HB 208: "An Act relating to trusts and powers of appointment; and providing for an effective date."
00 HOUSE BILL NO. 208 01 "An Act relating to trusts and powers of appointment; and providing for an effective 02 date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 13.12.704 is amended by adding new subsections to read: 05 (b) A power of appointment shall be considered to be held as a nonfiduciary 06 power of appointment unless granted to a trustee or other fiduciary in the capacity of a 07 trustee or other fiduciary. 08 (c) A nonfiduciary power of appointment may be exercised or not exercised in 09 any manner that is not unlawful subject only to any limitations expressed in the 10 instrument that grants the power of appointment. 11 (d) The exercise or nonexercise of a power of appointment held in a 12 nonfiduciary capacity may not be limited because the person who holds the 13 nonfiduciary power is a trustee or other fiduciary under the instrument that grants the 14 power.
01 (e) The person holding a nonfiduciary power of appointment may not be 02 compelled by a person, court, or authority to exercise the power in any manner and 03 may not be foreclosed from exercising the power in any lawful manner. 04 (f) Except as provided in AS 34.40.115, property subject to the exercise of a 05 nonfiduciary power of appointment, whether a general power of appointment or a 06 nongeneral power of appointment, is not subject to the claims of creditors of the 07 person holding the power or to the claims of the creditors of any person, including the 08 person who created the nonfiduciary power of appointment, in whose favor the power 09 may be exercised. 10 * Sec. 2. AS 13.36.109 is amended to read: 11 Sec. 13.36.109. Specific powers of trustees. Except as otherwise provided by 12 this chapter, in addition to the powers conferred by the terms of the trust, a trustee may 13 perform all actions necessary to accomplish the proper management, investment, and 14 distribution of the trust property, including the power 15 (1) to collect, hold, and retain trust property received from a settlor or 16 another person; the property may be retained even if it includes property in which the 17 trustee is personally interested; 18 (2) to accept additions to the property of the trust from a settlor or 19 another person; 20 (3) to continue or to participate in the operation of a business or other 21 enterprise that is part of the trust property and to effect an incorporation, dissolution, 22 or other change in the form of the organization of the business or enterprise; 23 (4) to acquire or dispose of property, for cash or on credit, at public or 24 private sale or by exchange; 25 (5) to manage, control, divide, develop, improve, exchange, partition, 26 change the character of, or abandon trust property; 27 (6) to encumber, mortgage, or pledge trust property for a term within 28 or extending beyond the term of the trust in connection with the exercise of a power 29 vested in the trustee; 30 (7) to make ordinary or extraordinary repairs, alterations, or 31 improvements in buildings or other trust property; to demolish improvements; and to
01 raze existing or erect new party walls or buildings; 02 (8) to subdivide or develop land; to dedicate land to public use; to 03 make or obtain the vacation of plats and to adjust boundaries; to adjust differences in 04 valuation on exchange or partition by giving or receiving consideration; and to 05 dedicate easements to public use without consideration; 06 (9) to enter into a lease for any purpose as lessor or lessee with or 07 without the option to purchase or renew and for a term within or extending beyond the 08 term of the trust; 09 (10) to enter into a lease or arrangement for exploration and removal of 10 gas, oil, or other minerals or geothermal energy; and to enter into a community oil 11 lease, a pooling agreement, or a unitization agreement; 12 (11) to grant an option involving disposition of trust property or to take 13 an option for the acquisition of property, including an option that is exercisable 14 beyond the duration of the trust; 15 (12) with respect to shares of stock of a domestic or foreign 16 corporation, a membership in a nonprofit corporation, or other property, to 17 (A) vote in person and to give proxies to exercise any voting 18 rights with respect to the shares, memberships, or property; 19 (B) waive notice of a meeting or to give consent to the holding 20 of a meeting; and 21 (C) authorize, ratify, approve, or confirm an action that could 22 be taken by shareholders, members, or property owners; 23 (13) to pay calls, assessments, and other sums chargeable to or 24 accruing against or on a securities account; 25 (14) to sell or exercise stock subscription or conversion rights; 26 (15) to consent, directly or through a committee or other agent, to the 27 reorganization, consolidation, merger, dissolution, or liquidation of a corporation or 28 other business enterprise; to participate in voting trusts, pooling arrangements, and 29 foreclosures; and, in connection with a reorganization, consolidation, merger, 30 dissolution, liquidation, voting trust, pooling arrangement, or foreclosure, to deposit 31 securities with, transfer title, and delegate discretion to a protective or other committee
01 as the trustee considers advisable; 02 (16) to deposit securities in a securities depository; 03 (17) to insure the property of the trust against damage or loss and to 04 insure the trustee against liability with respect to third persons or beneficiaries of the 05 trust; 06 (18) to borrow money for a trust purpose to be repaid from trust 07 property; 08 (19) to pay or contest a claim, to settle a claim by or against the trust 09 by compromise, arbitration, or otherwise, and to release, in whole or in part, a claim 10 belonging to the trust; 11 (20) to pay taxes, assessments, reasonable compensation of the trustee, 12 employees, and agents of the trust, and other expenses incurred in the collection, care, 13 administration, and protection of the trust; 14 (21) to make loans out of trust property to an eligible beneficiary or an 15 eligible third-party entity on terms and conditions the trustee considers to be fair and 16 reasonable under the circumstances and to guarantee loans to the eligible beneficiary 17 or eligible third-party entity by encumbrances on trust property; in this paragraph, 18 (A) "eligible beneficiary" means a beneficiary of the trust who 19 is currently eligible for or entitled to a distribution of income or principal of 20 the trust; 21 (B) "eligible third-party entity" means a third-party entity if 22 more than 50 percent of the equity of the entity is owned by the trust or by one 23 or more beneficiaries of the trust; 24 (22) to pay an amount distributable to a beneficiary, whether or not the 25 beneficiary is under a legal disability, by paying the amount to the beneficiary or by 26 paying the amount to another person for the use or benefit of the beneficiary; 27 (23) to make a distribution of property and money in divided or 28 undivided interests, pro rata or otherwise, and to adjust resulting differences in 29 valuation; 30 (24) to employ accountants, attorneys, investment advisers, appraisers, 31 or other persons, even if they are associated or affiliated with the trustee, to advise or
01 assist the trustee in the performance of administrative duties; 02 (25) to inspect or investigate property that the trustee has been asked to 03 hold or property owned or operated by an entity in which the trustee holds or has been 04 asked to hold an interest for the purpose of determining the application of 05 environmental law to the property and to take action to prevent, abate, or otherwise 06 remedy an actual or potential violation of an environmental law affecting property 07 held directly or indirectly by the trustee; 08 (26) to establish for an asset a reserve for depreciation, depletion, or 09 obsolescence, and to decide, under law, how and in what proportions a receipt or 10 disbursement is to be credited, charged, or apportioned between principal and income; 11 (27) to execute and deliver instruments that are useful to accomplish or 12 facilitate the exercise of the trustee's powers; 13 (28) to prosecute or defend an action, claim, or proceeding in order to 14 protect trust property and the trustee in the performance of the trustee's duties; and 15 (29) to consider discretionary distributions to a beneficiary as being 16 made from capital gains realized during the year. 17 * Sec. 3. AS 13.36.109 is amended by adding a new subsection to read: 18 (b) A trustee may pay as a charge against trust property the cost incurred to 19 perform an action authorized under (a) of this section. 20 * Sec. 4. AS 13.36.157(a) is amended to read: 21 (a) An unlimited authorized trustee [WITH UNLIMITED DISCRETION TO 22 INVADE TRUST PRINCIPAL] may appoint part or all of the [THAT] principal of 23 the trust to a trustee of an appointed trust for, and only for, the current or future 24 benefit of [,] one or more of the current beneficiaries of the invaded trust to the 25 exclusion of one or more of the other current beneficiaries, and for the future 26 benefit of beneficiaries who are not current beneficiaries. A permissible appointee 27 of a power of appointment held by a beneficiary of the appointed trust is not 28 considered a current beneficiary of the appointed trust [, REGARDLESS OF 29 WHETHER THE PERMISSIBLE APPOINTEE IS A CURRENT BENEFICIARY 30 OR A SUCCESSOR AND REMAINDER BENEFICIARY]. 31 * Sec. 5. AS 13.36.157(b) is amended to read:
01 (b) An unlimited authorized trustee exercising the power under (a) of this 02 section may grant a discretionary power of appointment, including a presently 03 exercisable power of appointment in favor of one or more permissible appointees, 04 in the appointed trust to one or more of the current beneficiaries of the invaded trust, if 05 [TO THE EXTENT THAT] the beneficiary who is granted the power to appoint is 06 authorized to receive the principal outright under the terms of the invaded trust. A 07 permissible appointee includes 08 (1) a person who is not a beneficiary [LIMITED TO THE 09 BENEFICIARIES] of the invaded trust; 10 (2) the holder of the power of appointment; 11 (3) the estate of the holder of the power of appointment; 12 (4) a creditor of the holder of the power of appointment; or 13 (5) a creditor of the estate of the holder of the power of 14 appointment. 15 * Sec. 6. AS 13.36.157(c) is amended to read: 16 (c) Under (a) [AND (b)] of this section, if the beneficiaries of the invaded trust 17 are described by a class, the beneficiaries of the appointed trust may include present or 18 future members of that class, except that a person may not become a beneficiary 19 sooner than as provided in or authorized by the invaded trust. 20 * Sec. 7. AS 13.36.157(d) is amended to read: 21 (d) A limited [AN] authorized trustee [WITH THE POWER TO INVADE 22 TRUST PRINCIPAL BUT WITHOUT UNLIMITED DISCRETION] may appoint 23 part or all of the principal of the trust to a trustee of an appointed trust if the current 24 beneficiaries of the appointed trust are the same as the current beneficiaries of the 25 invaded trust and the successor and remainder beneficiaries of the appointed trust are 26 the same as the successor and remainder beneficiaries of the invaded trust. If the 27 power to appoint trust principal is exercised in favor of more than one appointed 28 trust, the appointed trusts must, in the aggregate, grant each beneficiary of the 29 invaded trust beneficial interests in the appointed trusts that are substantially 30 similar to the beneficial interests of the beneficiary in the invaded trust. A power 31 to make a distribution for the benefit of a beneficiary under an appointed trust is
01 considered to be substantially similar to a power to make a distribution to the 02 beneficiary under the invaded trust [THE SHARES OF THE CURRENT 03 BENEFICIARIES OF THE APPOINTED TRUST MUST BE THE SAME AS THE 04 SHARES OF THE CURRENT BENEFICIARIES OF THE INVADED TRUST, AND 05 THE SHARES OF THE SUCCESSOR AND REMAINDER BENEFICIARIES OF 06 THE APPOINTED TRUST MUST BE THE SAME AS THE SHARES OF THE 07 SUCCESSOR AND REMAINDER BENEFICIARIES OF THE INVADED TRUST]. 08 * Sec. 8. AS 13.36.157(e) is amended to read: 09 (e) If a limited [THE] authorized trustee exercises the power under (d) of this 10 section, the appointed trust must include the same standard authorizing the trustee to 11 distribute the income or invade the principal of the appointed trust as the standard in 12 the invaded trust. However, the standard authorizing the trustee to distribute the 13 income or invade the principal of the appointed trust may be changed by a limited 14 authorized trustee other than the settlor if the trustee appoints to an appointed trust 15 that is a special needs trust, a pooled trust, or a third-party trust. 16 * Sec. 9. AS 13.36.157(g) is amended to read: 17 (g) Under (k) [(d) - (f)] of this section, if the beneficiaries of the invaded trust 18 are described by a class, the beneficiaries of the appointed trust include present or 19 future members of that class. 20 * Sec. 10. AS 13.36.157(h) is amended to read: 21 (h) If the limited authorized trustee exercises the power under (d), (e), or (k) 22 [(d) - (g)] of this section and if the invaded trust grants a power of appointment to a 23 beneficiary of the trust, the appointed trust must grant the same [THIS] power of 24 appointment in the appointed trust [, AND THE CLASS OF PERMISSIBLE 25 APPOINTEES SHALL BE THE SAME] as in the invaded trust. 26 * Sec. 11. AS 13.36.157 is amended by adding new subsections to read: 27 (i) An unlimited authorized trustee exercising the power under (a) of this 28 section may establish a standard for the distribution of income or invasion of principal 29 in the appointed trust that is a different standard from the standard in the invaded trust, 30 and the trustee may appoint the invaded trust to an appointed trust that is a special 31 needs trust, a pooled trust, or a third-party trust.
01 (j) Subject to the restriction in AS 13.36.158(i)(1), an unlimited authorized 02 trustee may reduce a beneficiary's current right to a mandatory distribution of income 03 or principal. 04 (k) A limited authorized trustee may not exercise power of appointment under 05 this section to reduce a beneficiary's current right to a mandatory distribution of 06 income or principal, except that a limited authorized trustee other than the settlor may 07 exercise a power of appointment under this section to an appointed trust that is a 08 special needs trust, a pooled trust, or a third-party trust, subject to the restriction in 09 AS 13.36.158(i)(1). 10 * Sec. 12. AS 13.36.158(b) is amended to read: 11 (b) The appointed trust to which an unlimited authorized trustee appoints the 12 assets of the invaded trust under AS 13.36.157 may have a duration that is longer than 13 the duration set out in the invaded trust, including a term measured by the length of 14 the life of a current beneficiary. 15 * Sec. 13. AS 13.36.158(c) is repealed and reenacted to read: 16 (c) If both an unlimited authorized trustee and a limited authorized trustee 17 have the power to pay the trust principal of the same trust to or for a current 18 beneficiary, the unlimited authorized trustee may exercise the power under 19 AS 13.36.157(a), (b), (i), and (j). 20 * Sec. 14. AS 13.36.158(e) is amended to read: 21 (e) An authorized trustee exercising the power under AS 13.36.157 - 22 13.36.159 has a fiduciary duty to exercise the power in the best interests of one or 23 more proper objects of the exercise of the power and as a prudent person would 24 exercise the power under the prevailing circumstances. [THE AUTHORIZED 25 TRUSTEE MAY NOT EXERCISE THE POWER UNDER AS 13.36.157 - 13.36.159 26 IF THERE IS SUBSTANTIAL EVIDENCE OF A CONTRARY INTENT OF THE 27 SETTLOR AND IT CANNOT BE ESTABLISHED THAT THE SETTLOR WOULD 28 BE LIKELY TO HAVE CHANGED THIS INTENTION UNDER THE 29 CIRCUMSTANCES EXISTING AT THE TIME THE TRUSTEE EXERCISES THE 30 POWER. THE PROVISIONS OF THE INVADED TRUST MAY NOT BE VIEWED 31 ALONE AS SUBSTANTIAL EVIDENCE OF A CONTRARY INTENT OF THE
01 SETTLOR UNLESS THE INVADED TRUST EXPRESSLY PROHIBITS THE 02 EXERCISE OF THE POWER IN THE MANNER INTENDED BY THE 03 AUTHORIZED TRUSTEE.] 04 * Sec. 15. AS 13.36.158(f) is amended to read: 05 (f) Notwithstanding the provisions of AS 13.36.157 - 13.36.159, the terms 06 of the governing instrument of a trust may specifically expand or restrict the 07 right of a trustee to appoint property of a trust. The provisions of AS 13.36.157 - 08 13.36.159 may not be construed to abridge the right of a trustee to appoint property 09 further in trust under the terms of the governing instrument of a trust, another 10 provision of law, or common law, or as directed by a court having jurisdiction over the 11 trust. 12 * Sec. 16. AS 13.36.158(i) is amended to read: 13 (i) An authorized trustee may not exercise a power authorized by 14 AS 13.36.157 to 15 (1) reduce, limit, or modify a beneficiary's current right to a mandatory 16 distribution of income, [OR PRINCIPAL, A MANDATORY] annuity, or unitrust 17 interest for which a marital deduction has been taken for federal tax purposes 18 under 26 U.S.C. 2056 or 26 U.S.C. 2523 (Internal Revenue Code) or for state tax 19 purposes under a comparable provision of applicable state law [, A RIGHT TO 20 WITHDRAW A PERCENTAGE OF THE VALUE OF THE TRUST, OR A RIGHT 21 TO WITHDRAW A SPECIFIED DOLLAR AMOUNT, IF THE MANDATORY 22 RIGHT HAS COME INTO EFFECT WITH RESPECT TO THE BENEFICIARY, 23 BUT THE MANDATORY RIGHT MAY BE REDUCED, LIMITED, OR 24 MODIFIED DURING ANY EXTENDED DURATION OF THE TRUST; 25 HOWEVER, NOTWITHSTANDING THE OTHER PROVISIONS IN THIS 26 PARAGRAPH, BUT SUBJECT TO THE OTHER LIMITATIONS IN AS 13.36.157 - 27 13.36.159, AN AUTHORIZED TRUSTEE MAY EXERCISE A POWER 28 AUTHORIZED BY AS 13.36.157 TO APPOINT TO AN APPOINTED TRUST 29 THAT IS A SPECIAL NEEDS TRUST, A POOLED TRUST, OR A THIRD-PARTY 30 TRUST]; 31 (2) decrease or indemnify against a trustee's liability or exonerate a
01 trustee from liability for failure to exercise reasonable care, diligence, and prudence 02 unless the court having jurisdiction over the trust specifies otherwise; 03 (3) eliminate a provision granting another person the right to remove 04 or replace the authorized trustee exercising the power under AS 13.36.157 unless a 05 court having jurisdiction over the trust specifies otherwise; 06 (4) fix as binding and conclusive the value of an asset for purposes of 07 distribution, allocation, or otherwise; or 08 (5) jeopardize 09 (A) the deduction or exclusion originally claimed with respect 10 to a contribution to the invaded trust that qualified for the annual exclusion 11 under 26 U.S.C. 2503(b), the marital deduction under 26 U.S.C. 2056(a) or 26 12 U.S.C. 2523(a), or the charitable deduction under 26 U.S.C. 170(a), 26 U.S.C. 13 642(c), 26 U.S.C. 2055(a), or 26 U.S.C. 2522(a) (Internal Revenue Code); 14 (B) the qualification of a transfer as a direct skip under 26 15 U.S.C. 2642(c) (Internal Revenue Code); 16 (C) the election to treat a corporation as a subchapter S 17 corporation under 26 U.S.C. 1362 (Internal Revenue Code); or 18 (D) another specific tax benefit for which a contribution 19 originally qualified for income, gift, estate, or generation-skipping transfer tax 20 purposes under 26 U.S.C. (Internal Revenue Code). 21 * Sec. 17. AS 13.36.158(n) is amended to read: 22 (n) Unless the invaded trust expressly provides otherwise, the provisions in 23 AS 13.36.157 - 13.36.159 apply to 24 (1) a trust, whether testamentary or inter vivos, governed by the laws 25 of this state, including a trust whose governing law has been changed to the laws of 26 this state; and 27 (2) a trust that has a trustee who is an individual domiciled in this state, 28 or a trustee that is an entity having an office in this state, if a majority of the 29 authorized trustees of the invaded trust select this state as the location for the 30 primary administration of the trust and the selection is made by an instrument in 31 writing that is signed and acknowledged by a majority of the authorized trustees of
01 the invaded trust; the instrument exercising this selection shall be kept with the 02 records of the invaded trust. 03 * Sec. 18. AS 13.36.158(o) is amended to read: 04 (o) In this section, "Internal Revenue Code" means the Internal Revenue Code 05 of the United States (26 U.S.C.) as it exists on the effective date of this Act 06 [SEPTEMBER 9, 2013] and as it is amended from time to time. 07 * Sec. 19. AS 13.36.159(b) is amended to read: 08 (b) The exercise of the power to appoint to an appointed trust under 09 AS 13.36.157 shall be evidenced by an instrument in writing that is signed, dated, and 10 acknowledged by the authorized trustee. The exercise of the power is effective 30 days 11 after the date of service of the instrument as specified in (d) of this section, unless the 12 persons entitled to notice waive part or all of the notice period to permit an earlier 13 [CONSENT IN WRITING TO A SOONER] effective date. 14 * Sec. 20. AS 13.36.159(d) is amended to read: 15 (d) A copy of the invaded trust, a copy of the signed appointed trust, a 16 conformed copy of the appointed trust or an unsigned copy or the substantial 17 form of the proposed appointed trust, and the instrument exercising the power shall 18 be delivered to 19 (1) the settlor, if living, of the invaded trust; 20 (2) a person having the right, under the terms of the invaded trust, to 21 remove or replace the authorized trustee exercising the power under AS 13.36.157; 22 and 23 (3) at least one [A] qualified beneficiary or a person who may 24 represent and bind a qualified beneficiary under AS 13.06.120. 25 * Sec. 21. AS 13.36.159(e) is amended to read: 26 (e) Notice under (d) of this section to a qualified beneficiary is not required if 27 the settlor has exempted the authorized trustee from providing notification or 28 information to beneficiaries under AS 13.36.080(b). Notwithstanding AS 13.36.080, 29 the trust instrument may authorize a trustee to exercise the power under 30 AS 13.36.157 without notice to any beneficiaries. Notice under (d) of this section 31 shall be provided under AS 13.06.110.
01 * Sec. 22. AS 13.36.159 is amended by adding a new subsection to read: 02 (j) An authorized trustee may exercise the power authorized in AS 13.36.157 03 without the consent of the settlor or a person interested in the invaded trust and 04 without court approval. However, an authorized trustee may seek court approval for 05 the exercise. When seeking court approval, notice shall be sent to each qualified 06 beneficiary of the invaded trust or to a person who can represent and bind the qualified 07 beneficiary under AS 13.06.120. 08 * Sec. 23. AS 13.36 is amended by adding a new section to read: 09 Sec. 13.36.173. Dividing trust into separate portions for income tax 10 purposes. Unless a governing instrument specifically refers to this section and 11 provides otherwise, if a trust is created by more than one settlor, and if a trustee keeps 12 records tracing contributions made to the trust by the different settlors and the earnings 13 on and reinvestments of the contributions, a trustee may divide the trust into one or 14 more separate trusts for which a specific settlor shall be treated as the sole settlor of 15 the separate portion of the trust to which the settlor contributed. A trustee may 16 exercise this power at any time, whether before, on, or after a settlor's death. A trustee 17 may exercise this power whether or not the trust was initially governed by the law of 18 this state or the situs of a trust was moved to this state. 19 * Sec. 24. AS 13.36 is amended by adding a new section to read: 20 Sec. 13.36.210. Standard. In AS 13.36.157 - 13.36.159, "standard" refers to 21 the words in the governing instrument describing the purposes, if any, for which a 22 trustee may invade principal, and the discretion, if any, given to a trustee to invade 23 principal, whether or not the words constitute an ascertainable standard under 26 24 C.F.R. 25.2514-1. The words establishing a standard in a governing instrument may 25 use "absolute," "best interest," "any reason," "no reason," or other words to grant a 26 trustee unlimited discretion to invade principal. 27 * Sec. 25. AS 13.36.215(b)(1) is amended to read: 28 (1) "appointed trust" means an irrevocable trust that receives principal 29 from an invaded trust under AS 13.36.157 and that is [, INCLUDING A NEW 30 TRUST] created by 31 (A) the settlor of the invaded trust;
01 (B) [OR BY] the trustees, acting in that capacity, of the 02 invaded trust or a restatement or modification of the invaded trust; or 03 (C) another person; 04 * Sec. 26. AS 13.36.215(b)(2) is amended to read: 05 (2) "authorized trustee" means, with regard to an invaded trust, a 06 trustee with the power [AUTHORITY] to pay trust principal to or for a current 07 beneficiary; [IN THIS PARAGRAPH, "TRUSTEE" DOES NOT INCLUDE A 08 SETTLOR OR A BENEFICIARY TO WHOM INCOME OR PRINCIPAL MUST BE 09 PAID, CURRENTLY OR IN THE FUTURE, OR WHO IS OR WILL BECOME 10 ELIGIBLE TO RECEIVE A DISTRIBUTION OF INCOME OR PRINCIPAL IN 11 THE DISCRETION OF THE TRUSTEE OTHER THAN BY THE EXERCISE OF A 12 POWER OF APPOINTMENT HELD IN A NONFIDUCIARY CAPACITY;] 13 * Sec. 27. AS 13.36.215(b)(5) is amended to read: 14 (5) "invaded trust" means a revocable or [AN] irrevocable inter vivos 15 or testamentary trust the principal of which is appointed under AS 13.36.157; 16 * Sec. 28. AS 13.36.215(b) is amended by adding new paragraphs to read: 17 (11) "beneficiary" means a person who is, or in the future may be, 18 eligible to receive income or principal under the terms of a trust, even if the person has 19 a remote contingent remainder interest, unless the 20 (A) only interest of the person in the trust is the interest of a 21 potential appointee under a nonfiduciary power of appointment held by another 22 person; and 23 (B) power of appointment identified under (A) of this 24 paragraph has not been exercised or will only be exercised in the future; 25 (12) "limited authorized trustee" means, with regard to an invaded 26 trust, an authorized trustee who is a settlor or beneficiary; 27 (13) "unlimited authorized trustee" means, with regard to an invaded 28 trust, an authorized trustee other than a settlor or beneficiary. 29 * Sec. 29. AS 13.36 is amended by adding a new section to read: 30 Sec. 13.36.380. Distribution of principal. (a) On petition by a trustee of an 31 irrevocable trust, a court may authorize the trustee to invade the principal of a trust, for
01 any reason, if the court finds that granting the authority for the principal invasion 02 (1) is consistent with the settlor's purpose in creating the trust; 03 (2) is in the best interests of the beneficiary to whom or on whose 04 behalf the principal invasion would be made; and 05 (3) would not jeopardize a deduction or exclusion originally claimed 06 with respect to a contribution to the trust that qualified for an annual exclusion under 07 26 U.S.C. 2503(b), a marital deduction under 26 U.S.C. 2056(a) or 26 U.S.C. 2523(a), 08 or a charitable deduction under 26 U.S.C. 170(a), 26 U.S.C. 642(c), 26 U.S.C. 09 2055(a), or 26 U.S.C. 2522(a) (Internal Revenue Code). 10 (b) This section applies only to an irrevocable trust for which the trust 11 instrument provides for income distributions, annuity distributions, or unitrust 12 distributions, except that this section does not apply to an irrevocable trust that already 13 permits discretionary distributions of principal. 14 * Sec. 30. AS 34.27.051 is repealed and reenacted to read: 15 Sec. 34.27.051. Statutory rule against perpetuities. (a) If a first power is 16 exercised to create a second power, the second power may be validly exercised to 17 postpone the vesting of the property over which the second power may be exercised 18 without regard to the creation of the first power. In this subsection, "second power" 19 means a presently exercisable nongeneral power of appointment or presently 20 exercisable general power of appointment created by the exercise of the first power. 21 (b) If a first power is exercised to create a second power, the second power is 22 not valid unless all property interests subject to the second power vest not later than 23 1,000 years after the creation of the first power. In this subsection, "second power" 24 means a nongeneral power of appointment that is not presently exercisable, or a 25 general power of appointment that is not presently exercisable, created by the exercise 26 of the first power. 27 (c) In this section, "first power" means a nongeneral power of appointment 28 that is exercised to create a second power. 29 * Sec. 31. AS 34.27.053 is amended to read: 30 Sec. 34.27.053. Savings provision. A property interest that, under 31 AS 34.27.051(b) [AS 34.27.051], becomes invalid shall, upon the expiration of the
01 1,000-year period set out in AS 34.27.051(b) [AS 34.27.051], 02 (1) if income from the property interest is payable 03 (A) to one person, be distributed to the person to whom the 04 income is then payable; 05 (B) to more than one person, be distributed to the persons to 06 whom the income is then payable 07 (i) in the shares to which the persons are entitled to the 08 income; or 09 (ii) equally among all persons who are entitled to the 10 income if shares are not specified; 11 (2) if income from the property interest is payable in the discretion of a 12 trustee and is payable 13 (A) to one person, be distributed to the person then eligible to 14 receive the income; or 15 (B) to more than one person, be distributed to the persons then 16 eligible to receive the income 17 (i) in the shares to which the persons are entitled to the 18 income; or 19 (ii) equally among all persons who are entitled to the 20 income if shares are not specified; or 21 (3) when there is no person then living to whom the property interest 22 may be distributed under (1) or (2) of this section, be payable to one or more 23 organizations described in 26 U.S.C. 2055(a) (Internal Revenue Code), or to one or 24 more organizations described in any successor provision to 26 U.S.C. 2055(a), in the 25 shares or proportions that the trustee or trustees then acting may determine. 26 * Sec. 32. AS 34.27.070(a) is amended to read: 27 (a) Except as extended by (b) of this section, the [FORMER] provisions of 28 AS 34.27.051 - 34.27.100 that existed before April 2, 1997, apply to a nonvested 29 property interest or a power of appointment that is created on or after January 1, 1996, 30 and before April 2, 1997. For purposes of this subsection, a nonvested property 31 interest or a power of appointment created by the exercise of a power of appointment
01 is created when the power is irrevocably exercised or when a revocable exercise 02 becomes irrevocable. 03 * Sec. 33. AS 34.27.070(c) is amended to read: 04 (c) The provisions of AS 34.27.051 that exist on the effective date of this 05 Act apply to a trust instrument or conveyance executed on or after April 2, 1997, if 06 (1) the trust instrument or conveyance creates a contingent power of 07 appointment or nonvested property interest subject to the exercise of a power of 08 appointment that creates a new or successive power of appointment; and 09 (2) before the effective date of this Act, the power of appointment 10 identified under (1) of this subsection has not been irrevocably exercised or 11 terminated. 12 * Sec. 34. AS 13.36.157(f), 13.36.159(c), 13.36.159(i), and 13.36.215(b)(10) are repealed. 13 * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to 14 read: 15 APPLICABILITY: POWERS OF APPOINTMENT; TRUSTS. (a) AS 13.12.704, as 16 amended by sec. 1 of this Act, applies to powers of appointment that exist on or after the 17 effective date of this Act. 18 (b) AS 13.36.109, as amended by secs. 2 and 3 of this Act, AS 13.36.157, as amended 19 by secs. 4 - 11 of this Act, AS 13.36.158, as amended by secs. 12 - 18 of this Act, 20 AS 13.36.159, as amended by secs. 19 - 22 of this Act, AS 13.36.173, added by sec. 23 of this 21 Act, AS 13.36.210, added by sec. 24 of this Act, AS 13.36.215(b)(1), as amended by sec. 25 22 of this Act, AS 13.36.215(b)(2), as amended by sec. 26 of this Act, AS 13.36.215(b)(5), as 23 amended by sec. 27 of this Act, AS 13.36.215(b)(11) - (13), added by sec. 28 of this Act, and 24 AS 13.36.380, added by sec. 29 of this Act, apply to a trust that exists on or after the effective 25 date of this Act. 26 * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to 27 read: 28 RETROACTIVE EFFECT. AS 34.27.051, as repealed and reenacted by sec. 30 of this 29 Act, AS 34.27.053, as amended by sec. 31 of this Act, AS 34.27.070(a), as amended by sec. 30 32 of this Act, and AS 34.27.070(c), as amended by sec. 33 of this Act, are retroactive to 31 April 2, 1997, and apply to a trust instrument or conveyance executed on or after April 2,
01 1997, on the conditions set out in those subsections. 02 * Sec. 37. This Act takes effect immediately under AS 01.10.070(c).