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