Legislature(2003 - 2004)
03/24/2004 01:15 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 517 - SECURITY ACCOUNT BENEFICIARY DESIGNATION Number 0425 CHAIR McGUIRE announced that the next order of business would be HOUSE BILL NO. 517, "An Act relating to registration in beneficiary form of certain security accounts, including certain reinvestment, investment management, and custody accounts." REPRESENTATIVE ANDERSON, speaking as the chair of the House Labor and Commerce Standing Committee, sponsor of HB 517, relayed that the bill will permit an investment management or custody account with a trust company, or a trust division of a bank with trust powers, to have a beneficiary designation take effect upon the death of the owner. Under current law, securities and brokerage accounts may have beneficiary designations take effect upon the death of the owner pursuant to the Uniform Transfer-On-Death Security Registration Act. However, the current definition in Alaska statutes regarding security accounts is not broad enough to include investment management or custody accounts, which are generally used by trust departments. REPRESENTATIVE ANDERSON relayed that HB 517 comes at the request of Wells Fargo and will allow all of "these products" to avoid probate by providing statutory authorization to use a beneficiary designation. The bill will also put banks' trust departments on an equal footing with brokerage firms. The problem cannot be solved other than by statute, he opined, and noted that several states have enacted similar legislation in the last three years, including California, Idaho, Iowa, Minnesota, and Washington. He mentioned that members' packets contain a letter of support from Wells Fargo. Number 0580 MARIBETH CONWAY, Trust Manager, Wells Fargo, offered her belief that HB 517 is a simple technical change to Alaska's current transfer on death (TOD) law. Current Alaska law, which was initially drafted as a uniform state law, focuses on accounts offered by brokerages and other financial institutions because it is generally assumed that bank accounts fall under another statute. However, banks' trust departments and trust companies do have investment management and custody accounts that are not included in the current statutory definition of security accounts. Consequently, security and brokerage accounts can have a specified beneficiary designation that takes effect upon the death of the owner - the form used is very similar to the beneficiary designation form used for life insurance policies or individual retirement accounts (IRAs) - allowing probate to be avoided, but investment management accounts and custody accounts offered by banks do not yet have this flexibility. MS. CONWAY remarked that customers of banks, however, expect that investment management accounts and custody accounts would be handled the same way as similar accounts are treated in brokerage firms, and HB 517 would, in fact, make this possible. Without passage of the bill, investment management accounts and custody accounts, whether in a trust company or in a trust division of a bank, must go through probate. House Bill 517 allows for very simple treatment of beneficiary designations, clarifies the definition of security account, and puts the same types of accounts held in different companies on equal footing with regard to transfers on death. She mentioned that similar changes have recently been enacted in other states, that the changes appear to be non-controversial, and that no one has experienced problems with the changes. For these reasons, she remarked, Wells Fargo would appreciate the committee's support in passing HB 517. MS. CONWAY, in response to questions, relayed that it is very common for individuals to have investment management accounts through Wells Fargo's trust department even though such accounts are not specifically trust accounts; the same can be done via a trust company, and these accounts are similar to ones that can be arranged through brokerage firms, which currently have forms that allow for beneficiary designations to take effect upon death of the account owners. Number 0901 REPRESENTATIVE GRUENBERG turned attention to AS 13.33.310(b)(3), which uses the term "LDPS." He asked what "LDPS" stands for. MS. CONWAY said she was not sure. REPRESENTATIVE GRUENBERG asked whether the bill "just puts bank- managed accounts on the same footing as brokerage-managed accounts." MS. CONWAY said that is correct. In response to another question, she offered her recollection that the model Act was adopted in whole, for the most part, in Alaska. REPRESENTATIVE GRUENBERG turned attention to page 2, lines 8 and 20, and asked what would be considered "cash equivalents". MS. CONWAY offered as an example a money market investment fund. CHAIR McGUIRE, after ascertaining that no one else wished to testify, closed public testimony on HB 517. REPRESENTATIVE ANDERSON, in response to a question, reiterated his earlier comments regarding the perceived need for the bill. REPRESENTATIVE GARA noted that the bill is only a definition section. REPRESENTATIVE GRUENBERG offered that it is a definition section for the Uniform Transfer-On-Death Security Registration Act, which allows one to simplify a transfer at the time of death and avoid probate by setting up either a "pay on death (POD)" account or a "transfer on death (TOD)" account. He mentioned that a POD usually pertains to money, whereas a TOD usually pertains to securities. Such accounts are simple ways of ensuring that upon the death of the owner, the assets are passed on to the beneficiary or beneficiaries without the need for probate. Number 1297 REPRESENTATIVE GARA moved to report HB 517 out of committee with individual recommendations and the accompanying zero fiscal [note]. There being no objection, HB 517 was reported from the House Judiciary Standing Committee.
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