(a) A provision for a nonprobate transfer on death in an insurance policy, contract of employment, bond, mortgage, promissory note, certificated or uncertificated security, account agreement, custodial agreement, deposit agreement, compensation plan, pension plan, individual retirement plan, employee benefit plan, trust, conveyance, deed of gift, marital property agreement, or other written instrument of a similar nature is nontestamentary. This subsection includes a written provision that

(1) money or other benefits due to, controlled by, or owned by a decedent before death must be paid after the decedent's death to a person whom the decedent designates either in the instrument or in a separate writing, including a will, executed either before or at the same time as the instrument, or later;

(2) money due or to become due under the instrument ceases to be payable in the event of death of the promisee or the promisor before payment or demand; or

(3) property controlled by or owned by the decedent before death that is the subject of the instrument passes to a person the decedent designates either in the instrument or in a separate writing, including a will, executed either before or at the same time as the instrument, or later.

(b) An instrument referred to in (a) of this section may designate as a beneficiary, payee, or owner, a trustee named or to be named in the will of the person entitled to make the designation. The designation may be made before or after the execution of the designator's will. It is not necessary to the validity of the underlying trust that there be in existence a trust corpus other than the right to receive benefits or to exercise the rights resulting from the designation.

(c) This section does not limit rights of creditors under other laws of this state.

(d) The money or other benefits paid under a provision for a nonprobate transfer on death in a life insurance contract or a retirement plan are not subject to

(1) the debts of the individual who was insured under the life insurance contract or who was a participant in the retirement plan; or

(2) the claims of the creditors of the individual who was insured under the life insurance contract or who was a participant in the retirement plan.

(e) The provisions of (d) of this section apply even if

(1) the provision for a nonprobate transfer on death is contained in the life insurance contract or the retirement plan and designates the person to whom the money or other benefits are to be paid if the person who is the owner or insured under the life insurance policy or the participant in the retirement plan does not select a beneficiary;

(2) the life insurance contract, retirement plan, or a provision for a nonprobate transfer on death in the life insurance contract or retirement plan makes the money or other benefits payable, directly or indirectly, to

(A) a decedent's estate or the personal representative of a decedent's estate, except that, if the decedent owes money for child support arrearages, for spousal support arrearages, or under AS 47.07.055, the provisions of (d) of this section do not apply; in this subparagraph, “personal representative” has the meaning given in AS 13.06.050;

(B) a trustee of a trust established under a will, except that, if the decedent owes money for child support arrearages, for spousal support arrearages, or under AS 47.07.055, the provisions of (d) of this section do not apply; or

(C) a trustee of a trust instrument that is separate from the life insurance contract or retirement plan and that designates the ultimate beneficiary;

(3) a trust to which the money or other benefits are payable may be amended, revoked, or both amended and revoked, or is funded or unfunded; or

(4) the settlor of the trust to which the money or other benefits are payable has reserved all rights of ownership in the life insurance contract or under the retirement plan.

(f) The provisions of (d) of this section do not limit the rights of the owner of a life insurance contract to pledge or assign by contract the money or other benefits from a life insurance contract as collateral for the debts of the owner.

(g) In (d) of this section,

(1) “life insurance contract” means a life insurance policy, an annuity contract, an endowment contract, and a contract entered into by an insurance company in connection with, supplemental to, or in settlement of a life insurance policy, an annuity contract, or an endowment contract;

(2) “retirement plan” means

(A) a retirement plan that is qualified under 26 U.S.C. 401(a), 26 U.S.C. 403(a), 26 U.S.C. 403(b), 26 U.S.C. 408, 26 U.S.C. 408A, or 26 U.S.C. 409 (Internal Revenue Code); and

(B) the amounts held in the teachers' retirement system under AS 14.25, judicial retirement system under AS 22.25, public employees' retirement system under AS 39.35, or elected public officers' retirement system under former AS 39.37.