HB 146: "An Act relating to transfer restrictions on trust interests."
00 HOUSE BILL NO. 146 01 "An Act relating to transfer restrictions on trust interests." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 34.40.110(b) is amended to read: 04 (b) If a trust contains a transfer restriction allowed under (a) of this section, 05 the transfer restriction prevents a creditor existing when the trust is created or a person 06 who subsequently becomes a creditor from satisfying a claim out of the beneficiary's 07 interest in the trust, unless the creditor is a creditor of the settlor and 08 (1) the creditor establishes by clear and convincing evidence that 09 the settlor's transfer of property in trust was made with the intent to defraud that 10 creditor, and a cause of action or claim for relief with respect to the fraudulent transfer 11 complies with the requirements of (d) of this section; however, a settlor's expressed 12 intention to protect trust assets from a beneficiary's potential future creditors is not 13 evidence of an intent to defraud; 14 (2) the trust, except for an eligible individual retirement account trust, 15 provides that the settlor may revoke or terminate all or part of the trust without the
01 consent of a person who has a substantial beneficial interest in the trust and the interest 02 would be adversely affected by the exercise of the power held by the settlor to revoke 03 or terminate all or part of the trust; in this paragraph, "revoke or terminate" does not 04 include a power to veto a distribution from the trust, a testamentary nongeneral power 05 of appointment or similar power, or the right to receive a distribution of income, 06 principal, or both in the discretion of a person, including a trustee, other than the 07 settlor, or a right to receive a distribution of income or principal under (3)(A), (B), 08 (C), (D), (E), or (F) [(3)(A), (B), (C), OR (D)] of this subsection; 09 (3) the trust, except for an eligible individual retirement account trust, 10 requires that all or a part of the trust's income or principal, or both, must be distributed 11 to the settlor; however, this paragraph does not apply to a settlor's right to receive the 12 following types of distributions, which remain subject to the restriction provided by 13 (a) of this section until the distributions occur: 14 (A) income or principal from a charitable remainder annuity 15 trust or charitable remainder unitrust; in this subparagraph, "charitable 16 remainder annuity trust" and "charitable remainder unitrust" have the meanings 17 given in 26 U.S.C. 664 (Internal Revenue Code) as that section reads on 18 October 8, 2003, and as it may be amended; 19 (B) a percentage of the value of the trust each year as 20 determined from time to time under the trust instrument, but not exceeding the 21 amount that may be defined as income under AS 13.38 or under 26 U.S.C. 22 643(b) (Internal Revenue Code) as that subsection reads on October 8, 2003, 23 and as it may be amended; 24 (C) the transferor's potential or actual use of real property held 25 under a qualified personal residence trust within the meaning of 26 U.S.C. 26 2702(c) (Internal Revenue Code) as that subsection reads on September 15, 27 2004, or as it may be amended in the future; or 28 (D) income or principal from a grantor retained annuity trust or 29 grantor retained unitrust that is allowed under 26 U.S.C. 2702 (Internal 30 Revenue Code) as that section reads on September 15, 2004, or as it may be 31 amended in the future;
01 (E) distributions that are made under the exercise of 02 discretion by a trustee who is not the settlor, whether or not the exercise of 03 the discretion is governed by a standard; or 04 (F) the transferor's potential or actual receipt of income or 05 principal to pay, in whole or in part, income taxes due on income of the 06 trust if the potential or actual receipt of income or principal is made 07 under a provision in the trust instrument that expressly provides for the 08 payment of the taxes and if the potential or actual receipt of income or 09 principal would be the result of a trustee's acting in the trustee's 10 discretion or under a mandatory direction in the trust instrument; 11 distributions to pay income taxes made under a discretionary or 12 mandatory provision included in a governing instrument referred to in 13 this subparagraph may be made by direct payment to the taxing 14 authorities; or 15 (4) at the time of the transfer, the settlor is in default by 30 or more 16 days of making a payment due under a child support judgment or order. 17 * Sec. 2. AS 34.40.110(h) is repealed and reenacted to read: 18 (h) A transfer restriction is allowed under (a) of this section and is enforceable 19 under (b) of this section even if the settlor has the authority under the terms of the trust 20 instrument to 21 (1) appoint a trustee, a trust protector under AS 13.36.370, or an 22 advisor under AS 13.36.375; 23 (2) remove a trustee or trust protector and appoint a replacement 24 trustee or trust protector who is not a related or subordinate party; in this paragraph, 25 "related or subordinate party" has the meaning given in 26 U.S.C. 672(c) (Internal 26 Revenue Code); or 27 (3) remove an advisor and appoint a replacement advisor. 28 * Sec. 3. AS 34.40.110(l) is amended to read: 29 (l) If a trust has a transfer restriction allowed under (a) of this section, in the 30 event of the divorce or dissolution of the marriage of a beneficiary of the trust, the 31 beneficiary's interest in the trust, whether or not vested, is not considered a factor or
01 economic circumstance in the division of property subject to division under 02 AS 25.24.160 or 25.24.230 or a part of a property division under AS 25.24.160 or 03 25.24.230. Unless otherwise agreed to in writing by the parties to the marriage, this 04 subsection does not apply to a settlor's interest in a self-settled trust with respect to 05 assets transferred to the trust 06 (1) after the settlor's marriage; or 07 (2) within 30 days before the settlor's marriage unless the settlor gives 08 written notice to the other party to the marriage of the transfer.