SB 17

Under existing law, the Alabama Family Trust (AFT Trust) has been established to receive funds used to enhance the provision of medical, social, or supplemental services to life beneficiaries who suffer a mental or physical disability. Existing state law does not require the Alabama Family Trust Corporation to comply with the federal Social Security Administration laws and rules

This bill would specify that the Alabama Family Trust Corporation would take all steps necessary to comply with all rules of the Social Security Administration. The bill would delete provisions providing for a successor life beneficiary and would provide, upon termination of the trust under certain conditions, for disbursement of the remainder, including reimbursement of governmental entities for medical assistance. The bill would also specify that the AFT Trust would not affect appropriations to the Alabama Medicaid Agency

Relating to the Alabama Family Trust (AFT Trust) and the Alabama Family Trust Corporation (AFT Corporation); to amend Sections 38-9B-2, 38-9B-3, and 38-9B-5 of the Code of Alabama 1975; to specify that the Alabama Family Trust Corporation would take all steps necessary to comply with all rules of the Social Security Administration; to delete provisions providing for a successor life beneficiary and provide for disbursement of the trust upon termination of the trust under certain conditions; and to specify that the AFT Trust would not affect appropriations to the Alabama Medicaid Agency.

Section 1

Sections 38-9B-2, 38-9B-3, and 38-9B-5 of the Code of Alabama 1975, are amended to read as follows:

§38-9B-2.

As used in this chapter, the following words shall have the following meanings:

(1) ALABAMA FAMILY CHARITABLE TRUST (AFT CHARITABLE TRUST). The trust established by the board of trustees that qualifies as a tax exempt charitable entity under the United States Internal Revenue Code, to provide benefits for any individual who does not have a sufficient amount in his or her AFT Trust to meet the individual's needs.

(2) ALABAMA FAMILY TRUST (AFT TRUST). The Alabama Family Trust established pursuant to this chapter.

(3) ALABAMA FAMILY TRUST CORPORATION (AFT CORPORATION). An Alabama not-for-profit corporation established by the board of trustees pursuant to this chapter that qualifies as a tax exempt charitable organization under the United States Internal Revenue Code.

(4) BOARD OF TRUSTEES. The Alabama Family Trust Board of Trustees established pursuant to this chapter.

(5) COMMISSIONER. The Commissioner of the Alabama Department of Mental Health.

(6) CONTRIBUTION. The balance of all amounts placed in a particular account but not including any appreciation in value of investments or accretions thereto resulting from any source, such as dividends, interest, and capital gains. In no event shall contribution mean more than the total of all contributions made to a particular account.

(7) CONTRIBUTOR. Any person who makes a donation directly to the AFT Corporation or the AFT Charitable Trust.

(8) CO-TRUSTEE. Any person named by the settlor to work with the trustee in providing benefits to a life beneficiary, except neither a contributor nor a contributor's spouse shall be the co-trustee if the contributor or the contributor's spouse is the life beneficiary.

(9) DEPARTMENT. The Alabama Department of Mental Health.

(10) IMPAIRMENT. A mental or physical disability that substantially limits one or more major life activities, whether the impairment is congenital or acquired by accident, injury, age, or disease, and where the impairment is verified by medical findings that meet the medical-vocational requirements for a finding of disability under Section 223(d) of the Social Security Act, 42 U.S.C. Section 423(d), or under Section 1614 of the Social Security Act, 42 U.S.C. Section 1382c.

(11) LIFE BENEFICIARY. A beneficiary designated by a settlor.

(12) NET INCOME. The earnings received on investments less expenses and fees for administration.

(13) REQUESTING PARTY. The party requesting arbitration of a dispute regarding benefits to be provided by the AFT Trust.

(14) RESPONDING PARTY. The party not requesting arbitration of a dispute regarding benefits to be provided by the AFT Trust.

(15) SETTLOR. A person who establishes an AFT Trust account for a life beneficiary.

(16) SUCCESSOR LIFE BENEFICIARY. A successor life beneficiary designated by the settlor to the AFT Trust, who is a legal sibling of the life beneficiary and who otherwise qualifies as a life beneficiary under the conditions of this chapter.

(17)(16) TRUSTEE. The Alabama Family Trust Corporation.

§38-9B-3.

(a) Contributors may supplement the care, support, habilitation, and treatment of impaired persons pursuant to this chapter. Neither the contribution to the AFT Trust for the benefit of a life beneficiary nor the use of AFT Trust assets to provide benefits shall in any way reduce, impair, or diminish the benefits to which a person is otherwise entitled by law. The establishment and administration of the AFT Trust shall not be taken into consideration in appropriations for the department or the Alabama Medicaid Agency to render services required by law.

(b) The assets held by the trustee and assets held in the AFT Trust and the AFT Charitable Trust pursuant to this chapter shall not be considered state money, assets of the state, or revenue for any purpose of the Constitution of Alabama of 1901, or statute or any other state's constitution or statute. The assets held by the trustee and its income and operations shall be exempt from all state and local taxation.

§38-9B-5.

(a) The board of trustees shall establish and administer the AFT Corporation. The board of trustees shall execute all documents necessary to establish and administer the AFT Corporation including, but not limited to, documents to form a not-for-profit corporation and to qualify as an organization pursuant to Section 501(c)(3) of the United States Internal Revenue Code.

(b) The AFT Corporation shall establish the AFT Trust and the AFT Charitable Trust, and the board of trustees shall administer the AFT Trust and the AFT Charitable Trust through the AFT Corporation. The board of trustees and the AFT Corporation shall take all steps necessary to satisfy all federal and state laws, and all regulations, rules, and policies established by the federal Social Security Administration to ensure that the AFT Trust and the AFT Charitable Trust are qualified to supplement the provision of government entitlement funding and, where necessary, are qualified as tax exempt entities under the United States Internal Revenue Code., including, but not limited to, amending any master or joinder trust agreements or other corporation documents to comply with all relevant federal and state laws, rules, regulations, and policies. Any such amendments shall apply to all existing and future trust agreements for the benefit of life beneficiaries.

(c) The documents establishing the AFT Trust shall include and be limited by the following:

(1) To be eligible to participate in the AFT Trust, a life beneficiary must suffer from an impairment as defined in this chapter.

(2) The AFT Trust may accept contributions from any source, so long as basic eligibility requirements are satisfied, to be held, administered, managed, invested, and distributed in order to facilitate the coordination and integration of private financing for individuals who have an impairment, while maintaining the eligibility of those individuals for government entitlement funding so that life beneficiaries remain eligible for means-tested government benefits. Contributions and earnings of the AFT Trust may be administered as one trust for purposes of investment and management of funds. Notwithstanding the foregoing, separate accounts shall be established for each designated life beneficiary. The net income earned shall be credited to the accounts of the life beneficiaries in proportion to the fair market value that each account has to the total fair market value of all accounts. Administrative fees and administrative expenses may be charged directly to an account of a life beneficiary, except that administrative fees shall not exceed the income allocated to that account.

(3) Every settlor shall designate a specific person as the life beneficiary of the contribution made by the contributor. In addition, each settlor shall name a co-trustee, including a successor or successors to the co-trustee, to act with the trustee on behalf of the designated life beneficiary. Notwithstanding the foregoing, neither a life beneficiary or his or her spouse shall be eligible to be a co-trustee or a successor co-trustee.

(4) If a settlor designates a contributor or the contributor's spouse as the life beneficiary, then the account of the life beneficiary shall, regardless of any other provision of this chapter, meet the following additional conditions:

(i) The AFT Trust shall be irrevocable.

(ii) The amounts remaining in the life beneficiary's account upon the death of the life beneficiary shall be first dispersed to the AFT Corporation, as agent for all purposes of the State of Alabama, as reimbursement for any funds owed to. The amounts remaining in the life beneficiary's account upon the death of the life beneficiary shall be disbursed by the AFT Corporation as follows: (1) payment of any taxes due from the trust to the state or any other state or the federal government because of the death of the beneficiary; (2) payment of reasonable fees for administration of the trust such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with termination and wrapping up of the trust; (3) retention of 10 percent to AFT Corporation for the AFT Charitable Trust; (4) reimbursement to the State of Alabama, or to any other state, the District of Columbia or any other commonwealth, territory, or jurisdiction of the United States for medical assistance paid on behalf of the life beneficiary under the plan of the respective jurisdiction, and; and (5) payment of the balance, if any, shall be dispersed in accordance with rules and regulations adopted by the AFT Corporation. All sums received by the AFT Corporation, as agent for the State of Alabama, shall be distributed, as appropriate, by the AFT Corporation. The AFT Corporation shall determine the amount to be retained by the AFT Corporation for the AFT Charitable Trust from the amounts remaining in the life beneficiary's account at death and the amount shall be outlined in the trust agreement established at the time of the creation of the life beneficiary's account with the AFT Corporation.

(iii) Neither a contributor nor the contributor's spouse shall serve as co-trustee.

(5) During his or her lifetime, any contributor or contributor's spouse who has not been designated as the life beneficiary, may revoke his or her contribution made to the AFT Trust. Notwithstanding the foregoing, any contributor may, at any time, voluntarily waive the right to revoke by written notice. If the life beneficiary has not received any benefits provided by the use of the AFT Trust income or principal at the time the contributor revokes the contribution to the AFT Trust, then, subject to the payment of any administrative fees and expenses as established by the AFT Corporation, an amount equal to the current fair market value of the balance of the life beneficiary's account in the AFT Trust as determined on the date of distribution shall be returned to the contributor. If at the time a contributor revokes the contribution to the AFT Trust the life beneficiary has received any benefits provided by the use of the AFT Trust income or principal, then, subject to the payment of any administrative fees and expenses as established by the AFT Corporation, an amount equal to 95 percent of the current fair market value of the principal balance of the life beneficiary account in the AFT Trust as determined on the date of distribution shall be returned to the contributor. The remaining balance of the life beneficiary account shall be distributed to the AFT Charitable Trust.

(6) The co-trustee, with the consent of the trustee, shall agree on the amount of income or principal, or both, to be used to provide non-cash benefits in the best interest of the life beneficiary. Any net income which is not used shall be added annually to the principal.

(7) In the event that the trustees trustee and the co-trustee shall be unable to agree either on the amount of income or principal, or income and principal, to be used or the benefits to be provided, then either the trustees trustee or the co-trustee may request that the matter be resolved by arbitration. The requesting party shall send a written request for arbitration to the responding party and shall in the request set forth the name, address, and telephone number of the requesting party's arbitrator. The responding party shall, within 10 days, after receipt of the request for arbitration, set forth in writing to the requesting party the name, address, and telephone number of the responding party's arbitrator. Copies of the request for arbitration and response shall be sent to the commissioner of the department. If the two designated arbitrators are unable to agree upon a third arbitrator within 10 days after the responding party has identified the responding party's arbitrator, then the commissioner shall designate the third arbitrator by written notice to the requesting and responding parties' arbitrators. The three arbitrators shall meet and render a decision within 30 calendar days after the appointment of the third arbitrator. A decision of a majority of the arbitrators shall be binding upon the requesting and responding parties. Each party shall pay the fees and expenses of the party's arbitrator and the fees and expenses of the third arbitrator shall be borne equally by the parties.

(8) If a life beneficiary for whose benefit a contribution has been made to the AFT Trust ceases to be eligible to participate in the AFT Trust, and the contributor does not revoke or withdraw the applicable balance of the life beneficiary's account in the AFT Trust, then the trustee may, by written notice to the contributor or acting co-trustee, terminate the AFT Trust as to such life beneficiary.

(9) At the time of termination pursuant to subdivision (8) of this subsection of a life beneficiary's account from the AFT Trust, if the life beneficiary has not received any benefits provided by the use of AFT Trust income or principal, or the life beneficiary has received benefits provided by the use of AFT Trust income or principal for a period of not more than five years from the date a contribution has first been made to the AFT Trust for the life beneficiary, then an amount equal to 95 percent of the current fair market value of the principal balance of the life beneficiary's account in the AFT Trust as determined on the date of distribution shall be distributed to the account of the successor life beneficiary, and the balance of the life beneficiary's account in the AFT Trust shall be distributed to the AFT Charitable Trust. At the time of withdrawal by the co-trustee or termination as provided above, if the life beneficiary has received any benefits provided by the use of AFT Trust income or principal for a period of more than five years from the date a contribution has first been made to an account in the AFT Trust for the life beneficiary, then an amount equal to 90 percent of the current fair market value of the balance of the life beneficiary's account in the AFT Trust as determined on the date of distribution shall be distributed to the account of the successor life beneficiary, and the balance of the life beneficiary's account in the AFT Trust shall be distributed to the AFT Charitable Trust.

(10) If the life beneficiary dies before receiving any benefits provided by the use of AFT Trust income or principal, all amounts remaining in the account of such life beneficiary shall be transferred to the account of a successor life beneficiary, if any. If there is no successor life beneficiary, then an amount equal to the current fair market value of the principal balance of the life beneficiary's account in the AFT Trust as determined on the date of distribution shall be distributed to the person or persons as the settlor has designated. If at the time of death of the life beneficiary, the life beneficiary has received benefits provided by the use of AFT Trust income or principal, or both, then all amounts remaining in the account of such life beneficiary shall be transferred to the account of a successor life beneficiary, if any. If there is no successor life beneficiary, an amount equal to 90 percent of the current fair market value of the balance of the life beneficiary's account in the AFT Trust, as determined on the date of distribution, shall be distributed to the person or persons as the settlor has designated, and the remaining balance of the life beneficiary's account in the AFT Trust, shall be distributed to the AFT Charitable Trust.

(11) Upon receipt of a notice of the death of a life beneficiary where there is a successor life beneficiary, the applicable portion of the current fair market value of the life beneficiary's account in the AFT Trust shall be transferred to the account of the successor life beneficiary, and the co-trustee for the successor life beneficiary, with the consent of the trustee, shall agree on the amount of income or principal, or both, to be used to provide non-cash benefits in the best interest of the successor life beneficiary. After the death of a life beneficiary, an amount equal to 90 percent of the current fair market value of the balance of the successor life beneficiary's account in the AFT Trust, as determined on the date of distribution, shall be distributed to the person or persons as the settlor has designated, and the remaining balance of the successor life beneficiary's account in the AFT Trust shall be distributed to the AFT Charitable Trust.

(8) If a settlor designates a contributor or the contributor's spouse as the life beneficiary and the trustee terminates the individual trust agreement for any lawful reason other than the death of the life beneficiary, the amounts remaining in the life beneficiary's account upon the termination shall be dispersed as follows:

a. Payment of reasonable fees for administration of the trust such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with termination and wrapping up of the trust;

b. Reimbursement to the State of Alabama, or to any other state, the District of Columbia, or any other commonwealth, territory, or jurisdiction of the United States, for medical assistance paid on behalf of the life beneficiary under the plan of the respective jurisdiction; and

c. Payment of the balance, if any, to the life beneficiary.

(d) The documents establishing the AFT Charitable Trust shall include and be limited to the following:

(1) The AFT Charitable Trust shall be a charitable trust under the United States Internal Revenue Code and shall be administered as part of the AFT Trust, but as a separate account. The income attributable to the AFT Charitable Trust shall be used for the benefit of beneficiaries of AFT individual trusts who have needs that cannot be met from funds available to such life beneficiaries from their AFT individual trusts. The board of trustees shall determine annually the amount of AFT Charitable Trust income to be used to provide benefits and the nature and type of benefits to be provided for each AFT life beneficiary while taking into account the individual's eligibility for government benefits. Any income of the AFT Charitable Trust not used shall be added annually to the principal.

(2) The board of trustees shall accept contributions to the AFT Charitable Trust from any source and shall comply with all rules and regulations under the United States Internal Revenue Code that govern the acceptance of charitable contributions."

Section 2

This act shall become effective immediately following its passage and approval by the Governor, or its otherwise becoming law.