00                            SENATE BILL NO. 192                                                                         
01 "An Act relating to fiduciary discretion and the allocation of capital gains to income                                  
02 under the Alaska Principal and Income Act."                                                                             
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
04    * Section 1. AS 13.38.220 is amended by adding a new subsection to read:                                           
05 (c)  A fiduciary may petition a court to determine if a decision proposed by the                                        
06 fiduciary will result in an abuse of the fiduciary's discretion. If the petition describes                              
07 the proposed decision and the facts on which the fiduciary is relying, contains                                         
08 sufficient information to inform the beneficiary of the reasons for the proposed                                        
09 decision, and explains how the beneficiary will be affected by the proposed decision,                                   
10       the beneficiary has the burden to prove that the proposed decision will result in an                              
11       abuse of the fiduciary's discretion.                                                                              
12    * Sec. 2. AS 13.38.630 is amended to read:                                                                         
13            Sec. 13.38.630. Principal receipts. A trustee shall allocate to principal any of                           
14       the following:                                                                                                    

01                 (1)  to the extent not allocated to income under this chapter, assets                                   
02       received from                                                                                                     
03                      (A)  a transferor during the transferor's lifetime;                                                
04                      (B)  a decedent's estate;                                                                          
05                      (C)  a trust with a terminating income interest; or                                                
06                      (D)  a payor under a contract naming the trust or its trustee as                                   
07            beneficiary;                                                                                                 
08                 (2)  except as provided by AS 13.38.760, money or other property                                    
09       received from a principal asset's sale, exchange, liquidation, or change in form,                                 
10       including realized profit subject to AS 13.38.600 - 13.38.750;                                                    
11 (3)  amounts recovered from third parties to reimburse the trust because                                                
12 of disbursements described in AS 13.38.810(a)(8) or for other reasons, to the extent                                    
13 not based on the loss of income, except that a separate award made for the loss of                                      
14 income with respect to an accounting period during which a current income                                               
15       beneficiary had a mandatory income interest is income;                                                            
16 (4)  net income received in an accounting period during which there is                                                  
17       not a beneficiary to whom a trustee may or must distribute income;                                                
18                 (5)  other receipts as provided in AS 13.38.680 - 13.38.750.                                            
19    * Sec. 3. AS 13.38 is amended by adding a new section to article 6 to read:                                        
20 Sec. 13.38.760. Discretionary allocation of capital gains to income. In                                               
21 addition to the power to adjust between principal and income under AS 13.38.210(a),                                     
22 a fiduciary, whether or not the fiduciary is a beneficiary, may, if the fiduciary                                       
23 exercises the fiduciary's discretion reasonably and impartially, allocate to income                                     
24 gains from the sale or exchange of capital assets. However, a fiduciary may not                                         
25 allocate to income gains from the sale or exchange of capital assets to the extent that                                 
26       the fiduciary's possession or exercise of the power to allocate the gains would cause                             
27 (1)  an asset of the estate or trust to be included in the gross estate of an                                           
28       individual for federal estate tax purposes; or                                                                    
29 (2) an individual to be treated as making a gift for federal gift tax                                                   
30       purposes.                                                                                                         
31    * Sec. 4. AS 13.38.220(b)(4) is repealed.