22nd Alaska State Legislature
Information from Representative Lesil McGuire



Portrait of Representative Lesil McGuire, 123.4 K. Session:
State Capitol, Room 418
Juneau, AK 99801-1182
Phone: (907) 465-2995
Fax: (907) 465-6592


Interim:
716 W. 4th Ave., Suite 430
Anchorage, AK 99501-2133
Phone: (907) 269-0250
Fax: (907) 269-0249

Sponsor Statement for HB 316
Powers of Appointments/Trusts/Creditors

An Act relating to trusts, including trust protectors, trustee advisors, and transfers of trust interests, and to creditors' claims against property subject to a power of appointment; and providing for an effective date.
Released: April 9, 2002
Contact: Representative Lesil McGuire's office at (907) 465-5446

Alaska has been in the lead in the development of trust law. Other states have not only enacted similar legislation but have improved on it. This bill fine-tunes Alaska's existing trust legislation.

HB 316 provides statutory authority to provisions commonly found in trust instruments. For instance, section 1 of the bill specifically provides for the position of a trust advisor and trust protector and clarifies the manner in which these positions relate to the administration of a trust. Delaware has similar legislation. Many trust instruments allow a trustee to make trust assets available for the use of a beneficiary. Section 2 allows trusts assets consisting of real property and tangible personal property to be used by a beneficiary without the use being considered a distribution which could in turn be subjected to the claims of a beneficiary's creditors.

Other sections contained in the bill codify a number of matters which have always been accepted by Alaska trust practitioners as being the common law of this state, but for which there has been no statutory counterpart. Section 4 provides that trust assets can not be attached by a beneficiary's creditor until such time that trust assets are actually distributed to a beneficiary, nor can there be a continuing order against the trustee with respect to future distributions that a trustee would choose to make. Section 6 adds a new subsection (i) to AS 34.40.110 which clarifies that the statute affording spendthrift protection for beneficial interests applies not only to trusts in which a settlor may have a retained interest, but also to the very common third party settled trust where a beneficiary might be serving as sole trustee.

Sections 5 and 6 make amendments AS 34.40.110 which will assist a future court in the interpretation of this statute, something an Alaska court has yet to do. Section 5 clarifies that a fraudulent conveyance action may only be brought against a settlor of a trust and then only as to a specific transfer of assets which are determined to be fraudulent as to that creditor. Section 6, also clarifies the definition of a preexisting creditor who can avail themselves of the time period found in AS 34.40.110(d)(1) for bringing a fraudulent conveyance action against the settlor of a self-settled trust. Subsection (h) as found in Section 6 provides a transfer restriction will be valid with respect to a beneficial interest retained by a settlor even though the settlor serves as a co-trustee, provided the settlor doesn't have control over the manner in which distributions may be made to the settlor. Subsection (k) invalidates any unwritten agreement or understanding between a settlor who is a beneficiary and a trustee which gives the settlor rights greater than those which are permitted to be expressed in the trust instrument.

Last, there are several provisions contained in this bill which have their counterpart in the laws of other states. Section 3 provides the circumstances in which a transfer restriction will continue to be valid even though a settlor retains a unitrust or annuity interest in the trust. These provisions presently exist in Delaware. Section 7 of the bill clarifies when property subject to a power of appointment can be subjected to the claims of a donee's creditors and codifies the common law as it is now found and enunciated in the Restatement 2nd of Property. This section has its genesis in a comparable Rhode Island statute. All the provisions found in this bill are necessary additions if Alaska expects our trust industry to remain competitive with other states.

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Attachments:

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Related Links

Alaska Statutes Title 45: Trade and Commerce

HB 212 : Employer's Liability for Workers' Compensation

HB 294 : Payment Date for Bills For Services

HB 316 : Powers of Appointments/Trusts/Creditors

HB 354 : Corporations: Proxy Voting

HB 393 : Sales Of Business Opportunities

HB 418 : Electronic Proxy Voting & Notification

HB 499 : Disposition Of Business Assets

HB 512 : Unfair Cigarette Sales Act

SB 190 : Guardianships; Conservatorships

SB 301 : Electronic Proxy Voting/Corporate Reports