Legislature(2017 - 2018)BELTZ 105 (TSBldg)
04/19/2018 09:00 AM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SB81 | |
| HB355 | |
| HB208 | |
| HB123 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 355 | TELECONFERENCED | |
| += | SB 81 | TELECONFERENCED | |
| += | HB 208 | TELECONFERENCED | |
| += | HB 123 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 208-TRUSTS; COMM PROP TRUSTS; POWERS OF APPT
9:29:41 AM
CHAIR COGHILL announced the consideration of HB 208 and stated
that the purpose today was to take public testimony. He asked
the sponsor if she wanted to provide opening comments.
9:30:31 AM
REPRESENTATIVE DELENA JOHNSON, Alaska State Legislature, Juneau,
Alaska, sponsor of HB 208, thanked the committee for hearing the
bill. She said the more questions she answers, the more
convinced she becomes that this is a good bill. It brings a
significant amount of money into the state without costs. She
directed attention to the handout that has good explanations of
decanting and fiduciary responsibility.
9:32:28 AM
CHAIR COGHILL opened public testimony on HB 208.
9:33:00 AM
DAVE G. SHAFTEL, representing self, Shaftel Law Offices PC,
Anchorage, Alaska, said he has been practicing in the area of
trusts and estate law since the late 1970s. He advised that
since the bill was heard last, members of the Estate Planning
Section of the Alaska Bar Association have said either they
oppose the proposed decanting provisions of HB 208 or they would
like the Estate Planning Section to thoroughly review them
before any changes are made. Another major concern articulated
in the responses is that the bill grants the trustee very broad
powers to change the dispositive intent after the person who
made the trust dies or becomes incapacitated. He provided
examples to demonstrate that this could lead to abuse.
MR. SHAFTEL said HB 208 also raises some very basic procedural
fairness concerns. For example, a trustee who decides to modify
where the property is going only has to give notice to one
beneficiary. Furthermore, the bill says that the trustee only
has a fiduciary duty to one beneficiary. That is totally
inappropriate because trustees should have a fiduciary duty to
all beneficiaries.
9:40:14 AM
RICHARD HOMPESCH, attorney representing self, Fairbanks, Alaska,
stated that he strongly disagrees with Mr. Shaftel's testimony.
He pointed out that all beneficiaries of a trust are entitled to
an accounting under AS 13.36.080 and any decanting should be
included in that accounting. Since 2013, the law has required
notice of decanting to the settlor if living, the persons who
have the power to remove the trustee who is exercising the
decanting power, and a qualified beneficiary. HB 208 does not
substantively change that rule. It does change the phrase "a
qualified beneficiary" to "at least one qualified beneficiary."
MR. HOMPESCH said he believes that a trustee who wants to abuse
the settlor's intent has ample opportunity to do so by making
outright distributions, perhaps contrary to the settlor's
intent, instead of using decanting. Notice is not required for
an outright distribution and if other beneficiaries review the
accounting and think it was outside the standard, those
resources are gone and there may not be much recourse other than
to sue the trustee. By contrast, if a beneficiary later objects
to a decanting, the money is still available; they can go to
court and ask that the monies be returned to the original trust.
Thus, the objections to HB 208 are unfounded, he said.
9:45:33 AM
MATT BLATTMACHR, Vice President, Peak Trust Company, Anchorage,
Alaska, stated that Peak Trust Company supports HB 208 but not
the proposed amendments. They may have unintended and negative
consequences. The bill has been four years in the making due to
its complexity and the desire to get the statute just right.
Peak Trust Company believes that the concerns of those who
oppose HB 208 have been considered and properly addressed under
other Alaska statutes or federal law, even if not expressly
stated in the bill. Further, Alaska statutes require a trustee
to discover and make effective the dispositive intent of a
grantor whether under a will or trust. That cannot be changed.
Additionally, a trustee has a duty to all beneficiaries. This is
an unchangeable right and the language in HB 208 cannot be
interpreted to say otherwise. He urged the committee to pass HB
208.
9:48:07 AM
BHREE ROUMAGOUX, Attorney, Shaftel Law Offices, Anchorage,
Alaska, said she has worked in estate planning, is a trustee,
and a beneficiary. She said the decanting statute needs to be
updated and it would not be difficult to get to something that
protects all parties and gives trustees the flexibility that's
required due to changes in tax laws and changes in life
situations. The statute should also allow people to do it in
ways that are not as costly as going to court for modification
of an irrevocable trust. She also opined that the fiduciary
standard in the proposed AS 13.36.158(e) should be modified so
it applies to all beneficiaries. The current language in that
subsection should not be passed.
9:51:07 AM
SUSAN BEHIKE FOLEY, President, University of Alaska Foundation,
and Chief Development Officer, UA System, Anchorage, Alaska,
related that before she moved to the university, she spent much
of her professional career as a trust and estate planning
attorney in Alaska. She stated that the University of Alaska is
concerned about the effect HB 208 could have on donations
Alaskans make to the university upon their deaths. Their donors
are primarily average Alaskans who prepare documents for their
estates believing that their wishes will be honored. Ensuring
that will happen is the university's concern. Because planned
gifts to the university are a vital source of revenue for the
university, they have been actively working to improve HB 208.
They have honed their recommendations to three suggested
changes:
• Clarify the trustee's fiduciary duties.
• Protect gifts to charities like the UA
Foundation, that are not claimed as deductions
for tax purposes.
• Require notice of decanting to charities to
ensure organizations like the UA Foundation are
not left out of the loop.
Without these changes, the University of Alaska Foundation
cannot support HB 208, she said.
9:54:04 AM
BETH CHAPMAN, Attorney, Juneau, Alaska, stated that she has been
a trust and estates attorney for 30 years and was intimately
involved in drafting HB 208 and she supports the original
version. It fulfills the settlor's intent and continues to
provide the protections to beneficiaries in existing law. It
will give trustees more flexibility to make changes to trusts
instead of outright distributions. This ultimately protects
beneficiaries.
She opined that the proposed amendments, including those from
the university, would not improve the bill. She pointed out that
any charitable gift for which a charitable deduction has been
taken cannot be changed going forward.
9:55:34 AM
JAMIE DELMAN, Attorney, Shaftel Law Offices PC, Anchorage,
Alaska, stated that he was strongly opposed to HB 208 and wanted
to comment on some of the supporting testimony. Mr. Blattmachr
and Ms. Chapman noted that intent is not jeopardized by this
bill but Section 14 deletes the language that prevents a
decanting if there is substantial evidence of a contrary intent
of the settlor. Ms. Chapman also noted that charitable gifts for
which a deduction has been claimed would be protected but many
Alaskans make charitable gifts as remainder beneficiaries in
their trust documents or they don't need a charitable deduction
because they don't have over $11 million in assets. Mr. Hompesch
also argued that beneficiaries can request an accounting. This
is true if the beneficiary knows they are a beneficiary but that
is not always the case. It is difficult to imagine how they
could request an accounting from a trust they don't know
anything about, he said. The argument that the assets are
protected in a distribution in further trust is unfounded in the
sense that a beneficiary could be completely cut out under HB
208 and know nothing about it until years later when much of the
money may already have been spent.
He reiterated that he strongly opposes HB 208.
9:58:57 AM
ANNE HELZER, Attorney, Anchorage, Alaska, stated that she
opposes HB 208 as currently drafted. She advised that over the
last eight years she has assisted hundreds of Alaskans in the
area of estate and trust planning and she finds it concerning
that she only learned of this bill a month ago. She pointed out
that abuse by fiduciaries is neither an unforeseeable event nor
is it uncommon, especially among the elderly. She opined that
the decanting of a trust should only happen in limited
circumstances and for very good reasons. Flexibility may be a
good thing but checks and balances are needed. Earlier testimony
that disputes could be pursued in court underestimates the cost
involved to a beneficiary to bring an action in court. It's a
David and Goliath situation, she said and reiterated her
opposition to HB 208 as currently drafted.
10:04:24 AM
ALEX SLIVKA, Chair, University of Alaska Foundation, Anchorage,
Alaska, said he wanted to echo the comments of Mr. Shaftel and
Susan Foley. He advised that the University of Alaska benefits
from a large number of planned gifts amounting to millions of
dollars that benefit UA programs, students, and campuses across
the state. In these times of tight state funding, this is a top
priority for the Foundation, the Board of Regents, and the
university leadership, he said.
He expressed concern that the current draft of HB 208 may have
unintended consequences. He urged the committee to adopt the
changes Ms. Foley described to help safeguard the University of
Alaska Foundation and a crucial source of funding.
10:05:48 AM
VANCE SANDERS, Attorney, Juneau, Alaska, said he has practiced
in Alaska since 1984 and a significant portion of his practice
is representing disabled people. He noted that the statute Mr.
Hompesch referenced that allows decanting has been very helpful
in meeting the changing requirements for SSI benefits that many
of his clients rely on. He stated strong support for HB 208 as
written.
10:07:19 AM
ABIGAIL O'CONNER, representing self, Anchorage Alaska, said she
supports HB 208 without any of the proposed amendments. However,
that does not mean she and other supporters wouldn't be willing
to work with their colleagues on further amendments. It's that
the amendments proposed so far have issues She opined that the
notice requirement is not a change. The language in existing
statute says notice is to be given to "a qualified beneficiary"
and the bill clarifies that to say, "at least one qualified
beneficiary." She opined that beneficiaries are entitled to
notice and that it's reasonable for a beneficiary to
specifically request notice if a trust is ever decanted.
She pointed out that decanting is in current statute and there
are existing concerns over abuse. These concerns should not
stand in the way of enhancing the decanting statutes. The
flexibility this bill proposes will be very helpful. If a
trustee wants to frustrate the settlor's intent, they can do so
by distributing all the assets outright to one beneficiary, by
improperly managing the money, or by improperly investing. There
are already remedies for these potential abuses of trust and
there would be a remedy for this one two. She reiterated her
strong support for HB 208.
10:10:17 AM
PAUL KARLKAUFMAN Attorney, Shaftel Law Offices, Anchorage,
Alaska, said he practices estate planning and charitable giving
and he represents nonprofit organizations. He is also a member
of the Anchorage Library Foundation Board and wanted to focus on
the charitable implications of HB 208. He advised that the
Alaska Chapter of Fundraising Professionals has asked for more
time to consider the effect of HB 208 because they only learned
about it last month. If there was a serious intention to ask for
the input of stakeholders, they should have an opportunity to
speak.
MR. KARLKAUFMAN stated opposition to HB 208 and outlined its
impact on Alaska charities.
• Section 4 gives a trustee authority to change the
charitable beneficiary despite contrary donor intent.
• Section 14 deletes the provision in existing law that
prohibits decanting where there is substantial evidence of
the contrary intent of the donor.
• A donor's intent is protected under Section 16 only if a
charitable deduction applies. It does not protect an
identified charity. Only the ultra-wealthy would be
protected. Even if a charitable deduction is claimed,
Section 16 does not prevent a trustee from changing the
charitable beneficiary.
• The lack of notice to all beneficiaries in Section 20 means
an Alaska charity will almost certainly not receive notice
if it has been removed as a beneficiary. Charities are
often not aware they are a beneficiary until the trustee
notifies them.
MR. KARLKAUFMAN concluded that lack of notice, change in the
fiduciary standard, removal of the requirement to honor the
donor's intent, minimal protection of charitable deductions, and
the retroactive application of HB 208 all place Alaska charities
at risk.
10:13:59 AM
MICHAEL CAVLALIERE, Attorney, Fairbanks, Alaska, said he
supports the original draft of HB 208. The changes made to the
decanting statute will allow flexibility and give trustees the
ability to respond to changing circumstances in a beneficiary's
life or changes in the tax laws. The decanting provision allows
these changes to be made in a cost-effective manner. He said he
understands the concerns voiced about abuse, but trustees have
the duty to always act in the best interest of the beneficiaries
and that is not being changed or eliminated. Also, there is
already ample opportunity for abuse under current laws such as
outright distributions to one beneficiary to the exclusion of
the others. No notice is required in that circumstance He
reiterated his support for HB 208.
10:15:53 AM
CHAIR COGHILL closed public testimony on HB 208 and held the
bill in committee. He noted that he would be looking for a
pathway forward.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 123 - Explanation of changes (ver. O to ver. B).pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |
| HB 123 - Letters of Opposition.pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |
| HB 123 - Letter of Support - Fairbanks Chamber.pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |
| HB 123 - Letters of Support.pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |
| HB 123 - Sectional Analysis (ver. B).pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |
| HB 123 - Sponsor Statement.pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |
| HB 123 - Supporting Document - ADN Article.pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |
| HB 123 - Supporting Document - Health Care Price Transparency Laws.pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |
| HB 123 - Supporting Document - How Price Transparency Can Control the Cost of Health Care.pdf |
SJUD 4/19/2018 9:00:00 AM |
HB 123 |