Legislature(2009 - 2010)BARNES 124
04/13/2009 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB144 | |
| HB207 | |
| HB37 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 144 | TELECONFERENCED | |
| + | HB 207 | TELECONFERENCED | |
| = | HB 37 | ||
| + | TELECONFERENCED |
HB 144-UNIFORM PROBATE CODE; TRUSTS, WILLS 3:24:57 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 144, "An Act relating to the Uniform Probate Code, including wills, trusts, nonprobate transfers, augmented estates, personal representatives, and trustees; and amending Rules 3 and 8, Alaska Rules of Civil Procedure, Rule 1, Alaska Rules of Probate Procedure, and Rule 37.5, Alaska Rules of Administration." 3:25:01 PM JANE W. PIERSON, Staff, Representative Jay Ramras, Alaska State Legislature, on behalf of the prime sponsor, Representative Jay Ramras, stated that HB 144 will amend the Uniform Probate Code. She explained the bill would add provisions that would allow the settlor of a trust to designate a representative for an incapacitated person in proceedings related to the trust administration. Ms. Pierson stated that HB 144 would establish that an augmented estate does not include property transferred to an irrevocable trust if the settlor is a discretionary beneficiary of the trust and when the transfer is made more than 30 days before marriage or with the consent of the decedent's spouse. She pointed out that this provision is similar to Delaware's statutes for trusts. She stated that the value of the estate is calculated only if the surviving spouse declines whatever he or she is left by the will. 3:26:29 PM MS. PIERSON related that HB 144 also creates a procedure for the establishment of a will and trust validity before death. She explained that situations may arise in which there may be a question concerning a person's capacity to execute a will or trust, or whether the document was executed as a result of undue influence, duress, fraud, or mistake. The new procedure under the bill will allow these issues to be brought before the court while the testator or the settler is alive, and when evidence is fresh. She mentioned that similar procedures are allowed in three other states. This bill would provide a venue for probate proceeding if the decedent is not domiciled in Alaska, but significant assets are located within the state. The passage of HB 144 will ensure Alaska remains a premier state in which to establish trusts and estates. 3:27:17 PM MS. PIERSON related Section 1 of HB 144 amends AS 13.06.120(2), which lists the situations when persons are bound by orders binding others in proceedings under the Uniform Probate Code (UPC). This provision would allow a person designated by a trust instrument to represent and bind a born or unborn trust beneficiary. It allows a designated person serving as a trustee to represent and bind the beneficiaries in various ways. It generally does not allow a designated person serving as a trustee to represent and bind the beneficiaries. It generally does not allow the designated person to represent and bind a beneficiary if the designated person is also a beneficiary. MS. PIERSON explained that Section 1 also provides certain persons who represent other persons under AS 13.06.120(2)(A)-(F) are not liable for good faith acts and omissions to the beneficiaries whose interests are represented or to persons claiming through those beneficiaries. 3:28:19 PM MS. PIERSON stated that Section 2 amends AS 13.12.201 (b)(9), and makes grammatical and conforming amendments to the definition of "transfer" for certain provisions of the Uniform Probate Code that relates to the elective share of a surviving spouse. MS. PIERSON explained that Section 3 of HB 144 amends AS 13.12.205, which relates to a decedent's nonprobate transfers to other persons. It would also delete an irrevocable transfer in trust with a transfer restriction from the property that is included in the augmented estate. 3:28:48 PM MS. PIERSON related that Section 4, proposed AS 13.12.205(b) would provide that the augmented estate does not include property transferred to an irrevocable trust with a transfer restriction if two conditions are met relating to the trust's settlors and the transfers timing. MS. PIERSON referred to Section 5, 6, and 7, which represent conforming amendments for the bill. 3:29:29 PM MS. PIERSON stated that Section 8 adds a new set of sections that provide for establishing the validity of wills and trusts before the testator's death including adding proposed sections which she clarified by reading from the sectional analysis of the bill as follows: AS 13.12.530. Allows certain persons to petition the court to determine the validity of a will. AS 13.12.535. Allows certain persons to petition the court to determine the validity of a will before a person's death. AS 13.12.540. Establishes the venue. AS 13.12.545. Identifies what a petition for will validity must contain as does AS 13.12.550. AS 13.12.555. Authorizes a court to declare a will or trust to be valid. Declares that the will has full legal effect and must be admitted to probate on request of the testator's death, unless modified or revoked after the court's declaration. 3:30:07 PM MS. PIERSON continued reading a sectional analysis of HB 144, as follows: AS 13.12.560. Makes the court's validity declaration binding on other persons. AS 13.12.565. Directs the court to hold a hearing after a petition is filed. Requires the petitioner to notify the spouse, children, and heirs of the testator or settlor. For a will, this provision also requires the petitioner to notify the testator, the personal representatives nominated in the will, and the devisees under the will. For a trust, this provision also requires the petitioner to notify the settlor, and parties in interest. AS 13.12.570. Establishes the burden of proof for the petitions. 3:30:43 PM MS. PIERSON continued to read a sectional analysis of HB 144, as follows: AS 13.12.575. Allows a testator to modify or revoke the will or codicil after the court's declaration. AS 13.12.580. Allows a trust to be modified, terminated, revoked, or reformed after the court's declaration. AS 13.12.585. Establishes which records related to a petition are public, which are available only to certain persons, and which are confidential. Allows the court to order confidential records to be made available to other persons when good cause is shown. AS 131.12.590. Defines the terms used in the new article. 3:31:18 PM MS. PIERSON continued to read a sectional analysis, as follows: Section 10 would amend AS 13.16.410 and allow a personal representative to consider discretionary distributions to a beneficiary as being made from capital gains during the year. Section 11. Amends AS 13.36.109 and allows trustees to consider discretionary distributions to a beneficiary as being made from capital gains realized during the year. Section 12. Indicates how certain provisions of the bill amends court rules. Section 13. States that those sections that amend the court rules only take effect if the bill section 11 is approved by a two-thirds vote. 3:32:00 PM CHAIR OLSON asked if these statutes were changed last year. MS. PIERSON explained that these statutes are frequently amended since Alaska, like Delaware, is one of the premier places for trust estates. Additionally, since this state does not impose a state income tax there is significant benefit for trust estates in the state. She related that $50 million deposited in Alaska's banks can be used by its citizens and businesses. Further, the state imposes a 6 percent tax on any insurance premiums sold. 3:32:47 PM REPRESENTATIVE BUCH referred to AS 13.12.205, which relates to a decedent's nonprobate transfers. He asked how these transfers are conducted. 3:33:51 PM DAVID SHAFTEL, Attorney, David Shaftel Law Offices PC, stated that he has been a member of an informal group of trust officers who have worked with the legislature since 1997 on estate law. He explained that he has worked with legislative staff on proposed language for HB 144. He recalled Ms. Pierson's comments on how estate legislation has assisted the state financially. He suggested, more importantly, that estate law is one area of law that every resident will be affected by at one point or another, either by virtue of their relatives passing away or upon their own death. 3:35:43 PM MR. SHAFTEL related that the estate and trust statutes are very important to constituents. He highlighted the significant changes in this bill facilitate the ability to designate a representative who can stand in for incapacitated people. He suggested if a person was drafting a will or trust for his children and grandchildren that he/she may decide to appoint someone. In the event that his children or grandchildren would be affected by some court proceeding relating to his estate or trust, the designated person would represent and make decisions for them. He offered that this bill was modeled after recent Florida statutes. He opined that this bill will help to avoid some complex proceedings, including appointment of a guardian ad litum to represent any minor children, unborn grandchildren, or incapacitated children. 3:37:55 PM MR. SHAFTEL pointed out one significant change. He explained that years from now when the Chair is elderly he may have a relative that challenges the will, and it may be that the challenge is made after his death, such as an allegation of undue influence or fraud. However, this bill would allow a person to currently petition the court to seek a determination that his/her will is carried out and ensure the person's wishes are made without incapacitation, without fraud, or undue influence. He opined that this is unique since only three other states have these types of proceedings called advisory opinions, yet none are as well-written as the provisions in HB 144. 3:40:16 PM MR. SHAFTEL stated that many practitioners in this field often see capacity challenges and otherwise unnecessary litigation. 3:41:07 PM MR. SHAFTEL noted this bill clarifies that a nonresident of Alaska can have a venue located in Alaska even for assets not located in Alaska. He mentioned that the bill makes one tax change, with respect to discretionary distribution of personal representative or trustees and allows the personal representative or trustee to designate those as capital gains, which in some situations will also allow for tax savings. He opined that this is a good statute. He urged members to give consideration to HB 144 and approve it. 3:41:50 PM REPRESENTATIVE BUCH stated he is interested in hearing the dangers of not having a will. MR. SHAFTEL explained that those who do not have a will are considered to have died intestate, and the state provides the mechanism of a default will for them. First, proceedings similar to probate proceedings would be held in state court, and the court would appoint a manager for that process, an administrator for the intestate estate. He highlighted that the administrator may not be someone the person would have chosen to represent him/herself. The administrator would gather assets, value them, pay income and transfer taxes, as well as any federal estate taxes, notify creditors, pay creditors, and challenge faulty or false claims. Once finished, the assets would be distributed according to a pattern the state has laid out such that a surviving spouse and children would receive specific portions of the estate. MR. SHAFTEL offered that assets may end up being disbursed outright, rather than distributed according to a trust. It is often more valuable to have assets held in trust, which allows protection of the assets, provides better management and investment, and allows for distributions to be made according to the needs of young people rather than at the whim of their desires or urges. Additionally, he suggested a trust allows for better tax planning. Thus, a variety of tools are available to the person sets out their wishes in a will. However, absent a plan, the state provides a skeletal type of plan for you. He mentioned his office has clients who are surviving spouses or surviving adult children and the default probate process has proven to be more expensive and often resulted in poor tax planning, or in assets being disbursed in directions the person who died never would have wanted. 3:46:38 PM REPRESENTATIVE BUCH said that he appreciated Mr. Shaftel's comments. He acknowledged that these are very important issues to consider. 3:47:19 PM REPRESENTATIVE COGHILL referred to Section 3 of HB 144, which relates to descendents nonprobate asset transfers to others. He then referred to page 6, lines 11 to 13 which removes language that reads ", INCLUDING AN IRREVOCABLE TRANSFER IN TRUST WITH A TRANSFER RESTRICTION UNDER AS 34.40 110(a)," and asked for clarification. MR. SHAFTEL explained that this provision deals with a very narrow right, called the widow's election. He explained that in the event a person does not provide for his/her spouse in the will, the spouse can take one-third of the combined assets of the family. The augmented estate is comprised of what is gathered together and represents the entire estate. He pointed out that a type of trust was initiated in 1997 in Alaska. He noted that 11 other states implemented this provision, which is an irrevocable trust. He related a scenario in which a person created the trust. He offered that the person could be a discretionary beneficiary of the trust, and could place assets into trust, yet creditors are prohibited from accessing the assets in the trust. He explained that most states allow a self-settled trust, in which a person places assets in the trust, but creditors can reach the assets to the maximum extent that the trustee can make distributions. Thus, in that scenario a trustee has absolute discretion to make distributions to a person, a spouse, and their children, and the maximum amount would be all of the trust's assets. Therefore, a creditor could reach all of the assets in that trust. 3:50:31 PM MR. SHAFTEL related that the Alaska estate law changed in 1997, such that a trust is not to avoid creditors at the time the trust is established. The purpose in establishing a trust is to be assured that funds placed in the trust are safe in the event of an accidental death. He reiterated that a trust does not protect against existing creditors. He stated that if a trust is created 30 days prior to a marriage, or if a spouse consents to a trust after the marriage, the trust funds are protected from any spousal claims during a divorce. He opined that this option benefits any children involved. 3:52:20 PM MR. SHAFTEL indicated that the informal group he previously mentioned had inadvertently failed to conform to the widow's election. He explained the changes contained Section 3 and 4 or HB 144 remedy that omission. In the scenario in which a person created a trust prior to marriage, placed assets in the trust, and designated the beneficiaries and disbursement, when the person dies, the wife could elect against the estate. He referred to the provision in question and stated that the widow's election would prevent the spouse from including in the augmented estate any trust created prior to marriage, nor could she include in the augmented estate any trust she consented to after the marriage. Those are the changes contained in Sections 3 and 4 of the bill, he said. 3:53:38 PM REPRESENTATIVE COGHILL stated he had was unaware of the widow's trust issue and related that he would consider this provision further. REPRESENTATIVE HOLMES said her question was already answered. DOUG BLATTMACHR, President, Alaska Trust Company, offered his strong support for HB 144. RICHARD HOMPESCH II, Attorney, Hompesch, & Evans, PC, noted that one of his clients has a son who may contest his/her will. 3:56:01 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 144. 3:56:48 PM REPRESENTATIVE NEUMAN moved to report HB 144 out of committee with individual recommendations and the accompanying fiscal note. There being no objection, HB 144 was reported from the House Labor and Commerce Standing Committee. 3:57:38 PM The committee took an at-ease from 3:57 p.m. to 3:59 p.m. 3:59:41 PM
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01_HB207_version_A.pdf |
HL&C 4/13/2009 3:15:00 PM |
HB 207 |
| 02_HB207_Sponsor_Statement.pdf |
HL&C 4/13/2009 3:15:00 PM |
HB 207 |
| 03_HB207_Fiscal_Note-1-1-041009-DFG-N.pdf |
HL&C 4/13/2009 3:15:00 PM |
HB 207 |
| 04_HB207_Fiscal_Note-2-1-041009-LWF-Y.pdf |
HL&C 4/13/2009 3:15:00 PM |
HB 207 |