A BILL
FOR AN ACT ENTITLED

"An Act relating to trusts, including trust protectors, trustee advisors, transfers of property in trust, and transfers of trust interests, and to creditors' claims against property subject to a power of appointment."

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:

* Section 1. AS 13.36 is amended by adding new sections to read:

Sec. 13.36.370. Trust protector. (a) A trust instrument may provide for the
appointment of a disinterested third party to act as a trust protector.

(b) A trust protector appointed under (a) of this section has the powers, delegations, and functions conferred on the protector by the trust instrument, which may include the power to

(1) remove and appoint a trustee;

(2) modify or amend the trust instrument to achieve favorable tax status or to respond to changes in 26 U.S.C. (Internal Revenue Code) or state law, or the rulings and regulations under those laws;

(3) increase or decrease the interests of any beneficiary to the trust; and

(4) modify the terms of a power of appointment granted by the trust.

(c) A modification authorized under (b) of this section may not

(1) grant a beneficial interest to an individual or a class of individuals unless the individual or class of individuals is specifically provided for under the trust instrument;

(2) modify the beneficial interest of a governmental unit in a trust created under AS 47.07.020(f).

(d) Subject to the terms of the trust instrument, a trust protector is not liable or accountable as a trustee or fiduciary because of an act or omission of the trust protector taken when performing the function of a trust protector under the trust instrument.

Sec. 13.36.375. Trustee advisor. (a) A trust instrument may provide for the
appointment of a person to act as an advisor to the trustee with regard to all or some of the matters relating to the property of the trust.

(b) Unless the terms of the trust instrument provide otherwise, if an advisor is
appointed under (a) of this section, the property and management of the trust and the exercise of all powers and discretionary acts exercisable by the trustee remain vested in the trustee as fully and effectively as if an advisor were not appointed, the trustee is not required to follow the advice of the advisor, and the advisor is not liable as or considered to be a trustee of the trust or a fiduciary when acting as an advisor to the trust.

* Sec. 2. AS 34.40.110(a) is amended to read:

(a) A person who in writing transfers property in trust may provide that the
interest of a beneficiary of the trust, including a beneficiary who is the settlor of the trust, may not be either voluntarily or involuntarily transferred before payment or delivery of the interest to the beneficiary by the trustee. Payment or delivery of theinterest to the beneficiary does not include a beneficiary's use or occupancy of real property or tangible personal property owned by the trust if the use or occupancy is in accordance with the trustee's discretionary authority under the trust instrument. In this subsection,

(1) "property" includes real property, personal property, and interests
in real or personal property;

(2) "transfer" means any form of transfer, including deed, conveyance,
or assignment.

* Sec. 3. AS 34.40.110(b) is amended to read:

(b) If a trust contains a transfer restriction allowed under (a) of this section, the transfer restriction prevents a creditor existing when the trust is created or [,] a person who subsequently becomes a creditor [, OR ANOTHER PERSON] from satisfying a claim out of the beneficiary's interest in the trust, unless the creditor is a creditor of the settlor and

(1) the settlor's transfer of property in trust was made with the intent [INTENDED IN WHOLE OR IN PART] to [HINDER, DELAY, OR] defraud that creditor [CREDITORS OR OTHER PERSONS UNDER AS 34.40.010];

(2) the trust provides that the settlor may revoke or terminate all or part of the trust without the consent of a person who has a substantial beneficial interest in the trust and the interest would be adversely affected by the exercise of the power held by the settlor to revoke or terminate all or part of the trust; in this paragraph, "revoke or terminate" does not include a power to veto a distribution from the trust, a testamentary nongeneral [SPECIAL] power of appointment or similar power, or the right to receive a distribution of income, principal [CORPUS], or both in the discretion of a person, including a trustee, other than the settlor, or a right to receive a distribution of income or principal under (3)(A) or (B) of this subsection;

(3) the trust requires that all or a part of the trust's income or principal, or both, must be distributed to the settlor; however, this paragraph does not apply to a settlor's right to receive

(A) income or principal from a charitable remainder
annuity trust or charitable remainder unitrust; in this subparagraph, "charitable remainder annuity trust" and "charitable remainder unitrust" have the meanings given in 26 U.S.C. 664 (Internal Revenue Code) as that section reads on the effective date of this bill section and as it may be amended;

(B) a percentage of the value of the trust each year as
determined from time to time under the trust instrument, but not exceeding the amount that may be defined as income under AS 13.38 or under 26 U.S.C. 643(b) (Internal Revenue Code) as that subsection reads on the effective date of this bill section and as it may be amended; or

(4) at the time of the transfer, the settlor is in default by 30 or more days of making a payment due under a child support judgment or order.

* Sec. 4. AS 34.40.110(c) is amended to read:

(c) The satisfaction of a claim under (b)(1) - (4) of this section is limited to that part of the trust for [TO] which a transfer restriction is not allowed under (b)(1) - (4) of this section, and an attachment or other order may not be made against the trustee with respect to a beneficiary's interest in the trust or against property that is subject to a transfer restriction, except to the extent that a transfer restriction is determined not to be allowed under (b)(1) - (4) of this section [APPLIES].

* Sec. 5. AS 34.40.110(d) is amended to read:

(d) A cause of action or claim for relief with respect to a fraudulent transfer of a settlor's assets under (b)(1) of this section [, OR UNDER OTHER LAW,] is extinguished unless the action under (b)(1) of this section is brought by a creditor of the settlor [AS TO A PERSON] who

(1) is a creditor of the settlor before the settlor's assets are
transferred to the trust, and the action under (b)(1) of this section is brought [WHEN THE TRUST IS CREATED,] within the later of

(A) four years after the transfer is made; or

(B) one year after the transfer is or reasonably could have been discovered by the creditor if the creditor

(i) can demonstrate, by a preponderance of the evidence, that the creditor asserted a specific claim against the settlor before the transfer; or

(ii) files another action, other than an action under

(b)(1) of this section, against the settlor that asserts a claim based on an act or omission of the settlor that occurred before the transfer, and the action described in this sub-subparagraph is filed within four years after the transfer [PERSON]; or

(2) becomes a creditor subsequent to the transfer into trust, and the action under (b)(1) of this section is brought within four years after the transfer is made.

* Sec. 6. AS 34.40.110 is amended by adding new subsections to read:

(g) A transfer restriction allowed under (a) of this section and enforceable under (b) of this section applies to a settlor who is also a beneficiary of the trust even if the settlor serves as a co-trustee or as an advisor to the trustee under AS 13.36.375 if the settlor does not have a trustee power over discretionary distributions.

(h) A transfer restriction allowed under (a) of this section and enforceable under (b) of this section applies to a beneficiary who is not the settlor of the trust, whether or not the beneficiary serves as a sole trustee, a co-trustee, or an advisor to the trustee under AS 13.36.375.

(i) A transfer restriction is allowed under (a) of this section and is enforceable under (b) of this section even if a settlor has the authority under the terms of the trust instrument to appoint a trust protector under AS 13.36.370 or an advisor to the trustee under AS 13.36.375.

(j) A settlor whose beneficial interest in a trust is subject to a transfer restriction that is allowed under (a) of this section may not benefit from, direct a distribution of, or use trust property except as may be stated in the trust instrument. An agreement or understanding, express or implied, between the settlor and the trustee that attempts to grant or permit the retention of greater rights or authority than is stated in the trust instrument is void.

(k) A settlor who creates a trust that names the settlor as a beneficiary and whose beneficial interest is subject to a transfer restriction allowed under (a) of this section shall sign a sworn affidavit before the settlor transfers assets to the trust. The affidavit must state that

(1) the settlor has full right, title, and authority to transfer the assets to the trust;

(2) the transfer of the assets to the trust will not render the settlor insolvent;

(3) the settlor does not intend to defraud a creditor by transferring the assets to the trust;

(4) the settlor does not have any pending or threatened court actions against the settlor, except for those court actions identified by the settlor on an attachment to the affidavit;

(5) the settlor is not involved in any administrative proceedings, except for those administrative proceedings identified on an attachment to the affidavit;

(6) at the time of the transfer of the assets to the trust, the settlor is not currently in default of a child support obligation by more than 30 days;

(7) the settlor does not contemplate filing for relief under the provisions of 11 U.S.C. (Bankruptcy Code); and

(8) the assets being transferred to the trust were not derived from unlawful activities.

* Sec. 7. AS 34.40 is amended by adding a new section to read:

Sec. 34.40.115. Subjecting appointed property to claims of donee's creditor. The property that a donee of a power of appointment is authorized to appoint is not subject to the claims of the creditors of the donee except to the extent that a donee of an inter vivos or testamentary power of appointment

(1) is permitted by the donor of the power to appoint the property to
the donee, the creditors of the donee, the donee's estate, or the creditors of the donee's estate; and

(2) effectively exercises the power of appointment in favor of the donee, the creditors of the donee, the donee's estate, or the creditors of the donee's estate.

* Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to read:

APPLICABILITY. (a) Except as provided by (b) of this section, this Act applies to a trust regardless of whether the trust was created before, on, or after the effective date of the applicable section of this Act.

(b) AS 34.40.110(k), enacted by sec. 6 of this Act, applies to a trust only if the trust is created on or after the effective date of this Act.