debtor, in the

words of appellees, to "have his cake and eat it too."                 As one

Texas court has explained:

       Public policy does not countenance devices by which one frees
       his own property from liability for his debts or restricts his
       power of alienation of it; and it is accordingly universally
       recognized that one cannot settle upon himself a spendthrift
       or other protective trust, or purchase such a trust from
       another, which will be effective to protect either the income
       or the corpus against the claims of his creditors, or to free
       it from his own power of alienation.      The rule applies in
       respect of both present and future creditors and irrespective
       of any fraudulent intent in the settlement or purchase of a
       trust.10

        The novel issue presented here is whether the entirety of a

beneficiary's    interest   in    a    spendthrift    trust   is   subject   to

creditors' claims where the trust is only partially self-funded by

the beneficiary.    There is no compelling Texas authority on this

issue, but we conclude that on these facts Texas courts would

surely hold that the partially self-funded spendthrift trust is

only partially subject to creditors' claims.

       Allowing creditors to reach only the self-settled portion of

the trust is consistent with the other long-standing rule of Texas

law that a settlor should be allowed to create a spendthrift trust

that   shields   trust   assets       from   the   beneficiary's   creditors.



voluntary or involuntary transfer of his beneficial interest does
not prevent his creditors from satisfying claims from his interest
in the trust estate.").
       10
       Glass v. Carpenter, 330 S.W.2d 530, 533 (Tex.Civ.App.—San
Antonio 1959, writ ref'd n.r.e.).

                                        7
"Spendthrift trusts have long been held valid by Texas courts."11

The bankruptcy court's ruling ignores the wishes of Shurley's

parents, the primary settlors of the trust, and the state's policy

of respecting their expectations.             "Spendthrift trusts are not

sustained     out   of   consideration    for   the    beneficiary.        Their

justification is found in the right of the donor to control his

bounty and secure its application according to his pleasure."12

Allowing     creditors   to   reach   only    that    portion   of   the   trust

contributed by Shurley would further the policy of allowing her

parents to create a spendthrift trust for the benefit of Shurley

that is protected from her creditors, while giving effect to the

exception for self-settled trusts. At least one court from another

jurisdiction agrees with this this approach,13 and we believe that

Texas courts would do the same.              Accordingly we hold that the

property which Shurley herself contributed to the trust—the Marfa

ranch—is not protected from creditors under state law and is

therefore property of the bankruptcy estate, but that all other

assets of the trust are not property of the estate.14

     11
          Moody, 837 F.2d at 723.
    12
      Hines v. Sands, 312 S.W.2d 275, 279 (Tex.Civ.App.—Fort Worth
1958, no writ).
     13
       In re Johannes Trust, 191 Mich.App. 514, 479 N.W.2d 25, 29
(1991) ("[The self-settlor's] creditors can reach the assets of the
trust and compel payment in the maximum amount that would be in the
trustee's discretion with respect to that portion of the assets
that came from [the self-settlor], but not with respect to any
portion of the trust that came from other individuals, particularly
petitioner.").
    14
      We note that the Marfa ranch was still held by the trust when
Shurley commenced her bankruptcy case. If the ranch had been sold,

                                      8
       We so hold despite Shurley's "power of appointment" granted by

the trust agreement.           Under the agreement each sister has a right

to allocate assets of the trust to specified beneficiaries.                   The

agreement states that the sisters "shall each have a special power

of appointment over an adjusted one-half (1/2) of the trust assets,

to appoint such adjusted one-half (1/2) of the assets of said trust

to and among their children and lineal descendants....                  Neither

[daughter] can appoint assets to herself, her creditors, her

estate, or the creditors of her estate."               If a daughter does not

exercise her power of appointment, the trust agreement provides

that her interest shall be distributed in equal shares "to her

children and lineal descendants, and to the lineal descendants of

a deceased child, per stirpes."           Shurley represents on appeal that

she has not exercised her special power of appointment because she

is    content    with    the    trust's   distribution    provisions   for   her

descendants.

       This power of appointment does not alter our conclusion that

the   Marfa     ranch    is    property   of   the   bankruptcy   estate.     The

Bankruptcy Code expressly excludes such a power of appointment from

the   bankruptcy        estate,   since   section    541(b)(1)    provides   that

property of the estate does not include "any power that the debtor


prior to the bankruptcy filing, this case would be more
complicated. We would still hold that some portion of Shurley's
interest in the trust was self-settled and therefore property of
the estate, but would have to engage in a further analysis of (1)
how to value the self-settled portion of the trust, through tracing
of assets or some other method of calculating Shurley's
proportionate contribution to the trust relative to the other
settlors' contributions, and (2) who should have the burden of
proof on this issue.

                                          9
may exercise solely for the benefit of an entity other than the

debtor."   However, while the power of appointment to others does

not become property of the estate under § 541(b)(1), the property

which became part of the bankruptcy estate under the Code upon the

commencement of the bankruptcy case now belongs to that estate and

is controlled by the bankruptcy trustee. Regardless of how Shurley

might indicate that trust assets should be divided upon her death,

the Marfa ranch now belongs to the bankruptcy estate, and her

designation of beneficiaries is irrelevant.   The bankruptcy estate

will be divided among creditors according to the Code, regardless

of Shirley's appointment of assets under the trust agreement.

     The exercise of the power of appointment under the trust

agreement is analogous to a will, and has no more effect on the

property of the bankruptcy estate and creditor priorities than a

garden-variety will of the debtor.     With an ordinary will, the

heirs only receive the stipulated items of the property that were

owned by the testator.     Stated more simply, a testator can only

give away that which was hers.     Here, the Marfa ranch no longer

belongs to Shurley;    it is property of the bankruptcy estate.

     Shurley argues that she only has a life estate in the Marfa

ranch and other trust assets in the form of an equitable interest

in the income from the trust assets during her life, and that

creditors therefore cannot reach the corpus of the trust even if it

is self-settled.      She is correct that absent distributions of

corpus at the discretion of the trustee or a premature termination

of the trust (discussed below), the trust agreement only provides


                                 10
her with an income interest in the trust assets, with the remainder

going to other beneficiaries.           Shurley cites authority that even

when a settlor creates a trust for herself, creditors can only

reach trust assets to the extent of the settlor's interest.15

     The issue here—whether the creditors can reach only Shurley's

income from the Marfa ranch or the ranch itself—does not turn on

whether the Shurley's interest in the trust is "equitable," since

the Bankruptcy Code defines property of the bankruptcy estate to

include     "all   legal     or   equitable   interests   of   the    debtor   in

property."16 Resolution of this question turns on whether creditors

can reach the trust corpus under state law, regardless of how the

interest is characterized.

     We conclude that under Texas law creditors can reach not only

Shurley's income from the Marfa ranch but the ranch itself, in

light of Bank of Dallas v. Republic National Bank of Dallas.17                 In

Bank of      Dallas,   the    debtor   settled   a   trust   with    spendthrift

language for the benefit of herself and her children.                The debtor

was to receive the net income of the trust during her lifetime,

with the remainder going to her children or other beneficiaries

named in her will.           The trust agreement further provided that

"[w]henever the trustee determines that the income of the Settlor

     15
      E.g., Fordyce v. Fordyce, 80 Misc.2d 909, 365 N.Y.S.2d 323,
328 (N.Y.Sup.Ct.1974) ("Even in the case of a self-settled trust,
creditors can only reach the interest the settlor retained for
himself.").
     16
          11 U.S.C. § 541(a)(1).
     17
          540 S.W.2d 499 (Tex.Civ.App.—Waco 1976, writ ref'd n.r.e.)


                                        11
from all sources known to the trustee is not sufficient for her

reasonable support, comfort, and health and for reasonable support

and education of Settlor's descendants, the trustee may in its

discretion pay to, or use for the benefit of, Settlor or one or

more of Settlor's descendants so much of the principal as the

trustee determined to be required for those purposes."

     The court held that "where a settlor creates a trust for his

own benefit, and inserts a spendthrift clause, it is void as far as

then existing or future creditors are concerned, and they can reach

his interest under the trust by garnishment."18    It further held

that income from the trust was subject to creditor claims, and that

"the interest of [the debtor] in the trust is such that the corpus

may be reached by her creditors."19

     The court considered the Restatement (Second) of Trusts § 156

(1959), which provides:

     (1) Where a person creates for his own benefit a trust with a
     provision restraining the voluntary or involuntary transfer of
     his interest, his transferee or creditors can reach his
     interest.

     (2) Where a person creates for his own benefit a trust for
     support or a discretionary trust, his transferee or creditors
     can reach the maximum amount which the trustee under the terms
     of the trust could pay to him or apply for his benefit.

     The court also looked to comment e of this section, which

states that "[w]here by the terms of the trust a trustee is to pay

the settlor or apply for his benefit as much of the income or

principal as the trustee may in his discretion determine, his

     18
          Id. at 501.
     19
          Id. at 501-02.

                                12
transferee or creditors can reach the maximum amount which the

trustee could pay to him or apply for his benefit."                 Applying these

rules the court held that the creditor could reach the corpus of

the trust, even though the debtor only had a life interest in the

trust.

     By   this   reasoning      the   creditors       are    able    to   reach    the

self-settled asset of the trust in our case, namely the Marfa

ranch.     The    trust      agreement   states       that   "[i]f    the   trustee

determines that the net income of said trust is insufficient to

maintain and support any of the beneficiaries of said trust or

their children and lineal descendants in their accustomed manner of

living, taking into account, however, such beneficiary's income

from all other sources, the trustee may use so much of the corpus

of said trust as the trustee sees fit to make up such deficiency."

This language is even broader than the language of the trust

agreement in Bank of Dallas, since in our case the trustee can make

grants of trust corpus to support the beneficiaries' or their

descendants' "accustomed manner of living," while in Bank of Dallas

the trustee was limited to making such distributions to support the

beneficiary's "reasonable support, comfort, and health" and the

reasonable support and education her descendants. If anything, the

former term grants even more discretion to the trustee than the

latter. Accordingly we conclude that the creditors in our case can

reach    the   corpus   of    the   trust     under    Texas   law    as    to    that

property—the Marfa ranch—contributed by Shurley to the trust, and

that the ranch is therefore property of the estate.


                                         13
       The court in Bank of Dallas also quoted comment c to § 156,

which states that "[i]f the settlor reserves for his own benefit

not only a life interest but also a general power to appoint the

remainder by deed or will or by deed only or by will alone, the

creditors can reach the principal of the trust as well as the

income."        In Bank of Dallas the debtor apparently had a general

power to appoint the remaining trust assets by will, while in our

case Shurley and her sister have a special power of appointment,

meaning that the trust document limits the choice of recipients of

appointed assets to the sisters' descendants.          We do not see this

factual distinction as significant.          Comment c was only one of

three comments to § 156 (comments c, d, and e) quoted by the court

in Bank of Dallas, and § 156 itself, as we read it, states than any

self-settled support or discretionary trust is subject to creditor

claims up to "the maximum amount which the trustee under the terms

of the trust could pay to" the beneficiary.          We cannot fathom why

the court would have reached a different result if the debtor had

had a special rather than a general power of appointment.            Before

even    mentioning      the   Restatement,   the   court   stated   without

qualification that, under Texas law, "where a settlor creates a

trust for his own benefit, and inserts a spendthrift clause, it is

void as far as then existing or future creditors are concerned, and

they can reach his interest under the trust by garnishment."20

       A similar result was reached in State v. Nashville Trust Co.21

       20
            Bank of Dallas, 540 S.W.2d at 501.
       21
            28 Tenn.App. 388, 190 S.W.2d 785 (1944).

                                      14
The debtor was the beneficiary of a spendthrift trust holding real

estate.      The debtor built a mansion on the property.   The court

held that the debtor had self-settled the trust to the extent of

the improvements he had made, and that the property was therefore

subject to the creditor's claim to the extent of the debtor's

improvements.     The debtor argued that even if he "can be held to

have contributed to the trust property, enhanced its value, and to

that extent created a spendthrift trust for his own benefit, only

his interest in such enhancement, i.e. his life estate in such

enhancement, may be subjected and that the remainder interest of

his children ... may not be subjected for any debt of his."22    The

court rejected this argument, reasoning that the debtor's children

"could only be donees or volunteers and could take no benefits

under such transfer as against his creditors.      So we think the

chancellor did not err against defendants in decreeing that the

[creditor] had a right to subject the land for the amount by which

its value had been enhanced by reason of the improvements."23    The

court held that the creditor was entitled to a lien on the trust

property for the value of the debtor's improvements, and that the

creditor was "entitled to a sale of the land, if necessary, to

enforce the lien."24

     Shurley argues that creditors cannot reach the corpus of the

trust because of our decisions in In re Goff, 706 F.2d 574 (5th

     22
          Id. 190 S.W.2d at 791.
     23
          Id. at 792.
     24
          Id. at 799.

                                   15
Cir.1983) (Goff I), and In re Goff, 812 F.2d 931 (5th Cir.1987)

(Goff II ).           In Goff I we held that the debtor's Keogh plan, a

pension trust under the ERISA statute,25 was not a spendthrift trust

excluded       from    the   bankruptcy   estate   under   Bankruptcy   Code   §

541(c)(2) because it was self-funded.                We stated that "[t]he

general rule is well established that if a settlor creates a trust

for his own benefit and inserts a "spendthrift' clause, restraining

alienation or assignment, it is void as far as creditors are

concerned and they can reach the settlor's interest in the trust."26

     In Goff II, a creditor claimed that its recorded judgment

against the debtor gave it a statutory lien against the property

held in the pension trust, and that it therefore had a secured

bankruptcy claim. The bankruptcy trustee argued that the claim was

unsecured.       We held that the claim was unsecured, because under

Texas law a judgment lien only attaches to real property in which

the debtor has legal title, and the debtor only had equitable title

to the real property in the trust.             We stated that "[t]he trust

remains valid;           only the spendthrift clause is void, allowing

creditors to reach the property held in trust by garnishment."27

Goff II did not, as appellants argue, hold that creditors cannot


     25
          29 U.S.C. §§ 1001 et seq.
          26
        Goff I, 706 F.2d at 587.    The principal holding of the
case—that a qualified ERISA pension plan is not excluded from the
bankruptcy estate because the federal ERISA statute is not
"applicable   nonbankruptcy   law"   under   Bankruptcy   Code   §
541(c)(2)—was expressly overruled in Patterson, 504 U.S. at 757 n.
1, 112 S.Ct. at 2246 n. 1 (citing Goff I ).
     27
          Goff II, 812 F.2d at 933.

                                          16
reach the corpus of a self-funded trust with an invalid spendthrift

clause.      It held only that a judgment lien against the debtor did

not create a secured claim against the assets of the trust.                           We

have cited Goff II for the proposition that "[a] creditor can reach

the trust assets" of a trust funded by the debtor-beneficiary.28

As   with     the    Bryant   Family    Trust,      the   trust   in   question      (1)

contained a spendthrift clause, (2) provided the debtor with a life

interest      in    the   income,     with    the    remainder     going     to    other

beneficiaries, and (3) provided that the trustee could invade the

corpus of the trust for the debtor's support, maintenance and

welfare.

           Shurley    points    out    that       when    she   made   the   original

contribution of the Marfa ranch to the trust, it was subject to a

note and lien.            She argues that this lien should affect our

analysis, but we disagree.             There is no dispute that Shurley was

the owner of the ranch when she conveyed it to the trust, even if

it was encumbered with a lien.           The note and lien may have affected

the value of the property at the time the trust was funded, but

they did not affect ownership of the property.                    When determining

the property of the estate, the Bankruptcy Code looks to the

debtor's property "as of the commencement of the case."29                     It makes

no more sense to look to the value of the ranch at the time of the

creation of the trust than in does to look to the value of any

other property of the debtor on the date of acquisition.                          If the

      28
           In re Latham, 823 F.2d 108, 111 (5th Cir.1987).
      29
           11 U.S.C. § 541(a)(1).

                                             17
debtor owns stock, bonds, real estate or other property, the

original value or cost basis of those assets is irrelevant to the

bankruptcy matter of defining the estate.           Accordingly a lien on

the ranch at the time of the trust's creation does not alter our

conclusion that the ranch is property of the bankruptcy estate.

The ranch might have appreciated or depreciated in value for any

number of reasons since 1965, including the balance on the note,

but it is still property of the bankruptcy estate.

      Shurley argues that there was no proof by appellees that she

had any equity in the ranch at the time of creation of the trust,

reasoning that she could not be a self-settlor if the property she

contributed was worthless.            Assuming that Shurley is legally

correct—that a settlor's contribution to a trust of real property

in which she had no equity at the time of the trust's creation does

not fall within the self-settlor rule—the bankruptcy court found

that she had equity in the property at the time of the creation of

the trust in 1965.30     This fact finding is not clearly erroneous.

Shurley     purchased   the   ranch    from   her   parents   in   1950   for

$131,366.64 and assumed a $50,000 balance on the note.31                  The

balance on the note was only $23,000 when the property was conveyed

to the trust.32     Moreover, in the trust agreement itself, Shurley

as a signatory represented that "the value of that portion of said

     30
          Shurley, 171 B.R. at 778-79 n. 5.
     31
      Shurley paid only $200 down for the ranch, and executed 25
separate promissory notes to her parents, which were annually
forgiven by the parents.
     32
          The note was subsequently paid off by the trust.

                                       18
real property to be contributed by [Shurley and her sister] each

represents (1/6) of the total value of all of said real property to

be contributed."         This declaration is an admission by Shurley that

the property she contributed had some value, exceeding the balance

on the note, since the trust assumed the note.

B. Beneficiary Control

          The bankruptcy court concluded that "[e]ither substantial

control or self-settlement may operate to invalidate protective

trust provisions."33         It found that Shurley exercised too much

control     over   the    trust   to   qualify   as   the   beneficiary   of   a

spendthrift trust.        We find none of the reasons given persuasive.34

     First, the court found that "Mrs. Shurley, in conjunction with

her father during his life, had the power to revoke, alter, or

amend the Trust document, or distribute the Trust assets back to

the settlors."35        We disagree.    The agreement provides that "M.D.

Bryant (the father) with the concurrence of either Settlor Anne

Bryant Ridge or Settlor Jane Bryant Shurley, shall have the right

at any time during his lifetime to revoke, alter and amend said

trust and distribute the assets of said trust to the Settlors in

the same proportion as the original contributions by each of said

Settlor, taking into account any adjustment under paragraph (b)."

     33
          Shurley, 171 B.R. at 782.
    34
     We assume without deciding that the court was legally correct
in concluding that "substantial control" can render a spendthrift
or other protective trust subject to creditor claims.      We note
however that we do not believe that appellees have cited any Texas
authority for this proposition.
     35
          Id. at 783.

                                        19
The power to revoke or amend the trust was vested in the father,

not the daughters.   Shurley had no authority to alter the trust.

She only had the authority to prevent her father from doing so, and

only if she and her sister vetoed the change.          At most therefore

she and her sister in combination had the power to ensure the

perpetuation of the trust.         Further, this power lapsed upon the

death of the father in 1967.         We find no authority that such a

limited power rendered the trust subject of creditor claims against

the beneficiaries.

     Second, the bankruptcy court noted that the agreement provided

that Shurley had the right to petition three "special trustees" for

the partial or complete termination of the trust.           The agreement

provides for the appointment of certain named special trustees,

including a state judge, after the death of the parents.           It states

that "[u]pon application made by either daughter ... or both,

showing that termination would best serve the intended purpose of

the trust, such Special Trustees shall in their sole and absolute

discretion have the power and authority by unanimous consent to

terminate in whole or in part and from time to time the trust or

trusts established hereunder." Again, this provision does not vest

in Shurley the power to terminate or alter the trust.               It only

authorizes her to request such a change from special trustees, who

have "in their sole and absolute discretion" the authority to alter

the trust.   Even absent such a provision, Shurley, like all Texas

trust   beneficiaries,   had   a   statutory   right   to   seek   judicial

modification or termination of the trust if "compliance with the


                                     20
terms of      the   trust   would   defeat   or   substantially   impair   the

accomplishment of the purposes of the trust."36           No court has ever

held that such a statutory right renders a spendthrift trust

subject to creditor claims.

     Third, the bankruptcy court noted Shurley's special power of

appointment.        This    provision   merely    gave   the   daughters   the

authority to allocate trust assets to their descendants. It grants

no authority to the daughters to allocate assets to themselves.             As

explained above, the Bankruptcy Code expressly excludes such a

power of appointment from the bankruptcy estate. Section 541(b)(1)

of the Code provides that property of the estate does not include

"any power that the debtor may exercise solely for the benefit of

an entity other than the debtor."

      Aside from the terms of the trust agreement, the bankruptcy

court found that Shurley had exercised de facto control over the

trust.     The court found:

     Outside the Trust document, the Shurleys also manipulated
     Trust assets and governed the initial Trustee, Bryant
     Williams.    The Shurleys were regularly able to obtain
     unrestricted corpus distributions and loans. While the Trust
     provides   for   such  distributions,   the   liberality   and
     circumstances under which they were requested and granted
     suggested a domination by M.D. Bryant, Mrs. Shurley and Mrs.
     Watkins of Mr. Williams.      Only recently had any corpus
     distribution request been denied, and only recently had the
     successor Trustee, Mr. Armstrong, started to make only
     "loans," to the exclusion of corpus distributions. Indeed, in
     the early days of the Trust, the initial Trustee, on behalf of
     the Trust, executed promissory notes as a comaker for the
     Shurleys. Part of the malleability of Bryant Williams may
     have arisen either from his fear of being replaced for failing
     to abide by the wishes of Mrs. Shurley and Mrs. Watkins, or
     from his close relationship with the family.       While M.D.

     36
          Tex. Prop.Code Ann. § 112.054 (Vernon 1995).

                                        21
     Bryant, the Shurleys and the Watkines may not have held all of
     the puppet strings to Mr. Williams, they held enough of them
     to exert the control necessary to defeat the Trust's
     protective attributes.37

Shurley strongly denies that the evidence at trial supported these

findings, arguing for example that there is no evidence that the

first trustee ever made a single distribution of trust corpus or a

single loan to Shurley or any other beneficiary.     Appellees argue

that in addition to the above-quoted findings, Shurley, among other

things, "used the Trust income to induce extensions of credit to

herself and her husband," and "engaged in "trustee shopping' to

help further her control of the trust assets."

     Even if these findings are taken as undisputed, they do not

establish control by the daughters over the trust assets sufficient

to make the trust subject to their creditors.      The fact that the

trustees liberally bestowed trust assets on the daughters, by

itself, does not establish de facto control by the daughters over

the affairs of the estate.    The daughters were after all two of the

principal beneficiaries of the trust, and distributions of the

wealth of the the trust to the daughters is entirely consistent

with its apparent purpose. The agreement provides that the trustee

was not limited to distributing income generated from the corpus of

the trust. As discussed above, it expressly authorized the trustee

to make distributions from the trust corpus "[i]f the trustee

determines that the net income of said trust is insufficient to

maintain and support any of the beneficiaries of said trust or


     37
          Shurley, 171 B.R. at 783.

                                      22
their children and lineal descendants in their accustomed manner of

living...."       It also expressly authorized the trustee to "loan

money to ... and otherwise deal with any and all persons" including

"the beneficiaries of this trust."

      As one Texas decision has explained in denying a creditor's

claim against assets held by a spendthrift trust:

      the purpose of such a trust is not defeated by the fact that
      the trustee is authorized in his discretion to apply a part of
      the corpus of the fund to the use of the beneficiary in
      accordance with the terms of the trust.        Neither is the
      purpose of such trust defeated by the fact that the trustee is
      authorized or even required to turn the entire trust fund or
      property over to the beneficiary absolutely at some fixed time
      in the future.38

      Appellees did not establish that loans or grants from the

trust to the daughters, on their face consistent with the purpose

and language of the trust, amounted to de facto control of the

trust by the daughters.         Further, the fact that the beneficiary of

a spendthrift trust may have behaved as a spendthrift only shows

the   prescience     of   the   settlors,    and   should   not   defeat     the

protective features of the trust. Appellees' focus on the behavior

of Shurley as beneficiary is misplaced, since as explained above,

spendthrift      trusts   are    not   shielded    from   creditors   "out    of

consideration for the beneficiary. Their justification is found in

the right of the donor to control his bounty and secure its

application according to his pleasure."39


      38
           Adams v. Williams, 112 Tex. 469, 248 S.W. 673, 679 (1923).

      39
      Hines v. Sands 312 S.W.2d 275, 279 (Tex.Civ.App.—Fort Worth
1958, no writ).

                                        23
C. Whether the Trust Is an Annuity

     By separate appeal Shurley argues that the bankruptcy court

erred in denying her summary judgment motion urging that her

interest in the trust is an "annuity" exempt from creditors under

Texas law.

     Under Texas law and Bankruptcy Code § 522, Texas debtors may

elect     either   state   or   federal   exemptions   from   creditors.40

Shurley's claims that her interest in the trust is an annuity

exempt from creditors under Tex. Ins. Code Ann. art. 21.22 (Vernon

Supp.1997), which provides an exemption for "all money or benefits

of any kind, including policy proceeds and cash values, to be paid

or rendered to the insured or any beneficiary under any policy of

insurance or annuity contract issued by a life, health or accident

insurance company, including mutual and fraternal insurance, or

under any plan or program of annuities and benefits in use by an

employer or individual."        The emphasized language was added by a

1993 amendment to the statute, after Shurley filed for bankruptcy.

        This argument fails for two reasons.     First, her interest in

the trust was not issued by an insurance company or employer, so

the only conceivable claim of exemption is that her interest is

part of a "plan or program of annuities and benefits in use by an

... individual."     The reference to an individual was added to the

statute after the bankruptcy filing.       In determining exemptions we

must apply the law in effect at the time the debtor entered



     40
          In re Walden, 12 F.3d 445, 448 (5th Cir.1994).

                                     24
bankruptcy.41        Although      Texas         exemption   laws   are    liberally

construed,42 the exemption Shurley claims simply did not exist at

the commencement of her bankruptcy case.                     We cannot agree with

Shurley that the 1993 amendment merely "clarified" legislative

intent insofar as it added a reference to non-employer annuities

that are not issued by insurance companies.43                 The statute plainly

did not apply to such annuities prior to the amendment.

         Second, we do not believe that Shurley's trust interest can

be characterized as an annuity in any event.                  One Texas court has

described      an   annuity   as   a   "a    form     of   investment     which   pays

periodically during the life of the annuitant or during a term

fixed by contract rather than on the occurrence of a future

contingency."44      We have cited this same definition with approval.45

While all annuities do not make payments in fixed, predetermined


          41
        Walden, 12 F.3d at 449 n. 7. In so holding, Walden was
interpreting the same state statute at issue here, Insurance Code
art. 21.22
     42
          Id. at 448.
     43
       We assume without deciding that Shurley is correct that an
annuity under the current statute can be issued by an entity other
than an insurance company. But see art. 21.22(6) ("For purposes of
regulation under this code, an annuity contract issued by a life,
health, or accident insurance company, including a mutual company
or fraternal company, or under any plan or program of annuities or
benefits in use by an employer or individual, shall be considered
a policy or contract on insurance.").     Texas, like all states,
comprehensively regulates insurers and insurance policies.
    44
      Steves & Sons, Inc. v. House of Doors, Inc., 749 S.W.2d 172,
175 (Tex.App.—San Antonio 1988, writ denied) (quoting In re
Howerton, 21 B.R. 621 (Bankr.N.D.Tex.1982)).
         45
       In re Young, 806 F.2d 1303, 1306 (5th Cir.1987) (quoting
Howerton ).

                                            25
amounts,46 we do not believe that the term extends to a trust where

future payments are highly contingent on the future circumstances

of the beneficiaries.         The trust agreement provides that the

trustee "may" make distributions of trust corpus if he determines

that such distributions are needed to "maintain and support any of

the beneficiaries or their children or lineal descendants in their

accustomed manner of living." Any such good faith determination by

the trustee is "final and binding on all interested parties."          Such

distributions were in fact made. By design, such distributions are

tied to contingencies unknown at the time of the creation of the

trust, and are not consistent with the concept that an annuity

makes payments without regard to "the occurrence of a future

contingency."47     In addition, under terms of the trust agreement

discussed above, payments to Shurley were contingent on (1) the

death of her parents, since her interest increased on the death of

one parent and increased again on the death of the second parent,

(2) whether the father, with the consent of either sister, chose to

terminate     the   trust,   and   (3)    whether   the   special   trustees

terminated the trust.

     Further, Shurley's argument simply proves too much, since if

her interest in the trust is an annuity, then all beneficiaries of

self-settled trusts could make the same argument, as long as the


    46
     With a variable annuity, "payments to the purchaser vary with
investment performance." NationsBank of North Carolina, N.A. v.
Variable Annuity Life Ins. Co., 513 U.S. 251, 254, 115 S.Ct. 810,
812, 130 L.Ed.2d 740 (1995).
     47
          Steves & Sons, 749 S.W.2d at 175.

                                     26
trust agreement called for periodic payments to the settlor for

life or a fixed term.    We cannot accept that the Texas legislature

intended this result, which would reject the universally recognized

rule, and one codified by Texas statute, that a settlor cannot

create his   own   spendthrift     trust   and    shield   its   assets   from

creditors.   If the legislature had intended this result, it would

have repealed Tex. Prop.Code Ann. § 112.035(d), which provides that

"[i]f the settlor is also a beneficiary of the trust, a provision

restraining the voluntary or involuntary transfer of his beneficial

interest does not prevent his creditors from satisfying claims from

his interest in the trust estate."

                               CONCLUSION

     In summary, we conclude that the Marfa ranch and income

generated therefrom is property of the estate.48            The judgment is

reversed   and   the   case   is   remanded      for   further   proceedings

consistent with this opinion.

     REVERSED and REMANDED.




      48
        Income from the ranch belongs to the estate because the
Bankruptcy Code defines property of the estate to include
"[p]roceeds, product, offspring, rents, or profits of or from
property of the estate." 11 U.S.C. § 541(a)(6).

                                    27
