CSSSHB 275(JUD): "An Act relating to the Uniform Probate Code, including trusts and governing instruments; relating to trustees; relating to underproductive trust property; and relating to conveyances of real property and interests in real property by or to trusts."
00CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 275(JUD) 01 "An Act relating to the Uniform Probate Code, including trusts and governing 02 instruments; relating to trustees; relating to underproductive trust property; and 03 relating to conveyances of real property and interests in real property by or 04 to trusts." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 13.12.606(a) is amended to read: 07 (a) A specific devisee has a right to the specifically devised property in the 08 testator's estate at death and 09 (1) [ANY BALANCE OF THE PURCHASE PRICE, TOGETHER 10 WITH ANY SECURITY AGREEMENT, OWING FROM A PURCHASER TO THE 11 TESTATOR AT DEATH BY REASON OF SALE OF THE PROPERTY; 12 (2)] any amount of a condemnation award for the taking of the property 13 unpaid at death; 14 (2) [(3)] any proceeds unpaid at death on fire or casualty insurance on
01 or other recovery for injury to the property; and 02 (3) [(4)] property owned by the testator at death and acquired as a 03 result of foreclosure, or obtained in lieu of foreclosure, of the security interest for the 04 specifically devised obligation. 05 * Sec. 2. AS 13.12 is amended by adding new sections to article 7 to read: 06 Sec. 13.12.712. Nonademption of specific transfers in trust; unpaid 07 proceeds of sale, condemnation, or insurance; sale by conservator or agent. (a) 08 A beneficiary of a trust has a right to the specific property transferred by the trust and 09 (1) any amount of a condemnation award for the taking of the property 10 unpaid at the time of the transfer; 11 (2) any proceeds unpaid at the time of the transfer on fire or casualty 12 insurance on or other recovery for injury to the property; and 13 (3) property owned by the settlor at the time of the transfer and 14 acquired as a result of foreclosure, or obtained in lieu of foreclosure, of the security 15 interest for the specifically transferred obligation. 16 (b) If property that is specifically transferred to a beneficiary of a trust is sold 17 or mortgaged by a conservator or by an agent acting within the authority of a durable 18 power of attorney for an incapacitated principal, or if a condemnation award, insurance 19 proceeds, or recovery for injury to the property are paid to a conservator or to an agent 20 acting within the authority of a durable power of attorney for an incapacitated 21 principal, the beneficiary has the right to a general pecuniary property transfer that is 22 equal to the net sale price, the amount of the unpaid loan, the condemnation award, 23 the insurance proceeds, or the recovery. 24 (c) The right of a beneficiary under (b) of this section is reduced by any right 25 the beneficiary has under (a) of this section. 26 (d) For the purposes of the references in (b) of this section to a conservator, 27 (b) of this section does not apply if, after the sale, mortgage, condemnation, casualty, 28 or recovery, it was adjudicated that the settlor's incapacity ceased and the settlor 29 survived the adjudication by one year. 30 (e) For the purposes of the references in (b) of this section to an agent acting 31 within the authority of a durable power of attorney for an incapacitated principal,
01 (1) "incapacitated principal" means a principal who is an incapacitated 02 person; 03 (2) adjudication of incapacity before death is not necessary; and 04 (3) the acts of an agent within the authority of a durable power of 05 attorney are presumed to be for an incapacitated principal. 06 Sec. 13.12.720. Family-owned business deduction. (a) If an individual 07 includes a provision in a will, trust document, or beneficiary designation that is 08 designed to reduce federal estate tax liability to zero, or to the lowest possible amount 09 payable, by describing a portion or amount measured by reference to the unified credit, 10 applicable exclusion amount, or exemption equivalent under 26 U.S.C. 2010 (Internal 11 Revenue Code), or to other credits or deductions under 26 U.S.C. (Internal Revenue 12 Code), then unless specifically stated otherwise, the reference to the unified credit, 13 applicable exclusion amount, exemption equivalent, other credit, or other deduction 14 shall be considered to include a reference to the family-owned business deduction 15 available and allowed under 26 U.S.C. 2057 (Internal Revenue Code). 16 (b) Unless specifically stated otherwise, the reference in the will, trust 17 document, or beneficiary designation to the unified credit, applicable exclusion amount, 18 exemption equivalent, family-owned business deduction, other credit, or other 19 deduction shall be considered to refer to the unified credit, applicable exclusion 20 amount, exemption equivalent, family-owned business deduction, other credit, or other 21 deduction as it exists at the time of death of the individual. 22 * Sec. 3. AS 13.16.550 is amended to read: 23 Sec. 13.16.550. Interest on general pecuniary devise. General pecuniary 24 devises , whether made outright or in trust, bear interest at the stated [LEGAL] rate 25 beginning two years [ONE YEAR] after the decedent's death [FIRST 26 APPOINTMENT OF A PERSONAL REPRESENTATIVE] until payment, unless a 27 contrary intent is indicated by the governing instrument. In this subsection, 28 (1) "discount rate" means the rate charged member banks for 29 advances by the 12th Federal Reserve District; 30 (2) "stated rate" means the annual discount rate in effect on the 31 first day of the month that is the 23rd month following the decedent's death, not
01 counting the month of the decedent's death [WILL]. 02 * Sec. 4. AS 13.16.550 is amended by adding a new subsection to read: 03 (b) The provisions of (a) of this section do not apply to a marital pecuniary 04 devise, whether stated as a formula or otherwise and whether made outright to the 05 decedent's spouse or in trust for the benefit of the spouse, if the devise is intended to 06 qualify for the marital deduction under 26 U.S.C. (Internal Revenue Code). A marital 07 pecuniary devise to which this subsection applies shares ratably with the residue of the 08 estate in the income earned by the estate during the period of administration, unless 09 a contrary intention is expressed by the governing instrument. 10 * Sec. 5. AS 13.16.560(a) is amended to read: 11 (a) Unless a contrary intention is indicated by the will, the distributable assets 12 of a decedent's estate shall be distributed in kind to the extent possible through 13 application of the following provisions: 14 (1) a specific devisee is entitled to distribution of the thing devised, and 15 a spouse or child who has selected particular assets of an estate as provided in 16 AS 13.12.402 - 13.12.405 shall receive the items selected; 17 (2) a homestead or family allowance or devise payable in money may 18 be satisfied by value in kind if 19 (A) the person entitled to the payment has not demanded 20 payment in cash; 21 (B) the property distributed in kind is valued at fair market 22 value as of the date of its distribution; and 23 (C) no residuary devisee has requested that the asset in question 24 remain a part of the residue of the estate; 25 (3) for the purpose of valuation under (2) of this subsection, securities 26 regularly traded on recognized exchanges, if distributed in kind, are valued at the price 27 for the last sale of like securities traded on the business day before distribution [,] or , 28 if there was no sale on that day, at the median between amounts bid and offered at the 29 close of that day; assets consisting of sums owed the decedent or the estate by solvent 30 debtors as to which there is no known dispute or defense are valued at the sum due 31 with accrued interest or discounted to the date of distribution; for assets that do not
01 have readily ascertainable values, a valuation as of a date not more than 30 days 02 before the date of distribution, if otherwise reasonable, controls; for purposes of 03 facilitating distribution, the personal representative may ascertain the value of the 04 assets as of the time of the proposed distribution in any reasonable way, including the 05 employment of qualified appraisers, even if the assets may have been previously 06 appraised; 07 (4) the residuary estate shall be distributed in any equitable manner , 08 including distribution in kind, in cash, partially in kind, partially in cash, in 09 divided interests, in undivided interests, pro rata among all the distributees, or 10 by a method other than pro rata among all distributees; distribution under this 11 paragraph may be made without regard to the income tax basis or other special 12 tax attributes of the assets; a distribution under this paragraph may be made in 13 whatever manner the personal representative finds to be the most practicable and 14 in the best interests of the distributees . 15 * Sec. 6. AS 13.36 is amended by adding a new section to read: 16 Sec. 13.36.153. Restrictions on exercising certain trustee powers. (a) 17 Notwithstanding AS 13.36.107, a trustee who is not an independent trustee may not 18 exercise a power to make or cause to be made a discretionary distribution of either 19 principal or income 20 (1) to or for the direct or indirect benefit of the trustee individually or 21 to any person holding a power to remove and replace the trustee, except to the extent 22 that the power is exercised in accordance with an ascertainable standard that relates 23 to the health, education, maintenance, or support of the trustee or person; 24 (2) to satisfy a legal obligation that is owed by the trustee individually 25 or by any person holding a power to remove and replace this trustee; or 26 (3) if the distribution would constitute a taxable gift from the trustee 27 individually or from a person holding a power to remove and replace the trustee. 28 (b) The prohibitions of (a) of this section apply to a trustee even if the 29 governing instrument states that the trustee may make distributions in the trustee's 30 uncontrolled, absolute, or total discretion, or that distributions are not subject to review 31 by a court, or the governing instrument otherwise indicates that distributions by the
01 trustee are not subject to reasonableness when the trustee exercises discretion. 02 (c) If a trustee is prohibited by (a) of this section from exercising a power and 03 if one or more other trustees are not prohibited by (a) of this section from exercising 04 the power, the other trustees may exercise the power. If there is not a trustee who can 05 exercise a power prohibited under (a) of this section, a party in interest may apply to 06 the superior court to appoint an independent trustee to exercise the power. 07 (d) The provisions of (a) of this section do not prohibit a trustee from making 08 payments, including reimbursement of and compensation of an independent trustee 09 appointed under (c) of this section, for the protection of the trust or the assets of the 10 trust, or for the expenses, losses, or liabilities incurred in the collection, care, 11 administration, or protection of the trust or the assets of the trust. 12 (e) Except as provided in (f) of this section, this section applies to 13 (1) a trust that is created on or after the effective date of this Act; or 14 (2) the decisions and actions of a trust that is in existence on the 15 effective date of this Act if the decisions are made, or the actions occur, on or after 16 the effective date of this Act. 17 (f) The application provisions of (e) of this section do not apply if 18 (1) the terms of the trust, including the terms as amended, expressly 19 provide that this section does not apply and either specifically refer to this section or 20 otherwise clearly demonstrate the intent that this section does not apply; or 21 (2) the trust is irrevocable and all parties in interest elect under (g) of 22 this section not to be subject to the application of this section; an election under this 23 paragraph must be made on or before January 1, 2003, or three years after the date on 24 which the trust becomes irrevocable, whichever date is later; however, notwithstanding 25 AS 13.36.080, the trustee does not have a duty to inform the parties in interest of this 26 election. 27 (g) The election allowed under (f) of this section shall be made by a written 28 declaration that is delivered to the trustee. 29 (h) The prohibitions of (a) of this section do not apply to a trustee with respect 30 to trust property, including income from the trust property, if the trust property would, 31 upon the death of the trustee, be included, for any reason other than the exercise of a
01 power prohibited by (a) of this section, in the gross estate of the trustee for federal 02 estate tax purposes. 03 (i) This section does not create a new cause of action, or impair a cause of 04 action existing before the effective date of this Act, if the new or existing cause of 05 action relates to the exercise of a power prohibited by (a) of this section that was 06 exercised before the effective date of this Act. 07 (j) In this section, "independent trustee" means a trustee that is not related or 08 subordinate, as defined in 26 U.S.C. 672(c), to the person having the power to remove 09 the trustee or to any beneficiary. 10 * Sec. 7. AS 13.36 is amended by adding a new section to read: 11 Sec. 13.36.169. Elections to qualify property for marital deduction and 12 generation-skipping transfer tax allocations. (a) Unless a governing instrument 13 specifically refers to this section and provides otherwise, a trustee who makes an 14 election under 26 U.S.C. 2056, 2056A, or 2523 (Internal Revenue Code), or who 15 makes an allocation under 26 U.S.C. 2632 (Internal Revenue Code), may benefit 16 personally from the election or allocation and is not required to reimburse another 17 person interested in the election or allocation, to make an equitable adjustment, or to 18 treat interested persons impartially with respect to the election or allocation. 19 (b) Unless a governing instrument specifically refers to this section and 20 provides otherwise, if an election is made under 26 U.S.C. 2056, 2056A, or 2523 21 (Internal Revenue Code), if an allocation is made under 26 U.S.C. 2632 (Internal 22 Revenue Code), or if division of a trust benefits the persons interested in the trust, the 23 trustee may divide the trust into two or more separate trusts of equal or unequal value 24 if the terms of the separate resulting trusts are substantially identical to the terms of 25 the trust before the division. The allocation of assets must be based on the fair market 26 value of the assets at the time of the division. 27 (c) Except as provided in (d) of this section, this section applies to 28 (1) a trust that is created on or after the effective date of this Act; or 29 (2) the decisions and actions of a trust that is in existence on the 30 effective date of this Act if the decisions are made or actions occur on or after the 31 effective date of this Act.
01 (d) The application provisions of (c) of this section do not apply if 02 (1) the terms of the trust, including the terms as amended, expressly 03 provide that this section does not apply and either specifically refer to this section or 04 otherwise clearly demonstrate the intent that this section does not apply; or 05 (2) the trust is irrevocable and all parties in interest elect not to be 06 subject to the application of this section; an election under this paragraph must be 07 made on or before January 1, 2003, or three years after the date on which the trust 08 becomes irrevocable, whichever date is later; however, notwithstanding AS 13.36.080, 09 the trustee does not have a duty to inform the parties in interest of this election; the 10 election allowed under this paragraph must be made by a written declaration delivered 11 to the trustee. 12 * Sec. 8. AS 13.36 is amended by adding a new section to read: 13 Sec. 13.36.335. Application of special distribution provisions. The asset 14 distribution provisions of AS 13.16.540 - 13.16.550, 13.16.560, and AS 13.38.030(a) 15 apply to the administration of a revocable trust following the death of the settlor of the 16 trust, unless the terms of the trust indicate a different intention. 17 * Sec. 9. AS 13.36.390 is amended by adding a new paragraph to read: 18 (4) "party in interest" means, if the trust is 19 (A) revocable and if the settlor is incapacitated, the settlor's 20 legal representative under applicable law or the settlor's agent under a durable 21 power of attorney; or 22 (B) irrevocable, 23 (i) each trustee serving at the time; 24 (ii) each beneficiary entitled to receive a mandatory 25 distribution of income or principal from a trust or, if a beneficiary 26 entitled to receive a mandatory distribution of income or principal from 27 a trust is not 19 years of age or is incapacitated, the beneficiary's legal 28 representative under applicable law or the beneficiary's agent under a 29 durable power of attorney; and 30 (iii) each vested remainder beneficiary in existence at 31 the time or, if a vested remainder beneficiary is not 19 years of age or
01 is incapacitated, the vested remainder beneficiary's legal representative 02 under applicable law or the vested remainder beneficiary's agent under 03 a durable power of attorney. 04 * Sec. 10. AS 13.38.110 is amended by adding a new subsection to read: 05 (e) Notwithstanding (a) - (d) of this section, if a trust, except a trust that 06 provides for the payment of the entire remaining trust estate to the estate of the spouse 07 when the income interest terminates, is created under a will or trust for the benefit of 08 the spouse of the testator or the grantor of the trust, if the trust requires that all income 09 of the trust be paid at least annually to the spouse, and if a federal estate or gift tax 10 marital deduction is claimed with respect to the trust, then, unless the will or trust 11 specifically refers to this subsection and provides otherwise, an investment in or 12 retention of unproductive property as an asset of the trust is subject to the power of 13 the spouse to require that, within a reasonable time, the asset produce income or be 14 converted to assets that produce income. 15 * Sec. 11. AS 34.25 is amended by adding a new section to read: 16 Sec. 34.25.055. Conveyances to or from trusts. (a) A person, including a 17 trustee, may convey real property to a trust whether or not a trustee of the trust is 18 named as a grantee in the instrument of conveyance. A trustee of a trust may convey 19 real property from a trust whether or not a trustee of the trust is named as a grantor 20 in the instrument of conveyance. 21 (b) In a conveyance under (a) of this section, notice of the existence of the 22 trust does not affect the status of a purchaser as a bona fide purchaser. 23 (c) Real property that is owned by a trust and that is purchased by a bona fide 24 purchaser from a person in the person's capacity as trustee of the trust is acquired free 25 of any claim of the beneficiaries of the trust. 26 (d) Notwithstanding other provisions of law, a trust instrument may not change 27 the effect of (c) of this section. 28 (e) In this section, 29 (1) "bona fide purchaser" means a person who purchases real property 30 for value from a trust and who 31 (A) has not knowingly been a party to fraud or illegality
01 affecting the interest of persons who are parties to the purchase transaction or 02 beneficiaries of the trust; 03 (B) does not have notice of an adverse claim by a beneficiary 04 of the trust; and 05 (C) has acted in good faith in the purchase transaction; 06 (2) "conveyance" means a conveyance made before, on, or after the 07 effective date of this section; 08 (3) "purchaser" means a person who acquires real property by sale, 09 lease, mortgage, pledge, or lien, or who otherwise deals with real property in a 10 voluntary transaction other than by making a gift; 11 (4) "real property" includes an interest in real property; 12 (5) "value" means acquisition of property 13 (A) in return for a binding commitment to extend credit; 14 (B) as security for or in total or partial satisfaction of a claim 15 that existed before the giving of the security; 16 (C) by accepting delivery of the real property under a contract 17 that is for the purchase of the real property and that existed before the delivery; 18 or 19 (D) in return for other consideration sufficient to support a 20 contract.