Legislature(2009 - 2010)BELTZ 105 (TSBldg)
03/24/2010 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB277 | |
| HB319 | |
| SB46 | |
| SB63 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 46 | TELECONFERENCED | |
| + | SB 63 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 277 | TELECONFERENCED | |
| += | HB 319 | TELECONFERENCED | |
SB 63-TRANSFER RESTRICTIONS ON TRUSTS
2:09:35 PM
CHAIR FRENCH announced the consideration of SB 63. [CSSB 63(STA)
was before the committee.]
ESTER CHA, Staff to Senator Lesil McGuire, introduced SB 63
reading from the following sponsor statement:
The climate for trust and estate planning is highly
competitive, and the trust business is a multi-billion
dollar sector that often crosses state lines in order
to take advantage of more attractive state trust laws.
In 1997, Alaska became the first state to establish a
law that allows a person to form an irrevocable trust,
be a discretionary beneficiary of the trust and, if
the trust has a spendthrift clause, protect the trust
assets from the settlor's creditors.
To give a little background, I'll summarize the aspect
of trusts to which this bill refers. In trusts, there
are three parties: a settlor also known as a trust-
maker, grantor, or testator; the trustee, which can be
an individual or an institution; and beneficiaries.
The settlor designates whether or not a beneficiary is
discretionary, which means that payment of
distributions is determined based on the discretion of
the trustee instead of the settlor stating how much
and how often payments will be distributed. With
discretionary beneficiaries, trustees may be given
standards by which to exercise discretion e.g. the
HEMS or Health, Education, Management, and Support
standard. If the trust has a spendthrift provision, a
creditor cannot force the trustee to pay money
directly to the creditor. Instead, the creditor must
wait until the trustee pays out the distribution to a
beneficiary, at which time the creditor can seize the
assets.
Alaska established in 1997 that assets in a trust
would be protected from a settlor's creditors if he
designates himself as a discretionary beneficiary,
provided that he has no current claims pending. Since
Alaska enacted this statute, numerous other states
have enacted similar statutes. At present, twelve
states allow this type of trust. SB 63 upgrades
Alaska's trust statute by adopting provisions that
have been adopted by other states. Therefore, without
changes in legislation, Alaska would not be able to
maintain its position at the forefront.
This bill provides the following amendments:
· It clarifies the burden of proof which a creditor
must meet to establish that a transfer in trust
was done with the intent to defraud a creditor
· Clarifies that a spendthrift provision will apply
to a trust if distributions are made under the
exercise of discretion by a trustee who is not
the settler, whether or not the exercise of the
discretion is governed by the standard
· Provides that the spendthrift provision in a
trust will apply even though the trustee may
distribute income or principal to the settlor to
pay income taxes
· 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
These changes in SB 63 were brought to our office's
attention by experts in the probate and trust field.
SB 63 is part of an ongoing effort to modernize our
trust laws and by doing so (1) to create jobs and
revenue, (2) to diversify our economy, and (3) to
continue making Alaska attractive to trust business
and investment.
2:14:02 PM
JONATHAN BLATTMACHR, Principal, ILS Management, characterized SB
63 as a catch-up bill for trusts that will ensure that Alaska
trust laws are at least as good as any other state's and better
in some respects. He noted that in Private Letter Ruling 2009
44002, the IRS held that an individual could create an Alaska
trust of which he or she is a discretionary beneficiary and
those assets wouldn't be included in that person's estate upon
their death. He opined that the only other state that might
possibly fall under that favorable ruling is Nevada. He urged
the committee to pass the bill.
2:16:58 PM
RICHARD HOMPESCH, II, Attorney, Hompesch and Evans LLC,
Fairbanks, said he agrees with Mr. Blattmachr's comments and
believes that Alaska is nationally recognized for its trust
laws. This has made a difference in his practice and has had an
impact on the estate planning his company does for clients in
Fairbanks. He urged the committee to pass SB 63.
CHAIR FRENCH asked if out-of-state individuals enlist his
services to establish trusts under Alaska law because the
statutes in this state are more favorable.
MR. HOMPESCH said yes and cited examples.
2:19:03 PM
DAVID G. SHAFTEL, Shaftel Law Offices, said he is a private
attorney and a member of the informal group of attorneys and
trust officers who have been working with the Legislature since
the late 1990's on trust legislation. He related that he has had
a similar experience as Mr. Hompesch; many Alaska clients as
well as individuals from other states have wanted to take
advantage of Alaska's superior trust laws. The provisions in SB
63 will further strengthen the law with respect to this type of
trust. He urged the committee to approve the bill.
2:20:04 PM
SENATOR WIELECHOWSKI asked if the increased out-of-state
business will create additional work for the court system.
MR. SHAFTEL said he doesn't believe so; if non-residents with
trusts here were to litigate these matters, they would likely do
it in bankruptcy court or the state court where the settlor is a
resident rather than in Alaska.
2:21:15 PM
CHAIR FRENCH asked for a motion to adopt the committee
substitute (CS).
SENATOR WIELECHOWSKI moved to adopt work draft CS for SB 63,
labeled 26-LS0317\P, as the working document. There being no
objection, version P was before the committee.
2:21:47 PM
JANET TEMPEL, Senior Trust Officer, Alaska USA Trust Company,
said her company is the trustee for residents and non-residents
on a number of trusts that have been set up under the Alaska
Trust Act. She said she completely agrees with the previous
testimony that it is important to keep Alaska's trust laws
updated. We completely support SB 63, she said.
CHAIR FRENCH closed public testimony and held SB 63 to a future
hearing.
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