AlabamaStarting October 2026, trustees may adjust trust income and principal
Starting October 1, 2026, trustees may adjust how trust money is counted when a beneficiary’s payments depend on income and the stated allocation rules cannot be followed.
What it does
Trustees may adjust how trust receipts and payments are counted as income or principal when distributions depend on income and the stated allocation rules cannot be followed. Several tax protections and trustee conflicts bar adjustments.
A trustee or beneficiary may ask a court to have a covered trust follow these rules going forward. They may instead elect to do so with written consent from all current income beneficiaries and presumptive remainder beneficiaries.
Argument forAdjusting how a trust’s money is counted could help trustees meet beneficiaries’ needs when the usual allocation rules do not work.
Argument againstTrustees could shift money away from income, which might reduce payments to some beneficiaries, though the law bars adjustments in several situations.
More detail
A trustee may adjust how trust receipts and payments are counted as income or principal. This applies to trustees of trusts covered by the chapter, subject to the listed limits. The text ties this power to prudent investing, distributions based on trust income, and a finding that the stated allocation rules cannot be followed. Trustees must consider the trust and beneficiaries’ circumstances. The text bars adjustments in several tax-sensitive situations, when they would benefit a trustee, when a trustee is a beneficiary, and for unitrusts. The law takes effect October 1, 2026.
A trustee or beneficiary may seek court approval for a covered trust to follow this section going forward, or elect to do so with written consent. This option covers a trust under the chapter and a trust to be created from a decedent’s estate that is under the chapter. An election without court approval requires written consent from all current income beneficiaries and presumptive remainder beneficiaries. The text says that consent binds others who may have an interest in the trust. The law takes effect October 1, 2026.
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Where it stands
- Introduced
- Passed Senate
- Passed House
- To Governor
- Became Law
Looking ahead
No hearings or votes scheduled.
History
- 2026
- Apr 15EnactedBecame Law
- Apr 8Third Reading in Second House
- Vote recorded Third Reading in Second House. Result: pass.Lower
- Vote recorded Motion to Read a Third Time and Pass - Adopted Roll Call 1299. Result: pass.Lower
- Apr 8Motion to Read a Third Time and Pass - Adopted Roll Call 1299Passed House
- Apr 8Ready to Enroll
- Apr 8EnrolledTo Governor
- Apr 8Signature Requested
- Apr 8Delivered to GovernorMinor
- Apr 1Reported Out of Committee Second House
- Apr 1Read for the Second Time and placed on the Calendar (Judiciary)Minor
- Mar 19Read for the first time and referred to the House Committee on JudiciaryMinor
- Mar 19Pending Committee Action in Second House (Judiciary)
- Mar 17Third Reading in House of Origin
- Vote recorded Third Reading in House of Origin. Result: pass.Upper
- Vote recorded Motion to Read a Third Time and Pass - Adopted Roll Call 934. Result: pass.Upper
- Mar 17Motion to Read a Third Time and Pass - Adopted Roll Call 934Passed Senate
- Feb 25Reported Out of Committee House of Origin
- Feb 25Read for the Second Time and placed on the Calendar (Judiciary)Minor
- Jan 20Read for the first time and referred to the Senate Committee on JudiciaryMinor
- Jan 20Pending Committee Action in House of Origin (Judiciary)Introduced
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