Legislature(2001 - 2002)
05/01/2002 03:52 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 369-POWERS OF APPOINTMENTS/TRUSTS/CREDITORS
CHAIRMAN TAYLOR noted he recently introduced SB 369 as Chair of
the Senate Judiciary Committee because there has been some
difficulty getting the House bill to the Senate. He informed
members that the committee has had extensive hearings on this
subject in the past. He stated his intent to move SB 369 from
committee today and to ship it over to the House if the House
bill does not get to the Senate soon. He then asked Mr.
Blattmachr or Mr. Greer to explain the provisions of the bill.
MR. DOUG BLATTMACHR said that back in 1997 and 1998, a lot of
trust legislation was passed by the Alaska Legislature, which had
the disadvantage of going first. Other states have been able to
improve on Alaska's legislation and make their legislation
clearer. SB 369 will do four things:
· It gives statutory authorization for provisions that are
commonly found in trusts;
· It cleans up a glitch or two in the present law;
· It adds three provisions found in the Delaware law;
· It clarifies what attorneys presently believe the law to be
in statute.
MR. BLATTMACHR said the bill is basically a clean-up bill.
CHAIRMAN TAYLOR asked Mr. Blattmachr to stand by in case members
had questions and then took public testimony.
MR. JON SHERWOOD, Division of Medical Assistance, Department of
Health and Social Services (DHSS), expressed concern with a
provision in SB 369 that may run afoul with another trust
provision in statute. He explained that under the Medicaid
eligibility rules, people with assets can qualify for Medicaid
coverage by putting income or assets into a small class of trusts
[a Miller trust]. As part of the criteria to qualify, the trust
must provide that upon the death of the beneficiary, the state be
reimbursed for the amount of Medicaid expenses or the corpus of
the trust, whichever is smaller. DHSS is concerned that the
state's ability to collect on these trusts might be affected by
the provisions in SB 369 that authorize a trust protector to
change or modify the distributions to beneficiaries. Since the
legislation was enacted that created that class of trusts in
about 1994, the state has collected on 61 trusts for an amount of
about $650,000. DHSS currently has about 200 trust cases open, in
which Medicaid clients are still alive. He said that people who
use these devices essentially impoverish themselves to get
Medicaid. They typically have very high long term care needs or
prescription drug costs that are not covered by Medicare.
MR. BLATTMACHR asked to clarify some confusion and explained the
trust protector provision would only apply if the document
authorized a trust protector and gave the trust protector that
particular power. The Medicaid trusts would not have that
provision, therefore SB 369 would have no affect.
MR. STEVE GREER asked to address a concern raised by the Attorney
General's Office at a different hearing and stated, "What they're
missing is the first three core words of the statute that says,
'A trust instrument may provide....'" Mr. Greer said that an
attorney would be guilty of malpractice if he or she drew up a
Miller trust with a trust protector provision.
CHAIRMAN TAYLOR said, "It wouldn't qualify, would it?"
MR. GREER said it would not. He said the issue is a red herring
and has no viability at all.
MR. SHERWOOD said his agency would take the position that such a
trust would not qualify but it is seeking clear statutory
language because it has come into conflict with attorneys over
the interpretation of trust laws. DHSS's decisions are subject to
appeal to fair hearing in Superior Court.
MR. GREER informed members that he spoke with Una Gandbhir, an
acknowledged expert on Medicaid trusts, and she was incredulous
that this issue was raised by DHSS because it signifies that DHSS
doesn't understand what a trust protector is. He noted a common
example of a trust protector would be one in which he sets up an
irrevocable trust for the benefit of his child. He then names a
bank as the trustee of that trust. At some point in time, the
bank may be inappropriate as the trustee, therefore, in the trust
instrument, he could have given and named anyone who is not a
beneficiary of the trust the power to remove and replace that
trustee. If he did not have the trust protector provision in
there, the beneficiary would be forced to go to court and undergo
a costly and expensive court proceeding to get the trustee
removed. He repeated that this provision has nothing to do with
the Miller trust issue raised by DHSS. One would not have a trust
protector provision in a Miller trust any more than one could
have a Miller trust that was revocable.
CHAIRMAN TAYLOR agreed that one couldn't have either. He asked,
How would a trust qualify for the application, Mr.
Sherwood, that they would be attempting to achieve,
which is to put those assets in trust, let the income
pay over - that's the way it works, right, to the
state, and you then provide benefits because their
income's too low during that period. Right?
He then asked if DHSS is reimbursed for certain costs it incurred
after the person passes on.
MR. SHERWOOD said it is.
CHAIRMAN TAYLOR said if he set up an irrevocable trust, DHSS
would not qualify him to receive benefits.
MR. SHERWOOD said that is correct and added that DHSS became
aware of this provision yesterday. He stated,
You know, what I would be concerned about is that
someone dies, the residual beneficiary after the state
is also say, a disabled person with needs and someone
might make the determination that that residual
beneficiary would, you know, a trust protector could
make that.
CHAIRMAN TAYLOR said DHSS cannot accept a trust protector either
because that would violate the very intent of the trust that was
set up to qualify for the benefits.
MR. SHERWOOD said DHSS would prefer "suspenders and a belt rather
than having to go in and litigate."
CHAIRMAN TAYLOR said he planned to move the bill to the Senate
Rules Committee because time is limited but that he did not
expect further action to be taken on the bill for another week.
He offered to work with Mr. Sherwood and the Attorney General's
Office designee to draft an amendment if, in fact, a problem
exists.
MR. SHERWOOD thanked Chairman Taylor.
SENATOR COWDERY moved SB 369 from committee with individual
recommendations. There being no objections, the motion carried.
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