Alaska trust managers would follow rules for dividing income and property

Trustees and estate managers would divide money received and expenses paid between income and the underlying property, called principal. The rules would generally cover trusts and estates administered in Alaska, plus Alaska property held for one person’s use before passing to another. Trust terms would generally take priority over these rules. Managers would act in good faith and treat beneficiaries fairly, except where the trust allows some to be favored. Managers could keep earlier accounting methods for natural-resource interests and timber land held before the effective date. The rules would apply to trusts and estates existing or created on or after the act’s effective date, unless the trust or act expressly provides otherwise.

Independent trustees and estate managers could shift amounts between income and principal without court approval to help them treat beneficiaries fairly. This power would cover trusts and estates. An eligible co-manager could act when another manager is barred because of a conflict or specified tax consequences. The manager using this power could not be a trust creator, beneficiary, or another person excluded by the independence rules, including certain relatives, controlled businesses, and employees. Adjustments could not change fixed payments, trigger specified tax consequences, or make certain trust funds count toward the creator’s public-benefit eligibility. Limits would protect charitable funds and certain income rights tied to tax benefits. Some adjustments between current and future beneficiaries would remain allowed. A trust could expressly limit this power. Managers could not use it for trusts whose income is calculated as a percentage of value under these rules. An adjustment could apply to the current accounting period, the immediately preceding period, and later periods.

Trust managers could calculate income payments as a percentage of trust value, revise that method, or return to ordinary income accounting. Eligible trusts could use this option. Trusts with special tax benefits or managers who are not independent would face a three-to-five-percent payment-rate limit. Managers would need a written policy or decision and a finding that the action would help them treat beneficiaries fairly. Required notices would go to covered beneficiaries, people holding specified trust powers, and living or existing trust creators. Written consent could replace notice. Each required group of notified beneficiaries would need at least one legally competent person or an existing organization. Trust terms could expressly block or limit these actions. Certain trusts identified by federal tax rules and certain trusts affecting public-benefit eligibility would be excluded. Notice recipients would have at least 30 days after notice is sent to object. A timely written objection would prevent use of the no-court process; a manager or beneficiary could then ask a court to decide.

Courts could require managers to change decisions about income and principal only if they found a misuse of the manager’s allowed judgment. Review would cover accounting decisions, decisions about using payment-setting powers, and how those decisions are carried out. When a manager asks a court about a proposed decision and gives the required explanation, an opposing beneficiary would have to show a misuse of the manager’s allowed judgment. If a court finds that misuse, it could order payments, require beneficiaries to return money, or reduce future payments to restore their proper positions.