Legislature(2005 - 2006)BUTROVICH 205

03/02/2006 08:30 AM Senate JUDICIARY


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 298 TRUSTS: CHALLENGES; CLAIMS; LIABILITIES TELECONFERENCED
Moved CSSB 298(JUD) Out of Committee
+ HB 92 UNIV. OF ALASKA & NONPROFIT CORP STOCK TELECONFERENCED
Heard & Held
+ HB 318 LIMITATION ON EMINENT DOMAIN TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 284 SENTENCING FOR ALCOHOL-RELATED CRIMES
Moved CSSB 284(JUD) Out of Committee
= SB 249 REPORTING BAIL AND RELEASE INFORMATION
Moved CSSB 249(JUD) Out of Committee
         SB 298-TRUSTS: CHALLENGES; CLAIMS; LIABILITIES                                                                     
                                                                                                                                
9:26:25 AM                                                                                                                    
CHAIR RALPH SEEKINS announced SB 298 to be up for consideration.                                                                
                                                                                                                                
BRIAN  HOVE, Staff  to  Senator Seekins,  introduced  SB 298.  The                                                              
bill revises  Titles 13  and 34  pertaining to the  administration                                                              
of trust assets.                                                                                                                
                                                                                                                                
Updates  incorporated  into  Title  13  include  the  addition  of                                                              
clarifying  language  relating  to the  various  powers  conferred                                                              
upon  the  trustee; trustee  reporting  requirements;  and  claims                                                              
made against trust assets.                                                                                                      
                                                                                                                                
Updates integrated  into Title 34  include language  pertaining to                                                              
the  exemption from  transfer  provisions  for certain  IRA  trust                                                              
assets; technical  corrections  made to AS  34.40.110(b);  and the                                                              
handling of trust assets in cases of divorce or dissolution.                                                                    
                                                                                                                                
Since 1997, the  Alaska State Legislature has  consistently worked                                                              
to update  and improve laws  regarding the use and  administration                                                              
of trusts.  As a result, Alaska  is considered one of  the premier                                                              
trust jurisdictions  in the  country. The  updates proposed  in SB
298 are in keeping  with revisions made to Alaska's  trust laws in                                                              
1997  and 2003.  They are  intended to  preserve Alaska's  leading                                                              
position  within the  universe of  products  and services  offered                                                              
nationwide.                                                                                                                     
                                                                                                                                
9:28:50 AM                                                                                                                    
The   bill   clarifies   prior  trust   legislation,   makes   the                                                              
administration  of  trusts  in  Alaska  more  efficient  and  cost                                                              
effective,  and will  keep Alaska  as the  jurisdiction of  choice                                                              
for  trust administration.  Mr.  Hove  offered to  answer  general                                                              
questions.                                                                                                                      
                                                                                                                                
9:29:48 AM                                                                                                                    
BETH  CHAPMAN described  herself  as a  private practice  attorney                                                              
working  in   estates  and   trusts.  She  represents   individual                                                              
families, individuals  who service trustees, and  beneficiaries of                                                              
trust.  She said she  supports the  bill because  it brings  trust                                                              
business and revenues to Alaska and helps protect families.                                                                     
                                                                                                                                
The first  provision  to discuss  is in  Sections 2  and 3 and  is                                                              
designed to  clarify a trustee's  powers to appoint  trust assets.                                                              
Simply  put,  it is  designed  to  improve the  administration  of                                                              
trusts so  that trustees have  flexibility to respond  to changing                                                              
circumstances in the family.                                                                                                    
                                                                                                                                
CHAIR  SEEKINS interrupted  Ms. Chapman  to ask  the committee  to                                                              
adopt the current version of the bill.                                                                                          
                                                                                                                                
9:30:58 AM                                                                                                                    
SENATOR  CHARLIE  HUGGINS  moved  to adopt  24-LS1113\  Y  as  the                                                              
working document  before the committee. Hearing no  objection, the                                                              
motion carried.                                                                                                                 
                                                                                                                                
CHAIR SEEKINS  explained the  Y version  replaces the  word "from"                                                              
on page 2 line 1 with "or" after the word "income."                                                                             
                                                                                                                                
MS. CHAPMAN  continued the bill  allows the trustee to  respond to                                                              
changes   in   circumstances.  Many   times   families   establish                                                              
irrevocable  trusts and then  circumstances  arise with regard  to                                                              
beneficiaries. The  provision would allow the trustee  to continue                                                              
the  trust under  terms that  are beneficial  to the  beneficiary,                                                              
does  not impact  their interest  in the  trust, and  yet does  so                                                              
without the need to involve a court proceeding.                                                                                 
                                                                                                                                
9:32:38 AM                                                                                                                    
MS. CHAPMAN  continued the second  provision concerns  the statute                                                              
of  limitations for  claims against  a  trustee. Currently  Alaska                                                              
law  has  three  different  statutes  of  limitations  for  claims                                                              
against  a  trustee  brought  by  a  beneficiary.  This  leads  to                                                              
confusion and  works to the  disadvantage of trust  beneficiaries.                                                              
The proposed  changes would eliminate  the different  time periods                                                              
for  interim reports  and final  reports. It  would eliminate  the                                                              
difference so that  there would be one statute  of limitations for                                                              
all types of  claims relating to  a report given by a  trustee. It                                                              
would  also  impose  additional  obligations on  the  trustees  to                                                              
ensure that the beneficiaries are aware of the time limitation.                                                                 
                                                                                                                                
The statute would  require that the trustee use  14-point pitch to                                                              
clearly communicate the limitation period to the beneficiary.                                                                   
                                                                                                                                
9:33:51 AM                                                                                                                    
The other  amendment to  the statute  of limitations corrects  the                                                              
time periods for  notices when a trustee decides to  use the court                                                              
to  approve  a   report.  Currently  there  is   an  inconsistency                                                              
regarding when  those notices  must be  provided. The  probate and                                                              
trust  codes are  designed to  protect  beneficiaries by  ensuring                                                              
that claims  are handled in an  expeditious manner so  that assets                                                              
can  be distributed  to beneficiaries  free  of potential  claims.                                                              
The amendment balances  expeditious resolution of  claims with the                                                              
rights  of beneficiaries  to adequate  disclosure regarding  trust                                                              
assets  and  the  right  to bring  claims  arising  from  a  trust                                                              
report.  The limitation  periods  proposed in  SB  298 are  longer                                                              
than the  limitation periods  currently in  the probate  code that                                                              
apply to  estates but  they are  fair and  provide a good  balance                                                              
between  the   needs  for   administration  of   a  trust   in  an                                                              
expeditious manner yet protect beneficiaries rights, she said.                                                                  
                                                                                                                                
9:35:11 AM                                                                                                                    
SENATOR  HOLLIS  FRENCH asked  Ms.  Chapman  what the  statute  of                                                              
limitations would be if the bill were to pass.                                                                                  
                                                                                                                                
MS. CHAPMAN  responded the  bill would reduce  the process  to two                                                              
statutes  of   limitations.  The   first  would  be   an  ultimate                                                              
limitation of  three years. That would  be from any report  that a                                                              
trustee provides  to a beneficiary.  The second limitation  period                                                              
would be  six months. That applies  to final reports  and proposes                                                              
to  eliminate a  longer  statute of  limitations  that applies  to                                                              
interim reports, which is two years.                                                                                            
                                                                                                                                
SENATOR  FRENCH   asked  Ms.  Chapman  to  describe   under  which                                                              
circumstances  when, in the  life of  a trust,  a final  report is                                                              
issued.                                                                                                                         
                                                                                                                                
MS.  CHAPMAN  said  a  final  report  is  issued  when  the  trust                                                              
relationship is  going to be  terminated either because  the trust                                                              
is to be  terminated and the  assets distributed or a  new trustee                                                              
will be taking over the duties of administration.                                                                               
                                                                                                                                
SENATOR FRENCH clarified  in the notice of the  final report there                                                              
would  be delivery  of notice to  the beneficiary  that they  have                                                              
six months to act should there be any dispute.                                                                                  
                                                                                                                                
MS. CHAPMAN agreed.                                                                                                             
                                                                                                                                
9:37:29 AM                                                                                                                    
RICH  HOMPESCH,  described  himself  as  an  attorney  in  private                                                              
practice   who   does   estate  planning,   probate,   and   trust                                                              
administration.  He testified in  support of  the bill  and agreed                                                              
with the testimony of Ms. Chapman.                                                                                              
                                                                                                                                
DICK THWAITS, Attorney  and Chairman of the Board  of Alaska Trust                                                              
Company,  testified in  support of  the bill  and agreed with  the                                                              
testimony  of Ms.  Chapman.  He  said often  times  a trustee  can                                                              
anticipate when  a trust  terminates and can  start in  motion the                                                              
six-month statute and make the distribution immediately.                                                                        
                                                                                                                                
9:39:40 AM                                                                                                                    
SENATOR  FRENCH  asked him  to  restate  his point  regarding  the                                                              
distribution to beneficiaries and the issuance of report.                                                                       
                                                                                                                                
MR. THWAITS said:                                                                                                               
     Oftentimes  as a trust  comes to  its termination,  that                                                                   
     is,  the children  are  reaching the  age  at which  the                                                                   
     trust  can be distributed  to them,  it is  advantageous                                                                   
     to then  issue a  preliminary report  as to what  assets                                                                   
     are there, what  has been done with the  assets, and how                                                                   
     the  assets are  going to  distribute. Each  beneficiary                                                                   
     would  then  have  a  six-month  period  with  which  to                                                                   
     respond or reply.                                                                                                          
                                                                                                                                
9:41:09 AM                                                                                                                    
MR.  BLATTMACHR,  President  and  CEO  of  Alaska  Trust  Company,                                                              
expressed strong support for SB 298.                                                                                            
                                                                                                                                
DAVID SHAFTEL identified  himself as an attorney who  works in the                                                              
estate  and  trust arena  and  a  member  of attorneys  and  trust                                                              
officers who  have worked to  improve estate statutes  since 1997.                                                              
He testified in support of SB 298.                                                                                              
                                                                                                                                
STEVE GREER identified  himself as an attorney  whose practice was                                                              
limited to  estate and trust work.  He testified in support  of SB
298.                                                                                                                            
                                                                                                                                
9:43:39 AM                                                                                                                    
JONATHON BLATTMACHR,  Attorney,  said although he  is a  member of                                                              
the  Alaska  Bar, he  practices  primarily  in  New York.  He  was                                                              
involved in  the development of  the Alaska trust  legislation and                                                              
said it  was a pro-consumer  bill. He testified  in support  of SB
298.                                                                                                                            
                                                                                                                                
CHAIR SEEKINS closed public testimony.                                                                                          
                                                                                                                                
SENATOR GRETCHEN  GUESS asked  Ms. Chapman  to walk the  committee                                                              
through how Section 11 would work.                                                                                              
                                                                                                                                
MS. CHAPMAN  said Section 11 was  designed to parallel  the claims                                                              
procedure reviews  for probates when there is  an estate involved.                                                              
An  irrevocable  trust  doesn't   go  through  the  court  probate                                                              
process and  there has  been uncertainty  regarding how  creditors                                                              
can assert claims against the revocable trusts.                                                                                 
                                                                                                                                
When the settlor  dies, the trustee can publish  notice similar to                                                              
the notice published  for an estate. That notice has  a four month                                                              
statute of limitations  and it adopts the probate  procedures that                                                              
are contained in  AS 13.16.450-525. They also can  file a petition                                                              
with the superior  court for the determination of  claims if there                                                              
are any issues regarding those claims.                                                                                          
                                                                                                                                
She said:                                                                                                                       
     So  what happens  is you  file  a public  notice in  the                                                                   
     newspaper.  Claims come in  from creditors. The  trustee                                                                   
     can  either allow  them  or deny  them  pursuant to  the                                                                   
     probate code.  If a claim is disallowed then  we have to                                                                   
     give  them additional  notice and allow  them the  right                                                                   
     to  petition the  court for  determination and  validity                                                                   
     of  the  claim. If  there  are  no  claims or  if  we've                                                                   
     resolved  all   claims  within  four  months,   then  no                                                                   
     further claims  can be asserted against the  assets of a                                                                   
     revocable  trust just  as that happens  with an  estate,                                                                   
     and  then   the  assets  can   be  distributed   to  the                                                                   
     beneficiaries  knowing that all  claims of the  deceased                                                                   
     have been satisfied.                                                                                                       
                                                                                                                                
9:47:41 AM                                                                                                                    
SENATOR  CHARLIE  HUGGINS  related  an anecdote  about  a  probate                                                              
judge in  Georgia who  used his  position to  accumulate a  lot of                                                              
land. He  asked her whether  there was  a liability in  Alaska for                                                              
that scenario to happen.                                                                                                        
                                                                                                                                
MS.  CHAPMAN said  she  did not  believe  Alaska  runs that  risk.                                                              
Other  than Anchorage,  the state  does not  have probate  judges.                                                              
The  courts do  not  oversee the  administration  of the  estates;                                                              
they are there only as needed for resolving disputes.                                                                           
                                                                                                                                
9:49:47 AM                                                                                                                    
SENATOR   HUGGINS  moved   CSSB  298(JUD)   from  committee   with                                                              
individual recommendations  and attached fiscal notes.  Hearing no                                                              
objections, the motion carried.                                                                                                 
                                                                                                                                
9:50:10 AM                                                                                                                    
                                                                                                                                

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