Senate Bill 179 Alabama 2026 Session

Summary

Primary Sponsor

Will BarfootSenator

Republican

Session

2026 Regular Session

Title

Alabama Uniform Trust Code; amended to conform with Alabama Qualified Dispositions in Trust Act, limit property subject to creditors' claims

Summary

SB179 harmonizes creditor claim limits under the Alabama Uniform Trust Code with the Alabama Qualified Dispositions in Trust Act, clarifies when a trust’s settlor or withdrawal-power holder is treated as the creator, and allows the trustee to reimburse the creator for trust taxes without creditor claims attaching to that reimbursement.

What This Bill Does

The bill restricts creditor claims on irrevocable trusts to the same limits used in the Qualified Dispositions in Trust Act. It clarifies when a withdrawal-power holder or beneficiary is considered the settlor/creator, based on whether the power is exercisable and related value thresholds. It also lets a trustee reimburse the trust creator for income taxes paid or payable from the trust without those reimbursements becoming claims of the creator’s creditors. Additionally, it makes nonsubstantive technical updates to modernize the code language and establishes an effective date.

Who It Affects

• Settlers/creators of trusts (including those with withdrawal powers) — will see clarified rules on when they are treated as the trust creator and on the limits of creditor claims against their trust.
• Trustees and beneficiaries — will have the trustee’s authority to reimburse the creator for taxes protected from the creator’s creditors, and will be subject to updated administration and definitional provisions.

Key Provisions

• Creditors’ claims against irrevocable trusts are capped to match the limits in the Alabama Qualified Dispositions in Trust Act.
• A withdrawal-power holder and certain beneficiaries are treated as the settlor/creator only to the extent of the property subject to the power, with treatment changing if the power lapses, is released, or waives, based on IRS safe-harbor thresholds.
• Trustees may reimburse the trust creator for income taxes paid or payable from trust assets without those payments being subject to the creator’s creditors.
• Nonsubstantive, technical revisions to update existing code language to current style.
• Effective October 1, 2026, with application to all trusts per Section 19-3B-1204.

AI-generated summary using openai/gpt-5-nano on Feb 12, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Property & Estates