Petition for Decanting (Alabama)

PETITION FOR DECANTING (PETITION FOR INSTRUCTION AND CONFIRMATION OF EXERCISE OF DECANTING POWER UNDER ALA. CODE §§ 19-3D-1 to -29)

COURT INFORMATION

IN THE CIRCUIT COURT OF [________________________________] COUNTY, ALABAMA

Case No.: [________________________________]

Division: [☐ Civil ☐ Equity ☐ Other: ________________]

IN THE MATTER OF THE [NAME OF FIRST TRUST]: PETITION FOR INSTRUCTION AND CONFIRMATION OF EXERCISE OF DECANTING POWER UNDER ALA. CODE §§ 19-3D-1 to -29

PETITION

Petitioner, [________________________________], as Authorized Fiduciary of the [Name of First Trust], by and through undersigned counsel, respectfully alleges as follows:

I. PETITIONER

1. Petitioner is [________________________________], the [☐ sole trustee ☐ co-trustee ☐ other authorized fiduciary as defined in Ala. Code § 19-3D-2] of the [Name of First Trust] (the "First Trust" or "Invaded Trust").

2. Petitioner's status:
   ☐ Alabama-resident individual trustee
   ☐ Alabama-chartered trust company / national bank with trust powers
   ☐ Out-of-state trustee acting under trust with Alabama situs
   ☐ Co-trustee with [________________________________]
   ☐ Authorized fiduciary other than trustee (e.g., directed trustee under § 19-3B-808)

3. Petitioner's contact information:
   Street: [________________________________]
   City: [________________] State: [____] Zip: [________]
   Telephone: [(___) ___-____] Email: [________________________________]

II. JURISDICTION AND VENUE

4. This Court has subject matter jurisdiction over this proceeding pursuant to Ala. Code §§ 19-3B-201 (role of court in administration of trust) and 19-3B-203 (circuit court subject-matter jurisdiction over trust proceedings), and 19-3D-9 (Alabama Uniform Trust Decanting Act — court involvement).

5. Venue is proper in [________________________________] County, Alabama under Ala. Code § 19-3B-204 because (check all that apply):
   ☐ The principal place of administration of the First Trust is in this County;
   ☐ Venue for a civil action generally is proper in this County under Title 6, Chapter 3, because [STATE FACTS AND PINPOINT RULE];
   ☐ The principal place of administration is outside Alabama, and the Settlor resided in this County when the Trust was created;
   ☐ This is a testamentary trust with its principal place of administration outside Alabama, and the Settlor's estate was administered in this County.

6. The principal place of administration of the First Trust is [CITY, COUNTY, STATE]. The basis for applying Alabama law to the proposed decanting is [STATE THE GOVERNING TRUST TERM OR OTHER BASIS].

III. THE FIRST TRUST (INVADED TRUST)

7. The First Trust is the [________________________________] (the "First Trust"), created by [________________________________] (the "Settlor") by trust instrument dated [__/__/____] (the "First Trust Instrument"). A true and correct copy of the First Trust Instrument, together with all amendments, is attached as Exhibit A.

8. The First Trust is irrevocable. The Settlor is [☐ living ☐ deceased, died [__/__/____]].

9. The First Trust is (check all that apply):
   ☐ Inter vivos trust
   ☐ Testamentary trust
   ☐ Trust for beneficiary with disability (Ala. Code § 19-3D-13)
   ☐ Trust with charitable interest (Ala. Code § 19-3D-14; Attorney General notice under § 19-3D-7(c)(7) only if § 19-3D-14(b) applies)
   ☐ Grandfathered GST trust (irrevocable on or before September 25, 1985)
   ☐ Trust with allocated GST exemption (zero or partial inclusion ratio)
   ☐ Other: [________________________________]

10. The First Trust holds assets with an approximate fair market value of $[__________] as of [__/__/____]. A summary inventory is attached as Exhibit B.

11. The qualified beneficiaries of the First Trust within the meaning of Ala. Code § 19-3B-103(14) are:

12. The distributive discretion of the Petitioner-Authorized Fiduciary under the First Trust is (check one):

☐ Expanded distributive discretion (Ala. Code § 19-3D-11) — discretion that is not limited to an ascertainable standard or a reasonably definite standard (e.g., broad discretion for "comfort," "best interests," or "welfare," or discretion unconstrained by any standard).

☐ Limited distributive discretion (Ala. Code § 19-3D-12) — discretion limited to an ascertainable standard or a reasonably definite standard (e.g., HEMS — health, education, maintenance, support).

13. The trust provision granting distributive discretion is quoted verbatim:

"[Quote the exact language of the discretionary distribution clause from the First Trust Instrument.]"

14. Petitioner is an "authorized fiduciary" within the meaning of Ala. Code § 19-3D-2(3) because: [________________________________].

IV. THE SECOND TRUST (APPOINTED TRUST)

15. The Second Trust is the [________________________________] (the "Second Trust"). The proposed Second Trust instrument is attached as Exhibit C.

16. The Second Trust [☐ is a newly created trust ☐ is an existing trust to which the Petitioner proposes to appoint the assets of the First Trust].

17. The situs / principal place of administration of the Second Trust is [☐ Alabama ☐ ________________].

18. The trustee(s) of the Second Trust will be:

19. The current beneficiaries, successor beneficiaries, and remainder beneficiaries of the Second Trust are:

V. STATUTORY AUTHORITY FOR DECANTING — ALA. CODE §§ 19-3D-11 / 19-3D-12

20. Statutory basis (check one):

☐ Ala. Code § 19-3D-11 — Expanded Distributive Discretion. Petitioner has expanded distributive discretion under the First Trust. Pursuant to § 19-3D-11, Petitioner may exercise the decanting power to distribute property of the First Trust to a Second Trust whose terms may differ materially from the First Trust, subject to the limitations of §§ 19-3D-13 (disability trust), 19-3D-14 (charitable interest), 19-3D-15 (trust limitation on decanting), 19-3D-16 (change in compensation), 19-3D-17 (relief from liability), 19-3D-18 (removal/replacement of authorized fiduciary), 19-3D-19 (tax-related limitations), and 19-3D-23 (trust for care of animal).

☐ Ala. Code § 19-3D-12 — Limited Distributive Discretion. Petitioner has limited distributive discretion under the First Trust. Pursuant to § 19-3D-12(c), the Second Trust(s), in the aggregate, must grant each beneficiary of the First Trust beneficial interests substantially similar to the beneficiary's beneficial interests in the First Trust (the statutory term is "substantially similar," not "the same"). ☐ Confirmed.

21. Petitioner's exercise of the decanting power is consistent with the duty imposed by Ala. Code § 19-3D-4 (fiduciary duty in exercising decanting power), including the duty to act in good faith and consistent with the purposes of the First Trust and the interests of the beneficiaries.

22. The Second Trust is for the benefit of one or more of the beneficiaries of the First Trust. ☐ Confirmed.

23. ☐ The proposed decanting does not reduce or eliminate a vested interest protected by Ala. Code § 19-3D-11(c)(3). If a proposed change affects such an interest, identify a separately authorized route before asking for approval; beneficiary consent alone is not an exception in § 19-3D-11(c)(3).

VI. COMPARISON OF FIRST TRUST AND SECOND TRUST PROVISIONS

24. The material differences between the First Trust and the Second Trust are summarized in the following table. A complete redlined comparison is attached as Exhibit D.

VII. COMPLIANCE WITH SPECIAL PROVISIONS OF THE UTDA

25. Charitable Interest (§ 19-3D-14): The First Trust [☐ does ☐ does not] contain a charitable interest. If yes:
    ☐ The interest is determinable and not entirely held by or for identified, existing charities; if so, the Alabama Attorney General has been given notice under §§ 19-3D-7(c)(7), 19-3D-14(b);
    ☐ The charitable interest in the Second Trust is substantially identical to or more favorable than in the First Trust;
    ☐ No diminution of charitable interest results from the decanting.

26. Beneficiary with Disability (§ 19-3D-13): The First Trust [☐ does ☐ does not] benefit a beneficiary with a disability. If yes:
    ☐ The decanting is intended to convert/preserve a special-needs trust qualified under SSA POMS for SSI/Medicaid eligibility;
    ☐ Special-needs analysis is attached as Exhibit H.

27. Removal/Replacement of Fiduciary (§ 19-3D-18): The Second Trust [☐ does ☐ does not] modify provisions for removal or replacement of any fiduciary. If yes, the modification complies with § 19-3D-18.

28. Trustee Compensation (§ 19-3D-16): The Second Trust [☐ does ☐ does not] increase trustee compensation. If yes, the increase complies with § 19-3D-16 (no increase above the specified or Chapter 3B-permitted compensation absent court approval or consent of all qualified beneficiaries of the second trust).

29. Tax-Related Limitations (§ 19-3D-19): The decanting preserves the benefits specifically protected by subsection (b), including applicable marital and charitable deductions, gift-tax annual exclusions, § 2642(c) zero-inclusion-ratio gifts, S-corporation shareholder status, and qualified-benefits-property distribution rules. Analyze any other claimed GST tax benefit under the conditions in § 19-3D-19(b)(8), together with applicable federal law. Tax analysis is attached as Exhibit E.

VIII. GST INCLUSION-RATIO ANALYSIS (Treas. Reg. § 26.2654-1; § 26.2601-1(b)(4))

30. The GST tax status of the First Trust is:

☐ Grandfathered (irrevocable on or before September 25, 1985) — Treas. Reg. § 26.2601-1(b)(1).
☐ Non-grandfathered with GST exemption fully allocated (zero inclusion ratio).
☐ Non-grandfathered with partial GST exemption allocation (inclusion ratio = [____]).
☐ Non-grandfathered with no GST exemption allocated (inclusion ratio = 1.0).
☐ Not a GST-relevant trust.

31. The proposed decanting [☐ will ☐ will not] cause the First Trust to lose grandfathered status under Treas. Reg. § 26.2601-1(b)(4). Analysis is set forth in Exhibit E, including application of the applicable rules in Treas. Reg. § 26.2601-1(b)(4)(i)(A)–(D).

32. If the Second Trust constitutes a severance of the First Trust, the severance [☐ does ☐ does not] qualify as a "qualified severance" under Treas. Reg. § 26.2642-6, preserving the separate inclusion ratios of the resulting trusts.

33. No portion of the assets of the First Trust having a zero inclusion ratio will be commingled with assets having an inclusion ratio greater than zero in the Second Trust, except as a permissible qualified severance.

IX. NOTICE UNDER ALA. CODE § 19-3D-7 (60-DAY NOTICE)

34. Petitioner [☐ has provided ☐ will provide] written notice of the proposed exercise of the decanting power, pursuant to Ala. Code § 19-3D-7, not less than 60 days before the effective date of the decanting, to each of the following:

35. The notice contains the items required by Ala. Code § 19-3D-7(e):
    ☐ The manner in which Petitioner intends to exercise the decanting power;
    ☐ The proposed effective date for exercising the power;
    ☐ A copy of the First Trust instrument;
    ☐ Copies of all proposed Second Trust instruments;
    ☐ A statement of the capacity in which each recipient is receiving notice;
    ☐ A statement that any application under § 19-3D-9 must be filed within six months from the day notice is given.

If Petitioner also explains the reason for the proposed decanting, that explanation is additional information and is not a substitute for the required notice contents.

36. The proposed exercise date is [__/__/____]. The notice period ☐ will end / ended at least 60 days after the last required notice, or ☐ was waived in signed records by all persons entitled to notice under § 19-3D-7(f) (attach waivers). Regarding any objection or court application (check one):
    ☐ No qualified beneficiary or other notice recipient has objected; or
    ☐ All objections have been resolved by consent or by Court order; or
    ☐ The Court has entered an order approving the decanting notwithstanding objection.

37. Proofs of service / acknowledgments of notice are attached as Exhibit F.

X. FACTUAL BASIS FOR DECANTING

38. The First Trust was established by the Settlor for the following purposes: [________________________________].

39. Since the creation of the First Trust, the following circumstances have arisen warranting the exercise of the decanting power:

[________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________]

40. The exercise of the decanting power is consistent with the Settlor's intent, the purposes of the First Trust, and the fiduciary duties owed to the beneficiaries because: [____________].

XI. PRIOR PROCEEDINGS

41. There are no prior or pending court proceedings involving the First Trust except: ☐ None ☐ [____________].

XII. PRAYER FOR RELIEF

WHEREFORE, Petitioner respectfully prays that this Court enter an Order:

A. Finding that the Court has subject matter jurisdiction over the parties and the proceeding pursuant to Ala. Code §§ 19-3B-201, -203 and 19-3D-9, and that venue is proper under § 19-3B-204;

B. Finding the First Trust's principal place of administration and the basis for applying Alabama law to the proposed decanting;

C. Finding that Petitioner is an "authorized fiduciary" of the First Trust within the meaning of Ala. Code § 19-3D-2(3) and possesses the requisite distributive discretion to exercise the decanting power;

D. Finding that the proposed exercise of the decanting power complies with Ala. Code § 19-3D-11 [or § 19-3D-12, as applicable] and with the fiduciary duties imposed by § 19-3D-4;

E. Finding that notice has been provided in accordance with Ala. Code § 19-3D-7, including (where applicable) notice to the Alabama Attorney General under § 19-3D-14, and that the 60-day notice period has elapsed or was validly waived;

F. Finding that the proposed decanting complies with the applicable tax-related limitations in Ala. Code § 19-3D-19(b), including the specific deductions, exclusions, S-corporation and retirement-plan rules, and any additional tax benefit satisfying subsection (b)(8);

G. Finding (where applicable) that the proposed decanting complies with the special provisions for trusts benefiting beneficiaries with disabilities (§ 19-3D-13) and trusts with charitable interests (§ 19-3D-14);

H. Approving and confirming the exercise of the decanting power by Petitioner, appointing all (or such portion as specified) of the property of the First Trust to the trustee(s) of the Second Trust, on the terms set forth in the proposed Second Trust instrument (Exhibit C);

I. Directing that the Second Trust be administered in accordance with its terms following the effective date of the decanting, and that the First Trust be terminated (if all property decanted) or continued (if partial decanting);

J. Recognizing, if Petitioner is a trustee, reimbursement from the First Trust under Ala. Code § 19-3B-709 for attorney's fees and costs properly incurred in trust administration, subject to that section's limits; any separate fee award is requested only under [IDENTIFY INDEPENDENT AUTHORITY, IF ANY];

K. Retaining jurisdiction to enforce or further interpret this Order; and

L. Granting such other and further relief as the Court deems just and equitable.

XIII. VERIFICATION

STATE OF ALABAMA )
) ss.:
COUNTY OF [____________] )

[________________________________], being first duly sworn, deposes and states: I am the Petitioner named in the foregoing Petition and am the Authorized Fiduciary of the First Trust. I have read the Petition and know its contents. The matters stated are true to my own knowledge, except those stated upon information and belief, which I believe to be true. I declare under penalty of perjury under the laws of the State of Alabama that the foregoing is true and correct.

Executed on [__/__/____].

________________________________
[Authorized Fiduciary / Petitioner Signature]

Subscribed and sworn to before me this [____] day of [____________], 20[____].

________________________________
Notary Public, State of Alabama
My commission expires: [__/__/____]

XIV. SIGNATURE OF ATTORNEY

Respectfully submitted,

Dated: [__/__/____]

________________________________
[Attorney Name]
[Firm Name]
[Address]
[Telephone] | [Email]
Alabama Bar No. [____________]
Attorney for Petitioner

XV. PROOF OF SERVICE

I, [________________________________], certify that on [__/__/____] I served the foregoing Petition for Decanting, together with all Exhibits, upon the persons listed in Section IX above by the methods and on the dates indicated, in accordance with Ala. Code § 19-3D-7 and the Alabama Rules of Civil Procedure.

Persons served include:

________________________________
[Signature] Date: [__/__/____]

EXHIBITS

• Exhibit A: First Trust Instrument dated [__/__/____] and all amendments
• Exhibit B: Inventory of First Trust assets as of [__/__/____]
• Exhibit C: Proposed Second Trust Instrument
• Exhibit D: Redlined comparison of First Trust and Second Trust provisions
• Exhibit E: Tax analysis — GST inclusion ratio (Treas. Reg. § 26.2654-1; § 26.2601-1(b)(4)); marital, charitable, income tax, S-corp; compliance with Ala. Code § 19-3D-19
• Exhibit F: Notices given under Ala. Code § 19-3D-7 and proofs of service (including AG notice if applicable)
• Exhibit G: Written consent of any beneficiary whose mandatory interest is affected
• Exhibit H: Special-needs / disability analysis (if § 19-3D-13 applies)
• Exhibit I: Trustee / authorized fiduciary certification of authority

ALABAMA-SPECIFIC PRACTICE NOTES

UTDA jurisdiction. Alabama adopted the Alabama Uniform Trust Decanting Act in Act 2018-519, codified at Ala. Code §§ 19-3D-1 to -29. Apply Alabama's enacted sections to this petition.

Court approval is OPTIONAL. Under § 19-3D-9, court approval is not a prerequisite to exercising the decanting power. An authorized fiduciary may petition for instructions or approval of an exercise. Section 19-3D-17 limits liability relief and indemnification terms in a Second Trust; it does not independently authorize a court-ordered release from liability.

Expanded vs. limited distributive discretion. The threshold question is whether the fiduciary has expanded distributive discretion under § 19-3D-11 (broad power exceeding an ascertainable standard) or limited distributive discretion under § 19-3D-12 (power limited to an ascertainable or reasonably definite standard, e.g., HEMS). Expanded discretion permits substantial change to the second trust's beneficial provisions; limited discretion requires substantial identity of beneficial interests.

Notice — 60 days. Section 19-3D-7(c) requires written notice at least 60 days before the exercise to each settlor of the First Trust who is living or existing, each qualified beneficiary of the First Trust, each holder of a presently exercisable power of appointment over the First Trust, each person with a current right to remove or replace the authorized fiduciary, each other fiduciary of the First Trust, each fiduciary of the Second Trust, and the Alabama Attorney General when § 19-3D-14(b) applies. Section 19-3D-7(e) requires the manner and proposed effective date of exercise, copies of the First Trust instrument and all Second Trust instruments, each recipient's capacity, and the six-month application statement.

Tax-related limitations. Section 19-3D-19(b) protects specified marital and charitable deductions, gift-tax annual exclusions, § 2642(c) zero-inclusion-ratio gifts, S-corporation shareholder status, and qualified-benefits-property distribution rules. Subsection (b)(8) protects another federal or state tax benefit only when the first-trust instrument expresses or clearly reflects the required intent and the transfer or trust qualified or would have qualified for that benefit. Assess GST grandfathering and allocation under the applicable federal rules; they are not unconditional protections named in this section.

Charitable interests. Section 19-3D-14(c) protects charitable interests. The Attorney General receives notice under § 19-3D-7(c)(7) when the first trust has a determinable charitable interest not entirely held by or for identified, existing charitable organizations under § 19-3D-14(b).

Special-needs trusts. Section 19-3D-13 permits decanting to a special-needs trust to qualify or maintain qualification for SSI/Medicaid for a beneficiary with a disability, even if the second trust differs materially from the first.

Trustee removal. Section 19-3D-18 restricts the use of decanting to modify trustee removal/replacement provisions to the trustee's benefit.

Forum. Circuit Courts have jurisdiction over trust matters under the Alabama Uniform Trust Code (§§ 19-3B-201, -202, -203). Under § 19-3B-204(a), venue may be proper in a county where civil-action venue is proper generally or where the trust's principal place of administration is located. For a trust administered outside Alabama, check the additional settlor-residence or testamentary-estate venue in § 19-3B-204(a). Record the chosen basis in paragraph 5.

SOURCES AND REFERENCES

• Alabama Code Chapter 3D (Alabama Uniform Trust Decanting Act) §§ 19-3D-1 to -29
• Alabama Code Chapter 3B (Alabama Uniform Trust Code) §§ 19-3B-101 et seq.
• Uniform Trust Decanting Act (2015) — Uniform Law Commission
• Ala. R. Civ. P. (service of process and notice)
• 26 U.S.C. §§ 2056, 2523 (marital deduction); §§ 2055, 2522 (charitable deduction); § 2503(b), (c) (annual exclusion); § 2642 (GST inclusion ratio); § 1361 (S-corp eligibility)
• Treas. Reg. § 26.2601-1(b)(4) (grandfathered GST trust modifications); § 26.2642-6 (qualified severance); § 26.2654-1 (certain trusts treated as separate trusts)
• Alabama Law Institute commentary on UTDA adoption (2018)
• Alabama Office of the Attorney General — notice recipient only when § 19-3D-14(b) applies