1 HB293
2 209389-3
3 By Representative Faulkner
4 RFD: Financial Services
5 First Read: 03-FEB-21
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1
2 ENROLLED, An Act,
3 Relating to trusts; to create the Alabama Qualified
4 Dispositions in Trust Act to govern certain transfers of trust
5 property.
6 BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
7 Section 1. Short title.
8 This act shall be known and may be cited as the
9 Alabama Qualified Dispositions in Trust Act.
10 Section 2. Definitions.
11 As used in this act, the following terms shall have
12 the following meanings:
13 (1) ADVISOR. A person who is given authority by the
14 terms of a trust instrument to remove or appoint, or both, one
15 or more trustees or to direct, consent to, approve, or veto a
16 trustee's actual or proposed investment or distribution
17 decisions. A person is considered an advisor even if the
18 person is denominated by another title, such as trust
19 protector. Any person may serve as an advisor.
20 (2) ASCERTAINABLE STANDARD. A standard relating to
21 an individual's health, education, support, or maintenance
22 within the meaning of 26 U.S.C. 2041(b)(1)(A), as amended,
23 or 26 U.S.C. 2514(c)(1), as amended, and any applicable
24 regulations.
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1 (3) CLAIM. A right to payment, whether or not the
2 right is reduced to judgment, liquidated, unliquidated, fixed,
3 contingent, matured, unmatured, disputed, undisputed, legal,
4 equitable, secured, or unsecured.
5 (4) CREDITOR. With respect to a transferor, a person
6 who has a claim, whether directly or indirectly.
7 (5) DEBT. Liability on a claim.
8 (6) DISCRETIONARY TRUST PROVISION. A provision in a
9 trust, regardless of whether the terms of the trust provide a
10 standard for the exercise of the trustee's discretion and
11 regardless of whether the trust contains a spendthrift
12 provision, which provides that the trustee has discretion, or
13 words of similar import, to determine one or more of the
14 following:
15 a. Whether to distribute to or for the benefit of an
16 individual or a class of beneficiaries the income or
17 principal, or both, of the trust.
18 b. The amount, if any, of the income or principal,
19 or both, of the trust to distribute to or for the benefit of
20 an individual or a class of beneficiaries.
21 c. Who, if any, among a class of beneficiaries will
22 receive income or principal, or both, of the trust.
23 d. Whether the distribution of trust property is
24 from income or principal, or both, of the trust.
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1 e. When to pay income or principal, except that a
2 power to determine when to distribute income or principal
3 within or with respect to a calendar or taxable year of the
4 trust is not a discretionary trust provision if the
5 distribution is required to be made.
6 (7) DISPOSITION. A transfer of property that either
7 creates a new fiduciary relationship between at least one
8 trustee and a trust beneficiary or subjects property to a
9 preexisting fiduciary relationship between at least one
10 trustee and a trust beneficiary. The term includes a transfer
11 by conveyance or assignment; by exercise of a power of
12 appointment, including a power to substitute a trustee for
13 another or to add one or more new trustees; by exercise of a
14 power of revocation or amendment; or, except as provided in
15 this subdivision, by disclaimer, release, or relinquishment.
16 The term does not include a disclaimer, release, or
17 relinquishment of property that was previously the subject of
18 a qualified disposition. For purposes of this subdivision, as
19 between a given trustee and a given beneficiary, a new
20 fiduciary relationship is created whenever the terms of the
21 governing trust instrument are materially altered, including
22 alteration by an irrevocable written election as described in
23 subsection (f) of Section 5 with respect to the trust
24 beneficiary in question.
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1 (8) DISTRIBUTION DECISION. A decision regarding the
2 distribution of trust property to or for the benefit of a
3 trust beneficiary. The term includes a decision whether to
4 make or guarantee a loan to or for the benefit of a trust
5 beneficiary.
6 (9) FIDUCIARY DISPOSITION. A disposition made by a
7 trustee acting in a fiduciary capacity.
8 (10) FIDUCIARY QUALIFIED DISPOSITION. A qualified
9 disposition made by a trustee acting in a fiduciary capacity.
10 (11) GENERAL POWER OF APPOINTMENT. A power to
11 appoint trust property, the permissible appointees of which
12 include the power holder, his or her estate, his or her
13 creditors, or the creditors of his or her estate. The term
14 includes a power that is not expressly restricted as to
15 appointees. A power may be general as to some property and
16 special as to other property. The term does not include a
17 power exercisable in favor of the power holder, his or her
18 estate, his or her creditors, or the creditors of his or her
19 estate that is limited by an ascertainable standard.
20 (12) INVESTMENT DECISION. A decision regarding
21 whether to purchase, sell, exchange, tender, or pledge any
22 trust property. The term includes decisions regarding other
23 transactions affecting the ownership of or rights in any trust
24 property, other than distribution decisions. Unless otherwise
25 provided in the trust instrument, the term also includes a
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1 decision regarding whether to make or guarantee a loan to or
2 on behalf of an entity in which the trust owns an interest,
3 directly or indirectly, in the entity's debt or equity.
4 (13) LIEN. A charge against or an interest in
5 property to secure payment of a debt or performance of an
6 obligation. The term includes a security interest created by
7 agreement, a judicial lien obtained by legal or equitable
8 process or proceedings, a common law lien, or a statutory
9 lien.
10 (14) ORGANIZATION. A person other than an
11 individual.
12 (15) PERSON. An individual, estate, partnership,
13 association, trust, business or nonprofit entity, public
14 corporation, government or governmental subdivision, agency,
15 or instrumentality, or other legal or commercial entity.
16 (16) PROPERTY. Anything that may be the subject of
17 ownership, whether real or personal, legal or equitable, or
18 any interest therein. The term includes choses in action,
19 claims, and interests created by a beneficiary designation
20 under policies of insurance, financial instruments, deferred
21 compensation, and other retirement arrangements, whether
22 revocable or irrevocable.
23 (17) QUALIFIED BENEFICIARY. A living trust
24 beneficiary to whom any of the following apply on the date of
25 the beneficiary's qualification:
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1 a. The beneficiary is a distributee or permissible
2 distributee of trust income or principal.
3 b. The beneficiary would be a distributee or
4 permissible distributee of trust income or principal if the
5 interests of the distributees described in paragraph a.
6 terminated on that date, but the termination of those
7 interests would not cause the trust to terminate.
8 c. The beneficiary would be a distributee or
9 permissible distributee of trust income or principal if the
10 trust terminated on that date.
11 (18) QUALIFIED DISPOSITION. A disposition of
12 property to one or more trustees, at least one of whom is a
13 qualified trustee, which is governed by a trust instrument,
14 including, but not limited to, a trust instrument as modified
15 by an irrevocable written election described in subsection (f)
16 of Section 5, under which the transferor has no more rights,
17 powers, or interests than those permitted by Section 4. The
18 term does not include a disposition to the extent that, at the
19 time of the disposition, the transferor is in arrears on a
20 child support obligation by more than 30 days.
21 (19) QUALIFIED TRUSTEE. A person, other than the
22 transferor, who meets all of the following conditions:
23 a. Is an individual who is a resident of this state,
24 or is an organization that is authorized by the law of this
25 state to act as a trustee and whose activities are subject to
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1 supervision by the Alabama State Banking Department, the
2 Federal Deposit Insurance Corporation, the Comptroller of the
3 Currency, or the Office of Thrift Supervision.
4 b. Maintains or arranges for custody in this state
5 of some or all of the property that is the subject of the
6 qualified disposition and administers all or part of the trust
7 in this state.
8 c. Whose usual place of business, where some of the
9 records pertaining to the trust are kept, is located in this
10 state or, if the person does not have such a place of
11 business, who is a resident of this state. For a corporate
12 trustee, the usual place of business is the business location
13 of the primary trust officer.
14 (20) RETIREMENT BENEFIT. An interest in one of the
15 following types of assets if payable to a trust as a
16 beneficiary or owned by the trust:
17 a. A qualified or nonqualified annuity.
18 b. A benefit under a qualified or nonqualified plan
19 of deferred compensation.
20 c. Any account in, or benefit payable under, any
21 pension, profit-sharing, stock bonus, or other qualified
22 retirement plan.
23 d. Any individual retirement account or trust.
24 e. Any benefit under a plan or arrangement
25 established under Section 401, 403, 408, 408A, or 457,
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1 26 U.S.C 401, 403, 408, 408A, and 457, or a similar
2 provision of the Internal Revenue Code of 1986.
3 (21) SETTLOR. A person, including a testator or
4 trustee, who creates a trust. If more than one person creates
5 a trust, each person is a settlor of the portion of the trust
6 property attributable to that person's contribution. The
7 lapse, release, or waiver of a power of appointment does not
8 cause the holder of the power to be treated as a settlor of
9 the trust.
10 (22) SPECIAL POWER OF APPOINTMENT. A power to
11 appoint trust property, the permissible appointees of which do
12 not include the power holder, his or her estate, his or her
13 creditors, or the creditors of his or her estate.
14 (23) SPENDTHRIFT PROVISION. A term of a trust which
15 restrains both voluntary and involuntary transfers of a
16 beneficiary's interest.
17 (24) SPOUSE or FORMER SPOUSE. An individual to whom
18 the transferor was married at or before the time a qualified
19 disposition is made.
20 (25) SUPPORT PROVISION. A provision in a trust that
21 requires the trustee to distribute income or principal, or
22 both, for the health, education, support, or maintenance of a
23 trust beneficiary, or language of similar meaning. The term
24 does not include a provision that provides that a trustee has
25 discretion whether to distribute income or principal, or both,
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1 for these purposes or to select from among a class of
2 beneficiaries to receive distributions under the trust
3 provision.
4 (26) TRANSFEROR. Either of the following, as
5 applicable:
6 a. A person or, for more than one owner of undivided
7 interests, each of several persons who, as a beneficial owner
8 of certain property or as the holder of a general power of
9 appointment over certain property, directly or indirectly
10 makes a disposition of the property or causes a disposition to
11 be made.
12 b. For a fiduciary disposition, the person or
13 persons who, as of the time of the fiduciary disposition, most
14 recently fit the description in paragraph a. with respect to
15 the property subject to the fiduciary disposition.
16 (27) TRUST BENEFICIARY. The same meaning as the term
17 "beneficiary", as that term is defined in Section 19-3B-103,
18 Code of Alabama 1975.
19 (28) TRUST INSTRUMENT. An instrument appointing a
20 qualified trustee or qualified trustees for the property that
21 is the subject of a disposition to which all of the following
22 apply:
23 a. The instrument expressly incorporates the law of
24 this state to govern the validity, construction, and
25 administration of the trust.
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1 b. The instrument is irrevocable.
2 c. The instrument provides that the interest of the
3 transferor or other trust beneficiary in trust property may
4 not be transferred, assigned, pledged, or mortgaged, whether
5 voluntarily or involuntarily, before the qualified trustee or
6 qualified trustees actually distribute trust property to the
7 trust beneficiary. Such a provision in a trust instrument is
8 considered a restriction on the transfer of the transferor's
9 beneficial interest in the trust that is enforceable under
10 applicable nonbankruptcy law within the meaning of 11 U.S.C.
11 541(c)(2).
12 (29) VALID LIEN. A lien that is effective against
13 the holder of a judicial lien subsequently obtained by legal
14 or equitable process or proceedings.
15 Section 3. Jurisdiction and Venue.
16 (a) Except as provided in subsection (b), the
17 circuit court has exclusive jurisdiction over an action that
18 addresses either of the following questions:
19 (1) Whether a transfer is a qualified disposition.
20 (2) The extent of the transferor's interest in, or
21 the income from, a qualified disposition.
22 (b) A probate court granted statutory equitable
23 jurisdiction has concurrent jurisdiction with the circuit
24 court over questions described in subsection (a) and over an
25 action brought under subsection (b) of Section 5.
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1 (c) Except to the extent otherwise provided by court
2 rule, venue for a proceeding under subsection (a) or (b) is in
3 the following order of priority:
4 (1) In any county where venue is proper for civil
5 actions generally, pursuant to Chapter 3 of Title 6.
6 (2) In a county in this state in which the current
7 qualified trustee has its usual place of business or
8 residence.
9 (3) In a county in this state in which the
10 immediately preceding qualified trustee had its usual place of
11 business or residence.
12 (4) In a county in this state in which any trust
13 property subject to the qualified disposition is located.
14 (5) In a county in this state in which a trust
15 beneficiary resides.
16 Section 4. Permitted Trust Powers of Transferor.
17 (a) A transferor has only the powers and rights that
18 are conferred by the trust instrument. Except as otherwise
19 provided in this act, a transferor does not have any power or
20 right with respect to property that is the subject of a
21 qualified disposition or income from the property and any
22 agreement or understanding that purports to grant or permit
23 the retention of any greater powers or rights is void.
24 (b) A trust instrument may provide for one or more
25 of the following rights, powers, or interests of a transferor:
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1 (1) The power to direct the investment decisions of
2 the trust.
3 (2) The power to veto a distribution from the trust.
4 (3) A special power of appointment exercisable by
5 will or other written instrument of the transferor effective
6 only on the death of the transferor.
7 (4) The right to the potential or actual receipt of
8 income, including rights to income retained in the trust
9 instrument.
10 (5) The right to the potential or actual receipt of
11 income or principal from a charitable remainder unitrust or
12 charitable remainder annuity trust, as those terms are defined
13 in 26 U.S.C 664; and the right, at any time by written
14 instrument delivered to the trustee, to release the
15 transferor's interest in the trust, in whole or in part, in
16 favor of a charitable organization that has a succeeding
17 beneficial interest in the trust.
18 (6) The right to the potential or actual receipt of
19 income or principal from a grantor-retained annuity t