Legislature(1995 - 1996)
03/29/1996 01:30 PM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 308 UNIFORM PROBATE CODE REVISIONS
REPRESENTATIVE SEAN PARNELL, sponsor of HB 308, reviewed the
measure as follows. The National Conference of Commissioners on
Uniform State Law has prepared a revision of the Uniform Probate
Code which was enacted 24 years ago. HB 308 contains those
revisions, which are designed to update and clarify the UPC. HB
308 has been reviewed and supported by the Estate Planning Section
of the Alaska Bar Association.
Number 207
BOB MANLEY explained HB 308 contains a number of technical fixes
and responds to problems that have developed. It expands the
Uniform Simultaneous Death Act to a 120 hour survival requirement
to joint bank accounts and joint property to better carry out
people's expectations if they have not properly planned their
estate. It also expands the automatic revocation of disposition of
property by divorce to life insurance policies. Problems have
occurred in cases where a person divorced ten years ago started a
new family but forgot to change the beneficiary designation on the
life insurance policy. In such a case, the ex-spouse would obtain
all of the life insurance to the detriment of the new family. HB
308 changes the intestacy law to better reflect social patterns
over the past twenty years, to deal with blended families. HB 308
also expands the ability to disclaim property to nonprobate
property. Frivolous disclaimers are used to fix faulty estate
planning after a person has passed away.
SENATOR GREEN asked if it would supersede the naming of the
beneficiary if you have a succeeding family. MR. MANLEY responded
HB 308 would provide for an automatic revocation of an ex-spouse as
a beneficiary if a person is divorced. The divorced parties can
reinstate, after the divorce, the ex-spouse as a beneficiary if so
inclined, however if that is not done, the revocation would occur.
SENATOR GREEN remarked the person who bought the policy and
designated beneficiaries would not have to take responsibility for
their own business. MR. MANLEY stated that in the divorce context,
people occasionally forget to redesignate beneficiaries. He has
seen cases where an ex-spouse may receive the proceeds from a
policy, while the new spouse and children receive nothing at all.
CHAIRMAN TAYLOR stated the no-fault divorce policy removes the
legal profession from many divorce cases, and often results in
oversights.
JOHN GEORGE, representing the American Council of Life Insurance,
testified in opposition to the inclusion of life insurance in the
Probate Code. Insurance proceeds might be designated to take care
of children from a prior marriage, or a prior spouse, as part of a
divorce settlement.
CHAIRMAN TAYLOR commented if a divorced person wanted to retain the
ex-spouse as a beneficiary, he/she would only have to reinstate
that person on the policy, which is no more difficult than changing
the name of a beneficiary. He asked why the insurance industry
would care who the beneficiary is.
MR. GEORGE replied the insurance industry believes once a policy
holder dies, if the named beneficiaries do not receive the
proceeds, the insurance company will have to become involved. If
the provision applies to policies sold after the date of passage,
agents can inform clients when they purchase policies.
Number 320
SENATOR GREEN stated she believes it is bad policy for the
legislature to step in and allow a party to negate a contract.
She repeated it is the policy holder's responsibility to indicate
who the beneficiary of the policy will be.
CHAIRMAN TAYLOR explained that one of the primary reasons that
wills were included in the Uniform Probate Code was because people
frequently forget to change their wills. If the previous spouse is
designated as the beneficiary in a will, he/she receives 50
percent, while the current spouse receives 50 percent under the
Intestate Code.
REPRESENTATIVE PARNELL clarified Mr. George was referring to the
spousal elective share of 33 percent. Under current law, if a
person tries to disinherit a current spouse and leaves that spouse
with no assets, but has left a life insurance policy to another
person, the spousal elective share provides the spouse with 33
percent of anything in the augmented estate. Life insurance
policies are not considered part of the augmented estate. HB 308
would include life insurance policies in the augmented estate but
the spouse would have to make the claim against the beneficiary,
not the insurance company, for 33 percent. This bill would enforce
a policy against leaving a spouse with nothing.
Number 373
SENATOR GREEN asked if an ex-spouse could claim against the current
spouse for 33 percent. REPRESENTATIVE PARNELL answered no.
CHAIRMAN TAYLOR noted this would impact people who do not get
remarried because it is triggered on the divorce. REPRESENTATIVE
PARNELL commented the spousal elective share would not be triggered
if the policy holder was not married when he/she died.
CHAIRMAN TAYLOR asked if the beneficiary provision of the insurance
policy would revoke upon the action of the divorce, if the prime
beneficiary is one of the spouses being divorced. MR. MANLEY
replied that is correct; the revocation would be automatic and
could be reinstated only by completing new beneficiary forms. The
insurance industry's concern is bureaucratic; it simply wants to
pay the designated beneficiary. Life insurance would be included
in the augmented estate under HB 308 because the Uniform Probate
Code set up the augmented estate to prevent disinheriting thousands
but left a large loopholes.
ART PETERSON, Uniform Law Commissioner for the State of Alaska,
agreed with Mr. Manley and Representative Parnell. He explained
the bill does not include life insurance in probate; it includes
life insurance in the augmented estate which has a very limited
role in probate matters. Its use occurs when a spouse is
disinherited. All states, except Georgia, have some sort of
spousal elective share provision. That policy kicks in when the
disinherited spouse elects to exercise his or her right. HB 308
would no longer exempt life insurance from the augmented estate in
such an occurrence.
Number 455
SENATOR GREEN asked who would be responsible in a case where a
mistake was made and the settlement was contrary to the originally
named beneficiary, and that beneficiary made a claim for that
settlement.
CHAIRMAN TAYLOR questioned how the following scenario would be
handled. There is an original contract of insurance which insures
husband A with the beneficiary as wife B. HB 308 passes. At a
later date, husband A and wife B divorce. The divorce action
pursuant to HB 308 would nullify the beneficiary provision of that
contract of insurance. The insurance company is not notified of
the divorce. Husband A has remarried wife C, and then dies. The
insurance company pays wife B because of an existing instruction,
then wife C finds out the policy has been paid. She failed to give
prompt notification to the insurance company that husband A died,
but had she done so, she would have received the beneficiary
portion as opposed to wife B. Now the company has mistakenly paid
everything to wife B. Wife C chooses to exercise her right to an
augmented share to the deceased's estate and asks that the life
insurance policy be included in that estate. Would she be limited
to bringing a cause of action against wife B?
MR. PETERSON replied if the insurance company did not have notice
and paid the original beneficiary, it would not be required to pay
twice. The issue would be the value amount of the augmented
estate. Wife C has the right to have that value included in the
augmented estate. If an insurance company knows of a dispute, it
can pay the money into the court. Wife C's recourse would be to
take action against the estate.
MR. MANLEY referred to lines 17-24 on page 64, and explained that
section removes any risk from the insurance company unless they've
ignored notices provided to them.
MR. PETERSON noted the AARP strongly endorses HB 308, as does the
Alaska Commission on Aging.
SENATOR MILLER moved CSHB 308(JUD) out of committee with individual
recommendations. There being no objection, the motion carried.
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