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28th Legislature(2013-2014)

Bill Text 28th Legislature


00                             SENATE BILL NO. 65                                                                          
01 "An Act relating to property exemptions for retirement plans, individual retirement                                     
02 accounts, and Roth IRAs; relating to transfers of individual retirement plans; relating to                              
03 the rights of judgment creditors of members of limited liability companies and partners                                 
04 of limited liability partnerships; relating to the Uniform Probate Code, including                                      
05 pleadings, orders, liability, and notices under the Uniform Probate Code and the Alaska                                 
06 Principal and Income Act, the appointment of trust property, the Alaska Uniform                                         
07 Prudent Investor Act, co-trustees, trust protectors, and trust advisors; relating to the                                
08 Alaska Principal and Income Act; relating to the Alaska Uniform Transfers to Minors                                     
09 Act; relating to the disposition of human remains; relating to the tax on insurers for life                             
10 insurance policies; relating to insurable interests for certain insurance policies; relating                            
11 to restrictions on transfers of trust interests; relating to discretionary interests in                                 
12 irrevocable trusts; relating to the community property of married persons; and                                          
01 amending Rule 64, Alaska Rules of Civil Procedure, and Rule 301(a), Alaska Rules of                                     
02 Evidence."                                                                                                              
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
04    * Section 1.  AS 09.38.017(a) is amended to read:                                                                  
05            (a)  In addition to the exemption under AS 09.38.015(b), the following are                                   
06       exempt from a claim of an individual's or beneficiary's creditor:                                             
07                 (1)  the interest of the individual or beneficiary in a retirement plan;                            
08       [AND]                                                                                                             
09                 (2)  the money or other assets payable to the individual from a                                         
10       retirement plan;                                                                                              
11                 (3)  the interest of a beneficiary in                                                               
12                      (A)  a retirement plan if the beneficiary acquired the                                         
13            interest as a result of the death of an individual; the beneficiary's interest                           
14            is exempt to the same extent that the individual's interest was exempt                                   
15            immediately before the individual died;                                                                  
16                      (B)  an individual retirement account that has been                                            
17            transferred by the individual to the beneficiary during the individual's                                 
18            lifetime; the beneficiary's interest is exempt to the same extent that the                               
19            individual's interest was exempt immediately before the transfer to the                                  
20            beneficiary;                                                                                             
21                 (4)  the money or other assets payable to a beneficiary from                                        
22                      (A)  a retirement plan if the beneficiary acquired the money                                   
23            or other assets as a result of the death of an individual who would have                                 
24            had, during the individual's life, an exemption in the money or other                                    
25            assets;                                                                                                  
26                      (B)  an individual retirement account if the beneficiary                                       
27            acquired the money or other assets as a result of the transfer of the money                              
28            or other assets by an individual who would have had, at the time of the                                  
29            transfer, an exemption in the money or other assets.                                                     
30    * Sec. 2. AS 09.38.017(d) is amended to read:                                                                      
01            (d)  A retirement plan exempt from claims under (a) of this section is                                       
02       conclusively presumed to be a spendthrift trust under this section, except for                                
03       transfers or assignments under AS 34.40.118.                                                                  
04    * Sec. 3. AS 09.38.017(e) is amended to read:                                                                      
05            (e)  In this section,                                                                                        
06                 (1)  "alternate payee" has the meaning given in 26 U.S.C. 414(p)(8);                                    
07                 (2)  "beneficiary" includes a person, trust, or trustee who has,                                    
08       before or after the death of an individual, a direct or indirect beneficial interest                          
09       in a retirement plan; in this paragraph, "beneficial interest" includes an interest                           
10       that is acquired                                                                                              
11                      (A)  as a designated beneficiary, survivor, co-annuitant,                                      
12            heir, or legatee; or                                                                                     
13                      (B)  if excludible from gross income under 26 U.S.C.                                           
14            (Internal Revenue Code), as a                                                                            
15                           (i)  rollover under 26 U.S.C. 408 or 26 U.S.C. 408A;                                      
16                           (ii)  a distribution from one retirement plan to                                          
17                 another retirement plan; or                                                                         
18                           (iii)  a distribution that is similar to (i) or (ii) of this                              
19                 subparagraph;                                                                                       
20                 (3)  "individual" means [AN INDIVIDUAL WHO IS] a participant in,                                    
21       an owner [A BENEFICIARY] of, or an alternate payee of a retirement plan;                                      
22                 (4)  "individual retirement account" means an individual                                            
23       retirement account established under 26 U.S.C. 408 or a Roth IRA established                                  
24       under 26 U.S.C. 408A;                                                                                         
25                 (5) [(3)]  "retirement plan" means                                                                  
26                      (A)  a retirement plan that is qualified under 26 U.S.C. 401(a),                               
27            26 U.S.C. 403(a), 26 U.S.C. 403(b), [26 U.S.C. 408, 26 U.S.C. 408A, OR] 26                                   
28            U.S.C. 409, 26 U.S.C. 414(d), 26 U.S.C. 414(e), or 26 U.S.C. 457 (Internal                               
29            Revenue Code);                                                                                           
30                      (B)  an individual retirement account; and                                                     
31                      (C)  the teachers' retirement system under AS 14.25, the                                       
01            judicial retirement system under AS 22.25, the public employees'                                         
02            retirement system under AS 39.35, and the elected public officers'                                       
03            retirement system under former AS 39.37.                                                                 
04    * Sec. 4. AS 10.50.380(c) is amended to read:                                                                      
05            (c)  This section provides the exclusive remedy that a judgment creditor of a                                
06       member or a member's assignee may use to satisfy a judgment out of the judgment                                   
07       debtor's interest in the limited liability company. Other legal or equitable remedies,                        
08       including foreclosure on the member's limited liability company interest and a court                              
09       order for directions, accounts, and inquiries that the debtor member might have made,                             
10       are not available to the judgment creditor attempting to satisfy a judgment out of the                            
11       judgment debtor's interest in the limited liability company and may not be ordered by                             
12       a court.                                                                                                          
13    * Sec. 5. AS 10.50.380 is amended by adding a new subsection to read:                                              
14            (e)  This section applies to limited liability companies with only one member                                
15       as well as to limited liability companies with more than one member.                                            
16    * Sec. 6. AS 13.06.120 is amended to read:                                                                         
17            Sec. 13.06.120. Pleadings; when parties bound by orders; notice. In any                                    
18       proceedings involving trusts, nonprobate assets, or estates of decedents, minors,                                 
19       protected persons, or incapacitated persons brought under AS 13.06 - AS 13.36 or                                  
20       AS 13.38, [INCLUDING ANY JUDICIALLY SUPERVISED SETTLEMENTS AND                                                    
21       ANY NONJUDICIAL PROCEEDINGS AND SETTLEMENTS,] the following                                                       
22       apply:                                                                                                            
23                 (1)  interests to be affected shall be described in pleadings that give                                 
24       reasonable information to owners by name or class, by reference to the instrument                                 
25       creating the interests, or in other appropriate manner;                                                           
26                 (2)  persons are bound by orders binding others in the following cases:                                 
27                      (A)  orders binding the sole holder or all co-holders of a power                                   
28            of revocation or a general or nongeneral power of appointment, including one                                 
29            in the form of a power of amendment, bind other persons to the extent their                                  
30            interests, as objects, takers in default, or otherwise, are subject to the power;                            
31                      (B)  to the extent there is no conflict of interest between them or                                
01            among persons represented, orders binding a conservator bind the person                                      
02            whose estate the conservator controls; orders binding a guardian bind the ward                               
03            if no conservator of the estate has been appointed; orders binding a trustee bind                            
04            beneficiaries of the trust in proceedings to probate a will establishing or adding                           
05            to a trust, to review the acts or accounts of a prior fiduciary, and in proceedings                          
06            involving creditors or other third parties; orders binding a personal                                        
07            representative bind persons interested in the undistributed assets of a                                      
08            decedent's estate in actions or proceedings by or against the estate; and orders                             
09            binding an agent having authority to act with respect to the particular questions                            
10            or dispute bind the principal; if there is no conflict of interest and no                                    
11            conservator or guardian has been appointed, a parent may represent the minor                                 
12            child;                                                                                                       
13                      (C)  an unborn person, a minor, an incapacitated person, or a                                      
14            person whose identity or location is unknown or not reasonably ascertainable                                 
15            who is not otherwise represented is bound by an order to the extent the interest                             
16            is adequately represented by another party having a substantially identical                                  
17            interest in the proceeding;                                                                                  
18                      (D)  with regard to interests given upon the happening of a                                        
19            certain event to persons who comprise a certain class, orders binding the living                             
20            persons who would constitute the class, if the event had happened immediately                                
21            before the commencement of the proceeding, bind all members of the class;                                    
22                      (E)  with regard to an interest given to a living person when the                                  
23            same interest or a share of the interest is to pass to the surviving spouse or to                            
24            persons who are or might be the distributees, devisees, heirs, or issue of the                               
25            living person upon the happening of a future event, orders binding the living                                
26            person bind the surviving spouse, distributees, devisees, heirs, or issue of the                             
27            living person;                                                                                               
28                      (F)  with regard to interests given to a person or a class of                                      
29            persons, or to both, upon the happening of a future event, if the same interest                              
30            or a share of the interest is to pass to another person or class of persons, or to                           
31            both, upon the happening of an additional future event, orders binding the                                   
01            living person or class of persons who would take the interest upon the                                       
02            happening of the first event bind the persons and classes of persons who might                               
03            take on the happening of the additional future event;                                                        
04                      (G)  if a person is designated by a trust instrument to represent                                  
05            and bind a born or unborn beneficiary of the trust and receive a notice,                                     
06            information, accounting, or report for the beneficiary, then the beneficiary is                              
07            bound by an order binding the designated person; in this subparagraph,                                       
08                           (i)  the settlor may make the designation in the trust                                        
09                 instrument, in a separate document, or by a trust protector authorized in                               
10                 the trust instrument to make the designation;                                                           
11                           (ii)  except as otherwise provided in this subparagraph, a                                    
12                 person designated under (i) of this subparagraph may not represent and                                  
13                 bind a beneficiary while the designated person is serving as trustee;                                   
14                           (iii)  except as otherwise provided in this subparagraph,                                     
15                 a person designated under (i) of this subparagraph may not represent                                    
16                 and bind another beneficiary if the designated person also is a                                         
17                 beneficiary, unless the designated person was named by the settlor, is                                  
18                 the beneficiary's spouse, or is a grandparent or descendant of a                                        
19                 grandparent of the beneficiary or the beneficiary's spouse; in this sub-                                
20                 subparagraph, "spouse" means the individual to whom the beneficiary                                     
21                 is married and with whom the beneficiary is living, and a physical                                      
22                 separation primarily for education, business, health, and similar reasons                               
23                 does not prevent the individual from being considered to be living with                                 
24                 the beneficiary;                                                                                        
25                 (3)  a person representing another person under (2)(A) - (F) of this                                    
26       section and a person designated under (2)(G)(i) of this section are not liable to the                             
27       beneficiary whose interests are represented, or to a person claiming through that                                 
28       beneficiary, for an action or omission to act made in good faith;                                                 
29                 (4)  notice is required as follows:                                                                     
30                      (A)  notice as prescribed by AS 13.06.110 shall be given to                                        
31            every interested person or to one person who can bind an interested person as                                
01            described in (2)(A), (B), or (D) - (G) of this section; notice may be given both                             
02            to a person and to another person who may bind the person;                                                   
03                      (B)  notice is given to unborn persons, a minor, an incapacitated                                  
04            person, or a person whose identity or location is unknown or not reasonably                                  
05            ascertainable, and persons who are not represented under (2)(A), (B), or (D) -                               
06            (G) of this section, by giving notice to all known persons whose interests in the                            
07            proceedings are substantially identical to those of the unborn persons, the                                  
08            minor, the incapacitated person, or the person whose identity or location is                                 
09            unknown or not reasonably ascertainable;                                                                     
10                 (5)  at any point in a proceeding, a court may appoint a guardian ad                                    
11       litem to represent the interest of an unborn person, a minor, an incapacitated person, or                         
12       a person whose identity or address is unknown or not reasonably ascertainable, if the                             
13       court determines that representation of the interest otherwise would be inadequate; if                            
14       not precluded by conflict of interests, a guardian ad litem may be appointed to                                   
15       represent several persons or interests; the court shall set out its reasons for appointing                        
16       a guardian ad litem as a part of the record of the proceeding.                                                    
17    * Sec. 7. AS 13.06.120 is amended by adding a new subsection to read:                                              
18            (b)  In this section,                                                                                        
19                 (1)  "order" means a judicial order, nonjudicial order, the result of the                               
20       settlement of an account of a fiduciary under a procedure authorized by AS 13.06 -                                
21       13.36 or AS 13.38, and a settlement agreement resulting from a proceeding;                                        
22                 (2)  "proceeding" means a judicial proceeding, nonjudicial proceeding,                                  
23       the settlement of an account of a fiduciary under a procedure authorized by AS 13.06 -                            
24       13.36 or AS 13.38, and a settlement negotiation, even if the settlement negotiation                               
25       does not involve a judicial or nonjudicial third party who decides or facilitates a                               
26       settlement.                                                                                                       
27    * Sec. 8. AS 13.36.072 is amended by adding a new subsection to read:                                              
28            (c)  Notwithstanding the other provisions of this section, if the terms of a trust                           
29       instrument provide for the appointment of more than one trustee but confer on one or                              
30       more of the trustees, to the exclusion of other trustees, the power to direct or prevent                          
31       specified actions of other trustees, the excluded trustees shall act in accordance with                           
01       the exercise of the power. An excluded trustee under this subsection is not liable,                               
02       individually or as a fiduciary, for a consequence that results from complying with the                            
03       exercise of the power, regardless of the information available to the excluded trustee.                           
04       An excluded trustee does not have an obligation to review, inquire, investigate, or                               
05       make recommendations or evaluations with respect to the exercise of the power. A                                  
06       trustee having the power is liable to the beneficiaries as a fiduciary with respect to the                        
07       exercise of the power as if the excluded trustees were not in office and has the                                  
08       exclusive obligation to account to and to defend an action brought by the beneficiaries                           
09       with respect to the exercise of the power. In this subsection, "power" means the power                            
10       to direct or prevent specified actions by other trustees.                                                         
11    * Sec. 9. AS 13.36.157 is repealed and reenacted to read:                                                          
12            Sec. 13.36.157. Exercise of power of appointment. (a) An authorized trustee                                
13       with unlimited discretion to invade trust principal may appoint part or all of that                               
14       principal to a trustee of an appointed trust for, and only for the benefit of, one or more                        
15       current beneficiaries of the invaded trust to the exclusion of other current                                      
16       beneficiaries. A permissible appointee of a power of appointment held by a                                        
17       beneficiary of the appointed trust is not considered a beneficiary of the appointed trust,                        
18       regardless of whether the permissible appointee is a current beneficiary or a successor                           
19       and remainder beneficiary.                                                                                        
20            (b)  An authorized trustee exercising the power under (a) of this section may                                
21       grant a discretionary power of appointment, including a presently exercisable power of                            
22       appointment, in the appointed trust to one or more of the current beneficiaries of the                            
23       invaded trust, to the extent that the beneficiary who is granted the power to appoint is                          
24       authorized to receive the principal outright under the terms of the invaded trust. A                              
25       permissible appointee is not limited to the beneficiaries of the invaded trust.                                   
26            (c)  Under (a) and (b) of this section, if the beneficiaries of the invaded trust                            
27       are described by a class, the beneficiaries of the appointed trust may include present or                         
28       future members of that class.                                                                                     
29            (d)  An authorized trustee with the power to invade trust principal but without                              
30       unlimited discretion may appoint part or all of the principal of the trust to a trustee of                        
31       an appointed trust if the current beneficiaries of the appointed trust are the same as the                        
01       current beneficiaries of the invaded trust and the successor and remainder beneficiaries                          
02       of the appointed trust are the same as the successor and remainder beneficiaries of the                           
03       invaded trust. The shares of the current beneficiaries of the appointed trust must be the                         
04       same as the shares of the current beneficiaries of the invaded trust, and the shares of                           
05       the successor and remainder beneficiaries of the appointed trust must be the same as                              
06       the shares of the successor and remainder beneficiaries of the invaded trust.                                     
07            (e)  If the authorized trustee exercises the power under (d) of this section, the                            
08       appointed trust must include the same standard authorizing the trustee to distribute the                          
09       income or invade the principal of the appointed trust as the standard in the invaded                              
10       trust. However, the standard authorizing the trustee to distribute the income or invade                           
11       the principal of the appointed trust may be changed if the trustee appoints to an                                 
12       appointed trust that is a special needs trust, a pooled trust, or a third-party trust.                            
13            (f)  If an authorized trustee exercises the power under (d) and (e) of this section                          
14       to extend the duration of the appointed trust beyond the duration of the invaded trust                            
15       for any period after the invaded trust would have otherwise terminated under the                                  
16       provisions of the invaded trust, the appointed trust, in addition to the language                                 
17       required to be included in the appointed trust under (e) of this section, may also                                
18       provide an additional trustee with unlimited discretion to invade the principal of the                            
19       appointed trust during the extended duration. The trustee with unlimited discretion                               
20       continues to be subject to the restrictions in (d) - (h) of this section.                                         
21            (g)  Under (d) - (f) of this section, if the beneficiaries of the invaded trust are                          
22       described by a class, the beneficiaries of the appointed trust include present or future                          
23       members of that class.                                                                                            
24            (h)  If the authorized trustee exercises the power under (d) - (g) of this section                           
25       and if the invaded trust grants a power of appointment to a beneficiary of the trust, the                         
26       appointed trust must grant this power of appointment in the appointed trust, and the                              
27       class of permissible appointees shall be the same as in the invaded trust.                                        
28    * Sec. 10. AS 13.36 is amended by adding new sections to read:                                                     
29            Sec. 13.36.158. Additional provisions relating to exercise of a power of                                   
30       appointment. (a) An exercise of the power to invade trust principal under                                       
31       AS 13.36.157 is the exercise of a special power of appointment.                                                   
01            (b)  The appointed trust to which an authorized trustee appoints the assets of                               
02       the invaded trust under AS 13.36.157 may have a duration that is longer than the                                  
03       duration set out in the invaded trust.                                                                            
04            (c)  If an authorized trustee has unlimited discretion to invade the principal of a                          
05       trust and if the same trustee or another trustee has a power, not dependent on unlimited                          
06       discretion, to invade principal under the trust instrument, the authorized trustee having                         
07       unlimited discretion may exercise the power of appointment under AS 13.36.157(a) -                                
08       (c).                                                                                                              
09            (d)  An authorized trustee may exercise the power to appoint in favor of an                                  
10       appointed trust under AS 13.36.157 whether or not there is a current need to invade                               
11       principal under the terms of the invaded trust.                                                                   
12            (e)  An authorized trustee exercising the power under AS 13.36.157 -                                         
13       13.36.159 has a fiduciary duty to exercise the power in the best interests of one or                              
14       more proper objects of the exercise of the power and as a prudent person would                                    
15       exercise the power under the prevailing circumstances. The authorized trustee may not                             
16       exercise the power under AS 13.36.157 - 13.36.159 if there is substantial evidence of a                           
17       contrary intent of the settlor and it cannot be established that the settlor would be                             
18       likely to have changed this intention under the circumstances existing at the time the                            
19       trustee exercises the power. The provisions of the invaded trust may not be viewed                                
20       alone as substantial evidence of a contrary intent of the settlor unless the invaded trust                        
21       expressly prohibits the exercise of the power in the manner intended by the authorized                            
22       trustee.                                                                                                          
23            (f)  The provisions of AS 13.36.157 - 13.36.159 may not be construed to                                      
24       abridge the right of a trustee to appoint property further in trust under the terms of the                        
25       governing instrument of a trust, another provision of law, or common law, or as                                   
26       directed by a court having jurisdiction over the trust.                                                           
27            (g)  Nothing in AS 13.36.157 - 13.36.159 creates or implies a duty to exercise                               
28       a power to invade principal. An inference of impropriety may not be made, and                                     
29       liability is not incurred, as a result of an authorized trustee not exercising the power                          
30       conferred under AS 13.36.157.                                                                                     
31            (h)  A power authorized by AS 13.36.157 may be exercised, subject to the                                     
01       provisions of AS 13.36.159(a), unless expressly prohibited by the terms of the                                    
02       governing instrument. A general prohibition against amending or revoking the invaded                              
03       trust and a provision that constitutes a spendthrift clause do not preclude the exercise                          
04       of a power under AS 13.36.157.                                                                                    
05            (i)  An authorized trustee may not exercise a power authorized by                                            
06       AS 13.36.157 to                                                                                                   
07                 (1)  reduce, limit, or modify a beneficiary's current right to a mandatory                              
08       distribution of income or principal, a mandatory annuity or unitrust interest, a right to                         
09       withdraw a percentage of the value of the trust, or a right to withdraw a specified                               
10       dollar amount, if the mandatory right has come into effect with respect to the                                    
11       beneficiary, but the mandatory right may be reduced, limited, or modified during any                              
12       extended duration of the trust; however, notwithstanding the other provisions in this                             
13       paragraph, but subject to the other limitations in AS 13.36.157 - 13.36.159, an                                   
14       authorized trustee may exercise a power authorized by AS 13.36.157 to appoint to an                               
15       appointed trust that is a special needs trust, a pooled trust, or a third-party trust;                            
16                 (2)  decrease or indemnify against a trustee's liability or exonerate a                                 
17       trustee from liability for failure to exercise reasonable care, diligence, and prudence                           
18       unless the court having jurisdiction over the trust specifies otherwise;                                          
19                 (3)  eliminate a provision granting another person the right to remove                                  
20       or replace the authorized trustee exercising the power under AS 13.36.157 unless a                                
21       court having jurisdiction over the trust specifies otherwise;                                                     
22                 (4)  fix as binding and conclusive the value of an asset for purposes of                                
23       distribution, allocation, or otherwise; or                                                                        
24                 (5)  jeopardize                                                                                         
25                      (A)  the deduction or exclusion originally claimed with respect                                    
26            to a contribution to the invaded trust that qualified for the annual exclusion                               
27            under 26 U.S.C. 2503(b), the marital deduction under 26 U.S.C. 2056(a) or 26                                 
28            U.S.C. 2523(a), or the charitable deduction under 26 U.S.C. 170(a), 26 U.S.C.                                
29            642(c), 26 U.S.C. 2055(a), or 26 U.S.C. 2522(a) (Internal Revenue Code);                                     
30                      (B)  the qualification of a transfer as a direct skip under 26                                     
31            U.S.C. 2642(c) (Internal Revenue Code);                                                                      
01                      (C)  the election to treat a corporation as a subchapter S                                         
02            corporation under 26 U.S.C. 1362 (Internal Revenue Code); or                                                 
03                      (D)  another specific tax benefit for which a contribution                                         
04            originally qualified for income, gift, estate, or generation-skipping transfer tax                           
05            purposes under 26 U.S.C. (Internal Revenue Code).                                                            
06            (j)  Before exercising the power under AS 13.36.157, an authorized trustee                                   
07       shall consider the tax implications of the exercise of the power.                                                 
08            (k)  An authorized trustee may not exercise a power described in AS 13.36.157                                
09       - 13.36.159 in violation of the limitations on validity in AS 34.27.051 or 34.27.100, or                          
10       the restrictions on exercising certain powers in AS 13.36.153 by trustees who are not                             
11       independent. A violation voids the entire exercise of the power unless the exercise is                            
12       modified to correct the violation.                                                                                
13            (l)  Unless a court having jurisdiction over the trust directs otherwise, an                                 
14       authorized trustee may not exercise a power authorized by AS 13.36.157 to change the                              
15       provisions regarding the determination of the compensation of a trustee. The                                      
16       commissions or other compensation payable to the trustees of the invaded trust may                                
17       continue to be paid to the trustees of the appointed trust during the term of the                                 
18       appointed trust and shall be determined in the same manner as for the invaded trust.                              
19            (m)  A trustee may not receive a payment, a commission, or other                                             
20       compensation for appointing property from the invaded trust to an appointed trust                                 
21       under AS 13.36.157. However, a trustee may be compensated at a reasonable rate for                                
22       the time spent considering and implementing the exercise of a power to appoint.                                   
23            (n)  Unless the invaded trust expressly provides otherwise, the provisions in                                
24       AS 13.36.157 - 13.36.159 apply to                                                                                 
25                 (1)  a trust, whether testamentary or inter vivos, governed by the laws                                 
26       of this state, including a trust whose governing law has been changed to the laws of                              
27       this state; and                                                                                                   
28                 (2)  a trust that has a trustee who is an individual domiciled in this state,                           
29       or a trustee that is an entity having an office in this state, if a majority of the trustees                      
30       select this state as the location for the primary administration of the trust and the                             
31       selection is made by an instrument in writing that is signed and acknowledged by a                                
01       majority of the trustees; the instrument exercising this selection shall be kept with the                         
02       records of the invaded trust.                                                                                   
03            (o)  In this section, "internal revenue code" means the Internal Revenue Code                                
04       of the United States (26 U.S.C.) as it exists on the effective date of this Act and as it is                      
05       amended from time to time.                                                                                      
06            Sec. 13.36.159. Implementation of power of appointment. (a) Unless the                                     
07       authorized trustee provides otherwise, the appointment of                                                         
08                 (1)  all of the assets making up the principal of the invaded trust to an                               
09       appointed trust includes subsequently discovered assets of the invaded trust and                                  
10       undistributed principal of the invaded trust acquired after the appointment to the                                
11       appointed trust;                                                                                                  
12                 (2)  a part but not all of the assets making up the principal of the                                    
13       invaded trust to an appointed trust may not include subsequently discovered assets                                
14       belonging to the invaded trust or principal paid to or acquired by the invaded trust                              
15       after the appointment to the appointed trust; those subsequently discovered assets                                
16       remain the assets of the invaded trust.                                                                           
17            (b)  The exercise of the power to appoint to an appointed trust under                                        
18       AS 13.36.157 shall be evidenced by an instrument in writing that is signed, dated, and                            
19       acknowledged by the authorized trustee. The exercise of the power is effective 30 days                            
20       after the date of service of the instrument as specified in (d) of this section, unless the                       
21       persons entitled to notice consent in writing to a sooner effective date.                                         
22            (c)  An authorized trustee may exercise the power authorized by AS 13.36.157                                 
23       without the consent of the settlor or a person interested in the invaded trust and                                
24       without court approval. However, an authorized trustee may seek court approval for                                
25       the exercise. When seeking court approval, notice shall be sent to all qualified                                  
26       beneficiaries.                                                                                                    
27            (d)  A copy of the invaded trust, the appointed trust, and the instrument                                    
28       exercising the power shall be delivered to                                                                        
29                 (1)  the settlor, if living, of the invaded trust;                                                      
30                 (2)  a person having the right, under the terms of the invaded trust, to                                
31       remove or replace the authorized trustee exercising the power under AS 13.36.157;                                 
01       and                                                                                                               
02                 (3)  a qualified beneficiary or a person who may represent and bind a                                   
03       qualified beneficiary under AS 13.06.120.                                                                         
04            (e)  Notice under (d) of this section to a qualified beneficiary is not required if                          
05       the settlor has exempted the authorized trustee from providing notification or                                    
06       information to beneficiaries under AS 13.36.080(b). Notice under (d) of this section                              
07       shall be provided under AS 13.06.110.                                                                             
08            (f)  The instrument exercising the power must state whether the appointment is                               
09       of all or part of the assets making up the principal of the invaded trust and, if a part,                         
10       the approximate percentage of the value of the principal of the invaded trust that is the                         
11       subject of the appointment. A failure to state whether the appointment is of all or part                          
12       of the assets creates a presumption that only part of the assets is to be appointed.                              
13            (g)  A person entitled to notice under (d) of this section may object to the                                 
14       trustee's exercise of the power under AS 13.36.157 - 13.36.159 by serving a written                               
15       notice of objection on the trustee before the effective date of the exercise of the power.                        
16       The failure to object does not constitute consent.                                                                
17            (h)  The receipt of a copy of the instrument exercising the power does not,                                  
18       before the expiration of the limitation period in AS 13.36.100 with respect to a report                           
19       disclosing the exercise, affect the right of a qualified beneficiary to object to the                             
20       exercise of the power under AS 13.36.157 and to request the court to modify or to                                 
21       reverse the exercise.                                                                                             
22            (i)  A copy of the instrument exercising the power shall be kept with the                                    
23       records of the invaded trust.                                                                                     
24    * Sec. 11. AS 13.36.215 is amended by adding a new subsection to read:                                             
25            (b)  In AS 13.36.157 - 13.36.159,                                                                            
26                 (1)  "appointed trust" means an irrevocable trust that receives principal                               
27       from an invaded trust under AS 13.36.157, including a new trust created by the settlor                            
28       of the invaded trust or by the trustees, acting in that capacity, of the invaded trust;                           
29                 (2)  "authorized trustee" means, with regard to an invaded trust, a                                     
30       trustee with the authority to pay trust principal to or for a current beneficiary; in this                        
31       paragraph, "trustee" does not include a settlor or a beneficiary to whom income or                                
01       principal must be paid, currently or in the future, or who is or will become eligible to                          
02       receive a distribution of income or principal in the discretion of the trustee other than                         
03       by the exercise of a power of appointment held in a nonfiduciary capacity;                                        
04                 (3)  "current beneficiary" means a person or, with regard to a class of                                 
05       persons, a person who is a member of the class, to whom a trustee may distribute                                  
06       principal when exercising a power under AS 13.36.157;                                                             
07                 (4)  "invade" means pay directly to the beneficiary of a trust or apply to                              
08       the benefit of a beneficiary;                                                                                     
09                 (5)  "invaded trust" means an irrevocable inter vivos or testamentary                                   
10       trust the principal of which is appointed under AS 13.36.157;                                                     
11                 (6)  "pooled trust" means a trust described in 42 U.S.C. 1396p(d)(4)(C)                                 
12       that meets the requirements for a pooled trust under the regulations of this state                                
13       relating to the Medicaid treatment of trusts;                                                                     
14                 (7)  "principal" means the assets of a trust, including accrued and                                     
15       accumulated income, but excluding income that is currently required to be distributed;                            
16                 (8)  "special needs trust" means a trust under 42 U.S.C. 1396p(d)(4)(A)                                 
17       that meets the requirements for a special needs trust under the regulations of this state                         
18       relating to the Medicaid treatment of trusts;                                                                     
19                 (9)  "third-party trust" means a trust that is                                                          
20                      (A)  established by a third party with the assets of the third party                               
21            to provide for supplemental needs for a person eligible when the trust is                                    
22            created or at a future time for needs-based public assistance; and                                           
23                      (B)  exempt from the provisions of the regulations of this state                                   
24            relating to the Medicaid treatment of trusts;                                                                
25                 (10)  "unlimited discretion" means the unlimited right to distribute                                    
26       principal if the right is not restricted by an ascertainable standard under 26 C.F.R.                             
27       25.2514-1.                                                                                                        
28    * Sec. 12. AS 13.36.225(a) is amended to read:                                                                     
29            (a)  Except as otherwise provided in (b) of this section and AS 13.36.273, a                             
30       trustee who invests and manages trust assets owes a duty to the beneficiaries of the                              
31       trust to comply with the prudent investor rule set out in AS 13.36.230 - 13.36.290.                               
01    * Sec. 13. AS 13.36 is amended by adding a new section to read:                                                    
02            Sec. 13.36.273. Trustee duties relating to insurance. (a) With respect to a                                
03       contract for life insurance acquired or retained for a trust on the life of a qualified                           
04       person, a trustee does not have a duty to determine whether the contract was procured                             
05       or effected in accordance with AS 21.42.020 unless the trust instrument provides                                  
06       otherwise or unless the trustee applied for or accepted ownership of a contract of life                           
07       insurance and had knowledge that                                                                                  
08                 (1)  when the contract of life insurance was issued, the benefits were                                  
09       not payable to a person specified in AS 21.42.020; or                                                             
10                 (2)  the contract was purchased with resources or guarantees directly or                                
11       indirectly provided by a person who, when the contract was entered into, did not have                             
12       an insurable interest in the insured, and, when the contract was entered into there was                           
13       a verbal or written arrangement, agreement, or plan with a third party to transfer                                
14       ownership of the policy or the policy benefits in a manner that would violate the law                             
15       of this state.                                                                                                    
16            (b)  With respect to a contract for life insurance acquired or retained for a trust                          
17       on the life of a qualified person, if this subsection applies under (c) of this section, a                        
18       trustee does not have a duty to                                                                                   
19                 (1)  determine whether a contract of life insurance is a proper                                         
20       investment;                                                                                                       
21                 (2)  investigate the financial strength of the person issuing the life                                  
22       insurance policy;                                                                                                 
23                 (3)  determine whether to exercise a policy option available under the                                  
24       contract;                                                                                                         
25                 (4)  diversify the contract or the assets of the trust with respect to the                              
26       contract; or                                                                                                      
27                 (5)  inquire about or investigate the health or financial condition of an                               
28       insured.                                                                                                          
29            (c)  Unless the trust instrument provides otherwise, (b) of this section applies                             
30       to a trustee if                                                                                                   
31                 (1)  the trust instrument refers to this section and makes this section                                 
01       applicable to contracts for life insurance held by the trust; or                                                  
02                 (2)  the trustee notifies the qualified beneficiaries or a person who may                               
03       represent and bind the qualified beneficiaries under AS 13.06.120 that the trustee is                             
04       electing to have this section apply to a contract for life insurance held by the trust.                           
05            (d)  The notice provided under (c)(2) of this section must include a copy or                                 
06       restatement of (b) of this section and shall be provided                                                          
07                 (1)  by mailing a copy of the notice by certified, registered, or ordinary                              
08       first-class mail addressed to the person being notified at the post office address given                          
09       in the person's demand for notice, if any, or at the person's office or place of residence,                       
10       if known;                                                                                                         
11                 (2)  by delivering a copy of the notice personally to the person being                                  
12       notified; or                                                                                                      
13                 (3)  if the address or identity of the person is not known and cannot be                                
14       ascertained with reasonable diligence, by publishing, at least once a week for three                              
15       consecutive weeks, a copy of the notice in a newspaper having general circulation in                              
16       the judicial district where one of the trustees is located.                                                       
17            (e)  If, within 30 days after a person receives notice under (d)(1) or (2) of this                           
18       section or 30 days after the last date of publication of the notice under (d)(3) of this                          
19       section, a person delivers to the trustee a written objection to the application of (b) of                        
20       this section, (b) of this section does not apply until the objection is withdrawn.                                
21            (f)  Under (a) and (b) of this section, the trustee is not liable to the beneficiaries                       
22       of the trust or to another person for a loss sustained with respect to a life insurance                           
23       contract to which (a) and (b) of this section apply.                                                              
24            (g)  Notwithstanding the other provisions of this section, unless the duties have                            
25       been delegated to another person under AS 13.36.270, (a) and (b) of this section do                               
26       not apply to a contract for life insurance purchased from an affiliate of a trustee or for                        
27       which a trustee or an affiliate of the trustee receives a commission. In this subsection,                         
28       "affiliate" means a person who controls, is controlled by, or is under common control                             
29       with the trustee.                                                                                                 
30            (h)  A trustee who performs fiduciary or advisory services related to a policy of                            
31       life insurance to which (a)(1) or (2) of this section applies may not be compensated for                          
01       performing the services to which (a)(1) or (2) of this section applies.                                           
02            (i)  In this section, "qualified person" means a person who                                                  
03                 (1)  is an insured or a proposed insured under a policy of life insurance                               
04       or the spouse of that person; and                                                                                 
05                 (2)  provides                                                                                           
06                      (A)  the actual funds used to acquire or pay the premiums for                                      
07            the policy; or                                                                                               
08                      (B)  assets the income or principal of which are used to acquire                                   
09            or pay the premiums for the policy.                                                                          
10    * Sec. 14. AS 13.36.370(a) is amended to read:                                                                     
11            (a)  A trust instrument may provide for the appointment of a                                                 
12       [DISINTERESTED THIRD PARTY TO ACT AS A] trust protector.                                                          
13    * Sec. 15. AS 13.36.375 is amended by adding a new subsection to read:                                             
14            (c) Notwithstanding (b) of this section, if, by the terms of the trust instrument,                           
15       a trustee is designated to follow the directions of an advisor who is not designated in                           
16       the trust instrument as being a trustee, the trustee who, by the terms of the trust                               
17       instrument, is required to follow the directions of the advisor is not liable, individually                       
18       or as a fiduciary, to a beneficiary for a consequence of the trustee's compliance with                            
19       the advisor's directions, regardless of the information available to the trustee, and the                         
20       trustee does not have an obligation to review, inquire, investigate, or make                                      
21       recommendations or evaluations with respect to the exercise of a power of the trustee                             
22       if the exercise of the power complies with the directions given to the trustee. An                                
23       advisor under this subsection is liable to the beneficiaries as a fiduciary with respect to                       
24       the exercise of the advisor's directions by a trustee as if the trustee were not in office,                       
25       and the advisor has the exclusive obligation to account to the beneficiaries and to                               
26       defend an action brought by the beneficiaries with respect to the exercise of the                                 
27       advisor's directions by the trustee.                                                                              
28    * Sec. 16. AS 13.38.200(b) is amended to read:                                                                     
29            (b)  In exercising a discretionary power of administration regarding a matter                                
30       within the scope of this chapter, whether granted by the governing instrument or this                             
31       chapter, including AS 13.38.210 and 13.38.300 - 13.38.435 [13.38.300 - 13.38.410], a                          
01       fiduciary shall administer a trust or estate impartially based on what is fair and                                
02       reasonable to all of the beneficiaries, except to the extent that the governing                                   
03       instrument clearly manifests an intention that the fiduciary shall or may favor one or                            
04       more of the beneficiaries. A determination in accordance with this chapter is presumed                            
05       to be fair and reasonable to all of the beneficiaries.                                                            
06    * Sec. 17. AS 13.38.210(c) is amended to read:                                                                     
07            (c)  A trustee may not make an adjustment under this section if                                              
08                 (1)  the adjustment would diminish the income interest in a trust that                                  
09       requires all of the income to be paid at least annually to a spouse and for which a                               
10       federal estate tax or gift tax marital deduction would be allowed, in whole or in part, if                        
11       the trustee did not have the power to make the adjustment; the prohibition in this                                
12       paragraph does not apply to a trust after the trustee determines that the marital                                 
13       deduction has not been claimed or has not been allowed;                                                           
14                 (2)  the adjustment would reduce the actuarial value of the income                                      
15       interest in a trust to which a person transfers property with the intent to qualify for a                         
16       federal gift tax exclusion;                                                                                       
17                 (3)  the adjustment would change the amount payable to a beneficiary                                    
18       as a fixed annuity or a fixed fraction of the value of the trust assets;                                          
19                 (4)  the adjustment is from any amount that is permanently set aside for                                
20       charitable purposes under the governing instrument and for which a federal estate or                              
21       gift tax charitable deduction has been taken, unless both income and principal are                                
22       permanently set aside for charitable purposes under the governing instrument;                                     
23                 (5)  possessing or exercising the power to make an adjustment would                                     
24       cause an individual to be treated as the owner of all or part of the trust for federal                            
25       income tax purposes, and the individual would not be treated as the owner if the                                  
26       trustee did not possess the power to make an adjustment;                                                          
27                 (6)  possessing or exercising the power to make an adjustment would                                     
28       cause all or part of the trust assets to be subject to federal estate or gift tax with respect                    
29       to an individual, and the assets would not be subject to federal estate or gift tax with                          
30       respect to the individual if the trustee did not possess the power to make an                                     
31       adjustment;                                                                                                       
01                 (7)  the trustee is a beneficiary of the trust; or                                                      
02                 (8)  the trust has been converted to a unitrust under AS 13.38.300 -                                
03       13.38.435 [AS 13.38.300 - 13.38.410].                                                                         
04    * Sec. 18. AS 13.38.300 is amended to read:                                                                        
05            Sec. 13.38.300. Power to convert to unitrust. Unless expressly prohibited by                               
06       the governing instrument, a trustee may release the power to adjust under                                         
07       AS 13.38.210 and may convert a trust into a unitrust as described in AS 13.38.300 -                           
08       13.38.435 [AS 13.38.300 - 13.38.410] if                                                                       
09                 (1)  the trustee determines that the conversion will enable the trustee to                              
10       better carry out the intent of the settlor or testator and the purposes of the trust;                             
11                 (2)  the trustee gives written notice of the trustee's intention to release                             
12       the power to adjust, of the trustee's intention to convert the trust into a unitrust, of the                  
13       unitrust percentage selected, of the smoothing period selected, and of how the                                
14       unitrust will operate, including what initial decisions the trustee intends to [WILL]                         
15       make under AS 13.38.340 [THIS SECTION], to all the sui juris beneficiaries who                                
16                      (A)  are currently eligible to receive income from the trust;                                      
17                      (B)  would be eligible, if a power of appointment were not                                         
18            exercised, to receive income from the trust if the interest of all of the                                    
19            beneficiaries eligible to receive income under (A) of this paragraph were to                                 
20            terminate immediately before the giving of the notice; and                                                   
21                      (C)  would, if a power of appointment were not exercised,                                          
22            receive a distribution of principal if the trust were to terminate immediately                               
23            before the giving of the notice;                                                                             
24                 (3)  there are at least one sui juris beneficiary under (2)(A) of this                                  
25       section and at least one sui juris beneficiary under (2)(B) or (C) of this section; and                           
26                 (4)  a sui juris beneficiary does not object to the conversion to a unitrust                            
27       in a writing delivered to the trustee within 60 days after the mailing of the notice under                        
28       (2) of this section.                                                                                              
29    * Sec. 19. AS 13.38.310(a) is amended to read:                                                                     
30            (a)  A trustee may petition the court to approve the conversion to a unitrust if                             
31                 (1)  a beneficiary timely objects to the conversion to a unitrust; [OR]                                 
01                 (2)  there is not a sui juris beneficiary who is currently eligible under                           
02       AS 13.38.300(2)(A) or who would be eligible under AS 13.38.300(2)(B) or (C); or                               
03                 (3)  the trustee is a beneficiary [AS 13.38.300(2)(A), AND THERE                                    
04       IS NOT A SUI JURIS BENEFICIARY WHO IS ELIGIBLE UNDER                                                              
05       AS 13.38.300(2)(B) OR (C)].                                                                                       
06    * Sec. 20. AS 13.38.330(b) is amended to read:                                                                     
07            (b)  After a trust has been converted to a unitrust, "income" in the governing                               
08       instrument means an annual distribution equal to the amount produced by the                                   
09       application of a fixed unitrust percentage established under (d) of this section to                           
10       [FOUR PERCENT OF] the net fair market value, as determined annually, of the trust's                               
11       assets, whether the assets would be considered income or principal under other                                    
12       provisions of this chapter, averaged over the lesser of                                                       
13                 (1)  the preceding years in the smoothing period selected by the                                    
14       trustee; or                                                                                                   
15                 (2)  the period during which the trust has been in existence.                                       
16    * Sec. 21. AS 13.38.330 is amended by adding a new subsection to read:                                             
17            (d)  The unitrust percentage to be used in determining the amount to be                                      
18       distributed from a unitrust to a beneficiary must be a reasonable current return from                             
19       the unitrust of at least three percent and not more than five percent, taking into account                        
20       the intentions of the trustor of the unitrust as expressed in the governing instrument,                           
21       the needs of the beneficiaries, general economic conditions, projected current earnings                           
22       for the unitrust, projected appreciation for the unitrust, and the effect of projected                            
23       inflation on the unitrust.                                                                                        
24    * Sec. 22. AS 13.38.340 is amended to read:                                                                        
25            Sec. 13.38.340. Trustee's discretionary powers regarding unitrust. The                                     
26       trustee may, in the trustee's discretion, from time to time, determine                                            
27                 (1)  the effective date of a conversion to a unitrust;                                                  
28                 (2)  the provisions for prorating a unitrust distribution for a short year                              
29       in which a beneficiary's right to payments commences or ceases;                                                   
30                 (3)  the frequency of unitrust distributions during the year;                                           
31                 (4)  the effect of other payments from or contributions to the trust on                                 
01       the trust's valuation;                                                                                            
02                 (5)  whether to value the trust's assets annually or more frequently;                                   
03                 (6)  whether to use a smoothing period of three, four, or five years;                               
04                 (7)  what valuation dates to use;                                                                   
05                 (8) [(7)]  how frequently to value nonliquid assets and whether to                                  
06       estimate their value;                                                                                             
07                 (9) [(8)]  whether to omit trust property occupied or possessed by a                                
08       beneficiary from the calculations; and                                                                            
09                 (10) [(9)]  other matters necessary for the proper functioning of the                               
10       unitrust.                                                                                                         
11    * Sec. 23. AS 13.38.350(b) is amended to read:                                                                     
12            (b)  Unless otherwise provided by the governing instrument, a unitrust                                       
13       distribution shall be considered to have been paid from net income as net income                                  
14       would be determined if the trust were not a unitrust. To the extent net income is                                 
15       insufficient, the unitrust distribution shall be considered to have been paid from                                
16       ordinary income that is allocable under federal income tax rules to net income as                             
17       determined for a unitrust. To the extent that the ordinary income is insufficient,                            
18       the unitrust distribution is considered to have been paid from net realized short-                            
19       term capital gains. To the extent net income, ordinary income, and net realized short-                    
20       term capital gains are insufficient, the unitrust distribution shall be considered to have                        
21       been paid from net realized long-term capital gains. To the extent net income,                            
22       ordinary income, and net realized short-term and long-term capital gains are                                  
23       insufficient, the unitrust distribution shall be paid from the principal of the trust.                            
24    * Sec. 24. AS 13.38.360 is amended to read:                                                                        
25            Sec. 13.38.360. Court orders regarding unitrust. The trustee or, if the trustee                            
26       declines to petition the court, a beneficiary may petition the court to                                           
27                 [(1)  SELECT A PAYOUT PERCENTAGE DIFFERENT THAN                                                         
28       FOUR PERCENT;                                                                                                     
29                 (2)]  provide for a distribution of net income, as would be determined if                               
30       the unitrust [TRUST] were not a unitrust, in excess of the unitrust distribution if the                       
31       distribution is necessary to preserve a tax benefit [;                                                            
01                 (3)  AVERAGE THE VALUATION OF THE TRUST'S NET ASSETS                                                    
02       OVER A PERIOD OTHER THAN THREE YEARS].                                                                            
03    * Sec. 25. AS 13.38.390(b) is amended to read:                                                                     
04            (b)  If AS 13.38.380(a)(3), (4), or (6) applies to all the trustees, the trustees                            
05       may petition the court to direct a conversion. In the alternative, the trustees may                           
06       appoint an independent person who shall be granted the authority, while acting                                
07       in a fiduciary capacity, to make decisions in place of the trustees relating to a                             
08       conversion, reconversion, and the exercise of discretionary powers under                                      
09       AS 13.38.340.                                                                                                 
10    * Sec. 26. AS 13.38.400 is amended to read:                                                                        
11            Sec. 13.38.400. Reconversion from a unitrust. A trustee may reconvert a                                    
12       trust that has been converted into a unitrust under AS 13.38.300 by following the same                            
13       procedures provided in AS 13.38.300 - 13.38.435 [AS 13.38.300 - 13.38.410] for                                
14       converting a trust into a unitrust. If a unitrust is reconverted under this section, the                          
15       trustee's power to adjust under AS 13.38.210 applies to the trustee after the                                     
16       reconversion.                                                                                                     
17    * Sec. 27. AS 13.38 is amended by adding new sections to article 2 to read:                                        
18            Sec. 13.38.420. Express total return unitrusts. (a) This section applies to a                              
19       trust that, by its governing instrument, requires the distribution, at least annually, of a                       
20       unitrust amount.                                                                                                  
21            (b)  The trustee of an express total return unitrust may determine the unitrust                              
22       amount by reference to the net fair market value of the unitrust's assets in one or more                          
23       years.                                                                                                            
24            (c)  Distribution of a unitrust amount is considered a distribution of all of the                            
25       income of an express total return unitrust and is considered to be an income interest.                            
26            (d)  Distribution of a unitrust amount is considered to be a reasonable                                      
27       apportionment of the total return of an express total return unitrust.                                            
28            (e)  An express total return unitrust that provides for a distribution based on a                            
29       unitrust percentage in excess of five percent of the net fair market value of the unitrust                        
30       assets a year is considered a distribution of all of the income of the unitrust and a                             
31       distribution of principal of the unitrust to the extent that the distribution exceeds five                        
01       percent a year.                                                                                                   
02            (f)  The governing instrument of an express total return unitrust may grant                                  
03       discretion to the trustee to adopt a consistent practice of treating capital gains as part                        
04       of the unitrust amount to the extent that the unitrust amount exceeds the income                                  
05       determined as if the trust were not an express total return unitrust, or the governing                            
06       instrument may specify the ordering of classes of income.                                                         
07            (g)  Unless the terms of the express total return unitrust specifically provide                              
08       otherwise, a unitrust amount is considered a distribution made from the following                                 
09       sources, which are listed in order of priority:                                                                   
10                 (1)  net income determined as if the trust were not a unitrust;                                         
11                 (2)  ordinary income not allocable to net income;                                                       
12                 (3)  net realized short-term capital gains;                                                             
13                 (4)  net realized long-term capital gains; and                                                          
14                 (5)  the principal of the trust estate.                                                                 
15            (h)  The governing instrument of an express total return unitrust may provide                                
16       that the trustee may exclude assets used by the unitrust's beneficiary, including a                               
17       residence property or tangible personal property, from the net fair market value of the                           
18       unitrust's assets for the purposes of computing the unitrust amount. These assets may                             
19       be considered equivalent to income or to the unitrust amount.                                                     
20            (i)  In this section,                                                                                        
21                 (1)  "express total return unitrust" means a trust that, by its governing                               
22       instrument, requires the distribution, at least annually, of a unitrust amount;                                   
23                 (2)  "unitrust amount" means an amount equal to a fixed percentage of                                   
24       not less than three nor more than five percent each year of the net fair market value of                          
25       the annual value of the trust's assets distributed from an express total return unitrust to                       
26       a beneficiary.                                                                                                    
27            Sec. 13.38.430. Power to treat gains as part of distribution of principal.                                 
28       Unless prohibited by the unitrust's governing instrument or specifically addressed by                             
29       AS 13.38.350 or 13.38.420, the trustee of a unitrust may treat gains from the sale of                             
30       capital assets of the unitrust to be part of a distribution of principal to a beneficiary,                        
31       and, if the trustee treats those gains as part of a distribution of principal to a                                
01       beneficiary, the trustee shall treat those gains consistently on the unitrust's books,                            
02       records, and tax returns as part of a distribution to a beneficiary.                                              
03            Sec. 13.38.435. Definitions. In AS 13.38.300 - 13.38.435,                                                  
04                 (1)  "smoothing period" means the period of years over which the fair                                   
05       market value of the assets of a unitrust are averaged;                                                            
06                 (2)  "unitrust percentage" means the unitrust percentage established                                    
07       under AS 13.38.330(d).                                                                                            
08    * Sec. 28. AS 13.38.690(a) is repealed and reenacted to read:                                                      
09            (a)  A trustee shall allocate                                                                                
10                 (1)  to income that portion of a payment that equals the greater of the                                 
11       following:                                                                                                        
12                      (A)  the portion that the payor characterizes as interest, a                                       
13            dividend, a remittance in place of interest, or a remittance in place of a                                   
14            dividend; or                                                                                                 
15                      (B)  the portion that is characterized as imputed interest for                                     
16            federal income purposes;                                                                                     
17                 (2)  to principal that portion of a payment that remains after the                                      
18       allocation is made under (1) of this subsection.                                                                  
19    * Sec. 29. AS 13.38.690(b) is amended to read:                                                                     
20            (b)  If no [A] part of a payment under a contract calling for equal installments                         
21       over a fixed period of time is [NOT] allocable to income under the provisions of (a) of                           
22       this section, the difference between the trust's acquisition value of the contract and the                        
23       total expected return is [SHALL BE] considered to be interest. The trustee shall                              
24       allocate to income the portion of each payment equivalent to interest on the then                                 
25       unpaid principal balance at the rate specified in the contract or at a rate necessary to                          
26       amortize the difference between the expected return and the acquisition value, where                              
27       that rate is readily ascertainable by the trustee.                                                                
28    * Sec. 30. AS 13.38.690(c) is amended to read:                                                                     
29            (c)  If no [THERE IS NOT A] portion of a payment from a separate fund held                               
30       exclusively for the benefit of the trust [THAT] is allocable to income under (a) or (b)                           
31       of this section, but the internal net income of the fund determined as if the fund were a                         
01       separate trust subject to AS 13.38.200 - 13.38.410, 13.38.500 - 13.38.690, or                                 
02       13.38.710 - 13.38.860 [AS 13.38.500 - 13.38.860] is readily ascertainable by the                              
03       trustee, the internal net income of the fund is considered to be the income earned                            
04       by the fund, and the portion of the payment equal to the then undistributed net                               
05       income of the fund realized since the trust acquired its interest in the fund is                                  
06       considered to be a distribution of that internal net income of the fund and shall be                      
07       allocated to the trust income account. The balance of the payment described in this                               
08       subsection shall be allocated to principal. The power to adjust under AS 13.38.210,                           
09       the power to convert to a unitrust under AS 13.38.300, and the provisions of                                  
10       AS 13.38.420 apply to retirement benefits covered by this subsection that are                                 
11       payable to a trust. Those powers and provisions may be exercised by the payee                                 
12       trustee or in the governing instrument for the retirement benefits separately and                             
13       independently from the exercise by the payee trustee or in the governing                                      
14       instrument of those powers and provisions for the trust, as if the retirement                                 
15       benefits and the trust were separate trusts subject to this chapter.                                          
16    * Sec. 31. AS 13.38.690(d) is amended to read:                                                                     
17            (d)  A trustee shall allocate 10 percent of the part of the payment that is                                  
18       required to be made during the accounting period to income and the balance to                                     
19       principal if there is no [NOT A] part of the payment that is allocable to income under                        
20       (a) - (c) of this section and all or part of the payment is required to be made. The                              
21       trustee shall allocate the entire payment to principal if no [A] part of a payment is                         
22       [NOT] required to be made or the payment received is the entire amount to which the                               
23       trustee is entitled. In this subsection, a payment is not "required to be made" to the                            
24       extent that it is made because the trustee exercises a right of withdrawal.                                       
25    * Sec. 32. AS 13.38.690(e) is amended to read:                                                                     
26            (e)  If, to obtain a federal estate or gift tax marital deduction for a trust, the                           
27       trustee must allocate more of a payment to income than provided for by this section,                              
28       the trustee shall allocate to income the additional amount necessary to obtain the                            
29       marital deduction [TO INCOME].                                                                                    
30    * Sec. 33. AS 13.46.190 is amended to read:                                                                        
31            Sec. 13.46.190. Termination of custodianship. The custodian shall transfer in                              
01       an appropriate manner the custodial property to the minor or to the minor's estate upon                           
02       the earlier of the                                                                                                
03                 (1)  minor's attainment of 21 years of age with respect to property                                     
04       transferred under AS 13.46.030 or 13.46.040 unless the time of transfer of the                                    
05       custodial property to the minor is changed under AS 13.46.195 or 13.46.197;                                   
06                 (2)  minor's attainment of 18 years of age with respect to property                                     
07       transferred under AS 13.46.050 or 13.46.060, unless the time of transfer of the                               
08       custodial property to the minor is changed under AS 13.46.197;                                                
09                 (3)  time specified in the transfer under AS 13.46.080 if the time of                                   
10       transfer of the custodial property to the minor is changed under AS 13.46.195 or                              
11       13.46.197; or                                                                                                 
12                 (4)  minor's death.                                                                                     
13    * Sec. 34. AS 13.46 is amended by adding a new section to read:                                                    
14            Sec. 13.46.197. Extension of custodial term by custodian. (a) A custodian                                  
15       may extend the custodial term under this section to an age older than the age that is                             
16       specified by this chapter or a transferring document made under AS 13.46.080, subject                             
17       to the right of the minor to compel immediate distribution under (c) of this section.                             
18            (b)  To extend the custodial term under (a) of this section, the custodian shall                             
19       give the minor written notice of the custodian's intent to extend the custodial term. The                         
20       notice must specify the duration of the extension by indicating the new custodial term                            
21       and must inform the minor of the minor's right to compel immediate distribution under                             
22       (c) of this section. The custodian shall give the notice during the later of the following                        
23       periods:                                                                                                          
24                 (1)  the six-month period that precedes the last day of the custodial                                   
25       term; or                                                                                                          
26                 (2)  the six-month period that begins on the minor's 18th birthday.                                     
27            (c)  Rather than permit the extension of the custodial term, the minor may                                   
28       compel immediate distribution of all or part of the custodial property by giving written                          
29       notice to the custodian                                                                                           
30                 (1)  during the six-month period that begins on the day that is the last                                
31       day of the current custodial term; or                                                                             
01                 (2)  within 90 days after receiving the custodian's notice under (b) of                                 
02       this section.                                                                                                     
03            (d)  If a minor does not exercise the minor's right to compel distribution under                             
04       (c) of this section, the custodial term shall be extended as indicated in the custodian's                         
05       notice given under (b) of this section, and the minor may not compel the immediate                                
06       distribution of custodial property before the end of the custodial term, as extended.                             
07            (e)  A custodian may extend the custodial term more than once under this                                     
08       section.                                                                                                          
09            (f)  In this section, "custodial term" means the time provided in or allowed by                              
10       this chapter during which the custodian is directed to hold custodial property until the                          
11       property is transferred to the minor.                                                                             
12    * Sec. 35. AS 13.46.990(11) is amended to read:                                                                    
13                 (11)  "minor" means an individual who has not attained the age of 18                                    
14       years, except that when used in reference to the beneficiary for whose benefit                                    
15       custodial property is held or to be held, "minor" means an individual who has not                                 
16       attained the age at which the custodian is required under AS 13.46.190, [AND]                                 
17       13.46.195, and 13.46.197 to transfer the custodial property to the beneficiary;                               
18    * Sec. 36. AS 13 is amended by adding a new chapter to read:                                                       
19                  Chapter 75. Disposition of Human Remains.                                                            
20            Sec. 13.75.010. Directions by decedent. (a) A person may provide directions                                
21       for the disposition of the person's remains by placing the directions in a disposition                            
22       document. The directions may include or be limited to designating an agent to control                             
23       the disposition of the person's remains.                                                                          
24            (b)  A disposition document must be signed by the person and acknowledged                                    
25       before a notary public, and contain the form and contents required by AS 13.75.030. A                             
26       disposition document may be a separate document or it may be contained in another                                 
27       document, including a will or prepaid funeral or burial contract. The disposition                                 
28       document may be modified or revoked only by a subsequent disposition document that                                
29       complies with this subsection.                                                                                    
30            Sec. 13.75.020. Persons authorized to control disposition. (a) The following                               
31       persons, in the priority listed, may control disposition of a decedent's remains:                                 
01                 (1)  a person designated in a disposition document as the disposition                                   
02       agent for the decedent;                                                                                           
03                 (2)  a person serving, or nominated by the decedent in the decedent's                                   
04       will to serve, as the personal representative of the decedent's estate, if the person is                          
05       acting according to the decedent's written instructions contained in the decedent's will;                         
06                 (3)  the individual who was the spouse of the decedent at the time of the                               
07       decedent's death;                                                                                                 
08                 (4)  the sole surviving competent adult child of the decedent, or, if there                             
09       is more than one surviving competent adult child of the decedent, the majority of the                             
10       surviving competent adult children; fewer than one-half of the surviving competent                                
11       adult children may exercise the rights and duties of this section if these surviving adult                        
12       children use reasonable efforts to notify all other surviving competent adult children                            
13       that they are exercising these rights and duties and are not aware of any opposition by                           
14       one-half or more of all of the surviving competent adult children;                                                
15                 (5)  the surviving competent parents of the decedent; if one of the                                     
16       surviving competent parents is absent, the remaining competent parent may exercise                                
17       the rights and duties of this section after reasonable efforts have been unsuccessful in                          
18       locating the absent surviving competent parent; in this paragraph, "absent" means a                               
19       person who is unable to communicate decisions or participate in making decisions                                  
20       regarding the disposition of a decedent's remains personally, telephonically, or through                          
21       electronic communication;                                                                                         
22                 (6)  the surviving competent adult person in the next degrees of                                        
23       kindred, the two surviving competent adult persons of the same degree of kindred if                               
24       there are two, or, if there are more than two surviving competent adult persons of the                            
25       same degree of kindred, the majority of those persons; fewer than the majority of                                 
26       surviving competent adult persons of the same degree of kindred may exercise the                                  
27       rights and duties of this section if those persons use reasonable efforts to notify all                           
28       other surviving competent adult persons of the same degree of kindred that they are                               
29       exercising these rights and duties and are not aware of any opposition by one-half or                             
30       more of all surviving competent adult persons of the same degree of kindred;                                      
31                 (7)  in the case of an indigent or another individual whose final                                       
01       disposition is the responsibility of the state or a municipality, a public administrator,                         
02       medical examiner, coroner, or another public official charged with arranging the final                            
03       disposition of the decedent; or                                                                                   
04                 (8)  another person who is willing to assume legal and financial                                        
05       responsibility.                                                                                                   
06            (b)  If a person takes control of the disposition under (a) of this section, the                             
07       person is liable for the reasonable costs of the disposition if the assets of the estate or                       
08       other available assets are not adequate to pay the costs of the disposition.                                      
09            (c)  In this section,                                                                                        
10                 (1)  "adult" means a person who is 18 years of age or older;                                            
11                 (2)  "competent" means a person who does not suffer from disabilities                                   
12       that prevent the person from managing the person's property or affairs.                                           
13            Sec. 13.75.030. Form of disposition document. A disposition document must                                  
14       be in substantially the following form:                                                                           
15                             DISPOSITION DOCUMENT                                                                        
16                 You can select Part 1, Part 2, or both, by completing the part(s)                                       
17            you select, including providing any signatures indicated. Part 3 contains                                    
18            general statements and a place for your signature. You must sign in                                          
19            front of a notary.                                                                                           
20                 PART 1. APPOINTMENT OF AGENT TO CONTROL                                                                 
21            DISPOSITION OF REMAINS. If you appoint an agent, you and your                                                
22            agent must complete this part as indicated, and the agent must sign this                                     
23            part.                                                                                                        
24                 I, ______________, being of sound mind, wilfully and                                                    
25            voluntarily make known my desire that, on my death, the disposition of                                       
26            my remains shall be controlled by _____________ (name of agent first                                         
27            named below), and, with respect to that subject only, I appoint that                                         
28            person as my agent. All decisions made by my agent with respect to the                                       
29            disposition of my remains, including cremation, are binding.                                                 
30                     ACCEPTANCE BY AGENT OF APPOINTMENT.                                                                 
31                 THE AGENT, AND EACH SUCCESSOR AGENT, BY                                                                 
01            ACCEPTING THIS APPOINTMENT, AGREES TO AND ASSUMES                                                            
02            THE OBLIGATIONS PROVIDED IN THIS DOCUMENT. AN                                                                
03            AGENT MAY SIGN AT ANY TIME, BUT AN AGENT'S                                                                   
04            AUTHORITY TO ACT IS NOT EFFECTIVE UNTIL THE AGENT                                                            
05            SIGNS BELOW TO INDICATE THE ACCEPTANCE OF                                                                    
06            APPOINTMENT. ANY NUMBER OF AGENTS MAY SIGN, BUT                                                              
07            ONLY THE SIGNATURE OF THE AGENT ACTING AT ANY                                                                
08            TIME IS REQUIRED.                                                                                            
09            AGENT:                                                                                                       
10            Name: ___________________________________________________                                                    
11            Address: _________________________________________________                                                   
12            Telephone Number: _________________________________________                                                  
13            Signature Indicating Acceptance of Appointment:                                                              
14            _________________________________________________________                                                    
15            Date of Signature: __________________________________________                                                
16            SUCCESSORS:                                                                                                  
17                 If my agent dies, becomes legally disabled, resigns, or refuses to                                      
18            act, I appoint the following persons (each to act alone and successively,                                    
19            in the order named) to serve as my agent to control the disposition of                                       
20            my remains as authorized by this document:                                                                   
21            (1) First Successor                                                                                          
22            Name: ___________________________________________________                                                    
23            Address: _________________________________________________                                                   
24            Telephone Number: _________________________________________                                                  
25            Signature of First Successor Indicating Acceptance of Appointment:                                           
26            _________________________________________________________                                                    
27            Date of Signature: __________________________________________                                                
28            (2) Second Successor                                                                                         
29            Name: ___________________________________________________                                                    
30            Address: _________________________________________________                                                   
31            Telephone Number: _________________________________________                                                  
01            Signature of Second Successor Indicating Acceptance of Appointment:                                          
02            _________________________________________________________                                                    
03            Date of Signature: __________________________________________                                                
04            PART 2. DIRECTIONS FOR THE DISPOSITION OF MY                                                                 
05            REMAINS.                                                                                                     
06            Stated below are my directions for the disposition of my remains:                                            
07            _________________________________________________________                                                    
08            _________________________________________________________                                                    
09            _________________________________________________________                                                    
10            _________________________________________________________                                                    
11            If the disposition of my remains is by cremation, then (pick one):                                           
12                 ( ) I do not wish to allow any of my survivors the option of                                            
13            canceling my cremation and selecting alternative arrangements,                                               
14            regardless of whether my survivors consider a change to be appropriate.                                      
15                 ( ) I wish to allow only the survivors I have designated below to                                       
16            have the option of canceling my cremation and selecting alternative                                          
17            arrangements, if they consider that a change to be appropriate:                                              
18            _________________________________________________________                                                    
19            _________________________________________________________                                                    
20            _________________________________________________________                                                    
21            _________________________________________________________                                                    
22            PART 3. GENERAL PROVISIONS AND SIGNATURE.                                                                    
23                 WHEN DIRECTIONS BECOME EFFECTIVE. The directions,                                                       
24            including any appointment of an agent, in this disposition document                                          
25            become effective on my death.                                                                                
26                 REVOCATION OF PRIOR APPOINTMENTS. I revoke any                                                          
27            prior appointment of any person to control the disposition of my                                             
28            remains.                                                                                                     
29             SIGNATURE OF PERSON MAKING DISPOSITION DOCUMENT                                                             
30            Signature: ________________________________________________                                                  
31            Date of signature: __________________________________________                                                
01                       (Notary acknowledgment of signature)                                                              
02            Sec. 13.75.040. Agent's appointment. The person appointed as an agent in a                                 
03       disposition document may sign the disposition document at any time, but the agent's                               
04       authority to act is not effective until the agent signs the instrument.                                           
05            Sec. 13.75.050. Exercise of authority. If a person fails to exercise the person's                          
06       authority to control disposition under AS 13.75.020 within 48 hours after receiving                               
07       notification of the decedent's death or within 48 hours after the decedent's death,                               
08       whichever is earlier, the person may not control the disposition of the decedent's                                
09       remains, and the right to control the disposition of the decedent's remains passes to the                         
10       person who is next listed in priority under AS 13.75.020. If the person to whom the                               
11       right to control the disposition passes under this section fails to exercise the person's                         
12       authority to control the disposition within 48 hours after being notified that the                                
13       authority to control the disposition has passed to the person, the authority to control                           
14       the disposition passes to the person who is next listed in priority under AS 13.75.020.                           
15            Sec. 13.75.060. Certain persons prohibited from control. If a person is                                    
16       charged with a felonious killing in connection with a decedent's death and if the                                 
17       funeral director or the cemetery knows about the charge, then the person may not                                  
18       control disposition, and the right to control disposition passes to the person who is                             
19       next listed in priority under AS 13.75.020.                                                                       
20            Sec. 13.75.070. Prohibition of cremation; written instructions. A person                                   
21       may not authorize cremation for a decedent's remains if a decedent has left directions                            
22       in a disposition document that the decedent does not wish to be cremated.                                         
23            Sec. 13.75.080. Implementation of directions. (a) The person authorized to                                 
24       control the disposition shall carry out the directions of the decedent to the extent that                         
25       the decedent's estate or the person is financially able to carry out the directions.                              
26            (b)  Notwithstanding any other provision in AS 13.06 - 13.36 (Uniform                                        
27       Probate Code), if a person provides directions in a disposition document that is                                  
28       contained in a will, the directions shall be carried out immediately without the                                  
29       necessity of probate. If the will is not probated or is declared invalid for testamentary                         
30       purposes, the directions are valid to the extent to which they have been acted on in                              
31       good faith.                                                                                                       
01            Sec. 13.75.090. Misrepresentation; liability. If a person represents that the                              
02       person knows the identity of a decedent, and, with the intent to procure the disposition                          
03       of the decedent's remains, signs a statement, other than a death certificate, that                                
04       identifies the decedent, the person guarantees the identity of the decedent and is liable                         
05       for any damages that result, directly or indirectly, from that guarantee.                                         
06            Sec. 13.75.100. Liability. (a) A disposition organization is not liable for                                
07       carrying out the directions of a decedent if the disposition organization carries out the                         
08       directions of a decedent or a person who establishes that the person is entitled to                               
09       control the disposition.                                                                                          
10            (b)  This section may not be construed to reduce or eliminate the liability of a                             
11       disposition organization for its negligence or reckless acts.                                                     
12            Sec. 13.75.110. Disputes. (a) A person listed in AS 13.75.020 who is involved                              
13       in a dispute with one or more persons listed in AS 13.75.020 about which of the                                   
14       persons has the authority to control disposition may bring an action in the superior                              
15       court to resolve the dispute.                                                                                     
16            (b)  If there is a dispute with one or more persons listed in AS 13.75.020 about                             
17       which person has the authority to control disposition, a cemetery organization or                                 
18       funeral establishment is not liable for refusing to accept, to inter, or otherwise to                             
19       dispose of the decedent's remains until the cemetery organization or funeral                                      
20       establishment receives a court order or another suitable confirmation that the dispute                            
21       has been resolved.                                                                                                
22            Sec. 13.75.120. Exemptions. The disposition of the remains of a member of                                  
23       the organized militia under AS 26.05.262, the disposition of the remains of a member                              
24       of the armed forces under AS 26.10.065(a), and the disposition of the remains of a                                
25       member of the United States Coast Guard under AS 26.10.065(b) are exempt from this                                
26       chapter.                                                                                                          
27            Sec. 13.75.190. Definitions. In this chapter,                                                              
28                 (1)  "control" means the authority to control disposition;                                              
29                 (2)  "directions" means                                                                                 
30                      (A)  instructions for the disposition of a person's remains;                                       
31                      (B)  the appointment of an agent to handle the disposition of a                                    
01            person's remains; or                                                                                         
02                      (C)  both (A) and (B) of this paragraph;                                                           
03                 (3)  "disposition" means disposition of a decedent's remains, including                                 
04       cremation, but does not include an anatomical gift; in this paragraph, "anatomical gift"                          
05       has the meaning given in AS 13.52.390;                                                                            
06                 (4)  "disposition document" means a disposition document authorized                                     
07       by AS 13.75.010                                                                                                   
08                      (A)  in which a person provides directions regarding the                                           
09            disposition of the person's remains; and                                                                     
10                      (B)  that complies with AS 13.75.030;                                                              
11                 (5)  "disposition organization" means                                                                   
12                      (A)  a cemetery association formed under AS 10.30.010;                                             
13                      (B)  a nonprofit cemetery corporation authorized by                                                
14            AS 10.30.055;                                                                                                
15                      (C)  a person operating a crematory;                                                               
16                      (D)  a person operating a columbarium;                                                             
17                      (E)  a funeral home or other type of funeral establishment;                                        
18                      (F)  a funeral director or an embalmer.                                                            
19            Sec. 13.75.195. Short title. This chapter may be cited as the Disposition of                               
20       Human Remains Act.                                                                                                
21    * Sec. 37. AS 21.09.210(m) is amended to read:                                                                     
22            (m)  The tax imposed under this section for a single [AN INDIVIDUAL] life                                
23       insurance policy or for a group or other type of policy that insures the life of one                          
24       or more individuals shall be computed at the rate of                                                          
25                 (1)  2.7 percent of policy year premium up to $100,000; and                                             
26                 (2)  one-tenth of one percent of policy year premium exceeding                                          
27       $100,000.                                                                                                         
28    * Sec. 38. AS 21.42.020(a) is amended to read:                                                                     
29            (a)  A person of competent legal capacity may procure or effect an insurance                                 
30       contract on the life or body of the person for the benefit of any person. A person may                            
31       not procure or cause to be procured an insurance contract on [UPON] the life or body                          
01       of another person unless the benefits under the contract are payable to the individual                            
02       insured, the personal representatives of the individual insured, or to a person having, at                        
03       the time the contract was made or immediately after the contract was made, an                                 
04       insurable interest in the individual insured.                                                                     
05    * Sec. 39. AS 21.42.020 is amended by adding new subsections to read:                                              
06            (e)  Notwithstanding (a) of this section, a trustee, acting in a fiduciary capacity,                         
07       may procure or cause to be procured an insurance contract that is on the life or body of                          
08       an individual and under which the proceeds of the insurance contract are payable to                               
09       the trustee, acting in a fiduciary capacity, if                                                                   
10                 (1)  the trustee, acting in a fiduciary capacity, owns the insurance                                    
11       contract or the trust itself owns the insurance contract;                                                         
12                 (2)  on the date the contract is made, a settlor of the trust is the                                    
13       individual insured, has an insurable interest in the individual insured, or would have                            
14       had an insurable interest in the individual insured if the settlor were living at the time                        
15       the contract was made; in this paragraph, "settlor" means a person, including a person                            
16       for whom a fiduciary or agent is acting, who executes the trust instrument; and                                   
17                 (3)  the proceeds of the contract are primarily for the benefit of a trust                              
18       beneficiary who has an insurable interest in the individual insured, except that, if the                          
19       determination of the trust beneficiary's insurable interest is based on (d)(1) of this                            
20       section, the trust beneficiary's relation by blood or law must be within the third degree.                        
21            (f)  A person who has an insurable interest in the life or body of an individual                             
22       may form a business firm that is substantially or solely for the purpose of purchasing,                           
23       holding, or administering an insurance contract on the life or body of the individual. In                         
24       this subsection, "firm" has the meaning given in AS 21.97.900, but also includes a                                
25       business trust and a joint venture.                                                                               
26    * Sec. 40. AS 32.11.340(b) is amended to read:                                                                     
27            (b)  This section provides the exclusive remedy that a judgment creditor of a                                
28       general or limited partner or of the general or limited partner's assignee may use to                             
29       satisfy a judgment out of the judgment debtor's interest in the partnership. Other legal                      
30       or equitable remedies, including foreclosure on the general or limited partner's                              
31       partnership interest and a court order for directions, accounts, and inquiries that the                           
01       debtor general or limited partner might have made, are not available to the judgment                              
02       creditor attempting to satisfy the judgment out of the judgment debtor's interest in the                          
03       limited partnership and may not be ordered by a court.                                                            
04    * Sec. 41. AS 34.40.110(b) is amended to read:                                                                     
05            (b)  If a trust contains a transfer restriction allowed under (a) of this section,                           
06       the transfer restriction prevents a creditor existing when the trust is created or a person                       
07       who subsequently becomes a creditor from satisfying a claim out of the beneficiary's                              
08       interest in the trust, unless the creditor is a creditor of the settlor and                                       
09                 (1)  the creditor establishes by clear and convincing evidence that the                                 
10       settlor's transfer of property in trust was made with the intent to defraud that creditor,                        
11       and a cause of action or claim for relief with respect to the fraudulent transfer                                 
12       complies with the requirements of (d) of this section; however, a settlor's expressed                             
13       intention to protect trust assets from a beneficiary's potential future creditors is not                          
14       evidence of an intent to defraud;                                                                                 
15                 (2)  the trust, except for an eligible individual retirement account trust,                             
16       provides that the settlor may revoke or terminate all or part of the trust without the                            
17       consent of a person who has a substantial beneficial interest in the trust and the interest                       
18       would be adversely affected by the exercise of the power held by the settlor to revoke                            
19       or terminate all or part of the trust; in this paragraph, "revoke or terminate" does not                          
20       include a power to veto a distribution from the trust, a testamentary or lifetime                             
21       nongeneral power of appointment or similar power, or a right to receive a distribution                            
22       of income or principal under (3)(A), (B), (C), or (D) of this subsection;                                         
23                 (3)  the trust, except for an eligible individual retirement account trust,                             
24       requires that all or a part of the trust's income or principal, or both, must be distributed                      
25       to the settlor; however, this paragraph does not apply to a settlor's right to receive the                        
26       following types of distributions, which remain subject to the restriction provided by                             
27       (a) of this section until the distributions occur:                                                                
28                      (A)  income or principal from a charitable remainder annuity                                       
29            trust or charitable remainder unitrust; in this subparagraph, "charitable                                    
30            remainder annuity trust" and "charitable remainder unitrust" have the meanings                               
31            given in 26 U.S.C. 664 (Internal Revenue Code) [AS THAT SECTION                                              
01            READS ON OCTOBER 8, 2003,] and as it may be amended;                                                         
02                      (B)  a percentage of the value of the trust each year as                                           
03            determined from time to time under the trust instrument, but not exceeding the                               
04            amount that may be defined as income under AS 13.38 or under 26 U.S.C.                                       
05            643(b) (Internal Revenue Code) [AS THAT SUBSECTION READS ON                                                  
06            OCTOBER 8, 2003,] and as it may be amended;                                                                  
07                      (C)  the transferor's potential or actual use of real property held                                
08            under a qualified personal residence trust within the meaning of 26 U.S.C.                                   
09            2702(c) (Internal Revenue Code) [AS THAT SUBSECTION READS ON                                                 
10            SEPTEMBER 15, 2004,] or as it may be amended in the future; or                                               
11                      (D)  income or principal from a grantor retained annuity trust or                                  
12            grantor retained unitrust that is allowed under 26 U.S.C. 2702 (Internal                                     
13            Revenue Code) [AS THAT SECTION READS ON SEPTEMBER 15, 2004,]                                                 
14            or as it may be amended in the future; 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. 42. AS 34.40.110(d) is amended to read:                                                                     
18            (d)  A cause of action or claim for relief with respect to a fraudulent transfer of                          
19       a settlor's assets under (b)(1) of this section is extinguished unless the action under                           
20       (b)(1) of this section is brought by a creditor of the settlor who                                                
21                 (1)  is a creditor of the settlor before the settlor's assets are transferred                           
22       to the trust, and the action under (b)(1) of this section is brought within the later of                          
23                      (A)  two [FOUR] years after the transfer is made; or                                           
24                      (B)  six months [ONE YEAR] after the transfer is or reasonably                                 
25            could have been discovered by the creditor if the creditor                                                   
26                           (i)  can demonstrate, by a preponderance of the                                               
27                 evidence, that the creditor asserted a specific claim against the settlor                               
28                 before the transfer; or                                                                                 
29                           (ii)  files another action, other than an action under                                        
30                 (b)(1) of this section, against the settlor that asserts a claim based on an                            
31                 act or omission of the settlor that occurred before the transfer, and the                               
01                 action described in this sub-subparagraph is filed within two [FOUR]                                
02                 years after the transfer; or                                                                            
03                 (2)  becomes a creditor subsequent to the transfer into trust, and the                                  
04       action under (b)(1) of this section is brought within two [FOUR] years after the                              
05       transfer is made.                                                                                                 
06    * Sec. 43. AS 34.40 is amended by adding new sections to read:                                                     
07            Sec. 34.40.113. Discretionary interests in irrevocable trusts. (a) This section                            
08       applies to a creditor's claim with respect to a discretionary interest in an irrevocable                          
09       trust, unless the trust instrument provides otherwise.                                                            
10            (b)  A discretionary interest in an irrevocable trust is not a property interest or                          
11       an enforceable right. It is an expectancy that a creditor of a beneficiary may not attach                         
12       or otherwise reach.                                                                                               
13            (c)  A creditor of a beneficiary may not force a distribution with regard to a                               
14       discretionary interest in an irrevocable trust. A creditor may not compel a trustee to                            
15       exercise the trustee's discretion to make a distribution with regard to a discretionary                           
16       interest in an irrevocable trust.                                                                                 
17            (d)  Even if a beneficiary has an outstanding creditor, in the case of a                                     
18       discretionary interest in an irrevocable trust, a trustee who has the authority to pay                            
19       income or principal to a beneficiary may pay it to a third party if the payment is for the                        
20       benefit of the beneficiary. A trustee is not liable to a creditor for paying income or                            
21       principal on behalf of the beneficiary.                                                                           
22            (e)  A creditor of a beneficiary may not maintain an action or a proceeding in                               
23       court that interferes with the trustee's discretion to apply income or principal on behalf                        
24       of the beneficiary.                                                                                               
25            (f)  A creditor of a beneficiary may not obtain an order of attachment or similar                            
26       relief that would prevent a trustee from making a discretionary payment to a third                                
27       party on behalf of the beneficiary.                                                                               
28            (g)  This section does not prevent a creditor from obtaining relief from a                                   
29       fraudulent transfer under AS 34.40.110.                                                                           
30            (h)  In this section, a beneficiary's entitlement to a distribution is within the                            
31       discretion of a trustee, whether or not the trust instrument states the purposes for the                          
01       distribution or uses "may," "shall," "sole and absolute," "uncontrolled," or similar                              
02       words.                                                                                                            
03            (i)  In this section, "discretionary interest" means a beneficiary's interest in an                          
04       irrevocable trust if the beneficiary's entitlement to a distribution is within the                                
05       discretion of the trustee.                                                                                        
06            Sec. 34.40.118. Transfers of individual retirement accounts. (a)                                           
07       Notwithstanding a provision in AS 09.38.017(d), AS 34.40.110, or another law to the                               
08       contrary, a person may voluntarily transfer or assign the person's interest in an                                 
09       individual retirement account if the person                                                                       
10                 (1)  is the owner of or a participant in the individual retirement account;                             
11       or                                                                                                                
12                 (2)  acquired the interest as a result of the death of another individual.                              
13            (b)  In this section, "individual retirement account" means an individual                                    
14       retirement account established under 26 U.S.C. 408 or a Roth IRA established under                                
15       26 U.S.C. 408A.                                                                                                   
16    * Sec. 44. AS 34.77.030(g) is amended to read:                                                                     
17            (g)  Whether or not the community property agreement provides that all                                       
18       property acquired by either or both spouses during the marriage is community                                      
19       property, and except to the extent otherwise expressly provided by the spouses in the                         
20       community property agreement or by the settlors in a community property trust,                                
21       property acquired by a spouse during marriage and after the determination date is                                 
22       individual property if acquired                                                                                   
23                 (1)  by gift or a disposition at death made by a third person to the                                    
24       spouse and not to both spouses;                                                                                   
25                 (2)  in exchange for or with the proceeds of other individual property of                               
26       the spouse;                                                                                                       
27                 (3)  from appreciation or income of the spouse's individual property                                    
28       except to the extent that the income or appreciation is classified as community                                   
29       property under AS 34.77.130;                                                                                      
30                 (4)  by a decree, community property agreement, written consent, or                                     
31       reclassification under AS 34.77.060(b) designating it as the individual property of the                           
01       spouse;                                                                                                           
02                 (5)  as a recovery for damage to property under AS 34.77.140, except                                    
03       as specifically provided otherwise in a decree, community property agreement,                                     
04       community property trust, or written consent; [OR]                                                            
05                 (6)  as a recovery for personal injury, except for the amount of the                                    
06       recovery attributable to expenses paid or otherwise satisfied from community                                      
07       property; or                                                                                                  
08                 (7)  as a transfer to a community property trust and declared by                                    
09       the trust to be the individual property of the spouse.                                                        
10    * Sec. 45. AS 34.77.050(b) is amended to read:                                                                     
11            (b)  A gift of community property to a third person that is not allowed under                                
12       (a) of this section is subject to AS 34.77.140(e) - (h) [(d) OF THIS SECTION] unless                          
13       both spouses act together in making the gift or the other spouse ratifies the gift.                               
14    * Sec. 46. AS 34.77.110 is amended by adding new subsections to read:                                              
15            (f)  Property that spouses agree in a community property agreement is                                        
16       community property or property that is transferred to a community property trust and                              
17       expressly declared by the trust to be community property is owned as community                                    
18       property regardless of the form of title to the property, even if the title indicates that                        
19       the property is owned unequally by the spouses or is only in the name of one spouse.                              
20            (g)  If the title to community property is in a form that provides for ownership                             
21       by survivorship between the spouses, then ownership by survivorship is presumed to                                
22       have been made with the consent of both spouses.                                                                  
23            (h)  If a spouse with management and control of community property                                           
24       designates a beneficiary for the property on the death of one or both of the spouses,                             
25       and if the community property is held in a form of title that permits a beneficiary                               
26       designation, the beneficiary designation is effective only for the designating spouse's                           
27       one-half interest in the community property unless the other spouse consents in                                   
28       writing to the designation. A designation of the following as the beneficiary is                                  
29       presumed to have been made with the consent of the other spouse:                                                  
30                 (1)  the other spouse or an ancestor or descendant of either spouse;                                    
31                 (2)  a charity; or                                                                                      
01                 (3)  a trust, to the extent that the beneficiaries consist of persons or                                
02       entities identified in (1) or (2) of this subsection.                                                             
03            (i)  The testimony of one spouse is sufficient to rebut a presumption                                        
04       established under this section.                                                                                   
05            (j)  A disposition of community property contrary to (e) - (h) of this section is                            
06       voidable. An action in court to void the disposition must be commenced within the                                 
07       time specified by AS 34.77.140(e).                                                                                
08    * Sec. 47. AS 34.77.140(d) is amended to read:                                                                     
09            (d)  Except as provided otherwise in (e) - (h) of this section                                           
10       [AS 34.77.050(d)], a spouse must begin an action against the other spouse under (a) of                            
11       this section within three years after acquiring actual knowledge of the facts giving rise                         
12       to the claim.                                                                                                     
13    * Sec. 48. AS 34.77.140 is amended by adding new subsections to read:                                              
14            (e)  Except as provided by (f) - (h) of this section, if a gift of community                                 
15       property during marriage by a spouse does not comply with AS 34.77.050(a), the                                    
16       nondonor spouse may bring an action to recover the property or the amount of money                                
17       by which the gift exceeded the limit under AS 34.77.050(a). The nondonor spouse                                   
18       may bring the action against the donor spouse, the gift recipient, or both. The                                   
19       nondonor spouse must commence the action within the earliest of the following times:                              
20                 (1)  one year after the nondonor spouse receives notice of the gift;                                    
21                 (2)  one year after dissolution of the marriage; or                                                     
22                 (3)  on or before the deadline for filing a claim under AS 13.16.460                                    
23       after the death of the donor spouse.                                                                              
24            (f)  If a recovery under (e) of this section occurs during the marriage of the                               
25       donor spouse and the nondonor spouse, the property or money that is recovered is                                  
26       considered community property. If the recovery occurs after the dissolution of the                                
27       marriage of the donor and nondonor spouses or after the death of either the donor or                              
28       the nondonor spouse, the recovery is limited to 50 percent of the property or money                               
29       that would have been recovered if the recovery had occurred during the marriage.                                  
30            (g)  If a transfer of community property to a third person during marriage by a                              
31       spouse acting without the other spouse becomes a completed gift on the death of the                               
01       donor spouse, or if an arrangement involving community property during marriage by                                
02       a spouse acting without the other spouse is intended to be and becomes a gift to a third                          
03       person on the death of the donor spouse, the surviving spouse may bring an action in                              
04       court against the gift recipient to recover one-half of the gift. To bring an action under                        
05       this subsection, the surviving spouse must commence the action on or before the                                   
06       deadline for filing a claim under AS 13.16.460.                                                                   
07            (h)  If a spouse who would have been entitled to bring an action under (e) - (g)                             
08       of this section predeceases the donor spouse, the deceased spouse's successor in                                  
09       interest may bring an action for recovery under (e) - (g) of this section, but the action                         
10       must be commenced within one year after the deceased spouse's death. Recovery in an                               
11       action under this subsection is the same as if the donor spouse had predeceased the                               
12       spouse entitled to the recovery, but the amount of the recovery is calculated as of the                           
13       date of the death of the spouse entitled to the recovery.                                                         
14    * Sec. 49. AS 13.38.330(c); AS 34.77.050(d), and 34.77.110(d) are repealed.                                        
15    * Sec. 50. The uncodified law of the State of Alaska is amended by adding a new section to                         
16 read:                                                                                                                   
17       INDIRECT COURT RULE AMENDMENTS. (a) AS 34.40.113(f), enacted by sec. 43                                           
18 of this Act, has the effect of amending Rule 64, Alaska Rules of Civil Procedure, by                                    
19 prohibiting a creditor or beneficiary from obtaining an order of attachment or similar relief in                        
20 certain cases.                                                                                                          
21       (b)  AS 34.77.110(i), enacted by sec. 46 of this Act, has the effect of amending Rule                             
22 301(a), Alaska Rules of Evidence, by specifying the evidence that is sufficient to rebut a                              
23 presumption under AS 34.77.110(i), enacted by sec. 46 of this Act.                                                      
24    * Sec. 51. The uncodified law of the State of Alaska is amended by adding a new section to                         
25 read:                                                                                                                   
26       APPLICABILITY. (a) AS 09.38.017(a), as amended by sec. 1 of this Act,                                             
27 AS 09.38.017(d), as amended by sec. 2 of this Act, and AS 09.38.017(e), as amended by sec.                              
28 3 of this Act, apply to a retirement plan that exists before, on, or after the effective date of this                   
29 Act. In this section, "retirement plan" has the meaning given in AS 09.38.017(e), as amended                            
30 by sec. 3 of this Act.                                                                                                  
31       (b)  AS 13.36.157, as repealed and reenacted by sec. 9 of this Act, AS 13.36.158 and                              
01 13.36.159, enacted by sec. 10 of this Act, AS 13.36.072(c), enacted by sec. 8 of this Act,                              
02 AS 13.36.215(b), enacted by sec. 11 of this Act, AS 13.36.225(a), as amended by sec. 12 of                              
03 this Act, AS 13.36.273, enacted by sec. 13 of this Act, AS 13.36.370(a), as amended by sec.                             
04 14 of this Act, and AS 13.36.375(c), enacted by sec. 15 of this Act, apply to a trust that exists                       
05 before, on, or after the effective date of this Act.                                                                    
06       (c)  AS 13.46.190, as amended by sec. 33 of this Act, AS 13.46.197, enacted by sec.                               
07 34 of this Act, and AS 13.46.990(11), as amended by sec. 35 of this Act, apply to a transfer                            
08 that is made before, on, or after the effective date of this Act. In this section, "transfer" has the                   
09 meaning given in AS 13.46.990.                                                                                          
10       (d)  AS 34.40.118, enacted by sec. 43 of this Act, applies to an individual retirement                            
11 account that exists before, on, or after the effective date of this Act. In this section, "individual                   
12 retirement account" means an individual retirement account established under 26 U.S.C. 408                              
13 or a Roth IRA established under 26 U.S.C. 408A.                                                                         
14    * Sec. 52. The uncodified law of the State of Alaska is amended by adding a new section to                         
15 read:                                                                                                                   
16       CONDITIONAL EFFECT. (a) AS 34.40.113(f), enacted by sec. 43 of this Act, takes                                    
17 effect only if sec. 50(a) of this Act receives the two-thirds majority vote of each house                               
18 required by art. IV, sec. 15, Constitution of the State of Alaska.                                                      
19       (b)  AS 34.77.110(i), enacted by sec. 46 of this Act, takes effect only if sec. 50(b) of                          
20 this Act receives the two-thirds majority vote of each house required by art. IV, sec. 15,                              
21 Constitution of the State of Alaska.                                                                                    
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