(a) A qualified disposition may be avoided only to the extent necessary to satisfy or provide for the present value, taking into consideration any uncertainty of the transferor’s debt to the creditor at whose instance the disposition had been avoided.
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Terms Used In Alabama Code 19-3E-7

  • Affidavit: A written statement of facts confirmed by the oath of the party making it, before a notary or officer having authority to administer oaths.
  • Attachment: A procedure by which a person's property is seized to pay judgments levied by the court.
  • Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
  • Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
  • Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
  • following: means next after. See Alabama Code 1-1-1
  • Garnishment: Generally, garnishment is a court proceeding in which a creditor asks a court to order a third party who owes money to the debtor or otherwise holds assets belonging to the debtor to turn over to the creditor any of the debtor
  • Lien: A claim against real or personal property in satisfaction of a debt.
  • property: includes both real and personal property. See Alabama Code 1-1-1
  • Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
  • Tenancy in common: A type of property ownership in which two or more individuals have an undivided interest in property. At the death of one tenant in common, his (her) fractional percentage of ownership in the property passes to the decedent
  • Trustee: A person or institution holding and administering property in trust.
(b) If all or any portion of a qualified disposition is avoided, the following rules apply:

(1) If the court is satisfied that a trustee has acted in good faith in accepting or administering the property that is the subject of the qualified disposition, both of the following apply:

a. The trustee has a lien against the property that is the subject of the qualified disposition in an amount equal to the entire cost, including attorney fees, incurred in connection with an action dealing with the qualified disposition. The lien has priority over all other liens against the property, whether or not the other liens accrued or were recorded before the accrual of the lien created by this paragraph.
b. The qualified disposition is avoided subject to the fees, costs, preexisting rights, claims, and interests of the trustee who has acted in good faith and of any predecessor trustee who has acted in good faith.
(2) If the court is satisfied that a trust beneficiary acted in good faith, the avoidance of the qualified disposition is subject to the right of the trust beneficiary to retain any distribution received before the creditor’s commencement of an action to avoid the qualified disposition. The mere creation of the trust or acceptance of a distribution made under the terms of the trust by the trust beneficiary, including a trust beneficiary who is also a transferor of the trust, shall not be considered as evidence that the trust beneficiary failed to act in good faith.
(3) For purposes of this subsection, the mere acceptance of property with or without a qualified affidavit, or the making of any distribution under the terms of the trust, shall not be considered as evidence that a trustee failed to act in good faith.
(c) A creditor has the burden of proving by a preponderance of the evidence that a trustee or trust beneficiary failed to act in good faith. This subsection provides substantive, not procedural, rights.
(d) With respect to a qualified disposition, a levy, attachment, garnishment, notice of lien, sequestration, or other legal or equitable process is permitted only in those circumstances permitted by this chapter.
(e) Notwithstanding any other provision of this chapter, a creditor does not have a right against the interest of a trust beneficiary in property in a trust or portion of a trust that was the subject of qualified disposition solely because the trust beneficiary has the right to authorize or direct the trustee to pay all or part of the trust property in satisfaction of estate or inheritance taxes imposed on or with respect to the trust beneficiary’s postdeath estate, the debts of the trust beneficiary’s postdeath estate, or the expenses of administering the trust beneficiary’s postdeath estate, unless the trust beneficiary actually directs the payment of the taxes, debts, or expenses, and then only to the extent of the direction.
(f)

(1) Except as otherwise provided in the trust instrument, if a married couple makes a qualified disposition of property and, immediately before the qualified disposition, the property, any part of the property, or any accumulation to the property, under applicable law, was owned by the married couple as tenants in common for life with cross contingent remainder to the survivor in fee, then notwithstanding the qualified disposition, the property, any part of the property, or any accumulation to the property, while held in trust during the lifetime of both spouses, is treated as though it is property held in tenancy in common for life with cross contingent remainder to the survivor in fee.
(2) In an action concerning whether a creditor of either or both spouses may recover the debt from the trust, on avoidance of the qualified disposition, the sole remedy available to the creditor with respect to trust property treated as though it were tenancy in common for life with cross contingent remainder to the survivor in fee property is an order directing the trustee to transfer the property to both spouses as tenants in common for life with cross contingent remainder to the survivor in fee.
(g) Except as otherwise provided in subsection (f), on avoidance of a qualified disposition to the extent permitted under subsection (a), the sole remedy available to the creditor is an order directing the trustee to transfer to the transferor the amount necessary to satisfy the transferor’s debt to the creditor at whose instance the disposition has been avoided.
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