The bill amends Sections 19-3B-505 and 19-3B-816 of the Code of Alabama 1975 to align creditor claims with the Alabama Qualified Dispositions in Trust Act and clarify the status of individuals holding withdrawal powers in relation to trusts. Key insertions include provisions that specify a revocable trust's property remains subject to claims from the settlor's creditors during the settlor's lifetime and that a beneficiary of an irrevocable trust with a power of withdrawal is not deemed a settlor upon the lapse of that power. Additionally, the bill allows trustees to reimburse settlors for income taxes without those amounts being subject to creditor claims. The bill also makes technical revisions to update existing legal language and clarifies the conditions under which claims against a trust can be barred.

Furthermore, the bill SB179 introduces amendments focusing on the powers and responsibilities of trustees, including their authority to manage stocks and securities, construct or repair real property, and handle distributions to incapacitated beneficiaries. It establishes that compensation from affiliated business entities is presumed reasonable if it aligns with published fee schedules and clarifies that trustees are responsible for all necessary expenses related to trust administration. The bill also allows for investments in common trust funds and management-type investment companies, provided they comply with legal authorizations. Importantly, it grants trustees discretion to distribute trust assets for income tax purposes while ensuring compliance with the Alabama Constitution regarding investments in private corporation stock. The act is set to take effect on October 1, 2026.

Statutes affected:
Introduced: 19-3B-505, 19-3B-816
Enrolled: 19-3B-505, 19-3B-816