2006 Alabama Code - Section 19-3-324 — Actions trustee who is also beneficiary may not perform; powers of person who has right to remove trustee; parties in interest.

(a) Due to the inherent conflict of interest that exists when a trustee is also a beneficiary, unless the terms of a trust refer specifically to this section and provide to the contrary, a trustee shall not perform any of the following on behalf of or for the benefit of a beneficiary who is also a trustee:

(1) Make discretionary distributions of either principal or income for the benefit of the trustee, except to provide for the health, education, maintenance, or support of the trustee as described under Internal Revenue Code Sections 2041 and 2514, as amended.

(2) Make discretionary allocations of receipts or expenses as between principal and income, unless the trustee has no power to enlarge or shift any beneficial interest except as an incidental consequence of the discharge of the fiduciary duties of the trustee.

(3) Make discretionary distributions of either principal or income to satisfy any legal or support obligations of the trustee. Nothing in this section shall be construed as a general power of appointment for any trustee.

(b) Any of the proscribed powers enumerated in this section that are conferred upon two or more trustees may be exercised by the trustees who are not beneficiaries of the trust. If there is no trustee who is not a beneficiary, any party in interest, as defined in subsection (d) below, may apply to a court of competent jurisdiction to appoint an independent trustee and the power may be exercised by the independent trustee appointed by the court.

(c) A person who has the right to remove or to replace a trustee does not possess nor may that person be deemed to possess, by virtue of having that right, the powers of the trustee that is subject to removal or to replacement.

(d) For purposes of this article, the parties in interest of a trust shall include any of the following:

(1) If the trust is revocable or amendable and the settlor is not incapacitated, the party in interest is the settlor.

(2) If the trust is revocable or amendable and the settlor is incapacitated, the party in interest is the legal representative of the settlor under applicable law or the donee of the settlor under a durable power of attorney that is sufficient to grant the authority.

(3) If the trust is not revocable or amendable, the parties in interest are any of the following:

a. Each trustee then serving;

b. Each current beneficiary then in existence or, if any current beneficiary has not attained majority or is otherwise incapacitated, the legal representative of the current beneficiary under applicable law or the donee of the current beneficiary under a durable power of attorney that is sufficient to grant the authority; and

c. Each remainder beneficiary then in existence or, if any remainder beneficiary has not attained majority or is otherwise incapacitated, the legal representative of the beneficiary under applicable law or the donee of the beneficiary under a durable power of attorney that is sufficient to grant the authority.

(Acts 1995, No. 95-310, p. 571, §5.)

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