Code of Alabama § 38-9b-5 - Aft Corporation, Trust, and Charitable Trust

Section 38-9B-5

AFT Corporation, Trust, and Charitable Trust.

(a) The board of trustees shall establish and administer the AFT Corporation. The board of trustees shall execute all documents necessary to establish and administer the AFT Corporation including, but not limited to, documents to form a not-for-profit corporation and to qualify as an organization pursuant to Section 501(c)(3) of the United States Internal Revenue Code.

(b) The AFT Corporation shall establish the AFT Trust and the AFT Charitable Trust, and the board of trustees shall administer the AFT Trust and the AFT Charitable Trust through the AFT Corporation. The board of trustees and the AFT Corporation shall take all steps necessary to satisfy all federal and state laws to ensure that the AFT Trust and the AFT Charitable Trust are qualified to supplement the provision of government entitlement funding and, where necessary, are qualified as tax exempt entities under the United States Internal Revenue Code.

(c) The documents establishing the AFT Trust shall include and be limited by the following:

(1) To be eligible to participate in the AFT Trust, a life beneficiary must suffer from an impairment as defined in this chapter.

(2) The AFT Trust may accept contributions from any source, so long as basic eligibility requirements are satisfied, to be held, administered, managed, invested, and distributed in order to facilitate the coordination and integration of private financing for individuals who have an impairment, while maintaining the eligibility of those individuals for government entitlement funding. Contributions and earnings of the AFT Trust may be administered as one trust for purposes of investment and management of funds. Notwithstanding the foregoing, separate accounts shall be established for each designated life beneficiary. The net income earned shall be credited to the accounts of the life beneficiaries in proportion to the fair market value that each account has to the total fair market value of all accounts. Administrative fees and administrative expenses may be charged directly to an account of a life beneficiary, except that administrative fees shall not exceed the income allocated to that account.

(3) Every settlor shall designate a specific person as the life beneficiary of the contribution made by the contributor. In addition, each settlor shall name a co-trustee, including a successor or successors to the co-trustee, to act with the trustee on behalf of the designated life beneficiary. Notwithstanding the foregoing, neither a life beneficiary or his or her spouse shall be eligible to be a co-trustee or a successor co-trustee.

(4) If a settlor designates a contributor or the contributor's spouse as the life beneficiary, then the account of the life beneficiary shall, regardless of any other provision of this chapter, meet the following additional conditions:

(i) The AFT Trust shall be irrevocable.

(ii) The amounts remaining in the life beneficiary's account upon the death of the life beneficiary shall be first dispersed to the AFT Corporation, as agent for all purposes of the State of Alabama, as reimbursement for any funds owed to the State of Alabama, or to any other state, the District of Columbia or any other commonwealth, territory, or jurisdiction of the United States for medical assistance paid on behalf of the life beneficiary under the plan of the respective jurisdiction, and the balance, if any, shall be dispersed in accordance with rules and regulations adopted by the AFT Corporation. All sums received by the AFT Corporation, as agent for the State of Alabama, shall be distributed, as appropriate, by the AFT Corporation.

(iii) Neither a contributor nor the contributor's spouse shall serve as co-trustee.

(5) During his or her lifetime, any contributor or contributor's spouse who has not been designated as the life beneficiary, may revoke his or her contribution made to the AFT Trust. Notwithstanding the foregoing, any contributor may, at any time, voluntarily waive the right to revoke by written notice. If the life beneficiary has not received any benefits provided by the use of the AFT Trust income or principal at the time the contributor revokes the contribution to the AFT Trust, then an amount equal to the current fair market value of the balance of the life beneficiary's account in the AFT Trust as determined on the date of distribution shall be returned to the contributor. If at the time a contributor revokes the contribution to the AFT Trust, then an amount equal to 95 percent of the current fair market value of the principal balance of the life beneficiary account in the AFT Trust as determined on the date of distribution shall be returned to the contributor. The remaining balance of the life beneficiary account shall be distributed to the AFT Charitable Trust.

(6) The co-trustee, with the consent of the trustee, shall agree on the amount of income or principal, or both, to be used to provide non-cash benefits in the best interest of the life beneficiary. Any net income which is not used shall be added annually to the principal.

(7) In the event that the trustees and the co-trustee shall be unable to agree either on the amount of income or principal, or income and principal, to be used or the benefits to be provided, then either the trustees or the co-trustee may request that the matter be resolved by arbitration. The requesting party shall send a written request for arbitration to the responding party and shall in the request set forth the name, address, and telephone number of the requesting party's arbitrator. The responding party shall, within 10 days, after receipt of the request for arbitration, set forth in writing to the requesting party the name, address, and telephone number of the responding party's arbitrator. Copies of the request for arbitration and response shall be sent to the commissioner of the department. If the two designated arbitrators are unable to agree upon a third arbitrator within 10 days after the responding party has identified the responding party's arbitrator, then the commissioner shall designate the third arbitrator by written notice to the requesting and responding parties' arbitrators. The three arbitrators shall meet and render a decision within 30 calendar days after the appointment of the third arbitrator. A decision of a majority of the arbitrators shall be binding upon the requesting and responding parties. Each party shall pay the fees and expenses of the party's arbitrator and the fees and expenses of the third arbitrator shall be borne equally by the parties.

(8) If a life beneficiary for whose benefit a contribution has been made to the AFT Trust ceases to be eligible to participate in the AFT Trust, and the contributor does not revoke or withdraw the applicable balance of the life beneficiary's account in the AFT Trust, then the trustee may, by written notice to the contributor or acting co-trustee, terminate the AFT Trust as to such life beneficiary.

(9) At the time of termination pursuant to subdivision (8) of this subsection of a life beneficiary's account from the AFT Trust, if the life beneficiary has not received any benefits provided by the use of AFT Trust income or principal, or the life beneficiary has received benefits provided by the use of AFT Trust income or principal for a period of not more than five years from the date a contribution has first been made to the AFT Trust for the life beneficiary, then an amount equal to 95 percent of the current fair market value of the principal balance of the life beneficiary's account in the AFT Trust as determined on the date of distribution shall be distributed to the account of the successor life beneficiary, and the balance of the life beneficiary's account in the AFT Trust shall be distributed to the AFT Charitable Trust. At the time of withdrawal by the co-trustee or termination as provided above, if the life beneficiary has received any benefits provided by the use of AFT Trust income or principal for a period of more than five years from the date a contribution has first been made to an account in the AFT Trust for the life beneficiary, then an amount equal to 90 percent of the current fair market value of the balance of the life beneficiary's account in the AFT Trust as determined on the date of distribution shall be distributed to the account of the successor life beneficiary, and the balance of the life beneficiary's account in the AFT Trust shall be distributed to the AFT Charitable Trust.

(10) If the life beneficiary dies before receiving any benefits provided by the use of AFT Trust income or principal, all amounts remaining in the account of such life beneficiary shall be transferred to the account of a successor life beneficiary, if any. If there is no successor life beneficiary, then an amount equal to the current fair market value of the principal balance of the life beneficiary's account in the AFT Trust as determined on the date of distribution shall be distributed to the person or persons as the settlor has designated. If at the time of death of the life beneficiary, the life beneficiary has received benefits provided by the use of AFT Trust income or principal, or both, then all amounts remaining in the account of such life beneficiary shall be transferred to the account of a successor life beneficiary, if any. If there is no successor life beneficiary, an amount equal to 90 percent of the current fair market value of the balance of the life beneficiary's account in the AFT Trust, as determined on the date of distribution, shall be distributed to the person or persons as the settlor has designated, and the remaining balance of the life beneficiary's account in the AFT Trust, shall be distributed to the AFT Charitable Trust.

(11) Upon receipt of a notice of the death of a life beneficiary where there is a successor life beneficiary, the applicable portion of the current fair market value of the life beneficiary's account in the AFT Trust shall be transferred to the account of the successor life beneficiary, and the co-trustee for the successor life beneficiary, with the consent of the trustee, shall agree on the amount of income or principal, or both, to be used to provide non-cash benefits in the best interest of the successor life beneficiary. After the death of a life beneficiary, an amount equal to 90 percent of the current fair market value of the balance of the successor life beneficiary's account in the AFT Trust, as determined on the date of distribution, shall be distributed to the person or persons as the settlor has designated, and the remaining balance of the successor life beneficiary's account in the AFT Trust shall be distributed to the AFT Charitable Trust.

(d) The documents establishing the AFT Charitable Trust shall include and be limited to the following:

(1) The AFT Charitable Trust shall be a charitable trust under the United States Internal Revenue Code and shall be administered as part of the AFT Trust, but as a separate account. The income attributable to the AFT Charitable Trust shall be used for the benefit of beneficiaries of AFT individual trusts who have needs that cannot be met from funds available to such life beneficiaries from their AFT individual trusts. The board of trustees shall determine annually the amount of AFT Charitable Trust income to be used to provide benefits and the nature and type of benefits to be provided for each AFT life beneficiary while taking into account the individual's eligibility for government benefits. Any income of the AFT Charitable Trust not used shall be added annually to the principal.

(2) The board of trustees shall accept contributions to the AFT Charitable Trust from any source and shall comply with all rules and regulations under the United States Internal Revenue Code that govern the acceptance of charitable contributions.

(Acts 1994, No. 94-579, p. 1054, §5; Acts 1996, No. 96-559, p. 831, §1; Act 2000-141, p. 194, §1; Act 2006-604, p. 1658, §1; Act 2013-366, p. 1313, §1.)

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Last modified: November 15, 2016