Section 34.40.113. Discretionary interests in irrevocable trusts.

   (a) This section applies to a creditor's claim with respect to a discretionary interest in an irrevocable trust unless the trust instrument provides otherwise.
   (b) A discretionary interest in an irrevocable trust is not a property interest or an enforceable right. It is an expectancy that a creditor of a beneficiary may not attach or otherwise reach.
   (c) A creditor of a beneficiary may not force a distribution with regard to a discretionary interest in an irrevocable trust. A creditor may not compel a trustee to exercise the trustee's discretion to make a distribution with regard to a discretionary interest in an irrevocable trust.
   (d) Even if a beneficiary has an outstanding creditor, in the case of a discretionary interest in an irrevocable trust, a trustee who has the authority to pay income or principal to a beneficiary may pay it to a third party if the payment is for the benefit of the beneficiary. A trustee is not liable to a creditor for paying income or principal on behalf of the beneficiary.
   (e) A creditor of a beneficiary may not maintain an action or a proceeding in court that interferes with the trustee's discretion to apply income or principal on behalf of the beneficiary.
   (f) A creditor of a beneficiary may not obtain an order of attachment or similar relief that would prevent a trustee from making a discretionary payment to a third party on behalf of the beneficiary.
   (g) This section does not prevent a creditor from obtaining relief from a fraudulent transfer under AS 34.40.110.
   (h) In this section, a beneficiary's entitlement to a distribution is within the discretion of a trustee, whether or not the trust instrument states the purposes for the distribution or uses "may," "shall," "sole and absolute," "uncontrolled," or similar words.
   (i) In this section, "discretionary interest" means a beneficiary's interest in an irrevocable trust if the beneficiary's entitlement to a distribution is within the discretion of the trustee.

Notes

History

(Sec. 40 ch 45 SLA 2013)