Enrolled SB 298: Relating to loans from trust property; relating to a trustee's power to appoint the principal of a trust to another trust; relating to challenges to, claims against, and liabilities of trustees, beneficiaries, and creditors of trusts and of trusts and estates; relating to individual retirement accounts and plans; relating to certain trusts in divorce and dissolutions of marriage situations; and providing for an effective date.
00Enrolled SB 298 01 Relating to loans from trust property; relating to a trustee's power to appoint the principal of a 02 trust to another trust; relating to challenges to, claims against, and liabilities of trustees, 03 beneficiaries, and creditors of trusts and of trusts and estates; relating to individual retirement 04 accounts and plans; relating to certain trusts in divorce and dissolutions of marriage situations; 05 and providing for an effective date. 06 _______________ 07 * Section 1. AS 13.16 is amended by adding a new section to article 8 to read: 08 Sec. 13.16.530. Application to trustees. Notwithstanding AS 13.16.450 - 09 13.16.525, the trustee of a trust may, under AS 13.36.368(b)(3), take the action a 10 personal representative may take under AS 13.16.450 - 13.16.525. 11 * Sec. 2. AS 13.36.100(a) is amended to read: 12 (a) Unless resolved or barred under (b) or (c) of this section, and 13 notwithstanding the lack of adequate disclosure, all claims against a trustee who has 14 issued a [FINAL] report received by the beneficiary and who has informed the
01 beneficiary of the location and availability of records for examination by the 02 beneficiary are barred unless a proceeding to assert the claims is commenced within 03 three years after the beneficiary's receipt of the [FINAL] report. 04 * Sec. 3. AS 13.36.100(b) is amended to read: 05 (b) If a trustee petitions a court for an order approving a report that adequately 06 discloses the existence of a potential claim, serves the report on all beneficiaries to be 07 bound by the report, [AND] gives the beneficiaries at least 60 [90] days' notice of the 08 court proceeding, and notifies the beneficiary that a claim must be begun within 09 45 days after the beneficiary is served with notice of the court proceeding, all 10 potential claims of the beneficiaries against the trustee are barred unless the claims are 11 served on the trustee and filed with the court within 45 [60] days after the beneficiaries 12 are served with notice of [RECEIVE THE REPORT, OR DURING] the court 13 proceeding. 14 * Sec. 4. AS 13.36.100(c) is amended to read: 15 (c) If a trustee serves a report on a beneficiary that adequately discloses the 16 existence of a potential claim against the trustee, the trustee informs the beneficiary 17 that a proceeding to assert any claim against the trustee must be commenced by the 18 beneficiary within [24 MONTHS AFTER RECEIPT OF THE REPORT IF IT IS AN 19 INTERIM REPORT OR WITHIN] six months after receipt of the report [IF IT IS A 20 FINAL REPORT], and the beneficiary fails to assert a claim against the trustee, all 21 claims of the beneficiary are barred. 22 * Sec. 5. AS 13.36.100 is amended by adding a new subsection to read: 23 (h) The report of a trustee under this section is considered to provide adequate 24 notice to the beneficiary that there is a time limitation for filing a claim against the 25 trustee if the cover page or top of the first page of the report contains the following 26 language in at least 14 point bold type: "BY RECEIPT OF THIS REPORT, ANY 27 ACTION YOU MAY HAVE AS A BENEFICIARY AGAINST THE TRUSTEE 28 FOR BREACH OF TRUST BASED ON ANY MATTER ADEQUATELY 29 DISCLOSED IN THIS REPORT MAY BE BARRED UNLESS THE ACTION IS 30 BEGUN WITHIN SIX MONTHS AFTER YOU RECEIVE THIS REPORT. IF YOU 31 HAVE ANY QUESTIONS, YOU MAY WISH TO OBTAIN PROFESSIONAL
01 ADVICE REGARDING THIS REPORT." 02 * Sec. 6. AS 13.36.109(21) is amended to read: 03 (21) to make loans out of trust property to an eligible [A] beneficiary 04 or an eligible third-party entity on terms and conditions the trustee considers to be 05 fair and reasonable under the circumstances and to guarantee loans to the eligible 06 beneficiary or eligible third-party entity by encumbrances on trust property; in this 07 paragraph, 08 (A) "eligible beneficiary" means a beneficiary of the trust 09 who is currently eligible for or entitled to a distribution of income or 10 principal of the trust; 11 (B) "eligible third-party entity" means a third-party entity 12 if more than 50 percent of the equity of the entity is owned by the trust or 13 by one or more beneficiaries of the trust; 14 * Sec. 7. AS 13.36.310(a) is amended to read: 15 (a) Except as provided in AS 34.40.110(b) [AS 34.40.110], a trust that is 16 covered by AS 13.36.035(c) or that is otherwise governed by the laws of this state, or 17 a property transfer to a trust that is covered by AS 13.36.035(c) or that is otherwise 18 governed by the laws of this state, is not void, voidable, liable to be set aside, 19 defective in any fashion, or questionable as to the settlor's capacity, and the assets of 20 the trust are not subject to the claim of a creditor of the settlor or a creditor of a 21 beneficiary, on the grounds that the trust or transfer avoids or defeats a right, claim, or 22 interest conferred by law on a person by reason of a personal or business relationship 23 with the settlor or beneficiary or by way of a marital or similar right. 24 * Sec. 8. AS 13.36.310(b) is amended to read: 25 (b) If a trust or a property transfer to a trust is voided or set aside under 26 AS 34.40.110(b) [(a) OF THIS SECTION], then the trust or property transfer shall be 27 voided or set aside only to the extent necessary to satisfy the settlor's debt to the 28 creditor or other person at whose instance the trust or property transfer is voided or set 29 aside and the costs and attorney fees allowed under the rules of court. 30 * Sec. 9. AS 13.36.157(a) is amended to read: 31 (a) Subject to (d) of this section, unless [UNLESS] the terms of the
01 instrument expressly provide otherwise, a trustee who has authority [THE 02 ABSOLUTE DISCRETION] under the terms of an [A TESTAMENTARY] 03 instrument or irrevocable inter vivos agreement to invade the principal of a trust for 04 the benefit of a [THE] beneficiary who is eligible or entitled to the income of the trust 05 may exercise without prior court approval the trustee's authority [DISCRETION] by 06 appointing, whether or not there is a current need to invade the principal under 07 any standard stated in the governing instrument, part or all of the principal of the 08 trust in favor of a trustee of another [A] trust under an instrument other than that 09 under which the power to invade was created if the exercise of this authority 10 [DISCRETION] 11 (1) does not reduce any fixed income interest of a [AN INCOME] 12 beneficiary of the invaded trust; 13 (2) is in favor of the beneficiaries [BENEFICIARY] of the invaded 14 trust; [AND] 15 (3) does not violate the limitations on validity under AS 34.27.051 or 16 34.27.100; and 17 (4) results, in the appointed trust, in a standard for invading 18 principal that is the same as the standard for invading principal in the invaded 19 trust. 20 * Sec. 10. AS 13.36.157 is amended by adding new subsections to read: 21 (d) The governing instrument of an appointed trust may provide that, after a 22 time or an event specified in the governing instrument, the trust assets of the appointed 23 trust remaining after the time or event shall be held for the benefit of the beneficiaries 24 of the invaded trust on terms and conditions regarding the nature and extent of the 25 interests of the beneficiaries of the invaded trust that are substantially identical to the 26 terms and conditions governing the interests of the beneficiaries in the invaded trust. 27 (e) In this section, 28 (1) "appointed trust" means the trust to which principal is appointed 29 under (a) of this section; 30 (2) "invaded trust" means the trust whose principal is invaded under 31 (a) of this section.
01 * Sec. 11. AS 13.36 is amended by adding a new section to read: 02 Sec. 13.36.368. Claims against revocable trusts. (a) Whether or not the terms 03 of the trust contain a spendthrift restriction, 04 (1) during the lifetime of the settlor of a revocable trust, the property of 05 the trust is subject to claims of the settlor's creditors; and 06 (2) except as otherwise provided in (b) of this section, after the death 07 of the settlor of a trust that was revocable at the settlor's death, and subject to the 08 settlor's right to direct the source from which claims may be paid, the property of the 09 trust is subject to claims to the extent the settlor's estate is not adequate to satisfy the 10 claims. 11 (b) With respect to claims in connection with the settlement after the death of 12 the settlor of a trust that was revocable at the settlor's death, 13 (1) a creditor's claim that would be allowed or barred against a 14 decedent's estate under AS 13.16.450 - 13.16.525 shall be allowed or barred against 15 the trustee of the trust, the trust property, and the creditors and beneficiaries of the 16 trust; 17 (2) if the personal representative of the decedent's estate follows the 18 procedures provided by AS 13.16.450 - 13.16.525, then claims that are allowed or 19 barred against the decedent's estate shall also be allowed or barred against the assets of 20 the trust; 21 (3) if the personal representative of the decedent's estate fails to follow 22 the procedures stated by AS 13.16.450 - 13.16.525, the trustee of the trust may file a 23 petition with the superior court for a determination of claims and follow the 24 procedures established by AS 13.16.450 - 13.16.525, and claims against the trust and 25 against the decedent's estate shall be allowed or barred under those procedures. 26 (c) In (a)(2) and (b) of this section, "claim" means a claim 27 (1) of a creditor of the settlor; 28 (2) for the expenses of the administration of the settlor's estate; 29 (3) for the expenses of the settlor's funeral; and 30 (4) for the expenses of the disposal of the settlor's remains. 31 * Sec. 12. AS 34.40.110(b) is amended to read:
01 (b) If a trust contains a transfer restriction allowed under (a) of this section, 02 the transfer restriction prevents a creditor existing when the trust is created or a person 03 who subsequently becomes a creditor from satisfying a claim out of the beneficiary's 04 interest in the trust, unless the creditor is a creditor of the settlor and 05 (1) the settlor's transfer of property in trust was made with the intent to 06 defraud that creditor, and a cause of action or claim for relief with respect to the 07 fraudulent transfer complies with the requirements of (d) of this section; 08 (2) the trust, except for an eligible individual retirement account 09 trust, provides that the settlor may revoke or terminate all or part of the trust without 10 the consent of a person who has a substantial beneficial interest in the trust and the 11 interest would be adversely affected by the exercise of the power held by the settlor to 12 revoke or terminate all or part of the trust; in this paragraph, "revoke or terminate" 13 does not include a power to veto a distribution from the trust, a testamentary 14 nongeneral power of appointment or similar power, or the right to receive a 15 distribution of income, principal, or both in the discretion of a person, including a 16 trustee, other than the settlor, or a right to receive a distribution of income or principal 17 under (3)(A), (B), (C), or (D) [(3)(A) OR (B)] of this subsection; 18 (3) the trust, except for an eligible individual retirement account 19 trust, requires that all or a part of the trust's income or principal, or both, must be 20 distributed to the settlor; however, this paragraph does not apply to a settlor's right to 21 receive the following types of distributions, which remain subject to the restriction 22 provided by (a) of this section until the distributions occur: 23 (A) income or principal from a charitable remainder annuity 24 trust or charitable remainder unitrust; in this subparagraph, "charitable 25 remainder annuity trust" and "charitable remainder unitrust" have the meanings 26 given in 26 U.S.C. 664 (Internal Revenue Code) as that section reads on 27 October 8, 2003, and as it may be amended; 28 (B) a percentage of the value of the trust each year as 29 determined from time to time under the trust instrument, but not exceeding the 30 amount that may be defined as income under AS 13.38 or under 26 U.S.C. 31 643(b) (Internal Revenue Code) as that subsection reads on October 8, 2003,
01 and as it may be amended; 02 (C) the transferor's potential or actual use of real property held 03 under a qualified personal residence trust within the meaning of 26 U.S.C. 04 2702(c) (Internal Revenue Code) as that subsection reads on September 15, 05 2004, or as it may be amended in the future; or 06 (D) income or principal from a grantor retained annuity trust or 07 grantor retained unitrust that is allowed under 26 U.S.C. 2702 (Internal 08 Revenue Code) as that section reads on September 15, 2004, or as it may be 09 amended in the future; or 10 (4) at the time of the transfer, the settlor is in default by 30 or more 11 days of making a payment due under a child support judgment or order. 12 * Sec. 13. AS 34.40.110(l) is amended by adding a new paragraph to read: 13 (2) "eligible individual retirement account trust" means an individual 14 retirement account under 26 U.S.C. 408(a) or an individual retirement plan under 26 15 U.S.C. 408A(b) (Internal Revenue Code), as those sections read on the effective date 16 of this paragraph or as they may be amended in the future, that is in the form of a trust, 17 if a trust company or bank with its principal place of business in this state is the trustee 18 or custodian. 19 * Sec. 14. AS 34.40.110 is amended by adding a new subsection to read: 20 (m) If a trust has a transfer restriction allowed under (a) of this section, in the 21 event of the divorce or dissolution of the marriage of a beneficiary of the trust, the 22 beneficiary's interest in the trust is not considered property subject to division under 23 AS 25.24.160 or 25.24.230 or a part of a property division under AS 25.24.160 or 24 25.24.230. Unless otherwise agreed to in writing by the parties to the marriage, this 25 subsection does not apply to a settlor's interest in a self-settled trust with respect to 26 assets transferred to the trust 27 (1) after the settlor's marriage; or 28 (2) within 30 days before the settlor's marriage unless the settlor gives 29 written notice to the other party to the marriage of the transfer. 30 * Sec. 15. AS 13.36.100(g)(1) is repealed. 31 * Sec. 16. The uncodified law of the State of Alaska is amended by adding a new section to
01 read: 02 TRANSITION. AS 13.36.157(a), as amended by sec. 9 of this Act, and 03 AS 13.36.157(d) and (e), as added by sec. 10 of this Act, apply to a trust that is created by a 04 will or another instrument before, on, or after the effective date of secs. 9 and 10 of this Act. 05 * Sec. 17. Sections 9 and 10 of this Act take effect immediately under AS 01.10.070(c).