Legislature(1993 - 1994)

02/28/1994 01:15 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HB 316 - RULE AGAINST PERPETUITIES                                           
  Number 030                                                                   
  TIM BENINTENDI, Legislative  Aide to Rep. Carl  Moses, Prime                 
  Sponsor of HB 316, said the  desirability of enacting HB 316                 
  centers on two main  criteria.  One is to  simply administer                 
  the estate in  trust and the  other is to reduce  perpetuity                 
  litigation.  He indicated that uniformity  of the rule among                 
  the states is  attractive because  the mobility of  American                 
  society  has generated a range of legal complexities in this                 
  area.  He indicated that passage of HB 316 would  add Alaska                 
  to 20 other  states which have adopted  the uniform language                 
  contained in HB 316.                                                         
  Number 077                                                                   
  REP. PHILLIPS asked for a simple explanation of the contents                 
  of HB 316.                                                                   
  Number 083                                                                   
  MR. BENINTENDI responded that HB  316 basically upgrades the                 
  body  of law  currently  in  Alaska  dealing with  the  rule                 
  against perpetuities.  He indicated the principal common law                 
  rule is  very short,  but it's  implications throughout  the                 
  statute dealing with  the rule are  very complex and HB  316                 
  simply adopts the  National Conference  of Commissioners  on                 
  Uniform State Laws' upgraded language.                                       
  Number 134                                                                   
  CHAIRMAN PORTER asked if there was a lay version of the rule                 
  against perpetuities.                                                        
  Number 157                                                                   
  ART  PETERSON,   Attorney,  appearing   as  a   Uniform  Law                 
  Commissioner for the  State of Alaska, testified  in support                 
  of HB  316.  He  indicated the lay  version of the  rule was                 
  contained in the legislation itself.   He remarked that  the                 
  rule against perpetuities  involves future interests;  i.e.,                 
  if you were to deed something  to your son for life, and  to                 
  your son's children when  your son dies, they have  a future                 
  interest and your  present deed conveys a  present interest.                 
  Then,  once  you  have conveyed  that  interest,  the future                 
  interest of those grandchildren is vested.  They then have a                 
  right to  that deed and  it can't  be taken away  from them.                 
  They have that vested future interest.  The policy of common                 
  law  that  gave   rise  to   this  difficult  rule   against                 
  perpetuities  was  that  we  don't  want  property  held  in                 
  perpetuity.  Generally,  we want that perpetuity  rapped up;                 
  i.e., life plus 21 years.  He indicated that on lines  8 and                 
  9 on page 1, nonvested property interest is invalid  unless,                 
  when  the  interest is  created, it  is  certain to  vest or                 
  terminate  no  later than  21 years  after  the death  of an                 
  individual then alive.   He indicated further that  on lines                 
  10   and  11,  you  don't  invalidate   just  for  the  mere                 
  possibility  that a  future child  is  born to  someone that                 
  would invalidate the whole thing.                                            
  Number 319                                                                   
  CHAIRMAN PORTER asked if in his will his property were to go                 
  to his son, and his son decides that that property, which he                 
  doesn't have yet, were  to go to his son, is  that his power                 
  of appointment or does he actually have to have it first?                    
  Number 340                                                                   
  MR. PETERSON  responded  that he  actually  has to  have  it                 
  Number 353                                                                   
  CHAIRMAN PORTER then asked, if he bequeathed his property to                 
  his son and his son makes out a will that says he bequeathed                 
  it to his son, why is that somehow different than him having                 
  given the property to his son.                                               
  Number 356                                                                   
  MR. PETERSON responded that if you are still alive when your                 
  son dies, you have  the option of deciding or  changing your                 
  mind and selling the property, or  willing it to your second                 
  Number 360                                                                   
  CHAIRMAN  PORTER  asked  for  an   example  of  a  nonvested                 
  Number 362                                                                   
  MR. PETERSON responded that one example  is where there is a                 
  power of appointment.  Another  would be if there is  an age                 
  contingency.    Another  example  would  be  if  you  had  a                 
  provision where your son wouldn't get the  property until he                 
  got married.                                                                 
  Number 428                                                                   
  REP. GREEN asked whether, if he granted you  something, when                 
  "I pass  on, you  have the  power of  authority because  its                 
  Number 430                                                                   
  MR. PETERSON  responded that  that was  correct  "if it  was                 
  mine.   But because  of the kinds  of things  we are talking                 
  about here, I only have a life  interest, a right to get the                 
  income from this property, for example, during my life."                     
  Number 435                                                                   
  REP. GREEN asked whether you  couldn't divorce yourself from                 
  the thing until you die.                                                     
  MR.  PETERSON responded  that  yes, if  you  granted a  life                 
  estate, "then it's mine.   But if you give it  from Green to                 
  Peterson  for Peterson's  life,  then  to whomever  Peterson                 
  designates, that's different.  Then you've created that sort                 
  of future interest that the rule of perpetuities is going to                 
  Number 458                                                                   
  REP. GREEN asked how he gives the property in fee simple  to                 
  you with  a life  estate and  then it goes  to somebody  you                 
  Number 461                                                                   
  MR. PETERSON responded that "what you've given me is not fee                 
  simple.  You've  only given me a  life estate.   That person                 
  down the line gets the fee simple."                                          
  Number 463                                                                   
  REP.  GREEN  said  that "without  designating  I  can divest                 
  myself of everything with only partial  to you and then you,                 
  in turn,  can obtain  full title  through this  designation;                 
  i.e., not having  control of  it, are you  giving away  more                 
  than you have?"                                                              
  Number 471                                                                   
  MR. PETERSON responded that "you are giving away more than I                 
  have.  All  I'm doing is appointing  the ultimate recipient,                 
  but it's your control that actually starts this process."                    
  Number 531                                                                   
  DANIELLA LOPER,  House Judiciary Committee Aide, asked where                 
  the common law rule against perpetuities limit all trusts to                 
  a 90 year period.                                                            
  Number 539                                                                   
  MR.  PETERSON responded that the use  of a flat period of 90                 
  years simplifies  the process  of measuring the  permissible                 
  vesting   period  for  the  wait   and  see  element.    The                 
  alternative would be to measure the period on a case by case                 
  basis,  called the "measuring  lies approach."   The 90 year                 
  period  is  designed to  approximate  the average  margin of                 
  safety period provided under  the wait and see method  using                 
  actual  measuring  lives   or  by  traditional  perpetuities                 
  savings clauses.                                                             
  Number 586                                                                   
  CHAIRMAN  PORTER  asked  whether   there  were  any  further                 
  questions regarding the rule of perpetuities.                                
  Number 594                                                                   
  REP. GREEN moved  that HB  316 be moved  from the  Judiciary                 
  Committee with individual recommendations.                                   
  Number 596                                                                   
  CHAIRMAN  PORTER   asked  for  further  discussion  and  any                 
  objections.  Hearing none,  he declared HB 316 moved  out of                 

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