Legislature(1995 - 1996)

02/09/1996 01:10 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HB 459 - TRUSTS & PROPERTY TRANSFERS IN TRUST                               
                                                                               
 Number 084                                                                    
                                                                               
 REPRESENTATIVE VEZEY introduced HB 459 for discussion as sponsor.             
 He stated that this legislation resulted as an effort to help                 
 create a financial industry for Alaska.  This legislation would               
 give Alaska the strongest trust laws in the country with the                  
 possible exception of Missouri and it fits well in the overall                
 legal structure of Alaska.  Alaska has no sales tax or an income              
 tax, hence transfers of money are not excessively taxed.  The major           
 changes this bill would establish, firstly, that it creates a trust           
 that is irrevocable, it is not invadable by creditors, and at the             
 same time it is set up to prevent any attempts at fraudulent                  
 transfers.  Secondly, it allows trusts to be set up in perpetuity.            
                                                                               
 REPRESENTATIVE VEZEY likened the formation of these trusts to that            
 of the formation of a corporation.  The economic growth of the                
 United States is tied to the creation of corporations.  The idea of           
 the corporate structure has existed since Roman times.  As the                
 United States began to grow the need for the corporate structure to           
 allow for the accumulation of large amounts of capitol, limiting              
 the liability of the investors and providing for continuity became            
 stronger and stronger.  After the Civil War the laws surrounding              
 special status privileges associated with corporations were                   
 abolished to create more equality.  Anyone could then start a                 
 corporation, which would be treated the same as any other.                    
                                                                               
 REPRESENTATIVE VEZEY went on to add that in 1868 the United States            
 adopted the 14th amendment.  Subsequent to this, the Supreme Court            
 overturned what amounted to 2000 years of legal precedence by                 
 stating that a corporation was entitled due process just like a               
 legal person.  The rest is history.  Representative Vezey stated              
 that Alaska has an opportunity as parallel to this illustration, in           
 that the laws governing trusts have become convoluted over the                
 years so that a trust is no longer a legal entity unto itself, it             
 is not necessarily sheltered from creditors.  Trusts can still be             
 invaded and they cannot continue on in perpetuity such as a                   
 corporation can.  This bill attempts to create the concept that a             
 trust is a legal entity just like a person, and exist in                      
 perpetuity.                                                                   
                                                                               
 REPRESENTATIVE VEZEY felt as though this trust concept could be a             
 tool for the state to bring investment capitol to the state.  Even            
 though not all this capitol would stay in Alaska, just the business           
 of handling this money could create an industry to rival Wall                 
 Street.  He noted that there is a need for this service.  This is             
 why large sums of money leave the United States to bank accounts in           
 the Cayman Islands and the Bahamas, etc.  He added that there were            
 complicated legal concepts related to these trusts which would need           
 explanation and he then turned the discussion over to Mr. Thwaites.           
                                                                               
 Number 497                                                                    
                                                                               
 REPRESENTATIVE CON BUNDE questioned the effectiveness of the                  
 Missouri statutes regarding these trusts.                                     
                                                                               
 REPRESENTATIVE VEZEY pointed out that there is an uncertainty in              
 the minds of the investment community regarding the interpretation            
 of the Missouri statutes, therefore people are not willing to                 
 gamble on the security that they'd like to think they're getting              
 there.                                                                        
                                                                               
 Number 565                                                                    
                                                                               
 RICHARD THWAITES, ESTATE PLANNING ATTORNEY, testified regarding HB            
 459.  Mr. Thwaites has been an estate planning attorney since the             
 early 70's and has worked for First National Bank of Alaska in                
 their trust department and is currently a fellow of the American              
 College of Trust and Estates Council.  There are seven fellows in             
 the State of Alaska.  This organization recognizes the long                   
 standing tenure of those practicing in the area for at least ten              
 years.  It is required that a fellow either write or teach                    
 regarding estate law and then they are elected to the national                
 organization.                                                                 
                                                                               
 MR. THWAITES stated that in this capacity the fellows have                    
 discussed the evolution of trust law as it exists in the United               
 States today.  In the past ten years there has been a redevelopment           
 of stricter laws, which this present bill addresses.                          
 MR. THWAITES continued that this particular bill focuses on an                
 asset protection type of trust, very similar to off shore                     
 jurisdictions such as the Cayman and Cook Islands.  Recently, the             
 State of Alaska extended limited liability company protection to              
 entities which were formally operating as partnerships.  If these             
 entities chose to opt for the correct format, there is some                   
 additional liability protection afforded them.  This trust devise             
 takes this same concept and carries it over to individuals.  It is            
 possible that individual assets, which are not connected to                   
 fraudulent transfers or subject to any claims, can be placed                  
 irrevocably into a trust.  This does mean though that the settlor             
 (person creating the trust) no longer has any say in the management           
 of the trust, other than initially creating it.                               
                                                                               
 MR. THWAITES offered that the evolution of law in the United States           
 and England has been if the irrevocability can go back to the                 
 settlor, this trust would be considered invadable.  This proposed             
 devise permits the settlor or creator to be one of the class of               
 beneficiaries which can receive benefits from the irrevocable                 
 trust.  This concept is currently attracting what is thought to be            
 hugh sums of dollars offshore.  The estimate given by members of              
 the U.S. House of Representatives and Senate who deal with the                
 committee who write the tax laws of the United States, said that              
 last year alone about $460 billion dollars went offshore.                     
                                                                               
 MR. THWAITES has talked to a lot of practitioners throughout the              
 country and so far he has not found anyone who doesn't have three             
 to ten clients who would instantly want an Alaska family trust.               
 The dollar sums on the east coast are substantially larger than               
 ones in Alaska, which these are in the $50 to $80 million dollar              
 range.  Mr. Thwaites pointed out that an allowance in the present             
 language should be made to include specifically the national                  
 banking associations, such as National Bank of Alaska, First                  
 National, etc. to ensure that they are also protected.                        
                                                                               
 MR. THWAITES added that Bob Manley, of Hughes, Thorsness crafted              
 suggested language into the present draft of legislation before the           
 committee, which would specifically include the national banks and            
 also to provide more of a nexus to the state of Alaska.  The place            
 of administration would be in the state of Alaska so that someone             
 couldn't necessary hire a straw man who would deal (indisc.).  The            
 situs of the trust would be in Alaska, the administration of the              
 trust would be in Alaska.  This would be a very attractive devise             
 just because of the rule against perpetuities and the fact that               
 this trust is an asset protection trust.                                      
                                                                               
 MR. THWAITES stressed additionally, the fact that Alaska lacks an             
 income tax makes it a really attractive devise alternative for                
 (indisc.) outside.  The trust companies in Alaska would set a fee             
 schedule to administer these trusts and it is anticipated that this           
 number could substantially exceed that of the permanent fund in a             
 very short period of time.  He also suspected that this devise                
 would make it's way into the trust publications throughout the                
 company very quickly.  Mr. Thwaites also noted the high level of              
 interest from other states regarding the establishment of this                
 legislation.                                                                  
                                                                               
 MR. THWAITES summed up by stating that this legislation deals with            
 asset protection trusts.  As an asset protection trust it does                
 shelter the assets according to the person creating the trust.                
 Under this legislation, the state of Alaska recognizes this concept           
 and protects this right.                                                      
                                                                               
 Number 1010                                                                   
                                                                               
 REPRESENTATIVE GREEN made a motion to move to adopt version (M) of            
 CS HB 459 as the committee's working document.  Hearing no                    
 objection it was so moved.  He went on to propose a hypothetical              
 situation to aid in understanding this legislation better.                    
 Representative Green asked if it was possible that an individual              
 who owns a factory, to avoid litigation, sets up a trust with one             
 of their children along with an agreement to split the interest               
 made with an instrument such as proposed by this legislation.  He             
 asked if this would be possible.                                              
                                                                               
 MR. THWAITES stated no, because Representative Green had indicated            
 that there was an agreement in conjunction to this trust.  If there           
 was a verbal or written agreement to do so, this would negate the             
 terms of the trust.  The child could at their discretion return the           
 interest to the settlor, but not at the command of the settlor.               
                                                                               
 Number 1030                                                                   
                                                                               
 REPRESENTATIVE GREEN asked how many states have a rule against                
 perpetuity.                                                                   
                                                                               
 MR. THWAITES believed that it was all but two, Idaho and Missouri.            
 He said there might be one other.  He added that this rule of                 
 perpetuity in and of itself is not sufficient to do what's proposed           
 in this present legislation.  He used the example of South Dakota             
 creating the credit card rules to attract business to their state             
 and likened this trust law to this same concept.  Alaska does not             
 presently have complex sets of trust laws which allows this                   
 legislation to match nicely into it's present structure.  This was            
 the problem in Missouri, they have too many other trust statutes              
 and the language drafted to allow asset protection trusts was                 
 ambiguous.  These two factors contributed to a low sense of                   
 protection.                                                                   
                                                                               
 MR. THWAITES  added that the rule against perpetuity would stay in            
 Alaska statute, but this trust concept would provide an exception             
 to this rule.                                                                 
                                                                               
 Number 1209                                                                   
 CHAIRMAN PORTER handed the leadership of this meeting over to Vice            
 Chairman Green since he was required to testify before the Senate             
 Judiciary committee about tort reform.                                        
                                                                               
 Number 1230                                                                   
                                                                               
 REPRESENTATIVE VEZEY asked Mr. Thwaites to clarify the difference             
 between the present committee substitute before them and the                  
 legislation they had been working on as being found on page 3, line           
 25 (C) which dealt with national banking associations.                        
                                                                               
 MR. THWAITES answered yes, lines 25 through 28 on page 3 and also             
 the clause dealing with the place of administration, located on               
 page 2, line 14.  He went on to further clarify that these banking            
 institutions would be state banks headquartered in Alaska,                    
 exercising trust powers and they would have their principal place             
 of business in Alaska.  He noted that there are a number of state             
 banks who have chosen not to exercise trust powers.  They would               
 need to apply to the regulatory powers to do so.                              
                                                                               
 REPRESENTATIVE VEZEY noted that under the section located on page             
 3, line 25 that a state bank under Alaska statutes or an Alaskan              
 bank chartered under the National Banking Association federal laws            
 can utilize these trust laws, not a bank from New York for example,           
 who is not registered here in the state of Alaska.                            
                                                                               
 Number 1453                                                                   
                                                                               
 REPRESENTATIVE BUNDE asked Mr. Thwaites to give an estimate of how            
 this legislation would impact the state of Alaska, how many jobs,             
 how much money the state would realize, etc.                                  
                                                                               
 MR. THWAITES offered that he was could not accurately project these           
 numbers, but did note in Alaska Business Monthly that the total               
 assets of the Alaska banks combined is $5 billion.  When discussing           
 this concept with a banker in Great Falls, Montana this banker                
 estimated that they could see in a very short time an estimated               
 $200 billion in Alaska from formulating these trusts.  Mr. Thwaites           
 projected that there would be an increase in trust departments to             
 handle this business which would create revenue.                              
                                                                               
 MR. THWAITES  also offered that because the United States has the             
 full faith and credit of the military, even people outside of the             
 United States might come to Alaska to do business.  The potential             
 is virtually unlimited.                                                       
                                                                               
 Number 1570                                                                   
                                                                               
 REPRESENTATIVE BUNDE then asked if the trust capital in Alaska                
 would be brought to bear on Alaskan projects as well.                         
                                                                               
 MR. THWAITES said there would probably be some spin-off, but not              
 that great.                                                                   
                                                                               
 REPRESENTATIVE BUNDE asked how if an income tax did goes through in           
 Alaska, would this affect the influx of trust business.                       
                                                                               
 MR. THWAITES thought that if this legislation came on line before             
 income tax goes into effect, then the perpetuity feature, the                 
 credit shelter protection, and the security of the military would             
 still be desirable features in and of themselves.  He also pointed            
 out that the income tax proposed in Alaska would not rival the tax            
 now levied in the state of New York, for example.                             
                                                                               
 Number 1630                                                                   
                                                                               
 REPRESENTATIVE VEZEY made the argument that any tax to be discussed           
 would be a personal income tax, which in no way would affect the              
 corpus of the trust or the earnings until they were distributed.              
                                                                               
 MR. THWAITES said that this would not be the case.  This type of              
 trust would be deemed a grantor trust, meaning, as the income is              
 earned, federal tax would have to be paid on this money.  Because             
 the federal government would be required to pay taxes, the state of           
 Alaska would receive the other tax.  Mr. Thwaites raised an                   
 additional issue, that after passage of this legislation, the IRS             
 would need to pass a private letter ruling on this type of trust.             
 He noted that a firm in New York was ready and willing to pursue              
 this procedure at their expense if this legislation passed.                   
                                                                               
 MR. THWAITES offered that the current law would not tax the trust.            
 Whatever fees were raised under the administration of a trust would           
 be subject to any tax a bank would have to pay, if these banks are            
 in fact required to pay these taxes as noted.                                 
                                                                               
 Number 1734                                                                   
                                                                               
 REPRESENTATIVE CYNTHIA TOOHEY asked about those banks such as the             
 Key Bank with corporate offices in Seattle, would they be allowed             
 to administer trusts under this legislation.                                  
                                                                               
 MR. THWAITES responded that not the Seattle version of Key Bank,              
 but the Key Bank of Alaska would be able to.  Other banks such as             
 Chase Manhattan or the Bank of Tokyo could come to Alaska and apply           
 to open an Alaskan bank and perhaps form a holding company.  These            
 banks would be subject to a lot of regulatory processes, at least             
 the way the law is presently structured.                                      
                                                                               
 Number 1796                                                                   
                                                                               
 REPRESENTATIVE FINKELSTEIN asked what these trusts were subject to.           
 What can be used to get at these trusts, say for example, a                   
 criminal proceeding, something which comes out of a divorce                   
 proceeding.  He asked what superseded the nature of the limits of             
 this trust.                                                                   
                                                                               
 MR. THWAITES offered that the fraudulent transfer statute would               
 supersede these trusts, in other words, any asset going into the              
 trust would have to be free of any claim.  For example, if                    
 Representative Finkelstein gave some property to Mr. Thwaites                 
 trust, Representative Finkelstein would have no claim back against            
 this property, except by virtue of what these assets were.  If this           
 property was free and clear of any claims, none of Representative             
 Finkelstein's creditors could claim this property as long as it was           
 given without a fraudulent transfer and there were no liens or                
 encumbrances against it.                                                      
                                                                               
 MR. THWAITES also made an important clarification about the                   
 invasion of creditors.  If the trustee chose to pledge or                     
 collateralize assets of the trust against one of the beneficiary's            
 bank loans, this bank would then be able to foreclose against those           
 (indisc.) assets in satisfaction of a defaulted loan.  The                    
 individual and the trustee have to make an affirmative decision and           
 the bank has to make an affirmative decision that it won't loan the           
 money without requiring this collateral, so everybody is in an                
 equal bargaining position.  Basically the way the trust is set up,            
 the creditors of the person who set up this trust wouldn't have any           
 rights to it.                                                                 
                                                                               
 Number 1895                                                                   
                                                                               
 REPRESENTATIVE FINKELSTEIN stated that assuming there's no issue of           
 collateral, he asked if there were any legal proceeding which would           
 give a party access to this trust, for instance, a conviction of              
 various crimes, restitution for these crimes, or ill gotten money.            
                                                                               
 MR. THWAITES stated that ill gotten money wouldn't be eligible.               
 The trust could be penetrated for this at any time.  The money has            
 to be clean, there has to be no intent to convey for fraudulent               
 purposes, say to avoid a crime or restitution order, this would not           
 be allowable.  If a situation happened fairly contemporaneous with            
 the establishment of the trust, there would be probably be a                  
 presumption that this trust was set up for this reason and the                
 invaders could probably free the assets.                                      
                                                                               
 REPRESENTATIVE FINKELSTEIN asked about a divorce proceeding where             
 someone set up in advance a trust, would these assets be                      
 inaccessible to these court proceedings regarding the division of             
 marital assets.                                                               
                                                                               
 MR. THWAITES responded that maybe yes, maybe no.  If the spouse has           
 a claim or an interest in the corpus of the trust, then it's                  
 probably invadable.  Alaska has different divorce laws.  The courts           
 presume marital property under a similar concept of community                 
 property.  The mere fact that someone is married, without a                   
 prenuptial agreement, then it's presumed that this trust is co-               
 owned by both spouses.  A divorce would undoubtedly split the trust           
 into two parts.  He said this would be true even in a third party             
 situation.  If a spouse had a claim against assets assigned to a              
 trust, depending on the nature of the claim, the spouse would not             
 be precluded from obtaining this interest.                                    
                                                                               
 Number 2010                                                                   
                                                                               
 REPRESENTATIVE FINKELSTEIN stated he didn't understand what made              
 this particular trust irrevocable, especially because it's subject            
 to all of these proceedings.  He wondered why more states did not             
 pass such legislation if it was such a good deal.                             
                                                                               
 MR. THWAITES answered that most of the trust law in the other                 
 states is based on an evolution of this change.  Most other states            
 have income tax and they aren't choosing to allow this severance to           
 take place.  What makes it irrevocable is that if someone has free            
 and clear property and they choose to sever their interest in this            
 property they can place into this trust of which they could still             
 be a class of beneficiary.  This is clearly one of the benefits a             
 person would have, although they wouldn't have any control over the           
 trust as to where it goes and what happens to it under this                   
 statute.  Mr. Thwaites stated that he didn't understand why other             
 states haven't incorporated these trusts, unless it's just that               
 there's a competing interest back and forth between various parties           
 not to do this.  He cited the problem with Missouri's trust                   
 legislation again and spoke about other states which have made                
 varying attempts to incorporate this type of legislation.                     
                                                                               
 Number 2095                                                                   
                                                                               
 REPRESENTATIVE BUNDE asked Mr. Thwaites to elaborate on the                   
 involvement of the IRS and the firm which had offered to undertake            
 at their expense the necessary the procedures required of the IRS.            
                                                                               
 MR. THWAITES stated that for an investor to set up one of these               
 asset protection trusts they would want some assurance from the IRS           
 that this trust was legitimate.  He went on to add that they                  
 crafted this legislation to meet the IRS requirements thus far, but           
 he believed the IRS would issue a private letter ruling confirming            
 that this is a grantor trust.  What this letter does is confirms              
 that the income from this trust would automatically pass through              
 and be taxed to the beneficiaries as an individual.  One of the               
 benefits of this, is that presently, the tax rate for a trust is              
 39.6 percent for anything over $7500 a year.  A grantor trust is              
 taxed at the individual rate. It is a nice package to be able to              
 hand over to an investor that this trust is approved by the state             
 of Alaska, it's approved by the trust company, as well as, the IRS.           
                                                                               
 Number 2165                                                                   
                                                                               
 REPRESENTATIVE VEZEY asked if the majority of the state's do have             
 an income tax.                                                                
                                                                               
 MR. THWAITES stated that Nevada does not and South Dakota repealed            
 it in favor of a lottery.  Their Supreme Court set this aside and             
 they may go back to an income tax.                                            
                                                                               
 REPRESENTATIVE VEZEY then asked if a beneficiary acquires assets              
 from an estate, would a trust prevent the state from taxing these             
 assets again.                                                                 
                                                                               
 MR. THWAITES stated that these assets would be taxed again.  A                
 grantor trust provides for taxes attributable to the estate of the            
 decedent.  He added that there's a generation skipping transfer               
 tax.  This transfer tax would undoubtedly be applied to an asset              
 protection trust.  This is why they would want a private letter               
 ruling to see how the IRS would handle this type of trust.                    
 Arguably in the Cook Islands, many people avoid both the income tax           
 and the estate tax by just not paying it or declaring it.  The                
 private letter ruling would clear up the issues of how the IRS will           
 deal with this trust taxability wise.  The intent is not to shelter           
 it from taxes, but to provide in essence, a protection for the                
 assets which a family can receive much the same way a corporation             
 does or a limited liability company has done for partnerships and             
 such.                                                                         
                                                                               
 MR. THWAITES add that he believed not only would the income of the            
 trust be taxed, but also the entire value of the trust when it is             
 transferred.  He noted as an example, irrevocable trusts to third             
 parties, such as to children.  There is a gift tax which is the               
 same as the estate tax, that is assessed at the time of the gift              
 goes into the trust.  This tax is already paid up front or the                
 deduction is given credit up front.  There is a limit of a one time           
 transfer of $600,000 to a trust, tax free.  Anything above this               
 would be subject to tax of 39 percent.  This money would not be               
 subject to an estate tax until this child passed the trust onto               
 someone else.  He also noted the example of a trust with a life               
 estate remainder to the next generation, this trust would be                  
 subject to the $1 million generation skipping transfer.  This $1              
 million transfer could go to a grandchild with a child in-between             
 without paying a tax.                                                         
                                                                               
 Number 2360                                                                   
                                                                               
 BOB MANLEY, ESQ., testified by teleconference from Anchorage in               
 support of HB 459 as a private individual.  He stated that HB 459             
 would promote local financial institutions and provide additional             
 job opportunities.  It would increase the corporate income tax                
 base, because the banks will make more money and hence there will             
 be greater tax revenues into the state of Alaska.  This will be a             
 way to keep this type of money in the United States rather than it            
 being diverted to foreign shores.                                             
                                                                               
 BOB MANLEY also noted that this legislation could turn Alaska into            
 a magnet for this type of capitol.  The proposed amendments in the            
 working draft are important to make this concept work and that                
 Alaska is ensured some benefits from this type of opportunity.                
                                                                               
 TAPE 96-17, SIDE B                                                            
 Number 040                                                                    
                                                                               
 BRIAN BRUNDIN, ESQ, CPA, testified by teleconference from Anchorage           
 in support of HB 459 as a private citizen.  He noted that he had              
 been conducting estate planning for the last 29 years.  This                  
 legislation would help Alaskan's further protect their property.              
                                                                               
 Number 144                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN asked for any help Mr. Brundin could               
 give about a potential downside to this type of trust, in other               
 words, hiding assets which would be counter to the public interest.           
                                                                               
 MR. BRUNDIN noted that there is a potential that anyone can misuse            
 anything.  He noted that people come to him now and request things            
 that might be legally possible, but he doesn't do them.  He added             
 that he didn't think there was an advantage to be gained to someone           
 trying to get around certain situations.  In an irrevocable trust             
 a person has to relinquish control of their funds.  These have to             
 be funds they can afford to let go of.                                        
                                                                               
 REPRESENTATIVE FINKELSTEIN cited a drug dealer, where under the               
 circumstances it can't be proven that the money was ill-gotten.               
 He asked if there would there be some advantage gained by these               
 individuals if the legislature passed this bill.                              
                                                                               
 MR. BRUNDIN answered that he didn't see it.                                   
                                                                               
 Number 324                                                                    
                                                                               
 REPRESENTATIVE VEZEY pointed out that this type of trust especially           
 protects assets against an irresponsible beneficiary.  This type of           
 trust helps protect assets for multiple generations.                          
                                                                               
 REPRESENTATIVE BUNDE added that this trust also provided an                   
 opportunity to trade control of money for a guarantee of it's                 
 sanctity.                                                                     
                                                                               
 Number 411                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN stated that he still had a sense that              
 there is another side to this issue.  With the limited witnesses,             
 he said it was hard to determine what this other side was.  He                
 asked if someone from the administration would be testifying.  He             
 went on to use the example of bankruptcy in lieu of setting up this           
 type of trust.  He wondered if someone could knowingly set up one             
 of these trusts as a way to avoid creditors.                                  
                                                                               
 CHAIRMAN PORTER reminded Representative Finkelstein of the                    
 legislation they dealt with last session regarding the Uniform                
 Fraudulent Transfers Act, regarding these types of issues.  One of            
 the disagreements related to this legislation was whether it should           
 be considered a fraudulent transfer when someone puts money into a            
 trust and an obligation was incurred after this deposit.  It was              
 generally agreed that no, it shouldn't.  If someone puts this money           
 into a trust for the stated purpose of the trust, some future event           
 should not allow this person to be penalized.  The same thing                 
 applies here.  In the instance of drug money, the proof required              
 should be whether the money is tainted, not the strength of the               
 trust.                                                                        
                                                                               
 Number 555                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN again used the example of someone in a             
 high risk business venture who gets out from under their                      
 obligations by setting up a trust such as the one outlined.  This             
 issue is very complex and he was convinced that there was still a             
 downside to this legislation.                                                 
                                                                               
 Number 592                                                                    
                                                                               
 REPRESENTATIVE TOOHEY stated that she chose not to believe that               
 every trust transaction is between a bank and a drug dealer.  There           
 are people out there who are making legitimate, good, honest money            
 that want the security of a trust like this.                                  
                                                                               
 REPRESENTATIVE FINKELSTEIN noted that in order to figure out how              
 something can be misused, someone needs to look at the worse case             
 scenario.  He stated that they didn't want to set up a situation              
 for people trying to avoid proper responsibility.                             
                                                                               
 CHAIRMAN PORTER stated that proper notice had been given on this              
 legislation in order for individuals to testify, including the                
 respective state departments.                                                 
                                                                               
 Number 645                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN also noted the lack of a fiscal note               
 from the Department of Commerce.  He noticed that there was one               
 from the Department of Law though.                                            
                                                                               
 REPRESENTATIVE VEZEY responded that the request for a fiscal note             
 was transmitted to the legislative liaison and governor in                    
 accordance with the practices established by the government.                  
                                                                               
 Number 674                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN said that they do require fiscal notes             
 from the affected agency regardless of a procedure breakdown.                 
                                                                               
 CHAIRMAN PORTER added that the Department of Administration decides           
 which agencies are affected by a particular bill.                             
                                                                               
 REPRESENTATIVE FINKELSTEIN asked what department deals with Section           
 13.                                                                           
                                                                               
 MR. THWAITES stated that the probate code, trusts and estates, etc.           
 is handled by the Department of Law and legislation which affects             
 banks, etc. comes under the jurisdiction of the Department of                 
 Commerce.                                                                     
                                                                               
 Number 755                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN offered an amendment to this legislation           
 to insert the word "majority" instead of "some or all" on page 2,             
 line 11 and page 3, line 1.  He stated it seemed that if only one             
 percent is required that it's a sham.  There should be some sort of           
 minimum in the inclusion of assets in Alaska.                                 
                                                                               
 REPRESENTATIVE VEZEY commented that this would be counterproductive           
 to the intent of the bill.  He noted that they were not here to act           
 as financial advisors as to where these funds should be invested.             
                                                                               
 Number 820                                                                    
                                                                               
 MR. THWAITES added that there was a reason behind using the phrase            
 "some or all" because there are families that have rather large               
 estates including large office buildings, etc.  Since this real               
 estate for example, could not be moved to Alaska and since real               
 estate is a potential asset, hence the phrase "some or all" was               
 crafted.  This is why they allowed for the major administration of            
 these trusts be required in the state of Alaska, meaning for the              
 purposes of fees, any asset, including real estate would be used to           
 compute the fees an Alaska trustee would receive.                             
                                                                               
 Number 955                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN withdrew his amendment.                            
                                                                               
 Number 1021                                                                   
                                                                               
 REPRESENTATIVE VEZEY made a motion to move CSHB 459(JUD) from the             
 House Judiciary Committee with individual recommendations and                 
 fiscal notes as attached.  Hearing no objections it was so moved.             
                                                                               
 REPRESENTATIVE FINKELSTEIN noted for the record that he clearly has           
 the least experience with this legislation and the least confidence           
 in understanding what they are doing with it.  He said he would               
 attempt to further understand this legislation as it proceeds.                
                                                                               

Document Name Date/Time Subjects