Legislature(2007 - 2008)CAPITOL 120
04/04/2007 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB196 | |
| HB197 | |
| HB201 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 196 | TELECONFERENCED | |
| *+ | HB 197 | TELECONFERENCED | |
| *+ | HB 201 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 196 - HANDLING MATTERS AFTER A PERSON'S DEATH 1:06:12 PM CHAIR RAMRAS announced that the first order of business would be HOUSE BILL NO. 196, "An Act relating to the handling of matters after a person's death." 1:07:23 PM JANE W. PIERSON, Staff to Representative Jay Ramras, Alaska State Legislature, explained on behalf of the House Judiciary Standing Committee, sponsor of HB 196, that this legislation is one of three bills written with the intention of keeping Alaska competitive in the trust market. House Bill 196 provides that a will's penalty clause for contesting the will or instituting other proceedings applies even if probable cause exists; currently any such clause in a will is unenforceable. The bill also amends AS 13.16.680(a) such that the statement that must be contained in the affidavit used by a decedent's successor to collect personal property from another person shall indicate that the value of the entire estate does not consist of personal property valued at [more] than $25,000 excluding vehicles that do not exceed a total value of $100,000. MS. PIERSON explained that HB 196 also adds new subsections to AS 13.33.101. Proposed subsection (d) pertains to non probate transfers after a person's death; this subsection will protect an individual's life insurance contract and retirement plan debts from the claims of creditors. Proposed subsection (e) describes situations in which proposed subsection (d) applies. Proposed subsection (f) stipulates that subsection (d) does not limit the rights of the owner of a life insurance contract to pledge or assign the benefits of that contract as collateral for his/her debts. Proposed subsection (g) defines the terms, "life insurance contract" and "retirement plan" as they apply to AS 13.33.101. Section 5 of the bill contains transitional provisions regarding applicability. REPRESENTATIVE SAMUELS sought clarification regarding Section 1, which would allow a will to contain a provision penalizing an interested party for contesting the will even with probable cause. 1:12:12 PM DAVID G. SHAFTEL, Attorney at Law, explained that there is a similar statutory provision pertaining to trusts; these types of clauses are common and are designed to ensure that beneficiaries don't challenge a will, particularly just for the purpose of placing themselves in a bargaining position - such persons won't be able to raise a challenge by filing a lawsuit without also running the risk of forfeiting the proceeds of the will. Many people feel that when they write a will or a trust, they don't want the beneficiaries to challenge the will or trust. The problem with including the aforementioned type of penalty provision in a will is that current statute says that if one has probable cause, then any penalty clause included in the will is unenforceable. He opined that this loophole creates more litigation. He then mentioned that if [a potential beneficiary] entices someone to write his/her will in a certain way, that could constitute duress or undue influence, and such a will could still be challenged even under the bill. [Chair Ramras turned the gavel over to Representative Coghill.] MR. SHAFTEL, in response to a question, said that if a family member drafts a will and then benefits from that will, there will be a strong presumption that the will is invalid and that the family member committed fraud or exerted undue influence. He posited that Section 1 will protect a person's will against frivolous challenges. In response to a question, he suggested that [Section 1] will bring wills on par with trusts; currently, a similar penalty provision could be included in a trust and that trust could not then be challenged regardless of whether there is probable cause. [Representative Coghill returned the gavel to Chair Ramras.] 1:20:30 PM RICHARD S. THWAITES, JR., Attorney at Law, offered that the issue [of a potential beneficiary exerting undue influence on someone who is creating a will] has been complicated in recent years by elder law and disability law; many [estate law] practitioners, because of "special needs trusts," often find it necessary to include language in a will that disinherits a particular potential beneficiary from the main part of the will in order for the special needs trust to remain intact. Practitioners view such "disinheritance" language as a kind of penalty clause, and Section 1 would allow practitioners to safely create such special needs trusts, particularly for a disabled family member or a minor. There has been an increasing need for such a statutory provision as will and trust areas of the law evolve. MR. SHAFTEL, in response to a question, offered his understanding that there are not specific statutes that address exerting undue influence on someone creating a will; instead, case law addresses that point. In response to a further question, he said he doesn't know of any litigation in Alaska regarding exerting undue influence. Penalty clauses for contesting a will are meant to preclude one from bringing a non- meritorious claim in an effort to obtain leverage; if one truly has a meritorious claim - for example, a claim of duress or undue influence or incapacity - the will or trust will be set aside. MR. THWAITES offered that [AS 13.12.501] says, "An individual 18 or more years of age who is of sound mind may make a will.", and that the accompanying notes speak to the issues of undue influence, old age, debility, sickness, and presumptions. Furthermore, under AS 13.12.504, which pertains to self proving wills, witnesses to the execution of the will are required, via an affidavit, to swear to the fact that they witnessed the will in the presence and hearing of the person signing the will, and that to the best of the witnesses' knowledge the person signing the will at the time was 18 years of age or older, was of sound mind, and was under no constraint or undue influence. 1:27:26 PM REPRESENTATIVE HOLMES questioned whether such a clause would cause a person to not bring even a meritorious claim forward simply because of the risk of losing his/her inheritance. MR. SHAFTEL acknowledged that possibility, but pointed out that the decision of whether to include such a clause rests with the client. He offered his belief that if there really is something wrong, a potential beneficiary will go ahead and contest the will. In response to a question, he explained that the group of attorneys, when they recommended adding a similar provision to Alaska's trust law, simply overlooked having such a provision added to Alaska's laws regarding wills; the addition of such a provision should have been made to both laws at the same time. REPRESENTATIVE GRUENBERG asked what the interplay is between "these statutes" and the normal penalties for frivolous lawsuits as provided for under the Alaska Rules of Civil Procedure. MR. SHAFTEL opined that probate litigation is more vulnerable to abuse and delay. Furthermore, the person challenging a will may not be able to pay the prevailing party's attorney fees and so those court rules may not really act as a deterrent. He surmised that that is why almost every state has similar statutory language regarding such penalty clauses. REPRESENTATIVE SAMUELS [referring to proposed AS 13.33.101(d)] questioned whether this provision could be used to hide money from creditors. MR. THWAITES [instead offered the following comment regarding proposed AS 13.16.680(a):] The monetary limits included therein were carried through in the probate code without any adjustments to date, and were meant to be applied to smaller estates. REPRESENTATIVE GRUENBERG [referring to proposed AS 13.33.101(d)] asked whether that provision could be used to immunize one's self from child support claims; for example, if one put all of one's assets into a life insurance or annuity policy. MR. THWAITES offered his understanding that child support "has something referred to as a 'super lien,'" wherein money owed for child support would not be available to other creditors. REPRESENTATIVE GRUENBERG expressed concern about child support and taxes owed. CHAIR RAMRAS offered his belief that "this" only applies to small estates, and all other estates would be subject to child support claims. In response to a comment, he remarked that the bill may not cover every potential situation. REPRESENTATIVE HOLMES offered her understanding that if back child support is due, then a super lien will take into account that important exception. She suggested that the committee receive more guidance on that issue, but acknowledged that it might already be addressed in some other fashion. 1:43:01 PM MARY ELLEN BEARDSLEY, Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Anchorage), Department of Law (DOL), relayed that she would research that issue further, adding that she would like to have the issue addressed if in fact there is a need to do so. MR. SHAFTEL remarked that proposed AS 13.16.680(a) will alter existing statute, which currently contains a $15,000 exemption allowing the avoidance of a probate procedure; under the bill, the amount would be raised to $25,000. CHAIR RAMRAS acknowledged that point, but relayed that the committee is seeking to remedy a possible oversight regarding child support claims. REPRESENTATIVE GRUENBERG said he isn't sure that proposed AS 13.33.101(d) only applies to small estates. Referring to AS 13.16.680(a), he questioned whether it would permit people who owe child support to simply purchase personal property in order to avoid paying child support. MS. BEARDSLEY said she will provide the committee with an answer to the issue of child support claims within a day. REPRESENTATIVE GRUENBERG suggested that if the bill is held over in order to address the issue of child support claims, the committee could move quickly on it the next time it is heard. CHAIR RAMRAS, in response to a comment, remarked that if an amendment is needed to address that issue, it would be more appropriate to consider it in the House Judiciary Standing Committee rather than in either the House Rules Standing Committee or on the House floor. CHAIR RAMRAS, after ascertaining that no one else wished to testify, closed public testimony on HB 196, and relayed that the bill would be held over. [STEPHEN E. GREER, Attorney at Law, later in the meeting, during discussion of another bill, remarked that HB 196, particularly the provision pertaining to life insurance benefits and retirement plans, "is meant to protect the little guy."] [HB 196 was held over.]
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