AL Code § 19-3E-5 (2021)
2021 Code of Alabama|Title 19 - Fiduciaries and Trusts.|Chapter 3E - Alabama Qualified Dispositions in Trust Act.|Section 19-3E-5 - Right of Action of Creditor With Respect to a Qualified Disposition.

Section 19-3E-5Right of action of creditor with respect to a qualified disposition. (a) Notwithstanding any other provision of this chapter, with respect to any qualified disposition, a creditor has only the rights provided in this section and Section 19-3E-7. (b) In an action brought by a creditor for an attachment or other provisional remedy against property that is the subject of a qualified disposition or for avoidance of a qualified disposition, the following rules apply: (1) Except for the limitation period provided under subsection (c), the action may be brought only under Section 8-9B-5 or 8-9B-6. (2) For the claim of a creditor which arose after a qualified disposition, the action may involve only a qualified disposition that was made with actual intent to hinder, delay, or defraud the creditor. (3) The allegations in the action must be proven by a preponderance of the evidence. (c) A person may not bring or maintain an action concerning a qualified disposition under subsection (b) unless the action is commenced within either of the following periods: (1) If the claim arose before the qualified disposition was made, or on the later of the following: a. Two years after the qualified disposition was made. b. If the person who is or may be liable for any claim fraudulently concealed the existence of the claim or the identity of any person who is liable for the claim from the knowledge of the person entitled to sue on the claim, the earlier of one year after the qualified disposition was or could reasonably have been discovered by the claimant, and the time allowed under the applicable statute of limitations under Section 8-9B-10. (2) If the claim arose concurrent with or after the qualified disposition, two years after the qualified disposition was made. (d) If a trust beneficiary who has an interest in a qualified disposition or in property that is subject to a qualified disposition is a party to an action for annulment of a marriage, divorce, or separate maintenance, the following rules apply: (1) If the trust beneficiary is not the transferor of the qualified disposition, the interest of the trust beneficiary in the qualified disposition or in property that is the subject of the qualified disposition is not considered marital property, is not considered, directly or indirectly, part of the trust beneficiary's real or personal estate, and may not be awarded to the trust beneficiary's spouse in a judgment for annulment of a marriage, divorce, or separate maintenance. (2) If the trust beneficiary is the transferor of the qualified disposition, the interest of the trust beneficiary in the qualified disposition or in property that is the subject of the qualified disposition is not considered marital property, is not considered, directly or indirectly, part of the trust beneficiary's real or personal estate, and may not be awarded to the trust beneficiary's spouse in a judgment for annulment of a marriage, divorce, or separate maintenance if any of the following apply: a. The trust beneficiary transferred the property that is the subject of the qualified disposition more than 30 days before the commencement of the marriage that is the subject of the action. b. The parties to the marriage agree that this subdivision applies to the qualified disposition. c. The parties to the marriage agree that the property is not considered marital property, is not considered, directly or indirectly, part of the trust beneficiary's real or personal estate, and may not be awarded to the trust beneficiary's spouse in a judgment for annulment of a marriage, divorce, or separate maintenance. (3) If neither subdivision (1) nor (2) applies, subsections (b) and (c) do not limit the transferor's spouse's property division claims. (e) Except as otherwise provided in subdivision (1), a fiduciary qualified disposition is deemed made as of the time the property that is subject to the disposition was first transferred to the trustee who is making the disposition, or any predecessor of that trustee in an unbroken succession of fiduciary ownership of the property, in a form that meets either of the following requirements: (1) If the property that is subject to the qualified disposition was first transferred to the trustee making the disposition or the predecessor trustee before April 20, 2021, in a form that would otherwise meet the requirements of a qualified disposition, the qualified disposition is deemed to have been made as of April 20, 2021. (2) The requirements to be considered a qualified disposition or its equivalent under the laws of another state; provided, that the transferor has no more rights, powers, or interests than those permitted under Section 19-3E-4, as modified by an irrevocable written election described in subsection (f), and, at the time of the disposition, the transferor was not in arrears on a child support obligation by more than 30 days. (f) If a trustee of an existing trust proposes to make a disposition that, but for the exercise of authority granted in this subsection, would not be a qualified disposition because of a nonconforming power of appointment of the transferor, the trustee may modify the trust instrument by delivering to the qualified trustee an irrevocable written election to modify the nonconforming power of appointment to conform to the requirements of subdivision (3) or subdivision (11) of subsection (b) of Section 19-3E-4. An irrevocable written election described in this subsection shall include both of the following: (1) A description of the modified power of appointment. (2) The transferor's written consent to the modification. The transferor's consent is not a disposition. (g) With respect to a qualified disposition, a creditor does not have a claim or cause of action against any of the following: (1) The trustee of a trust that is the subject of a qualified disposition. (2) An advisor of a trust that is the subject of a qualified disposition. (3) A person involved in the counseling, drafting, preparation, execution, or funding of a trust that is the subject of a qualified disposition. (h) If more than one qualified disposition is made by means of the same trust instrument, the following rules apply: (1) With respect to a prior qualified disposition, both of the following apply: a. The making of a subsequent qualified disposition is disregarded in determining whether a creditor's claim is commenced within the time requirements specified in subsection (c). b. The making of a subsequent qualified disposition is disregarded in determining pursuant to subsection (d) whether a trust beneficiary's interest in a qualified disposition or in property that is the subject of a qualified disposition is considered marital property, is considered part of a trust beneficiary's real or personal estate, or may be awarded to the trust beneficiary's spouse in a judgment for annulment of a marriage, divorce, or separate maintenance. (2) A distribution to a trust beneficiary is considered to have been made from the most recent qualified disposition. (i) In an action against a trustee who received property in a qualified disposition, if a court takes any action declining to apply the law of this state in determining the validity, construction, or administration of the trust, or the effect of a spendthrift provision in the trust instrument, the trustee, without the further order of any court, shall immediately cease to be trustee of the trust. The former trustee does not have any power described in subsection (b) of Section 19-3E-4 except to convey the trust property to the successor trustee, to petition the court for appointment of a successor trustee, and to collect the former trustee's attorney fees, costs, and expenses. If the trust instrument does not provide for a successor trustee and the trust would otherwise be without a trustee, the following rules apply: (1) A court with jurisdiction over the trust under Chapter 3B, on the request of a qualified beneficiary of the trust, shall appoint a successor trustee on the terms and conditions the court determines to be consistent with the purposes of the trust and this chapter. (2) The former trustee may, but has no duty to, petition the court to appoint a successor trustee if a petition for appointment of a successor trustee is not brought by a qualified beneficiary within 30 days after the date on which the former trustee ceased to be a trustee of the trust. If the former trustee elects to petition for the appointment of a successor trustee, the former trustee shall be entitled to reimbursement for all attorney fees, costs, and expenses associated with the petition, and the amount of the attorney fees, costs, and expenses shall be a lien against the trust's property. (j) A valid lien attaching to property before a qualified disposition of the property survives the disposition. The trustee takes title to the property subject to the valid lien and is subject to any agreements that created or perfected the valid lien. (k) A written agreement between a transferor and a creditor may provide for any of the following: (1) The transferor will have a continuing or periodic obligation to disclose to the creditor any qualified dispositions. (2) A qualified disposition requires the prior written approval of the creditor. (3) The transferor is under any other obligation as the creditor may require with respect to a qualified disposition of the property. (4) In the event the transferor made an express or implied representation regarding an asset in order to create a debt to a creditor prior to December 31, 2021, the transferor is deemed to have entered into an agreement with the creditor, which as to the debt, a disposition of the asset would not be a qualified disposition as to the creditor, unless the disposition had the written approval of the creditor as to the disposition. (l) If a transfer that would otherwise be a qualified disposition violates an agreement with a creditor described in subsection (k), with respect to the creditor only, the transfer is not a qualified disposition and this chapter does not affect the rights of the creditor. (Act 2021-238, §5.)