Legislature(1993 - 1994)
02/28/1994 01:15 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 first. 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 son. Number 360 CHAIRMAN PORTER asked for an example of a nonvested interest. 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 yours?" 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 regulate." 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 designate. 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 committee.