Apr 2017 AFR: 2.6%
Gift Annuity State Regulations

Alabama


Intestacy


General Definition

A decedent's intestate estate is defined as any part of the estate not effectively disposed of by a valid will. Sec. 43-8-40.

Order of Distribution

The intestate share of the surviving spouse not including any elective share is as follows:

  1. If there is no surviving issue or parent of the decedent, the entire intestate estate;
  2. If there is no surviving issue but the decedent is survived by a parent or parents, the first $100,000.00 in value, plus 1/2 of the balance of the estate;
  3. If there are surviving issue all of whom are issue of the surviving spouse also, the first $50,000.00 in value, plus 1/2 of the balance of the intestate estate;
  4. If there are surviving issue one or more of who are not issue of the surviving spouse, 1/2 of the intestate estate. Sec. 43-8-41.

The part of the intestate estate not passing to the surviving spouse passes as follows:

  1. To the issue of the decedent; if they are all of the same degree of relations to the decedent they take equally, but if of unequal degree, then to those of more remote degree take by representation;
  2. If there is no surviving issue, to his parent or parents equally;
  3. If there is no surviving issue or parent, to the issue of the parents or either of them by representation;
  4. If there is no surviving issue, parent or issue of a parent, but the decedent is survived by one or more grandparents or issue of grandparents, 1/2 of the estate passes to the paternal grandparents or to the issue of the paternal grandparents if both are deceased, the issue taking equally if they are all of the same degree of relation to the decedent, but if of unequal degree those of more remote degree take by representation; and the other 1/2 passes to the maternal relatives in the same manner Sec. 43-8-42.

If no relative or issue of a relative can be located to take the estate of the decedent, the estate passes to the State of Alabama. Sec. 43-8-44.

Will Qualifications


Common Law or Community Property

Alabama is a common law property state.

Capacity

The testator of a valid will must be at least 18 years of age, of sound mind and free from improper influences at the time of the drafting. Sec. 43-8-130

Drafting

Every will must be in writing signed by the testator or by another person in the testator's presence and direction. In addition, the will must be signed by at least two persons each of whom witnessed either the signing or the testator's acknowledgment of the signature or of the will. Sec. 43-8-131

A self-proved will must be signed by the testator and two witnesses in one another's presence and must be witnessed and signed by a notary public licensed in Alabama. Sec. 43-8-132.

Beneficiaries

A beneficiary is any person who has any present and/or future interest, vested or contingent. A beneficiary also includes the owner of an interest by assignment or other transfer and as it relates to a charitable trust, includes any person entitled to enforce the trust. Sec. 43-8-1(1).

A beneficiary must survive the testator by five days or is treated as if he or she predeceased the testator. However, the testator may include a provision in his or her will dealing explicitly with simultaneous deaths or deaths in a common disaster that differs from the five day rule in the code. Sec 43-8-220.

Modifications

A will or any part of a will may be revoked by a subsequent will which revokes the prior will or any part expressly or by inconsistency. Sec. 43-8-136(a).

A will is revoked by being burned, torn, canceled, obliterated or destroyed with the intent of revoking it by the testator or by another person in his presence by his consent and direction. If the act is made by someone other than the testator, consent and direction of the testator must be proved by at least two witnesses. Sec. 43-8-136(b).

If after executing a will the testator is divorced, the divorce revokes any disposition made to the former spouse. The divorce also revokes any provision conferring a general or special power of appointment on the former spouse and any nomination of the former spouse as executor, trustee, or guardian, unless the will expressly provides otherwise. If a bequest(s) is revoked by divorce and the testator and former spouse later re-marry, the bequests are revived by the remarriage. Sec. 43-8-137.

Probate Process


Naming of Executor

Administration of an estate will be granted to the person named by the decedent's will. Sec. 43-2-20. When a person passes away intestate, letters must be granted to one of the persons in the following order:

  1. The husband or widow.
  2. The next of kin entitled to share in the distribution of the estate.
  3. The largest creditor of the estate residing in this state.
  4. Any other person as the judge of probate may appoint. Sec. 43-2-42.

Submission of Will

Upon the death of a decedent, the executor, devisee, or any legatee named in the will (or any person with an interest in the estate) or who has custody of the decedent's will may have the will proved before the proper probate court. Sec. 43-8-160.

Any person having custody of a will of the testator must deliver it to a person able to secure its probate and if none is known, to an appropriate court. Any person who willfully fails to deliver a will is liable for any damages which occur by the failure. Any person who willfully refuses or fails to deliver a will after being ordered by the court in a proceeding brought for the purpose of compelling delivery is subject to the penalty for contempt of court. Sec. 43-8-270.

Notifications

The surviving spouse and next of kin of the decedent must be notified ten days prior to the submission of the letters of administration or the petition to probate will be accepted by the court. Sec. 43-8-164.

Inventory

The personal representative, unless waived by the testator's will, must complete an inventory of the estate. The inventory must set forth the property and the amount and due date of all debts. Sec. 43-2-312.

The inventory must be completed within two months after appointment. The inventory must be sent to interested persons who request it. If the testator, by express provision in the will to that effect, exempts the personal representative from filing an inventory, the personal representative is not required to file it. Sec. 43-2-835.

Homestead Allowance, Exempt Property, Family Allowance and the Elective Share:

A surviving spouse is entitled to a homestead allowance of $6,000.00. If there is no surviving spouse, each minor child and each dependent child of the decedent is entitled to a homestead allowance amounting to $6,000.00 divided by the number of minor and dependent children of the decedent. The homestead allowance is exempt from and has priority over all claims against the estate. Sec. 43-8-110.

The surviving spouse is entitled to receive property of a value not exceeding $3,500.00 in household furniture, automobiles, furnishings, appliances and personal effects. If there is no surviving spouse, children of the decedent are entitled jointly to the same value. Sec. 43-8-111.

In addition to the right to homestead allowance and exempt property, the surviving spouse and minor children are entitled to a reasonable allowance in money out of the estate for their maintenance during the period of administration, not exceeding one year if the estate is inadequate to discharge allowed claims. The allowance may be paid as a lump sum or in periodic installments. The family allowance is exempt from and has priority over all claims but does not have priority over the homestead allowance. Sec. 43-8-112.

When a married person dies, the surviving spouse is entitled to an elective share of the estate. The elective share is the lesser of the total value of the decedent's estate reduced by the value of the surviving spouse's separate estate or one-third of the estate of the deceased. Sec. 43-8-70. A surviving spouse is entitled to a homestead allowance, exempt property and family allowance, whether or not he or she elects to take an elective share. Sec. 43-8-74.

Debts and Distributions

The presiding judge may declare the order of the distribution of the estate. Sec. 43-2-620.

However, if the debts against the estates exceed the value of the estate, they are to be paid in the following order:

  1. The funeral expenses.
  2. The fees and charges of administration.
  3. Expenses of the last sickness.
  4. Taxes assessed on the estate of the decedent previous to his death.
  5. Debts due to employees, as such, for services rendered the year of the death of the decedent.
  6. The other debts of the decedent. Sec. 43-2-371.

Estate/Inheritance Tax


Tax Rate

The tax equals the total amount of the federal credit available to the estate for state imposed estate tax. However, with the federal repeal of the credit for state estate taxes in 2005, there is currently no estate tax. Sec. 40-15-2.

Income Tax Charitable Deductions and/or Credits


Alabama allows a taxpaying resident to deduct itemized charitable gifts in the same manner as the IRS. Ala. Code §40-18-15(a)(10).

Gift Annuity Requirements


Alabama, a "registration" state, regulates the issuance of charitable gift annuities under Alabama Code Sec. 8-6-10, Administrative Code Chapter 830-X-6-.10 and 7555 Blue Sky Law Reports 4-93. Charities must obtain a permit from the Alabama Securities Commission and meet the annual filing and reserve requirements before issuing charitable gift annuities in order to comply with state law.

Application Process

To register for a permit with the Securities Commission, the charity must submit a detailed application requiring two forms. The first required form is the Uniform Application for Securities Industry Registration of Transfer (Form U-4), which registers each individual the organization employs to solicit funds on the charity's behalf. The fee is $60 fee per individual so registered. Accompanying required documents provide the Securities Commission with the charity's articles of incorporation, contact information for the gift annuity asset custodian, description of the charity's organizational structure and solicitation materials, list of directors and officers, advertising materials, financial statements for the last three years, investment parameters, sample gift annuity agreements, a sample disclosure statement and a detailed explanation of how annuity payments are calculated. The second required form is the Uniform Consent to Service of Process (Form U-2), which appoints the Alabama Secretary of State as the agent for service of process. No fee is required with Form U-2.

Disclosure Language

The sample gift annuity agreements must contain the following state-required disclosure language similar to the following:

"This charitable gift annuity is offered pursuant to a claim of exemption from registration under Section 37(h) [Section 8-6-10, Code of Alabama, 1975] of the Alabama Securities Act and Section 3(a)(4) of the Securities Act of 1933. A registration statement relating to this annuity has not been filed with the Alabama Securities Commission or with the United States Securities and Exchange Commission. Neither Commission has passed upon the value of this charitable gift annuity nor approved or disapproved of its offering, nor passed upon the adequacy or accuracy of this agreement. Any representation to the contrary is unlawful."

Applicants must also include a sample detailed disclosure statement that is to be signed by the donor(s) (before entering into a gift annuity agreement) and includes statements regarding relevant risks associated with charitable gift annuities, tax consequences, the financial condition of the organization (including the assets backing the annuity payments) and any present, pending or threatened material legal proceedings . The disclosure statement also must state the following required language:

"The payments made under a charitable gift annuity are backed by the full faith and credit of the organization and are not insured or guaranteed by an insurance company or backed in any way by the State of Alabama."

Reserve Requirements

Applying charities must maintain a segregated reserve account fund. Alabama does not require the charity meet a minimum number of years in operation, a minimum amount of unrestricted assets, a minimum amount for the segregated fund or impose investment restrictions on the account.

Annual Filing Requirements

Once a permit is granted, Alabama requires annual filings submitted to the Securities Commission. These filings renew the registration each year by submitting the charity's most recent financial statements and other information, such as any recent changes to the annuity program. The annual filing fee is $60.

State Contact Information

Alabama Securities Commission
Licensing and Registration
401 Adams Avenue, Suite 280
Montgomery, AL 36104-4338
(334) 242-2372 or (334) 242-2984
(800) 222-1253
Bene Kyles
bene.kyles@asc.alabama.gov

State Forms

For more information on state-specific form requirements, please contact Crescendo at 800-858-9154.
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