SB343 Alabama 2013 Session

Summary

Primary Sponsor

Tammy Irons

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

The bill updates Alabama's Principal and Income Act to recognize unitrusts, set conversion rules, and align the act with the Alabama Uniform Trust Code.

What This Bill Does

It defines a unitrust amount as 3-5% of the trust's net fair market value (with any excess above 5% going to principal), recognizes express unitrusts, and outlines how unitrusts are to operate. It creates procedures for converting existing trusts to unitrusts, including trustee-initiated conversions and beneficiary-initiated conversions with notices, consents, and potential court confirmation. It also clarifies that the Alabama Trust Code applies to the Principal and Income Act and brings these provisions in line with new federal rules.

Who It Affects

• Trustees and other fiduciaries who manage Alabama trusts, giving them new authority to establish, maintain, or convert to unitrusts, and to determine payment frequency, valuation dates, and other operational details.
• Beneficiaries of trusts (income and remainder), who may be required to consent or may object to conversions and who will be affected by how unitrust amounts are calculated and paid.
• Courts and legal professionals, who may be asked to approve or confirm conversions, set key terms in court orders, and handle related costs.

Key Provisions

• Defines UNITRUST AMOUNT as a percentage of net fair market value of trust assets, initially set at 3-5%; if the unitrust amount would exceed 5%, the income equals 5% and the excess becomes principal.
• Express unitrusts are recognized; income for an express unitrust equals the unitrust amount, with certain expenses not deducted from the unitrust amount; provides trustee discretion on payment frequency and valuation methods.
• Allows conversion to a unitrust by the trustee with written notice to qualified beneficiaries and requires at least one sui juris income beneficiary and one sui juris remainder beneficiary; beneficiaries may object within 60 days or consent; court may confirm the conversion.
• Allows a trust’s qualified beneficiaries to convert to a unitrust by a written instrument with all qualified beneficiaries’ consent; the court may order conversion if appropriate and will specify key terms (effective date, unitrust percentage, valuation method, etc.).
• Court orders for conversion must outline the effective date, unitrust percentage, valuation method, distributions schedule, and other necessary details; court costs are handled as determined by the court.
• The unitrust percentage for converted unitrusts is not less than 3% and not more than 5% unless the court orders otherwise; during conversion, income references in the governing instrument may be interpreted as the unitrust amount; modifications and reconversion are allowed under specified procedures.
• Certain restrictions apply to conversions (e.g., not allowed if it would change a fixed annuity, affect institutional funds, or undermine charitable or tax deductions); the act preserves other fiduciary powers and tax considerations related to units and allocations.
• Section 608 states that the Alabama Uniform Trust Code applies to the Principal and Income Act unless there is a conflict.

AI-generated summary using openai/gpt-5-nano on Feb 25, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Property, Real and Personal