Section 19-3-1

Express trust for support, maintenance and education of relative; qualified trust under Internal Revenue Code; definitions.

(a) It is lawful for any person or owner of property to convey or devise any of his real estate or personal property to another in trust to receive and pay the profits or income, and, at the grantor's or devisor's election, so much of the principal as may be required, in the trustee's opinion, for the support, maintenance and education of any child, grandchild or other relation by blood or marriage, with remainder as the grantor or devisor shall provide, during a period of time not exceeding the limit fixed by law as to perpetuities; and the property so conveyed and the income or profits therefrom shall not be liable for or subject to be seized or taken in any manner for the debt of such child, grandchild or other relation, whether the same is contracted or incurred before or after the creation of such trust.

(b) Qualified trust under the Internal Revenue Code.

(1) PROHIBITION ON ASSIGNMENT. - Any benefits provided under a plan which includes a trust that constitutes a "qualified trust" may not be assigned or alienated, voluntarily or involuntarily, and shall be exempt from the operation of any bankruptcy or insolvency laws under 11 U.S.C. § 522(b), as from time to time amended. This subdivision may not be waived by a participant or beneficiary of any qualified plan.

(2) EXCEPTION FOR PLAN LOANS. - The securing of a loan made to a participant or beneficiary of such a plan shall not be treated as an assignment or alienation under the preceding subdivision (1) if such loan is secured by the participant's accrued nonforfeitable benefit under the plan and is exempt from the tax imposed by Section 4975 of the Code by reason of Section 4975(d)(1) of the Code.

(3) EXCEPTION FOR QUALIFIED DOMESTIC RELATIONS ORDERS. - Subdivision (1) above shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, as such term is defined in Section 414(p) of the Code, except that subdivision (1) above shall not apply if the order is determined to be a "qualified domestic relations order" in accordance with Section 414(p) of the Code. However, no domestic relations order shall be deemed a qualified domestic relations order except in accordance with the procedures for such determination set forth in such Section 414(p) and the related provisions of the Employee Retirement Income Security Act of 1974, as from time to time amended.

(4) INTERPRETATION. - The provisions of this section shall be interpreted so as to provide restrictions on alienation and assignment to the extent, and only to the extent, the same are required for a trust within the definition of "qualified trust" herein to be a "qualified trust" under the applicable provisions of the Code, notwithstanding any attempted assignment or alienation in violation of Section 401(a) or other applicable provisions of the Code. It is intended that this section will constitute "a restriction of the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law" for purposes of Section 541(c)(2) of the Federal Bankruptcy Code, 11 U.S.C. § 541(c)(2), as from time to time amended. This section shall further be construed as a "state spendthrift trust law." It is further intended for this section to provide an exemption from creditors' claims within 11 U.S.C. § 522.

(5) DEFINITIONS.

a. The term "assignment or alienation," and any conjugation thereof, includes any anticipation, assignment (either at law or in equity), alienation, attachment, garnishment, levy, execution, or other legal or equitable process. Moreover, such term includes:

1. Any arrangement providing for the payment to the employer or other sponsor of such plan of benefits that otherwise would be due the participant under the plan;

2. Any direct or indirect arrangement (whether revocable or irrevocable) whereby any person acquires from a participant or beneficiary of such plan a right or interest enforceable against the plan in, or to, all or any part of a plan benefit which is, or may become, payable to the participant or beneficiary;

3. Any attachment, execution, seizure, or the like, or under any form of legal process whatsoever; and

4. The operation of any bankruptcy or insolvency laws under 11 U.S.C. § 522(b) as from time to time amended.

Notwithstanding the foregoing, "assignment and alienation" does not include those items excluded from such definition by Treasury Regulations § 1.401(a)-13(c)(2).

b. "Code" means the Internal Revenue Code of 1986, as from time to time amended, or as at any time superseded by reenactment, recodification, or adoption of any other similar revenue law. Reference to specific sections of the Code shall include references to their successor sections as a result of renumbering or recodification at any future date.

c. "Treasury Regulation" means a valid regulation of the United States Department of Treasury codified at Title 26 of the Code of Federal Regulations. References to specific Treasury Regulations include references to amendments and future reenactments or recodifications of such regulations, regardless of how designated.

d. "Qualified trust" means a "qualified trust" as such term is used in Section 401(a) of the Code, and includes any trust that would not be qualified but for this section. A "qualified trust" includes, without limitations, any trust that has received a favorable determination letter from the Internal Revenue Service of the United States Department of Treasury to the effect that such trust is, or will be upon the satisfaction of certain administrative conditions, a "qualified trust" under Section 401(a) of the Code. "Qualified trust" also includes:

1. A "retirement annuity" described in Section 404(a)(2) of the Code, including a retirement annuity that would not satisfy the requirements of Section 404(a)(2) of the Code but for this section;

2. An annuity described in Section 403(b) of the Code, including an annuity that would not satisfy the requirements of Section 403(b) of the Code but for this section;

3. An individual retirement plan described in Section 7701(a)(37) of the Code, including an individual retirement plan that would not satisfy the requirements of Section 7701(a)(37) of the Code but for this section;

4. A retirement bond described in Section 409 of the Code, as in effect prior to January 1, 1984, including a retirement bond that would not satisfy the requirements of Section 409 of the Code but for this section;

5. A governmental plan described in Section 414(d) of the Code;

6. A church plan described in Section 414(e) of the Code; and

7. A tax credit employee stock ownership plan described in Section 409 of the Code, including a tax credit employee stock ownership plan that would not satisfy the requirements of Section 409 of the Code but for this section.

(c) The provisions of subsection (b) of this section shall not apply to the Employees Retirement System of Alabama, Teacher's Retirement System of Alabama, and the Judicial Retirement Fund of Alabama.

(Acts 1935, No. 230, p. 626; Code 1940, T. 58, §1; Acts 1982, No. 82-625, p. 1179, §1; Acts 1990, No. 90-561.)