Frequently the settlor of a trust will not desire his or her children or grandchildren to know that a trust has been created for their benefit. The settlor may not want the beneficiaries to be negatively influenced by the fact that substantial assets will be available to them in the future. This desire for secrecy must be balanced against the need for accountability of the trustee with respect to the administration of the trust. Alaska has enacted the following compromise. The general rules in Alaska are that within 30 days of acceptance of a trust, the trustee must inform all of the current beneficiaries of the existence of the trust, and upon request, furnish them with an annual accounting. New legislation now allows a settlor to exempt the trustee from these duties. This exemption may not exceed the settlor's lifetime or a judicial determination of the settlor's incapacity.

In the same legislation, the Alaska legislature has enacted flexible methods for the reformation, modification, and termination of irrevocable trusts. A trustee, settlor, or beneficiary may initiate the proceedings to modify or terminate an irrevocable trust if, because of circumstances not anticipated by the settlor, modification or termination would substantially further the settlor's purposes in creating the trust. If the result is termination, then the trust property shall be distributed in accordance with the settlor's probable intention.

Similarly, the same parties may petition the court to reform the terms of an irrevocable trust, even if the trust instrument is not ambiguous, to conform to the settlor's intention if the failure to conform was due to a mistake of fact or law. Such mistake may be in the trust document, or may be in the inducement to create the trust. The settlor's intent must be established by clear and convincing evidence. The court may consider all evidence, including direct evidence contradicting the plain meaning of the trust instrument.

A court is given authority to construe the terms of a trust in order to achieve the settlor's tax objectives. Similarly, on petition by a trustee, settlor, or beneficiary, a court may modify the terms of an irrevocable trust to achieve the settlor's tax objectives in a manner that does not violate the settlor's probable intent. The court may order that the modification operate retroactively.

A court may modify or terminate an irrevocable trust if all of the beneficiaries consent and if continuation of the trust on its existing terms is not necessary to further a material purpose of the trust. However, the court, in its discretion, may determine that the reason for modifying or terminating the trust under the circumstances outweighs the interest in accomplishing the material purposes of the trust. The beneficiaries who must consent are limited to those who are presently entitled or eligible to receive a distribution of trust income or principal, or would be entitled to such a distribution if the trust were terminated. The lack of consent of a future or contingent beneficiary will be disregarded if the court determines that the rights of such a beneficiary will not be significantly impaired. The statute provides an express prohibition against modifying or terminating a self-settled discretionary spendthrift trust.

Finally, uneconomical irrevocable trusts may be terminated by the trustee if the value of the trust property is less than $50,000, unless the trust instrument provides otherwise. Further, on petition by a trustee, settlor, or beneficiary, the court may modify or terminate an irrevocable non-charitble trust, or remove the trustee and appoint a different trustee, if the court determines that the value of the trust property is insufficient to justify the cost of administration. Upon termination, the trust property will be distributed in accordance with its settlor's probable intent.

The provisions relating to notification and accounting are found in AS 13.36.080. The new reformation, modification, and termination provisions have been added by AS 13.36.335 through .365.

Alaska Senate Bill 163 was passed by the Alaska Legislature on April 24, 2000, and was transmitted to the Governor. His signature is expected.