Alabama Enacts Law Amending Trust Creditor Claims, Tax Reimbursements

The Alabama Legislature enacted a law amending the Code of Alabama to limit creditor claims against irrevocable trusts in conformity with the Alabama Qualified Dispositions in Trust Act and clarifying when holders of withdrawal powers are considered settlors. The law includes allowing trustees to reimburse settlors for income taxes paid on trust income, without subjecting those reimbursements to creditor claims. The law takes effect Oct. 1, 2026, and will apply to all trusts in accordance with §19-3B-1204. [S.B. 179, enacted 04/17/26]

This story was produced by Bloomberg Tax Automation, and edited by Bloomberg Tax staff.