Legislature(2007 - 2008)BELTZ 211
02/21/2008 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB153 | |
| SB209 | |
| HJR16 | |
| HB196 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 196 | TELECONFERENCED | |
| + | HJR 16 | TELECONFERENCED | |
| += | SB 153 | TELECONFERENCED | |
| += | SB 209 | TELECONFERENCED | |
CSHB 196(JUD)-HANDLING MATTERS AFTER A PERSON'S DEATH
CHAIR ELLIS announced CSHB 196(JUD) to be up for consideration.
1:53:51 PM
REPRESENTATIVE JAY RAMRAS, sponsor of HB 196, testified that it
discourages beneficiaries in a will from contesting elements of
the document; it also addresses proceeds from life insurance
policies.
1:56:08 PM
JANE PIERSON, staff to Representative Ramras, said the purpose
of HB 196 is to make the will process as streamlined and
efficient as possible. It works hand in hand with some of the
provisions in trusts and that was really the impetus of this
bill.
CHAIR ELLIS asked if it originated from trust attorneys.
MS. PEARSON replied yes.
SENATOR BUNDE asked if the bill wants to prevent someone who has
a legitimate claim from contesting a trust.
MS. PIERSON answered that provisions in case law address undue
influence in a will. This bill would apply if your last wishes
were being questioned. Sometimes a protest will be used as a
bargaining chip to get a monetary settlement in litigation.
1:58:55 PM
SENATOR BUNDE asked if this would prevent an investor from being
named in a life insurance contract to protect his investment if
the entrepreneur was somehow removed from the scene.
REPRESENTATIVE RAMRAS responded that the concept Senator Bunde
was referring to is called "key man" insurance coverage and he
had those same reservations last year. He deferred those answers
to professionals in the field because as a lay person he
couldn't see the logic.
2:01:03 PM
MS. PIERSON clarified that AS 13.33.101 lays out that life
insurance contracts and retirement plans are protected from
claims and creditors.
SENATOR BUNDE said he thought an answer is that if you have key
man insurance, those people are named in the insurance. So, this
would not prevent them from having a claim.
MS. PIERSON answered yes.
2:02:14 PM
ROBERT MANLEY, Estate Planning Attorney representing himself,
said he is part of an informal group of estate planning lawyers
who have been working to keep Alaska law on trusts current and
working well so Alaskans can have their wishes carried out with
a minimum of expense and tax costs. While other legislation in
recent years has come before them has been designed in part to
attract trusts from other jurisdictions, HB 196 is primarily of
local interest. It has been circulated through the bar
association and it has broad support. `
MR. MANLEY said Section 1 deals with no contest clauses;
Sections 2 and 3 deal with probate waiver affidavits and section
4 deals with beneficiary designations for life insurance,
qualified plans, IRAs and the like.
He said he wanted to speak to section 1 and allow his colleagues
to speak to the other sections; he said this section simply
brings Alaska law governing wills into conformity with laws
governing revocable trusts. Revocable trusts and wills are the
two primary vehicles that people use for estate planning. There
are various reasons for selecting one over the other including
privacy, avoidance of probate in multiple jurisdictions or
avoidance of the extra expense of funding a revocable trust.
MR. MANLEY said that Alaska trust law provides that no contest
clauses are effective; the laws governing wills say that contest
clauses are not effective if the challenger has probable cause.
The contest clause is the provision used if a beneficiary under
a will or trust challenges the dispositions someone wants to
make. Some people will challenge a will not because there is a
good reason for doing it, but because they are trying to extort
some kind of settlement on the basis of the cost of litigation;
often they are successful. This puts wills on the same plane as
trusts in preventing that kind of thing.
MR. MANLEY stated there is a valid challenge if the person
making the instrument didn't have testamentary capacity or was
unduly influenced, and then a court could invalidate that
instrument and the no contest clause is of no effect. More
importantly, he said, if you totally disinherit somebody a no
contest clause doesn't work at all because the person is risking
nothing. So, it only applies in situations where one child is
being favored over the other. This legislation will allow people
to exercise their own judgment over disposition of their own
money rather than have ongoing litigation in the future.
2:07:26 PM
Section 4(f) on page 3, line 21, specifically does not limit the
right of the owner of a policy to pledge or assign a contract
for collateral for debts. So it doesn't interfere in any way
with the ability for creditors to protect themselves through
life insurance. It clarifies in Alaska law that you can name a
trust as well as an individual and have that disposition free
from the claims of general predators of the deceased.
CHAIR ELLIS asked if he knew of any opposition to this bill.
MR. MANLEY replied he didn't know of any opposition.
2:08:44 PM
RODNEY KLEEDEHN, representing himself, supported HB 196 and said
he would comment on the part of Section 4 that addresses life
insurance proceeds payable to a beneficiary upon the death of an
insured and also that addresses retirement account proceeds
payable to a beneficiary upon the death of the account owner. He
explained that life insurance proceeds payable to an individual
or to an irrevocable trust are not subject to claims made by the
insureds' creditors. This is true in the case of retirement
account proceeds payable to an individual or an irrevocable
trust. However, proceeds payable to a revocable trust are
subject to such claims. This is the form of trust most widely
used by Alaskans.
The problem is that the ability of creditors to reach these
proceeds discourages use of revocable trusts, which provide much
needed management for immature beneficiaries and others who
can't manage money for one reason or another. His concern is for
the 18-year old who is legally an adult getting unfettered
control of life insurance proceeds because a parent chose not to
run the creditor risk of using a revocable trust. If the
proceeds had gone to the trust, management could be provided
indefinitely or to a suitable age for the individual to assume
responsibility for financial affairs. He was aware of no
opposition whatsoever; the consensus is it's a good idea.
2:11:19 PM
DOUGLAS BLATTMACHER, President, Alaska Trust Company, supported
HB 196. He said it would improve Alaska's trust laws and make
the administration of estates and trusts simpler.
CHAIR ELLIS asked him to describe what Alaska Trust Company
does.
MR. BLATTMACHER replied it is a stand-alone trust institution
similar to the bank's trust department, but all they do is
provide trust, fiduciary and investment management services
primarily to individuals, but to some institutions, as well. He
has nine employees and about 1,000 trust accounts mostly from
outside of Alaska. It started in 1996.
CHAIR ELLIS asked if it was fair to say the growth of his
company was due in part to changes the state has made over the
years in trust law in Alaska.
MR. BLATTMACHER replied yes; he added that trust departments in
other banks have also received additional business along with
insurance writers, stock brokers and attorneys.
2:13:21 PM
STEVE GREER, Estate Planning Attorney, representing himself,
Anchorage supported HB 196 and spoke to Sections 2 and 3. He
explained that they proposed bringing the threshold limit where
probate can be avoided up to a more reasonable amount. These
sections were meant to allow heirs to avoid the legal expense of
a probate proceeding.
Current statutes say that the decedent can only avoid the legal
expense of a probate proceeding if the decedent dies owning
$15,000 or less of personal property that has been on the books
since the early 80s. This bill raises that threshold to $25,000,
a number that has tracked the consumer price index (CPI) since
the early 80s. Cars are a problem and are treated separately.
Because no one really knows what a car is worth when a spouse
dies, and when title does not list the surviving spouse as
"and/or" or "or", the spouse would have to go through a probate
proceedings to get the car transferred to her if it exceeded the
value of $15,000. This bill raises the threshold for the value
of cars to a more reasonable amount of $100,000 because most
families have more than one car.
MR. GREER said it should be noted that virtually all states have
a similar statute only differing only in the amount in which
probate proceeding is not necessary. For example, Washington has
a statute which states the formal probate proceeding is not
necessary if a decedent's probatable estate is worth less than
$100,000; Oregon has a statute that says $200,000. He concluded
that this bill represents a compromise between those individuals
who want to avoid probate as opposed to those attorneys who
typically use the probate process to get assets from a decedent
to the heirs. It really is a consumer protection bill because it
makes it more possible for a decedent dying with a small estate
to avoid the expense that would be the case under current law.
He had heard of no objections to this bill; rather that it
provided good changes.
SENATOR BUNDE asked why increase the value of vehicles to
$100,000, but leave the other property or cash to a modest
increase of $25,000.
2:18:48 PM
MR. GREER answered it's the case with any bill when you set an
arbitrary amount whether it be $25,000 or $100,000, people have
different thoughts. One thought is if someone died with $100,000
in a bank account, there's too much room for fraud. He explained
that the affidavit procedure wherein probate can be avoided
simply states that a successor can go to a bank and the bank is
obligated to pay that money to him. However if someone else is
entitled to receive that money pursuant to the terms of the
decedent's will, that individual can still go to court and go
through the probate process. A property limit over $25,000 would
encourage abuse of this section, but that is not the case for
automobiles.
SENATOR BUNDE asked if it's possible that people who do probate
work would lose the opportunity to do some work if the limit
were raised to $100,000.
MR. GREER replied yes, but an attorney's duty is to his client,
not his pocketbook.
REPRESENTATIVE RAMRAS wrapped up that no one is hurt by the
changes and it is helpful to the process and an important
housekeeping measure for Alaska.
2:22:19 PM
SENATOR BUNDE said when the bill comes up again he wanted to
know what it would cost to go through probate for $25,000 -
because he understands it would cost them a significant portion
of the $25,000 to recover the $25,000 - especially when he has
heard other states are at $100,000 or $200,000 and vehicles are
$100,000. He wanted to raise the limit to $100,000 or something
higher so the cost of probate would not eat up most of the
inheritance.
REPRESENTATIVE RAMRAS said he shared those concerns.
CHAIR ELLIS said the bill would be held for further work. There
being no further business to come before the committee, he
adjourned the meeting at 2:25:46 PM.
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