CSSB 63(JUD): "An Act relating to transfer restrictions on trust interests."
00 CS FOR SENATE BILL NO. 63(JUD) 01 "An Act relating to transfer restrictions on trust interests." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 34.40.110(b) is amended to read: 04 (b) If a trust contains a transfer restriction allowed under (a) of this section, 05 the transfer restriction prevents a creditor existing when the trust is created or a person 06 who subsequently becomes a creditor from satisfying a claim out of the beneficiary's 07 interest in the trust, unless the creditor is a creditor of the settlor and 08 (1) the creditor establishes by clear and convincing evidence that 09 the settlor's transfer of property in trust was made with the intent to defraud that 10 creditor, and a cause of action or claim for relief with respect to the fraudulent transfer 11 complies with the requirements of (d) of this section; however, a settlor's expressed 12 intention to protect trust assets from a beneficiary's potential future creditors is not 13 evidence of an intent to defraud; 14 (2) the trust, except for an eligible individual retirement account trust, 15 provides that the settlor may revoke or terminate all or part of the trust without the
01 consent of a person who has a substantial beneficial interest in the trust and the interest 02 would be adversely affected by the exercise of the power held by the settlor to revoke 03 or terminate all or part of the trust; in this paragraph, "revoke or terminate" does not 04 include a power to veto a distribution from the trust, a testamentary nongeneral power 05 of appointment or similar power, [OR THE RIGHT TO RECEIVE A 06 DISTRIBUTION OF INCOME, PRINCIPAL, OR BOTH IN THE DISCRETION OF 07 A PERSON, INCLUDING A TRUSTEE, OTHER THAN THE SETTLOR,] or a right 08 to receive a distribution of income or principal under (3)(A), (B), (C), or (D) of this 09 subsection; 10 (3) the trust, except for an eligible individual retirement account trust, 11 requires that all or a part of the trust's income or principal, or both, must be distributed 12 to the settlor; however, this paragraph does not apply to a settlor's right to receive the 13 following types of distributions, which remain subject to the restriction provided by 14 (a) of this section until the distributions occur: 15 (A) income or principal from a charitable remainder annuity 16 trust or charitable remainder unitrust; in this subparagraph, "charitable 17 remainder annuity trust" and "charitable remainder unitrust" have the meanings 18 given in 26 U.S.C. 664 (Internal Revenue Code) as that section reads on 19 October 8, 2003, and as it may be amended; 20 (B) a percentage of the value of the trust each year as 21 determined from time to time under the trust instrument, but not exceeding the 22 amount that may be defined as income under AS 13.38 or under 26 U.S.C. 23 643(b) (Internal Revenue Code) as that subsection reads on October 8, 2003, 24 and as it may be amended; 25 (C) the transferor's potential or actual use of real property held 26 under a qualified personal residence trust within the meaning of 26 U.S.C. 27 2702(c) (Internal Revenue Code) as that subsection reads on September 15, 28 2004, or as it may be amended in the future; or 29 (D) income or principal from a grantor retained annuity trust or 30 grantor retained unitrust that is allowed under 26 U.S.C. 2702 (Internal 31 Revenue Code) as that section reads on September 15, 2004, or as it may be
01 amended in the future; or 02 (4) at the time of the transfer, the settlor is in default by 30 or more 03 days of making a payment due under a child support judgment or order. 04 * Sec. 2. AS 34.40.110(h) is repealed and reenacted to read: 05 (h) A transfer restriction is allowed under (a) of this section and is enforceable 06 under (b) of this section even if the settlor has the authority under the terms of the trust 07 instrument to 08 (1) appoint a trustee, a trust protector under AS 13.36.370, or an 09 advisor under AS 13.36.375; 10 (2) remove a trustee or trust protector and appoint a replacement 11 trustee or trust protector who is not a related or subordinate party; in this paragraph, 12 "related or subordinate party" has the meaning given in 26 U.S.C. 672(c) (Internal 13 Revenue Code); or 14 (3) remove an advisor and appoint a replacement advisor. 15 * Sec. 3. AS 34.40.110 is amended by adding a new subsection to read: 16 (n) If a trust contains a transfer restriction allowed under (a) of this section, 17 the transfer restriction prevents a creditor existing when the trust is created or a person 18 who subsequently becomes a creditor from satisfying a claim out of the interest of a 19 beneficiary, including a beneficiary who is the settlor of the trust, even if 20 (1) the beneficiary has the right to receive through the exercise of a 21 person's discretion, whether or not the exercise of the discretion is governed by a 22 standard, a distribution of income, principal, or both principal and interest, from the 23 trust; in this paragraph, "person" includes a trustee who is the settlor, unless the settlor 24 is the beneficiary; or 25 (2) the settlor potentially will receive or actually receives income or 26 principal to pay, in whole or in part, income taxes due on the income of the trust, if the 27 potential or actual receipt of income or principal will be or is made under a provision 28 in the trust instrument that expressly provides for the payment of the taxes and if the 29 potential or actual receipt of income or principal would be the result of a trustee's 30 acting in the trustee's discretion or under a mandatory direction in the trust instrument; 31 a distribution to pay income taxes that is made under a discretionary or mandatory
01 provision in a governing instrument under this paragraph may be made by direct 02 payment to a taxing authority.