Legislature(2017 - 2018)BELTZ 105 (TSBldg)
02/19/2018 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SB151 | |
| HB208 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 151 | TELECONFERENCED | |
| + | HB 208 | TELECONFERENCED | |
HB 208-TRUSTS; COMM PROP TRUSTS; POWERS OF APPT
2:05:06 PM
CHAIR COGHILL announced the consideration of HB 208.
REPRESENTATIVE DELENA JOHNSON, Alaska State Legislature, Juneau,
Alaska, sponsor of HB 208, stated that this legislation
increases the flexibility of existing trust law. It will restore
Alaska to its place as an attractive trust environment. She
relinquished further introduction to Mr. Evans.
2:06:23 PM
At ease
2:11:02 PM
CHAIR COGHILL reconvened the meeting and invited Mr. Evans to
proceed.
2:11:48 PM
ANDREW EVANS, Staff, Representative DeLena Johnson, Alaska State
Legislature, Juneau, Alaska, introduced HB 208 on behalf of the
sponsor. He explained that Alaska transitioned to a top choice
for the placement of trusts with the passage of the Alaska Trust
Act in 1997. This law effectively eliminated the rule against
perpetuities and allowed the protection of trust assets against
creditors of the beneficiary. The fact that Alaska has no income
tax was another benefit.
The trust market has evolved since then and states like New York
and Nevada have passed legislation that expand the flexibilities
available to trusts. Alaska's ranking of being in the top three
for housing trusts has fallen to number eight. HB 208 will
update, clarify, and increase flexibility in trust regulations,
while maintaining existing protections.
MR. EVANS stated that HB 208 will promote investment in Alaska's
economy and opportunities for growth in the financial services
sector. It will expand a non-natural resource extraction
industry by attracting nonresident trusts and create high-paying
jobs. It will also provide revenue to the state through
registration fees and life insurance premium taxes. These are
expected to bring in between $7 million and $12 million
annually.
2:14:11 PM
MR. EVANS advised that HB 208 expands the flexibility of trust
law in four areas. These are 1) decanting of trusts; 2) powers
of appointment; 3) traceability of assets; and 4) clarification
of trustees' specific powers.
He deferred to Mr. Hompesch to discuss the four areas in detail.
2:15:02 PM
RICHARD HOMPESCH, Attorney, Hompesch Evans & Averett, Fairbanks,
Alaska, explained that trusts are decanted by taking the assets
from one trust and placing them in a second trust that is more
appropriate for the current circumstance. Because Alaska law
allows a trust to continue for one thousand years, what may be
appropriate now may not be appropriate in future years. If a
trustee can distribute the assets from one trust to another,
that provides a lot of options to satisfy the beneficiaries
going forward.
The changes to the decanting statutes proposed in HB 208 make
the system more efficient and clarify points that raised
questions under old law. HB 208 clarifies that the beneficiaries
may waive the 30-day notice requirement, that at least one
beneficiary must be notified, and that the trustee may be
authorized to exercise a power without noticing beneficiaries.
He said this is important for settlors who may want to set up a
silent trust.
2:19:32 PM
MR. HOMPESCH explained that the power of appointment relates to
a person who has the power to distribute or give assets to
another person. HB 208 provides that a non-fiduciary who has the
power of appointment, that is someone that is not a trustee,
cannot be compelled to exercise that power in favor of a
creditor of the person holding the power.
2:20:52 PM
At ease for technical difficulties.
2:23:10 PM
CHAIR COGHILL reconvened the meeting and asked Mr. Hompesch to
continue.
MR. HOMPESCH advised that Section 2 allows the trustee to insure
property of the trust against damage or loss and themselves
against liability from third persons or beneficiaries of the
trust.
MR. HOMPESCH discussed the following points regarding
traceability of assets under HB 208.
· Assets entering the trust may be documented as to their
origin, pre-trust ownership or percentage of ownership
prior to being placed into the trust.
· In the event of divorce, beneficiary conflicts, or other
such events, the assets of the trust are traceable back to
the point they entered the trust.
· Tracing of origin will allow retention of certain tax
benefits even after one of the settlors expires.
2:25:07 PM
SENATOR COSTELLO asked what Alaskans are involved with trusts
and who in Alaska will benefit when the bill passes.
MR. HOMPESCH said many Alaskans want their assets held in trusts
for the benefit of their children and other descendants. This is
helpful in the circumstance of divorce because the assets in a
trust are not subject to division upon divorce. He said he's
surprised at the number of working Alaskans who are interested
in trusts and a lot of wealthy families from elsewhere in the
U.S. have decided to form their trusts under Alaska law because
the law is more flexible. "As Delaware is to corporations, we
wanted Alaska to be as trusts and I think we've succeeded in
large part."
SENATOR COSTELLO asked if Alaskans who have children with
special needs access trusts to ensure their children are taken
care of once they're gone.
MR. HOMPESCH confirmed that a special needs trust can be
created, or a trust can be decanted to a special needs trust if
the need arises.
SENATOR COSTELLO asked if the trust must have some nexus to
Alaska.
MR. HOMPESCH said yes; at least one of the trustees must be a
state resident and some of the administration must occur here.
However, neither the beneficiaries nor the settlor is required
to be a resident of Alaska.
CHAIR COGHILL asked the typical circumstances under which a
trust is decanted.
MR. HOMPESCH said a trust formed under the laws of another state
may be imported and registered under Alaska law and an Alaska
trustee is appointed. The trustees then have the power to decant
under Alaska statutes. Any forum shopping that occurs takes
place before decanting.
CHAIR COGHILL asked if HB 208 will attract new trust business or
make it easier for Alaska trusts to move to another
jurisdiction.
MR. HOMPESCH said his experience is that trusts that are moved
to Alaska and decanted under Alaska law remain in Alaska and HB
208 furthers that goal.
CHAIR COGHILL asked how HB 208 changes the insurance provisions
under Alaska trust law.
MR. HOMPESCH explained that AS 13.36.109 expands the powers of
the trustee to include insuring the trustee against liability
with respect to beneficiaries of the trust.
CHAIR COGHILL asked for an explanation of traceability of assets
as it relates to division of ownership.
MR. HOMPESCH explained that Section 23 of HB 208 adds a new
provision that allows a trustee to divide a trust for income tax
purposes. Unless specifically prohibited, a trustee who has kept
records tracing contributions to the trust by different settlors
may divide the trust such that the specific settlor is treated
as the sole settlor of those contributions.
2:36:56 PM
CHAIR COGHILL opened public testimony on HB 208.
2:37:36 PM
ABIGAIL O'CONNOR, Attorney, Holland & Knight LLP, Anchorage,
Alaska, stated that she is also licensed and practices law in
Florida. She agreed with Mr. Hompesch that HB 208 creates more
flexibility and opportunities, particularly for decanting a
trust. She provided an example to illustrate that changing the
situs of a trust to Alaska makes planning easier for the settlor
and is beneficial to Alaska. She also agreed with Mr. Hompesch
that the goal of the legislation is to enhance Alaska's
desirability as a place to create or move and maintain a trust.
2:40:22 PM
MATTHEW BLATTMACHR, Vice President and Trust Officer, Peak Trust
Company, Anchorage, Alaska, stated that many in the trust
community believe HB 208 will further Alaska's position as a
premier jurisdiction for both Alaskans and non-Alaskans to do
their planning. It's good Alaska.
2:41:21 PM
DOUGLAS BLATTMACHR, President and CEO, Peak Trust Company,
Anchorage, Alaska, referenced an earlier comment about location
of assets and explained that one of the requirements is that
some of the assets must be in Alaska. He shared that Peak Trust
has about $80 million in trust assets on deposit with local
banks which provides more money for the banks to lend and
circulate in the economy. This legislation will be very
beneficial to Alaskans and Alaska.
MR. HOMPESCH listed additional financial benefits to Alaska
including premium taxes on life insurance and fees associated
with forming LLCs related to trusts.
2:45:50 PM
CHAIR COGHILL held HB 208 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 151 - Sponsor Statement.pdf |
SJUD 2/19/2018 1:30:00 PM |
SB 151 |
| SB 151 - Supporting Case Filing Data.pdf |
SJUD 2/19/2018 1:30:00 PM |
SB 151 |
| HB 208 - Sectional Summary.pdf |
SJUD 2/19/2018 1:30:00 PM |
HB 208 |
| HB 208 - Sponsor Statement.pdf |
SJUD 2/19/2018 1:30:00 PM |
HB 208 |
| HB 208 - Supporting Document.pdf |
SJUD 2/19/2018 1:30:00 PM |
HB 208 |
| HB 208 - Presentation.pdf |
SJUD 2/19/2018 1:30:00 PM |
HB 208 |