STETSON LAW 2019 SPECIAL NEEDS TRUSTS NATIONAL … · 2019-10-08 · stetson law 2019 special needs...

STETSON LAW 2019 SPECIAL NEEDS TRUSTS NATIONAL CONFERENCE

OCTOBER 16-18, 2019

MY FIRST DECANTING: HOW I LEARNED TO LET THE WINE AND THE TRUST BREATHE

KATHERINE N. BARR, ESQ. SIROTE & PERMUTT, P.C. BIRMINGHAM, ALABAMA

[email protected] 205-930-5147

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I. Introduction.

I have always loved decanters. The crystal bottles with cut glass stoppers holding wine

or other spirits, usually accompanied by beautiful glasses, are a staple in every

television lawyer's office. Think Harvey Spector in Suits. I never thought I would be

decanting as part of my legal practice, however. Thanks to the new Uniform Trust

Decanting Act (hereinafter referred to as "UTDA"),1 and a client with a broken special

needs trust, I have now "volatized the esters" and been initiated into the exciting world

of trust decanting.

The handy Dictionary App that came pre-installed on my iPhone defines a decanter as

"a vessel, usually an ornamental glass bottle, for holding and serving wine, brandy, or

the like." It defines decanting as "pouring wine or other liquid gently so as not to disturb

the sediment, to pour a liquid from one container to another." In the trust world, it has

been said that "[d]ecanting is the new 'sexy' that is earning its reputation because of the

flexibility and usefulness of its technique."2 Without question, one of the hottest issues

in today's trust law is decanting, and the UTDA gives special needs trust their own

section.3

II. Decanting Statutes and Common Law.

a. As of 2019, at least 25 states have trust decanting statutes include Alabama, Alaska,

Arizona, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky,

Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, New

1 www.uniformlaws.org. 2 Amy J. Fanzlaw, Modification of Irrevocable Trust, National Conference on Special Needs Planning and Special Needs Trusts, October 20, 2017, page 25. For an expansive discussion of the uses of decanting, see, Stewart E. Swerk, Trust Decanting: A Critical Perspective, 38 Cardozo L. Rev. 1993 (2017). 3 Jerry W. Beyer and Melissa J. Willms, Decanting is Not Just For Sommeliers, Estate Planning Studies, July 2014.

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York, North Carolina, Ohio, Rhode Island, South Carolina, South Dakota,

Tennessee, Texas, Virginia, Wisconsin, and Wyoming. Attorney Susan T. Bart of

Schiff Hardin in Chicago chaired the Uniform Law Commission's Drafting

Committee for the UTDA. She has compiled a valuable and publicly accessible

comprehensive summary of current state decanting laws that is available at

www.schiffhardin.com/insights/publications/2017/summaries-of-statedecanting-

statutes. (See Exhibit 1 for a recent list.)

b. In 1982, long before the release of UTDA by the Uniform Law Commission, New

York enacted the first decanting statute. Where a state has a decanting statute, the

state statute of the situs of the trust will apply. If the state having jurisdiction of the

trust does not have a decanting statute, a Trustee may check for common law

provisions on decanting or could consider moving the trust to a different

jurisdiction.

Before Alabama adopted the UTDA, I considered changing the situs of a special

needs trust from Alabama to Arizona, and having Robert Fleming serve as Trustee.

Arizona's decanting statute contained the flexibility needed to decant the trust to a

new one to change an important trust provision that was preventing the trust from

serving its purpose. The Trustee decided against changing the trustee who would

then possibly change the applicable state law to Arizona. In this situation, the

Trustee had discretion to distribute the Trust principal.

c. Very little case law exists on the propriety of a Trustee's exercise of the power to

decant. One case, Hodges v. Johnson, 170 N.H.470(2017), directly addresses the

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relationship between the Trustee's duties to the beneficiaries and the power to

decant to a trust that eliminates the interest of some of those beneficiaries.

III. Reasons to Use Decanting.

Decanting is useful to modify a trust or to fix a trust which has provisions that no longer

work to allow it to provide for the beneficiary as originally intended in the document.

Times change, needs change and laws change, as we all know. Where the trust

document does not have a specific provision allowing for a modification (e.g., change

of trustee, change of remainder beneficiary, change to allow for new laws or

regulations) decanting can help fix a problem. Gerry Beyers' and Melissa Willms' list

common reasons as:

Correcting a drafting mistake.

Clarifying ambiguities in the trust agreement.

Correcting trust provisions, due to mistake of law or fact, to conform to the

Grantor's intent.

Updating trust provisions to include changes in the law, including new Trustee

powers.

Changing situs for administrative provisions or tax savings.

Combining trusts for efficiency in administration.

Allowing for appointment of removal of trustee without Court approval.

Allowing for appointment of a special trustee for a limited time or purpose.

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Changing Trustee powers, such as investment options.

Transferring assets to a special needs trust.

Adapting to a change of circumstances of the beneficiary, such as substance

abuse and creditor or marital issues, including modifying distributions to delay

distribution of trust assets.

Adding a spendthrift provision.

Dividing a pot trust into separate share trusts.

Partitioning a trust for marital deduction or generation-skipping transfer tax

planning.4

An extensive commentary on the mechanics and potential uses of decanting can be found

at Farhad Aghdami and Daniel J. Durst, 'Decanting Comes of Age' (2/12/2018), available

at www.wdcepc.org/assets/Councils/Washington-DC/library/Decanting-trusts'outline-

Feb.2018.pdf.

4 Beyer, Decanting is Not Just For Sommeliers, pages 1-2, (2014). See also, Eisenberg, Uncontested Trust Modifications; Tips and Techniques, Dall. B. Probate Trust and Estate Law, Section 1 (April 23, 2013). See also, Wi.s Stat. Section 701.0418(4)(a) which provides for a nonexclusive list of 19 reasons for which decanting may be permissible.

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IV. My First Decanting.

a. Decanting is used in the special needs world when a trust beneficiary with a

disability might need to retain or acquire eligibility for government benefits. A

trust without the necessary special needs language and protections can be decanted

into a new trust having these provisions. Decanting is a popular option to make

needed adjustments because the Trustee is not necessarily required to get approval

from the Trust beneficiaries in order to decant. Only notice and a 60-day waiting

period is required of them. Of course, it is a plus if approval can be obtained, so

that a clean record can exist and any litigation risk diminished. I included consent

to decanting in the Waiver of 60-Day notice I prepared for the beneficiaries of the

trust to sign.

b. In my situation, the client had a child, approximately age 25, who was the sole

beneficiary during his lifetime of a totally discretionary trust (with one exception),

established by his grandparents. The Trust was prepared in 2005 by a firm that

knew a little about special needs trust planning (enough to know that the trust

needed to be totally discretionary), but not enough to know that a Crummey power

given to any beneficiary with a disability and receiving government benefits should

not be included. Only one of the Grantors, beneficiary's grandmother, was still

living. The three (3) sons of the Grantors were named as initial Trustees and were

all living. One of those of the sons was the father of the beneficiary, who was on

the autism spectrum and had a lifetime interest in the trust. The remainder

beneficiaries, who would receive the trust at the death of the beneficiary with a

disability, were the other children of the Trustee who was father of the lifetime

beneficiary. The parents of the 25-year-old beneficiary had never made application

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for SSI or any other benefits for him. A program became available in which the

beneficiary could participate only if he had Medicaid eligibility. He needed to

obtain SSI for this purpose. The Appendix to this outline contains the Decanting

Agreement and other documents that were used in connection with this decanting.

I will discuss each one of these documents (see Exhibit 2, Attachments 1 through

8-1 of this outline) in the context of the requirement under Alabama's UTDA.

The whole transaction involved many documents. We prepared the following:

1. A third party stand-alone special needs trust was prepared to receive the assets

decanted into it from the 2005 Trust. This trust would also be used in the

parents' estate plan to receive portions of their estates and as beneficiary of

insurance and retirement assets.

2. While not used in the decanting process, a self-settled special needs trust into

which the beneficiary's Uniform Transfers to Minors Act accounts could be

transferred. This required a Court Order since the beneficiary was now twenty-

five (25), and did not have the capacity to make the transfer himself.

3. A decanting agreement to be entered into by the three (3) original Trustees and

the Trustee of the new third-party trust.

4. Correspondence from me to the three (3) initial Trustees, the remaining Grantor,

and all of the three (3) remainder beneficiaries of the trust and the mother of the

beneficiary as his representative under Alabama law for purposes of signing the

agreement; and

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5. Waivers of the Sixty-Day Notice Period for each of the beneficiaries, including

the remainder beneficiaries.

V. Decision to Decant.

Having been a member of the Alabama Law Institute Committee that studied the UTDA, when

clients approached me with their interest to help their son obtain eligibility, and upon reviewing

the third-party SNT with a Crummey power, I naturally thought of decanting. The 2005 trust

had a Crummey power that had not ever been exercised and a few other words in the allowable

expenditures description that might be a problem. The trust was totally discretionary, however,

and stated it was established for the beneficiary's best interest. While there might have been

other options to reform the 2005 Trust, I wanted to try out the new statute and rely upon its

authority. A nonjudicial reformation would have been another possibility to correct the trust,

but with the beneficiary's eligibility for means-tested benefits at stake, and the possibility of

rejection of the non-judicial reformation of the trust by Social Security or Medicaid, the

decanting statute offered a solution to correct the trust without having to go to court.

VI. The Statute.

a. Alabama's UTDA is based on the Uniform Act as finalized by the Uniform Law

Commission. (Exhibit 3) The most critical provision of the Act permits a Trustee

who has the discretion to make principal distributions, authorization to decant an

irrevocable trust. As stated by Amy J. Fanzlaw, "[d]ecanting should be undertaken

not to disregard the settlor's intent, but to modify the trust to better effectuate the

settlor's broader purposes or the settlor's probable intent had the settlor anticipated

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the circumstances at the time of the decanting."5 In my situation, the Trustee of the

2005 Trust had the discretion to distribute principal and broad discretion that could

be interpreted to allow decanting for the purpose of modifying beneficial interests,

subject to certain restrictions. Qualified beneficiaries of the 2005 Trust were

entitled to notice so that they would be able to seek Court redress if any of them

believed the Trustees had breached their fiduciary duty in decanting. Section 13 of

the Alabama UTDA is entitled Trust for Beneficiary with Disability. It reads as

follows:

§ 19-3D-13. Trust for beneficiary with disability., AL ST § 19-3D-13

Code of Alabama Title 19. Fiduciaries and Trusts. (Refs & Annos) Chapter 3D. Alabama Uniform Trust Decanting Act. (Refs & Annos)

Ala. Code 1975 § 19-3D-13

§ 19-3D-13. Trust for beneficiary with a disability.

Effective: January 1, 2019 Currentness

a. In this section the following terms have the following meanings:

(1) BENEFICIARY WITH A DISABILITY. A beneficiary of a first trust

who the authorized fiduciary believes may qualify for governmental benefits based on disability, whether or not the beneficiary currently receives those benefits or is an individual who has been adjudicated or incapacitated.

(2) GOVERNMENTAL BENEFITS. Financial aid or services from a state, federal, or other public agency.

(3) SPECIAL-NEEDS FIDUCIARY. With respect to a trust that has a beneficiary with a disability:

5 Fanzlaw, National Conference on Special Needs Planning and Special Needs Trust, page 27 (2017).

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(A) A trustee other fiduciary, other than a settlor, that has discretion to distribute part or all of the principal of a first trust to one or more current beneficiaries;

(B) If no trustee or fiduciary has discretion under subparagraph (a), a trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the income of the first trust to one or more current beneficiaries; or

(C) If no trustee or fiduciary has discretion under subparagraph (A) and (B), a trustee or other fiduciary, other than settlor, that is required to distribute part or all of the income or principal of the first trust to one or more current beneficiaries.

(4) SPECIAL-NEEDS TRUST. A trust the trustee believes would not be

considered a resource for purposes of determining whether a beneficiary with a disability is eligible for governmental benefits.

b. A special-needs fiduciary may exercise the decanting power under Section

19-3D-11 over the principal of a first trust as if the fiduciary had authority to distribute principal to a beneficiary with a disability subject to expanded distributive discretion if: (1) a second trust is a special-needs trust that benefits the beneficiary with

a disability; and

(2) the special-needs fiduciary determines that exercise of the decanting power will further the purposes of the first trust.

c. In an exercise of the decanting power under this section, the following rules

apply: (1) Notwithstanding Section 19-3D-11, the interest in the second trust of a

beneficiary with a disability may:

(A) Be a pooled trust as defined by Medicaid law for the benefit of the beneficiary under 42 U.S.C. Section 1396p(d)(4)(C), as amended; or

(B) Contain payback provisions complying with reimbursement

requirements of Medicaid law under 42 U.S.C. Section 1396p(d)(4)(A), as amended.

(2) Section 19-3D-11(c)(3) does not apply to the interests of the

beneficiary with a disability. (3) Except as affected by any change in the interests of the beneficiary with

a disability, the second trust, or if there are two or more second trusts,

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the second trusts in aggregate, must grant each beneficiary of the first trust beneficial interests in the second trusts which are substantially similar to he beneficiary's beneficial interests in the first trust.

Credits (Act 2018-519, §13.) Editor's Notes

ALABAMA COMMENT

Comparison to Uniform Act. This section is identical to Section 13 of the Uniform Trust Decanting Act (2015) except for the replacement of the words "special need fiduciary" with the words "authorized fiduciary," and the addition of the words "or incapacitated" in subjection (a). Ala. Code 1975 §19-3D-13; AL ST §19-3D-13 Current through Act 2019-540.

b. The drafting committee for Alabama's version of the UTDA noted that broad

parameters regarding a beneficiary with special needs apply. Specifically, the

beneficiary with a disability does not need to be currently receiving benefits or even

necessarily qualify for such benefits but for the terms of the current trust. In the

situation I was correcting, the beneficiary needed to qualify for benefits but likely

would not because his special needs trust had a crummey power. Even though the

trust had been funded only one time when it was set up, in this day's environment,

we did not want to risk a long review and felt more comfortable with a statutory

approach for this correction. The members of the committee noted that decanting,

for purposes of this section and others, must further the purposes of the first trust.6

VII. Drafting and Administration Issues.

a. My first follow-up matter concerned whether a new Tax ID number should be

obtained for the second trust. Alabama's UTDA does not answer this question.

Some attorneys do not think that a new trust created for a decanting requires an EIN

6 Ala. Uniform Trust Code §13(b)(2).

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because the tax attributes transfer with the decanted assets upon distribution to the

second trust. However, because the decanting statutes often describe the new trust

as the "second trust," implying that the second trust is a separate entity from the

first trust, others believe that a new EIN for the second trust is appropriate. Of

course, this would not apply if the first trust were a grantor trust using the Grantor's

Social Security Number for its EIN and the second trust was also a Grantor Trust

with the same Grantor. Unlikely for a decanting to be needed in that situation,

however.

b. Rule Against Perpetuities.

Another potential problem, at least in some states, involves the rule against

perpetuities. Make sure that the second trust agreement either states how long the

assets from the first trust may be held in the second trust, referencing the date of

the creation of the first trust, or (2) state generally that assets passing into the second

trust from another irrevocable trust can be held in trust as long as permitted by the

governing law of the state from which the assets came. Either of these adjustments

will help avoid the Delaware tax trap and adverse GST consequences.7

c. Notices to Beneficiaries Required But Not Consent.

The state statute being followed determines who must be given notice of the

decanting. The notice to the beneficiaries of the first trust should be drafted

carefully to avoid any potential gift tax issues that would arise from an argument

that the beneficiaries are consenting to the decanting. It is common for legal

advisors to want the beneficiaries of the first trust to sign a Waiver of the sixty (60)

day statutory waiting period the UTDA requires before the decanting can become

7 SEE, IRC § 25-14(d); Tres Reg. §§ 26.2601-1(b)(1) and 26.2601-(1)(b)(4).

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effective. For the protection of the Trustee of the first trust, as well for cost

efficiency, this also can include, a release of the Trustee by the beneficiaries of the

first trust and a final accounting. Note that while notice must be provided by the

trustees (present and primary remainder beneficiaries), the statute does not require

consent. Legal advisors will need to determine the exact information the

beneficiaries need to see regarding the trusts. This helps to avoid problems within

the family. The logistics of meeting all of the implementation requirements for

decanting often lengthens the process, as it did for me.

d. Second Trust Can Absolve First Trust Liabilities.

In addition to preparing the second trust, consider having the second trust assume

the liabilities of the first trust, if any. To protect the Trustee who is implementing

the decanting, consider an indemnification of that Trustee by the Trustee of the

second trust.8

VIII. Conclusion.

With the special chapter specifically for beneficiaries with a disability, the UTDA, as

well as other decanting statutes adopted by states and recognized in the common law,

are powerful trust administration tools. The work involved to follow the statutory

requirements is well worth it to rectify an old trust that cannot meet its purposes because

of circumstances not anticipated or provided for in an irrevocable trust. Decanting is a

useful and safer alternative to a judicial or a nonjudicial modification of an outdated or

broken irrevocable trust.

8 Brandon A.S. Ross, Practical Considerations for Decanting, Probate and Property, March/April 2016.

Exhibit 1, Page 1 DOCSBHM\2291476\1

STATE DECANTING STATUTES PASSED OR PROPOSED

As of August 20, 20181 compiled by M. Patricia Culler Hahn Loeser & Parks LLP, Cleveland, OH

State Statutory Cite Effective

Date/Status

1. Alabama HB 163 https://openstates.org/al/bills/2018rs/HB163/ 1/1/19

2. Alaska Alaska Stat. §§ 13.36.157-13.36.159 (original § 13.36.157 repealed 9/9/13 and replaced with new 13 36 157 159)

9/15/98; amended 2006, 9/9/13

3. Arizona Ariz. Rev. Stat. § 14-10819 9/30/09; amended 7/20/11

4. Colorado CRS 15-16-901, et seq. 8/10/2016

5. Delaware 12 Del. Code § 3528 6/30/03; amended 6/24/04, 6/27/06, 7/5/07, 7/6/09, 7/13/11, 8/6/13, 8/1/14, 8/1/15

6. Florida Fla. Stat. § 736.04117 1/1/07

7. Georgia HB 121; Ga. Stat. §53-12-62 http://www.legis.ga.gov/Legislation/20172018/177916.pdf

7/1/2018

8. Illinois 760 Ill. Comp. Stat. 5/§ 16.4 1/1/13; amended 7/27/15

9. Indiana Ind. Code 30-4-3-36 7/1/10; amended 7/1/14

10. Kentucky Ky. Rev. Stat. § 386.175 7/11/12; amended 7/15/14

11. Michigan Mich. Comp. Laws § 700.7820a Mich. Comp. Laws § 556.115a Mich Comp Laws § 700 7103 (definitions)

12/28/12

12. Minnesota Minn. Stat. §502.851 1/1/16

13. Missouri Mo. Rev. Stat. § 456.4-419 8/28/11

14. Nevada Nev. Rev. Stat. 163.556 10/1/09; amended 10/1/11, 10/1/15

15. New Hampshire

N.H. Rev. Stat. § 564-B:4-418 9/9/08; amended 7/1/14, 10/1/15

1 The author has attempted to make this list as accurate and as current as possible with the assistance of other fellows of the American College of Trust and Estate Counsel (ACTEC). This most recent version may not include updates for amendments to existing statutes since 1/1/18. Other statutes may be under consideration. Thanks to Susan Bart of Schiff Hardin LLP for 2017-2018 updates.


State Statutory Cite Effective Date/Status

16. New Mexico Uniform Trust Decanting Act (first state to pass it) N.M.S. §§46-12-101 through 46-12 129

1/1/2017

17. New York N.Y. Est. Powers & Trusts § 10-6.6(b)-(s) 7/24/92; amended 8/17/11, 11/13/13, 7/22/14, 11/21/15

18. North Carolina

N.C. Gen. Stat. 36C-8B-1 through 36C-8B-26 10/1/09; amended 7/20/10, 6/12/13, 10/1/15, 7/18/17

19. Ohio Ohio Rev. Code § 5808.18 3/22/12; amended 3/27/13

20. Rhode Island R.I. Gen. Laws § 18-4-31. 6/23/12; amended 7/15/13

21. South Carolina

S.C. Code §62-7-816A 1/1/14

22. South Dakota S.D. Codified Laws §§ 55-2-15 through 55-2-21 3/5/07; amended 2008, 2008, 2009, 2011, 2013

23. Tennessee Tenn. Code § 35-15-816(b)(27) 7/1/04; amended 7/1/13

24. Texas Texas Prop Code §§112.071-112.087 9/1/13

25. Virginia Va. Code § 64.2-779.1 through 64.2-779.25 7/1/12; amended 10/1/12, 3/27/14, 7/1/17

26. Washington RCW 11.107.010-.080; http://app.leg.wa.gov/RCW/default.aspx?cite=11.107

7/23/17

27. Wisconsin Wisconsin Trust Code §701.0418 7/1/14

28. Wyoming W.S. 4-10-816(a)(xxviii) 7/1/13; amended 7/1/15

Exhibit 2, Page 1 Attachment 1, 3-1, 4-1 and 5-1

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DECANTING AGREEMENT

This Agreement is entered into this _______ day of _________________, 2019, among the Trustees now serving of the 2005 Trust for Stanley Doe dated January 1, 2005, established by James Doe and Elsie Doe (the "First Trust") and the Trustee of the Stanley Doe 2019 Trust dated the 2nd day of January, 2019, established by Jerry Doe (the "Second Trust"); and

WITNESSETH:

WHEREAS, the Trustees of the First Trust now serving are Jerry Doe, Lynn Doe, and Chris Doe; and the Trustee of the Second Trust is Jerry Doe; and

WHEREAS, the First Trust and the Second Trust are both discretionary trusts for the sole benefit of Stanley Doe ("Stanley") (who has a disability) during his lifetime, and upon his death pass to identical remainder beneficiaries; and

WHEREAS, the First Trust and the Second Trust both provide that the Settlors' intent is for the Trustees of such Trusts, in their sole and absolute discretion, to use the income and principal of such Trusts for Stanley in a manner that preserves and does not replace any government benefits for which he might be eligible from time to time; and

WHEREAS, the First Trust contains some provisions that are no longer allowed for "means-tested" government benefits and the Second Trust contains updated terms that preserve eligibility for such government benefits for Stanley; and

WHEREAS, the First Trust and the Second Trust, copies of which are attached hereto as Exhibits A and B (not included here) are both governed by the laws of the State of Alabama; and

WHEREAS, there are no outstanding exercises of any power of appointment provided for in the First Trust; and

WHEREAS, Ala. Code §19-3D-1, et seq. (the "Decanting Act") became effective January 1, 2019, and the Trustees of the First Trust desire to exercise their power under such Act to invade the principal of the First Trust by appointing all of it to Jerry Doe, as Trustee of the Second Trust, to be administered under its terms; and

WHEREAS, all persons required to receive notice of the exercise of the decanting power as set forth in §19-3D-7 of the Decanting Act (Exhibit C hereto lists such persons), have been provided with notice of the intent of the Trustees of the First Trust and all have provided written notice pursuant to Ala. Code §19-3D-7(f), of their respective waiver of the 60-day waiting period;

NOW THEREFORE, pursuant to §19-3D-11(b) and §19-3D-13 of the Decanting Act, in furtherance of their expanded discretionary distribution authority, the Trustees of the First Trust hereby unanimously exercise their power to invade the principal of such Trust by appointing all of its principal to Jerry Doe, as Trustee of the Second Trust, to be held, administered and distributed pursuant to the terms thereof, all of which is in accordance with the provisions of the Decanting Act.

This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, personal representatives, successors, and assigns.


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This Agreement shall be governed by and construed under the laws of the State of Alabama.

This Agreement may be executed in one or more counterparts and any Party hereto may execute any counterpart, each of which when executed (by copy or facsimile thereof) and delivered will be deemed to be an original and all of which, taken together, will be deemed to be but one and the same document.

This agreement will become effective upon the earlier of (a) sixty (60) days after all persons listed in Exhibit C hereto have received written notice of the intent of the Trustees of the First Trust or (b) the Trustees receipt of a written notice from each of the persons listed on Exhibit C hereto of their respective waivers of the sixty (60) day notice period.

TRUSTEE OF FIRST TRUST

____________________________________ Jerry Doe STATE OF ALABAMA ) COUNTY OF ___________ )

I, the undersigned, a Notary Public in and for the State of Alabama, County of ______________, hereby certify that Jerry Doe, whose name is signed to the foregoing document as Trustee of the 2005 Trust for Stanley Doe, dated _____________, 2005, and who is known to me, acknowledged before me on this day that, being informed of the contents of the document, he executed the same voluntarily on the day the same bears date.

Given under my hand and seal this _____ day of _____________________, 2019.

__________________________________________ Notary Public My Commission Expires:_____________________

[SEAL]


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____________________________________ Lynn Doe STATE OF ALABAMA ) COUNTY OF ___________ )

I, the undersigned, a Notary Public in and for the State of Alabama, County of ______________, hereby certify that Lynn Doe, whose name is signed to the foregoing document as Trustee of the 2005 Trust for Stanley Doe, dated ___________, 2005, and who is known to me, acknowledged before me on this day that, being informed of the contents of the document, she executed the same voluntarily on the day the same bears date.



[SEAL]


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____________________________________ Chris Doe STATE OF ALABAMA ) COUNTY OF ___________ )

I, the undersigned, a Notary Public in and for the State of Alabama, County of ______________, hereby certify that Chris Doe, whose name is signed to the foregoing document as Trustee of the 2005 Trust for Stanley Doe, dated _____________, 2005, and who is known to me, acknowledged before me on this day that, being informed of the contents of the document, he executed the same voluntarily on the day the same bears date.



[SEAL]


DOCSBHM\2291476\1

TRUSTEE OF THE SECOND TRUST ____________________________________ Jerry Doe STATE OF ALABAMA ) COUNTY OF ___________ )

I, the undersigned, a Notary Public in and for the State of Alabama, County of ______________, hereby certify that Jerry Doe, whose name is signed to the foregoing document as Trustee of the Stanley Doe 2019 Trust, dated February 20, 2019, and who is known to me, acknowledged before me on this day that, being informed of the contents of the document, he executed the same voluntarily on the day the same bears date.



[SEAL


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EXHIBIT C to DECANTING AGREEMENT

Correspondence to Settlor, Trustees and Beneficiaries and Signed Waivers of the 60-day Period:

Attachment 1: The Decanting Agreement Attachment 2: Elsie Doe - Correspondence

(Settlor of the First Trust) Attachment 3: Jerry Doe

(Trustee of First Trust and Second Trust, father and guardian of Stanley Doe, a holder of right to designate successor Trustee of First Trust, Settlor of Second Trust.) Mary Doe (Parent and guardian of Stanley Doe, who is Current Beneficiary of the First Trust and Second Trusts.)

Attachment 3-1: The Decanting Agreement Attachment 3-2: Notice of Intent to Decant Trust Principal Attachment 3-3: Stanley Doe by Mary Doe

(Beneficiary of First and Second Trust and holder of a presently exercisable power of appointment for both Trusts and Waiver of 60-Day Notice Period.

Attachment 4: Lynn Doe

(Trustee of the First Trust and holder of right to designate successor trustee of First Trust)

Attachment 4-1: The Decanting Agreement. Attachment 4-2: Notice of Intent to Decan Trust Principal. Attachment 5: Chris Doe

(Trustee of the First Trust and holder of right to designate successor trustee of First Trust)

Attachment 5-1: The Decanting Agreement. Attachment 5-2: Notice of Intent to Decant Trust Principal. Attachment 6: Samantha Doe

(Qualified Beneficiary of First Trust and holder of a right to Redesignate Trustee of Second Trust.)

Attachment 6-1: Waiver of 60-Day Notice Period.


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Attachment 7: Richard Rich (Sibling of Stanley Doe and contingent remainder beneficiary of First Trust and Second Trust.)

Attachment 7-1: Waiver of 60-Day Notice Period. Attachment 8: Rebecca Rich

(Sibling of Stanley Doe and contingent remainder beneficiary of First Trust and Second Trust.)

Attachment 8-1: Waiver of 60-Day Notice Period.

Exhibit 2, Page 8 Attachment 2

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Correspondence to Settlor of First Trust

Nothing to be Signed by Trust Settlor March 5, 2019

PERSONAL & CONFIDENTIAL

Ms. Elsie Doe _________________ _________________

Re: Notice of the Intent of the Trustees of the 2005 Trust for Stanley Doe (the “First Trust”) to Decant

Dear Mrs. Doe:

I am writing to you in your capacity as a Settlor of the "First Trust," as described above. The First Trust benefits Stanley Doe and is intended to be an excluded resource for his eligibility for government benefits. However, in the last fifteen years since the First Trust was established, some of the requirements have changed in order for a trust for the benefit of a person with a disability to be excluded from counting as a resource. Alabama has a new statute (the "Decanting Act") that became effective January 1, 2019, which allows the Trustees of a trust to "decant" its contents into a new trust without going to court if certain requirements are met. The Trustees of the First Trust now want to use the new statute to move the assets in the First Trust to a new trust for the benefit of Stanley Doe, with updated provisions that will qualify as an exempt resource. The Decanting Act requires each person living who is a beneficiary (primary or contingent), a Settlor, or a Trustee of the old trust or new trust, to be given written notice of the proposed transaction. I have attached a Notice of Intent to Decant Trust Principal, a copy of the First Trust, a copy of the new trust, a Decanting Agreement to be signed by all Trustees of these two trusts, and a Waiver of the Sixty-Day Waiting Period that is otherwise required prior to the transfer. With one exception, the new trust has the same beneficiaries as the old trust. Your son, Jerry Doe is the sole Trustee of the new trust instead of the three Trustees provided for in the First Trust. I would appreciate your signing the attached Waiver and Consent in front of a notary as soon as possible and sending it to Jerry Doe. This will allow the transfer of trust principal to occur before the end of a sixty (60) day notice period. Please do not hesitate to call me or Jerry Doe with any questions you may have. You should send your Waiver to Jerry at your earliest convenience. Very truly yours,

John Smith FOR THE FIRM JS/krs Enclosures


DOCSBHM\2291476\1

Correspondence to parents of Stanley in their

capacities as Trustee, Settlor, holder of a Power to Appoint, and as parents of Stanley

March 5, 2019


Mr. and Mrs. Jerry Doe __________________ __________________

Re: Notice of Intent of the Trustees of the 2005 Trust for Stanley Doe (the “First Trust”) to Decant

Dear Mary and Jerry:

I am writing to you both in your various capacities as Trustee, Settlor, holder of a power of appointment, and as Stanley's parents and natural guardian. The First Trust, as described above, benefits Stanley and is intended to be an excluded resource for government benefit purposes. However, in the last fifteen years since the First Trust was established, some of the requirements have changed in order for a trust for the benefit of a person with a disability to be excluded from counting as a resource for "means-tested" benefits. Alabama has a new statute (the "Decanting Act") that became effective January 1, 2019, which allows the Trustees of a trust to "decant" its contents into a new trust without going to court if certain requirements are met. The Trustees of the First Trust now want to use the new statute to move the assets in the First Trust to a new trust for the benefit of Stanley, with updated provisions that will qualify as an exempt resource and not count against the resource limit. The Decanting Act requires each person living who is a beneficiary (primary or contingent), a Settlor, or a Trustee of the old trust or the new trust, to be given written notice of the proposed transaction. I have attached a Notice of Intent to Decant Trust Principal, a copy of the First Trust, a copy of the new trust, a Decanting Agreement to be signed by all Trustees of these two trusts, and a Waiver of the Sixty-Day Waiting Period that is otherwise required prior to the transfer. With one exception, the new trust has the same beneficiaries as the old trust. Mr. Jerry Doe is the sole Trustee of the new trust instead of the three Trustees provided for in the First Trust. I would appreciate your signing the attached Waiver and Consent in front of a notary as soon as possible. This will allow the transfer of trust principal to occur before the end of a sixty (60) day notice period.


DOCSBHM\2291476\1

Please do not hesitate to call me with any questions you may have. I have requested that the individuals listed on Exhibit C to the Decanting Agreement send their signed Waivers to you, Jerry, at their earliest convenience. Very truly yours,

John Smith FOR THE FIRM

JS/krs Enclosure

Exhibit 2, Page 11 Attachment 3-2, 4-2, and 5-2 DOCSBHM\2291476\1

NOTICE OF INTENT TO

DECANT TRUST PRINCIPAL

This notice dated the _______ day of ___________________, 2019, is delivered to you as either a primary lifetime beneficiary, "Qualified" remainder beneficiary, contingent remainder beneficiary, settlor or trustee of one or more of the following trusts:

The 2005 Trust for Stanley Doe dated January 1, 2005, established by James and Elise Doe, with Jerry Doe, Lynn Doe and Chris Doe, as co-Trustees (the "First Trust").

The Stanley Doe 2019 Trust dated the 2nd day of January, 2019, established by Jerry Doe, as Grantor and Trustee (the "Second Trust").

As required by Ala. Code §19-3D-7, the Trustees of the First Trust hereby give notice of their intent to exercise their expanded discretionary authority under Ala. Code §19-3D-1, et seq., to invade the principal of the First Trust and appoint it to Jerry Doe as Trustee of the Second Trust, to be held, administered and distributed pursuant to the terms of the Second Trust.

Any objection or question with regard to the proposed transfer should be directed to any one or more of the Trustees of the First Trust no later than sixty (60) days from your receipt of this Notice.

TRUSTEES OF THE FIRST TRUST

____________________________________ Jerry Doe ____________________________________ Lynn Doe ____________________________________ Chris Doe

Exhibit 2, Page 12 Attachment 3-3 DOCSBHM\2291476\1

WAIVER AND CONSENT BY REPRESENTATIVE OF STANLEY DOE

WAIVER OF SIXTY-DAY NOTICE PERIOD AND CONSENT TO EXERCISE OF POWER TO

DECANT PRINCIPAL OF THE TRUST FOR STANLEY DOE

DATED JANUARY 1, 2005

WHEREAS, the undersigned is a "Qualified Beneficiary," as defined in Ala. Code §19-3D-2(20), under the Trust for Stanley Doe dated January 1, 2005 (hereinafter the "First Trust"); and

WHEREAS, the undersigned has received notice that Jerry Doe, Lynn Doe, and Chris Doe, as Trustees of the First Trust, intend to act under Ala. Code §19-3D-11 and §19-3D-13 of Alabama's new trust decanting statute to appoint all of the principal of the First Trust to Jerry Doe, as Trustee of the Stanley Doe 2019 Trust dated February 20, 2019 (hereinafter the "Second Trust") to be held, administered, and distributed pursuant to the terms thereof; and

WHEREAS, as provided for in Ala. Code §19-3D-7(f), the undersigned hereby waives the sixty day notice period and thereby allows the Trustees to decant all principal of the First Trust at any time following delivery to the undersigned of this notice, which is required under Ala. Code §19-3D-7.

NOW THEREFORE, the undersigned hereby waives the sixty-day notice period and consents to the proposed transfer.

____________________________________ Mary Doe, as parent and Guardian of Stanley Doe, who is the Current Beneficiary of the First Trust and the Second Trust.

STATE OF ALABAMA COUNTY OF _______________ I, the undersigned, a Notary Public in and for said County, in said State, hereby certify that Mary Doe, whose name is signed to the foregoing Agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the document, she executed the same voluntarily on the day the same bears date.

Given under my hand and seal this __________day of ______________________, 2019.


[SEAL]

Exhibit 2, Page 13 Attachment 4 DOCSBHM\2291476\1

CORRESPONDENCE TO TRUSTEE OF FIRST TRUST

March 5, 2019


Ms. Lynn Doe ________________ ________________


Dear Ms. Doe:

I am writing to you as Trustee of the Trust described above. The First Trust benefits Stanley Doe and is intended to be an excluded resource for his eligibility for government benefits. However, in the last fifteen years since the First Trust was established, some of the requirements have changed in order for a trust for the benefit of a person with a disability to be excluded from counting as a resource. Alabama has a new statute (the "Decanting Act") that became effective January 1, 2019, which allows the Trustees of a trust to "decant" its contents into a new trust without going to court if certain requirements are met. The Trustees of the First Trust can use the new statute to move the assets in the First Trust to a new trust for the benefit of Stanley Doe, with updated provisions that will qualify as an exempt resource. The Decanting Act requires each person living who is a beneficiary (primary or contingent), a Settlor, or a Trustee of the old trust or new trust, to be given written notice of the proposed transaction.I have attached a Notice of Intent to Decant Trust Principal, a copy of the First Trust, a copy of the new trust and a Decanting Agreement to be signed by all Trustees of these two trusts. With one exception, the new trust has the same beneficiaries as the old trust. Jerry Doe is the sole Trustee of the new trust instead of the three Trustees provided for in the First Trust. Please do not hesitate to call me or Jerry Doe with any questions you may have. You should send your signed Waiver to Jerry at your earliest convenience. Very truly yours,


JS/krs Enclosures


CORRESPONDENCE TO TRUSTEE OF FIRST TRUST

March 5, 2019


Mr. Chris Doe ________________ ________________


Dear Mr. Doe:

I am writing to you as Trustee of the Trust described above. The First Trust benefits Stanley Doe and is intended to be an excluded resource for his eligibility for government benefits. However, in the last fifteen years since the First Trust was established, some of the requirements have changed in order for a trust for the benefit of a person with a disability to be excluded from counting as a resource. Alabama has a new statute (the "Decanting Act") that became effective January 1, 2019, which allows the Trustees of a trust to "decant" its contents into a new trust without going to court if certain requirements are met. The Trustees of the First Trust can use the new statute to move the assets in the First Trust to a new trust for the benefit of Stanley Doe, with updated provisions that will qualify as an exempt resource. The Decanting Act requires each person living who is a beneficiary (primary or contingent), a Settlor, or a Trustee of the old trust or new trust, to be given written notice of the proposed transaction. I have attached a Notice of Intent to Decant Trust Principal, a copy of the First Trust, a copy of the new trust and a Decanting Agreement to be signed by all Trustees of these two trusts. With one exception, the new trust has the same beneficiaries as the old trust. Jerry Doe is the sole Trustee of the new trust instead of the three Trustees provided for in the First Trust. Please do not hesitate to call me or Jerry Doe with any questions you may have. You should send your signed Waiver to Jerry at your earliest convenience. Very truly yours,


JS/krs Enclosures


CORRESPONDENCE TO REMAINDER BENEFICIARY

AND HOLDER OF A POWER TO REDESIGNATE TRUSTEE

March 5, 2019


Ms. Samantha Doe _______________________ _______________________


Dear Ms. Doe:

I am writing to you in your separate capacities as beneficiary and holder of a right to redesignate the Trustee of a trust for Stanley. The First Trust, as described above, benefits Stanley Doe, and is intended to be an excluded resource for his eligibility for government benefits. However, in the last fifteen years since the First Trust was established, some of the requirements have changed in order for a trust for the benefit of a person with a disability to be excluded from counting as a resource. Alabama has a new statute (the "Decanting Act") that became effective January 1, 2019, which allows the Trustees of a trust to "decant" its contents into a new trust without going to court if certain requirements are met. The Trustees of the First Trust now want to use the new statute to move the assets in the First Trust to a new trust for the benefit of Stanley, with updated provisions that will qualify as an exempt resource. The Decanting Act requires each person living who is a beneficiary (primary or contingent), a Settlor, or a Trustee of the old trust or new trust, to be given written notice of the proposed transaction. I have attached a Notice of Intent to Decant Trust Principal, a copy of the First Trust, a copy of the new trust, a Decanting Agreement to be signed by all Trustees of these two trusts, and a Waiver of the Sixty-Day Waiting Period that is otherwise required prior to the transfer. With one exception, the new trust has the same beneficiaries as the old trust. Jerry Doe is the sole Trustee of the new trust instead of the three Trustees provided for in the First Trust. I would appreciate your signing the attached Waiver and Consent in front of a notary as soon as possible and sending it to Jerry Doe. This will allow the transfer of trust principal to occur earlier.


Please do not hesitate to call me or Jerry Doe with any questions you may have. You should send your signed Waiver to Jerry at your earliest convenience. Very truly yours,


JS/krs Enclosures


WAIVER AND CONSENT FOR REMAINDER BENEFICIARY

WAIVER OF SIXTY-DAY NOTICE PERIOD AND CONSENT TO EXERCISE OF POWER TO DECANT PRINCIPAL OF THE TRUST FOR STANLEY DOE



WHEREAS, the undersigned has received notice that Jerry Doe, Lynn Doe, and Chris Doe, as Trustees of the First Trust, intend to act under Ala. Code §19-3D-11 and §19-3D-13 of Alabama's new trust decanting statute to appoint all of the principal of the First Trust to Jerry Doe, as Trustee of the Stanley Doe 2019 Trust dated January 2, 2019 (hereinafter the "Second Trust") to be held, administered, and distributed pursuant to the terms thereof; and



____________________________________

Samantha Doe, individually, and as a Qualified Beneficiary of the First Trust and the Second Trust.

STATE OF ALABAMA COUNTY OF _______________ I, the undersigned, a Notary Public in and for said County, in said State, hereby certify that Samantha Doe, whose name is signed to the foregoing Agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the document, she executed the same voluntarily on the day the same bears date.



[SEAL]


CORRESPONDENCE TO CONTINGENT REMAINDER BENEFICIARY

OF FIRST TRUST AND AS REMAINDER BENEFICIARY OF SECOND TRUST

March 5, 2019


Mr. Richard Rich ___________________ ___________________


Dear Mr. Rich:

I am writing to you in your capacity as a contingent beneficiary of the First Trust, and as a remainder beneficiary of the new trust described below. The First Trust, as described above, benefits Stanley Doe and is intended to be an excluded resource for government benefit purposes. However, in the last fifteen years since the First Trust was established, some of the requirements have changed in order for a trust for the benefit of a person with a disability to be excluded from counting as a resource for "means-tested" benefits. Alabama has a new statute (the "Decanting Act") that became effective January 1, 2019, which allows the Trustees of a trust to "decant" its contents into a new trust without going to court if certain requirements are met. The Trustees of the First Trust now want to use the new statute to move the assets in the First Trust to a new trust for the benefit of Stanley, with updated provisions that will qualify as an exempt resource. The Decanting Act requires each person living who is a beneficiary (primary or contingent), a Settlor, or a Trustee of the old trust or the new trust, to be given written notice of the proposed transaction. I have attached a Notice of Intent to Decant Trust Principal, a copy of the First Trust, a copy of the new trust, a Decanting Agreement to be signed by all Trustees of these two trusts, and a Waiver of the Sixty-Day Waiting Period that is otherwise required prior to the transfer. With one exception, the new trust has the same beneficiaries as the old trust. Mr. Jerry Doe is the sole Trustee of the new trust instead of the three Trustees provided for in the First Trust. I would appreciate your signing the attached Waiver and Consent in front of a notary as soon as possible and sending it back to Jerry Doe. This will allow the transfer of trust principal to occur before the end of a sixty (60) day notice period.


Please do not hesitate to call me or Jerry Doe with any questions you may have. Very truly yours,


JS/krs Enclosures


WAIVER OF SIXTY-DAY NOTICE PERIOD AND CONSENT TO EXERCISE OF POWER TO

DECANT PRINCIPAL OF THE TRUST FOR STANLEY DOE






____________________________________

Richard Rich, individually, and as a Qualified Beneficiary of the First Trust and the Second Trust.

STATE OF ALABAMA COUNTY OF _______________ I, the undersigned, a Notary Public in and for said County, in said State, hereby certify that Richard Rich, whose name is signed to the foregoing Agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the document, he executed the same voluntarily on the day the same bears date.



[SEAL]


CORRESPONDENCE TO CONTINGENT REMAINDER BENEFICIARY

OF FIRST TRUST AND AS REMAINDER BENEFICIARY OF SECOND TRUST

March 5, 2019


Ms. Rebecca Rich ___________________ ___________________


Dear Ms. Rich:

I am writing to you in your capacity as a contingent beneficiary of the First Trust, and as a remainder beneficiary of the new trust described below. The First Trust, as described above, benefits Stanley Doe and is intended to be an excluded resource for government benefit purposes. However, in the last fifteen years since the First Trust was established, some of the requirements have changed in order for a trust for the benefit of a person with a disability to be excluded from counting as a resource for "means-tested" benefits. Alabama has a new statute (the "Decanting Act") that became effective January 1, 2019, which allows the Trustees of a trust to "decant" its contents into a new trust without going to court if certain requirements are met. The Trustees of the First Trust now want to use the new statute to move the assets in the First Trust to a new trust for the benefit of Stanley, with updated provisions that will qualify as an exempt resource. The Decanting Act requires each person living who is a beneficiary (primary or contingent), a Settlor, or a Trustee of the old trust or the new trust, to be given written notice of the proposed transaction. I have attached a Notice of Intent to Decant Trust Principal, a copy of the First Trust, a copy of the new trust, a Decanting Agreement to be signed by all Trustees of these two trusts, and a Waiver of the Sixty-Day Waiting Period that is otherwise required prior to the transfer. With one exception, the new trust has the same beneficiaries as the old trust. Mr. Jerry Doe is the sole Trustee of the new trust instead of the three Trustees provided for in the First Trust. I would appreciate your signing the attached Waiver and Consent in front of a notary as soon as possible and sending it back to Jerry Doe. This will allow the transfer of trust principal to occur before the end of a sixty (60) day notice period.


Please do not hesitate to call me or Jerry Doe with any questions you may have. Very truly yours,


JS/krs Enclosures


WAIVER FOR REMAINDER TRUST BENEFICIARY

WAIVER OF SIXTY-DAY NOTICE PERIOD AND CONSENT TO EXERCISE OF POWER TO DECANT PRINCIPAL OF THE TRUST FOR STANLEY DOE DATED JANUARY 1, 2005





____________________________________ Rebecca Rich, individually, and as a Qualified Beneficiary of the First Trust and the Second Trust.

STATE OF ALABAMA COUNTY OF _______________ I, the undersigned, a Notary Public in and for said County, in said State, hereby certify that Rebecca Rich, whose name is signed to the foregoing Agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the document, she executed the same voluntarily on the day the same bears date.



[SEAL]


Ala.Code 1975 T. 19, Ch. 3D, Refs & Annos Currentness

Ala. Code 1975 T. 19, Ch. 3D, Refs & Annos, AL ST T. 19, Ch. 3D, Refs & Annos Current through Act 2019-540.

End of Document © 2019 Thomson Reuters. No claim to original U.S. Government Works.

Code of Alabama

Title 19. Fiduciaries and Trusts. Chapter 3D. Alabama Uniform Trust Decanting Act.

§ 19-3D-1. Short title., AL ST § 19-3D-1


Ala.Code 1975 § 19-3D-1

§ 19-3D-1. Short title.


This chapter may be cited as the Alabama Uniform Trust Decanting Act. 1. Credits

(Act 2018-519, § 1.)

Ala. Code 1975 § 19-3D-1, AL ST § 19-3D-1 Current through Act 2019-540.


Code of Alabama

Title 19. Fiduciaries and Trusts. (Refs & Annos) Chapter 3D. Alabama Uniform Trust Decanting Act. (Refs & Annos)

§ 19-3D-2. Definitions., AL ST § 19-3D-2


Ala.Code 1975 § 19-3D-2

§ 19-3D-2. Definitions.


In this chapter the following terms have the following meanings:

(1) APPOINTIVE PROPERTY. The property or property interest subject to a power of appointment.

(2) ASCERTAINABLE STANDARD. A standard relating to an individual's health, education, support, or maintenance within the meaning of 26 U.S.C. Section 2041(b)(1)(A), as amended, or 26 U.S.C. Section 2514(c)(1), as amended, and any applicable regulations.

(3) AUTHORIZED FIDUCIARY. (A) A trustee or other fiduciary, other than a settlor, that has the discretion to distribute or direct a trustee to distribute part or all of the principal of the first trust to one or more current beneficiaries;

(B) a special fiduciary appointed under Section 19-3D-9; or

(C) a special-needs fiduciary under Section 19-3D-13.

(4) BENEFICIARY. A person that:

(A) has a present or future, vested or contingent, beneficial interest in a trust;

(B) holds a power of appointment over trust property; or

(C) is an identified charitable organization that will or may receive distributions under the terms of the

trust.

Code of Alabama




(5) CHARITABLE INTEREST. An interest in a trust which:

(A) is held by an identified charitable organization and makes the organization a qualified beneficiary;



(B) benefits only charitable organizations and, if the interest were held by an identified charitable organization, would make the organization a qualified beneficiary; or

(C) is held solely for charitable purposes and, if the interest were held by an identified charitable organization, would make the organization a qualified beneficiary.

(6) CHARITABLE ORGANIZATION. (A) a person, other than an individual, organized and operated exclusively for charitable purposes; or

(B) a government or governmental subdivision, agency, or instrumentality, to the extent it holds funds exclusively for a charitable purpose.

(7) CHARITABLE PURPOSE. The relief of poverty, the advancement of education or religion, the promotion of health, a municipal or other governmental purpose, or another purpose, the achievement of which is beneficial to the community.

(8) COURT. The court in this state having jurisdiction in matters relating to trusts.

(9) CURRENT BENEFICIARY. A beneficiary that on the date the beneficiary's qualification is determined is a distributee or permissible distributee of trust income or principal. The term includes the holder of a presently exercisable general power of appointment but does not include a person that is a beneficiary only because the person holds any other power of appointment.

(10) DECANTING POWER. The power of an authorized fiduciary under this chapter to distribute property of a first trust to one or more second trusts or to modify the terms of the first trust.

(11) EXPANDED DISTRIBUTIVE DISCRETION. A discretionary power of distribution that is not limited to an ascertainable standard or a reasonably definite standard.

(12) FIRST TRUST. A trust over which an authorized fiduciary may exercise the decanting power.

(13) FIRST-TRUST INSTRUMENT. The trust instrument for a first trust.

(14) GENERAL POWER OF APPOINTMENT. A power of appointment exercisable in favor of a powerholder, the powerholder's estate, a creditor of the powerholder, or a creditor of the powerholder's estate.



(15) JURISDICTION. With respect to a geographic area, includes a state or country.

(16) PERSON. An individual, estate, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity.



(17) POWER OF APPOINTMENT. A power that enables a powerholder acting in a nonfiduciary capacity to designate a recipient of an ownership interest in or another power of appointment over the appointive property. The term does not include a power of attorney.

(18) POWERHOLDER. A person in which a donor creates a power of appointment.

(19) PRESENTLY EXERCISABLE POWER OF APPOINTMENT. A power of appointment exercisable by the powerholder at the relevant time. The term:

(A) includes a power of appointment exercisable only after the occurrence of a specified event, the satisfaction of an ascertainable standard, or the passage of a specified time only after:

(i) the occurrence of the specified event;

(ii) the satisfaction of the ascertainable standard; or

(iii) the passage of the specified time; and

(B) does not include a power exercisable only at the powerholder's death.

(20) QUALIFIED BENEFICIARY. A beneficiary that on the date the beneficiary's qualification is

determined:

(A) to be a distributee or permissible distributee of trust income or principal;

(B) would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in subparagraph (A) terminated on that date, but the termination of those interests would not cause the trust to terminate; or

(C) would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.

(21) REASONABLY DEFINITE STANDARD. A clearly measurable standard under which a holder of a power of distribution is legally accountable within the meaning of 26 U.S.C. Section 674(b)(5)(A), as amended, and any applicable regulations.



(22) RECORD. Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(23) SECOND TRUST. (A) a first trust after modification under this chapter; or

(B) a trust to which a distribution of property from a first trust is or may be made under this chapter.



(24) SECOND-TRUST INSTRUMENT. The trust instrument for a second trust.

(25) SETTLOR. Except as otherwise provided in Section 19-3D-25, a person, including a testator, that creates or contributes property to a trust. If more than one person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to the person's contribution except to the extent another person has power to revoke or withdraw that portion.

(26) SIGN. With present intent to authenticate or adopt a record:

(A) to execute or adopt a tangible symbol; or

(B) to attach to or logically associate with the record an electronic symbol, sound, or process.

(27) STATE. A state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(28) TERMS OF THE TRUST. The manifestation of the settlor's intent regarding a trust's provisions as expressed in the trust instrument, as may be established by other evidence that would be admissible in a judicial proceeding, or as may be established by court order or nonjudicial settlement agreement.

(29) TRUST INSTRUMENT. A record executed by the settlor to create a trust or by any person to create a second trust which contains some or all of the terms of the trust, including any amendments.

2. Credits

(Act 2018-519, § 2.) 3. Editors' Notes

ALABAMA COMMENT

Comparison to Uniform Act. This section is identical to Section 2 of the Uniform Trust Decanting Act (2015), with the exception of the definition of “qualified beneficiary”, which has been changed to be consistent with the definition in the Alabama Uniform Trust Code. Though other changes were considered for consistency with other Alabama laws, it was determined that the goal of uniformity with the Uniform Act outweighed the need for consistency with other Alabama laws.



Specifically, neither the Uniform Trust Code nor the Alabama Uniform Trust Code uses the “26 U.S.C.” citation format, instead referencing the “Internal Revenue Code.” However, the citation format remains unchanged since the National Conference of Commissioners on Uniform State Laws chose not to remain consistent as between the Uniform Trust Decanting Act and the Uniform Trust Code in this respect. Similarly, the phrase “and any applicable regulations” has been retained to remain consistent with the Uniform Act, but this is not intended to imply that the regulations apply for purposes of this Act but not for the Alabama Uniform Trust Code (which does not include that phrase) or any other statute which does not contain that phrase.





§ 19-3D-3. Scope., AL ST § 19-3D-3


Ala.Code 1975 § 19-3D-3

§ 19-3D-3. Scope.


(a) Except as otherwise provided in subsections (b) and (c), this chapter applies to an express trust that is irrevocable, or revocable by the settlor only with the consent of the trustee or a person holding an adverse interest.

(b) This chapter does not apply to a trust held solely for charitable purposes.

(c) Subject to Section 19-3D-15, a trust instrument may restrict or prohibit exercise of the decanting power.

(d) This chapter does not limit the power of a trustee, powerholder, or other person to distribute or appoint property in further trust or to modify a trust under the trust instrument, laws of this state other than this chapter, common law, a court order, or a nonjudicial settlement agreement.

(e) This chapter does not affect the ability of a settlor to provide in a trust instrument for the distribution of the trust property or appointment in further trust of the trust property or for modification of the trust instrument.

4. Credits

(Act 2018-519, § 3.)



Code of Alabama


§ 19-3D-4. Fiduciary duty., AL ST § 19-3D-4


Ala.Code 1975 § 19-3D-4

§ 19-3D-4. Fiduciary duty.


(a) In exercising the decanting power, an authorized fiduciary shall act in accordance with its fiduciary duties, including the duty to act in accordance with the purposes of the first trust.

(b) This chapter does not create or imply a duty to consider or exercise the decanting power or to inform beneficiaries about the applicability of this chapter.

(c) Except as otherwise provided in a first-trust instrument, for purposes of this chapter and Sections 19-3B-801 and 19-3B-802(a), the terms of the first trust are deemed to include the decanting power.

5. Credits


ALABAMA COMMENT

Comparison to Uniform Act. This section is identical to Section 4 of the Uniform Trust Decanting Act (2015), except for the addition of the words “consider or” to subsection (b). This change is consistent with the Uniform Comment, which states: “The Uniform Trust Decanting Act does not impose a duty on the authorized fiduciary to decant. To impose a duty on the authorized fiduciary to consider whether any possible decanting could improve the administration of the trust or further the trust purposes would create unfair risks and burdens for fiduciaries and also might, in some situations, present impartiality issues. A trustee cannot possibly consider all the possible ways in which a trust could be improved by decanting. While this act does not create a presumption in favor of the terms of the first trust, an authorized fiduciary generally should not be penalized for not modifying the terms of the trust” (emphasis added). Moreover, the Comment to

Code of Alabama




§ 412 of the Uniform Trust Code (which was adopted by Alabama without change), observes that § 412, unlike the Restatement (Third) of Trusts, “does not impose a duty on the trustee to petition the court if the trustee is aware of circumstances justifying judicial modification.” Subsection (b) was therefore modified to make clear that this statute does not create or imply a duty to “consider” use of the decanting power. For the same reason, Alabama also rejects the Uniform Comment which suggests, based on the Restatement (Third) of Trusts, that a trustee may have a duty to seek a deviation.





§ 19-3D-5. Application; governing law., AL ST § 19-3D-5


Ala.Code 1975 § 19-3D-5

§ 19-3D-5. Application; governing law.


This chapter applies to a trust created before, on, or after January 1, 2019, which:

(1) has its principal place of administration in this state, including a trust whose principal place of administration has been changed to this state; or

(2) provides by its trust instrument that it is governed by the law of this state or is governed by the law of this state for the purpose of:

(A) administration, including administration of a trust whose governing law for purposes of administration has been changed to the law of this state;

(B) construction of terms of the trust; or

(C) determining the meaning or effect of terms of the trust.

7. Credits

(Act 2018-519, § 5.)



Code of Alabama


§ 19-3D-6. Reasonable reliance., AL ST § 19-3D-6


Ala.Code 1975 § 19-3D-6

§ 19-3D-6. Reasonable reliance.


A trustee or other person that reasonably relies on the validity of a distribution of part or all of the property of a trust to another trust, or a modification of a trust, under this chapter, laws of this state other than this chapter, or the law of another jurisdiction is not liable to any person for any action or failure to act as a result of the reliance. 8. Credits

(Act 2018-519, § 6.)



Code of Alabama


§ 19-3D-7. Notice; exercise of decanting power., AL ST § 19-3D-7


Ala.Code 1975 § 19-3D-7

§ 19-3D-7. Notice; exercise of decanting power.


(a) In this section, a notice period begins on the day notice is given under subsection (c) and ends 59 days after the day notice is given.

(b) Except as otherwise provided in this chapter, an authorized fiduciary may exercise the decanting power without the consent of any person and without court approval.

(c) Except as otherwise provided in subsection (f), an authorized fiduciary shall not exercise the decanting power prior to 60 days after giving record notice of the intended exercise of the decanting power to:

(1) each settlor of the first trust, if living or then in existence;

(2) each qualified beneficiary of the first trust;

(3) each holder of a presently exercisable power of appointment over any part or all of the first trust;

(4) each person that currently has the right to remove or replace the authorized fiduciary;

(5) each other fiduciary of the first trust;

(6) each fiduciary of the second trust; and

(7) the Attorney General, if Section 19-3D-14(b) applies.

(d) An authorized fiduciary may give notice under subsection (c) to a qualified beneficiary who is a minor or incapacitated individual by giving notice to such individual's representative. An authorized

Code of Alabama




fiduciary is not required to give notice under subsection (c) to a person that is not known to the fiduciary or is known to the fiduciary but cannot be located by the fiduciary after reasonable diligence.



(e) A notice under subsection (c) must:

(1) specify the manner in which the authorized fiduciary intends to exercise the decanting power;

(2) specify the proposed effective date for exercise of the power;

(3) include a copy of the first-trust instrument;

(4) include a copy of all second-trust instruments;

(5) include a statement indicating the capacity in which the intended recipient is being given notice; and

(6) include a statement that any application under Section 19-3D-9 must be filed within six months from the day notice is given.

(f) The decanting power may be exercised before expiration of the notice period under subsection (a) if all persons entitled to receive notice waive the period in a signed record.

(g) The receipt of notice, waiver of the notice period, or expiration of the notice period does not affect the right of a person to file an application under Section 19-3D-9.

(h) An exercise of the decanting power is not ineffective because of the failure to give notice to one or more persons under subsection (c) if the authorized fiduciary acted with reasonable care to comply with subsection (c).

9. Credits


ALABAMA COMMENT

Comparison to Uniform Act. This section is identical to Section 7 of the Uniform Trust Decanting Act (2015), except for a rewording of the opening clause of subsection (c) for clarity (because subsection (f) deals with waiver of the 60-day period, as opposed to waiver of notice), a



rewording of subsection (d) for clarity (because notice is given to the representative), the addition of subsections (e)(5) and (6) and the deletion of former subsections (g)(1) and (2) (to reflect the deadline imposed by subsection (c)).





§ 19-3D-8. Representation., AL ST § 19-3D-8


Ala.Code 1975 § 19-3D-8

§ 19-3D-8. Representation.


(a) Notice to a person with authority to represent and bind another person under a first-trust instrument or Chapter 3B (commencing with Section 19-3B-101) of this title, has the same effect as notice given directly to the person represented.

(b) Consent of or waiver by a person with authority to represent and bind another person under a first-trust instrument or Chapter 3B (commencing with Section 19-3B-101) of this title is binding on the person represented unless the person represented objects to the representation before the consent or waiver otherwise would become effective.

(c) A person with authority to represent and bind another person under a first-trust instrument or Chapter 3B (commencing with Section 19-3B-101) of this title, may file an application under Section 19-3D-9 on behalf of the person represented.

(d) A settlor may not represent or bind a beneficiary under this chapter. 11. Credits

(Act 2018-519, § 8.)



Code of Alabama


§ 19-3D-9. Court involvement., AL ST § 19-3D-9


Ala.Code 1975 § 19-3D-9

§ 19-3D-9. Court involvement.


(a) On application of an authorized fiduciary, a person entitled to notice under Section 19-3D-7(c), a beneficiary, or with respect to a charitable interest that is not entirely held by or for the benefit of one or more identified and existing charitable organizations, the Attorney General or other person that has standing to enforce the charitable interest, the court may:

(1) provide instructions to the authorized fiduciary regarding whether a proposed exercise of the decanting power is permitted under this chapter and consistent with the fiduciary duties of the authorized fiduciary;

(2) appoint a special fiduciary and authorize the special fiduciary to determine whether the decanting power should be exercised under this chapter and to exercise the decanting power;

(3) approve an exercise of the decanting power;

(4) subject to the limitations set forth in subsection (c), determine that a proposed or attempted exercise of the decanting power is ineffective because:

(A) after applying Section 19-3D-22, the proposed or attempted exercise does not or did not comply with this chapter; or

(B) the proposed or attempted exercise would be or was an abuse of the fiduciary's discretion or a breach

of fiduciary duty;

(5) determine the extent to which Section 19-3D-22 applies to a prior exercise of the decanting power;

(6) provide instructions to the trustee regarding the application of Section 19-3D-22 to a prior

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exercise of the decanting power; or

(7) order other relief to carry out the purposes of this chapter.

(b) On application of an authorized fiduciary, the court may approve:



(1) an increase in the fiduciary's compensation under Section 19-3D-16; or

(2) a modification under Section 19-3D-18 of a provision granting a person the right to remove or

replace the fiduciary.

(c) A proceeding under subsection (a)(4) may not be commenced by a person entitled to notice under Section 19-3D-7(c), or by a beneficiary, unless such proceeding is commenced within six months from the day notice is given under Section 19-3D-7(a). Failure to receive notice shall not extend the notice period if the authorized fiduciary acted with reasonable diligence to comply with the requirements of Section 19-3D-7(c).

12. Credits


ALABAMA COMMENT

Comparison to Uniform Act. This section is identical to Section 9 of the Uniform Trust Decanting Act (2015) except for the addition of subsection (c) (imposing a six-month time limit for commencing a proceeding to challenge a decanting), the addition of the phrase “that is not entirely held by or for the benefit of one or more identified and existing charitable organizations” in subsection (a) (see Alabama Comment to § 14 for additional information), and the addition of a cross reference to new subsection (c) in subsection (a)(4).



§ 19-3D-10. Formalities., AL ST § 19-3D-10


Ala.Code 1975 § 19-3D-10

§ 19-3D-10. Formalities.


An exercise of the decanting power must be made in a record signed by an authorized fiduciary. The signed record must, directly or by reference to the notice required by Section 19-3D-7, identify the first trust and the second trust or trusts and state the property of the first trust being distributed to each second trust and the property, if any, that remains in the first trust. 14. Credits

(Act 2018-519, § 10.)



Code of Alabama


§ 19-3D-11. Decanting power under expanded distributive discretion., AL ST § 19-3D-11


Ala.Code 1975 § 19-3D-11

§ 19-3D-11. Decanting power under expanded distributive discretion.


(a) In this section the following terms have the following meanings:

(1) NONCONTINGENT RIGHT. A right that is not subject to the exercise of discretion or the occurrence of a specified event that is not certain to occur. The term does not include a right held by a beneficiary if any person has discretion to distribute property subject to the right to any person other than the beneficiary or the beneficiary's estate.

(2) PRESUMPTIVE REMAINDER BENEFICIARY. A qualified beneficiary other than a current beneficiary.

(3) SUCCESSOR BENEFICIARY. A beneficiary that is not a qualified beneficiary on the date the beneficiary's qualification is determined. The term does not include a person that is a beneficiary only because the person holds a nongeneral power of appointment.

(4) VESTED INTEREST. (A) A right to a mandatory distribution that is a noncontingent right as of the date of the exercise of the decanting power;

(B) a current and noncontingent right, annually or more frequently, to a mandatory distribution of income, a specified dollar amount, or a percentage of value of some or all of the trust property;

(C) a current and noncontingent right, annually or more frequently, to withdraw income, a specified dollar amount, or a percentage of value of some or all of the trust property;

(D) a presently exercisable general power of appointment; or

(E) a right to receive an ascertainable part of the trust property on the trust's termination which is not

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subject to the exercise of discretion or to the occurrence of a specified event that is not certain to occur.

(b) Subject to subsection (c) and Section 19-3D-14:



(1) an authorized fiduciary that has expanded distributive discretion over the entire principal of a first trust for the benefit of one or more current beneficiaries may exercise the decanting power over the entire principal of the first trust; and

(2) an authorized fiduciary that has expanded distributive discretion over part but not all of the principal of a first trust may exercise the decanting power over that part of the principal over which the authorized fiduciary has expanded distributive discretion.

(c) Subject to Section 19-3D-13, in an exercise of the decanting power under this section, a second trust may not:

(1) include as a current beneficiary a person that is not a current beneficiary of the first trust, except as otherwise provided in subsection (d);

(2) include as a presumptive remainder beneficiary or successor beneficiary a person that is not a current beneficiary, presumptive remainder beneficiary, or successor beneficiary of the first trust, except as otherwise provided in subsection (d); or

(3) reduce or eliminate a vested interest.

(d) Subject to subsection (c)(3) and Section 19-3D-14, in an exercise of the decanting power under this section, a second trust may be a trust created or administered under the law of any jurisdiction and may:

(1) retain a power of appointment granted in the first trust;

(2) omit a power of appointment granted in the first trust, other than a presently exercisable general power

of appointment;

(3) create or modify a power of appointment if the powerholder is a current beneficiary of the first trust and the authorized fiduciary has expanded distributive discretion to distribute principal to the beneficiary; and

(4) create or modify a power of appointment if the powerholder is a presumptive remainder beneficiary or successor beneficiary of the first trust, but the exercise of the power may take effect only after the powerholder becomes, or would have become if then living, a current beneficiary.



(e) A power of appointment described in subsection (d) may be general or nongeneral. The class of permissible appointees in favor of which the power may be exercised may be broader than or different from the beneficiaries of the first trust.

15. Credits

(Act 2018-519, § 11.)



16. Editors' Notes

ALABAMA COMMENT

Comparison to Uniform Act. This section is identical to Section 11 of the Uniform Trust Decanting Act (2015) except for the relocation of former subsection (f) to become the new subsection (b)(2) to improve clarity.



§ 19-3D-12. Decanting power under limited distributive discretion., AL ST § 19-3D-12


Ala.Code 1975 § 19-3D-12

§ 19-3D-12. Decanting power under limited distributive discretion.


(a) In this section, “limited distributive discretion” means a discretionary power of distribution that is limited to an ascertainable standard or a reasonably definite standard.

(b) An authorized fiduciary that has limited distributive discretion over the principal of the first trust for the benefit of one or more current beneficiaries may exercise the decanting power over the principal of the first trust. If an authorized fiduciary has limited distributive discretion over part but not all of the principal of a first trust, the fiduciary may exercise the decanting power over that part of the principal over which the authorized fiduciary has limited distributive discretion.

(c) Under this section and subject to Section 19-3D-14, a second trust may be created or administered under the law of any jurisdiction. Under this section, the second trusts, in the aggregate, must grant each beneficiary of the first trust beneficial interests which are substantially similar to the beneficial interests of the beneficiary in the first trust.

(d) A power to make a distribution under a second trust for the benefit of a beneficiary who is an individual is substantially similar to a power under the first trust to make a distribution directly to the beneficiary. A distribution is for the benefit of a beneficiary if:

(1) the distribution is applied for the benefit of the beneficiary;

(2) the beneficiary is under a legal disability or the trustee reasonably believes the beneficiary is incapacitated, and the distribution is made as permitted under Chapter 3B (commencing with Section 19-3B-101) of this title; or

(3) the distribution is made as permitted under the terms of the first-trust instrument and the second-trust instrument for the benefit of the beneficiary.

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17. Credits


ALABAMA COMMENT



Comparison to Uniform Act. This section is identical to Section 12 of the Uniform Trust Decanting Act (2015) except for the incorporation of former subsection (e) into subsection (b) to improve clarity.





Ala.Code 1975 § 19-3D-13

§ 19-3D-13. Trust for beneficiary with disability.



(1) BENEFICIARY WITH A DISABILITY. A beneficiary of a first trust who the authorized fiduciary believes may qualify for governmental benefits based on disability, whether or not the beneficiary currently receives those benefits or is an individual who has been adjudicated incompetent or incapacitated.

(2) GOVERNMENTAL BENEFITS. Financial aid or services from a state, federal, or other public agency.

(3) SPECIAL-NEEDS FIDUCIARY. With respect to a trust that has a beneficiary with a disability:

(A) a trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the principal of a first trust to one or more current beneficiaries;

(B) if no trustee or fiduciary has discretion under subparagraph (A), a trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the income of the first trust to one or more current beneficiaries; or

(C) if no trustee or fiduciary has discretion under subparagraphs (A) and (B), a trustee or other fiduciary, other than a settlor, that is required to distribute part or all of the income or principal of the first trust to one or more current beneficiaries.

(4) SPECIAL-NEEDS TRUST. A trust the trustee believes would not be considered a resource for purposes of determining whether a beneficiary with a disability is eligible for governmental benefits.

(b) A special-needs fiduciary may exercise the decanting power under Section 19-3D-11 over the

Code of Alabama




principal of a first trust as if the fiduciary had authority to distribute principal to a beneficiary with a disability subject to expanded distributive discretion if:

(1) a second trust is a special-needs trust that benefits the beneficiary with a disability; and

(2) the special-needs fiduciary determines that exercise of the decanting power will further the purposes

of the first trust.



(c) In an exercise of the decanting power under this section, the following rules apply:

(1) Notwithstanding Section 19-3D-11(c)(2), the interest in the second trust of a beneficiary with a disability may:

(A) be a pooled trust as defined by Medicaid law for the benefit of the beneficiary with a disability under 42 U.S.C. Section 1396p(d)(4)(C), as amended; or

(B) contain payback provisions complying with reimbursement requirements of Medicaid law under 42 U.S.C. Section 1396p(d)(4)(A), as amended.

(2) Section 19-3D-11(c)(3) does not apply to the interests of the beneficiary with a disability.

(3) Except as affected by any change to the interests of the beneficiary with a disability, the second trust, or if there are two or more second trusts, the second trusts in the aggregate, must grant each other beneficiary of the first trust beneficial interests in the second trusts which are substantially similar to the beneficiary's beneficial interests in the first trust.

19. Credits


ALABAMA COMMENT

Comparison to Uniform Act. This section is identical to Section 13 of the Uniform Trust Decanting Act (2015) except for the replacement of the words “special needs fiduciary” with the words “authorized fiduciary,” and the addition of the words “or incapacitated” in subsection (a).



§ 19-3D-14. Protection of charitable interest., AL ST § 19-3D-14


Ala.Code 1975 § 19-3D-14

§ 19-3D-14. Protection of charitable interest.



(1) DETERMINABLE CHARITABLE INTEREST. A charitable interest that is a right to a mandatory distribution currently, periodically, on the occurrence of a specified event, or after the passage of a specified time, and which is unconditional or will be held solely for charitable purposes.

(2) UNCONDITIONAL. Not subject to the occurrence of a specified event that is not certain to occur, other than a requirement in a trust instrument that a charitable organization be in existence or qualify under a particular provision of the United States Internal Revenue Code of 1986, as amended, on the date of the distribution, if the charitable organization meets the requirement on the date of determination.

(b) If a first trust contains a determinable charitable interest that is not entirely held by or for the benefit of one or more identified and existing charitable organizations, the Attorney General has the rights of a qualified beneficiary and may represent and bind the charitable interest.

(c) If a first trust contains a charitable interest, the second trust or trusts may not:

(1) diminish the charitable interest;

(2) diminish the interest of an identified charitable organization that holds the charitable interest;

(3) alter any charitable purpose stated in the first-trust instrument; or

(4) alter any condition or restriction related to the charitable interest.

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(d) If there are two or more second trusts, the second trusts shall be treated as one trust for purposes of determining whether the exercise of the decanting power diminishes the charitable interest or diminishes the interest of an identified charitable organization for purposes of subsection (c).



(e) If a first trust contains a determinable charitable interest that is not entirely held by or for the benefit of one or more identified and existing charitable organizations, the second trust or trusts that include a charitable interest pursuant to subsection (c) must be administered under the law of this state unless:

(1) the Attorney General, after receiving notice under Section 19-3D-7, fails to object in a signed record delivered to the authorized fiduciary within the notice period;

(2) the Attorney General consents in a signed record to the second trust or trusts being administered under the law of another jurisdiction; or

(3) the court approves the exercise of the decanting power.

(f) This chapter does not limit the powers and duties of the Attorney General under laws of this state other

than this act. 21. Credits


ALABAMA COMMENT

Comparison to Uniform Act. This section is identical to Section 14 of the Uniform Trust Decanting Act (2015) except for the division of subsection (a)(1) into two clauses for clarity, and the addition of the phrase “that is not entirely held by or for the benefit of one or more identified and existing charitable organizations” in subsection 14(b) and 14(e) to limit the Attorney General’s representation to situations where the charitable interest is not held entirely for the benefit of one or more identified and existing charitable organizations, in which case such charities would represent themselves.



§ 19-3D-15. Trust limitation on decanting., AL ST § 19-3D-15


Ala.Code 1975 § 19-3D-15

§ 19-3D-15. Trust limitation on decanting.


(a) An authorized fiduciary may not exercise the decanting power to the extent the first-trust instrument expressly prohibits exercise of:

(1) the decanting power; or

(2) a power granted by state law to the fiduciary to distribute part or all of the principal of the trust to another trust or to modify the trust.

(b) Exercise of the decanting power is subject to any restriction in the first-trust instrument that expressly applies to exercise of:

(1) the decanting power; or

(2) a power granted by state law to a fiduciary to distribute part or all of the principal of the trust to another trust or to modify the trust.

(c) A general prohibition of the amendment or revocation of a first trust, a spendthrift clause, or a clause restraining the voluntary or involuntary transfer of a beneficiary's interest does not preclude exercise of the decanting power.

(d) Subject to subsections (a) and (b), an authorized fiduciary may exercise the decanting power under this chapter even if the first-trust instrument permits the authorized fiduciary or another person to modify the first-trust instrument or to distribute part or all of the principal of the first trust to another trust.

(e) If a first-trust instrument contains an express prohibition described in subsection (a) or an express restriction described in subsection (b), the provision must be included in the second-trust instrument.

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23. Credits

(Act 2018-519, § 15.)

Ala. Code 1975 § 19-3D-15, AL ST § 19-3D-15



Current through Act 2019-540.


§ 19-3D-16. Change in compensation., AL ST § 19-3D-16


Ala.Code 1975 § 19-3D-16

§ 19-3D-16. Change in compensation.


(a) If a first-trust instrument specifies an authorized fiduciary's compensation, the fiduciary may not exercise the decanting power to increase the fiduciary's compensation above the specified compensation unless:

(1) all qualified beneficiaries of the second trust consent to the increase in a signed record; or

(2) the increase is approved by the court.

(b) If a first-trust instrument does not specify an authorized fiduciary's compensation, the fiduciary may not exercise the decanting power to increase the fiduciary's compensation above the compensation permitted by Chapter 3B (commencing with Section 19-3B-101) of this title, unless:

(1) all qualified beneficiaries of the second trust consent to the increase in a signed record; or

(2) the increase is approved by the court.

(c) A change in an authorized fiduciary's compensation which is incidental to other changes made by the exercise of the decanting power is not an increase in the fiduciary's compensation for purposes of subsections (a) and (b).

24. Credits

(Act 2018-519, § 16.)


Code of Alabama


§ 19-3D-16. Change in compensation., AL ST § 19-3D-16



§ 19-3D-17. Relief from liability and indemnification., AL ST § 19-3D-17


Ala.Code 1975 § 19-3D-17

§ 19-3D-17. Relief from liability and indemnification.


(a) Except as otherwise provided in this section, a second-trust instrument may not relieve an authorized fiduciary from liability for breach of trust to a greater extent than the first-trust instrument.

(b) A second-trust instrument may provide for indemnification of an authorized fiduciary of the first trust or another person acting in a fiduciary capacity under the first trust for any liability or claim that would have been payable from the first trust if the decanting power had not been exercised.

(c) A second-trust instrument may not reduce fiduciary liability in the aggregate.

(d) Subject to subsection (c), a second-trust instrument may divide and reallocate fiduciary powers among fiduciaries, including one or more trustees, distribution advisors, investment advisors, trust protectors, or other persons, and relieve a fiduciary from liability for an act or failure to act of another fiduciary as permitted by laws of this state other than this chapter.

25. Credits

(Act 2018-519, § 17.)



Code of Alabama


§ 19-3D-18. Removal or replacement of authorized fiduciary., AL ST § 19-3D-18


Ala.Code 1975 § 19-3D-18

§ 19-3D-18. Removal or replacement of authorized fiduciary.


An authorized fiduciary may not exercise the decanting power to modify a provision in a first-trust instrument granting another person power to remove or replace the fiduciary unless:

(1) the person holding the power consents to the modification in a signed record and the modification applies only to the person;

(2) the person holding the power and the qualified beneficiaries of the second trust consent to the modification in a signed record and the modification grants a substantially similar power to another person; or

(3) the court approves the modification and the modification grants a substantially similar power to another person.

26. Credits

(Act 2018-519, § 18.)



Code of Alabama


§ 19-3D-19. Tax-related limitations., AL ST § 19-3D-19


Ala.Code 1975 § 19-3D-19

§ 19-3D-19. Tax-related limitations.



(1) GRANTOR TRUST. A trust as to which a settlor of a first trust is considered the owner under 26 U.S.C. Sections 671 through 677, as amended, or 26 U.S.C. Section 679, as amended.

(2) INTERNAL REVENUE CODE. The United States Internal Revenue Code of 1986, as amended.

(3) NONGRANTOR TRUST. A trust that is not a grantor trust.

(4) QUALIFIED BENEFITS PROPERTY. Property subject to the minimum distribution requirements of 26 U.S.C. Section 401(a)(9), as amended, and any applicable regulations, or to any similar requirements that refer to 26 U.S.C. Section 401(a) (9) or the regulations.

(b) An exercise of the decanting power is subject to the following limitations:

(1) If a first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for a marital deduction for purposes of the gift or estate tax under the Internal Revenue Code or a state gift, estate, or inheritance tax, the second-trust instrument must not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction, or would have reduced the amount of the deduction, under the same provisions of the Internal Revenue Code or state law under which the transfer qualified.

(2) If the first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for a charitable deduction for purposes of the income, gift, or estate tax

Code of Alabama




under the Internal Revenue Code or a state income, gift, estate, or inheritance tax, the second-trust instrument must not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction, or would have reduced the amount of the deduction, under the same provisions of the Internal Revenue Code or state law under which the transfer qualified.



(3) If the first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for the exclusion from the gift tax described in 26 U.S.C. Section 2503(b), as amended, the second-trust instrument must not include or omit a term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying under 26 U.S.C. Section 2503(b), as amended. If the first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for the exclusion from the gift tax described in 26 U.S.C. Section 2503(b), as amended, by application of 26 U.S.C. Section 2503(c), as amended, the second-trust instrument must not include or omit a term that, if included or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying under 26 U.S.C. Section 2503(c), as amended.

(4) If the property of the first trust includes shares of stock in an S corporation, as defined in 26 U.S.C. Section 1361, as amended, and the first trust is, or but for provisions of this chapter other than this section would be, a permitted shareholder under any provision of 26 U.S.C. Section 1361, as amended, an authorized fiduciary may exercise the power with respect to part or all of the S-corporation stock only if any second trust receiving the stock is a permitted shareholder under 26 U.S.C. Section 1361(c)(2), as amended. If the property of the first trust includes shares of stock in an S corporation and the first trust is, or but for provisions of this chapter other than this section would be, a qualified subchapter-S trust within the meaning of 26 U.S.C. Section 1361(d), as amended, the second-trust instrument must not include or omit a term that prevents the second trust from qualifying as a qualified subchapter-S trust.

(5) If the first trust contains property that qualified, or would have qualified but for provisions of this chapter other than this section, for a zero inclusion ratio for purposes of the generation-skipping transfer tax under 26 U.S.C. Section 2642(c), as amended, the second-trust instrument must not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented the transfer to the first trust from qualifying for a zero inclusion ratio under 26 U.S.C. Section 2642(c), as amended.

(6) If the first trust is directly or indirectly the beneficiary of qualified benefits property, the second-trust instrument may not include or omit any term that, if included in or omitted from the first-trust instrument, would have increased the minimum distributions required with respect to the qualified benefits property under 26 U.S.C. Section 401(a)(9), as amended, and any applicable regulations, or any similar requirements that refer to 26 U.S.C. Section 401(a)(9), as amended or the regulations. If an attempted exercise of the decanting power violates the preceding sentence, the trustee is deemed to have held the qualified benefits property and any reinvested distributions of the property as a separate share from the date of the exercise of the power and Section 19-3D-22 applies to the separate share.

(7) If the first trust qualifies as a grantor trust because of the application of 26 U.S.C. Section 672(f)(2)(A), as amended, the second trust may not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented the first trust from qualifying under 26 U.S.C.



Section 672(f)(2)(A), as amended.

(8) In this paragraph, “tax benefit” means a federal or state tax deduction, exemption, exclusion, or other benefit not otherwise listed in this section, except for a benefit arising from being a grantor trust. Subject to paragraph (9), a second- trust instrument may not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented qualification for a tax benefit if:

(A) the first-trust instrument expressly indicates an intent to qualify for the benefit or the first-trust instrument clearly is designed to enable the first trust to qualify for the benefit; and



(B) the transfer of property held by the first trust or the first trust qualified, or but for provisions of this chapter other than this section, would have qualified for the tax benefit.

(9) Subject to paragraph (4):

(A) except as otherwise provided in paragraph (7), the second trust may be a nongrantor trust, even if the first trust is a grantor trust; and

(B) except as otherwise provided in paragraph (10), the second trust may be a grantor trust, even if the first trust is a nongrantor trust.

(10) An authorized fiduciary may not exercise the decanting power if a settlor objects in a signed record delivered to the fiduciary within the notice period and:

(A) the first trust and a second trust are both grantor trusts, in whole or in part, the first trust grants the settlor or another person the power to cause the first trust to cease to be a grantor trust, and the second trust does not grant an equivalent power to the settlor or other person; or

(B) the first trust is a nongrantor trust and a second trust is a grantor trust, in whole or in part, with respect to the settlor, unless:

(i) the settlor has the power at all times to cause the second trust to cease to be a grantor trust; or

(ii) the first-trust instrument contains a provision granting the settlor or another person a power that would cause the first trust to cease to be a grantor trust and the second-trust instrument contains the same provision.

27. Credits

(Act 2018-519, § 19.)



§ 19-3D-20. Duration of second trust., AL ST § 19-3D-20


Ala.Code 1975 § 19-3D-20

§ 19-3D-20. Duration of second trust.


(a) Subject to subsection (b), a second trust may have a duration that is the same as or different from the duration of the first trust.

(b) To the extent that property of a second trust is attributable to property of the first trust, the property of the second trust is subject to any rules governing maximum perpetuity, accumulation, or suspension of the power of alienation which apply to property of the first trust.

28. Credits


ALABAMA COMMENT

Note that second trusts may also be constrained by Ala. Code § 35-4A-3(c) and (d), which provide as follows:

“(c) For purposes of this chapter, a nonvested property interest or a power of appointment arising from a transfer of property to a previously funded trust or other existing property arrangement is created when the nonvested property interest or power of appointment in the original contribution was created.

“(d) For purposes of this chapter, if a nongeneral or testamentary power of appointment is exercised to create another nongeneral or testamentary power of appointment, every nonvested property interest or power of appointment created through the exercise of such other nongeneral or testamentary power is considered to have been created at the time of the creation of the first nongeneral or testamentary power of appointment.”

Code of Alabama


§ 19-3D-20. Duration of second trust., AL ST § 19-3D-20




§ 19-3D-21. Need to distribute not required., AL ST § 19-3D-21


Ala.Code 1975 § 19-3D-21

§ 19-3D-21. Need to distribute not required.


An authorized fiduciary may exercise the decanting power whether or not under the first trust's discretionary distribution standard the fiduciary would have made or could have been compelled to make a discretionary distribution of principal at the time of the exercise. 30. Credits

(Act 2018-519, § 21.)



Code of Alabama


§ 19-3D-22. Saving provision., AL ST § 19-3D-22


Ala.Code 1975 § 19-3D-22

§ 19-3D-22. Saving provision.


(a) If exercise of the decanting power would be effective under this chapter except that the second-trust instrument in part does not comply with this chapter, the exercise of the power is effective and the following rules apply with respect to the principal of the second trust attributable to the exercise of the power:

(1) A provision in the second-trust instrument which is not permitted under this chapter is void to the extent necessary to comply with this chapter.

(2) A provision required by this chapter to be in the second-trust instrument which is not contained in the instrument is deemed to be included in the instrument to the extent necessary to comply with this chapter.

(b) If a trustee or other fiduciary of a second trust determines that subsection (a) applies to a prior exercise of the decanting power, the fiduciary shall take corrective action consistent with the fiduciary's duties.

31. Credits

(Act 2018-519, § 22.)



Code of Alabama


§ 19-3D-23. Trust for care of animal., AL ST § 19-3D-23


Ala.Code 1975 § 19-3D-23

§ 19-3D-23. Trust for care of animal.



(1) ANIMAL TRUST. A trust or an interest in a trust created to provide for the care of one or more animals.

(2) PROTECTOR. A person appointed in an animal trust to enforce the trust on behalf of the animal or, if no such person is appointed in the trust, a person appointed by the court for that purpose.

(b) The decanting power may be exercised over an animal trust that has a protector to the extent the trust could be decanted under this chapter if each animal that benefits from the trust were an individual, if the protector consents in a signed record to the exercise of the power.

(c) A protector for an animal has the rights under this chapter of a qualified beneficiary.

(d) Notwithstanding any other provision of this chapter, if a first trust is an animal trust, in an exercise of the decanting power, the second trust must provide that trust property may be applied only to its intended purpose for the period the first trust benefitted the animal.

32. Credits

(Act 2018-519, § 23.)



Code of Alabama


§ 19-3D-24. Terms of second trust., AL ST § 19-3D-24


Ala.Code 1975 § 19-3D-24

§ 19-3D-24. Terms of second trust.


A reference in Chapter 3B (commencing with Section 19-3B-101) of this title, to a trust instrument or terms of the trust includes a second-trust instrument and the terms of the second trust. 33. Credits

(Act 2018-519, § 24.)



Code of Alabama


§ 19-3D-25. Settlor., AL ST § 19-3D-25


Ala.Code 1975 § 19-3D-25

§ 19-3D-25. Settlor.


(a) For purposes of laws of this state other than this chapter and subject to subsection (b), a settlor of a first trust is deemed to be the settlor of the second trust with respect to the portion of the principal of the first trust subject to the exercise of the decanting power.

(b) In determining settlor intent with respect to a second trust, the intent of a settlor of the first trust, a settlor of the second trust, and the authorized fiduciary may be considered.

34. Credits

(Act 2018-519, § 25.)



Code of Alabama


§ 19-3D-26. Later-discovered property., AL ST § 19-3D-26


Ala.Code 1975 § 19-3D-26

§ 19-3D-26. Later-discovered property.


(a) Except as otherwise provided in subsection (c), if exercise of the decanting power was intended to distribute all the principal of the first trust to one or more second trusts, later-discovered property belonging to the first trust and property paid to or acquired by the first trust after the exercise of the power is part of the trust estate of the second trust or trusts.

(b) Except as otherwise provided in subsection (c), if exercise of the decanting power was intended to distribute less than all the principal of the first trust to one or more second trusts, later-discovered property belonging to the first trust or property paid to or acquired by the first trust after exercise of the power remains part of the trust estate of the first trust.

(c) An authorized fiduciary may provide in an exercise of the decanting power or by the terms of a second trust for disposition of later-discovered property belonging to the first trust or property paid to or acquired by the first trust after exercise of the power.

35. Credits

(Act 2018-519, § 26.)



Code of Alabama


§ 19-3D-27. Obligations., AL ST § 19-3D-27


Ala.Code 1975 § 19-3D-27

§ 19-3D-27. Obligations.


A debt, liability, or other obligation enforceable against property of a first trust is enforceable to the same extent against the property when held by the second trust after exercise of the decanting power. 36. Credits

(Act 2018-519, § 27.)



Code of Alabama


§ 19-3D-28. Uniformity of application and construction., AL ST § 19-3D-28


Ala.Code 1975 § 19-3D-28

§ 19-3D-28. Uniformity of application and construction.


In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it. 37. Credits

(Act 2018-519, § 28.)



Code of Alabama


Ala.Code 1975 § 19-3D-29

§ 19-3D-29. Relation to Electronic Signatures in Global and National Commerce Act.

Effective: January 1,

2019 Currentness

This chapter modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b). 38. Credits

(Act 2018-519, § 29.)



Code of Alabama


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