HB394 Alabama 2013 Session

Summary

Primary Sponsor

Chris EnglandRepresentative

Democrat

Session

Regular Session 2013

Title

Trusts, Principal and Income Act, apportionment between income and remainder beneficiaries, conversions of trust to unitrust provided for, Secs. 19-3A-102, 19-3A-103, 19-3A-104, 19-3A-409 am'd.; Secs. 19-3A-105, 19-3A-106, 19-3A-608 added

Summary

HB394 updates Alabama trusts to authorize unitrusts, refine income and principal allocations, and allow conversion of trusts to unitrusts, aligning state law with federal rules.

What This Bill Does

It defines unitrust amounts as a percentage of net fair market value (typically 3%–5%), with any excess to principal and expenses not deducted from the unitrust. It creates a process for converting trusts to unitrusts, including required notices to beneficiaries, consent, and potential court approval, and sets the terms the court or notice must cover (effective date, unitrust percentage, valuation method, etc.). It imposes restrictions on conversions to protect tax benefits, charitable deductions, and certain financial arrangements, and it outlines how separate funds and survivor transfers are treated. It also makes clear that the Alabama Uniform Trust Code applies to these provisions and notes the act’s effective date.

Who It Affects

• Beneficiaries of trusts (income and remainder) whose income calculation may switch to a unitrust amount and who may participate in or be affected by conversion decisions.
• Trustees and fiduciaries who gain authority to convert trusts to unitrusts, must compute and manage unitrust amounts, follow notice/consent procedures, and adhere to valuation and tax-related restrictions.

Key Provisions

• Express unitrust framework: unitrust amount is 3-5% of net fair market value; excess goes to principal; expenses are not deducted from the unitrust; trustee sets payment frequency and valuation rules and may adjust for nonliquid assets.
• Conversion to unitrust: trustee may convert if it better achieves trust goals; requires written notice to qualified beneficiaries with key terms; beneficiaries may consent; court approval can be sought; court orders specify effective date, unitrust percentage, valuation method, and related matters.
• Conversion restrictions: cannot convert if it would alter fixed annuity payments, involve an Institutional Fund, reduce charitable deductions, or trigger unwanted tax consequences for owners; limitations also guard against estate or marital tax issues.
• Allocation and separate funds: rules for payments from separate funds between income and principal; internal income for surviving spouses; unitrust treatment when applicable; practical methods provided if internal income or fund values are unavailable.
• Code integration and effective date: Alabama Uniform Trust Code applies to these provisions unless inconsistent; act becomes effective on the first day of the third month after passage and approval.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Property, Real and Personal