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