Legislature(2003 - 2004)
03/01/2004 03:20 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 517-SECURITY ACCOUNT BENEFICIARY DESIGNATION CHAIR ANDERSON announced that the final order of business would be HOUSE BILL NO. 517, "An Act relating to registration in beneficiary form of certain security accounts, including certain reinvestment, investment management, and custody accounts." [Chair Anderson turned the gavel over to Vice Chair Gatto.] Number 0725 JOSH APPLEBEE, Staff to Representative Tom Anderson, Alaska State Legislature, speaking as the committee aide, introduced HB 517, which was sponsored by the House Labor and Commerce Standing Committee. He said HB 517 will permit an investment management or custody account with a trust company or a trust division of a bank with trust powers to have a beneficiary designation take effect upon death of the owner. Under current law, securities and brokerage accounts may have beneficiary designations take effect upon the death of the owner pursuant to the Uniform Transfer on Death Security Registration Act. MR. APPLEBEE explained that the current definition of "security account" in the uniform Act isn't broad enough to include investment management or custody accounts, which are generally used by trust departments. The legislation will allow all of these products - and thus bank customers - to avoid probate by providing a statutory authorization to use a beneficiary designation. It will also put bank trust departments on an equal footing with brokerage firms. Mr. Applebee said the problem cannot be solved other than by statute. Several states, including California, Idaho, Iowa, Minnesota, and Washington, have enacted similar legislation in the last three years. Number 0584 LORIE HOVANEC, Senior Trust Administrator, Wells Fargo Bank, Anchorage, noting that she is an attorney, reinforced Mr. Applebee's explanation. She said under current law whereby securities and brokerage accounts may have beneficiary designations that take effect upon the death of the account's owner, the assets of the account pass automatically to designated beneficiaries upon the death of the owner without having to go through probate. The definition of security accounts in this transfer-on-death statute wasn't broad enough to include investment management for custody accounts, products generally offered by bank trust departments. Alaska's transfer- on-death statute is similar to that in other states. It was initially drafted as a uniform state law and subsequently was adopted in most states. MS. HOVANEC said custody and investment management accounts are similar to brokerage accounts except they are accounts at banks or trust companies, not at brokerages. These accounts may contain stocks and bonds, just like brokerage accounts. A custody account is customer-directed: the bank or trust company holds or "custodies" assets and then the customer manages and directs the investment by picking the stocks, bonds, and other assets. In contrast, in an investment management account the bank or trust company manages the assets. Number 0410 MS. HOVANEC provided her understanding that when the model transfer-on-death statute was drafted and adopted in Alaska, the drafters were focused on accounts offered by brokerages, since it was generally assumed that bank accounts would fall under another statute. She said HB 517 would simply make it possible to meet customer expectations. The proposal would benefit customers directly by avoiding probate in the same way that other pay-on-death and transfer-on-death accounts may avoid probate through use of these beneficiary forms. She said she didn't think this change was controversial, and said in other states in which this law had been enacted there haven't been any problems with customers, to her knowledge. VICE CHAIR GATTO asked if the probate process is difficult in Alaska. MS. HOVANEC replied that probate "isn't too bad" in Alaska. She said Alaska adopted the Uniform Probate Code, which helped the process. In response to a question from Representative Lynn, she said the avoidance of probate is the main reason she supports this bill. REPRESENTATIVE ROKEBERG said sometimes trusts provide ongoing income on a periodic basis to recipients of the trust. He asked if this bill would help prevent interrupting the cash flow from these trusts. He gave the example of a child as a sole survivor after the death of his only parent and asked if the transfer by avoiding probate would be faster. MS. HOVANEC affirmed that. REPRESENTATIVE ROKEBERG asked if this bill would only affect those security accounts within the trust situation or affects checking accounts or other types of accounts. MS. HOVANEC replied, "The language in the amendment specified investment management account or custody accounts, which are with the trust division of a bank with trust powers." TAPE 04-23, SIDE A Number 0010 REPRESENTATIVE DAHLSTROM moved to report HB 517 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 517 was reported from the House Labor and Commerce Standing Committee.
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