HB394 Alabama 2013 Session

Under federal Treasury Regulations Section 1.643(b)-1, a state law is allowed to provide that a trust may provide for an alternative for reasonable apportionment between the income and remainder beneficiaries of the total return of the trust. It offers as an example "a state statute providing that income is a unitrust amount of no less than 3 percent and no more than 5 percent of the fair market value of the trust assets, whether determined annually or averaged on a multiple year basis. . . ." This type of provisions is commonly referred to as a "unitrust." Under existing law in this state, the Alabama Principal and Income Act does not specifically define a "unitrust amount," provide that an express trust has the power to convert to a unitrust, or provide that the Alabama Trust Code applies to the Principal and Income Act

This bill would amend the Alabama Principal and Income Act to acknowledge trusts that are established initially as unitrusts and also to provide procedures for existing trusts to be converted into unitrusts. An additional provision is added to make clear that the Alabama Trust Code applies to the Alabama Principal and Income Act

Relating to trusts; to amend Sections 19-3A-102, 19-3A-103, 19-3A-104, and 19-3A-409 of the Code of Alabama 1975, relating to the Alabama Principal and Income Act, to make such provisions consistent with new federal law authorizing unitrusts; and to add Sections 19-3A-105, 19-3A-106, and 19-3A-608 to the Code of Alabama 1975, to address trusts created as express unitrusts, to authorize the conversion of trusts to unitrusts and to clarify that the Alabama Trust Code applies to the Alabama Principal and Income Act.