Articles

  • Why Alaska?
  • Grantor Trusts & Income Tax Reporting
  •  Why is Alaska the Best Jurisdiction
    • Alaska Trust Laws Provide for More Estate Planning Options than Any Other State
      • Perpetual (Dynasty) Trusts
      • No State Income Tax
      • Self-Settled Trusts
        • No Special Class of Creditors
        • Allows for Flexibility of Non-Resident Co-Trustees
        • Only State to Receive PLR - Stating Transfer is a Completed Gift
      • Only State to Allow Optional Community Property Trusts
      • Statues Protecting LPs and LLCs From Creditors
        • Court Cannot Terminate LPs or LLCs for Equitable Reason
        • Charging Order is the Only Remedy for Creditor
      • Flexible Probate Court
      • Lowest state life insurance premium tax on large policies
  •  Alaska AdvantageSM Legislation
    • Introduction
      • Over the last nine years, Alaska passed many unique pieces of trust and financial management legislation. We believe this makes Alaska the leading jurisdiction to setup and administer trusts and other wealth management techniques. This booklet provides a summary of each piece of legislation that has been passed. It is recommended that you read thoroughly each piece of legislation to fully appreciate and understand the flexibility and uniqueness of Alaska’s legislation.

        In summary, Alaska provides for:
        • Perpetual Trusts - House Bill 101, effective April 2, 1997
        • Perpetual Trusts – Modification - Senate Bill 162, effective April 22,2000
        • Self-Settled Spendthrift Trusts - House Bill 101, effective April 2, 1997
        • Unique Limited Partnership & LLC Statutes - House Bill 266, effective July 1, 1997
        • Limited Partnership & LLC Improvement Statute - House Bill 222,
          effective March 8, 2000
        • Alaska Community Property Trusts - House Bill 199, effective May 23, 1998
        • Alaska Community Property Trust – Technical Changes - Senate Bill 166,
          effective March 8, 2000
        • Innovative and Flexible Trust and Estate Law - Senate Bill 354,
          effective April 15, 1998
        • Alaska Uniform Prudent Investor Act - House Bill 321, effective May 23, 1998
        • Reduction in Life Insurance Premium Tax - House Bill 490, effective June 26, 1998
        • “Safety Net” Estate Planning Legislation - House Bill 275, effective August 9, 2000
        • Trust Notification – Rules; Modifying and Terminating Irrevocable Trusts -
          Senate Bill 163, effective August 30, 2000
        • Version of Uniform Principal & Income Act -
          Senate Bill 87, effective September 1, 2003
        • 2003 Alaska Trust Act - House Bill 212, effective October 8, 2003
        • Trust / Estate / Property Transfers - Senate Bill 344, effective June 24, 2004
        • Alaska’s 2006 Amendments to its Trust and Estate Statutes - Senate Bill 298, effective September 15, 2006
      • Alaska Trust Laws Provide for More Estate & Financial Planning Options
        Than Any Other State
        • Perpetual (Dynasty) Trusts
        • No State Income Tax
        • Self-Settled Spendthrift Trusts
        • No Special Class of Creditors
        • Allows for Flexibility of Non-Resident Co-Trustees
        • Only State to Receive PLR – Stating Transfer is a Completed Gift
        • Only State to Allow Optional Community Property Trusts
        • Statutes Protecting LPs and LLCs From Creditors
        • Court Cannot Terminate LPs or LLCs
        • Charging Order is the Only Remedy for Creditor
        • Flexible Probate Court
        • Lowest State Life Insurance Premium Tax on Large Policies
        • Only State to Define Pre-Existing Creditor
        • Best Protection from Future Creditors Because Creditors Cannot Use Constructive Fraud
        • Beneficiaries’ Interest in Trusts are Protected from Property Division when a Beneficiary Divorces
        • Nonresidents can form Asset Protected IRA’s in Alaska
    • What is a Trust?
      • Most of this legislation effects trusts. Trusts are probably the
        most effective method to:
        1. reduce, and in some cases, eliminate gift, estate and income taxes;
        2. preserve assets for the family; and
        3. accomplish the desires of the family;
        4. provide asset protection;
        5. improve quality of life by allowing use of trust assets by beneficiaries.
      • We have included a brief summary of what is a trust.

        • A trust is a legal arrangement where one person (called the trustee) holds property for the benefit of other persons (called the beneficiaries). There are many different kinds of trusts.

          The personal trust is the most common form of trust, created for non-business reasons for the benefit and protection of individuals. The trustee in a personal trust acts in accordance with the law and the instructions set forth in the governing instrument by the person who created the trust. The primary responsibilities of the trustee are to manage and protect the assets in the trust for the best interests of the beneficiaries. The management and protection responsibilities include proper investment of assets, collection of income, maintenance of accurate books and records, filing of tax returns and other reports, and payment of income and trust property to the beneficiaries in accordance with the terms of the trust.

    • Summary of the New Alaska Trust Act Trusts - House Bill 101

      • On April 2, 1997, the Alaska Trust Act became effective. The Act makes two changes to Alaska law, both of which may be of significant interest to individuals throughout the United States. First, for Alaska trusts, the Act effectively eliminates the “rule against perpetuities." This rule limits the time a trust can last to approximately 90 years. Now, any American can create a trust in Alaska and provide for it to last forever. This means that the benefits that the trust can provide to the beneficiaries can last for as long as the family wants. Trust benefits can include protecting trust assets from claims of the creditors of the beneficiaries, including claims that may arise in a divorce of any beneficiary. Also, because Alaska has no income tax, an Alaska trust can be used to avoid state income tax on trust income that is not distributed currently to the trust beneficiaries. However, an Alaska trust cannot be used to avoid state income tax if the person who created the trust (called the “grantor” or “settlor”) lives in a state that imposes an income tax and if the trust is a “grantor trust." A “grantor trust” is one that falls under a tax rule that causes the trust’s income to be attributable to the grantor.

        The second change, which results from the Act, relates to protecting trust assets from claims of creditors of the grantor of the trust. Throughout virtually all of the United States, creditors of the grantor of a trust can attach the assets if the trustee can distribute trust property back to the grantor. Alaska law now provides that the assets in such a trust are not subject to the claims of the grantor’s creditors, unless the original transfer to the trust was intended to defraud known creditors of the grantor or rendered the grantor insolvent. Hence, an individual can transfer assets to an irrevocable Alaska trust and be a beneficiary to whom the trustee can distribute trust property. Yet, the trust assets will no longer be subject under Alaska law to the claims of the grantor’s creditors. (The protection does not apply if the trust must distribute assets to the grantor.) This protection from creditor claims applies even if the grantor is the only person to whom the trustee may distribute trust assets and income. If there are beneficiaries in addition to the grantor, this protection from claims of creditors also applies even if the grantor retains the right to veto distributions to other beneficiaries of the trust. The protection also applies even if the grantor retains the right to direct where the trust property is to pass upon his or her death. By retaining these veto and control powers, transfers to the trust will not be subject to gift tax when the trust is created. However, retaining either of these powers will cause the trust assets to be includible in the grantor’s taxable estate at death. Alternatively, an individual may create an Alaska trust but not retain any power to veto distributions to other beneficiaries or to control the disposition of the trust property when the grantor dies. This should make the transfer to the trust a completed gift for gift tax purposes and should result in the exclusion of the assets from the grantor’s taxable estate.

        This opens a new dimension in estate planning because an individual can make a completed gift to be excluded from his or her estate while remaining eligible to receive distributions from the trust. As indicated, an Alaska trust can now be used to protect assets from claims of creditors but not if the grantor transfers the assets in defraud of his or her creditors or retains the power to revoke or terminate the trust. Generally, a transfer is made in defraud of creditors only if it either renders the grantor insolvent (e.g., unable to pay current obligations) or is intended to remove assets from the reach of specifically known creditors. A person may be a known creditor even if that person does not yet have a judgment against the grantor. It is probably sensible for a grantor wishing to provide protection from claims of creditors to transfer significantly less than one-half of his or her net wealth to an Alaska trust. First, such a transfer is unlikely to render the grantor insolvent. Second, because the grantor cannot retain the right to trust distributions, but only to be a beneficiary to whom the trustee may but is not required to distribute assets or income, it would not be wise to place most of one’s assets in such a trust and lose entitlement to their use or income. This is especially important if the grantor wishes to use an Alaska trust for estate tax planning purposes. Where the transfer to the trust is a completed gift, the grantor presumably will want to minimize distributions back to himself or herself because such distributions would erode the estate tax reduction benefits of having made a completed gift to the trust. The new law specifies what makes the trust Alaskan. Some part of the trust assets must be held in Alaska. Also, an Alaskan permanent resident, bank or trust company (that is headquartered in Alaska) must serve as a trustee and hold certain duties including maintaining books and records of the trust and preparing or arranging for the preparation of the trust’s income tax returns. Also, part of the administration of the trust must occur in Alaska.

    • Example of Tax Savings Using an Alaska Trust

      • Your transfer of assets to an Alaska Asset Preservation Trustsm can be a completed gift for Federal estate and gift tax purposes. You may decide to gift an amount equal to your annual gift tax exclusion of $12,000 per trust beneficiary, your gift tax exemption equivalent amount of $2,000,000 , or your $2,000,000 generation-skipping tax exemption, or some other amount. The trust assets could be held for the benefit of your family members and descendants forever. Perhaps most important, you can be an eligible beneficiary of the trust. Upon your death, the trust could be excluded from your estate for Federal estate tax purposes. Furthermore, creditors who are unknown when the trust is setup and who have claims that arise after the trust is settled should not be able to invade the trust to satisfy their claims.

        The potential estate tax savings are significant. For example, if you have $675,000 of assets today, you would hope that over the next 20 years these assets would appreciate at 10% per year to over $4 million or more. If these assets worth $4 million were included in your estate at the time of your death, your estate could owe as much as $2,400,000 of Federal estate taxes. On the other hand, if you transferred this $675,000 in assets to an Alaska Asset Preservation Trustsm, using your gift tax exemption equivalent, to be held for the benefit of yourself and your family members, then upon your death (if this occurred in 20 years), the $4 million of assets could be excluded from your estate and your estate could save $2,400,000 in estate taxes. The trust can continue forever for the benefit of your descendants and can be structured so that the trust assets are not included in any of their estates as well.If a family uses a $1 Million generation-skipping transfer tax exemption with the Alaska Perpetual (Dynasty)

        Trust after 120 years with an after-tax return of 10%, the trust would be worth almost $93 billion. If the Alaska Perpetual (Dynasty) Trust was not used; the value of the property would be less than $6 billion.

        The Economics of Perpetual Trusts
        After-Tax Growth Value of Perpetual Trust
        After 120 Years        		 Value of Property if
        No Trust
        3.00% 34,710,987 2,169,437
        4.00% 110,662,561 6,910,410
        5.00% 348,911,561 21,806,999
        6.00% 1,088,187,748 68,011,734
        7.00% 3,357,788,383 209,861,774
        8.00% 10,252,992,943 640,812,059
        9.00% 30,987,015,749 1,938,688,484
        10.00% 92,709,068,818 5,794,316,801
    • Leveraging the Alaska Perpetual Dynasty Trust with Life Insurance

      • Having the trust purchase life insurance with the trust contributions is an excellent strategy that can be used to leverage the $1 million generation-skipping transfer tax (GST) exemption that can dramatically increase trust assets. The proceeds from the insurance that will be paid to the trust will escape initial income and wealth transfer taxation in the estate and these proceeds will provide a large sum of money that can continue to benefit the beneficiaries for as long as the family desires.

  • Alternative to Foreign Asset Protection Trusts

    • The Alaska Trust is an alternative to foreign asset protection trusts and has many advantages. The Alaska Trust will have a trustee located in Alaska. Individuals should be more comfortable transferring assets to a trustee in a politically stable jurisdiction that is part of the United States. An Alaska Trust will not be subject to the new Internal Revenue Code foreign trust tax rules. In addition, Alaska occupies a central location on the globe. Alaska is mid-way from three of the largest financial centers of the world: London, New York, and Tokyo, and its time zone is just one hour earlier than Pacific Time.

      For some people there may be disadvantages to using an Alaska Trust. If an individual is looking for a way to hide taxable income or for a way to hide assets from existing creditors, he or she should look elsewhere. The trustee of an Alaska Trust will be subject to the jurisdiction of the courts of Alaska and will have to comply with the Internal Revenue Code. As such, the trustee will report all taxable income of the trust as required by the Internal Revenue Code. In addition, the trustee could be sued successfully under Alaska law if any transfers to the trust were fraudulent. Under new Alaska Statutes, a creditor who suspects that he or she has been defrauded has the longer of (1) four years from the date of the transfer to the trust or (2) one year after the transfer is discovered, or reasonably could have been discovered, to file a claim against the trustee to set aside a fraudulent transfer.

      Many offshore jurisdictions have shorter statutes of limitations for filing fraudulent transfer claims. On the other hand, if an individual has no known or ascertainable creditors and is willing to report all taxable income, an Alaska Trust could be an important estate and asset protection-planning vehicle.

  • Perpetual Dynasty Trust Modification - Senate Bill 162

    • Updates and Strengthened Alaska Perpetual (Dynasty) Trust Statutes

      Alaska’s new legislation expressly states that the common law rule against perpetuities does not apply in Alaska. Alaska then adopts a two-pronged approach to avoid the Delaware Tax Trap. The purpose of the first prong is to reestablish a rule against perpetuities for Alaska in the limited circumstances of property interests subject to a limited power of appointment which is exercised to create a new limited power of appointment. All such property interests are invalid unless within 1,000 years from the time of creation of the original instrument or conveyance creating the original limited power of appointment the property interests vest or terminate.

      This provision applies to a trust instrument or conveyance executed on or after 4/2/97, if the instrument or conveyance creates a non-vested property interest subject to the exercise of a power of appointment that creates a new or successive power of appointment. The goal of this provision is to cure the Delaware Tax Trap problem for all trusts created under Alaska law after the initial abolition of the rule against perpetuities in 1997.

      The second prong of the new legislation enacts a rule against suspension of the power of alienation of property. The statute provides that a trust is void if the trust terms suspend the power of alienation for a period of at least 30 years after the death of an individual alive at the time of the creation of the trust. However, the statute expressly states that a suspension of the power of alienation can be avoided by giving the trustee the express or implied power to sell the trust property.

       

      This second prong of Alaska’s approach to avoid the Delaware Tax Trap is based on the Tax Court’s decision in Estate of Murphy. In that case, the court held that the Delaware Tax Trap was not violated in Wisconsin, which had a perpetuities statute expressed in terms of a rule against suspension of the power of alienation (rather than a rule based on remoteness of vesting). The IRS has acquiesced in Murphy.

       

       

  • Alaska Limited Partnership and Limited Liability Companies - House Bill 266 and
    House Bill 222

    • Alaska's amendments to its limited partnerships and limited liability company statutes makes Alaska the preferred jurisdiction to form these entities. Alaska is the first state to take advantage of the simplified formation operation of limited partnership and limited liability companies as permitted under the new Treasury Department "check the box" regulations. In addition, under the new Alaska law, a court will be able to order the dissolution of a partnership or limited liability company only if it determines that it is impossible for the enterprise to continue to operate. Unlike the default rules under most state laws, an Alaska limited partnership or limited liability company does not go out of existence upon the death of a general partner of a limited partnership or the member of a limited liability company. Alaska has eliminated any right to demand to be bought out on six months notice. In fact, under default state law, a partner is entitled to distributions only as provided under the governing document. For these and other reasons, the combination of the Alaska Trust Act and the changes to Alaska's limited partnerships and LLC statutes provide for unique estate planning opportunities.

      House Bill 222 strengthened and improved Alaska’s limited partnerships and limited liability companies by clarifying by statute the only remedy for a creditor is a “charging order.”

  • Alaska Voluntary Community Property Option - House Bill 199 and Senate Bill 166

    • Income Tax Advantage of Community Property

      A person who owns assets with his or her spouse as community property in one of the nine community property states (Louisiana, Texas, New Mexico, Arizona, California, Nevada, Washington, Idaho and Wisconsin) has a major income tax advantage over a married person who owns assets with his or her spouse but that are not community property. This advantage results from the incongruous operation of the step-up in basis rule. This rule is one of the few, if only, income tax advantages that a person's estate receives upon his or her death.

      The best way to explain the step-up in basis rule is to start with an example of a single person living in any state on her death bed who twenty years ago paid $10,000 for a homestead that is presently worth $110,000. If the person sold the homestead before she died, she would realize a long-term capital gain of $100,000. The gain would be subject to a maximum capital gains tax of 15%, or $15,000. On the other hand, if the person decided not to sell the homestead and died the next day, the $100,000 profit would be forgiven. This means that her heirs could sell the homestead for $110,000and pay no income taxes! This is because the original cost basis of $10,000 is "stepped-up" to $110,000, the fair market value of the homestead at death. If the homestead is sold for $110,000, there is no gain and no income taxes will be owed.

      The step-up in basis rule gets more complicated when a married couple is involved. If we assume that a married couple in a non-community property state bought the homestead twenty years ago for $10,000 and held title as husband and wife, then each would own one-half of the homestead. If the husband was on his death bed and the couple sold the homestead before the husband died for its current fair market value of $110,000, the couple would realize a $100,000 long-term capital gain, just like the single person did. However, if the husband died and the wife inherited his half of the homestead and then sold it, she would only realize a $50,000 long-term capital gain. This is because the profit in the husband's half of the homestead would be forgiven by the step-up in basis rule. The husband's half of the homestead would get a "step-up" in basis to $55,000. When the husband's half was sold for $55,000 there would be no gain. However, the wife would have a gain on the sale of her half of the homestead. Her half of the homestead would have a basis of $5,000 (one-half of the original cost basis of $10,000). When this half was sold for $55,000, the wife would realize a $50,000 long-term capital gain and would pay a maximum of $7,500 of income taxes (15% of $50,000).

      If, on the other hand, the couple lived in a community property state like Washington, the income tax savings would be even greater. If the homestead was community property under Washington law, for example, the wife would get a step-up in basis in both halves of the homestead to $110,000. After her husband's death when she sold the homestead for $110,000 she would pay no income taxes! In contrast, in the prior example of the married couple who owned the homestead that was not community property, the wife who sold the homestead after her husband died would pay $7,500 of income taxes. In this way the income tax laws favor spouses in community property states that own assets as community property over spouses in non-community property states whom, as a general rule, cannot own assets as community.

      Overview of House Bill 199

      This Act (signed into law 5/23/98) will allow married Alaskans to execute a written agreement to recharacterize their assets as community property. Unlike other states which have a community property form of ownership for married persons, Alaskans would have their assets treated as community property, only to the extent they execute a written agreement and elect into a community property system under Alaska law. In contrast, community property states mandate the married couple's assets to be community property unless the spouses elect out.

      This Act not only allows Alaskan couples to enter into an agreement to have some or all of their assets treated as community property, but it also permits married persons who do not reside in Alaska to have their assets treated as community property under Alaska law by executing an Alaska Community Property Trust. Such a trust must have an Alaska trustee. It is anticipated that many married persons who reside outside of Alaska will wish to label a portion, or all, of their assets as community property because they believe that it is a more appropriate method of owning their assets and they wish to obtain the income tax advantages which are available to community property upon the death of the first spouse.

      Some believe that community property represents a more fair and rational system of sharing the ownership of property during marriage because it essentially treats the marriage like a partnership; as assets are earned during the marriage, they are treated as owned 50/50 by the two partners (the husband and wife). Others believe community property is not a fair or rational system. Regardless of one’s beliefs, it seems appropriate to allow Alaskans, and residents of other states, the freedom to choose the arrangement that is most appropriate for them.

      It should be emphasized that no asset would be labeled as community property under the Act. Rather, the Act merely authorizes married persons to execute a written agreement or trust in which they expressly elect to treat some or all of their assets as community property under Alaska law.

      Overview of Senate Bill 166

      Community property agreements and trusts strengthened. These amendments clarify ambiguities regarding the right to amend and revoke community property agreements and trusts. The amendments to Alaska Statutes 34.77.090 and .100 specify that if a community property agreement or trust provides for the non-testamentary disposition of property at the death of the second spouse, without probate, then at any time after the death of the first spouse the surviving spouse may amend the community property agreement or trust with respect to the surviving spouse’s property to be disposed of at his or her death.

      In addition, the amendment eliminates the prior statutory language that a community property agreement or trust may be amended only “on a particular date or on the occurrence of a particular event” set forth in the instrument. Rather, a community property agreement or trust may be amended or revoked at any time if the instrument generally authorizes amendment or revocation by the spouses. The amendments will apply to all community property agreements and trusts executed after the effective date of the Alaska Community Property Act.

      Note: The Chapter for Alaska Community Property Agreements and Trusts has been changed to AS 34.77.010-.100 from AS 34.75.010-.100

  • Innovative and Flexible Trust and Estate Revisions - Senate Bill 354

    • This Act creates major changes to Alaska’s Trust and Probate Laws making them, by far, the most effective and flexible while enhancing the use of Alaska Trusts. Outlined below is a summary of the key features of this Act.

      Probate Jurisdiction - AS 13.06.068

      This provision allows non-residents of Alaska to select to have their will probated under Alaska law. The advantages of this legislation are:

      1. It should allow the estate to avoid state income tax during the probate administration.

      2. It should avoid any statutory executor/personal representative fees and/or attorneys fees.

      3. The probate process in Alaska is very simple and straightforward which should save time and money.

      4. It seems that any trust that was created under the will would then have the ability to qualify as an Alaska perpetual trust and the other protective provisions of Alaska law.

      Change of Trust Situs to Alaska - AS 13. 36.043

      This provision makes it easier to move a trust to Alaska. It also clarifies that even though a trust was setup before Alaska changed its perpetual and asset protection provisions, a trust will still be valid under Alaska law. If someone has setup a trust in a foreign jurisdiction or in a U.S. jurisdiction and it either provides for asset protection and/or perpetual status, the trust can now be moved to Alaska and retain those advantages.

      Trustees Special Power to Appoint to a Different Trust - AS 13. 36.157

      This provision allows the trustee, without court approval, to appoint part or all of the trust principal to another trust if the trustee has the power to invade the principal of the trust for the benefit of the beneficiary. This power will be considered the exercise of a special Power of Appointment.

      This can be done as long as the transfer does not reduce any fixed income interest of an income beneficiary of the trust and is in favor of the beneficiary of the trust and, as required by the generation-skipping transfer tax grandfathering regulations, does not exceed the common law rule against perpetuities measured from the original commencement of the trust. The advantage is that it allows the trustee to extend any grandfathering for generation-skipping taxation; and allows the benefits of the trust to continue for future beneficiaries.

      Statute of Limitations Clarified - AS 34.40.110(d)

      This provision clarifies that the four-year statute of limitations to commence a legal action that a transfer to a trust was fraudulent starts from the cause of action rather than just the remedy.

      Challenges to Trusts - AS 13.36.310

      This provision clarifies that unless the transfer to the trust was a fraudulent conveyance, the trust is not void, voidable, liable to be set aside, defective in any fashion or questionable as to the settlor's capacity, on the grounds that the trust or transfer avoids or defeats a right, claim or interest conferred by law on a person by reason of a personal or business relationship with the settlor by the way of a marital or similar right.

      This new section also provides that even if the property in a trust is voided or set aside because it was considered a fraudulent conveyance, the trust can only be set aside to the extent necessary to satisfy the settlors’ debt to the creditor and the cost and attorney’s fees allowed.

      Trustee has First Lien on Assets - AS 13.36.310

      If the transfer to the trust is voided or set aside and the court is satisfied that the trustee has not acted in bad faith, in accepting or administering the trust, the trustee has the first and paramount lien against the property equal to the entire cost, including attorney’s fees properly incurred by the trustee in defense of the trust. Also, the beneficiary, including the Grantor, may retain a distribution made prior to the commencement of an action to set aside the transfer.

      Protection of Trustees and Others - AS 34.40.110(f)

      This provision prohibits a creditor from asserting a cause of action against the trustee and others involved in the preparation or funding of the trust for conspiracy to commit fraudulent conveyance, aiding and abetting a fraudulent conveyance or participation in the trust transaction. This means that the trustee and the client's advisors cannot be held liable for this transaction. It further states that the creditor's only relief is limited to the trust assets and to those owned by the settlor.

      Non-Alaska Co-Trustees - AS 13.36.320

      This provision allows non-residents of Alaska and banks and trust companies who are not headquartered in Alaska to act as a co-trustee with a qualified Alaska Trustee and not be considered engaged in business in Alaska solely by reason as serving as co-trustee.

      Limitation on Trustee Liability - AS 13.36.100

      This provision clarifies that a trustee, who has not been given a responsibility under the document, can not be held liable to the beneficiaries or others for the actions of the trustee who had that power. This provides extreme flexibility for the trustees in that different trustees may be given different responsibilities and the co-trustees do not have to be concerned about the actions of the other co-trustees who hold other powers. In addition, AS 13.36.192 clarifies that the settlor of the trust can relieve the trustee from any duties, restrictions and liabilities or can restrict the trustee’s privileges and powers or add duties, restrictions and liabilities. AS 13.36.194 clarifies that a beneficiary who has full legal capacity and acts on full information and may relieve the trustee from any and all duties and restrictions and liabilities that would otherwise be imposed on trustees by Alaska Statutes.

      Trust Incontestability Clause - AS 13.36.330

      This provision clarifies that if an intervivos trust penalizes a beneficiary for contesting the trust or instituting other proceedings prohibited by the trust agreement, the penalty provision will be enforceable even if probable cause exists for instituting the proceeding.

      Appreciation can be Considered as Income - AS 13.38.670

      This provision allows Alaska to be a very favorable jurisdiction for Charitable Remainder Unitrusts that are income-only with a make-up provision. Under most state laws, even though the trust may be an income-only make-up provision Charitable Remainder Trust, it is not very effective because capital appreciation usually cannot be converted into income. Alaska Statutes have been clarified to allow appreciation to be considered income making Alaska one of the best jurisdictions for Charitable Remainder Trusts.

  • Alaska Uniform Prudent Investor Act - House Bill 321

    • Alaska became the 17th state to adopt a version of the Uniform Prudent Investor Act. In essence, this Act brings trust investing up to the 21st Century by requiring the trustee to acknowledge the theory of efficient markets, more broadly known as the Modern Portfolio Theory. The trustee is required to consider, to the extent relevant, the following factors in formulating the investment portfolio:

      • the size of the portfolio;

      • the nature and likely duration of the trust;

      • the liquidity and distribution requirements;

      • the general economic conditions;

      • the possible effects of inflation or deflation;

      • the expected tax consequences of various investment and distribution decisions;

      • the role of each investment in the overall portfolio;

      • the expected total return of the portfolio; and

      • the needs of the beneficiaries for present and future distributions.

      This Act makes it clear that there are no investments, which are per se improper or imprudent, nor are there any which are per se proper or prudent. All investments must be reviewed and managed based upon the facts and circumstances of each trust situation, considering the above mentioned factors.

      A trustee can no longer escape liability for embracing a very conservative investment approach such as purchasing treasury bills or CDs. If a trust is to last for a number or years and the trustee does not consider the effects of inflation on the purchasing power of the trust, it would be liable to the beneficiaries for not having a growth component in the portfolio. Diversification is generally regarded as a requirement under the Prudent Investor Act, unless circumstances require otherwise.

      One significant change is that this Act allows the trustee to delegate investment management responsibility. For the majority of states that have not adopted a version of the Prudent Investor Act, delegation of investment responsibility by trustees is prohibited. The act also seems to indicate that if the trustee does not have investment management expertise it almost mandates that they do delegate their investment management responsibility. If a trustee delegates its management responsibility properly, it can be relieved of the liability and the liability would transfer to the organization or individual that has taken over the management duties. In order to properly delegate, the trustee must select the investment advisor in a prudent manner and must periodically review the manager’s performance and the assets held in the trust. The trustee also has a duty to control the costs of delegation.

  • Reduction in Alaska's Insurance Premium Tax - House Bill 490

    • This new law makes Alaska the preferred jurisdiction to have large life insurance policies written. All states impose a tax on life insurance premiums, which ranges from three-quarters of one percent to three percent. When calculating the premium, the insurance company adds on the applicable state insurance premium tax.

      Life insurance is the last true tax shelter. Except for the Roth IRA, it is the only vehicle where you can receive tax-free earnings. Qualified retirement plans, IRAs and annuity contracts only provide income tax deferral because when you withdraw those funds you have to pay an income tax. With the cash value that is built up in a life insurance policy, any imputed gain vanishes at death.

      With the advent of variable life insurance policies, where the insured has access to a broad range of investment strategies, including growth portfolios, this tax-free earning feature has gained greater significance. Individuals are now using private placement insurance policies where they may, in essence, select a specific manager and investment style. With this flexibility, they are investing significant sums in these policies ranging from $1 million to $50 million or more. Alaska has reduced its premium tax for premiums over $100,000 to only 10 basis points or one-tenth of one percent.

      Therefore, individuals who are purchasing large insurance policies should consider Alaska the premiere jurisdiction. With Alaska's unique trust laws, it is the ideal place to establish an irrevocable life insurance trust.

  • "Safety Net" Estate Planning Legislation - House Bill 275

    • All too frequently, estate planning documents fail to contain all the provisions necessary to maximize available federal gift, estate, and generation-skipping tax benefits. The documents may have been drafted long ago, and not appropriately updated. Alternatively, the drafter may have omitted necessary tax provisions.

      To partially cure this problem, Alaska has enacted a “Safety Net” bill. This legislation supplements wills and trusts in the following areas: marital deduction trusts, funding, the family-owned business deduction, restriction of powers of a trustee-beneficiary, interest rate for pecuniary devises, conveyances of real property to and from trusts, and applicability to revocable trusts as well as to wills.

  • Trust Modification Rules; Modifying and Terminating Irrevocable Trusts - Senate Bill 163

    • Trust Notification and accounting Rules

      The general rules in Alaska are that within 30 days of acceptance of a trust, the trustee must inform all the current beneficiaries of the existence of the trust, and upon request, furnish them with an annual accounting. New legislation now allows a settlor to exempt the trustee from these duties. This exemption may not continue beyond the settlor’s lifetime or a judicial determination of the settlor’s incapacity.

      Flexible Methods for Modifying and Terminating Irrevocable Trusts

      The Alaska legislature has enacted flexible methods for the modification and termination of irrevocable trusts. A trustee, settlor, or beneficiary may initiate proceedings to modify or terminate a trust if, because of circumstances not anticipated by the settlor, modification or termination would substantially further the settlor’s purposes in creating the trust. A court may also construe or modify the terms of a trust in order to achieve the settlor’s tax objectives.

      The legislation further provides that despite the settlor’s purposes in creating the trust, the trust can nonetheless be modified by the court upon consent of all beneficiaries if the reasons for modifying or terminating the trust outweigh the interest in accomplishing the material purposes of the trust. The inclusion of a spendthrift clause may constitute a material purpose, but is not presumed to be so. This modification provision allows for the possibility of modification due to the changed circumstances of the beneficiaries, despite what might have been a material intention of the settlor in establishing the trust.

      This new statute has particular relevancy for perpetual trusts because it provides a technique for future changes of a dispositive plan. Accordingly, this modification authority helps alleviate concern about control by a “dead hand.” A virtual representation principle is included.

  • Alaska 2003 Trust Act - Dramatically Improved Creditor Protection - House Bill 212

    • The following is taken from an article authored by Stephen E. Greer that was published in the August 2003 issue of Trusts & Estates Magazine.

      On July 10, 2003, Alaska’s Governor Murkowski signed a new Alaska Trust Act into law. The provisions of this bill greatly enhance creditor protection for third-party beneficiary trusts and self-settled spendthrift trusts, further enhancing Alaska’s desirability as a place to create and maintain trusts. The following is a short discussion of some of the more important provisions found in the act. A more complete discussion can be found in the August 2003 issue of Trusts & Estates.

      Provisions Affecting both Dynasty Trusts and Self-Settled Spendthrift Trusts

      • Courts cannot compel distributions or attach beneficial interest. Creditor protection is dependent on the protection that a spendthrift clause gives and the law of the state where the trust administration occurs. The protection that an Alaska spendthrift clause provides is extremely powerful because all creditors are barred from attaching trust assets before payment or delivery of the assets to the beneficiary. An Alaskan spendthrift clause will protect the trust assets from claims brought by spouses for support, ex-spouses for alimony, providers of necessity, tort creditors and claims for child support. Moreover, there is a provision in the act which states an attachment or other judicial order may not be made against the trustee with respect to a beneficiary’s interest held in trust. Nowhere else in the country can a settlor find such protection.

      • Dynasty trusts can name a beneficiary as the co-trustee with the authority to make distributions and there will be no loss in creditor protection. In many circumstances a settlor would like to give a beneficiary as much control as possible, provided there is no loss in creditor protection. It is now possible to name an Alaska trustee as the administrative co-trustee and name the beneficiary as the co-trustee in charge of distributions, which for tax purposes would usually be limited to the ascertainable standard defined in the Internal Revenue Code, without compromising creditor protection. What beneficiary would not like this right?

      • A beneficiary can be given a general power of appointment and the trust asset will still be protected from creditor claims. In every large estate there exists the possibility that distributions will be made to subtrusts that are not exempt from generations skipping transfer taxes. Because the estate tax is progressive in nature, federal taxes payable at death often will be less if the assets in a non-exempt trust are exposed to estate tax at the beneficiary’s death (rather than having the assets exposed to generation skimping transfer tax when the assets are distributed to skip beneficiaries). To accomplish this, a beneficiary in a non-exempt trust can be given a testamentary general power of appointment that will result in the trust assets being included in the beneficiary’s estate tax base. One of the most important provisions of Alaska’s new law states a beneficiary can be given a general power of appointment and the assets subject to this power can not be attached by the beneficiary’s creditors. This protection exists, regardless of whether there is a testamentary general power of appointment or a presently exercisable general power of appointment. Thus a settlor could conceivably give the beneficiary the power to appoint trust assets to himself and until such time that the beneficiary actually does so the trust assets will continue to be protected from creditor claims. Thus if the settlor wanted to give the beneficiary unlimited control of the trust assets, the settlor could do so but nonetheless have the assets protected from the beneficiary’s creditors until such time that the beneficiary actually distributed the assets to himself. This is an attractive alternative when the settlor wants to make an outright distribution to the beneficiary.

      This provision is also important in any trust where a beneficiary has been given a Crummey Withdrawal right. The Restatement of Law the Third, considers a beneficiary with a Crummey right to be the owner of the property over which the rights could be exercised, thus exposing the trust to the claims of a beneficiary’s creditors. However, in Alaska a beneficiary can have a Crummey Withdrawal right and the trust assets can not be subjected to the creditor claims of a beneficiary.

      • Use provisions respected. A use provision allows a trustee to make trust assets available for the use of a beneficiary. The new Alaska law states that real property or tangible personal property may be made available for the use of a beneficiary without the beneficiary’s use being considered a distribution, thus insulating the trust assets from the claims of a beneficiary’s creditors. This provision also allows an Alaska resident to create a self-settled spendthrift trust and protect a home from creditors where the homestead exemption is inadequate and through the use of a grantor trust provisions the settlor can be treated as the owner under federal income law and thus take advantage of all the favorable income tax laws pertaining to homes.

      • Trust protectors and trust advisors are not considered fiduciaries. In any long term trust it is often advisable to appoint a trust protector who is given the power to remove and replace the trustee, the power to modify or amend the trust instrument to achieve favorable tax status and the power to increase or decrease the interests of any beneficiary to the trust. In the absence of state law to the contrary, a court could consider the trust protector a fiduciary, thus decreasing the possibility of finding someone who would want to take on the trust protector role. The new Alaska law states a trust protector may have all of these powers and the trust protector will not be held accountable as a fiduciary.

      Additionally, a settlor might appoint a trust advisor that is personally knowledgeable of the beneficiary’s circumstances to assist a corporate trustee in carrying out its functions. The appointment of an advisor greatly improves the chances the purpose of the trust as envisioned by the settlor will be fulfilled. The new Alaska law states that an advisor will not be held accountable as a fiduciary.

      Provisions Affecting Only Self-Settled Spendthrift Trusts

      Needless to say, many of the provisions applicable to third-party beneficiary trusts also apply to self-settled spendthrift trusts. But some very important changes were made that apply exclusively to self-settled spendthrift trusts.

      • A major defect in self-settled spendthrift legislation is corrected. In all domestic self-settled spendthrift jurisdictions, other than Alaska, a “pre-existing creditor” has the benefit of what is essentially an unlimited statute of limitations to set aside a transfer of assets as being a fraudulent conveyance. This is because a creditor might not reasonably discover the transfer of assets to a trust until such time that the creditor has first reduced the underlying action to judgment and then had the opportunity to conduct a judgment debtor examination to discover the settlor’s assets. Even though a creditor must still prove the conveyance to the trust was fraudulent to have the transfer set aside, the creditor will have an unlimited period of time in which to do so.

      Consider this example: A doctor, unaware of any patient complaints, transfers property to a self-settled spendthrift trust. Subsequent to the transfer, a patient who was seen prior to the transfer complains that he was misdiagnosed and the doctor was negligent. Should this patient be considered a “pre-existing creditor” even though the patient’s claim was unknown to the doctor at the time the doctor transferred assets to the trust? If so, the patient would be allowed an unlimited period of time in which to assert a claim that the settlor’s transfer in trust was fraudulent and to have the transfer in trust set aside. As a result, no doctor, no contractor, or for that matter, no individual who had ever been engaged in business for any length of time could ever completely discount the possibility of a “pre-existing creditor” from successfully attacking the trust.

      The new Alaska law defines a “pre-existing creditor” as one who either:

      • Demonstrates, by a preponderance of the evidence, that he asserted a specific claim against the settlor before the settlor transferred assets to the trust; or

      • Within four years after the settlor transferred assets to the trust, files an action in court against the settlor asserting a specific cause of action based on an act or omission of the settlor (for instance a negligent surgery) that occurred before the transfer of assets to the trust.

      As a result of this change, a settlor will now know that after a certain point in time, a pre-existing creditor cannot suddenly appear and be able to maintain a successful fraudulent conveyance action against the settlor.

      • Threats from future creditors has been substantially reduced, if not eliminated. Threats from future creditors are now practically eliminated. For creditors that arise subsequent to the transfer of assets in trust, a creditor has 4 years to bring a fraudulent conveyance action to set aside the trust or the statute of limitations will run out. Realistically the statute of limitations is much shorter. First, a creditor will have to reduce the underlying claim to a judgment which in itself can take more than 4 years, before the creditor will be able to conduct a judgment debtor examination in which the transfer of assets to the trust can be discovered. Thus the typical scenario facing a future creditor is this: within a 4 year period all the following must occur; an act giving rise to a claim against the settlor, a lawsuit filed, litigated and reduced to a judgment, a judgment debtor examination conducted and another fraudulent conveyance action filed in which the creditor is able to prove that the transfer of assets in trust was fraudulent as to that creditor, whose existence in all likelihood was unknown to the settlor at the time the lawsuit was filed. Thus, it is highly unlikely that a future creditor will be able to prevail against the settlor.

      • The definition of a fraudulent conveyance is tightened. Delaware, Nevada, Rhode Island and Utah have adopted the Uniform Fraudulent Transfer Act. Under the provisions of that act, a creditor can have a transfer to a self-settled spendthrift trust set aside of the creditor can prove the transfer in trust was “intended to hinder or delay” a creditor. This gives creditors a huge arsenal with which to attach a trust. Alaska, on the other hand, eliminated the words “hinder or delay” from its statute. In Alaska, a settlor’s transfer of property in trust can be set aside only if a creditor can prove the transfer was made with an “intent to defraud that creditor.”

      • New affidavit requirement. It is common practice for an attorney to require an affidavit from a settlor of a self-settled spendthrift trust that states the conveyance is not fraudulent as to any creditor. Alaska now requires the settlor to sign a sworn affidavit containing specific provisions before the settlor transfers assets to the trust.

      As a result, the chance of a fraudulent conveyance has been reduced and the affidavit also provides additional protection to the attorney who drafts the trust.

      • CRT’s, including unitrusts with non-charitable reminder beneficiaries protected. Alaska law now allows a settlor to protect an annuity or unitrust interest that has been retained in a charitable remainder trust. In addition, a settlor may create a self-settled spendthrift trust and protect the retention of a unitrust interest despite the existence of non-charitable remainder beneficiaries.

      • An important distinction in Alaska law not changed. What was not changed is a very important distinction contained in Alaska law. In Alaska, no creditor of the settlor (not a child support agency, a spouse or an ex-spouse) is able to reach any of the trust assets. Completed gift treatment is dependent upon a determination that no creditor is able to satisfy its claim out of the trust assets. Herein lies the ability of a settlor in an Alaska self-settled spendthrift trust to make a completed gift that is not theoretically possible in other self-settled spendthrift trust jurisdictions. In each of those other states, there are specified creditors who can come into existence after the trust is established and have their claims satisfied out of the trust. Because a transfer of assets in a self-settled spendthrift trust in those states must be viewed as an incomplete gift, the trust assets are still part of, and thus must be included in the settlor’s gross estate. In Alaska, a settlor can make a completed gift and with proper drafting be able to exclude the assets from the settlor’s estate.

  • Overview of Senate Bill 344

    • Virtual Representation Amendment.

      Expands both the types of proceeding in which notice to one person who may represent another person may bind another person and the circumstances under which substitute notice may be given. Expanding the scope of the proceedings to include non-judicial settlements and informal proceedings under this chapter will streamline the process for resolving issues relating to trusts and estates and minimize the cost associated with formal court proceedings. The amendments incorporate the doctrine of “virtual representation” in which representation by one person having a substantially identical interest with respect to a particular issue may bind another person. Representation is not permitted, however, if there is a conflict of interest.

      Change of Trust Situs to Alaska.

      If the requirements of AS 13.36.035 (c) (1)-(4) are met, then the trust can be moved to the state of Alaska. At that time, if the trust instrument allows or is modified, then a governing law provision may be added which states that Alaska’s laws will apply to the trust.

      Limitations on Proceedings Against Trustees.

      AS 13.36.100 expands the reach of the limitations period for claims of breach of trust against a trustee. Under current law, a claim against a trustee for breach of trust is barred as to any beneficiary who receives a final account that terminates the trust relationship if a proceeding to assert the claim is not commenced within six months after receipt of the final account. In addition, if the trustee gives the beneficiary a periodic statement, which the beneficiary does not object, the trustee is resolved of liability after 24 months.

      Intention Regarding Spendthrift Restriction.

      AS 34.40.110 (a) (3) This new provision clarifies the legislature’s intent that the spendthrift provisions provided by AS 34.40.110 are intended to come under the exception for spendthrift trusts contained in § 541 (c) (2) (bankruptcy code).

      Protection for Interest and Qualified Personal Residence Trusts, Grantor-Retained Annuity Trusts and Grantor-Retained Uni-Trusts.

      AS 34.40.110 (b) Clarifies procedures for asserting claims. Language has been added to make it clear that a beneficiary’s interest in such distributions is protected until the distributions occur. Adds spendthrift protections for three commonly used types of estate planning approaches, personal resident’s trusts, GRATs and GRUTs.

      Protection for Persons Assisting with Creation of Trusts

      AS 34.40.110 (e) Subsection (e) was intended to protect professionals who assist in the planning and formation of self-settled discretionary spendthrift trusts. Subsequent experience with the formation of these trusts indicate that frequently assets are first placed into a limited partnership or limited liability company, and then interests in such companies are transferred to the trust. The purpose of the additional language is to protect professionals with respect to the formation of these entities as well as the formation of the trusts.

      Procedure for Asserting Fraudulent Transfer Claim

      AS 34.40.110 (b) (1) This provision clarifies that if a cause of action or a claim is asserted that a transfer to a trust is a fraudulent transfer, then the claim must be made under and processed pursuant to Alaska law.

  • Overview of Senate Bill 298

    • Summary of Analysis by David Shaftel, Esq.

      Alaska's 2006 Amendments to Its Trust and Estate Statutes

      The Alaska Legislature has again responded to suggestions from the estate planning community for improvements to Alaska's trust and estate statutes. A summary of the 2006 amendments is as follows:

      Divorce: Protection of Beneficiary's Interest in Trust.

      Many estate planners have assumed that a beneficiary's interest in a third party created spendthrift trust would be protected from the beneficiary's creditors, including a divorcing spouse. However, recent court decisions interpreting various state statutes and commentators' analyses have raised questions about this assumption. One commentator describes certain cases and theories both in states that have equitable distribution statutes and in community property states. Pursuant to these cases and theories, a beneficiary's interest in a trust has been or may be invaded or considered when the divorce court divides up the couple's property. Often the theories of the courts are based upon an interpretation of the applicable state statutes' concept of "property" which may be divided or considered upon divorce.

      Alaska's equitable division statute provides the court with authority to divide the parties' property, whether joint or separate, acquired during marriage, or acquired before marriage when the balancing of the equities between the parties requires it. If Alaska courts were in the future to determine that "property" included a spouse's interest as a beneficiary in a third party trust, or as a beneficiary in a self settled discretionary spendthrift trust created before marriage, then that interest could either be invaded or at least considered by the divorce court when equitably dividing the couple's property. Such an invasion or consideration of the beneficiary's interest will likely frustrate the intent of the settlor of the trust.

      For example, consider the situation where the senior generation creates a trust for the benefit of their child or grandchild. Most often the settlers would want the trust assets to be used for the benefit of the designated child or grandchild and not invaded and distributed to the beneficiary's ex spouse, or considered by the court in a way that allows the ex spouse to obtain more of the beneficiary's other property.

      This is an area that is driven by state law. The Alaska Legislature decided to expressly protect beneficial interests in trusts from invasion or consideration in a beneficiary's divorce property division. This protection applies whether the trust is a third party trust or a self settled discretionary spendthrift trust created prior to marriage.

      Alaska may be the first state to directly address this subject, and to expressly prohibit the divorce court's invasion or consideration of trust interests in divorce property divisions.

      Revocable Trusts: Adoption of UPC Claims Procedure.

      If a decedent has used a will as the primary vehicle for his or her estate planning, then the Uniform Probate Code provides an expedient claims procedure during the probate process. If the personal representative has provided notice to creditors, either by personal service on known creditors or by publication, then creditors must file a claim within four months of the date of the first publication or their claims will be barred.

      However, in many states, including Alaska, revocable trusts are often used as the central vehicle for estate planning. There may be no need to open a probate and appoint a personal representative. If the fiduciary desires to cut off creditors claims as quickly as possible, often a probate is opened and the claims procedure followed. Then the question arises whether this claims procedure only applies to assets in the probate estate (often minimal) or also to the assets of the revocable trust.

      In an effort to solve the above described procedural problem, Alaska has enacted Alaska Statutes 13.36.368 and 13.16.530 which are patterned after a provision that was proposed in Connecticut several years ago. In summary, these new provisions state that if a probate is opened and a personal representative appointed, and if the personal representative follows the claims procedure, then claims that are allowed or barred against the decedent's estate shall also be allowed or barred against the assets of the revocable trust. If a probate is not opened, or if the personal representative fails to follow the claims procedures, then the trustee of the revocable trust may file a petition with the court for a determination of claims and follow the general claims procedure of the Uniform Probate Code. Then claims against the revocable trust and against the decedent's estate shall be allowed or barred under those procedures.

      IRAs: Nonresidents May Form Alaska IRA Trusts for Asset Protection.

      ERISA provides asset protection for qualified plans, but not for IRAs. Many states have statutorily provided asset protection for IRAs. Alaska is one of these states. However, some states provide little or no asset protection for assets in IRAs.

      Alaska has enacted amendments that will allow nonresidents of Alaska to form an Alaska IRA trust. The trustee or custodian must be a trust company or bank with its principal place of business in Alaska. The purpose of this new IRA trust is to give nonresidents the opportunity to attempt to achieve asset protection for their IRAs. Many of the same issues that apply to domestic asset protection trusts will apply to these new IRA trusts. It should be noted that under the new Bankruptcy Act amendments, IRAs are subject to some limitations with respect to asset protection. Alaska's new IRA trust provisions are created by amendments to Alaska Statute 34.40.110(b) and new subsection, Alaska Statute 34.40.110(l)(2).

      Trust Decanting: Expansion of Statutory Authority.

      Webster tells us that "decanting" is pouring wine from one glass to another. New York enacted a "decanting" statute, which allowed a trustee who has absolute discretion to make distributions of trust assets from one trust to a new trust. Subsequently, Alaska, Delaware, and Tennessee have enacted similar provisions. This decanting authority may be used to achieve a variety of goals, including: dealing with changed circumstances; modifying administrative provisions; altering trusteeship provisions; extending the termination date of trusts (for non tax reasons); correcting drafting errors; converting a trust to a grantor trust or back; changing the governing law; dividing trust property to create separate trusts; and reducing potential liability.

      Alaska's new amendments to Alaska Statute 13.36.157 follow Delaware's lead, which allows decanting not only by a trustee who has absolute discretion but also by a trustee whose authority is limited by an ascertainable standard. However, unlike Delaware, Alaska has required that the ascertainable standard in the new trust be the same as that in the invaded trust. This limitation was added to prevent a trustee beneficiary from having a general power. For example, consider a surviving spouse who is the sole trustee of the bypass trust created by the deceased spouse's will. If state law allowed the surviving spouse to decant the bypass trust to a new trust, which did not have an ascertainable standard, then arguably the trustee beneficiary has a general power.

      Proceedings Against Trustees: Shorter Statutes of Limitations.

      Alaska has again amended its statute, which specifies the limitations periods applicable to trustees. Alaska's approach adopts some of the provisions of the Uniform Trust Code but then adds substantial changes. The most significant change shortens the claim period from twenty four months to six months.

      The new amendments to Alaska Statute 13.36.100 give a trustee three different methods to bar claims against the trustee.

      a. If the trustee issues a report without adequate disclosure of potential claims, and informs the beneficiary of the location and availability of records for examination by the beneficiary, then all claims against the trustee are barred unless a proceeding to assert a claim is commenced within three years after the beneficiary's receipt of the report.

      b. If the trustee serves a report on a beneficiary that adequately discloses the existence of a potential claim and the trustee informs the beneficiary that a proceeding to assert any claim must be commenced by the beneficiary within six months, and the beneficiary fails to so assert a claim against the trustee, then all claims of the beneficiary are barred.

      c. If the trustee petitions a court for an order approving a report that adequately discloses the existence of a potential claim, serves the report on the beneficiary, gives the beneficiary at least sixty days notice of the court proceeding, and notifies the beneficiary that a claim must be begun within forty five days after notice of the court proceeding, then all claims against the trustee will be barred unless the claims are served on the trustee and filed with the court within forty five days after the beneficiary is served with notice.

      The report of a trustee is considered to provide adequate notice to the beneficiary that there is a time limitation for filing claims if the report contains certain language specified by the new statute.

      Technical Corrections to Asset Protection Statutes.

      The new amendments also add language to Alaska Statute 13.36.310, which provides creditor protection for both third party trusts and self settled discretionary spendthrift trusts. These provisions either correct statutory references or clarify and bolster the asset protection aspects of the statute.

  • Conclusion

    • If you have the need for trust services, the Alaska Trust Company is the place to be. It was formed specifically to concentrate on investment management and trust services. It is the first independent trust company in our state. We also have the most knowledge and hands-on experience regarding trusts that can be setup under Alaska’s special trust legislation. Our services extend beyond those traditionally associated with bank trust departments.

      Alaska has always been the place for a new way to look at things. Let Alaska Trust Company show you how our state’s new trust laws can help assure the most precious wealth of all – a solid and secure future for you and your loved ones. Visit our website for copies of the legislation, sample trust forms, and other information.

      Offering a Full Range of Trust and Investment Management Services for Individuals, Families, and Institutions.

      • Customized Investment Management

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      • Retirement Plans, IRA, Profit Sharing, ESOT, etc

      ALASKA TRUST COMPANY, WITH ALASKA’S UNIQUE TRUST LAWS, PROVIDE THE COMPLETE TRUST SOLUTION

  • See How Easy it is to Open an Account With Alaska Trust Company

    • Attorney Submits

      • Draft document to Alaska Trust Company for review (Please see section 12 of website for required provisions)

      • Completed Data Information Questionnaire

      • Signed Affidavit of Solvency

      • Additional information required for asset protection trusts

      Alaska Trust Company Will

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      • Upon approval, sign finalized document and return duplicate to drafting attorney

      Due Upon Account Set-Up

      If Alaska Trust Company will have custody of individual assets:

      • Information on institution currently holding assets; including name of firm, contact, and phone number

      • List of assets to be set-up with cost values and Cusip numbers, etc.

      • Alaska attorney review fee, if applicable

      If Alaska Trust Company will not have custody of individual assets:

      • Appropriate set-up fee

      • Appropriate annual fee

      • $25,000 or other appropriate amount to be deposited in a Certificate of Deposit account at an Alaska bank

      • Alaska attorney review fee, if applicable

      Alaska Trust Company will set-up an account on its Trust System, and assets as required. Alaska Trust Company will send out statements according to frequency indicated in the New Account Form.

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