(a) Notwithstanding AS 13.36.107, a trustee who is not an independent trustee may not exercise a power to make or cause to be made a discretionary distribution of either principal or income

(1) to or for the direct or indirect benefit of the trustee individually or to any person holding a power to remove and replace the trustee, except to the extent that the power is exercised in accordance with an ascertainable standard that relates to the health, education, maintenance, or support of the trustee or person;

(2) to satisfy a legal obligation that is owed by the trustee individually or by any person holding a power to remove and replace this trustee; or

(3) if the distribution would constitute a taxable gift from the trustee individually or from a person holding a power to remove and replace the trustee.

(b) The prohibitions of (a) of this section apply to a trustee even if the governing instrument states that the trustee may make distributions in the trustee's uncontrolled, absolute, or total discretion, or that distributions are not subject to review by a court, or the governing instrument otherwise indicates that distributions by the trustee are not subject to reasonableness when the trustee exercises discretion.

(c) If a trustee is prohibited by (a) of this section from exercising a power and if one or more other trustees are not prohibited by (a) of this section from exercising the power, the other trustees may exercise the power. If there is not a trustee who can exercise a power prohibited under (a) of this section, a party in interest may apply to the superior court to appoint an independent trustee to exercise the power.

(d) The provisions of (a) of this section do not prohibit a trustee from making payments, including reimbursement of and compensation of an independent trustee appointed under (c) of this section, for the protection of the trust or the assets of the trust, or for the expenses, losses, or liabilities incurred in the collection, care, administration, or protection of the trust or the assets of the trust.

(e) Except as provided in (f) of this section, this section applies to

(1) a trust that is created on or after August 9, 2000; or

(2) the decisions and actions of a trust that is in existence on August 9, 2000, if the decisions are made, or the actions occur, on or after August 9, 2000.

(f) The application provisions of (e) of this section do not apply if

(1) the terms of the trust, including the terms as amended, expressly provide that this section does not apply and either specifically refer to this section or otherwise clearly demonstrate the intent that this section does not apply; or

(2) the trust is irrevocable and all parties in interest elect under (g) of this section not to be subject to the application of this section; an election under this paragraph must be made on or before January 1, 2003, or three years after the date on which the trust becomes irrevocable, whichever date is later; however, notwithstanding AS 13.36.080, the trustee does not have a duty to inform the parties in interest of this election.

(g) The election allowed under (f) of this section shall be made by a written declaration that is delivered to the trustee.

(h) The prohibitions of (a) of this section do not apply to a trustee with respect to trust property, including income from the trust property, if the trust property would, upon the death of the trustee, be included, for any reason other than the exercise of a power prohibited by (a) of this section, in the gross estate of the trustee for federal estate tax purposes.

(i) This section does not create a new cause of action, or impair a cause of action existing before August 9, 2000, if the new or existing cause of action relates to the exercise of a power prohibited by (a) of this section that was exercised before August 9, 2000.

(j) In this section, “independent trustee” means a trustee that is not related or subordinate, as defined in 26 U.S.C. 672(c), to the person having the power to remove the trustee or to any beneficiary.