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title-19•Title 19 — Fiduciaries and Trusts
This chapter may be cited as the Uniform Fiduciaries Act.
(Acts 1943, No. 557, p. 544, §14.)
In this chapter, unless the context or subject matter otherwise requires, the following terms shall have the meanings respectively ascribed to them by this section:
(1) BANK. Any person or association of persons, whether incorporated or not, carrying on the business of banking or trust company.
(2) FIDUCIARY. A trustee under any trust, expressed, implied, resulting or constructive, executor, administrator, guardian, conservator, curator, receiver, trustee in bankruptcy, assignee for the benefit of creditors, partner, agent, officer of a corporation, public or private, public officer or any other person acting in a fiduciary capacity for any person, trust or estate.
(3) PERSON. Such term includes a corporation, partnership, or other association, or two or more persons having a joint or common interest.
(4) PRINCIPAL. Any person to whom a fiduciary as such owes an obligation.
(Acts 1943, No. 557, p. 544, §1.)
A person who in good faith pays or transfers to a fiduciary any money or other property which the fiduciary as such is authorized to receive, is not responsible for the proper application thereof by the fiduciary; and any right or title acquired from the fiduciary in consideration of such payment or transfer is not invalid in consequence of a misapplication by the fiduciary.
(Acts 1943, No. 557, p. 544, §2.)
If any negotiable instrument payable or indorsed to a fiduciary as such is indorsed by the fiduciary, or if any negotiable instrument payable or indorsed to his principal is indorsed by a fiduciary, or if any negotiable instrument payable or indorsed to his principal is indorsed by a fiduciary empowered to indorse such instrument on behalf of his principal, the indorsee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in indorsing or delivering the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith. If, however, such instrument is transferred by the fiduciary in payment of or as security for a personal debt of the fiduciary to the actual knowledge of the creditor, or is transferred in any transaction known by the transferee to be for the personal benefit of the fiduciary, the creditor or other transferee is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in transferring the instrument.
(Acts 1943, No. 557, p. 544, §4.)
If a check or other bill of exchange is drawn by a fiduciary as such, or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, the payee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in drawing or delivering the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith. If, however, such instrument is payable to a personal creditor of the fiduciary and delivered to the creditor in payment of or as security for a personal debt of the fiduciary to the actual knowledge of the creditor, or is drawn and delivered in any transaction known by the payee to be for the personal benefit of the fiduciary, the creditor or other payee is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in drawing or delivering the instrument.
(Acts 1943, No. 557, p. 544, §5.)
If a check or other bill of exchange is drawn by a fiduciary as such or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, payable to the fiduciary personally, or payable to a third person and by him transferred to the fiduciary, and is thereafter transferred by the fiduciary, whether in payment of a personal debt of the fiduciary or otherwise, the transferee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in transferring the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.
(Acts 1943, No. 557, p. 544, §6.)
If a deposit is made in a bank to the credit of a fiduciary as such, the bank is authorized to pay the amount of the deposit or any part thereof upon the check of the fiduciary, signed with the name in which such deposit is entered without being liable to the principal, unless the bank pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in drawing the check or with knowledge of such facts that its action in paying the check amounts to bad faith. If, however, such a check is payable to the drawee bank and is delivered to it in payment of or as security for a personal debt of the fiduciary to it, the bank is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in drawing or delivering the check.
(Acts 1943, No. 557, p. 544, §7.)
If a check is drawn upon the account of his principal in a bank by a fiduciary who is empowered to draw checks upon his principal’s account, the bank is authorized to pay such check without being liable to the principal, unless the bank pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in drawing such check, or with knowledge of such facts that its action in paying the check amounts to bad faith. If, however, such a check is payable to the drawee bank and is delivered to it in payment of or as security for a personal debt of the fiduciary to it, the bank is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in drawing or delivering the check.
(Acts 1943, No. 557, p. 544, §8.)
If a fiduciary makes a deposit in a bank to his personal credit of checks drawn by him upon an account in his own name as fiduciary, or of checks payable to him as fiduciary, or of checks drawn by him upon an account in the name of his principal if he is empowered to draw checks thereon, or of checks payable to his principal and indorsed by him, if he is empowered to indorse such checks, or if he otherwise makes a deposit of funds held by him as fiduciary, the bank receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary; and the bank is authorized to pay the amount of the deposit or any part thereof upon the personal check of the fiduciary without being liable to the principal unless the bank receives the deposit or pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in making such deposit or in drawing such check, or with knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith.
(Acts 1943, No. 557, p. 544, §9.)
When a deposit is made in a bank in the name of two or more persons as fiduciaries and a check is drawn upon the trust account by any fiduciary or fiduciaries authorized by the other fiduciary or fiduciaries to draw checks upon the trust account, neither the payee nor other holder nor the bank is bound to inquire whether it is a breach of trust to authorize such fiduciary or fiduciaries to draw checks upon the trust account, and is not liable unless the circumstances be such that the action of the payee or other holder or the bank amounts to bad faith.
(Acts 1943, No. 557, p. 544, §10.)
The provisions of this chapter shall not apply to transactions taking place prior to July 7, 1943.
(Acts 1943, No. 557, p. 544, §11.)
In any case not provided for in this chapter the rules of law and equity, including the law merchant and those rules of law and equity relating to trusts, fiduciaries, agency, negotiable instruments and banking, shall continue to apply.
(Acts 1943, No. 557, p. 544, §12.)
This chapter shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states which enact it.
(Acts 1943, No. 557, p. 544, §13.)
This chapter may be cited as the Revised Uniform Fiduciary Access to Digital Assets Act.
(Act 2017-316, §1.)
In this chapter, the following terms have the following meanings:
(1) “Account” means an arrangement under a terms-of-service agreement in which a custodian carries, maintains, processes, receives, or stores a digital asset of the user or provides goods or services to the user.
(2) “Agent” means a person granted authority to act for a principal under a power of attorney, whether denoted an agent, attorney-in-fact, or otherwise. The term includes an original agent, co-agent, successor agent, and person to which an agent’s authority is delegated.
(3) “Carries” means engages in the transmission of an electronic communication.
(4) “Catalogue of electronic communications” means information that identifies each person with which a user has had an electronic communication, the time and date of the communication, and the electronic address of the person.
(5) “Conservator” means a person appointed by a court to manage the estate of a living individual. The term includes a limited conservator.
(6) “Content of an electronic communication” means information concerning the substance or meaning of the communication which:
(A) has been sent or received by a user;
(B) is in electronic storage by a custodian providing an electronic-communication service to the public or is carried or maintained by a custodian providing a remote-computing service to the public; and
(C) is not readily accessible to the public.
(7) “Court” means the circuit court or a probate court granted constitutional or statutory equitable jurisdiction.
(8) “Custodian” means a person that carries, maintains, processes, receives, or stores a digital asset of a user.
(9) “Designated recipient” means a person chosen by a user using an online tool to administer digital assets of the user.
(10) “Digital asset” means an electronic record in which an individual has a right or interest. The term does not include an underlying asset or liability unless the asset or liability is itself an electronic record.
(11) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
(12) “Electronic communication” has the meaning set forth in 18 U.S.C. Section 2510(12), as amended.
(13) “Electronic-communication service” means a custodian that provides to a user the ability to send or receive an electronic communication.
(14) “Fiduciary” means an original, additional, or successor personal representative, conservator, agent, or trustee.
(15) “Good faith” means honesty in fact and reasonable under the circumstances.
(16) “Information” means data, text, images, videos, sounds, codes, computer programs, software, databases, or the like.
(17) “Online tool” means an electronic service provided by a custodian that allows the user, in an agreement distinct from the terms-of-service agreement between the custodian and user, to provide directions for disclosure or nondisclosure of digital assets to a third person.
(18) “Person” means an individual, estate, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity.
(19) “Personal representative” means an executor, administrator, special administrator, or person that performs substantially the same function under the law of this state other than this chapter.
(20) “Power of attorney” means writing or other record that grants an agent authority to act in the place of a principal, whether or not the term power of attorney is used.
(21) “Principal” means an individual who grants authority to an agent in a power of attorney.
(22) “Protected person” means an individual for whom a conservator has been appointed. The term includes an individual for whom an application for the appointment of a conservator is pending.
(23) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(24) “Remote-computing service” means a custodian that provides to a user computer-processing services or the storage of digital assets by means of an electronic communications system, as defined in 18 U.S.C. Section 2510(14), as amended.
(25) “Terms-of-service agreement” means an agreement that controls the relationship between a user and a custodian.
(26) “Trustee” means a fiduciary with legal title to property under an agreement or declaration that creates a beneficial interest in another. The term includes a successor trustee.
(27) “User” means a person that has an account with a custodian.
(28) “Will” includes a codicil or a testamentary instrument that merely appoints a personal representative or an executor or revokes or revises another will.
(Act 2017-316, §1.)
(a) This chapter applies to:
(1) a fiduciary acting under a will or power of attorney executed before, on, or after October 1, 2016;
(2) a personal representative acting for a decedent who died before, on, or after October 1, 2016;
(3) a conservatorship proceeding commenced before, on, or after October 1, 2016; and
(4) a trustee acting under a trust created before, on, or after October 1, 2016.
(b) This chapter applies to a custodian if the user resides in this state or resided in this state at the time of the user’s death.
(c) This chapter does not apply to a digital asset of an employer used by an employee in the ordinary course of the employer’s business. Neither does this chapter apply to a digital asset, whether employer owned or otherwise, that an employee or contractor has stored on, housed on, maintained on, or transmitted to any software, program, hardware, system, account, drive, tape, media, or other storage device leased, licensed, or owned by the employer.
(Act 2017-316, §1.)
(a) A user may use an online tool to direct the custodian to disclose to the designated recipient or not to disclose some or all of the user’s digital assets, including the content of electronic communications. If the online tool allows the user to modify or delete a direction at all times, a direction regarding disclosure using an online tool overrides a contrary direction by the user in a will, trust, power of attorney, or other record.
(b) If a user has not used an online tool to give direction under subsection (a) or if the custodian has not provided an online tool, the user may allow or prohibit in a will, trust, power of attorney, or other record, disclosure to a fiduciary of some or all of the user’s digital assets, including the content of electronic communications sent or received by the user.
(c) A user’s direction under subsection (a) or (b) overrides a contrary provision in a terms-of-service agreement.
(Act 2017-316, §1.)
(a) This chapter does not change or impair a right of a custodian or a user under a terms-of-service agreement to access and use digital assets of the user.
(b) This chapter does not give a fiduciary or designated recipient any new or expanded rights other than those held by the user for whom, or for whose estate, the fiduciary or designated recipient acts or represents.
(c) A fiduciary’s or a designated recipient’s access to digital assets may be modified or eliminated by a user, by federal law, or by a terms-of-service agreement if the user has not provided direction under Section 19-1A-4.
(Act 2017-316, §1.)
(a) When disclosing digital assets of a user under this chapter, the custodian may at its sole discretion:
(1) grant a fiduciary or designated recipient full access to the user’s account;
(2) grant a fiduciary or designated recipient partial access to the user’s account sufficient to perform the tasks with which the fiduciary or designated recipient is charged; or
(3) provide a fiduciary or designated recipient a copy in a record of any digital asset that, on the date the custodian received the request for disclosure, the user could have accessed if the user were alive and had full capacity and access to the account.
(b) A custodian may assess a reasonable administrative charge for the cost of disclosing digital assets under this chapter.
(c) A custodian need not disclose under this chapter a digital asset deleted by a user.
(d) If a user directs or a fiduciary requests a custodian to disclose under this chapter some, but not all, of the user’s digital assets, the custodian need not disclose the assets if segregation of the assets would impose an undue burden on the custodian. If the custodian believes the direction or request imposes an undue burden, the custodian or fiduciary may seek an order from the court to disclose:
(1) a subset limited by date of the user’s digital assets;
(2) all of the user’s digital assets to the fiduciary or designated recipient;
(3) none of the user’s digital assets; or
(4) all of the user’s digital assets to the court for review in camera.
(Act 2017-316, §1.)
If a deceased user consented or a court directs disclosure of the contents of electronic communications of the deceased user, the custodian shall disclose to the personal representative of the estate of the user the content of an electronic communication sent or received by the user if the representative gives the custodian:
(1) a written request for disclosure in physical or electronic form;
(2) a copy of the death certificate of the user;
(3) a copy of letters testamentary, letters of administration, or court order;
(4) unless the user provided direction using an online tool, a copy of the user’s will, trust, power of attorney, or other record evidencing the user’s consent to disclosure of the content of electronic communications; and
(5) if requested by the custodian:
(A) a number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the user’s account;
(B) evidence linking the account to the user; or
(C) a finding by the court that:
(i) the user had a specific account with the custodian, identifiable by the information specified in subparagraph (A);
(ii) disclosure of the content of electronic communications of the user would not violate 18 U.S.C. Section 2701 et seq., as amended, 47 U.S.C. Section 222, as amended, or other applicable law;
(iii) unless the user provided direction using an online tool, the user consented to disclosure of the content of electronic communications; or
(iv) disclosure of the content of electronic communications of the user is reasonably necessary for administration of the estate.
(Act 2017-316, §1.)
Unless the user prohibited disclosure of digital assets or the court directs otherwise, a custodian shall disclose to the personal representative of the estate of a deceased user a catalogue of electronic communications sent or received by the user and digital assets, other than the content of electronic communications, of the user, if the representative gives the custodian:
(1) a written request for disclosure in physical or electronic form;
(2) a copy of the death certificate of the user;
(3) a copy of letters testamentary, letters of administration or court order; and
(4) if requested by the custodian:
(A) a number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the user’s account;
(B) evidence linking the account to the user;
(C) an affidavit stating that disclosure of the user’s digital assets is reasonably necessary for administration of the estate; or
(D) a finding by the court that:
(i) the user had a specific account with the custodian, identifiable by the information specified in subparagraph (A); or
(ii) disclosure of the user’s digital assets is reasonably necessary for administration of the estate.
(Act 2017-316, §1.)
To the extent a power of attorney expressly grants an agent authority over the content of electronic communications sent or received by the principal and unless directed otherwise by the principal or the court, a custodian shall disclose to the agent the content if the agent gives the custodian:
(1) a written request for disclosure in physical or electronic form;
(2) an original or copy of the power of attorney expressly granting the agent authority over the content of electronic communications of the principal;
(3) a certification by the agent, under penalty of perjury, that the power of attorney is in effect; and
(4) if requested by the custodian:
(A) a number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the principal’s account; or
(B) evidence linking the account to the principal.
(Act 2017-316, §1.)
Unless otherwise ordered by the court, directed by the principal, or provided by a power of attorney, a custodian shall disclose to an agent with specific authority over digital assets or general authority to act on behalf of a principal a catalogue of electronic communications sent or received by the principal and digital assets, other than the content of electronic communications, of the principal if the agent gives the custodian:
(1) a written request for disclosure in physical or electronic form;
(2) an original or a copy of the power of attorney that gives the agent specific authority over digital assets or general authority to act on behalf of the principal;
(3) a certification by the agent, under penalty of perjury, that the power of attorney is in effect; and
(4) if requested by the custodian:
(A) a number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the principal’s account; or
(B) evidence linking the account to the principal.
(Act 2017-316, §1.)
Unless otherwise ordered by the court or provided in a trust, a custodian shall disclose to any trustee of a trust of which any trustee is an original user of an account any digital asset of the account held in trust, including a catalogue of electronic communications of the trustee and the content of electronic communications.
(Act 2017-316, §1.)
Unless otherwise ordered by the court, directed by the user, or provided in a trust, a custodian shall disclose to a trustee that is not an original user of an account the content of an electronic communication sent or received by an original or successor user and carried, maintained, processed, received, or stored by the custodian in the account of the trust if the trustee gives the custodian:
(1) a written request for disclosure in physical or electronic form;
(2) a copy of the trust instrument or a certification of the trust under Section 19-3B-1013, which includes consent to disclosure of the content of electronic communications to the trustee;
(3) a certification by the trustee, under penalty of perjury, that the trust exists and the trustee is a currently acting trustee of the trust; and
(4) if requested by the custodian:
(A) a number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the trust’s account; or
(B) evidence linking the account to the trust.
(Act 2017-316, §1.)
Unless otherwise ordered by the court, directed by the user, or provided in a trust, a custodian shall disclose, to a trustee that is not an original user of an account, a catalogue of electronic communications sent or received by an original or successor user and stored, carried, or maintained by the custodian in an account of the trust and any digital assets, other than the content of electronic communications, in which the trust has a right or interest if the trustee gives the custodian:
(1) a written request for disclosure in physical or electronic form;
(2) a copy of the trust instrument or a certification of the trust under Section 19-3B-1013.
(3) a certification by the trustee, under penalty of perjury, that the trust exists and the trustee is a currently acting trustee of the trust; and
(4) if requested by the custodian:
(A) a number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the trust’s account; or
(B) evidence linking the account to the trust.
(Act 2017-316, §1.)
(a) After an opportunity for a hearing, the court may grant a conservator access to the digital assets of a protected person.
(b) Unless otherwise ordered by the court or directed by the user, a custodian shall disclose to a conservator the catalogue of electronic communications sent or received by a protected person and any digital assets, other than the content of electronic communications, in which the protected person has a right or interest if the conservator gives the custodian:
(1) a written request for disclosure in physical or electronic form;
(2) a copy of the court order that gives the conservator authority over the digital assets of the protected person; and
(3) if requested by the custodian:
(A) a number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the account of the protected person; or
(B) evidence linking the account to the protected person.
(c) A conservator with general authority to manage the assets of a protected person may request a custodian of the digital assets of the protected person to suspend or terminate an account of the protected person for good cause. A request made under this section must be accompanied by a copy of the court order giving the conservator authority over the protected person’s property.
(Act 2017-316, §1.)
(a) The legal duties imposed on a fiduciary charged with managing tangible property apply to the management of digital assets, including:
(1) the duty of care;
(2) the duty of loyalty; and
(3) the duty of confidentiality.
(b) A fiduciary’s or a designated recipient’s authority with respect to a digital asset of a user:
(1) except as otherwise provided in Section 19-1A-4, is subject to the applicable terms of service;
(2) is subject to other applicable law, including copyright law;
(3) in the case of a fiduciary, is limited by the scope of the fiduciary’s duties; and
(4) may not be used to impersonate the user.
(c) A fiduciary with authority over the property of a decedent, protected person, principal, or settlor has the right to access any digital asset in which the decedent, protected person, principal, or settlor had a right or interest and that is not held by a custodian or subject to a terms-of-service agreement.
(d) A fiduciary acting within the scope of the fiduciary’s duties is an authorized user of the property of the decedent, protected person, principal, or settlor for the purpose of applicable computer-fraud and unauthorized-computer-access laws, including this state’s law on unauthorized computer access.
(e) A fiduciary with authority over the tangible, personal property of a decedent, protected person, principal, or settlor:
(1) has the right to access the property and any digital asset stored in it; and
(2) is an authorized user for the purpose of computer-fraud and unauthorized-computer-access laws, including Article 5A of Chapter 8, Title 13A, 18 U.S.C. Section 2701 et seq., and 47 U.S.C. Section 222.
(f) A custodian may disclose information in an account to a fiduciary of the user when the information is required to terminate an account used to access digital assets licensed to the user.
(g) A fiduciary of a user may request a custodian to terminate the user’s account. A request for termination must be in writing, in either physical or electronic form, and accompanied by:
(1) if the user is deceased, a copy of the death certificate of the user;
(2) a copy of the letters testamentary, letters of administration, court order, power of attorney, or trust giving the fiduciary authority over the account; and
(3) if requested by the custodian:
(A) a number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the user’s account;
(B) evidence linking the account to the user; or
(C) a finding by the court that the user had a specific account with the custodian, identifiable by the information specified in subparagraph (A).
(Act 2017-316, §1.)
(a) Not later than 60 days after receipt of the information required under Sections 19-1A-7 to 19-1A-15, inclusive, a custodian shall comply with a request under this chapter from a fiduciary or designated recipient to disclose digital assets or terminate an account. If the custodian fails to comply, the fiduciary or designated recipient may apply to the court for an order directing compliance, and such other relief allowed under the law of this state.
(b) An order under subsection (a) directing compliance must contain a finding that compliance is not in violation of 18 U.S.C. Section 2702, as amended.
(c) A custodian may notify the user that a request for disclosure or to terminate an account was made under this chapter.
(d) A custodian may deny a request under this chapter from a fiduciary or designated recipient for disclosure of digital assets or to terminate an account if the custodian is aware of any lawful access to the account following the receipt of the fiduciary’s request.
(e) This chapter does not limit a custodian’s ability to obtain or require a fiduciary or designated recipient requesting disclosure or termination under this chapter to obtain a court order that:
(1) specifies that an account belongs to the protected person or principal;
(2) specifies that there is sufficient consent from the protected person or principal to support the requested disclosure; and
(3) contains a finding required by law other than this chapter.
(f) A custodian and its officers, employees, and agents are immune from liability for an act or omission done in good faith compliance with this chapter.
(Act 2017-316, §1.)
In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.
(Act 2017-316, §1.)
This chapter modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).
(Act 2017-316, §1.)
(a) When used in this chapter, unless the context otherwise requires, the following terms shall have the meanings respectively ascribed to them by this section:
(1) WAR SERVICE. Such term shall include the following, during the period that the United States shall be engaged in war with any foreign nation:
a. Active membership in the military, naval or air forces of the United States or any of its allies.
b. Acceptance for membership in the military, naval or air forces of the United States or any of its allies and awaiting induction into that service.
c. Participation in any work abroad in connection with a governmental agency of the United States, with the American Red Cross, or with any other similar service.
d. Internment in any enemy country, or absence from the United States and inability to return.
e. Any service at home or abroad arising out of or in connection with the war, which in the opinion of the court prevents the fiduciary from giving the proper attention to his duties.
(2) FIDUCIARY. A trustee of a testamentary trust or of any express trust, a guardian of the estate of a minor, a guardian, committee or conservator of the estate of an incompetent person, an executor of a will, an administrator of the estate of a decedent or an advisor or consultant exercising control over a testamentary or express trust.
(b) Words importing the masculine gender, as used herein, include the feminine.
(Acts 1943, No. 460, p. 421, §1.)
Any fiduciary engaged in war service may be removed from his office as such upon petition filed in the proper court having jurisdiction by any person interested in the trust fund or the estate being administered or by any co-fiduciary or surety, and if the trust has not been fully executed or the administration of the estate has not been fully completed, the court, upon such removal, must appoint a successor fiduciary to fill the vacancy caused by such removal if there is no trust instrument providing a practicable method of appointment. If the court shall find that, because of the military service of the fiduciary, the stating of an account at that time is not possible, an accounting by such fiduciary in military service shall not be a prerequisite to the appointment of a successor fiduciary, and upon the reinstatement of such fiduciary or at such time as the said court deems meet, such fiduciary may be required by said court to file an accounting of his administration of the trust fund.
(Acts 1943, No. 460, p. 421, §2.)
If any fiduciary in war service be removed from office and is a competent and suitable person to again serve as such fiduciary at any time after the termination of his war service, the fiduciary appointed to fill the vacancy caused by such removal, or his successor, shall be removed from office by the court upon petition filed by the former fiduciary in war service so removed or by any person interested in the trust fund or the estate being administered or by any co-fiduciary, and if the trust has not been fully executed or the administration of the estate has not been fully completed the court, upon such removal, shall appoint the fiduciary theretofore removed because of his war service to fill the vacancy caused by the removal of his successor in office if there is no trust instrument providing a practicable method of appointment.
(Acts 1943, No. 460, p. 421, §3.)
Notice of any petition to remove a fiduciary in war service and the day appointed to hear the same must be given to him by the register or clerk by registered or certified mail, postage prepaid, addressed to him at his post-office address, if known, or by publication once a week for four consecutive weeks in some newspaper published in the county, and if no newspaper is published in the county by posting at the courthouse door and three other public places in the county. If said fiduciary does not personally appear therein, or is not represented by an authorized attorney, the court may appoint an attorney to represent him and a reasonable fee, to be taxed as a part of the costs of such proceedings, may be allowed to said attorney so appointed. Notice of said petition and the time appointed to hear the same must be given by the register or clerk to all other parties interested in the trust fund or the estate being administered, other than creditors, in the manner and as required by the Alabama Rules of Civil Procedure. Notice of any petition filed under the provisions of Section 19-2-3 must be given by the register or clerk to all parties interested in the trust fund or estate being administered, other than creditors, in the manner and as required by the Alabama Rules of Civil Procedure.
(Acts 1943, No. 460, p. 421, §4.)
Unless exempted from so doing by law or trust instrument every fiduciary appointed by the court must give bond, before entering upon the discharge of his duties, in the amount and conditioned and payable as required by the law applicable to his fiduciary office.
(Acts 1943, No. 460, p. 421, §5.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1935, No. 230, p. 626; Code 1940, T. 58, §1; Acts 1982, No. 82-625, p. 1179, §1; Acts 1990, No. 90-561.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10431; Code 1940, T. 58, §2.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10433; Code 1940, T. 58, §3.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10430; Code 1940, T. 58, §4.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1936, Ex. Sess., No. 128, p. 90; Code 1940, T. 58, §6.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1936, Ex. Sess., No. 128, p. 90; Code 1940, T. 58, §§5, 7.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1951, No. 102, p. 323.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1951, No. 103, p. 324; Acts 1967, No. 337, p. 879.)
(a) Where by the terms of a will or trust instrument a fiduciary may or must satisfy a pecuniary gift thereunder by distributing or allocating property in kind according to the value thereof other than the value on the date of distribution or allocation, the fiduciary, in satisfying such gift from the property available therefor, shall, unless the governing document expressly prohibits such a selection of property, select property, including cash, fairly representative of appreciation or depreciation in the value at the date or dates of distribution or allocation of all property then available for distribution or allocation in satisfaction of such gift.
(b) The enactment of this section is not intended to imply that the present law of this state, relating to selection of property by fiduciaries in the circumstances herein described, has been otherwise than as set forth in subsection (a) of this section.
(Acts 1965, 2nd Ex. Sess., No. 41, p. 57, §§1, 2.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1971, No. 609, p. 1324, §3.)
(a) In addition to powers, remedies and rights which may be set forth in any will, trust agreement or other document which is the source of authority, a trustee, executor, administrator, guardian, or one acting in any other fiduciary capacity, whether an individual, corporation or other entity (“fiduciary”) shall have the following powers, rights and remedies whether or not set forth in the will, trust agreement or other document which is the source of authority:
(1) To inspect, investigate or cause to be inspected and investigated, property held by the fiduciary, including interests in sole proprietorships, partnerships, or corporations and any assets owned by any such business enterprise, for the purpose of determining compliance with environmental law affecting such property and to respond to any actual or potential violation of any environmental law affecting property held by the fiduciary;
(2) To take, on behalf of the estate or trust, any action necessary to prevent, abate, or otherwise remedy any actual or potential violation of any environmental law affecting property held by the fiduciary, either before or after the initiation of an enforcement action by any governmental body;
(3) To refuse to accept property in trust if the fiduciary determines that any property to be donated or conveyed to the trust either is contaminated by any hazardous substance or is being used or has been used for any activity directly or indirectly involving any hazardous substance which could result in liability to the trust or otherwise impair the value of the assets held therein;
(4) To settle or compromise at any time any and all claims against the trust or estate which may be asserted by any governmental body or private party involving the alleged violation of any environmental law affecting property held in trust or in an estate;
(5) To disclaim any power granted by any document, statute, or rule of law which, in the sole discretion of the fiduciary, may cause the fiduciary to incur personal liability under any environmental law;
(6) To decline to serve as a fiduciary if the fiduciary reasonably believes that there is or may be a conflict of interest between the fiduciary in its or his fiduciary capacity and in its or his individual capacity because of potential claims or liabilities which may be asserted against the fiduciary on behalf of the trust or estate because of the type or condition of assets held therein.
(b) The fiduciary shall be entitled to charge the cost of any inspection, investigation, review, abatement, response, cleanup, or remedial action authorized herein against the income or principal of the trust or estate. A fiduciary shall not be personally liable to any beneficiary or other party for any decrease in value of assets in trust or in an estate by reason of the fiduciary’s compliance or efforts to comply with any environmental law, specifically including any reporting requirement under such law. Neither the acceptance by the fiduciary of property or a failure by the fiduciary to inspect or investigate property shall be deemed to create any inference as to whether or not there is or may be any liability under any environmental law with respect to such property.
(c) For purposes of this section, “environmental law” means any federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment or human health. For purposes of this section, “hazardous substances” means any substance defined as hazardous or toxic or otherwise regulated by any environmental law.
(d) A fiduciary in its individual capacity shall not be considered an owner or operator of any property of the trust or estate for purposes of any environmental law.
(Acts 1990, No. 90-476, p. 696, §1.)
When an express trust is created for the payment or security of debts and, by the terms thereof, the trustee is not required to give bond with surety, any creditor interested therein may apply to the register or clerk of the circuit court of the county in which the trust property, or the most valuable portion thereof, may be, for an order requiring such trustee to give bond with surety for the faithful administration of the trust.
(Code 1886, §3549; Code 1896, §4152; Code 1907, §6054; Code 1923, §10391; Code 1940, T. 58, §8.)
The application must be in writing, verified by affidavit, must state the nature and character of the trust and of the interest of the applicant therein and must state, in the opinion of the applicant, said interest is, or will be endangered, if bond with sureties is not required of such trustee; and, on the filing of such petition, the register or clerk must appoint a day for the hearing thereof, of which not less than five days’ notice, by the service of summons to appear and answer, must be given the trustee, if he resides in the state, and if he resides without the state, notice must be given by publication for three successive weeks in some newspaper published in the county, if there be such paper, and if there be not, in the paper published nearest to such county.
(Code 1886, §3550; Code 1896, §4153; Code 1907, §6055; Code 1923, §10392; Code 1940, T. 58, §9.)
On the day appointed, or on any other day to which such application may be continued, if it appears that the applicant has a real, bona fide interest in the administration of the trust, and that by the terms thereof, the trustee is not required to give bond with surety, and that a majority in number and interest of all the creditors for whose benefit such trust may be created do not oppose such application, the register or clerk must make and enter an order requiring such trustee to give bond with at least two good and sufficient sureties, payable to such register or clerk, in such sum as the register or clerk may prescribe, subject to change on application to the judge, with condition for the faithful discharge of all the duties of such trustee, which bond must be approved, filed and recorded in his office.
(Code 1886, §3551; Code 1896, §4154; Code 1907, §6056; Code 1923, §10393; Code 1940, T. 58, §10.)
If the trustee fails for five days from and after the making of such order, to give such bond, the register or clerk must make and enter an order removing him as a trustee, and may make and enter an order appointing a successor, of whom bond, with sureties, payable and conditioned as provided in Section 19-3-22 must be required.
(Code 1886, §3552; Code 1896, §4155; Code 1907, §6057; Code 1923, §10394; Code 1940, T. 58, §11.)
It is the duty of the trustee of an express trust created for the payment of debts, within 20 days after entering upon the execution of such trust, to make an inventory of the entire trust property so far as the same has come to his possession or knowledge, describing the real estate and grouping and classifying the personal property in as brief and comprehensive manner as may be consistent with its proper identification and appraisement, and stating the amount and character of all choses in action, with the names of debtors, belonging to the trust. In reducing such inventory to writing, the trustee must leave appropriate spaces opposite each article or item, with proper caption, in which spaces the appraised value may be inserted by the appraisers. The trustee must, within the time above stipulated, file, in the office of the register or clerk of the county in which the most valuable portion of the trust property may be, two copies of such inventory, each of which shall be duly verified by his affidavit; and if there be property in more than one county, a separate inventory of the property in each county must be made and filed. Supplemental inventories may be made in like manner.
(Code 1886, §3553; Code 1896, §4156; Code 1907, §6058; Code 1923, §10395; Code 1940, T. 58, §12.)
On the filing of such inventory, the register or clerk must indorse upon each of such copies the fact and date of such filing and must appoint three competent and disinterested persons, who must not be of kin or of counsel to any person interested in the trust estate, appraisers of and in each county in which any part of the trust property may be, and must attach to the commission one of the copies of such inventory, filed by the trustee; and the appraisers must, in writing, appraise at its true value, the property described in such inventory, and set down in figures opposite each item, the appraised value thereof, add each column and carry forward the result so as to show the total valuation placed upon such property, and verify the same by affidavit and make return thereof to the register or clerk who must record the commission to the appraisers and such combined inventory and appraisement, together with the affidavits appended thereto. The other copy of the inventory filed by the trustee must be carefully preserved by the register or clerk, free to examination of all persons, but must not be recorded. The appraisers are severally entitled to $2.00 for each day’s service in making such appraisement, to be taxed as costs and collected and paid over by the register or clerk.
(Code 1886, §3554; Code 1896, §4157; Code 1907, §6059; Code 1923, §10396; Code 1940, T. 58, §13.)
If the value of the trust estate, as appraised by the appraisers, exceeds $1,000.00, the trustee, or assignor, or any creditor, or any number of them, may file a petition in the circuit court of the county in which the inventory and appraisement are required to be filed, for the administration of the trust. Such petition must briefly allege the making of the assignment, the value of the trust estate, as shown by the appraisement, and the names and residences of all creditors, so far as known, and pray that the trust be administered by the circuit court.
(Code 1896, §4158; Code 1907, §6060; Code 1923, §10397; Code 1940, T. 58, §14.)
Upon the filing of such petition the register or clerk must submit the same, together with the inventory and appraisement, upon the original papers, to the circuit judge and the circuit judge must make an order designating a day, not less than two nor more than 12 months from the date thereof, by or on which day all claims against the trust estate must be presented, verified by affidavit.
(Code 1896, §4159; Code 1907, §6061; Code 1923, §10398; Code 1940, T. 58, §15.)
Upon the making of such order the register or clerk must give notice thereof by mail, postage prepaid, to each creditor whose name and address he may, by diligent inquiry and investigation, ascertain from the trustee, or assignor, or the record of the deed of assignment in the office of the judge of probate, or any other available source of information, and must also give notice by publication once a week for three successive weeks in a newspaper published in the county, or if there be no such paper, by posting the notice at the courthouse door for the same length of time. Such notice may be substantially in the following form:
“To the creditors of A.B., of _____:
“The said A.B., having made an assignment for the benefit of creditors, and C.D. having filed his petition for the administration of such trust by the circuit court, and the circuit judge having made an order designating the _____ day of _____, as a day by or on which all claims of creditors must be presented; all parties in interest are hereby notified of the filing of such petition, and all persons having claims against the trust estate are required to file the same, or a statement thereof, verified by affidavit, in the office of the register or clerk at _____, by or on the day above specified, or the same will be barred.
“This the ____ day of ______.
E. F., Register or Clerk”
(Code 1896, §4160; Code 1907, §6062; Code 1923, §10399; Code 1940, T. 58, §16.)
All claims against the trust estate must be presented by or on the day specified in such order and notice, by filing the claim, or a statement thereof, in the office of the register or clerk, verified as claims against the estate of a decedent are required to be verified, before a notary public or other officer authorized to take and certify affidavits within or beyond the state; and all claims not so presented are precluded from sharing in the assignment or participating in any dividend that may be made from the trust estate, until all presented and allowed claims shall have been paid in full. But when a claim has been so presented prior to giving of such notice, a second presentation is not necessary. Any defect or insufficiency in the affidavit may be remedied by amendment at any time. The register or clerk must give to the creditor, his agent or attorney a receipt for his claim, and must indorse thereon the date of filing and sign his name thereto.
(Code 1896, §4161; Code 1907, §6063; Code 1923; §10400; Code 1940, T. 58, §17.)
The register or clerk must keep a docket in which he must enter each claim, showing under appropriate captions, the name and address of the claimant, the amount and character of his claim, when due, by whom certified and when filed, with appropriate spaces for the insertion of the amount of each claim allowed and the amount of the dividend thereon at each distribution of the trust estate.
(Code 1896, §4162; Code 1907, §6064; Code 1923, §10401; Code 1940, T. 58, §18.)
All claims to which no objection is made in the manner provided in Sections 19-3-32 and 19-3-33, within three months after the expiration of the time prescribed for the presentation of claims, stand allowed without further proof.
(Code 1896, §4163; Code 1907, §6065; Code 1923, §10402; Code 1940, T. 58, §19.)
At any time within three months after the expiration of the time allowed for the presentation of claims, or at any time prior thereto, the trustee or assignor or any creditor or party in interest may object to the allowance of any claim filed against the trust estate, by filing objections thereto in writing.
(Code 1896, §4164; Code 1907, §6066; Code 1923, §10403; Code 1940, T. 58, §20.)
Within 30 days after the expiration of the time allowed for filing objections to claims, the register or clerk must appoint a time, not less than 20 nor more than 60 days thereafter, for the hearing of such objections as have been filed; and of the nature of the objections and the time appointed for such hearing, he must give notice to each person whose claim is contested, by citation to be served upon him, his agent or attorney, or, if he be a nonresident and have no resident agent or attorney, such citation must be sent by mail, postage prepaid, to such claimant at his post office address.
(Code 1896, §4165; Code 1907, §6067; Code 1923, §10404; Code 1940, T. 58, §21.)
On the day appointed for the hearing, or any day to which the same may be continued, the register or clerk must proceed to hear and note the testimony for and against the contested claim, the verified claim or statement thereof being prima facie evidence of its correctness, and must make an order allowing or disallowing the claim, in whole or in part, according to the evidence.
(Code 1896, §4166; Code 1907, §6068; Code 1923, §10405; Code 1940, T. 58, §22.)
Within three months after the expiration of the time allowed for the filing of objections to claims, the trustee must render, under oath, to the register or clerk an account charging himself with all the moneys of the trust estate which have come into his possession, or with which he is chargeable, and crediting himself with all sums to which he is entitled as credits, and must file therewith the vouchers on which he relies to sustain such credits. A similar account must be filed every six months thereafter.
(Code 1896, §4167; Code 1907, §6069; Code 1923, §10406; Code 1940, T. 58, §23.)
Upon the filing of such account the register or clerk must appoint a day, not less than 20 nor more than 60 days thereafter, to hear and pass upon the account, and must give notice thereof by mail, postage prepaid, to each creditor, his agent or attorney and to the assignor.
(Code 1896, §4168; Code 1907, §6070; Code 1923, §10407; Code 1940, T. 58, §24.)
Upon the day so appointed, or any day to which the hearing may be continued, the register or clerk must proceed to examine and audit the account; and upon such auditing, the assignor or any creditor or party in interest, his representative or transferee, may move the register or clerk to charge the trustee with sums other than those with which he has charged himself, or may object to the allowance of any item for which he claims credit; and such matters must be heard and the account stated and passed upon by the register or clerk and distribution made and judgment to creditors as in insolvent estates administered in the court of probate; and after deducting the costs and expenses of administration, including five percent commissions to the trustee on the amount of money with which he is charged, and the allowance of reasonable charges for the preparation of the deed of assignment, and after the discharge of all liens or claims having priority, the register or clerk must enter judgment to each creditor whose claim has been allowed, his proportion of such money, reserving in the hands of the trustee a ratable proportion for such claims as may be then contested and undecided; and if no appeal is taken, as provided in Section 19-3-38, and prosecuted to effect, the register or clerk may issue execution upon such judgments, against the trustee, and the sureties on his bond, if he has given bond. Upon application to the register or clerk by the assignee or any party in interest, such compensation of the assignee may be increased or diminished by the register or clerk for good cause shown.
(Code 1896, §4169; Code 1907, §6071; Code 1923, §10408; Code 1940, T. 58, §25.)
Upon a hearing before the register or clerk under any of the provisions of this article, any competent legal evidence, written or oral, may be received. All such evidence must be noted and oral testimony reduced to writing by the register or clerk. Within 10 days thereafter, either party may file exceptions to the action or conclusion of the register or clerk, and may have the same reviewed by the circuit judge upon 10 days’ notice to the other party, such review to be without any presumption in favor of the correctness of the action or conclusion of the register or clerk. From the decision of the circuit judge thereon an appeal lies to the court of civil appeals or the supreme court within 42 days.
(Code 1896, §4170; Code 1907, §6072; Code 1923, §10409; Code 1940, T. 58, §26.)
Upon the application of the trustee, the court may authorize the compromise of any bad and doubtful debts or choses in action belonging to the trust estate, or the sale thereof to the highest bidder, on such terms and notice as the court may prescribe.
(Code 1896, §4171; Code 1907, §6073; Code 1923, §10410; Code 1940, T. 58, §27.)
The trustee may make sale of any real estate or interest therein belonging to the trust estate, at public outcry to the highest bidder, after giving notice thereof by publication once a week for three successive weeks in a newspaper published in the county where the real estate is situated, or, if there be no such paper, by posting notice at the courthouse door for the same length of time; and of such sale the trustee must also give notice by mail, postage prepaid, to each creditor, in time to reach him 10 days before the day of sale. But nothing contained in this section shall prevent the assignee from exercising the powers of sale or other powers conferred by the deed of assignment, unless specially restrained from so doing by an order made in writing by the circuit judge and filed in the court.
(Code 1896, §4172; Code 1907, §6074; Code 1923, §10411; Code 1940, T. 58, §28.)
If the trustee shall fail to make settlement, partial or final, as required in this article he may be compelled to do so, by citation to be issued by the register or clerk on order of the court, at the instance of any creditor or party interested in the trust, in all respects as executors and administrators may be compelled to make settlements in the court of probate; or, upon motion of a majority in value of the creditors, the court must remove such defaulting trustee and appoint another in his stead, who may be nominated by the creditors, as provided by this Code, for the nomination of an administrator of an insolvent estate by the creditors thereof.
(Code 1896, §4173; Code 1907, §6075; Code 1923, §10412; Code 1940, T. 58, §29.)
A business trust is an express trust created by a written declaration of trust whereby property is conveyed to one or more trustees, who hold and manage the same for the benefit and profit of such persons as may be or become the holders of transferable certificates evidencing the beneficial interest in the trust estate.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §1.)
A business trust may be established by a declaration of trust, duly executed by one or more trustees, for any lawful purpose including, but not limited to, acquiring, managing, improving, leasing, dealing in, selling or otherwise alienating, mortgaging or otherwise incumbering real and personal property of all kinds and descriptions, including dealing in, purchasing, holding, selling and exchanging stocks, bonds, mortgages, deeds of trust and other securities of all kinds and descriptions; receiving the income, dividends, rents, profits and returns therefrom, and investing the same or distributing the same to the beneficial owners of the trust in accordance with the terms of the declaration of trust.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §2.)
The trustees shall hold the legal title to all property at any time belonging to the business trust. They shall have control over such property as well as the control and management of the business and affairs of the business trust. Liability to third persons for any act, omission or obligation of a trustee of a business trust, when acting in such capacity, shall extend to the whole of the trust estate, or so much thereof as may be necessary to discharge such obligation, but no trustee shall be personally liable for any such act, omission or obligation. The trustees shall have such powers as to the investment of the trust estate as may be set out in the declaration of trust without regard to the type of investments to which trustees generally are restricted by the provisions of Article 6 of this chapter or otherwise.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §3.)
The beneficial ownership in a business trust shall be evidenced by certificates issued by the trustees. These certificates shall be transferable in the same manner as stock certificates of a corporation are transferable. No assessment shall be made against the interest of any beneficial owner, and no beneficial owner shall be personally liable for any debts or liabilities incurred by the trustees or by the business trust.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §4.)
The written declaration of trust may provide for the election of successor trustees in the event of the death, resignation and removal of a trustee and may provide for the amendment of said declaration of trust. The declaration of trust may also contain such other provisions regarding the operation and administration of the business trust as may be necessary or desirable.
The declaration of trust shall be recorded in the office of the judge of probate in the county in which its principal place of business is located, and a recording charge of $15.00 shall be paid therefor, which shall be in lieu of all other recording charges.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §5.)
A business trust shall not be deemed invalid as violating the rule against perpetuities or the law against suspension of the powers of alienation. Such trust may continue for such time as may be necessary to accomplish the purposes for which it may be created, provided the declaration of trust contains a provision that such trust may be terminated at any time by action of the trustees or by the vote of a specified percentage in interest of the beneficial owners thereof as set forth in the declaration of trust.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §6.)
A business trust may be sued for debts and other obligations incurred by the trustees in the performance of their duties under the declaration of trust and for any damages resulting from the negligence of such trustees, and its property shall be subject to attachment and execution in like manner as if it were a corporation.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §7.)
[Repealed]
Repealed by Act 2006-114, p. 173, §5, effective for tax years beginning on or after January 1, 2005.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §8.)
“Fiduciary funds,” as used in this article, shall include any sums whatsoever which have come into the hands of such officer and of which he is not the absolute and unqualified owner, including witness fees and other fees or funds to which any person other than himself is entitled.
(Acts 1909, No. 133, p. 166; Code 1923, §10459; Code 1940, T. 58, §31.)
Every register, probate judge, sheriff, clerk and register shall prepare a report in writing showing the amount of all fiduciary funds in the hands of such official, designating the name of the owner and the case or the circumstances under which the same was received, which statement shall be verified.
(Acts 1909, No. 133, p. 166; Code 1923, §10458; Code 1940, T. 58, §30.)
The register and the clerk shall file the report with the judge of the court of which he is the clerk, or clerk and register, at the first session of said court after January 1 of each year.
(Acts 1909, No. 133, p. 166; Code 1923, §10460; Code 1940, T. 58, §32.)
The sheriff shall file, at the first session held after the first day of January of each court under whose processes he holds any money, the report required by this article.
(Acts 1909, No. 133, p. 166; Code 1923, §10464; Code 1940, T. 58, §33.)
The judge of such court shall carefully examine said report and order the same recorded by the clerk of the court in a well-bound book, kept for that purpose, which book shall be open to the inspection of the public.
(Acts 1909, No. 133, p. 166; Code 1923, §10462; Code 1940, T. 58, §34.)
The probate judge shall file such statement in his court within the first 10 days of January of each year and record the same in a book kept for that purpose, which book shall be open to the inspection of the public.
(Acts 1909, No. 133, p. 166; Code 1923, §10463; Code 1940, T. 58, §35.)
The judges of courts of record in this state, at the first session of their courts held after January 1, shall enforce the provisions of this article and, if such report is not filed within the first day of said court, shall issue a mandatory order requiring the filing of said report and, unless the same is filed within the time named in said order, shall punish officers so in default for contempt of court.
(Acts 1909, No. 133, p. 166; Code 1923, §10464; Code 1940, T. 58, §36.)
(a) If at any time it appears to the court, or is made known to the court, that any balance has been in the hands of any officer for a period of five years and the same remains unclaimed, the court may make an order directing the same to be paid into the county treasury, and a separate account shall be kept of all the payments identifying each transaction.
(b) Any person entitled to recover all or part of any unclaimed amount paid into the county treasury may recover the amount, without interest, before the date that is 10 years after the payment was made into the county treasury by obtaining an order from the court that had ordered the payment into the county treasury. The order may be made by the court on summary motion against the judge of probate of the county after five days’ written notice unless the court continues the hearing to a further time for sufficient reasons.
(c)(1) Subject to subdivision (2), with respect to any unclaimed amount currently held in the county treasury or paid into the county treasury on or following August 1, 2023, which remain in the county treasury on the date that is 10 years after the date it was paid into the county treasury, the following shall occur:
a. Any person’s right, title, or interest in or to all unclaimed funds shall be forfeited.
b. All right, title, and interest in or to the unclaimed funds shall be vested in the county treasury to be set aside solely for the maintenance, repair, and construction of roads and bridges located within the county.
(2) Before any unclaimed funds may be forfeited under subdivision (1), the county shall provide notice of the intended forfeiture, including, at a minimum, a description of the funds, the date the forfeiture is scheduled to occur, and a description of how a person entitled to recover all or part of the unclaimed funds may make a claim. Notice shall be published on the Alabama Press Association’s website or other website used by the county for a minimum of 90 days before the date of forfeiture and in addition, in a newspaper of general circulation in the county, if one exists, at least once a week for four consecutive weeks before the date of forfeiture.
(d) This section shall not apply to the following:
(1)Unclaimed funds held by municipal courts.
(2)Unclaimed restitution payments under Section 15-18-115.
(3) Interest on unclaimed funds.
(Acts 1909, No. 133, p. 166; Code 1923, §§10465, 10466; Code 1940, T. 58, §§37, 38; Act 2023-102, §1.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3747; Code 1886, §3504; Code 1896, §4183; Code 1907, §6085; Code 1923, §10422; Code 1940, T. 58, §39.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3747; Code 1886, §3565; Code 1896, §4184; Code 1907, §6086; Code 1923, §10423; Code 1940, T. 58, §40.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3747; Code 1886, §3566; Code 1896, §4185; Code 1907, §6087; Code 1923, §10424; Code 1940, T. 58, §41.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1867, §4425; Code 1876, §3748; Code 1886, §3567; Code 1896, §4186; Code 1907, §6088; Code 1923, §10425; Code 1940, T. 58, §42.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1886, §3568; Code 1896, §4187; Code 1907, §6089; Code 1923, §10426; Code 1940, T. 58, §43.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1907, §6090; Code 1923, §10427; Code 1940, T. 58, §44.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1907, §6091; Code 1923, §10428; Code 1940, T. 58, §45.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1907, §6092; Code 1923, §10429; Code 1940, T. 58, §46.)
(a) Unless otherwise authorized or directed by the court having jurisdiction thereof, or by the will, trust agreement or other document which is the source of authority, a trustee, executor, administrator, guardian or one acting in any other fiduciary capacity, other than as a trustee governed by the Alabama Uniform Trust Code, with the exercise of reasonable business prudence, in addition to any other investments now permitted by law, may invest funds in securities or investments which, at the time of the making or purchase thereof, are included in one or more of the following classes:
(1) Bonds or other interest-bearing obligations of the United States of America, or payment of which the United States of America has guaranteed as to both principal and interest.
(2) Bonds issued by the Federal Land Bank, under the act of Congress of the United States of America, designated as “the Federal Farm Loan Act,” and acts amendatory thereof.
(3) Bonds or other interest-bearing obligations of any state of the United States of America.
(4) General obligation bonds pledging the full faith and credit, of any county of the State of Alabama which county for a period of five years next preceding the purchase of the bonds shall not have made default in the payment of principal or interest on any of its funded obligations.
(5) Interest-bearing general obligations pledging the full faith and credit, including interest-bearing warrants, of any board of education of any county or municipality of the State of Alabama secured by pledge of the three-mill school tax.
(6) Promissory notes, bonds, or other evidences of indebtedness secured directly or collaterally by mortgage or trust deed which is a first lien on improved real estate in this or any other state of the United States of America; provided, that:
a. No interest or participation in any note, bond, or other evidence of indebtedness secured by mortgage shall hereafter be purchased for any fiduciary account unless the entire principal indebtedness secured by the mortgage shall at the time be controlled by the fiduciary, that:
b. No such interest or participation less than the entire indebtedness shall at any time be sold by the fiduciary to any person, estate, trust, or other entity, not controlled by the fiduciary, and that:
c. No fiduciary shall hereafter purchase from any trust or estate under its control or from itself for any trust or estate any such loan, bond, or other evidence of indebtedness secured by mortgage, or interest therein, unless the items so acquired shall in good faith and with due diligence have originally been made or acquired by the fiduciary for trust investment; and provided further, that this section shall not, insofar as the same is prohibited by the constitution of this state, authorize the investment of such funds in the stocks or bonds of private corporations.
(7) As a deposit in the savings department of any bank which is a member of the Federal Deposit Insurance Corporation. In the event the fiduciary is such a bank, such deposit may be made in its own savings department, and in such event, it shall only be liable for interest thereon at the same rates, and subject to the same regulations as other savings deposits therein; provided, that any such deposit in the savings account shall not exceed the amount authorized to be insured by the Federal Deposit Insurance Corporation.
(8) Bonds, the issuance of which has been authorized by the director of the Alabama Securities Commission and which are secured directly or collaterally by mortgages or trust deeds which are first liens on improved real estate in this or any other state of the United States of America; provided, that the value by appraisal of the realty must be not less than one and one-half times the amount of any mortgage secured by the realty; except:
a. Mortgages guaranteed or insured in whole or in part by the Federal Housing Administrator, or
b. Mortgages guaranteed or insured in whole or in part by the Administrator of Veterans’ Affairs of the United States. Nothing in this subdivision shall prohibit the bonds from being secured by more than one first lien. In the event that any, or all of the first liens securing the bond issue are satisfied, other securities authorized by law for the investment of trust funds may be substituted therefor.
(9) Obligations of the African Development Bank.
(b) The power herein given is in addition to and not in derogation of any power of investment given under existing law, but to the extent that any statute now in force is in conflict herewith, the same is hereby repealed. Effective January 1, 2007, the classes of investments that may be made by trustees shall be governed by Chapter 3B instead of this section.
(Acts 1935, No. 33, p. 65; Acts 1936-37, Ex. Sess., No. 86, p. 99; Code 1940, T. 58, §47; Acts 1951, No. 763, p. 1330; Acts 1987, No. 87-593, p. 1031; Act 2006-216, p. 314, §3.)
In addition to the investments authorized by Section 19-3-120, by any other provision of law for the investment of funds held by a trustee, executor, administrator, guardian, conservator or other fiduciary, or by the will, trust agreement or other document which is the source of authority, such fiduciary, other than a trustee governed by Chapter 3B, may invest in and hold (1) interests, however evidenced, in any common trust fund or other collective investment fund maintained by any national or state chartered bank, trust company or savings and loan association having trust powers, or (2) securities of or other interests in any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, as from time to time amended, so long as the portfolio of such common trust fund, collective investment fund or investment company or investment trust consists of investments authorized with respect to such fiduciary by Section 19-3-120, by any other provision of law, or by the will, trust agreement or other document which is the source of authority. The fact that such fiduciary or any affiliate thereof is providing services to the investment company or investment trust as an investment advisor, sponsor, distributor, custodian, transfer agent, registrar, or otherwise, and is receiving reasonable remuneration for such services, shall not preclude such fiduciary from investing in the securities of such investment company or investment trust; provided, however, that with respect to any fiduciary account to which fees are charged for such services, the fiduciary shall disclose (by prospectus, account statement or otherwise) to the current income beneficiaries of such account or to any third party directing investments the basis (expressed as a percentage of asset value or otherwise) upon which the fee is calculated. This section shall not, insofar as such authorization may be prohibited by the constitution of this state, authorize the investment of trust funds in the stock of any private corporations. Effective January 1, 2007, investments by trustees in common trusts, collective investment funds, and interests of investment companies and trusts, shall be governed by Chapter 3B instead of this section.
(Acts 1984, No. 84-279, p. 466, §1; Acts 1990, No. 90-651, p. 1247, §1; Act 2006-216, p. 314, §3.)
(a) When investing, reinvesting, purchasing, acquiring, exchanging, selling and managing property for the benefit of another, a trustee, executor, administrator, guardian, conservator or other fiduciary, other than a trustee governed by Chapter 3B, shall act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use to attain the purposes of the account. In making investment decisions, a fiduciary shall consider the role that the investment plays within the account’s overall portfolio of assets and may consider the general economic conditions, the anticipated tax consequences of the investment, the anticipated duration of the account and the needs of the beneficiaries of the account.
(b) The propriety of an investment decision is to be determined by what a fiduciary knew or should have known at the time of the decision about the inherent nature and expected performance of the investment, the attributes of the account portfolio, the general economy, and the needs and objectives of the beneficiaries of the account as they existed at the time of the investment decision.
(c) Any fiduciary acting under a governing instrument shall not be liable to anyone whose interests arise from such instrument for the fiduciary’s good faith reliance on the express provisions of such instrument. The standards set forth in this section may be expanded, restricted, or eliminated by express provisions in a governing instrument.
(d) In the absence of an express provision to the contrary in a governing instrument, a fiduciary may without liability continue to hold property received into an account at its inception or subsequently added to it or acquired pursuant to proper authority if and as long as the fiduciary, in the exercise of good faith and of reasonable prudence, may consider that retention to be in the best interest of the account or in furtherance of the goals of the governing instrument. Such property may include, among other things, stock in the fiduciary if a corporation, and stock in any corporation controlling, controlled by or under common control with the fiduciary.
(e) Nothing in this section shall abrogate or restrict the power of the appropriate court in a proper case to direct or permit a fiduciary to deviate from the terms of a governing instrument regarding the acquisition, investment, reinvestment, exchange, retention, sale or management of property.
(f) The provisions of this section shall apply to all fiduciary relations, other than trustee relations covered by Chapter 3B, now existing or hereafter created, but only to the fiduciary actions or inactions occurring after the effective date hereof. Effective January 1, 2007, the standards for fiduciary investment and management for trustees shall be governed by Chapter 3B instead of this section.
(Acts 1989, No. 89-813, p. 1625; Act 2006-216, p. 314, §3.)
A trustee, executor, administrator, guardian or one acting in any other fiduciary capacity may, with the exercise of reasonable business prudence, in addition to any other investments now permitted by law, invest funds in interest-bearing warrants of any county board of education or city board of education in the State of Alabama, which warrants are secured by a pledge of a special county ad valorem tax for schools or a special district ad valorem tax for schools.
(Acts 1939, Ex. Sess., No. 16, p. 17; Code 1940, T. 58, §48; Acts 1949, No. 133, p. 163.)
It shall be lawful for trustees, executors, administrators, guardians and other fiduciaries, the State of Alabama and any of its departments, boards, institutions and agencies, and the municipalities, counties and other political subdivisions of the state to invest their funds and the moneys in their custody or possession eligible for investment in notes or bonds secured by mortgage or trust deed insured by the Secretary of Housing and Urban Development or his predecessor officer pursuant to the laws and regulations governing the insurance of such as now constituted or as hereafter amended and in debentures issued by such official.
(Acts 1939, No. 153, p. 227; Code 1940, T. 58, §49.)
It shall be lawful for trustees, executors, administrators, guardians and other fiduciaries to invest their funds and the moneys in their custody or possession eligible for investment in mortgages which have been accepted for insurance by the secretary of housing and urban development or his predecessor officer pursuant to Title 2 of the National Housing Act.
No law of this state requiring security upon which loans or investments may be made or prescribing the nature, amount or form of such security or prescribing or limiting the period for which loans or investments may be made shall be deemed to apply to loans or investments made pursuant to the foregoing paragraph.
(Acts 1935, No. 53, p. 124; Code 1940, T. 58, §50.)
It shall be lawful for trustees, executors, administrators, guardians and other fiduciaries, upon the termination of their fiduciary relationships, whether by revocation or otherwise, to make distribution of assets consisting of mortgages insured by the Secretary of Housing and Urban Development or his predecessor officer in cash rather than in kind, and in order to carry out the foregoing provision, such trustees, executors, administrators, guardians, and other fiduciaries, upon the termination of such fiduciary relationships, are hereby granted full power and authority to sell, transfer and deliver all such mortgages to other mortgagees approved by the Secretary of Housing and Urban Development or his predecessor officer, and the delivery of the proceeds of a bona fide sale of any such mortgage to the beneficial owner shall constitute full acquittance to such fiduciary as to such mortgage.
(Acts 1939, No. 152, p. 226; Code 1940, T. 58, §51.)
In addition to any other investment now permitted by law, a guardian or trustee may invest the funds of his ward or of the beneficiary of the trust in life, endowment or annuity contracts of legal reserve life insurance companies duly qualified and authorized to write such business in the State of Alabama; provided, however, that the annual premium or premiums on such contracts purchased by such guardian or trustee shall not exceed 25 percent of the income of the ward or the beneficiary for any calendar year preceding the date of such purchase. The contract must contain the following options after it has been in force for three years or less: a cash surrender value option, a paid-up insurance or endowment option, and an extended insurance or endowment option. Such contract may be issued on the life or lives of the ward or wards, or beneficiary or beneficiaries of the trust or upon the life or lives of persons in whose life or lives such ward or beneficiary of the trust has an insurable interest. The proceeds or avails of such contract shall be the sole property of the person or persons whose funds are invested therein. The contract or policy form may provide reasonable forfeiture for nonpayment of premiums and must be a form of contract which has been approved by the Commissioner of Insurance of the State of Alabama. Whether such contract so specifically provides or not, the guardian or trustee shall have the right without order of court to exercise for the use of the ward or beneficiary of the trust, any option contained in such contract; except, that the guardian or trustee shall not have the right to borrow on security of said policy or its proceeds unless authorized to do so by order of the court having jurisdiction of the guardianship or trust.
The power given in this section is in addition to and not in derogation of any power of investment given a guardian or trustee under existing law, but to the extent that any statute now in force is in conflict herewith, the same shall be and is hereby repealed.
(Acts 1943, No. 430, p. 399, §1.)
Unless otherwise directed by the court having jurisdiction thereof, or by the will, trust agreement or other document which is the source of authority, any trustee, executor, administrator, guardian or one acting in any other fiduciary capacity, may, with the exercise of reasonable business prudence, in addition to any other investments now permitted by law, invest funds in the tax anticipation bonds, warrants, certificates of indebtedness or other security heretofore or hereafter issued by any county pursuant to Constitutional Amendment No. 76.
(Acts 1950, 5th Ex. Sess., No. 46, p. 91, §1.)
Bonds issued by the Tennessee Valley Authority under the provisions of the Tennessee Valley Authority Act of 1933, as amended or as the same may be hereafter amended, shall be legal investments for fiduciaries investing trust funds and for investments by savings banks and insurance companies organized under the laws of the state, and shall be eligible to be used as security for the deposit of funds of the state and its instrumentalities.
(Acts 1961, Ex. Sess., No. 119, p. 2043, §1.)
All debts or extensions of credit incurred pursuant to any provision of the act of Congress known as the National Housing Act, as the same now exists or may hereafter be amended or supplemented, and all debts or extensions of credit incurred pursuant to any act of Congress relating to veterans’ benefits, as the same now exists or may hereafter be amended or supplemented, shall be legal investments for banks, insurance companies, savings and loan associations, trustees, fiduciaries of all types and for any other person, firm or corporation, and shall be free from any restrictions of this state as to the nature, forms, or amounts of any loans or investments.
The provisions of this section supersede the provisions of any act defining legal investments in any way contrary to the provisions hereof.
(Acts 1969, No. 2, p. 296, §1.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3742; Code 1886, §3555; Code 1896, §4174; Code 1907, §6076; Code 1923, §10413; Code 1940, T. 58, §52.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3743; Code 1886, §3556; Code 1896, §4175; Code 1907, §6077; Code 1923, §10414; Code 1940, T. 58, §53.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3743; Code 1886, §3557; Code 1896, §4176; Code 1907, §6078; Code 1923, §10415; Code 1940, T. 58, §54.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3743; Code 1886, §3559; Code 1896, §4178; Code 1907, §6080; Code 1923, §10417; Code 1940, T. 58, §55.)
As used in this article, the term “fiduciary” means the executor of a will, the administrator of a decedent’s estate or the trustee of an express inter vivos or testamentary trust, and includes both individual and corporate fiduciaries.
(Acts 1961, No. 1011, p. 1588, §I.)
If permitted by the trust instrument or will under which he serves or by order of a court having jurisdiction of the estate or trust, a fiduciary may enter into a partnership agreement or arrangement with others or accept the assignment of or otherwise acquire, hold and dispose of an interest in a partnership, and in so doing may become either a general or a limited partner. In any such case, as to creditors of or claimants against such partnership and as to the other members of such partnership, the liability, if any, of such fiduciary for the debts and other liabilities of the partnership, whether ex contractu or ex delicto or otherwise, shall be limited to the assets of the trust or estate, or so much thereof as may be necessary to discharge such debts and liabilities, but no personal liability shall attach to the fiduciary or to the beneficial owners of the assets of the trust or estate.
(Acts 1961, No. 1011, p. 1588, §II.)
Nothing in this article shall be construed to prohibit a fiduciary from further limiting his liability, or the liability of the trust or estate which he represents, in any manner otherwise permitted by law.
(Acts 1961, No. 1011, p. 1588, §III.)
When any deceased tenant in common, joint tenant or coparcener of real estate shall have devised any freehold interest in such estate to any person, with a contingent interest by way of remainder, substitution or executory devise to any other person, born or unborn, the circuit court may, on the complaint of any person interested, order partition of such estate to be made between the devisee or devisees, the surviving cotenant or cotenants and the person having such contingent interest; and the judgment shall bind the parties and the person having such contingent interest, his heirs and assigns.
(Code 1923, §10437; Code 1940, T. 58, §56.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10438; Code 1940, T. 58, §57.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10439; Code 1940, T. 58, §58.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10440; Code 1940, T. 58, §59.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3744; Code 1886, §3560; Code 1896, §4179; Code 1907, §6081; Code 1923, §10418; Code 1940, T. 58, §60.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3745; Code 1886, §3561; Code 1896, §4180; Code 1907, §6082; Code 1923, §10419; Code 1940, T. 58, §61.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1876, §3746; Code 1886, §3563; Code 1896, §4182; Code 1907, §6084; Code 1923, §10421; Code 1940, T. 58, §62.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10432; Code 1940, T. 55, §63.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1852, §2999; Code 1867, §3455; Code 1876, §3735; Code 1886, §3577; Code 1896, §4197; Code 1907, §6102; Code 1923, §10450; Acts 1939, No. 344, p. 478; Code 1940, T. 58, §65; Acts 1953, No. 875, p. 1180.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1852, §3000; Code 1867, §3456; Code 1876, §3736; Code 1886, §3578; Code 1896, §4198; Code 1907, §6103; Code 1923, §10451; Acts 1939, No. 345, p. 479; Code 1940, T. 58, §66.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1867, §3457; Code 1876, §3737; Code 1886, §3580; Code 1896, §4200; Code 1907, §6105; Code 1923, §10453; Code 1940, T. 58, §67.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1867, §3458; Code 1876, §3738; Code 1886, §3581; Code 1896, §4201; Code 1907, §6106; Code 1923, §10454; Code 1940, T. 58, §68.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1867, §3459; Code 1876, §3739; Code 1886, §3582; Code 1896, §4202; Code 1907, §6107; Code 1923, §10455; Code 1940, T. 58, §69.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1867, §3460; Code 1876, §3740; Code 1886, §3583; Code 1896, §4203; Code 1907, §6108; Code 1923, §10456; Code 1940, T. 58, §70.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1867, §3461; Code 1876, §3741; Code 1886, §3584; Code 1896, §4204; Code 1907, §6109; Code 1923, §10457; Code 1940, T. 58, §71.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10434; Code 1940, T. 58, §72.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10436; Code 1940, T. 58, §74.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1923, §10435; Code 1940, T. 58, §73.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Code 1896, §4196; Code 1907, §6101; Code 1923, §10449; Code 1940, T. 58, §64.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §75.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §76.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §77.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §78.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, § 79.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §80.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §81.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §82.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §83.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §84.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §85.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §86.)
[Repealed]
Repealed by Act 2000-675, § 2, and Act 2001-344, § 1, effective January 1, 2001.
(Acts 1939, No. 572, p. 902; Code 1940, T. 58, §87.)
Notwithstanding any provision to the contrary in the governing instrument or under any other law of this state and except as otherwise provided by judgment of a court or by a provision of the governing instrument, which in either case is entered or made after October 1, 1971, and expressly limits the applicability of this article, the trustee of a trust, whenever created, which is or is treated as a private foundation as defined in Section 509 of the Internal Revenue Code of 1954, a charitable trust as defined in Section 4947(a)(1) of the Internal Revenue Code of 1954, or a split-interest trust as defined in Section 4947(a)(2) of the Internal Revenue Code of 1954, during the period it is or is treated as a private foundation, charitable trust or split-interest trust as so defined:
(1) Shall not engage in any act of self-dealing as defined in Section 4941(d) thereof;
(2) Shall distribute for each taxable year not less than such amounts at such time and in such manner as not to subject the trust to the tax on undistributed income imposed by Section 4942 thereof;
(3) Shall not, if Section 4943 thereof is applicable, retain any excess business holdings as defined in subsection (c) of that section beyond the period permitted by that section;
(4) Shall not make any investment in such manner as to subject the trust to tax under Section 4944 thereof; and
(5) Shall not make any taxable expenditure as defined in Section 4945(d) thereof.
(Acts 1971, No. 2276, p. 3666, §1.)
(a) The trustee of a trust, whenever created, which is or is treated as a private foundation as defined in Section 509 of the Internal Revenue Code of 1954, a charitable trust as defined in Section 4947(a)(1) of the Internal Revenue Code of 1954, or a split-interest trust as defined in Section 4947(a)(2) of the Internal Revenue Code of 1954, may amend the terms of the governing instrument to the extent necessary to bring the trust into conformity with the requirements for:
(1) Termination of private foundation status in the manner described in Section 507(b) thereof;
(2) Exemption of the trust from the taxes imposed by Sections 4941 to 4945, inclusive, thereof; or
(3) Exclusion of the trust from private foundation status under Section 509(a)(3) thereof, and for this latter purpose may release, extinguish or renounce any power contained in the governing instrument, may reduce or limit the charitable organizations or classes of charitable organizations in whose favor a power to select may be exercised and may appoint new or additional trustees.
(b) No amendment of the governing instrument shall be required in order to make effective the requirements of Section 19-3-300.
(c) If the trust is for the benefit of one or more named charitable organizations, the trustee shall first obtain the written consent of those organizations before making any amendment under subdivision (3) of subsection (a) of this section.
(Acts 1971, No. 2276, p. 3666, §2.)
Nothing in this article shall impair the rights and powers of the courts or the Attorney General of this state with respect to any trust. The provisions of Sections 19-3-300 and 19-3-301 shall not apply to any trust to the extent that a court of competent jurisdiction shall determine that such application would be contrary to the terms of the instrument governing such trust and that the same may not properly be changed to conform to such sections.
(Acts 1971, No. 2276, p. 3666, §3.)
All references to sections of the Internal Revenue Code of 1954 shall include future amendments to such sections and corresponding provisions of future internal revenue laws.
(Acts 1971, No. 2276, p. 3666, §4.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §1.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §2.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §3.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §4.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §5.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §6.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §7.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §8.)
[Repealed]
Repealed by Act 2006-216, p. 314, §5, effective January 1, 2007.
(Acts 1995, No. 95-310, p. 571, §9; Act 2004-296, p. 418, §1.)
This chapter shall be known and may be cited as the “Alabama Principal and Income Act.”
(Act 2000-675, p. 1343, §1.)
As used in this chapter, the following terms are defined as follows:
(1) ACCOUNTING PERIOD. A calendar year unless another 12-month period is selected by a fiduciary. The term includes a portion of a calendar year or other 12-month period that begins when an income interest begins or ends when an income interest ends.
(2) BENEFICIARY. Includes, in the case of a decedent’s estate, an heir, legatee, and devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary.
(3) FIDUCIARY. A personal representative or a trustee. The term includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function.
(4) INCOME. Money or property that a fiduciary receives as current return from a principal asset. The term also includes a portion of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in Article 4.
(5) INCOME BENEFICIARY. A person to whom net income of a trust is or may be payable.
(6) INCOME INTEREST. The right of an income beneficiary to receive all or part of net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee’s discretion.
(7) INVENTORY VALUE. a. The cost of an asset that is purchased by the fiduciary, or b. the market value of an asset at the time the asset becomes subject to the trust; except that in the case of a testamentary trust, the fiduciary may use any value finally determined for the purposes of an estate or inheritance tax.
(8) MANDATORY INCOME INTEREST. The right of an income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute.
(9) NET INCOME. The total receipts allocated to income during an accounting period minus the disbursements made from income during the period, plus or minus transfers under this chapter to or from income during the period.
(10) PERSON. An individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity.
(11) PRESUMPTIVE REMAINDER BENEFICIARY. Those persons who would be entitled to the principal of a trust if the income interest were immediately terminated, and if a trust contains a power of appointment, the holder of such power of appointment shall also be a presumptive remainder beneficiary.
(12) PRINCIPAL. Property transferred to or acquired by a fiduciary and held in trust for distribution to a remainder beneficiary when an income interest ends.
(13) REMAINDER BENEFICIARY. A person entitled to receive principal when an income interest ends.
(14) TERMS OF A TRUST. The manifestation of the intent of a settlor or decedent with respect to the trust, expressed in a manner that admits of its proof in a judicial proceeding, whether by written or spoken words or by conduct.
(15) TRUSTEE. An original, additional, or successor trustee, whether or not appointed or confirmed by a court.
(16) UNITRUST AMOUNT. An amount determined annually equal to a percentage (specified by the provisions of the governing instrument, the written notice referenced in Section 19-3A-106(a), the written instrument referenced in Section 19-3A-106(b), or the order of the court referenced in Section 19-3A-106(c), whichever is applicable) of the net fair market value of the trust assets, whether determined annually or averaged over a designated multiple year smoothing period.
(Act 2000-675, p. 1343, §1; Act 2013-336, p. 1179, §1.)
(a) In allocating receipts and disbursements to or between principal and income, and with respect to any matter within the scope of Article 2 and Article 3, a fiduciary:
(1) Shall administer a trust or decedent’s estate in accordance with the terms of the trust or the will, even if there is a different provision in this chapter;
(2) May administer a trust or decedent’s estate by the exercise of a discretionary power of administration given to the fiduciary by the terms of the trust or the will, even if the exercise of the power produces a result different from a result required or permitted by this chapter;
(3) Subject to the provisions of Section 19-3A-104, shall administer a trust or decedent’s estate in accordance with this chapter if the terms of the trust or the will do not contain a different provision or do not give the fiduciary a discretionary power of administration; and
(4) Shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this chapter do not provide a rule for allocating the receipt or disbursement to or between principal and income.
(b) In exercising the power to adjust under Section 19-3A-104(a) or the power to convert to a unitrust under Section 19-3A-106, if applicable, or a discretionary power of administration regarding a matter within the scope of this chapter, whether granted by the terms of a trust, a will, or this chapter, a fiduciary shall administer a trust or decedent’s estate impartially, based on what is fair and reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the will clearly manifest an intention that the fiduciary shall or may favor one or more of the beneficiaries. The exercise of discretion in accordance with this chapter is presumed to be fair and reasonable to all of the beneficiaries.
(Act 2000-675, p. 1343, §1; Act 2013-336, p. 1179, §1.)
AMENDED BY ACT 2026-502, EFFECTIVE OCTOBER 1, 2026. SEE ACT FOR REVISED LANGUAGE.
(a) If the terms of the trust expressly provide by specific reference to this section, then a trustee may have the power to adjust between principal and income to the extent the trustee considers necessary if (1) the trustee invests and manages trust assets as a prudent investor; (2) the terms of the trust describe the amount that may or must be distributed to a beneficiary by referring to the trust’s income, and (3) the trustee determines, after applying the rules in Section 19-3A-103(a), that the trustee is unable to comply with Section 19-3A-103(b).
(b) In deciding whether and to what extent to exercise the power conferred by subsection (a), a trustee shall consider all factors relevant to the trust and its beneficiaries, including, but not limited to:
(1) The nature, purpose, and expected duration of the trust;
(2) The intent of the settlor;
(3) The identity and circumstances of the beneficiaries;
(4) The needs for liquidity for the trust;
(5) The regularity of income to the trust;
(6) The need for preservation and appreciation of capital;
(7) The nature of the assets held in the trust and the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property;
(8) The extent to which an asset is used by a beneficiary;
(9) Whether an asset was purchased by the trustee or received from the settlor;
(10) The net amount allocated to income under the other sections of this chapter and the increase or decrease in the value of the principal assets, which the trustee may estimate as to assets for which market values are not readily available;
(11) Whether and to what extent the terms of the trust a. give the trustee the power to invade principal or accumulate income, or b. prohibit the trustee from invading principal or accumulating income;
(12) The extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;
(13) The actual and anticipated effect of economic conditions, inflation, and deflation upon principal and income; and
(14) The anticipated income and transfer tax consequences of an adjustment.
(c) Notwithstanding the power conferred by subsection (a), a trustee may not make an adjustment:
(1) That diminishes the income interest in a trust that requires all of the income to be paid at least annually to a spouse and for which an estate tax or gift tax marital deduction would be allowed, in whole or in part, if the trustee did not have the power to make the adjustment;
(2) That reduces the actuarial value of the income interest in a trust to which a person transfers property with the intent to qualify the transfer for a gift tax exclusion;
(3) That changes the amount payable to a beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets;
(4) That changes the amount that is permanently set aside for charitable purposes under a will or the terms of a trust, unless both income and principal are so set aside;
(5) If possessing or exercising the power to make an adjustment causes an individual to be treated as the owner of all or part of the trust for income tax purposes, and the individual would not be treated as the owner if the trustee did not possess the power to make an adjustment;
(6) If possessing or exercising the power to make an adjustment causes all or part of the trust assets to be included for estate tax purposes in the estate of an individual who has the power to remove a trustee or appoint a trustee, or both, and the assets would not be included in the estate of the individual if the trustee did not possess the power to make an adjustment;
(7) If the trustee is not a beneficiary, but the adjustment would benefit the trustee directly or indirectly;
(8) If the trustee is a beneficiary of the trust; or
(9) If the trust is an express unitrust under Section 19-3A-105 (relating to express unitrusts) or is a unitrust by reason of a conversion under Section 19-3A-106 (relating to power to convert to unitrust).
(d) If subsection (c)(5), subsection (c)(6), subsection (c)(7), or subsection (c)(8) applies to a trustee and there is more than one trustee, then the co-trustee to whom the provision does not apply may make the adjustment, unless the exercise of the power by the remaining trustee or trustees is not permitted by the terms of the trust.
(e) A trustee may release the entire power conferred by subsection (a) or may release only the power to adjust from income to principal or the power to adjust from principal to income if the trustee is uncertain about whether possessing or exercising the power will cause a result described in subsection (c)(1) through subsection (c)(7) or if the trustee determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in subsection (c). The release may be permanent or for a specified period, including a period measured by the life of an individual.
(f) The trustee or any beneficiary of a trust covered by this chapter (or a trust to be created from a decedent’s estate that is covered by this chapter) (1) may seek approval from a court of competent jurisdiction to be governed prospectively by this section, or (2) may at any time affirmatively elect to be governed prospectively by this section by obtaining the written consent of all of the current income beneficiaries and the presumptive remainder beneficiaries of the trust, and such written consent shall conclusively bind all persons who may have any interest in the affected trust, including all contingent remainder beneficiaries and potential appointees of the trust.
(Act 2000-675, p. 1343, §1; Act 2013-336, p. 1179, §1.)
Except to the extent otherwise provided in the governing instrument, the following provisions shall apply to a trust which by its governing instrument requires distribution of a unitrust amount (whether payable in a single sum or in installments), such trust to be referred to as an “express unitrust”:
(1) The income and net income of an express unitrust is the unitrust amount, but only if the unitrust amount is not less than three percent and not more than five percent of the net fair market value of the trust assets. If the unitrust amount is more than five percent of the net fair market value of the trust assets, the income and net income shall be five percent of the net fair market value of the trust assets, and the excess over five percent shall be considered to be principal of the trust.
(2) Expenses which would be deducted from income if the trust were not an express unitrust shall not be deducted from the unitrust amount.
(3) The trustee, from time to time, may determine the following:
a. The frequency of payment of the unitrust amount during the year;
b. Any adjustments to be made to the unitrust amount due to other payments from or contributions to the trust;
c. The valuation dates to use;
d. How nonliquid or hard to value assets shall be valued, how frequently to value them and whether to estimate their value;
e. Whether to omit from the calculations the value of trust property occupied, used, or possessed by a beneficiary; and
f. Any other matters necessary for the proper functioning of the unitrust that are not inconsistent with the governing instrument.
(Act 2013-336, p. 1179, §2.)
(a) Unless expressly prohibited by the governing instrument, a trustee may convert a trust into a unitrust as described in this section if all of the following apply:
(1) The trustee has concluded that the conversion will enable the trustee to better carry out the intent of the settlor or testator and the purposes of the trust.
(2) The trustee gives written notice of the trustee’s intention to convert the trust into a unitrust, including the trustee’s initial decisions as set forth below, to all the qualified beneficiaries. The written notice shall include the following:
a. An explanation of how the unitrust will operate;
b. The effective date of the conversion to a unitrust;
c. The unitrust percentage to be used;
d. The provisions for prorating a unitrust distribution for a short year in which a beneficiary’s right to payments commences or ceases;
e. Whether the net fair market value of the trust assets will be determined annually or averaged over a designated multiple year smoothing period; and
f. Such other matters as the trustee deems appropriate for the proper functioning of the unitrust, which may include such matters as:
Whether to omit from the calculations trust property occupied, used, or possessed by a beneficiary;
How nonliquid or hard to value assets shall be valued, how frequently to value them, and whether to estimate their value; or
Whether the trust assets will be valued annually or more frequently.
(3) There is at least one sui juris income beneficiary and at least one sui juris presumptive remainder beneficiary.
(4) No beneficiary, or a person who may represent and bind a beneficiary who is not sui juris, objects to the conversion to a unitrust in a writing delivered to the trustee within 60 days of the mailing of the notice under subdivision (2).
(5) If the trustee requests, the trustee receives consents from such beneficiaries as determined by the trustee.
(b)(1) Unless expressly prohibited by the governing instrument, the qualified beneficiaries of a trust may convert the trust into a unitrust as described in this section by a written instrument delivered to the trustee that sets forth all of the following:
a. A representation by the qualified beneficiaries that they have concluded that the conversion will enable the trustee to better carry out the intent of the settlor or testator and the purposes of the trust;
b. The effective date of the conversion to a unitrust, which shall not be earlier than 60 days after the date the written instrument is delivered to the trustee, unless the trustee consents to an earlier date, provided that such earlier date is not earlier than the date the written instrument is delivered to the trustee;
c. The unitrust percentage to be used;
d. The provisions for prorating a unitrust distribution for a short year in which a beneficiary’s right to payments commences or ceases;
e. Whether the net fair market value of the trust assets will be determined annually or averaged over a designated multiple year smoothing period; and
f. Such other matters as the beneficiaries deem appropriate for the proper functioning of the unitrust, which may include such matters as:
Whether to omit from the calculations trust property occupied, used, or possessed by a beneficiary,
How nonliquid or hard to value assets shall be valued, how frequently to value them, and whether to estimate their value, or
Whether the trust’s assets will be valued annually or more frequently.
(2) A trust may not convert into a unitrust unless the written instrument is executed by all qualified beneficiaries and the trustee(s), whether directly or by representation.
(3) Notwithstanding the foregoing, a trustee, prior to the effective date of the conversion, may seek court confirmation that the foregoing representations and requirements have been satisfied, in which case the conversion will not be effective before the conversion is confirmed by the court.
(c)(1) The trustee or a qualified beneficiary may petition the court to review the conversion to a unitrust, even if any of the following apply:
a. A beneficiary timely objects to the conversion to a unitrust;
b. There are no sui juris income beneficiaries or sui juris presumptive remainder beneficiaries; or
c. The trustee does not consent.
(2) Unless expressly prohibited by the governing instrument, the court shall order the conversion if the court concludes:
a. that the conversion will enable the trustee to better carry out the intent of the settlor or testator and the purposes of the trust; or
b. all qualified beneficiaries have consented to the conversion.
(3) The court shall make the following decisions which shall be set forth in the order of the court approving the conversion:
a. The effective date of the conversion to a unitrust;
b. The unitrust percentage to be used;
c. The provisions for prorating a unitrust distribution for a short year in which a beneficiary’s right to payments commences or ceases;
d. Whether the net fair market value of the trust assets will be determined annually or averaged over a designated multiple year smoothing period; and
e. Such other matters as the court deems appropriate for the proper functioning of the unitrust, which may include such matters as:
Whether to omit from the calculations trust property occupied, used, or possessed by a beneficiary;
How nonliquid or hard to value assets shall be valued, how frequently to value them, and whether to estimate their value; or
Whether the trust assets will be valued annually or more frequently.
(4) Court costs shall be charged to the trust or as otherwise determined by the court.
(d) The unitrust percentage with respect to a converted unitrust to be used in determining the unitrust amount shall be not less than three percent nor more than five percent, unless otherwise ordered by the court.
(e) During the period of time that the trust is a converted unitrust, all of the following apply:
(1) Notwithstanding any provision of this chapter to the contrary, the term “income” or “net income” in the governing instrument shall mean the unitrust amount.
(2) The frequency of distributions shall be determined in accordance with the governing instrument.
(3) If the written notice referenced in subsection (a), the written instrument referenced in subsection (b), or the order of the court referenced in subsection (c) provides that the net fair market value of the trust assets will be averaged over a designated smoothing period, the net fair market value of the trust assets for purposes of determining the unitrust amount shall be the average of the net fair market value of the trust assets over the designated smoothing period.
(4) Any distribution in excess of the unitrust amount shall be deemed to have been paid out of the principal of the trust.
(5) Expenses which would be deducted from income if the trust were not a unitrust may not be deducted from the unitrust amount.
(f) A conversion to a unitrust does not affect a provision in the governing instrument directing or authorizing the trustee to distribute principal or authorizing a beneficiary to withdraw a portion or all of the principal.
(g) Except to the extent otherwise provided in the governing instrument, the written notice referenced in subsection (a), the written agreement referenced in subsection (b), or the order of the court referenced in subsection (c), the trustee, from time to time, may determine the following:
(1) The frequency of payment of the unitrust amount during the year;
(2) Any adjustments to be made to the unitrust amount due to other payments from or contributions to the trust;
(3) The valuation dates to use;
(4) How nonliquid or hard to value assets shall be valued, how frequently to value them, and whether to estimate their value;
(5) Whether to omit from the calculations the value of trust property occupied, used, or possessed by a beneficiary; and
(6) Any other matters necessary for the proper functioning of the unitrust that are not inconsistent with the written notice referenced in subsection (a), the written agreement referenced in subsection (b), or the order of the court referenced in subsection (c).
(h) Modification of the unitrust provisions of a converted unitrust may be implemented by the trustee following the same procedures as in subsection (a) for converting a trust into a unitrust with the exception that the written notice shall state the modifications, by the qualified beneficiaries following the same procedures as in subsection (b) for converting a trust into a unitrust with the exception that the written instrument shall state the modifications, or by the court pursuant to the petition of a beneficiary or the trustee. Modifications shall be set forth in the notice, written instrument, or court order, as the case may be, that makes the modification. Modification may include any of the following:
(1) Changes or additions to any of the matters set forth in, or that could have been set forth in, the original notice, written instrument or court order, as the case may be, or any subsequent modifications thereto;
(2) Provisions for a distribution of net income, as would be determined if the trust were not a unitrust, in excess of the unitrust distribution if such distribution is necessary to preserve a tax benefit; or
(3) Reversions from a unitrust, in which case the trust shall be administered in accordance with its provisions prior to its conversion to a unitrust. Upon reconversion, the power to adjust under Section 19-3A-104, if any, shall be revived.
(i) A trust may not be converted into a unitrust in any of the following circumstances:
(1) If payment of the unitrust amount would change the aggregate annual amount payable to a beneficiary as a fixed annuity;
(2) If the trust is an “Institutional Fund” governed by the provisions of Section 19-3C-1, et seq.;
(3) If the conversion would reduce any amount permanently set aside for charitable purposes under the governing instrument which is not expressed under the governing instrument as “income” or “net income” or determined pursuant to the terms of the governing instrument by reference to “income” or “net income”;
(4) If the conversion would reduce the value of any interest for which a federal estate or gift tax charitable deduction has been taken, or would cause the reduction of an amount being disbursed or to be disbursed to a charity for which an income, estate, or gift tax deduction has been taken;
(5) If possessing or exercising the power to convert would cause an individual to be treated as the owner of all or part of the trust for federal income tax purposes, and the individual would not be treated as the owner if the trustee did not possess the power to convert;
(6) If possessing or exercising the power to convert would cause all or part of the trust assets to be subject to federal estate or gift tax with respect to an individual, and the assets would not be subject to federal estate or gift tax with respect to the individual if the trustee did not possess the power to convert; or
(7) If the conversion would result in the disallowance of a federal estate or gift tax marital or charitable deduction which would be allowed if the trustee did not have the power to convert.
(j)(1) If subsection (i)(5) or subsection (i)(6) applies because a trustee is a beneficiary and there is more than one trustee, a co-trustee to whom the provision does not apply may convert the trust unless the exercise of the power by the remaining trustee or trustees is prohibited by the governing instrument.
(2) If subsection (i)(5) or subsection (i)(6) applies to all the trustees, the trustees may petition the court to direct a conversion or the beneficiaries may convert under subsection (b).
(k) (1) A trustee may release the power conferred by subsection (a) to convert to a unitrust if any of the following apply:
a. The trustee is uncertain about whether possessing or exercising the power will cause a result described in subsection (i)(5), subsection (i)(6), or subsection (i)(7).
b. The trustee determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in subsection (i).
(2) The release may be permanent or for a specified period, including a period measured by the life of an individual.
(Act 2013-336, p. 1179, §2.)
After the decedent’s death, in the case of a decedent’s estate, or after an income interest in a trust ends, the following rules apply:
(a) If property is specifically given to a beneficiary by will or by trust, then the fiduciary of the decedent’s estate or of the terminating income interest shall distribute the net income and net principal receipts to the beneficiary who is to receive the specifically given property, subject to the following rules:
(1) The net income and principal receipts from the specifically given property are determined by including all of the amounts the fiduciary receives or pays with respect to the specifically given property, whether such amounts accrued or became due before, on, or after the date of the decedent’s death or the date upon which an income interest in a trust terminates, and by making a reasonable provision for amounts that the fiduciary believes the decedent’s estate or terminating income interest may become obligated to pay after the specifically given property is distributed.
(2) A fiduciary may not reduce principal or income receipts from the specifically given property on account of a payment described in Section 19-3A-501 or Section 19-3A-502 to the extent that the will, the terms of the trust, or applicable law requires the fiduciary to make the payment from property other than the specifically given property or to the extent that the fiduciary recovers or expects to recover the payment from a third party.
(b) If a beneficiary is to receive a pecuniary amount (1) outright, in the case of a decedent’s estate or (2) outright from a trust after an income interest ends, then a fiduciary shall distribute to the beneficiary the interest or other amount provided by the will, the terms of the trust, or applicable law. The interest shall be paid from net income as determined under subsection (c) or from principal, to the extent that net income is insufficient.
(c) A fiduciary shall determine the remaining net income of the decedent’s estate or terminating income interest as provided in Article 3 through Article 5 and by:
(1) Including in net income all income from property used to discharge liabilities;
(2) Paying from income or principal, in the fiduciary’s discretion, a. fees of attorneys, accountants, and fiduciaries; b. court costs and other expenses of administration; and c. interest on death taxes. The fiduciary may pay these expenses from income of property passing to a trust for which the fiduciary claims an estate tax marital or charitable deduction, but only to the extent that the payment of these expenses from income will not cause the reduction or loss of the deduction; and
(3) Paying from principal all other disbursements made or incurred in connection with the settlement of a decedent’s estate or the winding up of a terminating income interest, including debts, funeral expenses, disposition of remains, family allowances, and death taxes and related penalties that are apportioned to the decedent’s estate or terminating income interest by the will, the terms of the trust, or applicable law.
(d) A fiduciary shall distribute the remaining net income in the manner described in Section 19-3A-202 to all other beneficiaries, including a beneficiary who receives a pecuniary amount in trust, even if the beneficiary holds an unqualified power to withdraw assets from the trust or other presently exercisable general power of appointment over the trust.
(e) In calculating the interest pursuant to subsection (b), the fiduciary shall use the interest rate for 180-day U.S. Treasury bills as of (1) the thirtieth day following the date on which the time for filing verified claims against the decedent’s estate expires, or (2) the date upon which an income interest ends.
(Act 2000-675, p. 1343, §1.)
(a) Each beneficiary described in Section 19-3A-201(d) is entitled to receive a portion of the net income equal to the beneficiary’s fractional interest in undistributed principal assets, using inventory values as of the appropriate distribution dates.
(b) In determining a beneficiary’s share of net income, the following rules apply:
(1) The beneficiary’s fractional interest in the undistributed principal assets shall be calculated without regard to property specifically given to the beneficiary and property required to pay pecuniary amounts not in trust.
(2) The beneficiary’s fractional interest in the undistributed principal assets shall be calculated on the basis of the aggregate inventory value of those assets as of the distribution date without reducing the value by any unpaid principal obligation.
(c) If a fiduciary does not distribute all of the collected but undistributed net income to each person as of a distribution date, then the fiduciary shall maintain appropriate records showing the interest of each beneficiary in that net income.
(d) The distribution date for purposes of this section may be the date as of which the fiduciary calculates the value of the assets if that date is reasonably near the date on which assets are actually distributed.
(e) A fiduciary may apply the rules in this section, to the extent that the fiduciary considers it appropriate, to net gain or loss realized after the date of death or terminating event or earlier distribution date from the disposition of a principal asset if this section applies to the income from the asset.
(Act 2000-675, p. 1343, §1.)
(a) An income beneficiary is entitled to net income from the date on which the income interest begins. An income interest begins on the date specified in the terms of the trust or, if no date is specified, then on the date an asset becomes subject to a trust or a successive income interest.
(b) An asset becomes subject to a trust at the following times:
(1) In the case of an asset that is transferred to a trust during the transferor’s life, on the date such asset is transferred to the trust;
(2) In the case of an asset that becomes subject to a trust by reason of a will, on the date of a testator’s death, even if there is an intervening period of administration of the testator’s estate; or
(3) In the case of an asset that is transferred to a fiduciary by a third party because of the individual’s death, on the date of an individual’s death.
(c) An asset becomes subject to a successive income interest on the day after the preceding income interest ends, as determined under subsection (d), even if there is an intervening period of administration to wind up the preceding income interest.
(d) An income interest ends on the day before an income beneficiary dies or another terminating event occurs, or on the last day of a period during which there is no beneficiary to whom a fiduciary may distribute income.
(Act 2000-675, p. 1343, §1.)
(a) A fiduciary shall allocate an income receipt or disbursement, other than one to which Section 19-3A-201(a) applies, to principal in the following instances:
(1) In the case of a decedent’s estate, if its due date occurs before the date of a decedent’s death; or
(2) In the case of a trust or successive income interest, if its due date occurs before an income interest begins.
(b) A fiduciary shall allocate an income receipt or disbursement to income if its due date occurs on or after the date on which a decedent dies or an income interest begins and it is a periodic due date. An income receipt or disbursement shall be treated as accruing from day to day if its due date is not periodic or if it has no due date. The portion of the receipt or disbursement accruing before the date on which a decedent dies or an income interest begins shall be allocated to principal and the balance shall be allocated to income.
(c) An item of income or an obligation is due on the date the payer is required to make a payment. If a payment date is not stated, then there is no due date for the purposes of this chapter. Distributions to shareholders or other owners from an entity to which Section 19-3A-401 applies are deemed to be due on the date fixed by the entity for determining who is entitled to receive the distribution or, if no date is fixed, on the declaration date for the distribution. A due date is periodic (1) for receipts or disbursements that must be paid at regular intervals under a lease or an obligation to pay interest or (2) for distributions customarily made by an entity at regular intervals.
(Act 2000-675, p. 1343, §1.)
(a) For the purposes of this section, “undistributed income” means net income received before the date on which an income interest ends. The term does not include an item of income or expense that is due or accrued or net income that has been added or is required to be added to principal under the terms of the trust.
(b) Except as provided in subsection (c), on the date when a mandatory income interest ends, the fiduciary shall pay to a mandatory income beneficiary who survives that date, or the estate of a deceased mandatory income beneficiary whose death causes the interest to end, the mandatory income beneficiary’s share of the undistributed income that is not disposed of under the terms of the trust.
(c) If, immediately before the income interest ends, the mandatory income beneficiary has an unqualified power to revoke more than five percent of the trust, then the undistributed income from the portion of the trust that may be revoked shall be added to principal.
(d) When a fiduciary’s obligation to pay a fixed annuity or a fixed fraction of the value of the trust’s assets ends, the fiduciary shall prorate the final payment.
(Act 2000-675, p. 1343, §1.)
(a) For purposes of this section, “entity” means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or any other organization in which a fiduciary has an interest other than (1) a trust or decedent’s estate to which Section 19-3A-402 applies, (2) a business or activity to which Section 19-3A-403 applies, or (3) an asset-backed security to which Section 19-3A-415 applies.
(b) Except as otherwise provided in this section, a fiduciary shall allocate to income money received from an entity.
(c) A fiduciary shall allocate the following receipts from an entity to principal:
(1) Property other than money except in cases when the fiduciary has the choice to receive dividends or similar payments either in cash or in the shares or similar ownership interests of the corporation or other business entity, in which case, the fiduciary shall allocate the receipts to income;
(2) Money received in one distribution or a series of related distributions in exchange for part or all of a trust’s interest in the entity;
(3) Money received in total or partial liquidation of the entity; and
(4) Money received from an entity that is a regulated investment company or a real estate investment trust, if the money distributed is a capital gain dividend for federal income tax purposes.
(d) For purposes of subsection (c)(3), money is received in partial liquidation to the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation.
(e) A fiduciary may rely upon a statement made by an entity about the source or character of a distribution if the statement is made at or near the time of distribution by the entity’s board of directors or other person or group of persons authorized to exercise powers to pay money or transfer property comparable to those of a corporation’s board of directors.
(Act 2000-675, p. 1343, §1.)
A fiduciary shall allocate to income an amount received as a distribution of income from a trust or a decedent’s estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a trust or decedent’s estate. If a fiduciary purchases an interest in a trust that is an investment entity, or a decedent or donor transfers an interest in such a trust to a fiduciary, then Section 19-3A-401 or Section 19-3A-415 applies to a receipt from such a trust.
(Act 2000-675, p. 1343, §1.)
(a) If a fiduciary who conducts a business or other activity determines that it is in the best interest of all the beneficiaries to account separately for the business or other activity instead of accounting for it as part of the trust’s general accounting records, then the fiduciary may maintain separate accounting records for its transactions, whether or not its assets are segregated from other trust assets.
(b) A fiduciary who accounts separately for a business or other activity may determine the extent to which net cash receipts must be retained for working capital, the acquisition or replacement of fixed assets and the other reasonably foreseeable needs of the business or other activity, and the extent to which the remaining net cash receipts are accounted for as principal or income in the trust’s general accounting records. If a fiduciary sells assets of the business or other activity, other than in the ordinary course of the business or activity, then the fiduciary shall account for the net amount received as principal in the trust’s general accounting records to the extent the fiduciary determines that the amount received is no longer required in the conduct of the business or other activity.
(c) Businesses and other activities for which a fiduciary may maintain separate accounting records include:
(1) Retail, manufacturing, service, and other traditional business activities;
(2) Farming;
(3) Raising and selling livestock and other animals;
(4) Managing rental properties;
(5) Extracting minerals and other natural resources;
(6) Timber operations; and
(7) Activities to which Section 19-3A-414 applies.
(Act 2000-675, p. 1343, §1)
A fiduciary shall allocate to principal:
(1) To the extent not allocated to income under this chapter, assets received from a transferor during the transferor’s lifetime, a decedent’s estate, a trust with a terminating income interest, or a payer under a contract naming the trust or its fiduciary as beneficiary;
(2) Subject to any contrary rules in Section 19-3A-401 through Section 19-3A-415, money or other property received from the sale, exchange, liquidation, or change in form of a principal asset, including realized profit;
(3) Amounts recovered from third parties to reimburse the trust because of disbursements described in Section 19-3A-502(c) or for other reasons not based on the loss of income;
(4) Proceeds of property taken by eminent domain, but a separate award made for the loss of income with respect to an accounting period during which a current income beneficiary had a mandatory income interest is income;
(5) Net income received in an accounting period during which there is no beneficiary to whom a fiduciary may or must distribute income; and
(6) Other receipts as provided in Section 19-3A-408 through Section 19-3A-415.
(Act 2000-675, p. 1343, §1.)
To the extent the fiduciary does not account for receipts from rental property pursuant to Section 19-3A-403, the fiduciary shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount received as a refundable deposit, including a security deposit or a deposit that is to be applied as rent for future periods, shall be added to principal and held subject to the terms of the lease and is not available for distribution to a beneficiary until the fiduciary’s contractual obligations have been satisfied with respect to that amount.
(Act 2000-675, p. 1343, §1.)
(a) An amount received as interest, whether determined at a fixed, variable, or floating rate, on a bond or an obligation to pay money to the fiduciary shall be allocated to income.
(b) Except as provided for in subsection (c) and subsection (d), a fiduciary shall allocate to principal any gain or loss realized upon the sale or maturity of any bond or obligation to pay money to the fiduciary, regardless of how such bond or other obligation was acquired.
(c) A fiduciary shall allocate to income the difference between inventory value or cost, and the amount realized upon sale or maturity, if greater, for bonds or other obligations that do not bear interest, regardless of how or when such bond or other obligation was acquired.
(d) For bonds or other obligations that are acquired by a fiduciary subsequent to the time the principal was established and whose cost is greater than their par or maturity value, the fiduciary shall amortize periodically out of income the premium paid, and upon sale or maturity, shall allocate to principal any gain or loss realized thereon.
(e) This section does not apply to a bond or other obligation to which Section 19-3A-409, Section 19-3A-410, Section 19-3A-411, Section 19-3A-412, Section 19-3A-414, or Section 19-3A-415 applies.
(Act 2000-675, p. 1343, §1.)
(a) Except as otherwise provided in subsection (b), a fiduciary shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its fiduciary is named as beneficiary, including a contract that insures the trust or its fiduciary against loss for damage to, destruction of, or loss of title to a trust asset. The fiduciary shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income, and to principal if the premiums are paid from principal.
(b) A fiduciary shall allocate to income proceeds of a contract that insures the fiduciary against loss of occupancy or other use by an income beneficiary, loss of income, or, subject to Section 19-3A-403, loss of profits from a business.
(c) This section does not apply to a contract to which Section 19-3A-409 applies.
(Act 2000-675, p. 1343, §1.)
(a) If a fiduciary determines that an allocation between principal and income required by Section 19-3A-409, Section 19-3A-410, Section 19-3A-411, Section 19-3A-412, or Section 19-3A-415 is insubstantial, then the fiduciary may allocate the entire amount to principal, unless one of the circumstances described in Section 19-3A-104(c) applies to the allocation. This power may be exercised by a co-trustee in the circumstances described in Section 19-3A-104(d) and may be released for the reasons and in the manner described in Section 19-3A-104(e). For purposes of this subsection, the circumstances set forth in Section 19-3A-104(c), Section 19-3A-104(d), and Section 19-3A-104(e) shall be applied whether or not Section 19-3A-104 is otherwise applicable to the trust.
(b) Nothing in this section imposes a duty on the fiduciary to make an allocation pursuant to this section, and the fiduciary is not liable for failure to make an allocation pursuant to this section.
(Act 2000-675, p. 1343, §1.)
(a) In this section:
(1) “Payment” means a payment that a fiduciary may receive over a fixed number of years or during the life of one or more individuals because of services rendered or property transferred to the payer in exchange for future payments. The term includes a payment made in money or property from the payer’s general assets or from a separate fund created by the payer. For purposes of subsections (d), (e), (f), and (g), the term also includes any payment from any separate fund, regardless of the reason for the payment.
(2) “Separate fund” includes a private or commercial annuity, an individual retirement account, and a pension, profit-sharing, stock-bonus, or stock-ownership plan.
(b) To the extent that a payment or portion thereof is characterized by other sections of this chapter as income in the hands of the payer, a fiduciary shall allocate such payment or portion thereof to income. The fiduciary shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as income to the payer by other sections of this chapter.
(c) To the extent that a payment is not allocated between income and principal pursuant to subsection (b), a fiduciary shall allocate to income ten percent (10%) of the part that is required to be made during the accounting period and the balance to principal. If no part of a payment is required to be made or if the payment received by the fiduciary is the entire amount to which the fiduciary is entitled, then the fiduciary shall allocate the entire payment to principal. For purposes of this subsection, a payment is not “required to be made” to the extent that it is made because the fiduciary exercises a right of withdrawal.
(d) Except as otherwise provided in subsection (e), subsections (f) and (g) apply and subsections (b) and (c) do not apply in determining the allocation of a payment made from a separate fund to:
(1) A trust to which an election to qualify for a marital deduction under Section 2056(b)(7) of the Internal Revenue Code of 1986, as amended, 26 U.S.C. Section 2056(b)(7), as amended, has been made; or
(2) A trust that qualifies for the marital deduction under Section 2056(b)(5) of the Internal Revenue Code of 1986, as amended, 26 U.S.C. Section 2056(b)(5), as amended.
(e) Subsections (d), (f), and (g) do not apply if and to the extent that the series of payments would, without the application of subsection (d), qualify for the marital deduction under Section 2056(b)(7)(C) of the Internal Revenue Code of 1986, as amended, 26 U.S.C. Section 2056(b)(7)(C), as amended.
(f) A fiduciary shall make a reasonable effort to determine the internal income of each separate fund for the accounting period as if the separate fund were a trust subject to this chapter. Upon request of the surviving spouse, the fiduciary shall make a demand on the person administering the separate fund to distribute the internal income to the trust. The fiduciary shall allocate a payment from the separate fund to income to the extent of the internal income of the separate fund and distribute that amount to the surviving spouse. The fiduciary shall allocate the balance of the payment to principal. Upon request of the surviving spouse, the fiduciary shall allocate principal to income to the extent the internal income of the separate fund exceeds payments made from the separate fund to the trust during the accounting period.
(g) If a fiduciary cannot determine the internal income of a separate fund pursuant to subsection (f) but can determine the value of the separate fund, the internal income of the separate fund for the accounting period is deemed to equal four percent of the fund’s value, according to the most recent statement of value preceding the beginning of the accounting period. If the fiduciary can determine neither the internal income of the separate fund nor the fund’s value, the internal income of the fund for the accounting period is deemed to equal the product of the interest rate and the present value of the expected future payments, as determined under Section 7520 of the Internal Revenue Code of 1986, as amended, 26 U.S.C. Section 7520, as amended, for the month preceding the accounting period for which the computation is made.
(h) This section does not apply to a payment to which Section 19-3A-410 applies.
(i) If a trust holds one or more separate funds and is an express unitrust under Section 19-3A-105, or is a unitrust by reason of conversion under Section 19-3A-106 (relating to power to convert to unitrust), the following rules shall apply:
(1) Income or net income from the separate funds shall be determined as provided in the governing instrument in the case of an express unitrust under Section 19-3A-105, or the written notice referenced in Section 19-3A-106(a), the written instrument referenced in Section 19-3A-106(b), or the order of the court referenced in Section 19-3A-106(c) in the case of a trust converted to a unitrust.
(2) If subdivision (1) does not apply and the fiduciary can determine the value of the separate fund, income or net income with respect to such separate fund shall be an amount equal to the unitrust percentage multiplied by the value in the manner applied pursuant to Section 19-3A-105 or Section 19-3A-106, as the case may be.
(3) If subdivision (1) does not apply and the fiduciary cannot determine the value of the separate fund, income or net income with respect to such separate fund shall be determined in the manner provided in the foregoing provisions of this section.
(Act 2000-675, p. 1343, §1; Act 2012-550, p. 1624, §1; Act 2013-336, p. 1179, §1.)
(a) In this section, “liquidating asset” means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. The term includes a leasehold, patent, copyright, royalty right, and right to receive payments under an arrangement that does not provide for the payment of interest on the unpaid balance. The term does not include a payment subject to Section 19-3A-409, natural resources subject to Section 19-3A-411, timber subject to Section 19-3A-412, an activity subject to Section 19-3A-414, an asset subject to Section 19-3A-415, or any asset for which the fiduciary establishes a reserve for depreciation under Section 19-3A-503.
(b) A fiduciary shall allocate to income ten percent (10%) of the receipts from a liquidating asset and the balance to principal.
(Act 2000-675, p. 1343, §1.)
(a) To the extent that a fiduciary accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the fiduciary shall allocate them as follows:
(1) If received as nominal delay rental or nominal annual rent on a lease, a receipt shall be allocated to income.
(2) If received from a production payment, a receipt shall be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance shall be allocated to principal.
(3) If an amount received as a royalty payment, shut-in-well payment, take-or-pay payment, bonus, or a delay rental that is more than nominal, then ninety percent (90%) shall be allocated to principal and the balance to income.
(4) If an amount is received from a working interest or any other interest not provided for in subdivisions (1), (2), or (3), then ninety percent (90%) of the net amount received shall be allocated to principal and the balance to income.
(b) An amount received on account of an interest in water that is renewable shall be allocated to income. If the water is not renewable, then ninety percent (90%) of the amount shall be allocated to principal and the balance to income.
(c) This chapter applies whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust.
(d) If a trust owns an interest in minerals, water, or other natural resources on January 1, 2001, then the fiduciary may allocate receipts from the interest as provided in this chapter or in the manner used by the fiduciary before January 1, 2001. If the trust acquires an interest in minerals, water, or other natural resources after January 1, 2001, then the fiduciary shall allocate receipts from the interest as provided in this chapter.
(Act 2000-675, p. 1343, §1.)
(a) To the extent that a fiduciary accounts for receipts from the sale of timber and related products pursuant to this section, the fiduciary shall allocate the net receipts first to principal, based upon the volume of the timber at the time of transfer to the trust or decedent’s estate. The balance shall be allocated eighty percent (80%) to income and the balance to principal.
(b) In determining net receipts as provided for in subsection (a), a fiduciary shall deduct the following expenses related to the sale of timber and related products from gross receipts:
(1) Management expenses;
(2) Legal and accounting expenses and fees;
(3) Sales commissions;
(4) Reforestation expenses; and
(5) Any necessary timber stand improvement expense that is recognized and accepted as good forest management practice at the time of sale.
(c) This chapter applies whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust or decedent’s estate.
(d) If a trust owns an interest in timberland on January 1, 2001, then the fiduciary shall allocate net receipts from the sale of timber and related products as provided in this chapter or in the manner used by the fiduciary before January 1, 2001. If the trust acquires an interest in timberland after January 1, 2001, then the fiduciary shall allocate net receipts from the sale of timber and related products as provided in this section.
(Act 2000-675, p. 1343, §1.)
(a) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the spouse with sufficient income from or use of the trust assets, and if the amounts that the fiduciary transfers from principal to income pursuant to Section 19-3A-104, if applicable, and distributes to the spouse from principal pursuant to the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, then the spouse may require the fiduciary (1) to make property productive of income, (2) to convert property within a reasonable time or (3) to exercise the power conferred by Section 19-3A-104(a), if applicable. The fiduciary may decide which action or combination of actions to take.
(b) In cases not governed by subsection (a), a fiduciary shall allocate to principal the proceeds from the sale or other disposition of an asset without regard to the amount of income the asset produces during any accounting period.
(Act 2000-675, p. 1343, §1.)
(a) In this section, “asset-backed security” means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. The term includes an asset that gives the owner the right to receive from the collateral financial assets (1) only the interest or other current return thereon or (2) only the proceeds other than interest or current return. The term does not include an asset to which Section 19-3A-401 or Section 19-3A-409 applies.
(b) If a trust receives a payment that includes interest or other current return and other proceeds of the collateral financial assets, then the fiduciary (1) shall allocate to income the portion of the payment which the payer identifies as being from interest or other current return; and (2) shall allocate the balance of the payment to principal.
(c) If a trust receives one or more payments in exchange for the trust’s entire interest in an asset-backed security within a 12-month period, then the fiduciary shall allocate the payments to principal. If a payment is one of a series of payments that will result in the liquidation of the trust’s interest in the security within a period exceeding 12 months, then the fiduciary shall allocate ten percent (10%) of the payment to income and the balance to principal.
(Act 2000-675, p. 1343, §1.)
(a) In this section, “derivative instrument” means a contract, a financial instrument, or a combination of contracts and financial instruments which gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates, or other market indicator for an asset or a group of assets.
(b) To the extent that a fiduciary does not account under Section 19-3A-403 for transactions in derivative instruments, the fiduciary shall allocate to principal receipts from and disbursements made in connection with those transactions.
(c) If a fiduciary grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another person to sell property to the trust, or acquires an option to buy property for the trust or an option to sell an asset owned by the trust, and the fiduciary or other owner of the asset is required to deliver the asset if the option is exercised, then an amount received for granting the option shall be allocated to principal. An amount paid to acquire the option shall be paid from principal. A gain or loss realized upon the exercise of an option, including an option granted to a settlor of the trust for services rendered, shall be allocated to principal.
(Act 2000-675, p. 1343, §1.)
A trustee shall make the following disbursements from income to the extent that they are not disbursements to which Section 19-3A-201(c)(2) or Section 19-3A-201(c)(3) applies:
(a) All of the regular compensation of the trustee and of any person providing investment advisory or custodial services to the trustee, to the extent not charged to principal pursuant to Section 19-3A-502(a)(1);
(b) All expenses for accountings, judicial proceedings, or other matters that involve both the income and remainder interests, to the extent not charged to principal pursuant to Section 19-3A-502(a)(1);
(c) All of the other ordinary expenses incurred in connection with the administration, management, or preservation of trust property and the distribution of income, including interest, ordinary repairs, regularly recurring taxes assessed against principal, and expenses of a proceeding or other matter that concerns primarily the income interest;
(d) All recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset; and
(e) All disbursements related to environmental matters, to the extent not charged to principal pursuant to Section 19-3A-502(c).
(Act 2000-675, p. 1343, §1.)
(a) A trustee shall make the following disbursements from principal:
(1) An amount, not to exceed fifty percent (50%), of the disbursements described in Section 19-3A-501(a) and Section 19-3A-501(b);
(2) All of the trustee’s compensation calculated on principal as a fee for acceptance, distribution, or termination, and disbursements made to prepare property for sale;
(3) Payments on the principal of a trust debt;
(4) Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;
(5) Premiums paid on a policy of insurance not described in Section 19-3A-501(d), of which the trust is the owner and beneficiary; and
(6) Estate, inheritance, and other transfer taxes, including penalties thereon, apportioned to the trust which carries the name of the estate.
(b) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, then the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.
(c) A trustee may charge all disbursements related to environmental matters to principal or income, as provided by applicable law.
(Act 2000-675, p. 1343, §1.)
(a) In this section, “depreciation” means a reduction in value due to wear, tear, decay, corrosion, or gradual obsolescence of a fixed asset having a useful life of more than one year.
(b) A fiduciary may transfer from income to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but may not transfer any amount for depreciation in any of the following circumstances:
(1) As to the portion of a. real property used or available for use by a beneficiary as a residence or b. tangible personal property held or made available for the personal use or enjoyment of a beneficiary;
(2) During the administration of a decedent’s estate; or
(3) If the fiduciary is accounting separately for the business or activity in which the asset is used, pursuant to Section 19-3A-403.
(c) An amount transferred from income to principal need not be held as a separate fund.
(Act 2000-675, p. 1343, §1.)
(a) If a fiduciary makes or expects to make a principal disbursement described in this section, then the fiduciary may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.
(b) Principal disbursements to which subsection (a) applies include the following, but only to the extent that the fiduciary has not been and does not expect to be reimbursed by a third party:
(1) An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs;
(2) A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments;
(3) Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements, and broker’s commissions; and
(4) Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments.
(c) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, then a fiduciary may continue to transfer amounts from income to principal as provided in subsection (a).
(Act 2000-675, p. 1343, §1.)
(a) A tax required to be paid by a fiduciary based on receipts allocated to income shall be paid from income.
(b) A tax required to be paid by a fiduciary based on receipts allocated to principal shall be paid from principal, even if the tax is called an income tax by the taxing authority.
(c) A tax required to be paid by a fiduciary on the trust’s share of an entity’s taxable income shall be paid as follows:
(1) From income to the extent that receipts from the entity are allocated only to income;
(2) From principal to the extent that receipts from the entity are allocated only to principal;
(3) Proportionately from principal and income to the extent that receipts from the entity are allocated to both income and principal; and
(4) From principal to the extent that the tax exceeds the total receipts from the entity.
(d) After applying subsections (a) through (c), the fiduciary shall adjust income or principal receipts to the extent that the trust’s taxes are reduced because the trust receives a deduction for payments made to a beneficiary.
(Act 2000-675, p. 1343, §1; Act 2012-550, p. 1624, §1.)
(a) A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries which arise from any of the following:
(1) Elections and decisions, other than those described in subsection (b), that the fiduciary makes from time to time regarding tax matters;
(2) An income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving a decedent’s estate, a trust, or a distribution from a decedent’s estate or a trust; or
(3) The ownership by a decedent’s estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the decedent’s estate, trust, or a beneficiary.
(b) If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by a decedent’s estate, trust, or beneficiary are decreased, then each decedent’s estate, trust, or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement shall equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each decedent’s estate, trust, or beneficiary whose income taxes are reduced shall be the same as its proportionate share of the total decrease in income tax. A decedent’s estate or a trust shall reimburse principal from income.
(Act 2000-675, p. 1343, §1.)
In applying and construing this uniform act, consideration shall be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.
(Act 2000-675, p. 1343, §1.)
If any provision of this chapter or its application to any person or circumstance is held invalid, then the invalidity does not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
(Act 2000-675, p. 1343, §1.)
This chapter shall become effective on January 1, 2001, and shall apply to every trust and decedent’s estate created on or after such date.
(Act 2000-675, p. 1343, §1.)
This chapter shall become applicable on January 1, 2001, to every trust and decedent’s estate already in existence on January 1, 2001, and to every testamentary trust to be created on or after January 1, 2001, from a decedent’s estate that is already in existence on January 1, 2001; provided, however, at any time prior to January 1, 2003, any such pre-existing trust or decedent’s estate (or testamentary trust to be created from a pre-existing estate) shall have the right to elect to continue operating under the law in effect prior to this chapter. Any fiduciary, income beneficiary, or presumptive remainder beneficiary of an affected trust or estate shall have the right to make the election to continue operating under the law in effect prior to this chapter, which election shall be made by a written instrument delivered to, or executed by, the fiduciary and placed with the fiduciary’s records. The decision of whether to make such election by the fiduciary or by any income beneficiary or presumptive remaindermen shall conclusively bind all persons who may have any interest in the affected trust, including all contingent remaindermen and potential appointees of the affected trust or estate.
(Act 2000-675, p. 1343, §1.)
A fiduciary may at any time obtain the written consent of all of the current income beneficiaries and presumptive remainder beneficiaries of a trust or decedent’s estate as to the fiduciary’s exercise of any discretion granted under this chapter, including the application of the chapter to pre-existing trusts or decedent’s estates, and such written consent shall conclusively bind all persons who may have any interest in the affected trust or decedent’s estate, including all contingent remainder beneficiaries and potential appointees of the affected trust or decedent’s estate.
(Act 2000-675, p. 1343, §1.)
This chapter shall govern the ascertainment of income and principal, and the apportionment of receipts and disbursements between tenant and remainderman, in all cases where a principal has been established with or, unless otherwise stated in this chapter, without the interposition of a trust; except that in the establishment of the principal, provision may be made touching all matters covered by this chapter, and the person establishing the principal may direct the manner of ascertainment of income and principal and the apportionment of receipts and disbursements or grant discretion to the trustee or other person to do so, and such provision and direction, where not otherwise contrary to law, shall control notwithstanding this chapter. This section is intended to be declarative of the law of Alabama from the time of enactment of the Alabama Principal and Income Act pursuant to this chapter.
(Act 2006-216, p. 314, §4.)
Section 19-3A-409, as amended by Act 2012-550, applies to a trust described in Section 19-3A-409(d) on and after the following dates:
(1) If the trust is not funded as of January 1, 2013, the date of the decedent’s death.
(2) If the trust is initially funded in the calendar year beginning January 1, 2013, the date of the decedent’s death.
(3) If the trust is not described in subdivision (1) or (2), January 1, 2013.
(Act 2012-550, p. 1624, §2.)
The provisions of the Alabama Uniform Trust Code apply to the Alabama Principal and Income Act, except to the extent the provisions are inconsistent with the provisions of this chapter.
(Act 2013-336, p. 1179, §2.)
This chapter may be cited as the Alabama Uniform Trust Code.
(Act 2006-216, p. 314, §1.)
This chapter applies to express trusts, charitable or noncharitable, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust.
(Act 2006-216, p. 314, §1.)
In this chapter:
(1) ACTION, with respect to an act of a trustee, includes a failure to act.
(2) ASCERTAINABLE STANDARD means a standard relating to an individual’s health, education, support, or maintenance within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code of 1986, as in effect on January 1, 2007, or as later amended.
(3) BENEFICIARY means a person that:
(A) has a present or future beneficial interest in a trust, vested or contingent; or
(B) in a capacity other than that of trustee, holds a power of appointment over trust property.
(4) CHARITABLE TRUST means a trust, or portion of a trust, created for a charitable purpose described in Section 19-3B-405(a).
(5) CONSERVATOR means a person appointed by the court to administer the estate of a minor or adult individual.
(6) ENVIRONMENTAL LAW means a federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment.
(7) GUARDIAN means a person who has qualified as a guardian of a minor or incapacitated person pursuant to parental or spousal nomination or court appointment and includes a limited guardian as described in Section 26-2A-78(e) and Section 26-2A-105(c), but excludes one who is merely a guardian ad litem.
(8) INTERESTS OF THE BENEFICIARIES means the beneficial interests provided in the terms of the trust.
(9) JURISDICTION, with respect to a geographic area, includes a state or country.
(10) PERSON means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government; governmental subdivision, agency, or instrumentality; public corporation, or any other legal or commercial entity.
(11) POWER OF WITHDRAWAL means a presently exercisable general power of appointment other than a power exercisable by a trustee which is limited by an ascertainable standard, or which is exercisable by another person only upon consent of the trustee or a person holding an adverse interest.
(12) PRESUMPTIVE REMAINDER BENEFICIARY means a person who would be entitled to the principal of a trust if the income interest were immediately terminated, and if a trust contains a power of appointment, then the holder of such power of appointment shall also be a presumptive remainder beneficiary.
(13) PROPERTY means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein. Property includes choses in action, claims, and interests created by beneficiary designation under policies of insurance, financial instruments and deferred compensation and other retirement arrangements, whether revocable or irrevocable.
(14) QUALIFIED BENEFICIARY means a living beneficiary who, on the date the beneficiary’s qualification is determined:
(A) is a distributee or permissible distributee of trust income or principal;
(B) would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in paragraph (A) terminated on that date, but the termination of those interests would not cause the trust to terminate; or
(C) would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.
(15) REVOCABLE, as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest.
(16) SETTLOR means a person, including a testator, who creates, or contributes property to, a trust. If more than one person creates or contributes property to a trust, then each person is a settlor of the portion of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that portion.
(17) SPENDTHRIFT PROVISION means a term of a trust which restrains both voluntary and involuntary transfer of a beneficiary’s interest.
(18) STATE means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band recognized by federal law or formally acknowledged by a state.
(19) TERMS OF A TRUST means the manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust instrument or as may be established by other evidence that would be admissible in a judicial proceeding.
(20) TRUST INSTRUMENT means an instrument executed by the settlor that contains terms of the trust, including any amendments thereto.
(21) TRUSTEE includes an original, additional, and successor trustee, and a co-trustee.
(Act 2006-216, p. 314, §1.)
(a) Subject to subsection (b), a person has knowledge of a fact if the person:
(1) has actual knowledge of it;
(2) has received a notice or notification of it; or
(3) from all the facts and circumstances known to the person at the time in question, has reason to know it.
(b) An organization that conducts activities through employees has notice or knowledge of a fact involving a trust only from the time the information was received by an employee having responsibility to act for the trust, or would have been brought to the employee’s attention if the organization had exercised reasonable diligence. An organization exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the employee having responsibility to act for the trust and there is reasonable compliance with the routines. Reasonable diligence does not require an employee of the organization to communicate information unless the communication is part of the individual’s regular duties or the individual knows a matter involving the trust would be materially affected by the information.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in the terms of the trust, this chapter governs the duties and powers of a trustee, relations among trustees, and the rights and interests of a beneficiary.
(b) The terms of a trust prevail over any provision of this chapter except:
(1) the requirements for creating a trust;
(2) the duty of a trustee to act in good faith and in accordance with the terms and purposes of the trust and the interest of the beneficiaries;
(3) the requirement that a trust and its terms be for the benefit of its beneficiaries, and that the trust have a purpose that is lawful, not contrary to public policy, and possible to achieve;
(4) the power of the court to modify or terminate a trust under Sections 19-3B-410 through 19-3B-416;
(5) the effect of a spendthrift provision and the rights of certain creditors and assignees to reach a trust as provided in Article 5;
(6) the power of the court under Section 19-3B-702 to require, dispense with, or modify or terminate a bond;
(7) the power of the court under Section 19-3B-708(b) to adjust a trustee’s compensation, as specified in the terms of the trust or by written agreement, which is unreasonably low or high;
(8) the duty under Section 19-3B-813(a)(2) to respond to the request of a qualified beneficiary of an irrevocable trust for trustee’s reports and other information reasonably related to the administration of a trust;
(9) the effect of an exculpatory term under Section 19-3B-1008;
(10) the rights under Sections 19-3B-1010 through 19-3B-1013 of a person other than a trustee or beneficiary;
(11) periods of limitation for commencing a judicial proceeding;
(12) the power of the court to take such action and exercise such jurisdiction as may be necessary in the interests of justice; and
(13) a proceeding as provided in Sections 19-3B-203 through 19-3B-205.
(Act 2006-216, p. 314, §1.)
The common law of trusts and principles of equity supplement this chapter, except to the extent modified by this chapter or another statute of this state.
(Act 2006-216, p. 314, §1.)
The meaning and effect of the terms of a trust are determined by:
(1) the law of the jurisdiction designated in the terms unless the designation of that jurisdiction’s law is contrary to a strong public policy of the jurisdiction having the most significant relationship to the matter at issue; or
(2) in the absence of a controlling designation in the terms of the trust, the law of the jurisdiction having the most significant relationship to the matter at issue.
(Act 2006-216, p. 314, §1.)
(a) Without precluding other means for establishing a sufficient connection with the designated jurisdiction, terms of a trust designating the principal place of administration are valid and controlling if:
(1) a trustee’s principal place of business is located in or a trustee is a resident of the designated jurisdiction; or
(2) all or part of the administration occurs in the designated jurisdiction.
(b) A trustee shall administer the trust at a place appropriate to its purposes, its administration, and the interests of the beneficiaries; provided, however, a trustee shall not be required to transfer the trust’s principal place of administration to another state or to a jurisdiction outside of the United States.
(c) Without precluding the right of the court to order, approve, or disapprove a transfer, the trustee may transfer the trust’s principal place of administration to another state or to a jurisdiction outside of the United States, provided that the transfer is to a place appropriate to the trust’s purposes, its administration and the interests of the beneficiaries.
(d) The trustee shall notify the qualified beneficiaries of a proposed transfer of a trust’s principal place of administration to another state or to a jurisdiction outside of the United States not less than 30 days before initiating the transfer. The notice of proposed transfer must include:
(1) the name of the jurisdiction to which the principal place of administration is to be transferred;
(2) the address and telephone number at the new location at which the trustee can be contacted;
(3) an explanation of the reasons for the proposed transfer;
(4) the date on which the proposed transfer is anticipated to occur; and
(5) the date, not less than 30 days after the giving of the notice, by which the qualified beneficiary must notify the trustee of an objection to the proposed transfer.
(e) The authority of a trustee under this section to transfer a trust’s principal place of administration to another state or to a jurisdiction outside of the United States terminates if a qualified beneficiary notifies the trustee of an objection to the proposed transfer on or before the date specified in the notice.
(f) In connection with a transfer of the trust’s principal place of administration, the trustee may transfer some or all of the trust property to a successor trustee designated in the terms of the trust or appointed pursuant to Section 19-3B-704.
(g) Unless otherwise designated in the trust instrument, the principal place of administration of a trust is the usual place where the day-to-day activity of the trust is carried on by the trustee or its representative who is primarily responsible for the administration of the trust. If the principal place of administration of the trust cannot be determined pursuant to the foregoing sentence, then it shall be determined as follows:
(1) If the trust has a single trustee, then the principal place of administration of the trust is the trustee’s residence or usual place of business.
(2) If the trust has more than one trustee, then the principal place of administration of the trust is (i) the usual place of business of the corporate trustee if there is but one corporate co-trustee, or (ii) the usual place of business or residence of the individual trustee who is a professional fiduciary if there is but one such person and no corporate co-trustee. If neither (i) nor (ii) apply, then the principal place of administration shall be the usual place of business or residence of any of the co-trustees.
(Act 2006-216, p. 314, §1.)
(a) Notice to a person under this chapter or the transmission of information to a person under this chapter must be accomplished in a manner reasonably suitable under the circumstances and likely to result in receipt of the notice or information. Permissible methods of notice or for transmitting information include first-class mail, personal delivery, delivery to the person’s last known place of residence or place of business, a properly directed electronic message, or any method otherwise provided by the Alabama Rules of Civil Procedure.
(b) Notice otherwise required under this chapter or information otherwise required to be sent under this chapter need not be provided to a person whose identity or location is unknown to and not reasonably ascertainable by the trustee.
(c) Notice under this chapter or the transmission of information under this chapter may be waived by the person to be notified or sent the document.
(d) Notice of a judicial proceeding must be given as provided in the applicable rules of civil procedure.
(Act 2006-216, p. 314, §1.)
(a) Whenever notice to qualified beneficiaries of a trust is required under this chapter, the trustee must also give notice to any other beneficiary who has sent the trustee a request for notice.
(b) A charitable organization expressly designated to receive distributions under the terms of a charitable trust has the rights of a qualified beneficiary under this chapter if the charitable organization, on the date of the charitable organization’s qualification is being determined:
(1) is a distributee or a permissible distributee of trust income or principal;
(2) would be a distributee or permissible distributee of trust income or principal upon the termination of the interests of other distributees or permissible distributees then receiving or eligible to receive distributions; or
(3) would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.
(c) A person appointed to enforce a trust created for the care of an animal or another noncharitable purpose as provided in Section 19-3B-408 or 19-3B-409 has the rights of a qualified beneficiary under this chapter.
(d) The Attorney General of this state has the rights of a qualified beneficiary when the charitable interest to be represented would qualify under subsection (b) but no charitable organization has been expressly designated to receive distribution under the terms of a charitable trust.
(Act 2006-216, p. 314, §1.)
(a) For purposes of this section, “interested persons” means persons whose consent would be required in order to achieve a binding settlement were the settlement to be approved by the court.
(b) Except as otherwise provided in subsection (c), interested persons may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust.
(c) A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the court under this chapter or other applicable law.
(d) Matters that may be resolved by a nonjudicial settlement agreement include:
(1) the interpretation or construction of the terms of the trust;
(2) the approval of a trustee’s report or accounting;
(3) direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;
(4) the resignation or appointment of a trustee and the determination of a trustee’s compensation;
(5) transfer of a trust’s principal place of administration;
(6) liability of a trustee for an action relating to the trust; and
(7) partial or final settlements.
(e) Any interested person may request the court to approve a nonjudicial settlement agreement, to determine whether the representation as provided in Article 3 was adequate, and to determine whether the agreement contains terms and conditions the court could have properly approved.
(Act 2006-216, p. 314, §1.)
Except as otherwise provided in this chapter, the rules of construction under Title 43, Chapter 8, Article 8, and the miscellaneous provisions of Article 9 that apply in this state to the interpretation of and disposition of property by will also apply as appropriate to the interpretation of the terms of a trust and the disposition of the trust property.
(Act 2006-216, p. 314, §1.)
(a) The court may intervene in the administration of a trust to the extent its jurisdiction is invoked by an interested person or as provided by law.
(b) A trust is not subject to continuing judicial supervision unless ordered by the court.
(c) A judicial proceeding involving a trust may relate to any matter involving the trust’s administration, including a request for instructions and an action to declare rights.
(d) A judicial proceeding involving a trust may relate to any matter involving the trust’s administration, including, but not being limited to a proceeding to:
(1) request instructions;
(2) determine the existence or nonexistence of any immunity, power, privilege, duty or right;
(3) approve a nonjudicial settlement;
(4) interpret or construe the terms of the trust;
(5) determine the validity of a trust or of any of its terms;
(6) approve a trustee’s report or accounting or compel a trustee to report or account;
(7) direct a trustee to refrain from performing a particular act or grant to a trustee any necessary or desirable power;
(8) review the actions or approve the proposed actions of a trustee, including the exercise of a discretionary power;
(9) accept the resignation of a trustee;
(10) appoint or remove a trustee;
(11) determine a trustee’s compensation;
(12) transfer a trust’s principal place of administration or a trust’s property to another jurisdiction;
(13) determine the liability of a trustee for an action relating to the trust and compel redress of a breach of trust by any available remedy;
(14) modify or terminate a trust;
(15) combine trusts or divide a trust;
(16) determine liability of a trust for debts of a beneficiary and living settlor;
(17) determine liability of a trust for debts, expenses of administration, and statutory allowances chargeable against the estate of a deceased settlor;
(18) determine the liability of a trust for claims, expenses and taxes in connection with the settlement of a trust that was revocable at the settlor’s death; and
(19) ascertain beneficiaries and determine to whom property will pass upon final or partial termination of a trust.
(Act 2006-216, p. 314, §1.)
(a) A trustee submits personally to the jurisdiction of the courts of this state regarding any matter involving a trust:
(1) by accepting the trusteeship of a trust whose settlor was a resident of this state at the time of the trust’s creation, or in the case of testamentary trusts, the settlor was a resident of this state at death;
(2) by accepting the trusteeship of a trust having its principal place of administration in this state; or
(3) by moving the principal place of administration of the trust to this state.
Notwithstanding the foregoing, subsection (a)(1) shall not apply if the settlor designates the law of a jurisdiction other than this state to govern the trust.
(b) With respect to their interests in the trust, the beneficiaries of a trust having its principal place of administration in this state are subject to the jurisdiction of the courts of this state regarding any matter involving the trust. By accepting a distribution from such a trust, the recipient submits personally to the jurisdiction of the courts of this state regarding any matter involving the trust.
(c) This section does not preclude other methods of obtaining jurisdiction over a trustee, beneficiary, or other person receiving property from the trust.
(Act 2006-216, p. 314, §1.)
(a) Except as provided in subsection (b), the circuit court has exclusive jurisdiction of proceedings in this state brought by a trustee or beneficiary concerning the administration of a trust.
(b) A probate court granted statutory equitable jurisdiction has concurrent jurisdiction with the circuit court in any proceeding involving a testamentary or inter vivos trust.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in subsection (b), venue for actions and proceedings involving a trust is proper (i) in any county where venue is proper for civil actions generally, pursuant to Title 6, Chapter 3; (ii) in the county of this state where the trust has its principal place of administration; or (iii) in the case of a trust whose principal place of administration is in a jurisdiction other than this state, in the county where the settlor resided at the creation of the trust, or in the case of a testamentary trust, where the settlor’s estate was administered.
(b) If a trust has no trustee, then venue for a judicial proceeding for the appointment of a trustee is in a county of this state in which a beneficiary resides, in a county in which any trust property is located, and if the trust is created by will, in the county in which the decedent’s estate was or is being administered.
(Act 2006-216, p. 314, §1.)
(a) A trustee may file an accounting of the trustee’s administration of a trust in court at any time and seek a partial or final settlement thereof or, upon petition of an interested party, a court may order a trustee to render an accounting of the trustee’s administration of a trust and require a partial or final settlement thereof. Notice of such judicial proceeding shall be provided to the trustee and each beneficiary, or representative thereof pursuant to Article 3, as provided by the applicable rules of civil procedure.
(b) A trust accounting must be a reasonably understandable report from the date of the last accounting or, if none, from the date upon which the trustee became accountable, or other such date the court may set, which provides reasonable detail of the transactions affecting the administration of the trust, and which adequately discloses the following information:
(1) The accounting must identify the trust, the trustee furnishing the accounting, and the time period covered by the accounting.
(2) The accounting must show all receipts and disbursements occurring during the accounting period. Gains and losses realized during the accounting period must also be shown.
(3) The accounting, to the extent feasible, must identify and value trust assets on hand at the close of the accounting period. For each asset or class of assets reasonably capable of valuation, the accounting shall contain two values, (i) the asset acquisition value or carrying value, and (ii) the estimated current value, if feasible. The accounting must identify each known noncontingent liability with an estimated current amount of the liability if known.
(4) To the extent feasible, the accounting must show the significant non-cash transactions affecting the assets of the trust, including name changes in investment holdings, adjustments to carrying value, or stock splits.
(5) The accounting must reflect the allocation of receipts and disbursements between income and principal when the allocation affects the interest of any beneficiary of the trust.
(c) Any order or judgment of the court on such accounting and partial or final settlement shall be final and conclusive as to all matters occurring during the accounting period, and appeals therefrom shall and must be taken in the manner provided for from any other final judgment of the court.
(Act 2006-216, p. 314, §1.)
(a) Notice to a person who may represent and bind another person under this article has the same effect as if notice were given directly to the other person.
(b) The consent of a person who may represent and bind another person under this article is binding on the person represented unless the person represented objects to the representation before the consent would otherwise have become effective.
(c) Except as otherwise provided in Sections 19-3B-411 and 19-3B-602, a person who under this article may represent a settlor who lacks capacity may receive notice and give a binding consent on the settlor’s behalf.
(d) A settlor may not represent and bind a beneficiary under this article with respect to the termination or modification of a trust under Section 19-3B-411(a).
(Act 2006-216, p. 314, §1.)
(a) The holder of a lifetime power to appoint to oneself may represent and bind all persons whose interests are subject to the power, including but without limitation, permissible appointees and takers in default.
(b) To the extent that there is no conflict of interest between the holder of a power of appointment, other than a power enumerated in subsection (a), and the persons represented with respect to the particular question or dispute, the holder may represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to the power.
(Act 2006-216, p. 314, §1.)
To the extent there is no conflict of interest between the representative and the person represented or among those being represented with respect to a particular question or dispute:
(1) a conservator may represent and bind the estate that the conservator controls;
(2) a guardian may represent and bind the ward if a conservator of the ward’s estate has not been appointed;
(3) an agent having authority to act with respect to the particular question or dispute may represent and bind the principal;
(4) a trustee may represent and bind the beneficiaries of the trust;
(5) a personal representative of a decedent’s estate may represent and bind persons interested in the estate; and
(6) a parent or other direct ancestor may represent and bind the minor or unborn issue if a conservator or guardian for the issue has not been appointed.
(Act 2006-216, p. 314, §1.)
(a) Unless otherwise represented, a minor, incapacitated, or unborn individual, or a person whose identity or location is unknown and not reasonably ascertainable, may be represented by and bound by another having a substantially identical interest with respect to the particular question or dispute, but only to the extent there is no conflict of interest between the representative and the person represented.
(b) A presumptive remainder beneficiary may represent contingent successor remainder beneficiaries with respect to matters in which there is no conflict of interest.
(Act 2006-216, p. 314, §1.)
(a) If the court determines that an interest is not represented under this article, or that the otherwise available representation might be inadequate, then the court may appoint a guardian ad litem or other representative to receive notice, give consent, and otherwise represent, bind, and act on behalf of a minor, incapacitated, or unborn individual, or a person whose identity or location is unknown.
(b) A guardian ad litem or other representative may act on behalf of the individual represented with respect to any matter arising under this chapter, whether or not a judicial proceeding concerning the trust is pending.
(c) In making decisions, a guardian ad litem or other representative may consider general benefit accruing to the living members of the individual’s family.
(d) A guardian ad litem or other representative may be appointed to represent several persons or interests.
(Act 2006-216, p. 314, §1.)
A trust may be created by:
(1) transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect upon the settlor’s death;
(2) declaration by the owner of property that the owner holds identifiable property as trustee;
(3) exercise of a power of appointment in favor of a trustee; or
(4) a court in the exercise of its equitable powers.
(Act 2006-216, p. 314, §1.)
(a) A trust is created only if:
(1) the settlor has capacity to create a trust;
(2) the settlor indicates an intention to create the trust;
(3) the trust has a definite beneficiary or is:
(A) a charitable trust;
(B) a trust for the care of an animal, as provided in Section 19-3B-408; or
(C) a trust for a noncharitable purpose, as provided in Section 19-3B-409;
(4) the trustee has duties to perform; and
(5) the same person is not the sole trustee and sole beneficiary.
(b) A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities.
(c) A power in a trustee to select a beneficiary from an indefinite class is valid. If the power is not exercised within a reasonable time, then the power fails and the property subject to the power passes to the persons who would have taken the property had the power not been conferred.
(Act 2006-216, p. 314, §1.)
A trust not created by will is validly created if its creation complies with the law of the jurisdiction in which the trust instrument was executed, or the law of the jurisdiction in which, at the time of creation:
(1) the settlor was domiciled, had a place of abode, or was a national;
(2) a trustee was domiciled or had a place of business; or
(3) any trust property was located.
(Act 2006-216, p. 314, §1.)
A trust may be created only to the extent its purposes are lawful, not contrary to public policy, and possible to achieve. A trust and its terms must be for the benefit of its beneficiaries.
(Act 2006-216, p. 314, §1.)
(a) A charitable trust may be created for the relief of poverty, the advancement of education or religion, the promotion of health, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community.
(b) If the terms of a charitable trust do not indicate a particular charitable purpose or beneficiary, then the court may select one or more charitable purposes or beneficiaries. The selection must be consistent with the settlor’s intention to the extent it can be ascertained.
(c) The settlor of a charitable trust, among others, may maintain a proceeding to enforce the trust.
(Act 2006-216, p. 314, §1.)
A trust is void to the extent its creation was induced by fraud, duress, or undue influence.
(Act 2006-216, p. 314, §1.)
Except as required by a statute other than this chapter, a trust need not be evidenced by a trust instrument, but the creation of an oral trust and its terms may be established only by clear and convincing evidence.
(Act 2006-216, p. 314, §1.)
(a) A trust may be created to provide for the care of an animal alive during the settlor’s lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor’s lifetime, upon the death of the last surviving animal.
(b) A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court. A person having an interest in the welfare of the animal may request the court to appoint a person to enforce the trust or to remove a person appointed.
(c) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor’s successors in interest.
(Act 2006-216, p. 314, §1.)
Except as otherwise provided in Section 19-3B-408 or by another statute, the following rules apply:
(1) A trust may be created for a noncharitable purpose without a definite or definitely ascertainable beneficiary or for a noncharitable but otherwise valid purpose to be selected by the trustee. The trust may not be enforced for more than 21 years.
(2) A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court.
(3) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor’s successors in interest.
(Act 2006-216, p. 314, §1.)
(a) In addition to the methods of termination prescribed by Sections 19-3B-411 through 19-3B-414, a trust terminates to the extent the trust is revoked or expires pursuant to its terms, no purpose of the trust remains to be achieved, or the purposes of the trust have become unlawful, contrary to public policy, or impossible to achieve.
(b) A proceeding to approve or disapprove a proposed modification or termination under Sections 19-3B-411 through 19-3B-416, or trust combination or division under Section 19-3B-417, may be commenced by a trustee or beneficiary. The settlor of a charitable trust may maintain a proceeding to modify the trust under Section 19-3B-413.
(Act 2006-216, p. 314, §1.)
(a) If, upon petition, the court finds that the settlor and all beneficiaries consent to the modification or termination of an irrevocable trust, the court shall enter an order approving the modification or termination even if the modification or termination is inconsistent with a material purpose of the trust. A settlor’s power to consent to a trust’s modification or termination may be exercised by an agent under a power of attorney only to the extent expressly authorized by the power of attorney or the terms of the trust; by the settlor’s conservator with the approval of the court supervising the conservatorship if an agent is not so authorized; or by the settlor’s guardian with the approval of the court supervising the guardianship if an agent is not so authorized and a conservator has not been appointed.
(b) A noncharitable irrevocable trust may be terminated upon consent of all of the beneficiaries if the court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust. A noncharitable irrevocable trust may be modified upon consent of all of the beneficiaries if the court concludes that modification is not inconsistent with a material purpose of the trust.
(c) A spendthrift provision in the terms of the trust is not presumed to constitute a material purpose of the trust. This subsection applies only to irrevocable trusts created on or after January 1, 2007, and to revocable trusts which become irrevocable on or after January 1, 2007.
(d) Upon termination of a trust under subsection (a) or (b), the trustee shall distribute the trust property as agreed by the beneficiaries.
(e) If not all of the beneficiaries consent to a proposed modification or termination of the trust under subsection (a) or (b), then the modification or termination may be approved by the court if the court is satisfied that:
(1) if all of the beneficiaries had consented, the trust could have been modified or terminated under this section; and
(2) the interests of a beneficiary who does not consent will be adequately protected.
(Act 2006-216, p. 314, §1.)
(a) The court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the modification must be made in accordance with the settlor’s probable intention.
(b) The court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust’s administration.
(c) Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in subsection (b), if a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful:
(1) the trust does not fail, in whole or in part;
(2) the trust property does not revert to the settlor or the settlor’s successors in interest; and
(3) the court may apply cy pres to modify or terminate the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner consistent with the settlor’s charitable purposes.
(b) A provision in the terms of a charitable trust that would result in distribution of the trust property to a noncharitable beneficiary prevails over the power of the court under subsection (a) to apply cy pres to modify or terminate the trust only if, when the provision takes effect:
(1) the trust property is to revert to the settlor and the settlor is still living; or
(2) fewer than 21 years have elapsed since the date of the trust’s creation.
(Act 2006-216, p. 314, §1.)
(a) Subject to subsection (e), after notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value less than one hundred thousand dollars ($100,000) may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration.
(b) The court may modify or terminate a trust or remove the trustee and appoint a different trustee if the court determines that the value of the trust property is insufficient to justify the cost of administration.
(c) Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.
(d) This section does not apply to an easement for conservation or preservation.
(e)(1) The dollar amount provided in subsection (a) shall apply to any trust consisting of trust property during the 2023 calendar year.
(2)a. Beginning January 1, 2024, the dollar amount described in subsection (a) shall be increased or decreased if the Consumer Price Index (C.P.I.) for the calendar year immediately preceding the year of value determination exceeds or is less than the reference base index.
b. The amount of any increase or decrease shall be computed by multiplying each dollar amount by the percentage by which the C.P.I. for the calendar year immediately preceding the value determination exceeds or is less than the reference base index.
c. If any increase or decrease produced by the computation is not a multiple of one hundred dollars ($100), the increase or decrease shall either be rounded down if there is an increase, or rounded up if there is a decrease, to the next multiple of one hundred dollars ($100).
d. If the C.P.I. for the 2022 calendar year is changed by the Bureau of Labor Statistics, the reference base index shall be revised using the rebasing factor reported by the Bureau of Labor Statistics, or other comparable data if a rebasing factor is not reported.
e. On or before February 1, 2024, and on or before February 1 of each succeeding calendar year thereafter, the State Treasurer shall publish a cumulative list, beginning with the dollar amounts effective for value determination of a trust consisting of trust property for the 2023 calendar year, of the dollar amount as increased or decreased under this section.
f. As used in this section, the following terms have the following meanings:
CONSUMER PRICE INDEX or C.P.I. The Consumer Price Index for All Urban Consumers (CPI-U) reported by the Bureau of Labor Statistics of the United States Department of Labor or, if the index is discontinued, an equivalent index reported by a federal authority. If no such index is reported, the term means the substitute index chosen by the State Treasurer.
REFERENCE BASE INDEX. The C.P.I. for the 2022 calendar year.
(Act 2006-216, p. 314, §1; Act 2023-176, §1.)
The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intention if it is proved by clear and convincing evidence that both the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.
(Act 2006-216, p. 314, §1.)
To achieve the settlor’s tax objectives, the court may modify the terms of a trust in a manner that is not contrary to the settlor’s probable intention. The court may provide that the modification has retroactive effect.
(Act 2006-216, p. 314, §1.)
After notice to the qualified beneficiaries, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts, if the result does not impair rights of any beneficiary or adversely affect achievement of the purposes of the trust.
(Act 2006-216, p. 314, §1.)
To the extent a beneficiary’s interest is not subject to a spendthrift provision, the court may authorize a creditor or assignee of the beneficiary to reach the beneficiary’s interest by attachment of present or future distributions to or for the benefit of the beneficiary or other means. The court may limit the award to such relief as is appropriate under the circumstances.
(Act 2006-216, p. 314, §1.)
(a) A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer of a beneficiary’s interest.
(b) A term of a trust providing that the interest of a beneficiary is held subject to a “spendthrift trust,” or words of similar import, is sufficient to restrain both voluntary and involuntary transfer of the beneficiary’s interest.
(c) A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision and, except as otherwise provided in this article, a creditor or assignee of the beneficiary may not reach the interest or a distribution by the trustee before its receipt by the beneficiary.
(Act 2006-216, p. 314, §1.)
(a) In this section, “child” includes any person for whom an order or judgment for child support has been entered in this or another state.
(b) A spendthrift provision is unenforceable against:
(1) a beneficiary’s child, spouse, or former spouse who has a judgment or court order against the beneficiary for support or maintenance;
(2) a judgment creditor who has provided services for the protection of a beneficiary’s interest in the trust; and
(3) a claim of this state or the United States to the extent a statute of this state or federal law so provides.
(c) A claimant against whom a spendthrift provision cannot be enforced may obtain from a court an order attaching present or future distributions to or for the benefit of the beneficiary. The court may limit the award to such relief as is appropriate under the circumstances.
(Act 2006-216, p. 314, §1.)
(a) In this section, the terms “child”, “spouse”, or “former spouse” include any person for whom an order or judgment for child or spousal support has been entered in this or another state.
(b) Except as otherwise provided in subsection (c), whether or not a trust contains a spendthrift provision, a creditor of a beneficiary may not compel a distribution that is subject to the trustee’s discretion, even if:
(1) the discretion is expressed in the form of a standard of distribution; or
(2) the trustee has abused the discretion.
(c) To the extent a trustee has not complied with a standard of distribution or has abused a discretion:
(1) a distribution may be ordered by the court to satisfy a judgment or court order against the beneficiary for support or maintenance of the beneficiary’s child, spouse, or former spouse; and
(2) the court shall direct the trustee to pay to the child, spouse, or former spouse such amount as is equitable under the circumstances but not more than the amount the trustee would have been required to distribute to or for the benefit of the beneficiary had the trustee complied with the standard or not abused the discretion.
(d) This section does not limit the right of a beneficiary to maintain a judicial proceeding against a trustee for an abuse of discretion or failure to comply with a standard for distribution.
(e) A creditor may not reach the interest of a beneficiary who is also a trustee or co-trustee, or otherwise compel a distribution, if the trustee’s discretion to make distributions for the trustee’s own benefit is limited by an ascertainable standard.
(Act 2006-216, p. 314, §1.)
AMENDED BY ACT 2026-584, EFFECTIVE OCTOBER 1, 2026. SEE ACT FOR REVISED LANGUAGE. (a) Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:
(1) During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors.
(2) With respect to an irrevocable trust, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor’s benefit. If a trust has more than one settlor, then the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor’s interest in the portion of the trust attributable to that settlor’s contribution.
(3) After the death of a settlor, and subject to the settlor’s right to direct the source from which liabilities will be paid, the property of a trust that was revocable immediately prior to the settlor’s death is subject to claims of the settlor’s creditors, costs of administration of the settlor’s estate, the expenses of the settlor’s funeral and disposal of remains, and homestead allowance, exempt property and family allowance to a surviving spouse and children to the extent the settlor’s probate estate is inadequate to satisfy those claims, costs, expenses, and homestead allowance, exempt property and family allowance.
(b) With respect to claims, expenses, and taxes in connection with the settlement of a trust that was revocable at the settlor’s death:
(1) Any claim of a creditor which would be barred against the fiduciary of a decedent’s estate, the estate of the decedent, or any creditor or beneficiary of the decedent’s estate, shall be barred against the trustee, the trust property, and the creditors and beneficiaries of the trust.
(2) A trustee at any time may give notice to any person the trustee has reason to believe may have a claim against the settlor at death. The notice shall contain the name and address of the trustee to whom the claim must be presented. If the person fails to present the claim in writing within 90 days from the date of the notice, then the person shall be forever barred from asserting or recovering on the claim from the trustee, the trust property and the creditors and beneficiaries of the trust. Any person who presents a claim on or before the date specified in the notice may not later increase the claim following the expiration of the 90-day period.
(3) If a claim is not presented in writing to the personal representative of the settlor’s estate or to the trustee (i) within six months from the date of the appointment of the initial personal representative of the settlor’s estate, or (ii) if no personal representative is appointed within six months from the settlor’s date of death and a claim is not presented in writing to the trustee within six months from the settlor’s date of death, then no trustee shall be chargeable for any assets that the trustee may pay or distribute in good faith in satisfaction of any lawful claims, expenses, or taxes or to any beneficiary before the claim was presented. A payment or distribution of assets by a trustee shall be deemed to have been made in good faith unless the creditor can prove that the trustee had actual knowledge of the claim at the time of the payment or distribution. The six-month period shall not be interrupted or affected by the death, resignation, or removal of a trustee, except that the time during which there is no trustee in office shall not be counted as part of the period.
(4) The provisions of Section 43-2-371 dealing with the priority of payment of claims, expenses, and taxes from the probate estate of a decedent shall apply to a revocable trust to the extent the assets of the decedent’s probate estate are inadequate.
(c) For purposes of this section:
(1) during the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power; and
(2) upon the lapse, release, or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the amount specified in Section 2041(b)(2), 2503(b), or 2514(e) of the Internal Revenue Code of 1986, in each case as in effect on January 1, 2007, or as later amended.
(Act 2006-216, p. 314, §1.)
(a) In this section, “mandatory distribution” means a distribution of income or principal that the trustee is required to make to a beneficiary under the terms of the trust, including a distribution upon termination of the trust. The term excludes a distribution subject to the exercise of the trustee’s discretion regardless of whether the terms of the trust (i) include a support or other standard to guide the trustee in making distribution decisions or (ii) provide that the trustee “may” or “shall” make discretionary distributions, including distributions pursuant to a support or other standard.
(b) Whether or not a trust contains a spendthrift provision, a creditor or assignee of a beneficiary may compel a mandatory distribution of income or principal to a beneficiary, including a distribution upon termination of the trust, if the trustee has not made the distribution to the beneficiary within a reasonable time after the mandated distribution date.
(Act 2006-216, p. 314, §1.)
Trust property is not subject to personal obligations of the trustee, even if the trustee becomes insolvent or bankrupt.
(Act 2006-216, p. 314, §1.)
(a) As used in this section:
(1) ASSIGNMENT or ALIENATION, and any conjugation thereof, includes any anticipation, assignment at law or in equity, alienation, attachment, garnishment, levy, execution, or other legal or equitable process. The term includes: (i) any arrangement providing for the payment to the employer or other sponsor of such plan of benefits that otherwise would be due the participant under the plan; (ii) any direct or indirect arrangement, whether revocable or irrevocable, whereby any person acquires from a participant or beneficiary of such plan a right or interest enforceable against the plan in, or to, all or any part of a plan benefit which is, or may become, payable to the participant or beneficiary; (iii) any attachment, execution, seizure, or the like, or under any form of legal process whatsoever; and (iv) the operation of any bankruptcy or insolvency laws under 11 U.S.C. § 522(b) as from time to time amended. Notwithstanding the foregoing, the term does not include those items excluded from the definition by Treasury Regulations § 1.401(a)-13(c)(2).
(2) CODE means the Internal Revenue Code of 1986, as from time to time amended, or as at any time superseded by reenactment, recodification, or adoption of any other similar revenue law. Reference to specific sections of the code shall include references to their successor sections as a result of renumbering or recodification at any future date.
(3) QUALIFIED ROLLOVER CONTRIBUTION means any of the following:
a. Amounts qualifying as nontaxable rollover contributions or direct transfers under Section 402(a)(5), 403(a)(4), 403(b)(8), or 403(d)(3) of the code before January 1, 1993.
b. Amounts qualifying as nontaxable rollover contributions or direct transfers under Sections 402(c), 402(e)(6), 402(f), 403(a)(4), 403(a)(5), 403(b)(8), 403(b)(10), or 408(d)(3) of the code on or after January 1, 1993.
c. Amounts treated as qualified rollover contributions under Section 408A of the code.
(4) QUALIFIED TRUST includes all trusts created or organized under Section 401(a) of the code, including, but not limited to, a trust forming part of a qualified pension plan, qualified stock bonus plan, or qualified profit sharing plan and includes any trust that would not be qualified but for this section, any trust that has received a favorable determination letter from the Internal Revenue Service of the United States Department of Treasury to the effect that such trust is, or will be upon the satisfaction of certain administrative conditions, a “qualified trust” under Section 401(a) of the code; any qualified annuity plan described in the code, including an individual retirement annuity and individual retirement account (IRA), rollover individual retirement account, an individual retirement plan defined as a Roth IRA under Section 408A of the code; simplified employee pension (SEP), savings incentive match plan for employees (SIMPLE IRA), or other individual retirement plan described in Section 408 of the code; a retirement bond described in Section 409 of the code, as in effect prior to January 1, 1984, any governmental plan described in Section 414(d) of the code; health savings accounts and church plans described in Section 414(e) of the code; a tax credit employee stock ownership plan described in Section 409 of the code; an eligible deferred compensation plan described in Section 457(b) of the code; and any other plan, contract, annuity, account, or arrangement which satisfies the requirements of Sections 401, 403(a), 404(a)(2), 408, 408A, 409, 414(d), 414(e), or 457 of the code.
(5) TREASURY REGULATION means a valid regulation of the United States Department of Treasury codified at Title 26 of the Code of Federal Regulations. References to specific Treasury Regulations include references to amendments and future reenactments or recodifications of such regulations, regardless of how designated.
(b) Except where stated otherwise in this section, benefits provided under a plan, contract, annuity, account, or arrangement which includes or constitutes a qualified trust may not be assigned or alienated, voluntarily or involuntarily, and shall be exempt from the operation of any bankruptcy or insolvency laws under 11 U.S.C. § 522(b), as from time to time amended. This subsection may not be waived by a participant or beneficiary of any qualified plan.
(c) Subsection (b) shall not apply to taxes owed to any local, state, or federal taxing authority, to a qualified domestic relations order as determined in accordance with the procedures for such determination set forth in Section 414(p) of the code and the related provisions of the Employee Retirement Income Security Act of 1974, as from time to time amended, to contributions to a qualified trust that exceed the amounts allowed under the applicable provisions of the code and any earnings thereon, unless otherwise exempt by law, or to criminal restitution orders enforced as civil judgments.
(d) The securing of a loan made to a participant or beneficiary of such a plan shall not be treated as an assignment or alienation under subsection (b) if such loan is secured by the participant’s accrued nonforfeitable benefit under the plan, contract, annuity, account, or arrangement and is exempt from the tax imposed by Section 4975 of the code by reason of Section 4975(d)(1) of the code.
(e) The protections afforded by subsection (b) shall apply to any amounts of money or other assets distributed from a qualified trust if such distribution constitutes a qualified rollover contribution.
(f) Money or other assets distributed from a qualified trust subject to restraint on assignment or alienation of benefits under subsection (b) are not subject to assignment or alienation for the greater of 60 days after the date of distribution or such additional period of time allowed by the Internal Revenue Service to effectuate a valid rollover if the contribution of such money or other assets constitutes a qualified rollover contribution.
(g) Any money or other assets in a qualified trust subject to restraint on assignment or alienation of benefits under subsection (b) cease to be exempt after the account owner’s death, except with respect to any money or other assets in a qualified trust owned or controlled by the surviving spouse of the deceased account owner.
(h) This section does not apply to the Employees’ Retirement System of Alabama, Teachers’ Retirement System of Alabama, and the Judicial Retirement Fund of Alabama.
(Act 2006-216, p. 314, §1; Act 2012-381, p. 1006, §1; Act 2017-317, §1.)
The capacity required to create, amend, revoke, or add property to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will.
(Act 2006-216, p. 314, §1.)
(a) Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust. This subsection does not apply to a trust created under an instrument executed before January 1, 2007.
(b) If a revocable trust is created or funded by more than one settlor, then:
(1) to the extent the trust consists of community property, the trust may be revoked by either spouse acting alone but may be amended only by joint action of both spouses;
(2) to the extent the trust consists of property other than community property, each settlor may revoke or amend the trust with regard to the portion of the trust property attributable to that settlor’s contribution; and
(3) upon the revocation or amendment of the trust by fewer than all of the settlors, the trustee shall promptly notify the other settlors of the revocation or amendment.
(c) The settlor may revoke or amend a revocable trust:
(1) by substantial compliance with a method provided in the terms of the trust; or
(2) if the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by:
(A) a later will or codicil that expressly refers to the trust or that specifically devises property that would otherwise have passed according to the terms of the trust; or
(B) any other method manifesting clear and convincing evidence of the settlor’s intent; provided, however, that a written revocable trust may only be amended and revoked by a later written instrument delivered to the trustee.
(d) Upon revocation of a revocable trust, the trustee shall deliver the trust property as the settlor directs.
(e) A settlor’s powers with respect to revocation, amendment, or distribution of trust property may be exercised by an agent under a power of attorney only to the extent expressly authorized by the terms of the trust.
(f) A conservator of the settlor or, if no conservator has been appointed, a guardian of the settlor may exercise a settlor’s powers with respect to revocation, amendment, or distribution of trust property only with the approval of the court supervising the conservatorship or guardianship.
(g) A trustee who does not have actual knowledge that a trust has been revoked or amended is not liable to the settlor or settlor’s successors in interest for distributions made and other actions taken on the assumption that the trust had not been amended or revoked.
(Act 2006-216, p. 314, §1.)
(a) While a trust is revocable, rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.
(b) During the period the power may be exercised, the holder of a power of withdrawal has the rights of a settlor of a revocable trust under this section to the extent of the property subject to the power.
(Act 2006-216, p. 314, §1.)
(a) A person may commence a judicial proceeding to contest the validity of all or part of the terms of a trust that was revocable at the settlor’s death within the earlier of:
(1) two years after the settlor’s death; or
(2) six months after the trustee sent the person a copy of the trust instrument and a notice informing the person of the trust’s existence, of the trustee’s name and address, and of the time allowed for commencing a proceeding.
(b) Upon the death of the settlor of a trust that was revocable at the settlor’s death, the trustee may proceed to distribute the trust property in accordance with the terms of the trust. The trustee is not subject to liability for doing so unless:
(1) the trustee has actual knowledge of a pending judicial proceeding contesting the validity of all or part of the terms of the trust; or
(2) if, prior to the trustee’s actual distribution, a potential contestant has notified the trustee of a possible judicial proceeding to contest the trust and a judicial proceeding is commenced within 60 days after the contestant sent the notification.
(c) A beneficiary of a trust that is determined to have been invalid in whole or in part is liable to return any distribution received to the extent that the invalidity applies to the distribution.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in subsection (c), a person designated as trustee accepts the trusteeship:
(1) by substantially complying with a method of acceptance provided in the terms of the trust; or
(2) if the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by accepting delivery of the trust property, exercising powers or performing duties as trustee, or otherwise indicating acceptance of the trusteeship.
(b) A person designated as trustee who has not yet accepted the trusteeship may reject the trusteeship. A designated trustee who does not accept the trusteeship within a reasonable time after knowing of the designation is deemed to have rejected the trusteeship.
(c) A person designated as trustee, without accepting the trusteeship, may:
(1) act to preserve the trust property if, within a reasonable time after acting, the person sends a rejection of the trusteeship to the settlor or, if the settlor is dead or lacks capacity, to a qualified beneficiary; and
(2) inspect or investigate trust property to determine potential liability under environmental or other law or for any other purpose.
(Act 2006-216, p. 314, §1.)
(a) A trustee shall give bond to secure performance of the trustee’s duties only if the court finds that a bond is needed to protect the interests of the beneficiaries or is required by the terms of the trust and the court has not dispensed with the requirement.
(b) The court may specify the amount of a bond, its liabilities, and whether sureties are necessary. The court may modify or terminate a bond at any time.
(Act 2006-216, p. 314, §1.)
(a) Co-trustees who are unable to reach a unanimous decision after consultation among all the co-trustees may act by majority decision.
(b) If a vacancy occurs in a co-trusteeship, then the remaining co-trustees may act for the trust.
(c) A co-trustee must participate in the performance of a trustee’s function and consult with the other co-trustees unless the co-trustee is unavailable to perform the function because of absence, illness, disqualification under other law, or other temporary incapacity or the co-trustee has properly delegated the performance of the function to another trustee.
(d) If a co-trustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity, and prompt action is necessary to achieve the purposes of the trust or to avoid injury to the trust property, then the remaining co-trustee or a majority of the remaining co-trustees may act for the trust.
(e) A trustee may delegate to a co-trustee the performance of any function other than a function that the terms of the trust expressly require the trustees to perform jointly. Unless a delegation was irrevocable, a trustee may revoke a delegation previously made.
(f) Except as otherwise provided in subsection (g), a trustee who does not join in an action of another trustee is not liable for the action.
(g) Each trustee shall exercise reasonable care to: (i) prevent a co-trustee from committing a serious breach of trust; and (ii) compel a co-trustee to redress a serious breach of trust.
(h) A dissenting trustee who joins in an action at the direction of the majority of the trustees and who notified any co-trustee of the dissent at or before the time of the action is not liable for the action unless the action is a serious breach of trust.
(Act 2006-216, p. 314, §1.)
(a) A vacancy in a trusteeship occurs if:
(1) a person designated as trustee rejects the trusteeship;
(2) a person designated as trustee cannot be identified or does not exist;
(3) a trustee resigns;
(4) a trustee is disqualified or removed;
(5) a trustee dies; or
(6) a guardian or conservator is appointed for an individual serving as trustee.
(b) If one or more co-trustees remain in office, then a vacancy in a trusteeship need not be filled. A vacancy in a trusteeship must be filled if the trust has no remaining trustee.
(c) A vacancy in a trusteeship of a noncharitable trust that is required to be filled must be filled in the following order of priority:
(1) by a person designated in the terms of the trust to act as successor trustee;
(2) by a person appointed by unanimous agreement of the adult qualified beneficiaries and any entity which is a qualified beneficiary; or
(3) by a person appointed by the court.
(d) A vacancy in a trusteeship of a charitable trust that is required to be filled must be filled in the following order of priority:
(1) by a person designated in the terms of the trust to act as successor trustee;
(2) by a person selected by the charitable organizations expressly designated to receive distributions under the terms of the trust; or
(3) by a person appointed by the court.
(e) A vacancy in a trusteeship of a trust that is both noncharitable and charitable and that is required to be filled must be filled in the following order of priority:
(1) by a person designated in the terms of the trust to act as successor trustee;
(2) by a person appointed by unanimous agreement of the adult qualified beneficiaries, any entity which is a qualified beneficiary and the charitable organizations expressly designated to receive distributions under the terms of the trust; or
(3) by a person appointed by the court.
(f) If a person is acting as the sole trustee of a trust and if there is no provision in the trust for a successor trustee, then the sole trustee and the adult qualified beneficiaries, by unanimous written agreement, may designate a successor trustee, which shall become trustee of the trust upon the vacancy in the trusteeship. The agreement may be recorded in the probate court or filed in the records of the trust.
(g) Whether or not a vacancy in a trusteeship exists or is required to be filled, the court may appoint an additional trustee or special fiduciary whenever the court considers the appointment necessary for the administration of the trust.
(Act 2006-216, p. 314, §1.)
(a) A trustee may resign:
(1) upon at least 30 days’ notice to the qualified beneficiaries, the settlor, if living, and all co-trustees; or
(2) with the approval of the court.
(b) In approving a resignation, the court may issue orders and impose conditions reasonably necessary for the protection of the trust property.
(c) Any liability of a resigning trustee or of any sureties on the trustee’s bond for acts or omissions of the trustee is not discharged or affected by the trustee’s resignation.
(Act 2006-216, p. 314, §1.)
(a) The settlor, a co-trustee, or a beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on its own initiative.
(b) The court may remove a trustee if:
(1) the trustee has committed a serious breach of trust;
(2) lack of cooperation among co-trustees substantially impairs the administration of the trust;
(3) because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; or
(4)(A) there has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries;
(B) the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust; and
(C) a suitable co-trustee or successor trustee is available.
(c) Pending a final decision on a request to remove a trustee, or in lieu of or in addition to removing a trustee, the court may order such appropriate relief under Section 19-3B-1001(b) as may be necessary to protect the trust property or the interests of the beneficiaries.
(Act 2006-216, p. 314, §1.)
(a) Unless a co-trustee remains in office or the court otherwise orders, and until the trust property is delivered to a successor trustee or other person entitled to it, a trustee who has resigned or been removed has:
(1) the duties of a trustee; and
(2) the powers necessary to protect the trust property.
(b) A trustee who has resigned or been removed shall proceed expeditiously to deliver the trust property within the trustee’s possession to the co-trustee, successor trustee, or other person entitled to it.
(Act 2006-216, p. 314, §1.)
(a) If the terms of a trust do not specify the trustee’s compensation, then a trustee is entitled to compensation that is reasonable under the circumstances.
(b) If the terms of a trust specify the trustee’s compensation, the trustee has entered into a written fee agreement with the settlor, or the trustee has entered into a written fee agreement with the adult current permissible distributees of income and, in the event the trustee’s compensation is allocated to principal, the adult presumptive remainder beneficiaries of the trust, then the trustee is entitled to be compensated as specified in the applicable agreement, but the court may allow more or less compensation if:
(1) the duties of the trustee are substantially different from those contemplated when the trust was created or when the applicable agreement was executed; or
(2) the compensation specified by the terms of the trust or the applicable agreement would be unreasonably low or high.
(c) A trustee who invests in any common trust fund or other collective investment fund maintained by any regulated financial institution, or securities of, or other interests in any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, as from time to time amended, to which the trustee, or its affiliate, provides services such as investment advisor, sponsor, distributor, custodian, transfer agent, registrar, broker, or otherwise, may be compensated by the investment company or investment trust for providing those services out of fees charged to the investment company or the investment trust or to the trust, if the trustee at least annually notifies the persons entitled under Section 19-3B-813(a) to receive a copy of the trustee’s annual report, prospectus, or other report, of the rate and method by which the compensation was determined.
(d) Compensation paid to a business entity affiliated with the trustee shall be presumed to be reasonable if the compensation is consistent with the published fee schedule maintained by the affiliated business entity in the ordinary course of business.
(Act 2006-216, p. 314, §1.)
(a) A trustee is entitled to be reimbursed out of the trust property, with interest as appropriate for:
(1) expenses that were properly incurred in the administration of the trust, including the defense or prosecution of any action, whether successful or not, unless the trustee is determined to have willfully or wantonly committed a material breach of the trust; and
(2) to the extent necessary to prevent unjust enrichment of the trust, expenses that were not properly incurred in the administration of the trust.
(b) An advance by the trustee of money for the protection of the trust gives rise to a lien against trust property to secure reimbursement with reasonable interest.
(Act 2006-216, p. 314, §1.)
Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with the terms of the trust and its purposes and the interests of the beneficiaries, and in accordance with this chapter.
(Act 2006-216, p. 314, §1.)
(a) A trustee shall administer the trust solely in the interests of the beneficiaries.
(b) Subject to the rights of persons dealing with or assisting the trustee as provided in Section 19-3B-1012, a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee’s own personal account or which is otherwise affected by a conflict between the trustee’s fiduciary and personal interests is voidable by a beneficiary affected by the transaction unless:
(1) the transaction was authorized by the terms of the trust;
(2) the transaction was approved by the court;
(3) the beneficiary did not commence a judicial proceeding within the time allowed by Section 19-3B-1005;
(4) the beneficiary consented to the trustee’s conduct, ratified the transaction, or released the trustee in compliance with Section 19-3B-1009; or
(5) the transaction involves a contract entered into or claim acquired by the trustee before the person became or contemplated becoming trustee.
(c) A sale, encumbrance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests if it is entered into by the trustee with:
(1) the trustee’s spouse;
(2) the trustee’s descendants, siblings, parents, or their spouses;
(3) an agent or attorney of the trustee; or
(4) a corporation or other person or enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee’s best judgment.
(d) A transaction not concerning trust property in which the trustee engages in the trustee’s individual capacity involves a conflict between personal and fiduciary interests if the transaction concerns an opportunity properly belonging to the trust.
(e) A trustee that is a regulated financial institution may engage in transactions with departments of the institution, with related affiliates of the institution, or other business entities of the institution. Transactions are not presumed to be affected by a conflict of interest between a trustee’s personal and fiduciary interests provided that the transaction and any investment made pursuant to the transaction otherwise complies with the Prudent Investor Rule of Article 9. Transactions may include, but not be limited to, the following:
(1) investment by a trustee in securities of, or other interests in, any entity to which the trustee, or its affiliates, provides services, including, without limitation, any common trust fund or other collective investment fund maintained by any regulated financial institution, any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, as from time to time amended, (the “Investment Company Act”), or any entity that is exempt from the definition of investment company by Section 3(c) of the Investment Company Act;
(2) an investment by a trustee in an insurance contract purchased from an insurance agency owned by or affiliated with the trustee or its affiliate;
(3) the placing of securities transactions by a trustee through a securities broker-dealer that is a part of the same company as the trustee, is owned by the trustee, or is affiliated with the trustee;
(4) the borrowing of funds or entering into any lending relationship by a trustee with a related department or its affiliate company; and
(5) the purchase of bonds for which the trustee in another capacity performed services as underwriter of the bonds or participates in the distribution of the bonds. If the trustee receives compensation for any transaction described in this subsection in addition to fees charged to the trust, or from the affiliate business entity, then the trustee must at least annually notify the persons entitled under Section 19-3B-813(a) to receive a copy of the trustee’s annual report, prospectus, or other report, of the rate and method by which the compensation was determined.
(f) In other forms of enterprise, the trustee shall act in the best interests of the beneficiaries. If the trust is the sole owner of a corporation or other form of enterprise, then the trustee shall elect or appoint directors or other managers who will manage the corporation or enterprise in the best interests of the beneficiaries.
(g) This section does not preclude the following transactions, if fair to the beneficiaries:
(1) an agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee;
(2) payment of reasonable compensation to the trustee;
(3) a transaction between a trust and another trust, decedent’s estate, or conservatorship of which the trustee is a fiduciary or in which a beneficiary has an interest;
(4) a deposit of trust money in a regulated financial-service institution operated by the trustee; or
(5) an advance by the trustee of money for the protection of the trust and for any or all expenses, losses, and liabilities sustained in the administration of the trust or as a result of the holding or ownership of any asset by the trust.
(h) The court may appoint a special fiduciary to make a decision with respect to any proposed transaction that might violate this section if entered into by the trustee.
(Act 2006-216, p. 314, §1.)
If a trust has two or more beneficiaries, then the trustee shall act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries’ respective interests and the purposes of the trust.
(Act 2006-216, p. 314, §1.)
A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distributional requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
(Act 2006-216, p. 314, §1.)
In administering a trust, the trustee may incur costs that are reasonable in relation to the trust property, the purposes of the trust, and the skills of the trustee.
(Act 2006-216, p. 314, §1.)
A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee’s representation that the trustee has special skills or expertise, shall use those special skills or expertise.
(Act 2006-216, p. 314, §1.)
(a) A trustee may delegate duties and powers that a prudent trustee could properly delegate under the circumstances. The trustee shall exercise reasonable care, skill, and caution in:
(1) selecting an agent;
(2) establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and
(3) periodically reviewing the agent’s actions in order to monitor the agent’s performance and compliance with the terms of the delegation.
(b) In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care, skill, and caution to comply with the terms of the delegation.
(c) A trustee who complies with subsection (a) is not liable to the beneficiaries or to the trust for an action of the agent to whom the function was delegated.
(d) By accepting a delegation of powers or duties from the trustee of a trust that is subject to the law of this state, an agent submits to the jurisdiction of the courts of this state.
(Act 2006-216, p. 314, §1.)
(a) While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to the terms of the trust.
(b) If the terms of a trust confer upon a person other than the settlor of a revocable trust power to direct certain actions of the trustee, then the trustee shall act in accordance with an exercise of the power unless the attempted exercise is manifestly contrary to the terms of the trust or the trustee knows the attempted exercise would constitute a serious breach of a fiduciary duty that the person holding the power owes to the beneficiaries of the trust.
(c) The terms of a trust may confer upon a trustee or other person a power to direct the modification or termination of the trust.
(d) A person, other than a beneficiary, who holds a power to direct is presumptively a fiduciary who, as such, is required to act in good faith with regard to the purposes of the trust and the interests of the beneficiaries. The holder of a power to direct is liable for any loss that results from breach of a fiduciary duty.
(Act 2006-216, p. 314, §1.)
A trustee shall take reasonable steps to take control of and protect the trust property.
(Act 2006-216, p. 314, §1.)
(a) A trustee shall keep adequate records of the administration of the trust.
(b) A trustee shall keep trust property separate from the trustee’s own property.
(c) Except as otherwise provided in subsection (d), a trustee shall cause the trust property to be designated so that the interest of the trust, to the extent feasible, appears in records maintained by a party other than a trustee or beneficiary.
(d) If the trustee maintains records clearly indicating the respective interests, then a trustee may invest as a whole the property of two or more separate trusts.
(Act 2006-216, p. 314, §1.)
A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.
(Act 2006-216, p. 314, §1.)
A trustee shall take reasonable steps to compel a former trustee or other person to deliver trust property to the trustee, and to redress a breach of trust known to the trustee to have been committed by a former trustee.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in Section 19-3B-603, the following rules apply:
(1) A trustee shall keep the current permissible distributees of income or principal of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.
(2) Unless unreasonable under the circumstances, a trustee shall promptly respond to a qualified beneficiary’s request for information related to the administration of the trust.
(b) A trustee:
(1) upon request of a beneficiary, shall promptly furnish to the beneficiary a copy of the trust instrument;
(2) within 60 days after accepting a trusteeship, shall notify the qualified beneficiaries of the acceptance and of the trustee’s name, address, and telephone number;
(3) within 60 days after accepting the trusteeship of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, shall notify the qualified beneficiaries of the trust’s existence, of the identity of the settlor or settlors, of the right to request a copy of the trust instrument, and of the right to a trustee’s most recent report as provided in subsection (c), except no notice shall be required to be given to any beneficiary of a split interest charitable trust whose interest is not irrevocable until that beneficiary’s interest becomes that of a current permissible distributee; and
(4) shall notify the current permissible distributees of income or principal of the trust in advance of any change in the method or rate of the trustee’s compensation.
(c) A trustee shall send to the distributees or permissible distributees of trust income or principal, and to other qualified or nonqualified beneficiaries who request it, at least annually, a report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets and, if feasible, their respective market values, and, upon termination of the trust, a final report commencing with the date of the most recent annual report through the last transaction of the trust. Upon a vacancy in a trusteeship, unless a co-trustee remains in office, a report must be sent to the qualified beneficiaries by the former trustee. A personal representative, conservator, or guardian may send the qualified beneficiaries a report on behalf of a deceased or incapacitated trustee.
(d) A beneficiary may waive the right to a trustee’s report or other information otherwise required to be furnished under this section. A beneficiary, with respect to future reports and other information, may withdraw a waiver previously given.
(e) Subsection (b)(2) and subsection (b)(3) shall apply only to trustees who accept a trusteeship on or after January 1, 2007, to irrevocable trusts created on or after January 1, 2007, and to revocable trusts which become irrevocable on or after January 1, 2007.
(Act 2006-216, p. 314, §1.)
(a) Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of such terms as “absolute,” “sole,” or “uncontrolled,” the trustee shall exercise a discretionary power in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.
(b) Subject to subsection (d), and unless the terms of the trust expressly indicate that a rule in this subsection does not apply:
(1) a person other than a settlor who is a beneficiary and trustee of a trust that confers on the trustee a power to make discretionary distributions to or for the trustee’s personal benefit may exercise the power only in accordance with an ascertainable standard; and
(2) a trustee may not exercise a power to make discretionary distributions to satisfy a legal obligation of support that the trustee personally owes another person.
(c) A power whose exercise is limited or prohibited by subsection (b) may be exercised by a majority of the remaining trustees whose exercise of the power is not so limited or prohibited. If the power of all trustees is so limited or prohibited, then the court may appoint a special fiduciary with authority to exercise the power.
(d) Subsection (b) does not apply to:
(1) a power held by the settlor’s spouse who is the trustee of a trust for which a marital deduction, as defined in Section 2056(b)(5) or 2523(e) of the Internal Revenue Code of 1986, as in effect on January 1, 2007, or as later amended, was previously allowed;
(2) any trust during any period that the trust may be revoked or amended by its settlor; or
(3) a trust if contributions to the trust qualify for the annual exclusion under Section 2503(c) of the Internal Revenue Code of 1986, as in effect on January 1, 2007, or as later amended.
(Act 2006-216, p. 314, §1.)
(a) A trustee, without authorization by the court, may exercise:
(1) powers conferred by the terms of the trust; and
(2) except as limited by the terms of the trust:
(A) all powers over the trust property which an unmarried competent owner has over individually owned property;
(B) any other powers appropriate to achieve the proper investment, management, and distribution of the trust property; and
(C) any other powers conferred by this chapter.
(b) The exercise of a power is subject to the fiduciary duties prescribed by this article.
(Act 2006-216, p. 314, §1.)
AMENDED BY ACT 2026-584, EFFECTIVE OCTOBER 1, 2026. SEE ACT FOR REVISED LANGUAGE.
(a) Without limiting the authority conferred by Section 19-3B-815, a trustee may:
(1) collect trust property and accept or reject additions to the trust property from a settlor or any other person, including, but not being limited to, the authority to receive, collect, hold, and retain common or preferred stock or other interests in the trustee or any related party;
(2) acquire or sell property, for cash or on credit, at public or private sale;
(3) exchange, partition, or otherwise change the character of trust property;
(4) deposit trust money in an account in a regulated financial-service institution;
(5) borrow money, with or without security, and mortgage or pledge trust property for a period within or extending beyond the duration of the trust;
(6) with respect to an interest in a proprietorship, partnership, limited liability company, business trust, corporation, or other form of business or enterprise, continue the business or other enterprise and take any action that may be taken by shareholders, members, or property owners, including merging, dissolving, or otherwise changing the form of business organization or contributing additional capital;
(7) with respect to stocks or other securities, exercise the rights of an absolute owner, including the right to:
(A) vote, or give proxies to vote, with or without power of substitution, or enter into or continue a voting trust agreement;
(B) hold a security in the name of a nominee or in other form without disclosure of the trust so that title may pass by delivery;
(C) pay calls, assessments, and other sums chargeable or accruing against the securities, and sell or exercise stock subscription or conversion rights; and
(D) deposit the securities with a depositary or other regulated financial-service institution;
(8) with respect to an interest in real property, construct, or make ordinary or extraordinary repairs to, alterations to, or improvements in, buildings or other structures, demolish improvements, raze existing or erect new party walls or buildings, subdivide or develop land, dedicate land to public use or grant public or private easements, and make or vacate plats and adjust boundaries;
(9) enter into a lease for any purpose as lessor or lessee, including a lease or other arrangement for exploration and removal of natural resources, with or without the option to purchase or renew, for a period within or extending beyond the duration of the trust;
(10) grant an option involving a sale, lease, or other disposition of trust property or acquire an option for the acquisition of property, including an option exercisable beyond the duration of the trust, and exercise an option so acquired;
(11) insure the property of the trust against damage or loss and insure the trustee, the trustee’s agents, and beneficiaries against liability arising from the administration of the trust;
(12) abandon or decline to administer property of no value or of insufficient value to justify its collection or continued administration;
(13) with respect to environmental law, exercise those powers granted a fiduciary by applicable law;
(14) pay or contest any claim, settle a claim by or against the trust, and release, in whole or in part, a claim belonging to the trust;
(15) pay taxes, assessments, compensation of the trustee and of employees and agents of the trust, and other expenses incurred in the administration of the trust;
(16) exercise elections with respect to federal, state, and local taxes;
(17) select a mode of payment under any employee benefit or retirement plan, annuity, or life insurance payable to the trustee, exercise rights thereunder, including exercise of the right to indemnification for expenses and against liabilities, and take appropriate action to collect the proceeds;
(18) make loans out of trust property, including loans to a beneficiary on terms and conditions the trustee considers to be fair and reasonable under the circumstances, and the trustee has a lien on future distributions for repayment of those loans;
(19) pledge trust property to guarantee loans made by others to the beneficiary;
(20) appoint a trustee to act in another jurisdiction with respect to trust property located in the other jurisdiction, confer upon the appointed trustee all of the powers and duties of the appointing trustee, require that the appointed trustee furnish security, and remove any trustee so appointed;
(21)(A) pay an amount distributable to a beneficiary who is under a legal disability or who the trustee reasonably believes is incapacitated, by paying it directly to the beneficiary or applying it for the beneficiary’s benefit, or by:
paying it to the beneficiary’s conservator or, if the beneficiary does not have a conservator, the beneficiary’s guardian;
paying it to the beneficiary’s custodian under the Uniform Transfers to Minors Act or custodial trustee under the Uniform Custodial Trust Act, and, for that purpose, creating a custodianship or custodial trust;
if the trustee does not know of a conservator, guardian, custodian, or custodial trustee, paying it to an adult relative or other person having legal or physical care or custody of the beneficiary, to be expended on the beneficiary’s behalf; or
managing it as a separate fund on the beneficiary’s behalf, subject to the beneficiary’s continuing right to withdraw the distribution.
(B) the trustee shall not be under any duty to see to the application of the payment made pursuant to subparagraphs 1. to 4. above, so made if the trustee acted as a prudent person in the selection of the person, including the minor or incompetent, to whom the payments were made; and the receipt of the person shall be full acquittance to the trustee.
(22) on distribution of trust property or the division or termination of a trust, make distributions in divided or undivided interests, allocate particular assets in proportionate or disproportionate shares, value the trust property for those purposes, and adjust for resulting differences in valuation;
(23) resolve a dispute concerning the interpretation of the trust or its administration by mediation, arbitration, or other procedure for alternative dispute resolution and to employ counsel, expert witnesses, or other agents;
(24) prosecute or defend an action, claim, or judicial proceeding in any jurisdiction to protect trust property and the trustee in the performance of the trustee’s duties and to employ counsel, expert witnesses, or other agents;
(25) sign and deliver contracts and other instruments that are useful to achieve or facilitate the exercise of the trustee’s powers;
(26) on termination of the trust, exercise the powers appropriate to wind up the administration of the trust and distribute the trust property to the persons entitled to it;
(27) create or join in the creation of a joint venture, partnership, limited liability company, business trust, corporation, or other form of business or enterprise, continue the business or other enterprise and take any action that may be taken by shareholders, members, or property owners, including merging, dissolving, or otherwise changing the form of business organization or contributing additional capital;
(28) employ and compensate persons deemed by the trustee needful to advise or assist in the proper management and administration of the trust, including, but not limited to, agents, auditors, including public accountants, certified public accountants or internal auditors, brokers, attorneys-at-law, attorneys-in-fact, investment bankers, investment advisors, rental agents, realtors, appraisers, and tax specialists, including any related party, so long as the relationship and the fees charged are reasonable and disclosed in any reasonable manner to the current beneficiaries; and to do so without liability for any neglect, omission, misconduct, or default of the agent or representative, provided the trustee acted as a prudent person in selecting and monitoring the agent or representative. For purposes of the immediately preceding sentence, compensation charged by or paid to an affiliated business entity shall be presumed to be reasonable if the compensation is consistent with the published fee schedule maintained by the affiliated business entity in the ordinary course of business;
(29) pay any and all expenses reasonably necessary for the administration of the trust including interest, taxes, insurance premiums, assessments, agents’ fees or compensation, trustees’ fees or compensation, including additional fees for extraordinary services and fees to related parties, and other expenses incurred in the collection, care, administration, and protection of the trust estate; and
(30) in addition to the investments authorized by the document or any provision of law for the investment of funds held by a trustee, the trustee may invest in and hold (i) interests, however evidenced, in any common trust fund or other collective investment fund maintained by any national or state chartered bank or trust company having trust powers or (ii) securities of or other interests in any open-end or closed-end management type investment company or investment trust so long as the portfolio of such common trust fund, collective investment fund, or investment company or investment trust consists of investments authorized with respect to the trustee.
(b) Nothing contained in this section, insofar as such authorization may be prohibited by the Constitution of Alabama of 1901, shall authorize the investment of trust assets in the stock of any private corporation.
(Act 2006-216, p. 314, §1; Act 2010-598, p. 1344, §1(b).)
(a) Upon termination or partial termination of a trust, the trustee may send to the beneficiaries a proposal for distribution. The right of any beneficiary to object to the proposed distribution terminates if the beneficiary does not notify the trustee of an objection within 30 days after the proposal was sent but only if the proposal informed the beneficiary of the right to object and of the time allowed for objection.
(b) Upon the occurrence of an event terminating or partially terminating a trust, the trustee shall proceed expeditiously to distribute the trust property to the persons entitled to it, subject to the right of the trustee to retain a reasonable reserve for the payment of debts, expenses, and taxes.
(c) A release by a beneficiary of a trustee from liability for breach of trust is invalid to the extent:
(1) it was induced by improper conduct of the trustee; or
(2) the beneficiary, at the time of the release, did not know of the material facts relating to the alleged breach and the trustee had actual knowledge of the facts relating to the alleged breach.
(Act 2006-216, p. 314, §1.)
A trustee may retain any life insurance policy contributed to a trust by a settlor, or purchased by the trustee upon the request of the settlor, as an asset of the trust without regard to any lack of diversification caused thereby and without regard to the terms and conditions of the life insurance policy. The trustee shall not be liable for lack of diversification to any beneficiary of a trust for the trustee’s retention of the life insurance policy.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in subsection (b), a trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule set forth in this article.
(b) The prudent investor rule, a default rule, may be expanded, restricted, eliminated, or otherwise altered by the terms of a trust. A trustee is not liable to a beneficiary to the extent that the trustee acted in reasonable reliance on the terms of the trust.
(Act 2006-216, p. 314, §1.)
(a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
(b) A trustee’s investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.
(c) Among circumstances that a trustee may consider in investing and managing trust assets are such of the following as are relevant to the trust or its beneficiaries:
(1) general economic conditions;
(2) the possible effect of inflation or deflation;
(3) the expected tax consequences of investment decisions or strategies;
(4) the role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;
(5) the expected total return from income and the appreciation of capital;
(6) other resources of the beneficiaries;
(7) needs for liquidity, regularity of income, and preservation or appreciation of capital;
(8) an asset’s special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries;
(9) the size of the portfolio; and
(10) the purposes and estimated duration of the trust.
(d) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.
(e) A trustee may invest in any kind of property or type of investment consistent with the standards of this chapter. Nothing contained in this section, insofar as such authorization may be prohibited by the Constitution of Alabama of 1901, shall authorize the investment of trust assets in the stock of any private corporation.
(Act 2006-216, p. 314, §1.)
(a) A trustee shall diversify the investments of the trust unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying.
(b) In the absence of an express provision to the contrary in the terms of the trust, a trustee without liability, may continue to hold property received into the trust at its inception or subsequently added to it or acquired pursuant to proper authority if and so long as the trustee, in the exercise of good faith and of reasonable prudence, considers the retention to be in the best interest of the trust or in furtherance of the purposes of the trust. The property shall include any successor-in-interest to the original property. The property may also include, among other things, stock in the trustee if a corporation and stock in any corporation controlling, controlled by, or under common control with the trustee.
(Act 2006-216, p. 314, §1.)
Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee shall review the trust assets and make and implement decisions concerning the retention and disposition of assets, in order to bring the trust portfolio into compliance with the purposes, terms, distribution requirements, and other circumstances of the trust, and with the requirements of this chapter.
(Act 2006-216, p. 314, §1.)
Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee’s decision or action and not by hindsight. The prudent investor rule does not guarantee a specific outcome or performance, but is a standard of conduct.
(Act 2006-216, p. 314, §1.)
The following terms or comparable language in the terms of a trust, unless otherwise limited or modified, authorizes any investment or strategy permitted under this chapter: “investments permissible by law for investment of trust funds,” “legal investments,” “authorized investments,” “using the judgment and care under the circumstances then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital,” “prudent man rule,” “prudent trustee rule,” “prudent person rule,” and “prudent investor rule.”
(Act 2006-216, p. 314, §1.)
(a) A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust.
(b) To remedy a breach of trust that has occurred or may occur, the court may:
(1) compel the trustee to perform the trustee’s duties;
(2) enjoin the trustee from committing a breach of trust;
(3) compel the trustee to redress a breach of trust by paying money, restoring property, or other means;
(4) order a trustee to account;
(5) appoint a special fiduciary to take possession of the trust property and administer the trust;
(6) suspend the trustee;
(7) remove the trustee as provided in Section 19-3B-706;
(8) reduce or deny compensation to the trustee;
(9) subject to Section 19-3B-1012, void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or
(10) order any other appropriate relief.
(Act 2006-216, p. 314, §1.)
(a) A trustee who commits a breach of trust is liable to the beneficiaries affected for:
(1) the greater of:
(i) the amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred; or
(ii) the profit the trustee made by reason of the breach;
(2) any measure of damage otherwise provided by law.
(b) Except as otherwise provided in this subsection, if more than one trustee is liable to the beneficiaries for a breach of trust, a trustee is entitled to contribution from the other trustee or trustees. A trustee is not entitled to contribution if the trustee was substantially more at fault than another trustee or if the trustee committed the breach of trust in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries. A trustee who received a benefit from the breach of trust is not entitled to contribution from another trustee to the extent of the benefit received.
(Act 2006-216, p. 314, §1.)
(a) A trustee is accountable to an affected beneficiary for any profit made by the trustee arising from the administration of the trust, even absent a breach of trust.
(b) Absent a breach of trust, a trustee is not liable to a beneficiary for a loss or depreciation in the value of trust property or for not having made a profit.
(Act 2006-216, p. 314, §1.)
[Reserved]
(a) A beneficiary may not commence a proceeding against a trustee for breach of trust more than two years after the date the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust. For purposes of this section, a report is an account statement or other form of written disclosure made by the trustee to the beneficiary.
(b) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.
(c) If subsection (a) does not apply, then a judicial proceeding by a beneficiary against a trustee for breach of trust must be commenced within two years after the first to occur of the following:
(1) The removal, resignation, or death of the trustee;
(2) The termination of the beneficiary’s interest in the trust; or
(3) The termination of the trust.
(Act 2006-216, p. 314, §1; Act 2021-384, §1.)
A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance.
(Act 2006-216, p. 314, §1.)
If the happening of an event, including marriage, divorce, performance of educational requirements, or death, affects the administration or distribution of a trust, then a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee’s lack of knowledge.
(Act 2006-216, p. 314, §1.)
(a) A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that it:
(1) relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries; or
(2) was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor.
(b) Except for terms intended to provide protection for carrying out a stated trust purpose, an exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term is fair under the circumstances and that its existence and contents were adequately communicated to the settlor.
(Act 2006-216, p. 314, §1.)
A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless:
(1) the consent, release, or ratification of the beneficiary was induced by improper conduct of the trustee; or
(2) at the time of the consent, release, or ratification, the beneficiary did not know of the material facts relating to the alleged breach and the trustee had actual knowledge of the facts relating to the alleged breach.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee’s fiduciary capacity in the course of administering the trust if the trustee in the contract disclosed the fiduciary capacity.
(b) A trustee is personally liable for torts committed in the course of administering a trust, or for obligations arising from ownership or control of trust property, including liability for violation of environmental law, but only if the trustee, the trustee’s employee, or the trustee’s agent is personally at fault.
(c) A claim based on a contract entered into by a trustee in the trustee’s fiduciary capacity, on an obligation arising from ownership or control of trust property, or on a tort committed in the course of administering a trust, may be asserted in a judicial proceeding against the trustee in the trustee’s fiduciary capacity, whether or not the trustee is personally liable for the claim.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in subsection (c) or unless personal liability is imposed in the contract, a trustee who holds an interest as a general partner in a general or limited partnership is not personally liable on a contract entered into by the partnership after the trust’s acquisition of the interest if the fiduciary capacity was disclosed in the contract or in a statement previously filed pursuant to Chapter 8A or Chapter 9B of Title 10.
(b) Except as otherwise provided in subsection (c), a trustee who holds an interest as a general partner is not personally liable for torts committed by the partnership or for obligations arising from ownership or control of the interest unless the trustee is personally at fault.
(c) The immunity provided by this section does not apply if an interest in the partnership is held by the trustee in a capacity other than that of trustee or is held by the trustee’s spouse or one or more of the trustee’s descendants, siblings, or parents, or the spouse of any of them.
(d) If the trustee of a revocable trust holds an interest as a general partner, then the settlor is personally liable for contracts and other obligations of the partnership as if the settlor were a general partner.
(Act 2006-216, p. 314, §1.)
(a) A person other than a beneficiary who in good faith assists a trustee, or who in good faith and for value deals with a trustee, without knowledge that the trustee is exceeding or improperly exercising the trustee’s powers is protected from liability as if the trustee properly exercised the power.
(b) A person other than a beneficiary who in good faith deals with a trustee is not required to inquire into the extent of the trustee’s powers or the propriety of their exercise.
(c) A person who in good faith delivers assets to a trustee need not ensure their proper application.
(d) A person other than a beneficiary who in good faith assists a former trustee, or who in good faith and for value deals with a former trustee, without knowledge that the trusteeship has terminated is protected from liability as if the former trustee were still a trustee.
(e) Comparable protective provisions of other laws relating to commercial transactions or transfer of securities by fiduciaries prevail over the protection provided by this section.
(Act 2006-216, p. 314, §1.)
(a) Instead of furnishing a copy of the trust instrument to a person other than a beneficiary, the trustee may furnish to the person a certification of trust containing the following information:
(1) that the trust exists and the date the trust instrument was executed;
(2) the identity of the settlor;
(3) the identity and address of the currently acting trustee;
(4) the powers of the trustee in a pending transaction or relevant to the request;
(5) the revocability or irrevocability of the trust and the identity of any person holding a power to revoke the trust;
(6) the authority of co-trustees to sign or otherwise authenticate and whether all or less than all are required in order to exercise powers of the trustee;
(7) the trust’s taxpayer identification number; and
(8) the name in which title to trust property may be taken.
(b) A certification of trust may be signed or otherwise authenticated by any trustee.
(c) A certification of trust must state that the trust has not been revoked, modified, or amended in any manner that would cause the representations contained in the certification of trust to be incorrect.
(d) A certification of trust need not contain the dispositive terms of a trust.
(e) A recipient of a certification of trust may require the trustee to furnish copies of those excerpts from the original trust instrument and later amendments which designate the trustee and confer upon the trustee the power to act in the pending transaction.
(f) A person who acts in reliance upon a certification of trust without knowledge that the representations contained therein are incorrect is not liable to any person for so acting and may assume without inquiry the existence of the facts contained in the certification. Knowledge of the terms of the trust may not be inferred solely from the fact that a copy of all or part of the trust instrument is held by the person relying upon the certification.
(g) A person who in good faith enters into a transaction in reliance upon a certification of trust may enforce the transaction against the trust property as if the representations contained in the certification were correct.
(h) A person making a demand for the trust instrument in addition to a certification of trust or excerpts is liable for damages if the court determines that the person did not act in good faith in demanding the trust instrument.
(i) This section does not limit the right of a person to obtain a copy of the trust instrument in a judicial proceeding concerning the trust.
(Act 2006-216, p. 314, §1.)
Notwithstanding the provisions of this chapter that may otherwise be applicable to a trust, no provision thereof shall apply to any special needs trust, supplemental needs trust, or other similar trust established for a person with a disability as a beneficiary, including without limitation, any trust established pursuant to the provisions of 42 U.S.C. § 1396p(d)(4)A or C, as amended from time to time, or other similar federal or state statute, to the extent that such provision would disqualify such trust beneficiary at any time from eligibility for public needs-based assistance benefits for which the beneficiary would otherwise qualify.
(Act 2006-216, p. 314, §1.)
In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.
(Act 2006-216, p. 314, §1.)
The provisions of this chapter governing the legal effect, validity, or enforceability of electronic records or electronic signatures, and of contracts formed or performed with the use of such records or signatures, conform to the requirements of Section 102 of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7002) and supersede, modify, and limit the requirements of the Electronic Signatures in Global and National Commerce Act.
(Act 2006-216, p. 314, §1.)
If any provision of this chapter or its application to any person or circumstances is held invalid, then the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
(Act 2006-216, p. 314, §1.)
(a) Except as otherwise provided in this chapter, on January 1, 2007:
(1) this chapter applies to all trusts created before, on, or after January 1, 2007;
(2) this chapter applies to all judicial proceedings concerning trusts commenced on or after January 1, 2007;
(3) this chapter applies to judicial proceedings concerning trusts commenced before January 1, 2007, unless the court finds that application of a particular provision of this chapter would substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties, in which case the particular provision of this chapter does not apply and the superseded law applies;
(4) any rule of construction or presumption provided in this chapter applies to trust instruments executed before January 1, 2007, unless there is a clear indication of a contrary intent in the terms of the trust; and
(5) an act done before January 1, 2007, is not affected by this chapter.
(b) If a right is acquired, extinguished, or barred upon the expiration of a prescribed period that has commenced to run under any other statute before January 1, 2007, then that statute continues to apply to the right even if it has been repealed or superseded.
(Act 2006-216, p. 314, §1.)
No trust concerning lands, except such as results by implication or construction of law, or which may be transferred or extinguished by operation of law, can be created, unless by instrument in writing, signed by the party creating or declaring the same, or his or her agent or attorney lawfully authorized thereto in writing.
(Code 1852, §1320; Code 1867, §1590; Code 1876, §2199; Code 1886, §1845; Code 1896, §1041; Code 1907, §3412; Code 1923, §6917; Code 1940, T. 47, §149; §35-4-255; Act 2006-216, p. 314, §2.)
No such trusts, whether implied by law or created or declared by the parties, can defeat the title of creditors or purchasers for a valuable consideration without notice.
(Code 1852, §1321; Code 1867, §1591; Code 1876, §2200; Code 1886, §1846; Code 1896, §1042; Code 1907, §3413; Code 1923, §6918; Code 1940, T. 47, §150; §35-4-256; Act 2006-216, p. 314, §2.)
Upon the death of a sole or surviving trustee of an express trust, the trust estate does not descend to his or her heirs or pass to his or her personal representatives.
(Code 1852, §1323; Code 1867, §1593; Code 1876, §2202; Code 1886, §1848; Code 1896, §1044; Code 1907, §3415; Code 1923, §6920; Code 1940, T. 47, §152; §35-4-258; Act 2006-216, p. 314, §2.)
(a) A trust of real or personal property or real and personal property combined:
(1) which is created by an employer as part of a stock bonus plan, pension plan, disability or death benefit plan, or profit-sharing plan, for the exclusive benefit of some or all his or her employees, to which contributions are made by such employer or employees, or both, for the purpose of distribution to such employees the earnings of the principal, or both earnings and principal of the fund so held in trust; or
(2) which is created by a self-employed person or group of self-employed persons and:
a. which is part of a retirement, disability, or death benefit plan for such self-employed person or persons; and
b. contributions to which are deductible, in whole or in part, from gross income for federal income tax purposes under the internal revenue laws of the United States; or
(3) which is created for the collective investment of the funds of trusts which fall within the coverage of subdivisions (1) or (2) shall not be deemed to be invalid as violating any existing laws against perpetuities or against suspension of the power of alienation of title to property or against trusts for the purpose of the accumulation of income; but such a trust may continue for such a time as may be necessary to accomplish the purpose for which it was created.
(b) This section shall apply to all trusts of the nature specified in subsection (a) whether now in existence or hereafter created.
(c) Any employee who has the power to benefit others under the terms of any trust, including a pension or profit-sharing trust or any trust which has been created as a part of a stock bonus plan, pension plan, disability or death benefit plan, or profit-sharing plan, which has been created for the direct or indirect benefit of any class or classes or employees of one or more employers, may designate any person as a primary, contingent, alternate, joint, or other beneficiary in accordance with the terms of the instrument governing such trust. Such designation, in the form, if any, required by the terms of the instrument governing such trust, shall be effective to give to such designated beneficiary the benefits provided under the terms of the instrument governing such trust, notwithstanding any law which would otherwise make ineffective such designation, including, but without limitation to, any rule against perpetuities or law respecting testamentary dispositions; provided, that any such designation must be in writing.
(d) Any trustee or other person, including any person, corporation or national banking association, may make payment to any person, or his or her legal representative, designated as provided in subsection (c), and no trustee or other person shall be liable in any way to any person for making payment to a person, or his or her legal representative, so designated.
(e) This section shall not be construed to indicate any invalidity of designations such as are provided in subsection (c) made prior to September 9, 1961. This section shall not be construed to impose liability for the payment by a trustee or other person, in accordance with the terms of a trust instrument, to a person or his or her legal representative, not designated as provided herein.
(Acts 1945, No. 306, p. 499; Acts 1961, No. 1014, p. 1592; §35-4-255; Act 2006-216, p. 314, §2.)
Trusts consisting solely of policies of life, health, accident, or disability insurance, or of the proceeds or avails thereof, shall for the purpose of determining whether any law against perpetuities or suspension of the power of alienation of title to property is applicable thereto be regarded as created when the liability of the insurer accrues by reason of the occurrence of the event insured against, whether or not a power to revoke the trust as to the policies was reserved during the life of the insured and whether or not any beneficial interest in the policies is alienable by the beneficiaries and whether or not the beneficiary or beneficiaries were in being at the time of the creation of the trust.
(Acts 1949, No. 265, p. 389; §35-4-260; Act 2006-216, p. 314, §2.)
(a) A trustee may obtain a settlement of its accounts in accordance with subsection (b) when any of the following occur:
(1) A trust terminates pursuant to the terms of the trust.
(2) A trust terminates early pursuant to Section 19-3B-414.
(3) A trustee resigns or is removed.
(4) A trustee seeks discharge of an interim accounting period when the trust is continuing.
(b)(1) A trustee who elects to proceed under this section shall provide all of the following to the qualified beneficiaries of the trust and the successor trustee, if applicable, within a reasonable time after termination of the trust pursuant to its terms, the resignation or removal of the trustee, or the end of the period for which the trustee is seeking discharge:
a. A statement showing the fair market value of the new assets to be distributed from a terminating trust or to a successor trustee.
b. A trust accounting for the prior two years showing all receipts and disbursements and inventory value of the net assets.
c. An estimate for any items reasonably anticipated to be received or disbursed.
d. The amount of any fees, including trustee fees, remaining to be paid.
e. Notice that the trust is terminating, or that the trustee has resigned or been removed, the time period for which the trustee seeks discharge of its accounts, and a statement providing that claims against a trustee under Section 19-3B-604 and Section 19-3B-1005, if applicable, shall be barred if no objections are received within the time period described in subsection (c).
f. The name and mailing address of the trustee.
g. The name and telephone number of a person who may be contacted for additional information.
(2) The trustee may also provide the statement and notice described in this subsection to any other person who the trustee reasonably believes may have an interest in the trust.
(3) The statement and notice described in this subsection shall be provided in accordance with Section 19-3B-109.
(c)(1) If, after receiving the notice and trust information described in subsection (b), a qualified beneficiary or any other party that received the notice and trust information objects to a disclosed act or omission, the qualified beneficiary shall provide written notice of the objection to the trustee not later than 45 days after the notice was sent by the trustee. If no written objection is provided in the 45-day time period, the information provided under subsection (b) shall be considered approved by the recipient. The trustee, in the case of a trust terminating pursuant to the terms of the trust or the trustee’s resignation or removal, within a reasonable period of time following the expiration of the 45-day time period, shall distribute the assets as provided in the trust or to the successor trustee. If a qualified beneficiary gives the trustee a written objection within the applicable 45-day time period, the trustee or the qualified beneficiary may do either of the following:
a. Submit the written objection to the court for resolution and charge the expense of commencing a proceeding to the trust.
b. Resolve the objection by a nonjudicial settlement agreement or other written agreement.
(2) Any agreement entered into pursuant to paragraph (1)b. may include a release, an indemnity clause, or both, on the part of the beneficiary against the trustee relating to the trust. If the parties agree to a nonjudicial settlement agreement or other written agreement, any related expenses shall be charged to the trust. Upon a resolution of an objection under this subsection, within a reasonable period of time, the trustee shall distribute the remaining trust assets as provided in the trust or to the successor trustee.
(d) The trustee may rely upon the written statement of a person receiving notice that the person does not object.
(e) When a trustee distributes assets of a terminating trust or to the successor trustee after complying with this article and having received no objections, each person who received notice and either consented or failed to object pursuant to this section is barred from doing either of the following:
(1) Bringing a claim against the trustee or challenging the validity of the trust to the same extent and with the same preclusive effect as if the court had entered a final order approving the trustee’s final account.
(2) Bringing a claim against the trustee for the period of such interim accounts to the same extent and with the same preclusive effect as if the court had entered a final order approving the trustee’s interim accounts.
(f) The court, as determined under Section 19-3B-203, shall have exclusive jurisdiction over matters under this section.
(g) Sections 19-3B-301 through 19-3B-304 shall apply to this section.
(h) Nothing in this section shall preclude a trustee from proceeding under Section 19-3B-201 to have the trustee’s accounts reviewed and settled by the court.
(Act 2021-384, §2.)
This chapter may be cited as the Alabama Uniform Prudent Management of Institutional Funds Act.
(Act 2008-276, p. 434, §2.)
In this chapter:
(1) CHARITABLE PURPOSE means the relief of poverty, the advancement of education or religion, the promotion of health, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community.
(2) ENDOWMENT FUND means an institutional fund or part thereof that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. The term does not include assets that an institution designates as an endowment fund for its own use.
(3) GIFT INSTRUMENT means a record or records, including an institutional solicitation, under which property is granted to, transferred to, or held by an institution as an institutional fund.
(4) INSTITUTION means:
(A) a person, other than an individual, organized and operated exclusively for charitable purposes;
(B) a government or governmental subdivision, agency, or instrumentality, to the extent that it holds funds exclusively for a charitable purpose; and
(C) a trust that had both charitable and noncharitable interests, after all noncharitable interests have terminated.
The term institution shall not include any bank, trust company, or other regulated financial institution.
(5) INSTITUTIONAL FUND means a fund held by an institution exclusively for charitable purposes. The term does not include:
(A) program-related assets;
(B) a fund held for an institution by a trustee that is not an institution; or
(C) a fund in which a beneficiary that is not an institution has an interest, other than an interest that could arise upon violation or failure of the purposes of the fund.
(6) PERSON means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
(7) PROGRAM-RELATED ASSET means an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment.
(8) RECORD means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(Act 2008-276, p. 434, §2.)
(a) Subject to the intent of a donor expressed in a gift instrument, an institution, in managing and investing an institutional fund, shall consider the charitable purposes of the institution and the purposes of the institutional fund.
(b) In addition to complying with the duty of loyalty imposed by law other than this chapter, each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
(c) In managing and investing an institutional fund, an institution:
(1) may incur costs that are appropriate and reasonable in relation to the assets, the purposes of the institution, and the skills available to the institution; and
(2) shall make a reasonable effort to verify facts relevant to the management and investment of the fund.
(d) An institution may pool two or more institutional funds for purposes of management and investment.
(e) Except as otherwise provided by a gift instrument, the following rules apply:
(1) In managing and investing an institutional fund, the following factors, if relevant, may be considered:
(A) general economic conditions;
(B) the possible effect of inflation or deflation;
(C) the expected tax consequences, if any, of investment decisions or strategies;
(D) the role that each investment or course of action plays within the overall investment portfolio of the fund;
(E) the expected total return from income and the appreciation of investments;
(F) other resources of the institution;
(G) the needs of the institution and the fund to make distributions and to preserve capital;
(H) an asset’s special relationship or special value, if any, to the charitable purposes of the institution; and
(I) the size of the fund.
(2) Management and investment decisions about an individual asset must be made not in isolation but rather in the context of the institutional fund’s portfolio of investments as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund and to the institution.
(3) Except as otherwise provided by law other than this chapter, an institution may invest in any kind of property or type of investment consistent with this section.
(4) An institution shall diversify the investments of an institutional fund unless the institution reasonably determines that, because of special circumstances, the purposes of the fund are better served without diversification.
(5) Within a reasonable time after receiving property, an institution shall make and carry out decisions concerning the retention or disposition of the property or to rebalance a portfolio, in order to bring the institutional fund into compliance with the purposes, terms, and distribution requirements of the institution as necessary to meet other circumstances of the institution and the requirements of this chapter.
(6) A person that has special skills or expertise, or is selected in reliance upon the person’s representation that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.
(Act 2008-276, p. 434, §2.)
(a) Subject to the intent of a donor expressed in the gift instrument, an institution may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes, and duration for which the endowment fund is established. Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. In making a determination to appropriate or accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shall consider, if relevant, the following factors:
(1) the duration and preservation of the endowment fund;
(2) the purposes of the institution and the endowment fund;
(3) general economic conditions;
(4) the possible effect of inflation or deflation;
(5) the expected total return from income and the appreciation of investments;
(6) other resources of the institution; and
(7) the investment policy of the institution.
(b) To limit the authority to appropriate for expenditure or accumulate under subsection (a), a gift instrument must specifically state the limitation.
(c) Terms in a gift instrument designating a gift as an endowment, or a direction or authorization in the gift instrument to use only “income”, “interest”, “dividends”, or “rents, issues, or profits”, or “to preserve the principal intact”, or words of similar import:
(1) create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund; and
(2) do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection (a).
(Act 2008-276, p. 434, §2.)
(a) Subject to any specific limitation set forth in a gift instrument or in law other than this chapter, an institution may delegate to an external agent the management and investment of an institutional fund to the extent that an institution could prudently delegate under the circumstances. An institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, in:
(1) selecting an agent;
(2) establishing the scope and terms of the delegation, consistent with the purposes of the institution and the institutional fund; and
(3) periodically reviewing the agent’s actions in order to monitor the agent’s performance and compliance with the scope and terms of the delegation.
(b) In performing a delegated function, an agent owes a duty to the institution to exercise reasonable care to comply with the scope and terms of the delegation.
(c) Absent negligence, wantonness, recklessness, or deliberate misconduct, an institution that complies with subsection (a) is not liable for the decisions or actions of an agent to which the function was delegated.
(d) By accepting delegation of a management or investment function from an institution that is subject to the laws of this state, an agent submits to the jurisdiction of the courts of this state in all proceedings arising from or related to the delegation or the performance of the delegated function.
(e) An institution may delegate management and investment functions to its committees, officers, or employees as authorized by law of this state other than this chapter.
(Act 2008-276, p. 434, §2.)
(a) If the donor consents in a record, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund. A release or modification may not allow a fund to be used for a purpose other than a charitable purpose of the institution.
(b) The court, upon application of an institution, may modify a restriction contained in a gift instrument regarding the management or investment of an institutional fund if the restriction has become impracticable or wasteful, if it impairs the management or investment of the fund, or if, because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund. The institution shall apply in the name of the institution to the circuit court of the county in which the principal activities of the institution are conducted, and shall notify the Attorney General of the application, and the Attorney General must be given an opportunity to be heard. To the extent practicable, any modification must be made in accordance with the donor’s probable intention.
(c) If a particular charitable purpose or a restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, impossible to achieve, wasteful, or if because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund, the court, upon application of an institution, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall apply in the name of the institution to the circuit court of the county in which the principal activities of the institution are conducted, and shall notify the Attorney General of the application, and the Attorney General must be given an opportunity to be heard.
(d) If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, 60 days after notification to the Attorney General, may release or modify the restriction, in whole or part, if:
(1) the institutional fund subject to the restriction has a total value of less than fifty thousand dollars ($50,000);
(2) more than 10 years have elapsed since the fund was established; and
(3) the institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument.
(Act 2008-276, p. 434, §2.)
Compliance with this chapter is determined in light of the facts and circumstances existing at the time a decision is made or action is taken, and not by hindsight.
(Act 2008-276, p. 434, §2.)
This chapter applies to institutional funds existing on or established after January 1, 2009. As applied to institutional funds existing on January 1, 2009, this chapter governs only decisions made or actions taken on or after that date.
(Act 2008-276, p. 434, §2.)
This chapter modifies, limits, and supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101 of that act, 15 U.S.C. Section 7001(a), or authorize electronic delivery of any of the notices described in Section 103 of that act, 15 U.S.C. Section 7003(b).
(Act 2008-276, p. 434, §2.)
In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.
(Act 2008-276, p. 434, §2.)
This chapter may be cited as the Alabama Uniform Trust Decanting Act.
(Act 2018-519, §1.)
In this chapter the following terms have the following meanings:
(1) APPOINTIVE PROPERTY. The property or property interest subject to a power of appointment.
(2) ASCERTAINABLE STANDARD. A standard relating to an individual’s health, education, support, or maintenance within the meaning of 26 U.S.C. Section 2041(b)(1)(A), as amended, or 26 U.S.C. Section 2514(c)(1), as amended, and any applicable regulations.
(3) AUTHORIZED FIDUCIARY. (A) A trustee or other fiduciary, other than a settlor, that has the discretion to distribute or direct a trustee to distribute part or all of the principal of the first trust to one or more current beneficiaries;
(B) a special fiduciary appointed under Section 19-3D-9; or
(C) a special-needs fiduciary under Section 19-3D-13.
(4) BENEFICIARY. A person that:
(A) has a present or future, vested or contingent, beneficial interest in a trust;
(B) holds a power of appointment over trust property; or
(C) is an identified charitable organization that will or may receive distributions under the terms of the trust.
(5) CHARITABLE INTEREST. An interest in a trust which:
(A) is held by an identified charitable organization and makes the organization a qualified beneficiary;
(B) benefits only charitable organizations and, if the interest were held by an identified charitable organization, would make the organization a qualified beneficiary; or
(C) is held solely for charitable purposes and, if the interest were held by an identified charitable organization, would make the organization a qualified beneficiary.
(6) CHARITABLE ORGANIZATION. (A) a person, other than an individual, organized and operated exclusively for charitable purposes; or
(B) a government or governmental subdivision, agency, or instrumentality, to the extent it holds funds exclusively for a charitable purpose.
(7) CHARITABLE PURPOSE. The relief of poverty, the advancement of education or religion, the promotion of health, a municipal or other governmental purpose, or another purpose, the achievement of which is beneficial to the community.
(8) COURT. The court in this state having jurisdiction in matters relating to trusts.
(9) CURRENT BENEFICIARY. A beneficiary that on the date the beneficiary’s qualification is determined is a distributee or permissible distributee of trust income or principal. The term includes the holder of a presently exercisable general power of appointment but does not include a person that is a beneficiary only because the person holds any other power of appointment.
(10) DECANTING POWER. The power of an authorized fiduciary under this chapter to distribute property of a first trust to one or more second trusts or to modify the terms of the first trust.
(11) EXPANDED DISTRIBUTIVE DISCRETION. A discretionary power of distribution that is not limited to an ascertainable standard or a reasonably definite standard.
(12) FIRST TRUST. A trust over which an authorized fiduciary may exercise the decanting power.
(13) FIRST-TRUST INSTRUMENT. The trust instrument for a first trust.
(14) GENERAL POWER OF APPOINTMENT. A power of appointment exercisable in favor of a powerholder, the powerholder’s estate, a creditor of the powerholder, or a creditor of the powerholder’s estate.
(15) JURISDICTION. With respect to a geographic area, includes a state or country.
(16) PERSON. An individual, estate, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity.
(17) POWER OF APPOINTMENT. A power that enables a powerholder acting in a nonfiduciary capacity to designate a recipient of an ownership interest in or another power of appointment over the appointive property. The term does not include a power of attorney.
(18) POWERHOLDER. A person in which a donor creates a power of appointment.
(19) PRESENTLY EXERCISABLE POWER OF APPOINTMENT. A power of appointment exercisable by the powerholder at the relevant time. The term:
(A) includes a power of appointment exercisable only after the occurrence of a specified event, the satisfaction of an ascertainable standard, or the passage of a specified time only after:
(i) the occurrence of the specified event;
(ii) the satisfaction of the ascertainable standard; or
(iii) the passage of the specified time; and
(B) does not include a power exercisable only at the powerholder’s death.
(20) QUALIFIED BENEFICIARY. A beneficiary that on the date the beneficiary’s qualification is determined:
(A) to be a distributee or permissible distributee of trust income or principal;
(B) would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in subparagraph (A) terminated on that date, but the termination of those interests would not cause the trust to terminate; or
(C) would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.
(21) REASONABLY DEFINITE STANDARD. A clearly measurable standard under which a holder of a power of distribution is legally accountable within the meaning of 26 U.S.C. Section 674(b)(5)(A), as amended, and any applicable regulations.
(22) RECORD. Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(23) SECOND TRUST. (A) a first trust after modification under this chapter; or
(B) a trust to which a distribution of property from a first trust is or may be made under this chapter.
(24) SECOND-TRUST INSTRUMENT. The trust instrument for a second trust.
(25) SETTLOR. Except as otherwise provided in Section 19-3D-25, a person, including a testator, that creates or contributes property to a trust. If more than one person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to the person’s contribution except to the extent another person has power to revoke or withdraw that portion.
(26) SIGN. With present intent to authenticate or adopt a record:
(A) to execute or adopt a tangible symbol; or
(B) to attach to or logically associate with the record an electronic symbol, sound, or process.
(27) STATE. A state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
(28) TERMS OF THE TRUST. The manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust instrument, as may be established by other evidence that would be admissible in a judicial proceeding, or as may be established by court order or nonjudicial settlement agreement.
(29) TRUST INSTRUMENT. A record executed by the settlor to create a trust or by any person to create a second trust which contains some or all of the terms of the trust, including any amendments.
(Act 2018-519, §2.)
(a) Except as otherwise provided in subsections (b) and (c), this chapter applies to an express trust that is irrevocable, or revocable by the settlor only with the consent of the trustee or a person holding an adverse interest.
(b) This chapter does not apply to a trust held solely for charitable purposes.
(c) Subject to Section 19-3D-15, a trust instrument may restrict or prohibit exercise of the decanting power.
(d) This chapter does not limit the power of a trustee, powerholder, or other person to distribute or appoint property in further trust or to modify a trust under the trust instrument, laws of this state other than this chapter, common law, a court order, or a nonjudicial settlement agreement.
(e) This chapter does not affect the ability of a settlor to provide in a trust instrument for the distribution of the trust property or appointment in further trust of the trust property or for modification of the trust instrument.
(Act 2018-519, §3.)
(a) In exercising the decanting power, an authorized fiduciary shall act in accordance with its fiduciary duties, including the duty to act in accordance with the purposes of the first trust.
(b) This chapter does not create or imply a duty to consider or exercise the decanting power or to inform beneficiaries about the applicability of this chapter.
(c) Except as otherwise provided in a first-trust instrument, for purposes of this chapter and Sections 19-3B-801 and 19-3B-802(a), the terms of the first trust are deemed to include the decanting power.
(Act 2018-519, §4.)
This chapter applies to a trust created before, on, or after January 1, 2019, which:
(1) has its principal place of administration in this state, including a trust whose principal place of administration has been changed to this state; or
(2) provides by its trust instrument that it is governed by the law of this state or is governed by the law of this state for the purpose of:
(A) administration, including administration of a trust whose governing law for purposes of administration has been changed to the law of this state;
(B) construction of terms of the trust; or
(C) determining the meaning or effect of terms of the trust.
(Act 2018-519, §5.)
A trustee or other person that reasonably relies on the validity of a distribution of part or all of the property of a trust to another trust, or a modification of a trust, under this chapter, laws of this state other than this chapter, or the law of another jurisdiction is not liable to any person for any action or failure to act as a result of the reliance.
(Act 2018-519, §6.)
(a) In this section, a notice period begins on the day notice is given under subsection (c) and ends 59 days after the day notice is given.
(b) Except as otherwise provided in this chapter, an authorized fiduciary may exercise the decanting power without the consent of any person and without court approval.
(c) Except as otherwise provided in subsection (f), an authorized fiduciary shall not exercise the decanting power prior to 60 days after giving notice in a record of the intended exercise of the decanting power to:
(1) each settlor of the first trust, if living or then in existence;
(2) each qualified beneficiary of the first trust;
(3) each holder of a presently exercisable power of appointment over any part or all of the first trust;
(4) each person that currently has the right to remove or replace the authorized fiduciary;
(5) each other fiduciary of the first trust;
(6) each fiduciary of the second trust; and
(7) the Attorney General, if Section 19-3D-14(b) applies.
(d) An authorized fiduciary may give notice under subsection (c) to a qualified beneficiary who is a minor or incapacitated individual by giving notice to such individual’s representative. An authorized fiduciary is not required to give notice under subsection (c) to a person that is not known to the fiduciary or is known to the fiduciary but cannot be located by the fiduciary after reasonable diligence.
(e) A notice under subsection (c) must:
(1) specify the manner in which the authorized fiduciary intends to exercise the decanting power;
(2) specify the proposed effective date for exercise of the power;
(3) include a copy of the first-trust instrument;
(4) include a copy of all second-trust instruments;
(5) include a statement indicating the capacity in which the intended recipient is being given notice; and
(6) include a statement that any application under Section 19-3D-9 must be filed within six months from the day notice is given.
(f) The decanting power may be exercised before expiration of the notice period under subsection (a) if all persons entitled to receive notice waive the period in a signed record.
(g) The receipt of notice, waiver of the notice period, or expiration of the notice period does not affect the right of a person to file an application under Section 19-3D-9.
(h) An exercise of the decanting power is not ineffective because of the failure to give notice to one or more persons under subsection (c) if the authorized fiduciary acted with reasonable care to comply with subsection (c).
(Act 2018-519, §7; Act 2021-143, §1.)
(a) Notice to a person with authority to represent and bind another person under a first-trust instrument or Chapter 3B (commencing with Section 19-3B-101) of this title, has the same effect as notice given directly to the person represented.
(b) Consent of or waiver by a person with authority to represent and bind another person under a first-trust instrument or Chapter 3B (commencing with Section 19-3B-101) of this title, is binding on the person represented unless the person represented objects to the representation before the consent or waiver otherwise would become effective.
(c) A person with authority to represent and bind another person under a first-trust instrument or Chapter 3B (commencing with Section 19-3B-101) of this title, may file an application under Section 19-3D-9 on behalf of the person represented.
(d) A settlor may not represent or bind a beneficiary under this chapter.
(Act 2018-519, §8.)
(a) On application of an authorized fiduciary, a person entitled to notice under Section 19-3D-7(c), a beneficiary, or with respect to a charitable interest that is not entirely held by or for the benefit of one or more identified and existing charitable organizations, the Attorney General or other person that has standing to enforce the charitable interest, the court may:
(1) provide instructions to the authorized fiduciary regarding whether a proposed exercise of the decanting power is permitted under this chapter and consistent with the fiduciary duties of the authorized fiduciary;
(2) appoint a special fiduciary and authorize the special fiduciary to determine whether the decanting power should be exercised under this chapter and to exercise the decanting power;
(3) approve an exercise of the decanting power;
(4) subject to the limitations set forth in subsection (c), determine that a proposed or attempted exercise of the decanting power is ineffective because:
(A) after applying Section 19-3D-22, the proposed or attempted exercise does not or did not comply with this chapter; or
(B) the proposed or attempted exercise would be or was an abuse of the fiduciary’s discretion or a breach of fiduciary duty;
(5) determine the extent to which Section 19-3D-22 applies to a prior exercise of the decanting power;
(6) provide instructions to the trustee regarding the application of Section 19-3D-22 to a prior exercise of the decanting power; or
(7) order other relief to carry out the purposes of this chapter.
(b) On application of an authorized fiduciary, the court may approve:
(1) an increase in the fiduciary’s compensation under Section 19-3D-16; or
(2) a modification under Section 19-3D-18 of a provision granting a person the right to remove or replace the fiduciary.
(c) A proceeding under subsection (a)(4) may not be commenced by a person entitled to notice under Section 19-3D-7(c), or by a beneficiary, unless such proceeding is commenced within six months from the day notice is given under Section 19-3D-7(a). Failure to receive notice shall not extend the time by which the proceeding must be commenced if the authorized fiduciary acted with reasonable diligence to comply with the requirements of Section 19-3D-7(c).
(Act 2018-519, §9; Act 2021-143, §1.)
An exercise of the decanting power must be made in a record signed by an authorized fiduciary. The signed record must, directly or by reference to the notice required by Section 19-3D-7, identify the first trust and the second trust or trusts and state the property of the first trust being distributed to each second trust and the property, if any, that remains in the first trust.
(Act 2018-519, §10.)
(a) In this section the following terms have the following meanings:
(1) NONCONTINGENT RIGHT. A right that is not subject to the exercise of discretion or the occurrence of a specified event that is not certain to occur. The term does not include a right held by a beneficiary if any person has discretion to distribute property subject to the right to any person other than the beneficiary or the beneficiary’s estate.
(2) PRESUMPTIVE REMAINDER BENEFICIARY. A qualified beneficiary other than a current beneficiary.
(3) SUCCESSOR BENEFICIARY. A beneficiary that is not a qualified beneficiary on the date the beneficiary’s qualification is determined. The term does not include a person that is a beneficiary only because the person holds a nongeneral power of appointment.
(4) VESTED INTEREST. (A) A right to a mandatory distribution that is a noncontingent right as of the date of the exercise of the decanting power;
(B) a current and noncontingent right, annually or more frequently, to a mandatory distribution of income, a specified dollar amount, or a percentage of value of some or all of the trust property;
(C) a current and noncontingent right, annually or more frequently, to withdraw income, a specified dollar amount, or a percentage of value of some or all of the trust property;
(D) a presently exercisable general power of appointment; or
(E) a right to receive an ascertainable part of the trust property on the trust’s termination which is not subject to the exercise of discretion or to the occurrence of a specified event that is not certain to occur.
(b) Subject to subsection (c) and Section 19-3D-14:
(1) an authorized fiduciary that has expanded distributive discretion over the entire principal of a first trust for the benefit of one or more current beneficiaries may exercise the decanting power over the entire principal of the first trust; and
(2) an authorized fiduciary that has expanded distributive discretion over part but not all of the principal of a first trust may exercise the decanting power over that part of the principal over which the authorized fiduciary has expanded distributive discretion.
(c) Subject to Section 19-3D-13, in an exercise of the decanting power under this section, a second trust may not:
(1) include as a current beneficiary a person that is not a current beneficiary of the first trust, except as otherwise provided in subsection (d);
(2) include as a presumptive remainder beneficiary or successor beneficiary a person that is not a current beneficiary, presumptive remainder beneficiary, or successor beneficiary of the first trust, except as otherwise provided in subsection (d); or
(3) reduce or eliminate a vested interest.
(d) Subject to subsection (c)(3) and Section 19-3D-14, in an exercise of the decanting power under this section, a second trust may be a trust created or administered under the law of any jurisdiction and may:
(1) retain a power of appointment granted in the first trust;
(2) omit a power of appointment granted in the first trust, other than a presently exercisable general power of appointment;
(3) create or modify a power of appointment if the powerholder is a current beneficiary of the first trust and the authorized fiduciary has expanded distributive discretion to distribute principal to the beneficiary; and
(4) create or modify a power of appointment if the powerholder is a presumptive remainder beneficiary or successor beneficiary of the first trust, but the exercise of the power may take effect only after the powerholder becomes, or would have become if then living, a current beneficiary.
(e) A power of appointment described in subsection (d) may be general or nongeneral. The class of permissible appointees in favor of which the power may be exercised may be broader than or different from the beneficiaries of the first trust.
(Act 2018-519, §11.)
(a) In this section, “limited distributive discretion” means a discretionary power of distribution that is limited to an ascertainable standard or a reasonably definite standard.
(b) An authorized fiduciary that has limited distributive discretion over the principal of the first trust for the benefit of one or more current beneficiaries may exercise the decanting power over the principal of the first trust. If an authorized fiduciary has limited distributive discretion over part but not all of the principal of a first trust, the fiduciary may exercise the decanting power over that part of the principal over which the authorized fiduciary has limited distributive discretion.
(c) Under this section and subject to Section 19-3D-14, a second trust may be created or administered under the law of any jurisdiction. Under this section, the second trusts, in the aggregate, must grant each beneficiary of the first trust beneficial interests which are substantially similar to the beneficial interests of the beneficiary in the first trust.
(d) A power to make a distribution under a second trust for the benefit of a beneficiary who is an individual is substantially similar to a power under the first trust to make a distribution directly to the beneficiary. A distribution is for the benefit of a beneficiary if:
(1) the distribution is applied for the benefit of the beneficiary;
(2) the beneficiary is under a legal disability or the trustee reasonably believes the beneficiary is incapacitated, and the distribution is made as permitted under Chapter 3B (commencing with Section 19-3B-101) of this title; or
(3) the distribution is made as permitted under the terms of the first-trust instrument and the second-trust instrument for the benefit of the beneficiary.
(Act 2018-519, §12.)
(a) In this section the following terms have the following meanings:
(1) BENEFICIARY WITH A DISABILITY. A beneficiary of a first trust who the authorized fiduciary believes may qualify for governmental benefits based on disability, whether or not the beneficiary currently receives those benefits or is an individual who has been adjudicated incompetent or incapacitated.
(2) GOVERNMENTAL BENEFITS. Financial aid or services from a state, federal, or other public agency.
(3) SPECIAL-NEEDS FIDUCIARY. With respect to a trust that has a beneficiary with a disability:
(A) a trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the principal of a first trust to one or more current beneficiaries;
(B) if no trustee or fiduciary has discretion under subparagraph (A), a trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the income of the first trust to one or more current beneficiaries; or
(C) if no trustee or fiduciary has discretion under subparagraphs (A) and (B), a trustee or other fiduciary, other than a settlor, that is required to distribute part or all of the income or principal of the first trust to one or more current beneficiaries.
(4) SPECIAL-NEEDS TRUST. A trust the trustee believes would not be considered a resource for purposes of determining whether a beneficiary with a disability is eligible for governmental benefits.
(b) A special-needs fiduciary may exercise the decanting power under Section 19-3D-11 over the principal of a first trust as if the fiduciary had authority to distribute principal to a beneficiary with a disability subject to expanded distributive discretion if:
(1) a second trust is a special-needs trust that benefits the beneficiary with a disability; and
(2) the special-needs fiduciary determines that exercise of the decanting power will further the purposes of the first trust.
(c) In an exercise of the decanting power under this section, the following rules apply:
(1) Notwithstanding Section 19-3D-11(c)(2), the interest in the second trust of a beneficiary with a disability may:
(A) be a pooled trust as defined by Medicaid law for the benefit of the beneficiary with a disability under 42 U.S.C. Section 1396p(d)(4)(C), as amended; or
(B) contain payback provisions complying with reimbursement requirements of Medicaid law under 42 U.S.C. Section 1396p(d)(4)(A), as amended.
(2) Section 19-3D-11(c)(3) does not apply to the interests of the beneficiary with a disability.
(3) Except as affected by any change to the interests of the beneficiary with a disability, the second trust, or if there are two or more second trusts, the second trusts in the aggregate, must grant each other beneficiary of the first trust beneficial interests in the second trusts which are substantially similar to the beneficiary’s beneficial interests in the first trust.
(Act 2018-519, §13.)
(a) In this section the following terms have the following meanings:
(1) DETERMINABLE CHARITABLE INTEREST. A charitable interest that is a right to a mandatory distribution currently, periodically, on the occurrence of a specified event, or after the passage of a specified time, and which is unconditional or will be held solely for charitable purposes.
(2) UNCONDITIONAL. Not subject to the occurrence of a specified event that is not certain to occur, other than a requirement in a trust instrument that a charitable organization be in existence or qualify under a particular provision of the United States Internal Revenue Code of 1986, as amended, on the date of the distribution, if the charitable organization meets the requirement on the date of determination.
(b) If a first trust contains a determinable charitable interest that is not entirely held by or for the benefit of one or more identified and existing charitable organizations, the Attorney General has the rights of a qualified beneficiary and may represent and bind the charitable interest.
(c) If a first trust contains a charitable interest, the second trust or trusts may not:
(1) diminish the charitable interest;
(2) diminish the interest of an identified charitable organization that holds the charitable interest;
(3) alter any charitable purpose stated in the first-trust instrument; or
(4) alter any condition or restriction related to the charitable interest.
(d) If there are two or more second trusts, the second trusts shall be treated as one trust for purposes of determining whether the exercise of the decanting power diminishes the charitable interest or diminishes the interest of an identified charitable organization for purposes of subsection (c).
(e) If a first trust contains a determinable charitable interest that is not entirely held by or for the benefit of one or more identified and existing charitable organizations, the second trust or trusts that include a charitable interest pursuant to subsection (c) must be administered under the law of this state unless:
(1) the Attorney General, after receiving notice under Section 19-3D-7, fails to object in a signed record delivered to the authorized fiduciary within the notice period;
(2) the Attorney General consents in a signed record to the second trust or trusts being administered under the law of another jurisdiction; or
(3) the court approves the exercise of the decanting power.
(f) This chapter does not limit the powers and duties of the Attorney General under laws of this state other than this chapter.
(Act 2018-519, §14.)
(a) An authorized fiduciary may not exercise the decanting power to the extent the first-trust instrument expressly prohibits exercise of:
(1) the decanting power; or
(2) a power granted by state law to the fiduciary to distribute part or all of the principal of the trust to another trust or to modify the trust.
(b) Exercise of the decanting power is subject to any restriction in the first-trust instrument that expressly applies to exercise of:
(1) the decanting power; or
(2) a power granted by state law to a fiduciary to distribute part or all of the principal of the trust to another trust or to modify the trust.
(c) A general prohibition of the amendment or revocation of a first trust, a spendthrift clause, or a clause restraining the voluntary or involuntary transfer of a beneficiary’s interest does not preclude exercise of the decanting power.
(d) Subject to subsections (a) and (b), an authorized fiduciary may exercise the decanting power under this chapter even if the first-trust instrument permits the authorized fiduciary or another person to modify the first-trust instrument or to distribute part or all of the principal of the first trust to another trust.
(e) If a first-trust instrument contains an express prohibition described in subsection (a) or an express restriction described in subsection (b), the provision must be included in the second-trust instrument.
(Act 2018-519, §15.)
(a) If a first-trust instrument specifies an authorized fiduciary’s compensation, the fiduciary may not exercise the decanting power to increase the fiduciary’s compensation above the specified compensation unless:
(1) all qualified beneficiaries of the second trust consent to the increase in a signed record; or
(2) the increase is approved by the court.
(b) If a first-trust instrument does not specify an authorized fiduciary’s compensation, the fiduciary may not exercise the decanting power to increase the fiduciary’s compensation above the compensation permitted by Chapter 3B (commencing with Section 19-3B-101) of this title, unless:
(1) all qualified beneficiaries of the second trust consent to the increase in a signed record; or
(2) the increase is approved by the court.
(c) A change in an authorized fiduciary’s compensation which is incidental to other changes made by the exercise of the decanting power is not an increase in the fiduciary’s compensation for purposes of subsections (a) and (b).
(Act 2018-519, §16.)
(a) Except as otherwise provided in this section, a second-trust instrument may not relieve an authorized fiduciary from liability for breach of trust to a greater extent than the first-trust instrument.
(b) A second-trust instrument may provide for indemnification of an authorized fiduciary of the first trust or another person acting in a fiduciary capacity under the first trust for any liability or claim that would have been payable from the first trust if the decanting power had not been exercised.
(c) A second-trust instrument may not reduce fiduciary liability in the aggregate.
(d) Subject to subsection (c), a second-trust instrument may divide and reallocate fiduciary powers among fiduciaries, including one or more trustees, distribution advisors, investment advisors, trust protectors, or other persons, and relieve a fiduciary from liability for an act or failure to act of another fiduciary as permitted by laws of this state other than this chapter.
(Act 2018-519, §17.)
An authorized fiduciary may not exercise the decanting power to modify a provision in a first-trust instrument granting another person power to remove or replace the fiduciary unless:
(1) the person holding the power consents to the modification in a signed record and the modification applies only to the person;
(2) the person holding the power and the qualified beneficiaries of the second trust consent to the modification in a signed record and the modification grants a substantially similar power to another person; or
(3) the court approves the modification and the modification grants a substantially similar power to another person.
(Act 2018-519, §18.)
(a) In this section the following terms have the following meanings:
(1) GRANTOR TRUST. A trust as to which a settlor of a first trust is considered the owner under 26 U.S.C. Sections 671 through 677, as amended, or 26 U.S.C. Section 679, as amended.
(2) INTERNAL REVENUE CODE. The United States Internal Revenue Code of 1986, as amended.
(3) NONGRANTOR TRUST. A trust that is not a grantor trust.
(4) QUALIFIED BENEFITS PROPERTY. Property subject to the minimum distribution requirements of 26 U.S.C. Section 401(a)(9), as amended, and any applicable regulations, or to any similar requirements that refer to 26 U.S.C. Section 401(a)(9) or the regulations.
(b) An exercise of the decanting power is subject to the following limitations:
(1) If a first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for a marital deduction for purposes of the gift or estate tax under the Internal Revenue Code or a state gift, estate, or inheritance tax, the second-trust instrument must not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction, or would have reduced the amount of the deduction, under the same provisions of the Internal Revenue Code or state law under which the transfer qualified.
(2) If the first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for a charitable deduction for purposes of the income, gift, or estate tax under the Internal Revenue Code or a state income, gift, estate, or inheritance tax, the second-trust instrument must not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction, or would have reduced the amount of the deduction, under the same provisions of the Internal Revenue Code or state law under which the transfer qualified.
(3) If the first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for the exclusion from the gift tax described in 26 U.S.C. Section 2503(b), as amended, the second-trust instrument must not include or omit a term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying under 26 U.S.C. Section 2503(b), as amended. If the first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for the exclusion from the gift tax described in 26 U.S.C. Section 2503(b), as amended, by application of 26 U.S.C. Section 2503(c), as amended, the second-trust instrument must not include or omit a term that, if included or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying under 26 U.S.C. Section 2503(c), as amended.
(4) If the property of the first trust includes shares of stock in an S corporation, as defined in 26 U.S.C. Section 1361, as amended, and the first trust is, or but for provisions of this chapter other than this section would be, a permitted shareholder under any provision of 26 U.S.C. Section 1361, as amended, an authorized fiduciary may exercise the power with respect to part or all of the S-corporation stock only if any second trust receiving the stock is a permitted shareholder under 26 U.S.C. Section 1361(c)(2), as amended. If the property of the first trust includes shares of stock in an S corporation and the first trust is, or but for provisions of this chapter other than this section would be, a qualified subchapter-S trust within the meaning of 26 U.S.C. Section 1361(d), as amended, the second-trust instrument must not include or omit a term that prevents the second trust from qualifying as a qualified subchapter-S trust.
(5) If the first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for a zero inclusion ratio for purposes of the generation-skipping transfer tax under 26 U.S.C. Section 2642(c), as amended, the second-trust instrument must not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented the transfer to the first trust from qualifying for a zero inclusion ratio under 26 U.S.C. Section 2642(c), as amended.
(6) If the first trust is directly or indirectly the beneficiary of qualified benefits property, the second-trust instrument may not include or omit any term that, if included in or omitted from the first-trust instrument, would have increased the minimum distributions required with respect to the qualified benefits property under 26 U.S.C. Section 401(a)(9), as amended, and any applicable regulations, or any similar requirements that refer to 26 U.S.C. Section 401(a)(9), as amended or the regulations. If an attempted exercise of the decanting power violates the preceding sentence, the trustee is deemed to have held the qualified benefits property and any reinvested distributions of the property as a separate share from the date of the exercise of the power and Section 19-3D-22 applies to the separate share.
(7) If the first trust qualifies as a grantor trust because of the application of 26 U.S.C. Section 672(f)(2)(A), as amended, the second trust may not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented the first trust from qualifying under 26 U.S.C. Section 672(f)(2)(A), as amended.
(8) In this paragraph, “tax benefit” means a federal or state tax deduction, exemption, exclusion, or other benefit not otherwise listed in this section, except for a benefit arising from being a grantor trust. Subject to paragraph (9), a second-trust instrument may not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented qualification for a tax benefit if:
(A) the first-trust instrument expressly indicates an intent to qualify for the benefit or the first-trust instrument clearly is designed to enable the first trust to qualify for the benefit; and
(B) the transfer of property held by the first trust or the first trust qualified, or but for provisions of this chapter other than this section, would have qualified for the tax benefit.
(9) Subject to paragraph (4):
(A) except as otherwise provided in paragraph (7), the second trust may be a nongrantor trust, even if the first trust is a grantor trust; and
(B) except as otherwise provided in paragraph (10), the second trust may be a grantor trust, even if the first trust is a nongrantor trust.
(10) An authorized fiduciary may not exercise the decanting power if a settlor objects in a signed record delivered to the fiduciary within the notice period and:
(A) the first trust and a second trust are both grantor trusts, in whole or in part, the first trust grants the settlor or another person the power to cause the first trust to cease to be a grantor trust, and the second trust does not grant an equivalent power to the settlor or other person; or
(B) the first trust is a nongrantor trust and a second trust is a grantor trust, in whole or in part, with respect to the settlor, unless:
(i) the settlor has the power at all times to cause the second trust to cease to be a grantor trust; or
(ii) the first-trust instrument contains a provision granting the settlor or another person a power that would cause the first trust to cease to be a grantor trust and the second-trust instrument contains the same provision.
(Act 2018-519, §19.)
(a) Subject to subsection (b), a second trust may have a duration that is the same as or different from the duration of the first trust.
(b) To the extent that property of a second trust is attributable to property of the first trust, the property of the second trust is subject to any rules governing maximum perpetuity, accumulation, or suspension of the power of alienation which apply to property of the first trust.
(Act 2018-519, §20.)
An authorized fiduciary may exercise the decanting power whether or not under the first trust’s discretionary distribution standard the fiduciary would have made or could have been compelled to make a discretionary distribution of principal at the time of the exercise.
(Act 2018-519, §21.)
(a) If exercise of the decanting power would be effective under this chapter except that the second-trust instrument in part does not comply with this chapter, the exercise of the power is effective and the following rules apply with respect to the principal of the second trust attributable to the exercise of the power:
(1) A provision in the second-trust instrument which is not permitted under this chapter is void to the extent necessary to comply with this chapter.
(2) A provision required by this chapter to be in the second-trust instrument which is not contained in the instrument is deemed to be included in the instrument to the extent necessary to comply with this chapter.
(b) If a trustee or other fiduciary of a second trust determines that subsection (a) applies to a prior exercise of the decanting power, the fiduciary shall take corrective action consistent with the fiduciary’s duties.
(Act 2018-519, §22.)
(a) In this section the following terms have the following meanings:
(1) ANIMAL TRUST. A trust or an interest in a trust created to provide for the care of one or more animals.
(2) PROTECTOR. A person appointed in an animal trust to enforce the trust on behalf of the animal or, if no such person is appointed in the trust, a person appointed by the court for that purpose.
(b) The decanting power may be exercised over an animal trust that has a protector to the extent the trust could be decanted under this chapter if each animal that benefits from the trust were an individual, if the protector consents in a signed record to the exercise of the power.
(c) A protector for an animal has the rights under this chapter of a qualified beneficiary.
(d) Notwithstanding any other provision of this chapter, if a first trust is an animal trust, in an exercise of the decanting power, the second trust must provide that trust property may be applied only to its intended purpose for the period the first trust benefitted the animal.
(Act 2018-519, §23.)
A reference in Chapter 3B (commencing with Section 19-3B-101) of this title, to a trust instrument or terms of the trust includes a second-trust instrument and the terms of the second trust.
(Act 2018-519, §24.)
(a) For purposes of laws of this state other than this chapter and subject to subsection (b), a settlor of a first trust is deemed to be the settlor of the second trust with respect to the portion of the principal of the first trust subject to the exercise of the decanting power.
(b) In determining settlor intent with respect to a second trust, the intent of a settlor of the first trust, a settlor of the second trust, and the authorized fiduciary may be considered.
(Act 2018-519, §25.)
(a) Except as otherwise provided in subsection (c), if exercise of the decanting power was intended to distribute all the principal of the first trust to one or more second trusts, later-discovered property belonging to the first trust and property paid to or acquired by the first trust after the exercise of the power is part of the trust estate of the second trust or trusts.
(b) Except as otherwise provided in subsection (c), if exercise of the decanting power was intended to distribute less than all the principal of the first trust to one or more second trusts, later-discovered property belonging to the first trust or property paid to or acquired by the first trust after exercise of the power remains part of the trust estate of the first trust.
(c) An authorized fiduciary may provide in an exercise of the decanting power or by the terms of a second trust for disposition of later-discovered property belonging to the first trust or property paid to or acquired by the first trust after exercise of the power.
(Act 2018-519, §26.)
A debt, liability, or other obligation enforceable against property of a first trust is enforceable to the same extent against the property when held by the second trust after exercise of the decanting power.
(Act 2018-519, §27.)
In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.
(Act 2018-519, §28.)
This chapter modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).
(Act 2018-519, §29.)
This chapter shall be known and may be cited as the Alabama Qualified Dispositions in Trust Act.
(Act 2021-238, §1.)
As used in this chapter, the following terms shall have the following meanings:
(1) ADVISOR. A person who is given authority by the terms of a trust instrument to remove or appoint, or both, one or more trustees or to direct, consent to, approve, or veto a trustee’s actual or proposed investment or distribution decisions. A person is considered an advisor even if the person is denominated by another title, such as trust protector. Any person may serve as an advisor.
(2) ASCERTAINABLE STANDARD. A standard relating to an individual’s health, education, support, or maintenance within the meaning of 26 U.S.C. § 2041(b)(1)(A), as amended, or 26 U.S.C. § 2514(c)(1), as amended, and any applicable regulations.
(3) CLAIM. A right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
(4) CREDITOR. With respect to a transferor, a person who has a claim, whether directly or indirectly.
(5) DEBT. Liability on a claim.
(6) DISCRETIONARY TRUST PROVISION. A provision in a trust, regardless of whether the terms of the trust provide a standard for the exercise of the trustee’s discretion and regardless of whether the trust contains a spendthrift provision, which provides that the trustee has discretion, or words of similar import, to determine one or more of the following:
a. Whether to distribute to or for the benefit of an individual or a class of beneficiaries the income or principal, or both, of the trust.
b. The amount, if any, of the income or principal, or both, of the trust to distribute to or for the benefit of an individual or a class of beneficiaries.
c. Who, if any, among a class of beneficiaries will receive income or principal, or both, of the trust.
d. Whether the distribution of trust property is from income or principal, or both, of the trust.
e. When to pay income or principal, except that a power to determine when to distribute income or principal within or with respect to a calendar or taxable year of the trust is not a discretionary trust provision if the distribution is required to be made.
(7) DISPOSITION. A transfer of property that either creates a new fiduciary relationship between at least one trustee and a trust beneficiary or subjects property to a preexisting fiduciary relationship between at least one trustee and a trust beneficiary. The term includes a transfer by conveyance or assignment; by exercise of a power of appointment, including a power to substitute a trustee for another or to add one or more new trustees; by exercise of a power of revocation or amendment; or, except as provided in this subdivision, by disclaimer, release, or relinquishment. The term does not include a disclaimer, release, or relinquishment of property that was previously the subject of a qualified disposition. For purposes of this subdivision, as between a given trustee and a given beneficiary, a new fiduciary relationship is created whenever the terms of the governing trust instrument are materially altered, including alteration by an irrevocable written election as described in subsection (f) of Section 19-3E-5 with respect to the trust beneficiary in question.
(8) DISTRIBUTION DECISION. A decision regarding the distribution of trust property to or for the benefit of a trust beneficiary. The term includes a decision whether to make or guarantee a loan to or for the benefit of a trust beneficiary.
(9) FIDUCIARY DISPOSITION. A disposition made by a trustee acting in a fiduciary capacity.
(10) FIDUCIARY QUALIFIED DISPOSITION. A qualified disposition made by a trustee acting in a fiduciary capacity.
(11) GENERAL POWER OF APPOINTMENT. A power to appoint trust property, the permissible appointees of which include the power holder, his or her estate, his or her creditors, or the creditors of his or her estate. The term includes a power that is not expressly restricted as to appointees. A power may be general as to some property and special as to other property. The term does not include a power exercisable in favor of the power holder, his or her estate, his or her creditors, or the creditors of his or her estate that is limited by an ascertainable standard.
(12) INVESTMENT DECISION. A decision regarding whether to purchase, sell, exchange, tender, or pledge any trust property. The term includes decisions regarding other transactions affecting the ownership of or rights in any trust property, other than distribution decisions. Unless otherwise provided in the trust instrument, the term also includes a decision regarding whether to make or guarantee a loan to or on behalf of an entity in which the trust owns an interest, directly or indirectly, in the entity’s debt or equity.
(13) LIEN. A charge against or an interest in property to secure payment of a debt or performance of an obligation. The term includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common law lien, or a statutory lien.
(14) ORGANIZATION. A person other than an individual.
(15) PERSON. An individual, estate, partnership, association, trust, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal or commercial entity.
(16) PROPERTY. Anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein. The term includes choses in action, claims, and interests created by a beneficiary designation under policies of insurance, financial instruments, deferred compensation, and other retirement arrangements, whether revocable or irrevocable.
(17) QUALIFIED BENEFICIARY. A living trust beneficiary to whom any of the following apply on the date of the beneficiary’s qualification:
a. The beneficiary is a distributee or permissible distributee of trust income or principal.
b. The beneficiary would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in paragraph a. terminated on that date, but the termination of those interests would not cause the trust to terminate.
c. The beneficiary would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.
(18) QUALIFIED DISPOSITION. A disposition of property to one or more trustees, at least one of whom is a qualified trustee, which is governed by a trust instrument, including, but not limited to, a trust instrument as modified by an irrevocable written election described in subsection (f) of Section 19-3E-5, under which the transferor has no more rights, powers, or interests than those permitted by Section 19-3E-4. The term does not include a disposition to the extent that, at the time of the disposition, the transferor is in arrears on a child support obligation by more than 30 days.
(19) QUALIFIED TRUSTEE. A person, other than the transferor, who meets all of the following conditions:
a. Is an individual who is a resident of this state, or is an organization that is authorized by the law of this state to act as a trustee and whose activities are subject to supervision by the Alabama State Banking Department, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, or the Office of Thrift Supervision.
b. Maintains or arranges for custody in this state of some or all of the property that is the subject of the qualified disposition and administers all or part of the trust in this state.
c. Whose usual place of business, where some of the records pertaining to the trust are kept, is located in this state or, if the person does not have such a place of business, who is a resident of this state. For a corporate trustee, the usual place of business is the business location of the primary trust officer.
(20) RETIREMENT BENEFIT. An interest in one of the following types of assets if payable to a trust as a beneficiary or owned by the trust:
a. A qualified or nonqualified annuity.
b. A benefit under a qualified or nonqualified plan of deferred compensation.
c. Any account in, or benefit payable under, any pension, profit-sharing, stock bonus, or other qualified retirement plan.
d. Any individual retirement account or trust.
e. Any benefit under a plan or arrangement established under 26 U.S.C §§ 401, 403, 408, 408A, or 457, or a similar provision of the Internal Revenue Code of 1986.
(21) SETTLOR. A person, including a testator or trustee, who creates a trust. If more than one person creates a trust, each person is a settlor of the portion of the trust property attributable to that person’s contribution. The lapse, release, or waiver of a power of appointment does not cause the holder of the power to be treated as a settlor of the trust.
(22) SPECIAL POWER OF APPOINTMENT. A power to appoint trust property, the permissible appointees of which do not include the power holder, his or her estate, his or her creditors, or the creditors of his or her estate.
(23) SPENDTHRIFT PROVISION. A term of a trust which restrains both voluntary and involuntary transfers of a beneficiary’s interest.
(24) SPOUSE or FORMER SPOUSE. An individual to whom the transferor was married at or before the time a qualified disposition is made.
(25) SUPPORT PROVISION. A provision in a trust that requires the trustee to distribute income or principal, or both, for the health, education, support, or maintenance of a trust beneficiary, or language of similar meaning. The term does not include a provision that provides that a trustee has discretion whether to distribute income or principal, or both, for these purposes or to select from among a class of beneficiaries to receive distributions under the trust provision.
(26) TRANSFEROR. Either of the following, as applicable:
a. A person or, for more than one owner of undivided interests, each of several persons who, as a beneficial owner of certain property or as the holder of a general power of appointment over certain property, directly or indirectly makes a disposition of the property or causes a disposition to be made.
b. For a fiduciary disposition, the person or persons who, as of the time of the fiduciary disposition, most recently fit the description in paragraph a. with respect to the property subject to the fiduciary disposition.
(27) TRUST BENEFICIARY. The same meaning as the term “beneficiary”, as that term is defined in Section 19-3B-103.
(28) TRUST INSTRUMENT. An instrument appointing a qualified trustee or qualified trustees for the property that is the subject of a disposition to which all of the following apply:
a. The instrument expressly incorporates the law of this state to govern the validity, construction, and administration of the trust.
b. The instrument is irrevocable.
c. The instrument provides that the interest of the transferor or other trust beneficiary in trust property may not be transferred, assigned, pledged, or mortgaged, whether voluntarily or involuntarily, before the qualified trustee or qualified trustees actually distribute trust property to the trust beneficiary. Such a provision in a trust instrument is considered a restriction on the transfer of the transferor’s beneficial interest in the trust that is enforceable under applicable nonbankruptcy law within the meaning of 11 U.S.C. § 541(c)(2).
(29) VALID LIEN. A lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.
(Act 2021-238, §2.)
(a) Except as provided in subsection (b), the circuit court has exclusive jurisdiction over an action that addresses either of the following questions:
(1) Whether a transfer is a qualified disposition.
(2) The extent of the transferor’s interest in, or the income from, a qualified disposition.
(b) A probate court granted statutory equitable jurisdiction has concurrent jurisdiction with the circuit court over questions described in subsection (a) and over an action brought under subsection (b) of Section 19-3E-5.
(c) Except to the extent otherwise provided by court rule, venue for a proceeding under subsection (a) or (b) is in the following order of priority:
(1) In any county where venue is proper for civil actions generally, pursuant to Chapter 3 of Title 6.
(2) In a county in this state in which the current qualified trustee has its usual place of business or residence.
(3) In a county in this state in which the immediately preceding qualified trustee had its usual place of business or residence.
(4) In a county in this state in which any trust property subject to the qualified disposition is located.
(5) In a county in this state in which a trust beneficiary resides.
(Act 2021-238, §3.)
(a) A transferor has only the powers and rights that are conferred by the trust instrument. Except as otherwise provided in this chapter, a transferor does not have any power or right with respect to property that is the subject of a qualified disposition or income from the property and any agreement or understanding that purports to grant or permit the retention of any greater powers or rights is void.
(b) A trust instrument may provide for one or more of the following rights, powers, or interests of a transferor:
(1) The power to direct the investment decisions of the trust.
(2) The power to veto a distribution from the trust.
(3) A special power of appointment exercisable by will or other written instrument of the transferor effective only on the death of the transferor.
(4) The right to the potential or actual receipt of income, including rights to income retained in the trust instrument.
(5) The right to the potential or actual receipt of income or principal from a charitable remainder unitrust or charitable remainder annuity trust, as those terms are defined in 26 U.S.C § 664; and the right, at any time by written instrument delivered to the trustee, to release the transferor’s interest in the trust, in whole or in part, in favor of a charitable organization that has a succeeding beneficial interest in the trust.
(6) The right to the potential or actual receipt of income or principal from a grantor-retained annuity trust or grantor-retained unitrust as those terms are described in 26 U.S.C. § 2702, or the receipt each year of a percentage of the value of the trust property, as provided in the trust instrument. The amount may be described either as a percentage, a fixed amount, or an amount determined from time to time under the governing instrument and may not exceed five percent of the value of the trust.
(7) The potential or actual receipt or use of principal if the potential or actual receipt or use of principal would be the result of a trustee acting under any of the following:
a. A discretionary trust provision.
b. A support provision.
c. The direction of an advisor acting under a discretionary trust provision or support provision.
(8) The right to remove a trustee or advisor and to appoint a new trustee or advisor.
(9) The right to the potential or actual use of real property held under a qualified personal residence trust within the meaning of that term as described in 26 U.S.C. § 2702(c), or the possession and enjoyment of a qualified annuity interest within the meaning of that term as described in 26 C.F.R. § 25.2702-5(c)(8).
(10) The right to the potential or actual receipt of income or principal to pay, in whole or in part, income taxes due on income of the trust if the potential or actual receipt of income or principal is under a provision in the trust instrument that expressly provides for the payment of those taxes and if the potential or actual receipt of income or principal would be the result of a qualified trustee acting in either of the following ways:
a. In the trustee’s discretion or under a mandatory direction in the trust instrument.
b. At the direction of an advisor who is acting in the advisor’s discretion.
(11) A trust instrument may authorize a qualified trustee, after the death of the transferor, to pay the transferor’s debts, the expenses of administering the transferor’s estate, and any estate or inheritance tax imposed on or with respect to the transferor’s estate, without regard to the source of the payment.
(12) The right to the actual or potential receipt of a minimum required distribution, as defined in 26 U.S.C. § 4974(b), with respect to a retirement benefit.
(c) None of the powers described in subsection (b), alone or in any combination, shall be deemed a power to revoke.
(Act 2021-238, §4.)
(a) Notwithstanding any other provision of this chapter, with respect to any qualified disposition, a creditor has only the rights provided in this section and Section 19-3E-7.
(b) In an action brought by a creditor for an attachment or other provisional remedy against property that is the subject of a qualified disposition or for avoidance of a qualified disposition, the following rules apply:
(1) Except for the limitation period provided under subsection (c), the action may be brought only under Section 8-9B-5 or 8-9B-6.
(2) For the claim of a creditor which arose after a qualified disposition, the action may involve only a qualified disposition that was made with actual intent to hinder, delay, or defraud the creditor.
(3) The allegations in the action must be proven by a preponderance of the evidence.
(c) A person may not bring or maintain an action concerning a qualified disposition under subsection (b) unless the action is commenced within either of the following periods:
(1) If the claim arose before the qualified disposition was made, or on the later of the following:
a. Two years after the qualified disposition was made.
b. If the person who is or may be liable for any claim fraudulently concealed the existence of the claim or the identity of any person who is liable for the claim from the knowledge of the person entitled to sue on the claim, the earlier of one year after the qualified disposition was or could reasonably have been discovered by the claimant, and the time allowed under the applicable statute of limitations under Section 8-9B-10.
(2) If the claim arose concurrent with or after the qualified disposition, two years after the qualified disposition was made.
(d) If a trust beneficiary who has an interest in a qualified disposition or in property that is subject to a qualified disposition is a party to an action for annulment of a marriage, divorce, or separate maintenance, the following rules apply:
(1) If the trust beneficiary is not the transferor of the qualified disposition, the interest of the trust beneficiary in the qualified disposition or in property that is the subject of the qualified disposition is not considered marital property, is not considered, directly or indirectly, part of the trust beneficiary’s real or personal estate, and may not be awarded to the trust beneficiary’s spouse in a judgment for annulment of a marriage, divorce, or separate maintenance.
(2) If the trust beneficiary is the transferor of the qualified disposition, the interest of the trust beneficiary in the qualified disposition or in property that is the subject of the qualified disposition is not considered marital property, is not considered, directly or indirectly, part of the trust beneficiary’s real or personal estate, and may not be awarded to the trust beneficiary’s spouse in a judgment for annulment of a marriage, divorce, or separate maintenance if any of the following apply:
a. The trust beneficiary transferred the property that is the subject of the qualified disposition more than 30 days before the commencement of the marriage that is the subject of the action.
b. The parties to the marriage agree that this subdivision applies to the qualified disposition.
c. The parties to the marriage agree that the property is not considered marital property, is not considered, directly or indirectly, part of the trust beneficiary’s real or personal estate, and may not be awarded to the trust beneficiary’s spouse in a judgment for annulment of a marriage, divorce, or separate maintenance.
(3) If neither subdivision (1) nor (2) applies, subsections (b) and (c) do not limit the transferor’s spouse’s property division claims.
(e) Except as otherwise provided in subdivision (1), a fiduciary qualified disposition is deemed made as of the time the property that is subject to the disposition was first transferred to the trustee who is making the disposition, or any predecessor of that trustee in an unbroken succession of fiduciary ownership of the property, in a form that meets either of the following requirements:
(1) If the property that is subject to the qualified disposition was first transferred to the trustee making the disposition or the predecessor trustee before April 20, 2021, in a form that would otherwise meet the requirements of a qualified disposition, the qualified disposition is deemed to have been made as of April 20, 2021.
(2) The requirements to be considered a qualified disposition or its equivalent under the laws of another state; provided, that the transferor has no more rights, powers, or interests than those permitted under Section 19-3E-4, as modified by an irrevocable written election described in subsection (f), and, at the time of the disposition, the transferor was not in arrears on a child support obligation by more than 30 days.
(f) If a trustee of an existing trust proposes to make a disposition that, but for the exercise of authority granted in this subsection, would not be a qualified disposition because of a nonconforming power of appointment of the transferor, the trustee may modify the trust instrument by delivering to the qualified trustee an irrevocable written election to modify the nonconforming power of appointment to conform to the requirements of subdivision (3) or subdivision (11) of subsection (b) of Section 19-3E-4. An irrevocable written election described in this subsection shall include both of the following:
(1) A description of the modified power of appointment.
(2) The transferor’s written consent to the modification. The transferor’s consent is not a disposition.
(g) With respect to a qualified disposition, a creditor does not have a claim or cause of action against any of the following:
(1) The trustee of a trust that is the subject of a qualified disposition.
(2) An advisor of a trust that is the subject of a qualified disposition.
(3) A person involved in the counseling, drafting, preparation, execution, or funding of a trust that is the subject of a qualified disposition.
(h) If more than one qualified disposition is made by means of the same trust instrument, the following rules apply:
(1) With respect to a prior qualified disposition, both of the following apply:
a. The making of a subsequent qualified disposition is disregarded in determining whether a creditor’s claim is commenced within the time requirements specified in subsection (c).
b. The making of a subsequent qualified disposition is disregarded in determining pursuant to subsection (d) whether a trust beneficiary’s interest in a qualified disposition or in property that is the subject of a qualified disposition is considered marital property, is considered part of a trust beneficiary’s real or personal estate, or may be awarded to the trust beneficiary’s spouse in a judgment for annulment of a marriage, divorce, or separate maintenance.
(2) A distribution to a trust beneficiary is considered to have been made from the most recent qualified disposition.
(i) In an action against a trustee who received property in a qualified disposition, if a court takes any action declining to apply the law of this state in determining the validity, construction, or administration of the trust, or the effect of a spendthrift provision in the trust instrument, the trustee, without the further order of any court, shall immediately cease to be trustee of the trust. The former trustee does not have any power described in subsection (b) of Section 19-3E-4 except to convey the trust property to the successor trustee, to petition the court for appointment of a successor trustee, and to collect the former trustee’s attorney fees, costs, and expenses. If the trust instrument does not provide for a successor trustee and the trust would otherwise be without a trustee, the following rules apply:
(1) A court with jurisdiction over the trust under Chapter 3B, on the request of a qualified beneficiary of the trust, shall appoint a successor trustee on the terms and conditions the court determines to be consistent with the purposes of the trust and this chapter.
(2) The former trustee may, but has no duty to, petition the court to appoint a successor trustee if a petition for appointment of a successor trustee is not brought by a qualified beneficiary within 30 days after the date on which the former trustee ceased to be a trustee of the trust. If the former trustee elects to petition for the appointment of a successor trustee, the former trustee shall be entitled to reimbursement for all attorney fees, costs, and expenses associated with the petition, and the amount of the attorney fees, costs, and expenses shall be a lien against the trust’s property.
(j) A valid lien attaching to property before a qualified disposition of the property survives the disposition. The trustee takes title to the property subject to the valid lien and is subject to any agreements that created or perfected the valid lien.
(k) A written agreement between a transferor and a creditor may provide for any of the following:
(1) The transferor will have a continuing or periodic obligation to disclose to the creditor any qualified dispositions.
(2) A qualified disposition requires the prior written approval of the creditor.
(3) The transferor is under any other obligation as the creditor may require with respect to a qualified disposition of the property.
(4) In the event the transferor made an express or implied representation regarding an asset in order to create a debt to a creditor prior to December 31, 2021, the transferor is deemed to have entered into an agreement with the creditor, which as to the debt, a disposition of the asset would not be a qualified disposition as to the creditor, unless the disposition had the written approval of the creditor as to the disposition.
(l) If a transfer that would otherwise be a qualified disposition violates an agreement with a creditor described in subsection (k), with respect to the creditor only, the transfer is not a qualified disposition and this chapter does not affect the rights of the creditor.
(Act 2021-238, §5.)
(a) Except as provided in subsection (f), for purposes of this section, a “qualified affidavit” means an affidavit in which the transferor states that at the time of the transfer of the property to the trust, all of the following apply:
(1) The transferor has full right, title, and authority to transfer the property to the trust.
(2) The transfer of the property to the trust will not render the transferor insolvent.
(3) The transferor does not intend to defraud a creditor by transferring the property to the trust.
(4) The transferor does not know of or have reason to know of any pending or threatened court actions against the transferor, except for those court actions identified by the transferor on an attachment to the affidavit.
(5) The transferor is not involved in any administrative proceedings, except for those administrative proceedings identified on an attachment to the affidavit.
(6) The transferor is not currently in arrears on a child support obligation by more than 30 days.
(7) The transferor does not contemplate filing for relief under the Bankruptcy Code, 11 U.S.C. §§ 101 to 1532, inclusive.
(8) The property being transferred to the trust was not derived from unlawful activities.
(b) The transferor shall sign a qualified affidavit before a qualified disposition is made.
(c) A qualified affidavit is defective if it materially fails to meet the criteria provided in subsection (a), except that a qualified affidavit is not defective because of any of the following:
(1) Nonsubstantive variances from the language provided in subsection (a).
(2) Statements or representations in addition to those provided in subsection (a) if the statements or representations do not contradict those required by subsection (a).
(3) Technical errors in administering an oath if the errors were not the fault of the transferor and the transferor reasonably relied on another person to prepare or administer the oath.
(d) A qualified affidavit is not required in any of the following circumstances:
(1) From the settlor for a fiduciary qualified disposition.
(2) From a transferor who is not the settlor of the qualified disposition, except to the extent the transferor is a beneficiary of the qualified disposition and the property subject to the qualified disposition was not previously subject to a qualified disposition with respect to which the transferor signed a qualified affidavit.
(3) In connection with a disposition that is part of, required by, or the direct result of, a prior qualified disposition supported by a qualified affidavit that otherwise complies with the requirements of subsection (a).
(e) If a qualified affidavit is required by this section and a transferor fails to sign timely a qualified affidavit or signs a defective affidavit, the failure or defect may be considered as evidence in an action described in subsection (b) of Section 19-3E-5 to the extent permitted by the Alabama Rules of Evidence, but the validity of the qualified disposition is not affected in any other way because of the failure or defect.
(f) If subdivision (d)(2) applies, the required affidavit shall omit the statements described in subdivisions (1) and (3) of subsection (a) and include a statement that the qualified disposition is not intended to defraud any creditor.
(Act 2021-238, §6.)
(a) A qualified disposition may be avoided only to the extent necessary to satisfy or provide for the present value, taking into consideration any uncertainty of the transferor’s debt to the creditor at whose instance the disposition had been avoided.
(b) If all or any portion of a qualified disposition is avoided, the following rules apply:
(1) If the court is satisfied that a trustee has acted in good faith in accepting or administering the property that is the subject of the qualified disposition, both of the following apply:
a. The trustee has a lien against the property that is the subject of the qualified disposition in an amount equal to the entire cost, including attorney fees, incurred in connection with an action dealing with the qualified disposition. The lien has priority over all other liens against the property, whether or not the other liens accrued or were recorded before the accrual of the lien created by this paragraph.
b. The qualified disposition is avoided subject to the fees, costs, preexisting rights, claims, and interests of the trustee who has acted in good faith and of any predecessor trustee who has acted in good faith.
(2) If the court is satisfied that a trust beneficiary acted in good faith, the avoidance of the qualified disposition is subject to the right of the trust beneficiary to retain any distribution received before the creditor’s commencement of an action to avoid the qualified disposition. The mere creation of the trust or acceptance of a distribution made under the terms of the trust by the trust beneficiary, including a trust beneficiary who is also a transferor of the trust, shall not be considered as evidence that the trust beneficiary failed to act in good faith.
(3) For purposes of this subsection, the mere acceptance of property with or without a qualified affidavit, or the making of any distribution under the terms of the trust, shall not be considered as evidence that a trustee failed to act in good faith.
(c) A creditor has the burden of proving by a preponderance of the evidence that a trustee or trust beneficiary failed to act in good faith. This subsection provides substantive, not procedural, rights.
(d) With respect to a qualified disposition, a levy, attachment, garnishment, notice of lien, sequestration, or other legal or equitable process is permitted only in those circumstances permitted by this chapter.
(e) Notwithstanding any other provision of this chapter, a creditor does not have a right against the interest of a trust beneficiary in property in a trust or portion of a trust that was the subject of qualified disposition solely because the trust beneficiary has the right to authorize or direct the trustee to pay all or part of the trust property in satisfaction of estate or inheritance taxes imposed on or with respect to the trust beneficiary’s postdeath estate, the debts of the trust beneficiary’s postdeath estate, or the expenses of administering the trust beneficiary’s postdeath estate, unless the trust beneficiary actually directs the payment of the taxes, debts, or expenses, and then only to the extent of the direction.
(f)(1) Except as otherwise provided in the trust instrument, if a married couple makes a qualified disposition of property and, immediately before the qualified disposition, the property, any part of the property, or any accumulation to the property, under applicable law, was owned by the married couple as tenants in common for life with cross contingent remainder to the survivor in fee, then notwithstanding the qualified disposition, the property, any part of the property, or any accumulation to the property, while held in trust during the lifetime of both spouses, is treated as though it is property held in tenancy in common for life with cross contingent remainder to the survivor in fee.
(2) In an action concerning whether a creditor of either or both spouses may recover the debt from the trust, on avoidance of the qualified disposition, the sole remedy available to the creditor with respect to trust property treated as though it were tenancy in common for life with cross contingent remainder to the survivor in fee property is an order directing the trustee to transfer the property to both spouses as tenants in common for life with cross contingent remainder to the survivor in fee.
(g) Except as otherwise provided in subsection (f), on avoidance of a qualified disposition to the extent permitted under subsection (a), the sole remedy available to the creditor is an order directing the trustee to transfer to the transferor the amount necessary to satisfy the transferor’s debt to the creditor at whose instance the disposition has been avoided.
(Act 2021-238, §7.)
(a)(1) If a person serving as a qualified trustee ceases to meet the requirements of a qualified trustee and there remains no trustee that meets the requirements of a qualified trustee, the person serving as qualified trustee is considered to have resigned as of the time of the cessation and the successor qualified trustee provided for in the trust instrument becomes a qualified trustee of the trust on the successor qualified trustee’s acceptance of trusteeship.
(2) In the absence of a successor qualified trustee provided for in the trust instrument, the court having jurisdiction, on petition of a qualified beneficiary, shall appoint a successor qualified trustee.
(b) A disposition that was a qualified disposition does not cease to be a qualified disposition as a result of a subsequent vacancy in the position of qualified trustee if a successor qualified trustee is appointed or a proceeding for the appointment of a successor qualified trustee is commenced within a reasonable time after a person with authority to appoint a qualified trustee or commence a proceeding to appoint a qualified trustee knows of the vacancy.
(Act 2021-238, §8.)
(a) A trust beneficiary does not have the power or capacity to transfer any of the income from property of a trust or portion of a trust which is the subject of a qualified disposition by his or her order, voluntary or involuntary, or by an order or direction of a court.
(b) Except as otherwise provided in this chapter, the interest of a beneficiary in a trust or portion of a trust that is a qualified disposition is not subject to a process of attachment issued against the beneficiary and may not be taken in execution under any form of legal process directed against the beneficiary, trustee, trust estate, or any part of the income of the trust estate. The whole of the trust estate and the income of the trust estate shall go to and be applied by the trustee solely for the benefit of the beneficiary, free, clear, and discharged of all obligations of the beneficiary.
(c) The trustee of a qualified disposition shall disregard and oppose an assignment or other act, voluntary or involuntary, that is attempted contrary to this section. The trustee is entitled to reimbursement for all attorneys fees, costs, and expenses associated with carrying out this duty and the amount of the attorneys fees, costs, and expenses is a lien against the property that is the subject of the qualified disposition. A trustee is not liable, and a trust beneficiary or any successor trust beneficiary does not have a claim or cause of action against a trustee, for a breach of this duty unless the trustee’s breach was not done in good faith or was the result of reckless indifference to the purposes of the trust or the interests of the trust beneficiaries.
(d) This section does not prohibit a beneficiary from disclaiming an interest in a trust or portion of a trust that is a qualified disposition or from exercising a power of appointment.
(Act 2021-238, §9.)
(a) Subject to subsection (e) of Section 19-3E-5, this chapter applies to qualified dispositions made on or after April 20, 2021.
(b) If any provision of this chapter conflicts with any provision of the Alabama Uniform Trust Code, Sections 19-3B-101 to 19-3B-1305, inclusive, or the Alabama Uniform Voidable Transactions Act, Sections 8-9B-1 to 8-9B-17, inclusive, the provision of this chapter prevails.
(Act 2021-238, §10.)
Unless otherwise displaced by the provisions of this chapter, the principles of law and equity, including the law merchant and the law relating to principal and agent, estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, and other validating or invalidating clauses, supplement its provisions.
(Act 2021-238, §11.)
When used in this article, the following words and phrases shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) FIDUCIARY. An administrator, an administrator with the will annexed, an administrator de bonis non, an executor, a trustee, a guardian, a conservator, an agent, a custodian or a custodian or agent for another fiduciary or fiduciaries.
(2) FIDUCIARY ACCOUNT. An estate, a trust, a guardianship, a custodianship, an agency or any other fiduciary relationship, including a custodianship or agency for another fiduciary or fiduciaries.
(3) BANK. A bank or trust company organized and existing under the laws of Alabama with authority to act as a fiduciary and a national banking association with its principal office in the State of Alabama and with authority to act as a fiduciary.
(4) SECURITY. Any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in an oil or mining title or lease or in payments out of production under such a title or lease; collateral trust certificate; transferable share; trustees’ share; investment trust debenture, unit, share or bond; voting trust certificate; or, in general, any interest or instrument commonly known as a security or, with respect to any of the foregoing, any certificate (including a temporary or interim certificate) of interest or participation, any receipt or certificate of deposit or any warrant or right to subscribe or purchase.
(5) CERTIFICATE. Any instrument, document or other writing representing a security.
(6) CLEARING CORPORATION. A corporation:
a. at least 90 percent of the capital stock of which is held by or for one or more persons (other than individuals), each of whom:
is subject to supervision or regulation pursuant to the provisions of federal or state banking laws or state insurance laws; or
is a broker or dealer or investment company registered under the Securities Exchange Act of 1934 or the Investment Company Act of 1940; or
is a national securities exchange or association registered under a statute of the United States such as the Securities Exchange Act of 1934;
b. none of whom, other than a national securities exchange or association, holds in excess of 20 percent of the capital stock of such corporation; and
c. any remaining capital stock of which is held by individuals who have purchased such capital stock at or prior to the time of their taking office as directors of such corporation and who have purchased only so much of such capital stock as may be necessary to permit them to qualify as such directors.
(7) DEPOSIT. Physical delivery and also crediting by entry on the books of a clearing corporation without physical delivery.
(Acts 1976, No. 609, p. 825, §1.)
(a) Notwithstanding any other provision of law to the contrary, any fiduciary holding securities in a fiduciary capacity is authorized, in the absence of specific provision to the contrary in the governing instrument or court order under which the fiduciary is acting, to deposit or arrange for the deposit of such securities in a clearing corporation.
(b) When such securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of such clearing corporation with any other such securities deposited in such clearing corporation by any person regardless of the ownership of securities and certificates of smaller denomination may be merged into one or more certificates of larger denomination.
(c) Ownership of and other interests in such securities may be transferred by entries on the books of said clearing corporation without physical delivery of certificates representing such securities.
(d) The records of the fiduciary shall at all times show the fiduciary accounts for which such securities are deposited and the ownership of such securities in each fiduciary account.
(e) Securities held in the name of a bank’s nominee may be deposited under the authority contained in this section.
(f) A bank, when acting under the authority contained in this section, shall be subject to such rules and regulations as, in the case of banks or trust companies organized and existing under the laws of Alabama, the Superintendent of Banks and, in the case of national banking associations, the Comptroller of the Currency may from time to time issue.
(g) A fiduciary shall, upon demand by any person to whom it has a duty to account with respect to a fiduciary account, certify in writing the securities deposited by it with the clearing corporation for that fiduciary account.
(Acts 1976, No. 609, p. 825, §2.)
This article shall apply to all fiduciary accounts now in existence or hereafter established regardless of the date of the governing instrument or court order under which the fiduciary is acting.
(Acts 1976, No. 609, p. 825, §3.)
When used in this article, the following words and phrases shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) FIDUCIARY. An administrator, an administrator with the will annexed, an administrator de bonis non, an executor, a trustee, a guardian, a conservator, an agent or a custodian.
(2) FIDUCIARY ACCOUNT. An estate, a trust, a guardianship, a custodianship, an agency or any other fiduciary relationship, including a custodianship or agency for another fiduciary or fiduciaries.
(3) BANK. A bank or trust company organized and existing under the laws of Alabama with authority to act as a fiduciary and a national banking association with its principal office in the State of Alabama and with authority to act as a fiduciary.
(4) SECURITY. Any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; collateral trust certificate; transferable share; trustees’ share; investment trust debenture, unit, share or bond; voting trust certificate; or, in general, any interest or instrument commonly known as a security or, with respect to any of the foregoing, any certificate (including a temporary or interim certificate) of interest or participation, any receipt or certificate of deposit or any warrant or right to subscribe or purchase.
(5) CERTIFICATE. Any instrument, document or other writing representing a security.
(Acts 1976, No. 610, p. 828, §1.)
(a) Notwithstanding any other provision of law to the contrary, any bank holding securities as a fiduciary, as a cofiduciary or as a custodian or agent for another fiduciary or fiduciaries is authorized, in the absence of specific provision to the contrary in the governing instrument or court order under which the bank is acting, to hold such securities in a manner such that, without certification as to ownership attached, certificates representing securities of the same class of the same issuer and from time to time constituting assets of different fiduciary accounts are held in bulk, including, to the extent feasible, the merging of certificates of smaller denominations into one or more certificates of larger denominations. In the event the bank holds securities as a cofiduciary, the bank before acting under the authority contained in this section must have the written consent of its cofiduciary, who is hereby authorized to give such consent.
(b) Securities held in the manner authorized by this section may be registered in the name of the bank’s nominee.
(c) When acting under the authority contained in this section, the records of the bank shall at all times show the fiduciary accounts for which such securities are held and the ownership of such securities in each fiduciary account.
(d) A bank, when acting under the authority contained in this section, shall be subject to such rules and regulations as, in the case of banks or trust companies organized and existing under the laws of Alabama, the Superintendent of Banks and, in the case of national banking associations, the Comptroller of the Currency, may from time to time issue.
(e) A bank so acting shall, upon demand by any person to whom it has a duty to account with respect to a fiduciary account, certify in writing the securities held by it for that fiduciary account.
(Acts 1976, No. 610, p. 828, §2.)
This article shall apply to all fiduciary accounts now in existence or hereafter established regardless of the date of the governing instrument or court order under which the bank is acting.
(Acts 1976, No. 610, p. 828, §3.)
When used in this article, the following words and phrases shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) FIDUCIARY. An administrator, an administrator with the will annexed, an administrator de bonis non, an executor, a trustee, a guardian, a conservator, an agent or a custodian.
(2) FIDUCIARY ACCOUNT. An estate, a trust, a guardianship, a custodianship, an agency or any other fiduciary relationship, including a custodianship or agency for another fiduciary or fiduciaries.
(3) BANK. A bank or trust company organized and existing under the laws of Alabama with authority to act as a fiduciary and a national banking association with its principal office in the State of Alabama and with authority to act as a fiduciary.
(4) TREASURY SECURITY. Any bill, note, bond, certificate of indebtedness or other evidence of indebtedness the principal and interest of which the United States or any department, agency or instrumentality thereof has agreed to pay or has guaranteed payment.
(5) DEPOSIT. Physical delivery and also crediting by entry on the books of the federal reserve bank without physical delivery.
(Acts 1976, No. 625, p. 858, §1.)
(a) Notwithstanding any other provision of law to the contrary, any bank holding treasury securities as a fiduciary, as a cofiduciary or as a custodian or agent for another fiduciary or fiduciaries is authorized, in the absence of specific provision to the contrary in the governing instrument or court order under which the bank is acting, to deposit or arrange for the deposit with the federal reserve bank in its district of such treasury securities to be credited to one or more accounts on the books of said federal reserve bank in the name of such bank to be designated trust or other accounts in accordance with rules and regulations of the federal reserve bank, to which similar treasury securities deposited by the bank for other fiduciary accounts may be credited.
(b) Ownership of and other interest in such treasury securities may be transferred by entries on the books of said federal reserve bank without physical delivery thereof.
(c) In the event the bank holds treasury securities as a cofiduciary, the bank before acting under the authority contained in this section must have the written consent of its cofiduciary, who is hereby authorized to give such consent.
(d) When acting under the authority contained in this section, the records of the bank shall at all times show the fiduciary accounts for which such treasury securities are deposited and the ownership of such treasury securities in each fiduciary account.
(e) A bank, when acting under the authority herein contained, shall be subject to such rules and regulations as, in the case of banks or trust companies organized and existing under the laws of Alabama, the Superintendent of Banks and, in the case of national banking associations, the Comptroller of the Currency, may from time to time issue.
(f) A bank shall, upon demand by any person to whom it has a duty to account with respect to a fiduciary account, certify in writing the treasury securities deposited by it with the federal reserve bank for that fiduciary account.
(Acts 1976, No. 625, p. 858, §2.)
This article shall apply to all fiduciary accounts now in existence or hereafter established regardless of the date of the governing instrument or court order under which the bank is acting.
(Acts 1976, No. 625, p. 858, §3.)
Idle funds are defined as collected income and principal cash balances received by a fiduciary and held awaiting investment in or distribution from a fiduciary account. As used in this chapter, the term “fiduciary account” shall mean any account for which the bank or trust company has investment responsibility.
(Acts 1991, No. 91-129, p. 163, §1(a).)
A bank or trust company duly authorized to exercise fiduciary powers through the operation of a trust department shall invest idle funds in each fiduciary account in accordance with the specific terms of the governing document.
(Acts 1991, No. 91-129, p. 163, §1(b).)
In the absence of specific instructions in the governing document, the fiduciary shall invest idle funds in each fiduciary account in a short-term investment vehicle, which may include a deposit in an interest-bearing account, a money market mutual fund, or any other generally accepted investment vehicle for the investment of idle funds. Such deposit in an interest-bearing account may be in the fiduciary’s own commercial bank or any affiliate thereof. Such investment in a money market mutual fund or any other generally accepted investment vehicle may include: (1) a mutual fund or investment vehicle provided by a third party vendor, even if the bank or trust company or any affiliate thereof receives separate compensation from the vendor, or (2) a mutual fund or investment vehicle provided by the bank or trust company or any affiliate thereof for which the bank or trust company or any affiliate thereof may receive compensation as the mutual fund or investment vehicle’s investment advisor, administrator, trustee, transfer agent, or other similar capacity.
(Acts 1991, No. 91-129, p. 163, §1(c).)
In the absence of specific instructions in the governing document, the fiduciary shall select an investment vehicle for idle funds in each fiduciary account which should provide a reasonable rate of return, taking into consideration the income needs of the current income beneficiary, the quality of the investment, the liquidity needs of the fiduciary account and the expense of making the funds productive of income.
(Acts 1991, No. 91-129, p. 163, §1(d).)
In the absence of specific instructions in the governing document, the fiduciary shall invest idle funds in each fiduciary account in a timely manner consistent with the technology employed by the fiduciary but not to exceed 10 business days after the receipt of collected funds; provided, however, that there shall be no obligation or requirement to invest idle funds in an amount less than $1,000.00 per each fiduciary account.
(Acts 1991, No. 91-129, p. 163, §1(e).)
In the absence of specific instructions in the governing document, the fiduciary may receive compensation for the investment of idle funds by netting said compensation from the yield of the investment; provided, however, that disclosure of the compensation (expressed as a percentage of asset value or otherwise) is made to the current income beneficiary by mailing separate notice (by prospectus, statement, letter or otherwise) to the current income beneficiary’s last known address.
(Acts 1991, No. 91-129, p. 163, §1(f).)
The provisions of this chapter shall apply to all fiduciary accounts now existing or hereafter created, but only to the bank or trust company’s actions or inactions occurring after May 28, 1991.
(Acts 1991, No. 91-129, p. 163, §1(g).)
For purposes of this chapter unless the context otherwise requires, the following terms mean:
(1) FIDUCIARY. Includes a personal representative or trustee.
(2) PERSONAL REPRESENTATIVE. An executor, administrator, special administrator, or a person who performs substantially the same function under the law governing the person’s status, and a successor to any of the above.
(3) TRUST. Any express trust, with additions thereto, wherever and however created, or any separate share of a trust, and includes any arrangement, other than an estate, which, although not a trust, has substantially the same effect as a trust.
(4) TRUSTEE. An original, additional, or successor trustee, whether or not appointed or confirmed by a court, and, in the case of an arrangement which is not a trust but which is treated as a trust for purposes of the GST, includes the person in actual or constructive possession of the property subject to such arrangement.
(5) INTERNAL REVENUE CODE. The Internal Revenue Code of 1986 as amended from time to time and successor provisions and codifications thereof.
(6) GST. The generation-skipping transfer tax imposed by Chapter 13 of the Internal Revenue Code.
(Acts 1988, No. 88-340, p. 516, §1; Acts 1989, No. 89-525, p. 1074.)
Unless prohibited by the governing instrument, any person having authority under Chapter 13 of the Internal Revenue Code to allocate any GST exemption shall be entitled to allocate such exemption to any property or to exclude any such property from such allocation.
(Acts 1988, No. 88-340, p. 516, §2.)
When property is held or to be held in a trust which is or would otherwise be partially exempted from the GST due to the allocation to such trust of a GST exemption, a fiduciary is authorized, but not required, to divide the trust into two separate trusts, of equal or unequal value, in order to create one trust entirely exempt from the GST and a second trust entirely subject to the GST. Other terms and provisions of both trusts will remain substantially identical in all respects to the original trust.
(Acts 1988, No. 88-340, p. 516, §3.)
If under the provisions of the governing instrument, property which is held in one trust (the “first trust”) is to be transferred or poured over to, merged with, or otherwise combined with property in another trust (the “second trust”) and property in the first trust is subject to different treatment for purposes of the GST from the property in the second trust, the fiduciary of the second trust is authorized, but not required, to retain the property in separate trusts in order to preclude or minimize the imposition of the GST upon transfers from either or both trusts, with other terms of each separate trust being substantially identical in all respects.
(Acts 1988, No. 88-340, p. 516, §4.)
When a grantor or decedent transfers property into a trust which has, or which pours into another trust which has, more than one beneficiary or class of beneficiaries for GST purposes, and when the grantor or fiduciary allocates the grantor’s or decedent’s GST exemption for the benefit of one or more, but less than all, beneficiaries or classes of beneficiaries of such trust, or when the surviving spouse of the grantor or decedent, or such surviving spouse’s fiduciary, allocates the surviving spouse’s GST exemption for the benefit of one or more, but less than all, beneficiaries or classes of beneficiaries of such trust, and when the instrument creating the trust does not specifically prohibit a fiduciary from dividing such trust into separate share trusts, a fiduciary shall divide such trust into two or more separate share trusts, of equal or unequal value, in order to effectuate and carry out the allocation of the grantor’s or decedent’s GST exemption, or if applicable, the GST exemption of the surviving spouse of the grantor or decedent. Other terms and provisions of each such separate share trust shall, when taken together as a whole, be substantially identical to the original trust. In general, this section contemplates that a fiduciary will divide a single trust into two or more separate share trusts when such division may decrease or eliminate the amount of distributions from such single share trust that would otherwise be subject to the GST.
(Acts 1988, No. 88-340, p. 516, §5.)
When a grantor or decedent transfers property into a trust for which an election is made or to be made pursuant to Section 2056(b)(7) or 2523(f) of the Internal Revenue Code to treat such property as qualified terminable interest property (the “QTIP trust”), and when a grantor or fiduciary makes an election pursuant to Section 2652(a)(3) of the Internal Revenue Code to have the grantor or decedent creating such QTIP trust deemed to be the transferor of a portion, but not all, of such QTIP trust for GST purposes, and when a grantor or fiduciary makes an allocation pursuant to Section 2631 of the Internal Revenue Code of any portion of such grantor’s or decedent’s GST exemption to such portion of the QTIP trust for which a Section 2652(a)(3) election is made or to be made, or to property passing from such portion of the QTIP trust to a trust or person that is a remainder beneficiary of such portion of the QTIP trust at the death of the surviving spouse of the grantor or decedent, and when the instrument creating the QTIP trust does not specifically prohibit a fiduciary from dividing such QTIP trust into separate share trusts, a fiduciary shall divide such QTIP trust into two or more separate share trusts, one of which shall be equal to that portion of the QTIP trust for which a Section 2652(a)(3) election is made or to be made, and the other one or more share trusts shall be divided in such manner as the fiduciary deems appropriate either (1) to effectuate and carry out the allocation of the grantor’s or decedent’s GST exemption to such portion of the QTIP trust for which a Section 2652(a)(3) election is made, or to property passing from such portion of the QTIP trust to a trust or person that is a remainder beneficiary of such portion of the QTIP trust at the death of the surviving spouse, or (2) to effectuate and carry out the allocation of the surviving spouse’s GST exemption to one or more of the share trusts created from the QTIP trust, or to property passing from such one or more share trusts to a trust or person that is a remainder beneficiary of such share trust(s) at the death of the surviving spouse. Upon the death of the surviving spouse of the grantor or decedent, the fiduciary shall pay the estate taxes attributable to the share trust(s) to which an allocation of the GST exemption is made from any other share trust created hereunder to which no GST exemption is allocated, or from one of the other share trusts created hereunder, unless the trust instrument or the will of the surviving spouse specifically provides otherwise; provided, however, that to the extent possible, estate taxes shall not be paid in the manner provided above if to do so could result in an increase in the property subject to the GST on account of such payment of estate taxes. Other terms and provisions of each such separate share trust created from the QTIP trust shall, when taken together as a whole, be substantially identical to the original QTIP trust. In general, this section contemplates that a fiduciary will divide the original QTIP trust into two or more separate share trusts when it may be desirable to allocate both the GST exemption of the grantor or decedent and the GST exemption of the surviving spouse of such grantor or decedent to the original QTIP trust or a share thereof. Moreover, this section contemplates that a fiduciary will pay the estate taxes attributable to the original QTIP trust from a share trust to which no GST exemption is allocated unless to do so could result in an increase in the amount subject to the GST of a share trust to which a GST exemption is allocated.
(Acts 1988, No. 88-340, p. 516, §6.)
Distributions provided for by the governing instrument, whether the original trust is divided into separate trusts under the provisions of Section 19-5-3, 19-5-5 or 19-5-6 hereof or the trusts are retained as separate trusts under the provisions of Section 19-5-4 or 19-5-5 hereof, may be made from either or both separate trusts in the absolute and uncontrolled discretion of the fiduciary; provided, however, in determining the total distributions, neither the division of a trust nor the retention as separate trusts shall result in the receipt by any beneficiary of a greater proportion of the total distributions than the beneficiary would have received if the trust or estate had not been so divided or retained separately.
(Acts 1988, No. 88-340, p. 516, §7.)
The purpose of this chapter is to authorize a fiduciary to take appropriate action to preclude or minimize to the extent possible the imposition of the GST, and this chapter shall be broadly construed to effectuate this purpose.
(Acts 1988, No. 88-340, p. 516, §8.)
A fiduciary may exercise the authority herein granted without prior approval or leave of any court. A fiduciary may also exercise the authority granted in each section contained herein concurrently with the authority granted in each other section contained herein.
(Acts 1988, No. 88-340, p. 516, §9.)
Any fiduciary who in good faith acts or fails to act shall not be liable to any person for taking or failing to take any action authorized or required by this chapter.
(Acts 1988, No. 88-340, p. 516, §10.)
This chapter applies to any trust or estate that may be subject to Chapter 13 of the Internal Revenue Code.
(Acts 1988, No. 88-340, p. 516, §11.)
This chapter shall be effective with respect to transfers in trust, and decedents dying, on and after January 1, 1987.
(Acts 1988, No. 88-340, p. 516, §13.)
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