HB293 Alabama 2021 Session

Summary

Primary Sponsor

David FaulknerRepresentative

Republican

Session

Regular Session 2021

Title

Qualified Dispositions in Trust Act, created, to govern certain transfers of trust property

Summary

Creates the Alabama Qualified Dispositions in Trust Act to govern certain transfers of trust property and regulate how these dispositions interact with creditors, trustees, and beneficiaries.

What This Bill Does

First, it defines key terms such as transferor, qualified disposition, and qualified trustee. Second, it limits the transferor's powers over property in a qualified disposition and sets allowed rights. Third, it creates creditor protections and procedures to challenge or avoid a qualified disposition, including timelines and remedies, and it establishes court jurisdiction and trustee succession rules.

Who It Affects

• Transferors (people who make qualified dispositions): would have only the powers allowed by the trust instrument and could lose control of the disposed property if the disposition is contested or nonconforming.
• Qualified Trustees and Advisors: must meet state residency/authorization and supervision requirements, keep custody of assets in Alabama, and have records in-state; if they no longer meet criteria, they may resign and a successor must take over.
• Trust Beneficiaries and Qualified Beneficiaries: have protections against certain creditor actions and are subject to avoidance rules when dispositions are challenged; their interests and potential distributions are addressed under specific rules, including marital-property considerations.
• Creditors: gain new rights to challenge or avoid qualified dispositions, with defined time limits, burden of proof, and remedies such as liens and priority rules for costs.
• Courts: circuit and probate courts have defined jurisdiction and venue rules for disputes about qualified dispositions.

Key Provisions

• Definitions section establishing terms like Advisor, Qualified Beneficiary, Qualified Disposition, Qualified Trustee, and other relevant concepts.
• Scope and precedence: the act applies to dispositions made on or after its effective date and generally prevails over conflicting Alabama trust or voidable-transaction laws.
• Permitted transferor powers (Section 4): a transferor may retain only specific rights listed in the trust instrument (e.g., directing investments, vetoing distributions, certain powers of appointment, income receipts, tax-related actions, and debt/expense rights) and none of these rights alone confer the power to revoke the disposition.
• Creditor rights (Section 5) and avoidance: creditors can pursue actions to attach or avoid qualified dispositions under controlled procedures and time limits, with rules about proof and limitations on who can sue.
• Qualified affidavit (Section 6): requires a transferor to sign a qualified affidavit before a qualified disposition, detailing permissible representations; defective affidavits have limited effect and certain exceptions exist.
• Effects of avoided dispositions (Section 7): outlines remedies if a disposition is avoided (e.g., trustee liens for costs, protections for good-faith trustees or beneficiaries, and special rules for marital property), and sets limits on what creditors can recover.
• Cessation and succession of qualified trustees (Section 8): if a qualified trustee ceases to meet requirements, a successor takes over or the court appoints one; dispositions remain qualified dispositions with timely succession.
• Rights of creditors of trust beneficiaries (Section 9): strengthens protections for trust beneficiaries from attachment, while authorizing necessary trustee duties to oppose improper transfers and recover costs as liens.
• Application and relation to other laws (Section 10): the act governs in its area and takes precedence over conflicting state laws; effective date is immediate after passage and approval.
• General framework: reinforces that the act supplements existing law with ongoing references to general principles of law and equity as needed.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Wills and Trusts