Legislature(1993 - 1994)

01/14/1994 01:15 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  HB 280 - UNIFORM CUSTODIAL TRUST ACT                                         
                                                                               
  Number 085                                                                   
                                                                               
  CHAIRMAN PORTER moved on to HB 280 and invited Art Peterson                  
  to testify.                                                                  
                                                                               
  Number 086                                                                   
                                                                               
  ART PETERSON, an attorney in private practice, and Uniform                   
  Law Commissioner for Alaska, asked that KAREN BRAND testify                  
  first.                                                                       
                                                                               
  Number 090                                                                   
                                                                               
  KAREN BRAND, legislative aide to Representative Carl Moses,                  
  prime sponsor of HB 280, testified on the basic definition                   
  of a trust, defined as the care and management of property                   
  or funds by a person or a bank for someone else.  She                        
  informed the committee that, if enacted, the bill would not                  
  change any existing law, but would add a new section to the                  
  Uniform Custodial Trust Act (UCTA), which makes the benefits                 
  of trusts available to everyone in Alaska.  She said there                   
  are four basic benefits of the trust.  First, trusts will be                 
  inexpensive to create.  Second, the trust is simple to                       
  create by basically setting forth a set of guidelines that                   
  can be easily filled out.  The third characteristic is                       
  control, whereby under the UCTA the control remains with the                 
  individual setting up the trust, at which time if the                        
  individual becomes incapacitated, the trust will take over                   
  and care for and manage the assets.  She continued by saying                 
  the last characteristic is that the trust is comprehensive,                  
  including physical property, stocks, bonds, intangibles and                  
  other financial assets.                                                      
                                                                               
  MS. BRAND said the adoption of the UCTA would benefit all                    
  Alaskans, as well as anyone who anticipates being                            
  incapacitated at some time and wants to be assured their                     
  belongings will be properly cared for in the manner that                     
  they had set out.  Ms. Brand said the most likely users                      
  would be senior citizens and persons leaving the country                     
  temporarily.  She stated the UCTA had been adopted in seven                  
  other states and was introduced in the 17th Alaska                           
  Legislature, voted out of the House unanimously, but due to                  
  a lack of time did not get a hearing in the Senate.                          
                                                                               
  Number 185                                                                   
                                                                               
  REP. GREEN asked how would UCTA affect customary method of                   
  leaving things through a will.                                               
                                                                               
  Number 195                                                                   
                                                                               
  MS. BRAND said that it was her understanding that if an                      
  individual set up a trust and a will, if the trust says that                 
  certain property will be removed from the estate and cared                   
  for or managed in a particular way, then it would come out                   
  of the estate first, then the will would dispose of the rest                 
  of the property as the will deems.  She further said that if                 
  someone has both a trust and a will, they can put in the                     
  will that in case of death, the trust is abolished.                          
                                                                               
  Number 210                                                                   
                                                                               
  REP. GREEN asked, If you could do this through trust, would                  
  you need a will?                                                             
                                                                               
  Number 219                                                                   
                                                                               
  MS. BRAND said the main purpose of the UCTA was for someone                  
  who anticipates being incapacitated for a time.  She said                    
  she believes the main focus is that and not for death.  It                   
  will care for assets if death occurs, but the focus is                       
  incapacity.                                                                  
                                                                               
  Number 238                                                                   
                                                                               
  MR. PETERSON commented that this type of trust was one means                 
  of avoiding some of the complications of probate, so as you                  
  take the assets of whatever part of your assets you want to                  
  designate and put in this trust, that's out of the estate                    
  that would go under your general will.  You can create the                   
  beneficiary of the trust as yourself or someone else, so                     
  it's extremely flexible.  Mr. Peterson continued, saying                     
  that if you create it for the benefit of someone else, you                   
  are then going outside of the probate system, thus avoiding                  
  the expense, the delay and complications of probate.  He                     
  said it is essentially the best of both worlds.                              
                                                                               
  Number 258                                                                   
                                                                               
  REP. GREEN commented that maybe this is a good vehicle;                      
  however, he thought it was temporary, and asked if it could                  
  be made permanent.                                                           
                                                                               
  Number 266                                                                   
                                                                               
  MR. PETERSON responded, yes, although he would not                           
  characterize it as having a higher strength, but many see it                 
  as another way of dealing with your assets.                                  
                                                                               
  Number 275                                                                   
                                                                               
  CHAIRMAN PORTER summarized by saying you could use this as a                 
  will and set it up to function that way.                                     
                                                                               
  Number 285                                                                   
                                                                               
  MR. PETERSON added one point to Chairman Porter's statement,                 
  saying that just as you can give something to a son or                       
  daughter or friend right now, thus depleting the amount of                   
  your estate, you could create a trust that would have that                   
  trust based on some contingency, incapacitation, death, and                  
  a whole range of things that can be handled by this type of                  
  instrument.                                                                  
                                                                               
  Number 300                                                                   
                                                                               
  REP. JAMES raised a question about the competency of the                     
  individual given the trusteeship, and asked if there was a                   
  provision in the bill addressing what to do if the                           
  individual is not competent.                                                 
                                                                               
  Number 316                                                                   
                                                                               
  MS. BRAND replied that the owner, the person that sets up                    
  the trust, when they set up the trust, whoever they choose                   
  to be the manager, and if at some point the owner doesn't                    
  think the manager is capable of managing the trust in the                    
  way initially intended, then the owner can certainly change                  
  that.  Ms. Brand said that the owner can change the                          
  beneficiary or the person managing the assets at any time                    
  until the owner becomes incapacitated.                                       
                                                                               
  Number 330                                                                   
                                                                               
  REP. JAMES clarified for Ms. Brand the question she was                      
  asking which was, Is there any protection for the ability of                 
  the person setting up the trust over the person caring out                   
  the trust?                                                                   
                                                                               
  Number 341                                                                   
                                                                               
  MR. PETERSON answered that he didn't know precisely, but he                  
  thought it would be subject to the same kind of challenge                    
  for incapacity.  He said related to that is the fact that                    
  someone, a creditor for example... if an individual wanted                   
  to set up a trust, but became incapacitated first, under                     
  Section 40 that creditor could put his/her debt to the                       
  individual in a custodial trust, and if it's over $20,000                    
  (an arbitrarily selected figure) then it has to go to court                  
  to prove that you are indeed incapacitated and this is                       
  something that will protect your assets, etc.                                
                                                                               
  MR. PETERSON continued that his explanation was a related                    
  answer, but he would have to check this again to make sure                   
  how the statute deals with it.                                               
                                                                               
  Number 364                                                                   
                                                                               
  REP. JAMES indicated that her concern related to an                          
  individual being partially incapacitated and finding                         
  somebody to administer it, but if someone convinced the                      
  individual to set up the trust when the individual was                       
  partially incapacitated, you wouldn't know about it until it                 
  was too late whether the individual was in sound mind when                   
  they set up the trust.  Rep. James said she didn't want to                   
  set up a condition whereby someone could be misused.                         
                                                                               
  Number 380                                                                   
                                                                               
  MR. PETERSON responded that the whole thrust of this act is                  
  to protect that person, but if someone is taking advantage                   
  of that person and the person really is incapacitated, then                  
  that would be subject to attack whether the bill provides                    
  for it or whether that's thrown back to common law, the                      
  general concept of law, he could not answer.                                 
                                                                               
  Number 389                                                                   
                                                                               
  CHAIRMAN PORTER indicated that he believed the same scenario                 
  could be used for power-of-attorney, and an unscrupulous                     
  person could go to a senior citizen, and does, but a                         
  relative or other interested parties could challenge that                    
  action.                                                                      
                                                                               
  Number 395                                                                   
                                                                               
  REP. GREEN commented that the legislation doesn't provide                    
  for witnessing, which might be construed as a little loose.                  
  He also asked, If the trustee changes their mind in the                      
  interim, does the trustee have to carry out their duties?                    
                                                                               
  Number 414                                                                   
                                                                               
  MR. PETERSON pointed out Section 30, which sets out the                      
  statutory form that tells the receipt and acceptance of the                  
  custodial trustee so that a person could not be forced to be                 
  a trustee.                                                                   
                                                                               
  Number 425                                                                   
                                                                               
  REP. GREEN asked about the part about witnessing.                            
                                                                               
  Number 430                                                                   
                                                                               
  MR. PETERSON indicated that it does not have to be                           
  witnessed, it's supposed to be kept simple.  He also stated                  
  that the scenario brought up by Rep. James would be just a                   
  tiny percentage of cases, because in virtually all instances                 
  the person is going to be in full capacity and in fact, is                   
  naming himself or herself as beneficiary.  The typical                       
  benefit is for the individual setting up the trust.                          
                                                                               
  Number 435                                                                   
                                                                               
  CHAIRMAN PORTER said the main emphasis is to be able to use                  
  your assets for your benefit while you're alive but                          
  incapacitated.                                                               
                                                                               
  Number 444                                                                   
                                                                               
  MR. PETERSON said he wanted to put a few comments on the                     
  record.  He said he strongly supported the bill and wanted                   
  to mention that he had additional material, including the                    
  Uniform Law Commissioners pamphlet, which was in the members                 
  packet.  Mr. Peterson continued by saying the whole point of                 
  HB 280 was to make it cheap, make it simple, easy to create,                 
  easy to manage, can be used to avoid probate, can be used in                 
  a variety of ways, and sets up the framework by giving                       
  language for the trust, giving language for the acceptance                   
  by the trustee, has provision telling the duties of the                      
  trustee, the consequences of various kinds of acts so people                 
  can easily refer to it and not have to pay lawyers, bankers,                 
  etc. to devise some complicated trust system.                                
                                                                               
  Number 482                                                                   
                                                                               
  REP. JAMES asked about the taxability of the trust.                          
                                                                               
  Number 488                                                                   
                                                                               
  MR. PETERSON answered that if it was income producing                        
  property, then a tax return would have to be filed with that                 
  income included.                                                             
                                                                               
  Number 490                                                                   
                                                                               
  CHAIRMAN PORTER asked if there was a national commission                     
  similar to the state commission.                                             
                                                                               
  Number 503                                                                   
                                                                               
  MR. PETERSON replied that the full name was the National                     
  Conference of Commissioners on Uniform State Laws, which was                 
  the formal and official name, but it has recently been                       
  shortened to Uniform Law Commissioners.  He said each state                  
  appoints its own group of commissioners, usually a                           
  gubernatorial appointment, as it is in Alaska.                               
                                                                               
  Number 525                                                                   
                                                                               
  CHAIRMAN PORTER asked if Mr. Peterson participated in                        
  national meetings.                                                           
                                                                               
  Number 528                                                                   
                                                                               
  MR. PETERSON said he does, at the national annual meeting,                   
  and a number of committees of the organization meet                          
  throughout the year.                                                         
                                                                               
  Number 559                                                                   
                                                                               
  REP. NORDLUND said he wanted it on the record that he                        
  supports the legislation, and he commended Mr. Peterson for                  
  his work, which was mainly pro-bono.                                         
                                                                               
  Number 569                                                                   
                                                                               
  REP. DAVIDSON also commended the legal community for its                     
  participation in pro-bono work.  He asked, If a trustee is                   
  removed for malfeasance, what recourse is there against the                  
  trustee?                                                                     
                                                                               
  Number 590                                                                   
                                                                               
  MR. PETERSON referred to Section 140 and 150 which address                   
  the issue.  He said he was not an expert in this specific                    
  area, but the trustee duties are subject to a fiduciary                      
  obligation, and if the trustee fails to perform that or does                 
  something fraudulent, then that would be subject to, 1)                      
  criminal action, and 2) termination of the trustee                           
  responsibility by a court.  Mr. Peterson said he could not                   
  tell the committee that it would be automatic, because it                    
  would probably have to go to court.                                          
                                                                               
  REP. DAVIDSON asked if there might be areas that are less                    
  than secure for the beneficiaries.                                           
                                                                               
  Number 614                                                                   
                                                                               
  MR. PETERSON responded that he couldn't answer because of                    
  his own unfamiliarity with it, but the bill sets out a tight                 
  set of obligations by the trustee.  He said that if you are                  
  talking about children of the beneficiary, they would have                   
  to go to court to terminate the role of the trustee.                         
                                                                               
  Number 625                                                                   
                                                                               
  REP. DAVIDSON said he was just wondering about safeguards                    
  for minors.                                                                  
                                                                               
  Number 630                                                                   
                                                                               
  MR. PETERSON explained that the intent has been to provide                   
  all the safeguards necessary and the gap is in his own                       
  knowledge, not in the bill itself.                                           
                                                                               
  Number 637                                                                   
                                                                               
  BOB BERRYHILL, representing the Alaska Association of                        
  Retired Persons, testified in favor of HB 280.                               
                                                                               
  Number 647                                                                   
                                                                               
  REP. JAMES moved for passage of HB 280 with individual                       
  recommendations.                                                             
                                                                               
  CHAIRMAN PORTER, hearing no objections, declared HB 280                      
  passed from the committee with individual recommendations.                   
  He then brought SB 45 to the table.                                          

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