Legislature(2009 - 2010)BARNES 124
01/25/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB146 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 146 | TELECONFERENCED | |
HB 146-TRANSFER RESTRICTIONS ON TRUSTS
CHAIR OLSON announced that the only order of business would be
HOUSE BILL NO. 146, "An Act relating to transfer restrictions on
trust interests."
3:20:41 PM
JANE W. PIERSON, Staff, Representative Jay Ramras, Alaska State
Legislature, presented HB 146 on behalf of the prime bill
sponsor, Representative Jay Ramras. She explained that HB 146
clarifies the burden of proof a creditor must meet to establish
to show a transfer in trust was done with the intent to defraud
a creditor. It clarifies the spendthrift provision in statute,
which will apply to a trust if distributions are made under the
exercise of discretion by a trustee who is not the settlor,
whether or not the exercise of the discretion is governed by a
standard.
MS. PIERSON continued. This bill provides that the spendthrift
provision in a trust will apply even though the trustee may
distribute income or principal to the settlor or to pay income
taxes. It clarifies that a beneficiary's interest in a trust,
whether or not vested, is not considered a factor or economic
circumstance in the division of property subject to divorce.
3:21:48 PM
MS. PIERSON provided a sectional analysis for HB 146. She
explained that Section 1 of HB 146 would amend AS 34.40.110(b),
which makes exemptions to transfer trust restrictions.
Subsection (b), paragraph (1) requires that a creditor must
establish criteria by clear and convincing evidence. The
subsection (b), paragraph (2) exception makes a conforming
amendment to reflect the additional materials under subsection
(b), paragraph (3) of HB 146. The two changes in paragraph (3)
of HB 146 would allow a creditor to satisfy a claim out of the
restricted trust interest if the trust requires its income or
principal to be distributed to the settlor. A new exception
would allow the settlor to receive certain discretionary
distributions made by the trustee, who is not the settlor. And
the first new exemption to subsection (b), paragraph (3) of HB
146 allows the settlor to receive certain discretionary
distributions made by a trustee, while a second new exemption
relates to the receipt of certain income or principal to pay
income tax due on the trust.
MS. PIERSON explained Section 2 of HB 146 would amend AS
34.40.110(h) to provide that a transfer restriction on a
beneficiary's trust interest is enforceable, even if the settlor
has certain powers relating to the appointment, removal, or
replacement of a trustee, trust protector, or an advisor.
3:22:52 PM
MS. PIERSON explained that Section 3 of HB 146 would amend
existing AS 34.40.110(l). If the trust has a transfer
restriction, the beneficiary's trust interest is not subject to
a division in the event of a divorce or dissolution of the
marriage of a beneficiary of the trust, whether or not the
trust's interest is vested. This bill clarifies that the trust
interest may not be considered a factor or economic circumstance
in the division of property at divorce or dissolution.
3:23:37 PM
REPRESENTATIVE HOLMES referred to page 1, line 8, of HB 146, to
the standard of clear and convincing evidence, and asked why
that standard was chosen instead of a propensity of evidence or
other legal standard.
MS. PIERSON deferred to one of the experts on the bill.
3:24:14 PM
REPRESENTATIVE BUCH asked whether the sponsor had any letters of
support or opposition for the bill.
MS. PIERSON answered that this is one of the bills developed
through the trust group and while there were not any letters of
support for the bill, one group supports HB 146 and will provide
testimony today.
3:24:55 PM
REPRESENTATIVE NEUMAN asked for the reason for the bill.
MS. PIERSON responded that Representative Ramras has been
working to keep Alaska as one of the premier places for trust
and investments, which is attractive since Alaska does not have
an income tax. The goal has been to encourage people to invest
in the state and to place money into trusts, which are taxed and
benefit the state. Thus far, this effort has been quite
successful.
REPRESENTATIVE NEUMAN recalled Representative Ramras has had
several bills come before the committee on trust topics. He
asked whether the purpose of these bills is to attract
investors.
MS. PIERSON answered yes.
3:26:12 PM
MS. PIERSON, in response to Chair Olson, recalled testimony last
year which indicated that trust investments bring $8 million to
the state. In further response to a comment, she said she
thought one more bill, which is not a trust bill, is planned for
this year.
3:27:25 PM
REPRESENTATIVE NEUMAN referred to a letter in member's packets
from Dana Olson and asked for an explanation.
MS. PIERSON responded that she held a long conversation with Ms.
Olson, who holds some agricultural trust land. She appears to
be in the process of a multi-faceted bifurcated divorce, and
expressed concerns to the sponsor that provisions in this bill
could affect her trust lands, she stated.
REPRESENTATIVE NEUMAN inquired as to whether Ms. Pierson was
able to address her concerns.
MS. PIERSON offered her belief that Ms. Olson has many concerns,
some of which are not related to changes made by HB 146.
REPRESENTATIVE NEUMAN suggested that perhaps some of Ms. Olson's
concerns will be addressed as this bill goes through the
legislative process.
3:28:55 PM
BETH ANN CHAPMAN, Attorney, Faulkner Banfield, stated she has
been practicing in the trust and estates area for the past 22
years. She offered her support for HB 146. She related that
she is part of an informal group of trust attorneys throughout
the state who work together to improve Alaska's trust laws. She
recalled testimony last year that discussed the amount of trust
assets in the state. Alaska now retains many assets that would
have left the state. Many families keep their trust funds in
Alaska for future generations. She addressed the constituent
concern raised earlier today. She explained the bill addresses
self-settled trusts, that in the context of divorce, this bill,
in particular, does not apply to trusts established during a
marriage unless there is an agreement that they will apply.
Thus, any trust established during a marriage would not be
affected by HB 146.
3:30:43 PM
REPRESENTATIVE BUCH asked for an example of successes in estate
trusts that keep monies in the state.
MS. CHAPMAN stated she represents a family that has significant
wealth, which was generated in Alaska, but the family now
resides in the Lower 48. Their assets would be distributed upon
their deaths and normally would move to the state in which their
children or survivors resided. As a result of the trust laws,
and since Alaska does not have a state income tax but also has
creditor protection, family members are keeping their estate in
Alaska and in Alaskan banks. Otherwise the estate would have
been liquidated and the assets would have moved out of state,
she stated.
3:31:47 PM
REPRESENTATIVE HOLMES asked Ms. Chapman about standard of proof.
MS. CHAPMAN said she could not, but suggested that Mr. Shaftel
would be able to answer the question.
3:32:13 PM
REPRESENTATIVE NEUMAN asked for the basic explanation of the
purpose of a trust and the mechanism of how it works.
MS. CHAPMAN answered that a trust can be established in a
variety of ways. For example, if she were to establish a trust
for her 17-year-old son, an attorney would draft the document,
and she would ask either a friend or family member to manage the
trust. For example, she could ask the Alaska Trust Company,
Wells Fargo, or her sister to be the trustee. The trustee would
invest the trust funds for her son, subject to the directions of
the trust document, would make distributions for his education
if that is what she had directed, and would use discretion to
insure the funds were invested to fulfill the purposes set out
in the trust.
REPRESENTATIVE NEUMAN asked whether the person who establishes
the trust has the full authority to explain the management and
disbursement of the funds contained in the trust. He asked for
changes to trust law contained in the bill.
MS. CHAPMAN responded, stating HB 146 will clarify that certain
types of trusts will have creditor protection and not all trusts
are discretionary trusts. For example, she could write a trust
to designate that assets shall be distributed for education, or
may be distributed for education, or she may decide to trust the
trustee to use the funds for any expenditure he/she deems
appropriate. This bill makes clear certain types of trusts with
mandatory distributions, such as income tax distribution, will
not subject the trust to the creditors of the settlor; creditor
protection is one reason to use such a trust.
3:34:58 PM
REPRESENTATIVE BUCH asked whether this covers probate law or
land trusts.
MS. CHAPMAN answered that this bill covers self-settled trusts,
but would not affect what might happen if a will has undergone
the probate process; these are very specific types of trust and
can affect land or investments as the trusts are not limited to
what can be placed in these types of trusts.
3:35:58 PM
DOUGLAS BLATTMACHR, President, Alaska Trust Company, stated that
he supports HB 146. He related that since Alaska adopted its
first trust law in 1997, well over $500 million has come to
Alaska and is managed in Alaska by his trust company and other
trust institutions and individuals. In addition, Alaska
receives about $1 million per year in insurance premium taxes.
3:37:30 PM
REPRESENTATIVE HOLMES asked Mr. Blattmachr to discuss the
standard of review in HB 146.
MR. BLATTMACHR said he is not best person to answer the
question, although he related Alaska is competing with other
states for trusts. He understood that some states have stronger
standards, but the clear and convincing standard seemed like a
reasonable standard but would still allow the state to remain
competitive. He explained he has been working with the trust
and estate attorneys since 1997 to try to make Alaska the
premier trust jurisdiction and the group thinks it has
accomplished that goal, and has enhanced a number of jobs in the
trust industry, insurance, and legal communities.
3:39:17 PM
MR. BLATTMACHR, in response to Chair Olson, offered that his
brother, Jonathan Blattmachr, is a leading estate-planning
attorney based in New York but is licensed in Alaska. He
explained that he, his brother, and Mr. David Shaftel are
currently attending an estate planning conference in Miami. He
thought the other testifiers may have had trouble getting on-
line or might be attending seminars.
3:40:10 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 146.
3:40:28 PM
REPRESENTATIVE NEUMAN moved to report HB 146, Version 26-
LS0633\A out of committee with individual recommendations and
the accompanying fiscal notes.
There being no objection, HB 146 was reported from the House
Labor and Commerce Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01 HB 146 ver A.pdf |
HJUD 2/3/2010 1:00:00 PM HL&C 1/25/2010 3:15:00 PM |
HB 146 |
| 02 HB146 Sponsor Statement.pdf |
HJUD 2/3/2010 1:00:00 PM HL&C 1/25/2010 3:15:00 PM |
HB 146 |
| 03 HB146 Sectional Analysis.pdf |
HJUD 2/3/2010 1:00:00 PM HL&C 1/25/2010 3:15:00 PM |
HB 146 |
| 04 HB146 Public Testimony(1).pdf |
HJUD 2/3/2010 1:00:00 PM HL&C 1/25/2010 3:15:00 PM |
HB 146 |
| 05 HB146 Fiscal Note Dept of Law.pdf |
HJUD 2/3/2010 1:00:00 PM HL&C 1/25/2010 3:15:00 PM |
HB 146 |