Arkansas 2023 Regular Session

Arkansas House Bill HB1019 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	Stricken language would be deleted from and underlined language would be added to present law.
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3	3
4	4	State of Arkansas 1
5	5	94th General Assembly A Bill 2
6	6	Regular Session, 2023 HOUSE BILL 1019 3
7	7	4
8	8	By: Representative Maddox 5
9	9	6
10	10	For An Act To Be Entitled 7
11	11	AN ACT TO AMEND THE LAW CONCERNING THE C REATION OF A 8
12	12	SPENDTHRIFT TRUST; T O CREATE THE ARKANSA S SPENDTHRIFT 9
13	13	TRUST ACT; TO AMEND THE UNIFORM STATUTOR Y RULE 10
14	14	AGAINST PERPETUITIES ; AND FOR OTHER PURP OSES. 11
15	15	12
16	16	13
17	17	Subtitle 14
18	18	TO AMEND THE LAW CONCERNING THE CREATION 15
19	19	OF A SPENDTHRIFT TRUST; TO CREATE THE 16
20	20	ARKANSAS SPENDTHRIFT TRUST ACT; AND TO 17
21	21	AMEND THE UNIFORM STATUTORY RULE AGAINST 18
22	22	PERPETUITIES. 19
23	23	20
24	24	21
25	25	BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 22
26	26	23
27	27	SECTION 1. Arkansas Code Title 18, Chapter 3 is amended to read as 24
28	28	follows: 25
29	29	18-3-101. Statutory rule against perpetuities. 26
30	30	(a) A nonvested property interest is invalid unless: 27
31	31	(1) when the interest is created, it is certain to vest or 28
32	32	terminate no later than 21 years after the death of an individ ual then alive; 29
33	33	or 30
34	34	(2) the interest either vests or terminates within 90 years 31
35	35	after its creation. 32
36	36	(b) A general power of appointment not presently exercisable because 33
37	37	of a condition precedent is invalid unless: 34
38	38	(1) when the power is created, the c ondition precedent is 35
39	39	certain to be satisfied or becomes impossible to satisfy no later than 21 36 HB1019
40	40
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42	42
43	43
44	44	years after the death of an individual then alive; or 1
45	45	(2) the condition precedent either is satisfied or becomes 2
46	46	impossible to satisfy within 90 years after its creation. 3
47	47	(c) A nongeneral power of appointment or a general testamentary power 4
48	48	of appointment is invalid unless: 5
49	49	(1) when the power is created, it is certain to be irrevocably 6
50	50	exercised or otherwise to terminate no later than 21 years after the d eath of 7
51	51	an individual then alive; or 8
52	52	(2) the power is irrevocably exercised or otherwise terminates 9
53	53	within 90 years after its creation. 10
54	54	(d) In determining whether a nonvested property interest or a power of 11
55	55	appointment is valid under subdivision (a)(1 ), (b)(1), or (c)(1) of this 12
56	56	section, the possibility that a child will be born to an individual after the 13
57	57	individual's death is disregarded. 14
58	58	(e) If, in measuring a period from the creation of a trust or other 15
59	59	property arrangement, language in a governin g instrument (i) seeks to 16
60	60	disallow the vesting or termination of any interest or trust beyond, (ii) 17
61	61	seeks to postpone the vesting or termination of any interest or trust until, 18
62	62	or (iii) seeks to operate in effect in any similar fashion upon, the later of 19
63	63	(A) the expiration of a period of time not exceeding 21 years after the death 20
64	64	of the survivor of specified lives in being at the creation of the trust or 21
65	65	other property arrangement or (B) the expiration of a period of time that 22
66	66	exceeds or might exceed 21 ye ars after the death of the survivor of lives in 23
67	67	being at the creation of the trust or other property arrangement, that 24
68	68	language is inoperative to the extent it produces a period of time that 25
69	69	exceeds 21 years after the death of the survivor of the specified lives 26
70	70	The common law rule against perpetuities is not in force in this state . 27
71	71	28
72	72	18-3-102. When nonvested property interest or power of appointment 29
73	73	created Limitation on suspension of absolute power of alienation . 30
74	74	(a) Except as provided in subsections (b) and (c) of this section and 31
75	75	in § 18-3-105(a), the time of creation of a nonvested property interest or a 32
76	76	power of appointment is determined under general principles of property law. 33
77	77	(b) For purposes of this chapter, if there is a person who alone can 34
78	78	exercise a power created by a governing instrument to become the unqualified 35
79	79	beneficial owner of (i) a nonvested property interest or (ii) a property 36 HB1019
80	80
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82	82
83	83
84	84	interest subject to a power of appointment described in § 18 -3-101(b) or § 1
85	85	18-3-101(c), the nonvested pro perty interest or power of appointment is 2
86	86	created when the power to become the unqualified beneficial owner terminates. 3
87	87	(c) For purposes of this chapter, a nonvested property interest or a 4
88	88	power of appointment arising from a transfer of property to a pre viously 5
89	89	funded trust or other existing property arrangement is created when the 6
90	90	nonvested property interest or power of appointment in the original 7
91	91	contribution was created. 8
92	92	(d) For purposes of this chapter, if a nongeneral power of appointment 9
93	93	or a general testamentary power of appointment is used to create another 10
94	94	nongeneral power of appointment or general testamentary power of appointment, 11
95	95	the nonvested property interest or power of appointment created through the 12
96	96	exercise of the other nongeneral power of appointment or general testamentary 13
97	97	power of appointment is considered to have been created at the same time the 14
98	98	first nongeneral power of appointment or general testamentary power of 15
99	99	appointment was created 16
100	100	The absolute power of alienation may not b e suspended by any limitation 17
101	101	or condition for a longer period than during the continuance of the lives of 18
102	102	persons in being plus a period of thirty (30) years at the creation of the 19
103	103	limitation or condition . 20
104	104	21
105	105	18-3-103. Reformation Permitted suspension of a bsolute power of 22
106	106	alienation. 23
107	107	Upon the petition of an interested person, a court shall reform a 24
108	108	disposition in the manner that most closely approximates the transferor's 25
109	109	manifested plan of distribution and is within the 90 years allowed by § 18 -3-26
110	110	101(a)(2), § 18-3-101(b)(2), or § 18-3-101(c)(2) if: 27
111	111	(1) a nonvested property interest or a power of appointment 28
112	112	becomes invalid under § 18 -3-101; 29
113	113	(2) a class gift is not but might become invalid under § 18 -3-30
114	114	101 and the time has arrived when the share of any class member is to take 31
115	115	effect in possession or enjoyment; or 32
116	116	(3) a nonvested property interest that is not validated by § 18 -33
117	117	3-101(a)(1) can vest but not within 90 years after its creation 34
118	118	(a) Every future interest is void which suspends the absolute power of 35
119	119	alienation for a longer period than prescribed in § 18 -3-103. 36 HB1019
120	120
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122	122
123	123
124	124	(b) A power of alienation is suspended when there are no persons in 1
125	125	being to whom an absolute interest in possession can be conveyed . 2
126	126	3
127	127	18-3-104. Exclusions from statutory rule against perpetuities 4
128	128	Suspension of term of years ownership . 5
129	129	Section 18-3-101 does not apply to: 6
130	130	(1) a nonvested property interest or a power of appointment 7
131	131	arising out of a nondonative transfer, except a nonvested property interest 8
132	132	or a power of appointment arising out of (i) a premarital or postmarital 9
133	133	agreement, (ii) a separation or divorce settlement, (iii) a spouse's 10
134	134	election, (iv) a similar arrangement arising out of a prospective, existing, 11
135	135	or previous marital relationship between the parties , (v) a contract to make 12
136	136	or not to revoke a will or trust, (vi) a contract to exercise or not to 13
137	137	exercise a power of appointment, (vii) a transfer in satisfaction of a duty 14
138	138	of support, or (viii) a reciprocal transfer; 15
139	139	(2) a fiduciary's power relating to the administration or 16
140	140	management of assets, including the power of a fiduciary to sell, lease, or 17
141	141	mortgage property, and the power of a fiduciary to determine principal and 18
142	142	income; 19
143	143	(3) a power to appoint a fiduciary; 20
144	144	(4) a discretionary power of a t rustee to distribute principal 21
145	145	before termination of a trust to a beneficiary having an indefeasibly vested 22
146	146	interest in the income and principal; 23
147	147	(5) a nonvested property interest held by a charity, government, 24
148	148	or governmental agency or subdivision, if the nonvested property interest is 25
149	149	preceded by an interest held by another charity, government, or governmental 26
150	150	agency or subdivision; 27
151	151	(6) a nonvested property interest in or a power of appointment 28
152	152	with respect to a trust or other property arrangement f orming part of a 29
153	153	pension, profit-sharing, stock bonus, health, disability, death benefit, 30
154	154	income deferral, or other current or deferred benefit plan for one or more 31
155	155	employees, independent contractors, or their beneficiaries or spouses, to 32
156	156	which contributions are made for the purpose of distributing to or for the 33
157	157	benefit of the participants or their beneficiaries or spouses the property, 34
158	158	income, or principal in the trust or other property arrangement, except a 35
159	159	nonvested property interest or a power of appoin tment that is created by an 36 HB1019
160	160
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162	162
163	163
164	164	election of a participant or a beneficiary or spouse; 1
165	165	(7) a property interest, power of appointment, or arrangement 2
166	166	that was not subject to the common -law rule against perpetuities or is 3
167	167	excluded by another statute of this St ate; or 4
168	168	(8)(A) a nonvested property interest or power of appointment 5
169	169	provided in a trust created or administered in this state so long as the 6
170	170	trust: 7
171	171	(i) has one (1) or more trustees who are able to convey an 8
172	172	absolute fee in possession of land, or fu ll ownership of personal property; 9
173	173	(ii) has one (1) or more trustees with express or implied 10
174	174	power to sell the trust assets; or 11
175	175	(iii) vests in one (1) or more persons in being the 12
176	176	unlimited power to terminate the trust. 13
177	177	(B) if the power of alien ation is suspended during the life of 14
178	178	the trust, the rule against perpetuities under § 18 -3-101 will begin to run 15
179	179	from the date of suspension. 16
180	180	(C) the exception created in this subdivision (8) applies to a 17
181	181	trust created in Arkansas on or after August 1, 2017 and to any other trust 18
182	182	whose principal place of administration is transferred to Arkansas on or 19
183	183	after August 1, 2017, regardless of when the trust was created 20
184	184	The absolute ownership of a term of years cannot be suspended for a 21
185	185	longer period than the absolute power of alienation can be suspended in 22
186	186	respect to a fee. 23
187	187	24
188	188	18-3-105. Prospective application Suspension of power to alienate 25
189	189	subject of trust. 26
190	190	(a) Except as extended by subsection (b) of this section, this chapter 27
191	191	applies to a nonvested proper ty interest or a power of appointment that is 28
192	192	created on or after March 9, 2007. For purposes of this section, a nonvested 29
193	193	property interest or a power of appointment created by the exercise of a 30
194	194	power of appointment is created when the power is irrevocabl y exercised or 31
195	195	when a revocable exercise becomes irrevocable. 32
196	196	(b) If a nonvested property interest or a power of appointment was 33
197	197	created before March 9, 2007, and is determined in a judicial proceeding, 34
198	198	commenced on or after March 9, 2007, to violate thi s State's rule against 35
199	199	perpetuities as that rule existed before March 9, 2007, a court upon the 36 HB1019
200	200
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202	202
203	203
204	204	petition of an interested person may reform the disposition in the manner 1
205	205	that most closely approximates the transferor's manifested plan of 2
206	206	distribution and is within the limits of the rule against perpetuities 3
207	207	applicable when the nonvested property interest or power of appointment was 4
208	208	created 5
209	209	The suspension of all power to alienate the subject of a trust is a 6
210	210	suspension of the power of alienation. 7
211	211	(b) However, there is no suspension of the power of alienation by a 8
212	212	trust or by equitable interests under a trust if the trustee has the power to 9
213	213	sell, either expressed or implied, or if there is an unlimited power to 10
214	214	terminate in one (1) or more persons in being . 11
215	215	12
216	216	18-3-106. Short title Computation of period for interest or trust 13
217	217	created under power of appointment . 14
218	218	This chapter may be cited as the Uniform Statutory Rule Against 15
219	219	Perpetuities If a future interest or trust is created by the exercise of a 16
220	220	power of appointment, the permissible period is computed from the time the 17
221	221	power is: 18
222	222	(1) Exercised, if the power is a general power including without 19
223	223	limitation a testamentary general power; or 20
224	224	(2) Created if the power is not a general power . 21
225	225	22
226	226	18-3-107. Uniformity of application and construction Final 23
227	227	distribution of trust assets . 24
228	228	This chapter shall be applied and construed to effectuate its general 25
229	229	purpose to make uniform the law with respect to the subject of this chapter 26
230	230	among states enacting it 27
231	231	If at the expiration of the period in which an instrument or a 28
232	232	provision of the instrument created by a trust or other legal relationship is 29
233	233	not to be rendered invalid by this chapter, measured by actual events rather 30
234	234	than possible events, any of the assets w hich have not by the terms of the 31
235	235	instrument become distributable or vested shall then be distributed as the 32
236	236	court having jurisdiction directs, giving effect to the general intent of the 33
237	237	creator of the trust or other instrument . 34
238	238	35
239	239	18-3-109. Supercession of common law Transfers exempt from chapter . 36 HB1019
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243	243
244	244	This chapter supersedes the rule of the common law known as the rule 1
245	245	against perpetuities 2
246	246	This chapter does not limit any of the following: 3
247	247	(1) Transfers, outright or in trust, for charitable purposes; 4
248	248	(2) Transfers to charitable corporations; 5
249	249	(3) Transfers to a cemetery corporation, society or association; 6
250	250	or 7
251	251	(4) Employees' trusts created as part of a pension, retirement, 8
252	252	insurance, savings, stock bonus, profit sharing, or similar plan established 9
253	253	by an employer for the benefit of employees eligible to participate . 10
254	254	11
255	255	18-3-110. Instruments 12
256	256	If an action or proceeding has not been instituted by July 1, 2024, to 13
257	257	declare void an instrument which existed before July 1, 2023, then the 14
258	258	instrument shall be interpreted under this chapter. 15
259	259	16
260	260	SECTION 2. Arkansas Code Title 28, Chapter 72, is amended to add an 17
261	261	additional subchapter to read as follows: 18
262	262	Subchapter 7 — Arkansas Spendthrift Trust Act 19
263	263	20
264	264	28-72-701. Title. 21
265	265	This subchapter shall be known and may be c ited as the "Arkansas 22
266	266	Spendthrift Trust Act". 23
267	267	24
268	268	28-72-702. Applicability. 25
269	269	(a) Unless the writing expressly states to the contrary, this 26
270	270	subchapter governs the construction, operation and enforcement of a 27
271	271	spendthrift trust in this state whether the spend thrift trust is created 28
272	272	inside or outside this state if: 29
273	273	(1) All or part of the land, rents, issues, or profits affected 30
274	274	are in this state; 31
275	275	(2) All or part of the personal property and other produce of 32
276	276	the personal property are in this state; 33
277	277	(3) The declared domicile of the creator of a spendthrift trust 34
278	278	affecting personal property is in this state; or 35
279	279	(4) At least one (1) trustee qualified under subsection (b) of 36 HB1019
280	280
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282	282
283	283
284	284	this section has powers that include without limitation: 1
285	285	(A) Maintaining trust records; 2
286	286	(B) Preparing income tax returns for the trust; and 3
287	287	(B) Administering all or part of the trust in this state. 4
288	288	(b) If the settlor is a beneficiary of the trust, at least one (1) 5
289	289	trustee of a spendthrift trust shall be a: 6
290	290	(1) Natural person who resides and has his or her domicile in 7
291	291	this state; 8
292	292	(2) Trust company that: 9
293	293	(A) Is organized under federal law or under the laws of 10
294	294	this state or another state; and 11
295	295	(B) Maintains an office in this state for the transaction 12
296	296	of business; or 13
297	297	(3) Bank that: 14
298	298	(A) Is organized under federal law or under the laws of 15
299	299	this state or another state; 16
300	300	(B) Maintains an office in this state for the transaction 17
301	301	of business; and 18
302	302	(C) Possesses and exercises trust powers. 19
303	303	(c) As used in this section, "trust company" does not include a 20
304	304	foreign independent trust company authorized to engage only in the 21
305	305	solicitation of trust company business in this state. 22
306	306	23
307	307	28-72-703. Definitions. 24
308	308	As used in this subchapter: 25
309	309	(1) "Adviser" means a person, including without limitation an 26
310	310	accountant, attorney, or investment adviser, who gives advice concerning or 27
311	311	who was involved in the creation of, transfer of property to, or 28
312	312	administration of the spendthrift trust or who parti cipated in the 29
313	313	preparation of accountings, tax returns, or other reports related to the 30
314	314	spendthrift trust; 31
315	315	(2) "Creditor" means a person or entity who has a claim; 32
316	316	(3) "Remainder beneficiary" means a person entitled to receive 33
317	317	trust principal when trust income interest ends; 34
318	318	(4) "Settlor" means: 35
319	319	(A) The person who creates a spendthrift trust as 36 HB1019
320	320
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322	322
323	323
324	324	described in the trust instrument; or 1
325	325	(B) A person who contributes assets to the spendthrift 2
326	326	trust as to the assets he or she contributed to the spendthrift trust except 3
327	327	to the extent of consideration received for the assets contributed by that 4
328	328	person; 5
329	329	(5) "Spendthrift trust" means trust in which by the terms of the 6
330	330	trust a valid restraint on the voluntary and involuntary transfer of the 7
331	331	interest of the beneficiary is imposed; 8
332	332	(6) "Writing" as used in this subchapter, unless the context 9
333	333	otherwise requires, when the term is used in reference to a will, trust, or 10
334	334	instrument. 11
335	335	12
336	336	28-72-704. Creation. 13
337	337	(a) A person competent by law to execute a will or deed may by an 14
338	338	executed writing create a spendthrift trust in real, personal, or mixed 15
339	339	property for the benefit of: 16
340	340	(1) A person other than the settlor; 17
341	341	(2) The settlor if the writing is irrevocable and does not: 18
342	342	(A) Require that any par t of the income or principal of 19
343	343	the trust be distributed to the settlor; and 20
344	344	(B) Hinder, delay, or defraud known creditors; or 21
345	345	(3) Both the settlor and another person if the writing meets the 22
346	346	requirements of subdivision (a)(2) of this section. 23
347	347	(b) A writing meets the requirements of subdivision (a)(2) of this 24
348	348	section even if under the terms of the writing the settlor: 25
349	349	(1) May prevent a distribution from the trust; 26
350	350	(2) Holds a special lifetime or testamentary power of 27
351	351	appointment that cannot be exercised in favor of the settlor, the settlor's 28
352	352	estate, a creditor of the settlor, or a creditor of the settlor's estate; 29
353	353	(3) Is a beneficiary of a trust that qualifies as a charitable 30
354	354	remainder trust under 26 U.S.C § 664 even if the settlor has the right to 31
355	355	release the settlor's retained interest in the charitable remainder trust, in 32
356	356	whole or in part, in favor of one (1) or more of the remainder beneficiaries 33
357	357	of the charitable remainder trust; 34
358	358	(4) May receive a percentage of the value of the trus t each year 35
359	359	as specified in the trust instrument of the initial value of the trust assets 36 HB1019
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362	362
363	363
364	364	or the value of the trust assets determined from time to time under the trust 1
365	365	instrument, but not exceeding: 2
366	366	(A) The amount that may be defined as income under 26 3
367	367	U.S.C. § 643(b); or 4
368	368	(B) With respect to benefits from any qualified retirement 5
369	369	plan or eligible deferred compensation plan, the minimum required 6
370	370	distribution as defined in 26 U.S.C. § 4974(b); 7
371	371	(5) May receive income or principal from a grantor ret ained 8
372	372	annuity trust paying out a qualified annuity interest within the meaning of 9
373	373	26 C.F.R. § 25.2702-3(b) or a grantor retained unitrust paying out a 10
374	374	qualified unitrust interest within the meaning of 26 C.F.R. § 25.2702 -3(c); 11
375	375	(6) May use real property held under a qualified personal 12
376	376	residence trust as described in 26 C.F.R. § 25.2702 -5(c), or the settlor may 13
377	377	possess a qualified annuity interest within the meaning of the term as 14
378	378	described in 26 C.F.R. § 25.2702 -3(b); 15
379	379	(7) May receive income or princip al from the trust but only 16
380	380	subject to the discretion of another person; or 17
381	381	(8) May use real or personal property owned by the trust. 18
382	382	(c) Except for the power of the settlor to make distributions to 19
383	383	himself or herself without the consent of another p erson, this section does 20
384	384	not prohibit the settlor of a spendthrift trust from holding other powers 21
385	385	under the spendthrift trust, whether or not the settlor is a cotrustee, 22
386	386	including without limitation the power to: 23
387	387	(1) Remove and replace a trustee; 24
388	388	(2) Direct trust investments; and 25
389	389	(3) Execute other trust management powers. 26
390	390	(d)(1) The creation of a spendthrift trust does not require specific 27
391	391	language. 28
392	392	(2) A spendthrift trust is created if by the terms of the 29
393	393	writing the settlor manifests an intention to create a spendthrift trust. 30
394	394	31
395	395	28-72-705. Settlor - powers. 32
396	396	(a) The settlor of a spendthrift has the powers and rights conferred 33
397	397	to the settlor by the trust instrument. 34
398	398	(b) An agreement or understanding express or implied between the 35
399	399	settlor and the trustee that attempts to grant or permit the retention of 36 HB1019
400	400
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402	402
403	403
404	404	greater rights or authority than is stated in the trust instrument is void. 1
405	405	2
406	406	28-72-706. Beneficiaries. 3
407	407	(a) The beneficiary of a spendthrift trust shall be named or clearly 4
408	408	referred to in the writing. 5
409	409	(b) A spouse, former spouse, child, or dependent of the settlor shall 6
410	410	not be a beneficiary of the spendthrift trust unless named or clearly 7
411	411	referred to as a beneficiary in the writing. 8
412	412	(c) The provision for the beneficiary in a spendthrift trust shall: 9
413	413	(1) Be for the support, education, maintenance and benefit of 10
414	414	the beneficiary and without reference to or limitation by the beneficiary's 11
415	415	needs, station in life, or mode of life, or the needs of any other person, 12
416	416	whether depended upon the beneficiary or not; and 13
417	417	(2) Extend to all of the income from the trust estate devoted 14
418	418	for that purpose by the creator of the spendthrift trust, without exception 15
419	419	or deduction other than for: 16
420	420	(A) Costs or fees regularly earned paid or incurred by the 17
421	421	trustee for administration of or protection of the trust estate; 18
422	422	(B) Taxes on the costs or fees regularly earned paid or 19
423	423	incurred by the trustee for administration of or protection of the trust 20
424	424	estate; or 21
425	425	(C) Taxes on the interest of the beneficiary. 22
426	426	(d) The existence of a spendthrift trust does not depend on the 23
427	427	beneficiary's: 24
428	428	(1) Character; 25
429	429	(2) Capacity; or 26
430	430	(3) Competency; 27
431	431	28
432	432	28-72-707. Discretion of trustee. 29
433	433	(a) The trustee's discretionary power is absolute whether a valid 30
434	434	provision for the accumulation of trust income is made or not and whether the 31
435	435	provision relates to the trust income from real or personal property in all 32
436	436	cases where the creator of a spendthrift trust: 33
437	437	(1) Indicates the sum to be applied for or paid to the 34
438	438	beneficiary or makes the application or payment of sums or further sums for 35
439	439	or to the beneficiary discretionary with the trustee; 36 HB1019
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442	442
443	443
444	444	(2) Makes the amount of trus t income to be applied for or paid 1
445	445	to the beneficiary discretionary with the trustee; or 2
446	446	(3) Gives the trustee discretion to pay all or any part of the 3
447	447	trust income to any one (1) or more of the beneficiaries. 4
448	448	(b) The discretion of a trustee under su bsection (a) of this section 5
449	449	shall not be interfered with for any consideration of the needs, station in 6
450	450	life, or mode of life of the beneficiary, or for uncertainty, or any pretext. 7
451	451	(c) A spendthrift trust is not invalidated by giving a trustee the 8
452	452	discretion granted under subsection (a) of this section. 9
453	453	(d) The trustee of a spendthrift trust is required to disregard and 10
454	454	defeat every assignment or other act, voluntary or involuntary, that is 11
455	455	attempted contrary to the provisions of this subchapter. 12
456	456	13
457	457	28-72-708. Restraints on alienation. 14
458	458	(a)(1) A spendthrift trust restrains and prohibits the assignment, 15
459	459	alienation, acceleration, or anticipation of any interest of the beneficiary 16
460	460	under the spendthrift trust by the voluntary or involuntary act of the 17
461	461	beneficiary, by operation of law, or any other circumstance. 18
462	462	(2) The trust estate, corpus, or capital of a spendthrift trust 19
463	463	shall not be assigned, aliened, diminished, or impaired by any alienation, 20
464	464	transfer, or seizure so as to cut off or diminish the payments, rents, 21
465	465	profits, earnings, or income of the trust estate that would otherwise be 22
466	466	currently available for the benefit of the beneficiary. 23
467	467	(b) A mandatory or discretionary payment by the trustee to the 24
468	468	beneficiary shall be made only to or for the benefit of the beneficiary and 25
469	469	not: 26
470	470	(1) By acceleration or anticipation; 27
471	471	(2) To an assignee of the beneficiary; or 28
472	472	(3) Upon an order, written or oral, given by the beneficiary 29
473	473	whether the assignment or order is a voluntary contractual act of the 30
474	474	beneficiary or is through any legal process, including without limitation: 31
475	475	(A) Judgment: 32
476	476	(B) Execution; 33
477	477	(C) Attachment; 34
478	478	(D) Garnishment; 35
479	479	(E) Bankruptcy; or 36 HB1019
480	480
481	481	13 12/2/2022 2:00:29 PM DTP024
482	482
483	483
484	484	(F) Contract, tort, or duty. 1
485	485	(c)(1) The beneficiary shall not have the p ower or capacity to make 2
486	486	any disposition of the trust income: 3
487	487	(A) By his or her order, voluntary or involuntary; or 4
488	488	(B) Upon the order or direction of any court or courts, 5
489	489	whether of bankruptcy or otherwise. 6
490	490	(2) The interest of the beneficiary s hall not be: 7
491	491	(A) Subject to any process of attachment issued against 8
492	492	the beneficiary; or 9
493	493	(B) Taken in execution under any form of legal process 10
494	494	directed against the beneficiary or against the trustee, or trust estate, or 11
495	495	any part of the income of t he trust estate. 12
496	496	13
497	497	28-72-709. Legal estate of beneficiary in corpus. 14
498	498	(a) A beneficiary of a spendthrift trust shall not have a legal estate 15
499	499	in the capital, principal, or corpus of the trust estate unless under the 16
500	500	terms of the spendthrift trust the b eneficiary or a person deriving title 17
501	501	from the beneficiary is entitled to have the title conveyed or transferred to 18
502	502	him or her immediately or after a term of years of after a life in being. 19
503	503	(b) The income of the corpus of the trust estate shall not be pa id to 20
504	504	the beneficiary or any other beneficiary in the meantime. 21
505	505	22
506	506	28-72-710. Perpetuities. 23
507	507	(a) A spendthrift trust may not continue for a period longer than that 24
508	508	allowed under § 18-3-101 et seq. 25
509	509	(b)(1) The free alienation of the legal estate by the t rustee may not 26
510	510	be suspended for a period exceeding the limit prescribed in any 27
511	511	constitutional or statutory prohibition against perpetuities existing in this 28
512	512	state or in the state where the lands affected by the trust are situate. 29
513	513	(2) However, a conting ent remainder in fee may be created on a 30
514	514	prior remainder in fee to take effect if the persons to whom the first 31
515	515	remainder is limited die under the age of twenty -one (21) years, or upon any 32
516	516	other contingency by which the estate of those persons may be deter mined 33
517	517	before they attain that age. 34
518	518	35
519	519	28-72-711. Accumulation of income. 36 HB1019
520	520
521	521	14 12/2/2022 2:00:29 PM DTP024
522	522
523	523
524	524	(a) An accumulation of the income of trust property may be directed in 1
525	525	the will or other writing creating a spendthrift trust for the benefit of one 2
526	526	(1) or more beneficiaries, to c ommence within the time permitted for the 3
527	527	vesting of future interests, not to extend beyond the period limiting the 4
528	528	time within which the absolute power of alienation of property may be 5
529	529	suspended. 6
530	530	(b) If the direction is for a longer term than is permitt ed by law, it 7
531	531	is void only as to the excess time, whether the direction is separable from 8
532	532	the other clauses in the spendthrift trust or not, and in such cases or 9
533	533	invalidity the trust income may be paid and distributed to the next 10
534	534	succeeding beneficiary in interest. 11
535	535	12
536	536	28-72-712. Settlor may make different provisions. 13
537	537	The principles stated in §§ 28 -72-701 - 28-72-711 shall not prevent the 14
538	538	settlor of a spendthrift trust, by will or other writing, from making other 15
539	539	or different provisions, provided he or she uses express, specific language 16
540	540	to that end. 17
541	541	18
542	542	28-72-713. Transfer of property to trust. 19
543	543	(a) A claimant may not bring an action with respect to a transfer of 20
544	544	property to a spendthrift trust if the person: 21
545	545	(1) Is a creditor when the transfer of property is made unless 22
546	546	the action is commenced within: 23
547	547	(A) Two (2) years after the transfer of property is made; 24
548	548	or 25
549	549	(B) Six (6) months after the person discovers or 26
550	550	reasonably should have discovered the transfer or property, whichever is 27
551	551	later; or 28
552	552	(2) Becomes a creditor after the transfer of property is made, 29
553	553	unless the action is commenced within two (2) years after the transfer of 30
554	554	property is made. 31
555	555	(b) A claimant discovers a transfer of property under subsection (a) 32
556	556	of this section at the t ime a public record is made of the transfer of 33
557	557	property, including without limitation at the time: 34
558	558	(1) The conveyance of real property is recorded in the office of 35
559	559	the county recorder of the county in which the property is located; or 36 HB1019
560	560
561	561	15 12/2/2022 2:00:29 PM DTP024
562	562
563	563
564	564	(2) A financing statement is filed under the Uniform Commercial 1
565	565	Code, § 4-1-101 et seq. 2
566	566	(c)(1) A creditor may not bring an action with respect to a transfer 3
567	567	of property to a spendthrift trust unless a creditor can prove by clear and 4
568	568	convincing evidence that the transf er of property: 5
569	569	(A) Was a fraudulent transfer under the Uniform Voidable 6
570	570	Transactions Act, § 4 -59-201 et seq.; or 7
571	571	(B) Violates a legal obligation owed to the creditor under 8
572	572	a contract or a valid court order that is legally enforceable by that 9
573	573	creditor. 10
574	574	(2) In the absence of clear and convincing evidence, the 11
575	575	property transferred is not subject to the claims of the creditor. 12
576	576	(3) Clear and convincing evidence by one (1) creditor that a 13
577	577	transfer of property was fraudulent or wrongful does not constitute clear and 14
578	578	convincing evidence as to any other creditor and clear and convincing 15
579	579	evidence of a fraudulent or wrongful transfer of property as to one (1) 16
580	580	creditor shall not invalidate any other transfer of property. 17
581	581	(d)(1) If property transferr ed to a spendthrift trust is conveyed to 18
582	582	the settlor or to a beneficiary for the purpose of obtaining a loan secured 19
583	583	by a mortgage or deed of trust on the property and then reconveyed to the 20
584	584	spendthrift trust for the purpose of bringing an action under sub section (a) 21
585	585	of this section, the transfer is disregarded and the reconveyance relates 22
586	586	back to the date the property was originally transferred to the spendthrift 23
587	587	trust. 24
588	588	(2) The mortgage or deed of trust on the property shall be 25
589	589	enforceable against the spendthrift trust. 26
590	590	(e) A person may not bring a claim against an adviser to the settlor 27
591	591	or trustee of a spendthrift trust unless the person can show by clear and 28
592	592	convincing evidence that the adviser acted in violation of the laws of this 29
593	593	state, knowingly and in bad faith, and the adviser's actions directly caused 30
594	594	the damages suffered by the person. 31
595	595	(f)(1) A person other than a beneficiary or settlor may not bring a 32
596	596	claim against a trustee of a spendthrift trust unless the person can show by 33
597	597	clear and convincing evidence that the trustee acted in violation of the laws 34
598	598	of this state, knowingly and in bad faith, and the trustee's actions directly 35
599	599	caused the damages suffered by the person. 36 HB1019
600	600
601	601	16 12/2/2022 2:00:29 PM DTP024
602	602
603	603
604	604	(2) As used in this subsection, "trustee" includes a cotrustee, 1
605	605	if any, and a predecessor trustee. 2
606	606	(g) If more than one (1) transfer of property is made to a spendthrift 3
607	607	trust: 4
608	608	(1) The subsequent transfer of property to the spendthrift trust 5
609	609	shall be disregarded for the purpose of determining whether a person may 6
610	610	bring an action under subsection (a) of this section with respect to a prior 7
611	611	transfer of property to the spendthrift trust; and 8
612	612	(2) Any distribution to a beneficiary from the spendthrift trust 9
613	613	is considered to have been made from the most recent transfer of property 10
614	614	made to the spendthrift trust. 11
615	615	(h) Notwithstanding any other provision of law, no action of any kind, 12
616	616	including without limitation an action to enforce a judgment entered by a 13
617	617	court or other body having adjudicative authority, may be brought at law or 14
618	618	in equity against the trustee of a spendthrift trust if, as of the date the 15
619	619	action is brought, an action by a creditor with respect to a transfer of 16
620	620	property to the spendthrift trust would be prohibited under this section. 17
621	621	(i) For purposes of this section, if a trustee exercises his or her 18
622	622	discretion or authority to distribute income or principal from the 19
623	623	spendthrift trust to or for a beneficiary of the spendthrift trust, by 20
624	624	appointing the property of the original spendthrift trust in favor of a 21
625	625	second spendthrift trust for the benefit of one (1) or more of the 22
626	626	beneficiaries under the Trustee Division of Trusts Act, § 28 -69-701, the time 23
627	627	of the transfer shall have occurred on the date the settlor of the original 24
628	628	spendthrift trust transferred ass ets into the original spendthrift thrust, 25
629	629	regardless of the fact that the property of the original spendthrift trust 26
630	630	may have been transferred to a second spendthrift trust. 27
631	631	28
632	632	28-72-714. Trust administered under laws of another state or foreign 29
633	633	jurisdiction. 30
634	634	(a) A trust administered under the laws of another state or under the 31
635	635	laws of a foreign jurisdiction is a spendthrift trust under this subchapter 32
636	636	if: 33
637	637	(1) The trustee of the trust complies with any requirements set 34
638	638	forth in the trust inst rument and any requirements of the laws of the state 35
639	639	or jurisdiction from which the trust is being transferred; 36 HB1019
640	640
641	641	17 12/2/2022 2:00:29 PM DTP024
642	642
643	643
644	644	(2) The trustee or other person having the power to transfer the 1
645	645	domicile of the trust declares the intent to transfer domicile of the trust 2
646	646	in writing; 3
647	647	(3) The writing declaring the intent to transfer the domicile of 4
648	648	the trust is delivered to the trustee, if it is executed by a person other 5
649	649	than the trustee; and 6
650	650	(4) All requirements of this chapter are satisfied 7
651	651	simultaneously with or i mmediately after the change of domicile. 8
652	652	(b) For purposes of § 28 -72-713, if the domicile of an existing trust 9
653	653	is transferred from another state or from a foreign jurisdiction to this 10
654	654	state and the laws of the other state or jurisdiction are similar to t he 11
655	655	provisions of this subchapter, the transfer of the trust has occurred: 12
656	656	(1) On the date on which the settlor of the trust transferred 13
657	657	assets into the trust if the applicable law of the trust has at all times 14
658	658	been substantially similar to the provision s of this subchapter; or 15
659	659	(2) On the earliest date on which the applicable laws of the 16
660	660	trust were substantially similar to the provisions of this subchapter. 17
661	661	18
662	662	SECTION 3. Arkansas Code Title 28, Chapter 73, Subchapter 5, is 19
663	663	repealed. 20
664	664	28-73-501. Rights of beneficiary's creditor or assignee. 21
665	665	To the extent a beneficiary's interest is not protected by a 22
666	666	spendthrift provision, a court may authorize a creditor or assignee of the 23
667	667	beneficiary to reach the beneficiary's interest by attachment of present or 24
668	668	future distributions to or for the benefit of the beneficiary or other means. 25
669	669	The court may limit the award to such relief as is appropriate under the 26
670	670	circumstances. 27
671	671	28
672	672	28-73-502. Spendthrift provision. 29
673	673	(a) A spendthrift provision is valid only if it restra ins both 30
674	674	voluntary and involuntary transfer of a beneficiary's interest. 31
675	675	(b) A term of a trust providing that the interest of a beneficiary is 32
676	676	held subject to a “spendthrift trust”, or words of similar import, is 33
677	677	sufficient to restrain both voluntary and involuntary transfer of the 34
678	678	beneficiary's interest. 35
679	679	(c) A beneficiary may not transfer an interest in a trust in violation 36 HB1019
680	680
681	681	18 12/2/2022 2:00:29 PM DTP024
682	682
683	683
684	684	of a valid spendthrift provision and, except as otherwise provided in this 1
685	685	subchapter, a creditor or assignee of the beneficiary may not reach the 2
686	686	interest or a distribution by the trustee before its receipt by the 3
687	687	beneficiary. 4
688	688	5
689	689	28-73-504. Discretionary trusts — Effect of standard. 6
690	690	(a) Whether or not a trust contains a spendthrift provision, a 7
691	691	creditor of a beneficiary may not co mpel a distribution that is subject to 8
692	692	the trustee's discretion, even if: 9
693	693	(1) the discretion is expressed in the form of a standard of 10
694	694	distribution; or 11
695	695	(2) the trustee has abused the discretion. 12
696	696	(b) This section does not limit the right of a benefi ciary to maintain 13
697	697	a judicial proceeding against a trustee for an abuse of discretion or failure 14
698	698	to comply with a standard for distribution. Under § 28 -73-814(a), a trustee 15
699	699	must always exercise a discretionary power in good faith and with regard to 16
700	700	the purposes of the trust and the interests of the beneficiaries. 17
701	701	(c) A creditor may not reach the interest of a beneficiary who is also 18
702	702	a trustee or cotrustee, or otherwise compel a distribution, if the trustee's 19
703	703	discretion to make distributions for the trustee 's own benefit is limited by 20
704	704	an ascertainable standard. 21
705	705	22
706	706	28-73-505. Creditor's claim against settlor. 23
707	707	(a) Whether or not the terms of a trust contain a spendthrift 24
708	708	provision, the following rules apply: 25
709	709	(1) During the lifetime of the settlor, the property of a 26
710	710	revocable trust is subject to claims of the settlor's creditors. If a trust 27
711	711	has more than one (1) settlor, the amount the creditor or assignee of a 28
712	712	particular settlor may reach may not exceed the settlor's interest in the 29
713	713	portion of the trust attributable to that settlor's contribution. 30
714	714	(2) With respect to an irrevocable trust, a creditor or assignee 31
715	715	of the settlor may reach the maximum amount that can be distributed to or for 32
716	716	the settlor's benefit. If a trust has more than one (1) settlor, the amount 33
717	717	the creditor or assignee of a particular settlor may reach may not exceed the 34
718	718	settlor's interest in the portion of the trust attributable to that settlor's 35
719	719	contribution. 36 HB1019
720	720
721	721	19 12/2/2022 2:00:29 PM DTP024
722	722
723	723
724	724	(b) For purposes of this section: 1
725	725	(1) During the period the power may be exercised, the holder of 2
726	726	a power of withdrawal is treated in the same manner as the settlor of a 3
727	727	revocable trust to the extent of the property subject to the power. 4
728	728	(2) On the lapse, release, or waiver of a power of withdrawal, 5
729	729	the holder of a power of withdrawal is not, by reason of any such power of 6
730	730	withdrawal, treated as the settlor of the trust. 7
731	731	(c)(1) Subject to § 4 -59-204, for the purposes of this section, 8
732	732	property contributed to the following trusts is not deemed to have been 9
733	733	contributed by the settlor, and a person who would otherwise be treated as a 10
734	734	settlor or a deemed settlor of the following trusts shall not be treated as a 11
735	735	settlor: 12
736	736	(A) an irrevocable trust that is treated as qualified 13
737	737	terminable interest property under section 2523(f ) of the Internal Revenue 14
738	738	Code of 1986 as in effect on January 1, 2015, if the settlor is a beneficiary 15
739	739	of the trust after the death of the settlor's spouse; 16
740	740	(B) an irrevocable trust that is treated as a general 17
741	741	power of appointment trust under section 2523(e) of the Internal Revenue Code 18
742	742	of 1986 as in effect on January 1, 2015, if the settlor is a beneficiary of 19
743	743	the trust after the death of the settlor's spouse; 20
744	744	(C) an irrevocable trust for the benefit of a person to 21
745	745	the extent that the property of the trust was subject to a limited power of 22
746	746	appointment or a general power of appointment in another person. 23
747	747	(2) For purposes of this subsection (c), a person is a 24
748	748	beneficiary whether named under the initial trust instrument or through the 25
749	749	exercise of a limited or general power of appointment by that person's spouse 26
750	750	or by another person. 27
751	751	(3) For purposes of subdivision (c)(1)(C) of this section, a 28
752	752	general power of appointment means a power of appointment exercisable in 29
753	753	favor of the holder of the powe r, the estate of the holder of the power, a 30
754	754	creditor of the holder of the power, or a creditor of the estate of the 31
755	755	holder of the power. 32
756	756	(4) As used in subdivision (c)(1)(C) of this section, "limited 33
757	757	power of appointment" means a power of appointment th at is not a general 34
758	758	power of appointment. 35
759	759	36 HB1019
760	760
761	761	20 12/2/2022 2:00:29 PM DTP024
762	762
763	763
764	764	28-73-506. Overdue distribution. 1
765	765	Whether or not a trust contains a spendthrift provision, a creditor or 2
766	766	assignee of a beneficiary may reach a mandatory distribution of income or 3
767	767	principal, including a distribut ion upon termination of the trust, if the 4
768	768	trustee has not made the distribution to the beneficiary within a reasonable 5
769	769	time after the designated distribution date. 6
770	770	7
771	771	28-73-507. Personal obligations of trustee. 8
772	772	Trust property is not subject to personal ob ligations of the trustee, 9
773	773	even if the trustee becomes insolvent or bankrupt. 10
774	774	11
775	775	12
776	776	13
777	777	14
778	778	15
779	779	16
780	780	17
781	781	18
782	782	19
783	783	20
784	784	21
785	785	22
786	786	23
787	787	24
788	788	25
789	789	26
790	790	27
791	791	28
792	792	29
793	793	30
794	794	31
795	795	32
796	796	33
797	797	34
798	798	35
799	799	36